Favorite Brands
In pursuit of excellence
So who fits the perfect profile? What are the
characteristics and traits of the ideal candidate?
“One is business savvy. We’re looking for a
demonstrated team-builder,” says Haner. “We
want multiunit franchisees. The day of the sin-gle-unit franchisee getting into one store and
staying 40 years—that’s not the way the business is structured. You can’t be everywhere, so
you need to be able to build infrastructure,
teams. If you’ve done it before, you have
demonstrated that you can do it again.”
Says Haner, “We want people with a vision
who are committed to grow, and who have a
sense of urgency. These are people who would
like to be a 10-store operator over time. We
don’t sell territory; we do it site by site. But we
try to look for places where we might have 5,
or 6, or 10 opportunities and put in people
who have a vision to build multiple stores.”
And, of course, he wants people with the
financial wherewithal to make that dream a reality. He says the financial piece—$400,000
liquid capital and $1 million net worth—is
the easiest part to determine. “You either have
the capital or you don’t.”
When it comes to the more challenging,
harder-to-operate brands, the value of related
experience goes up, and the better it is for
franchisees to have a track record with a similar type of operation.
Take Denny’s, which has 265 franchise
groups operating about 1,100 restaurants.
“This business, with its 24-hour operations
and complex menu, requires somebody that
has the past experience you need to predict future performance,” says Dunn. “It’s hard to
learn this on the job.”
A prime example of related experience, he
says, would be fast food brands with 24-hour
service, such as Jack in the Box or Del Taco.
“The customer base they’re going after is pretty
broad. For Del Taco, it’s a specific meal occasion for people looking for that style of food.
That’s separate from Denny’s. They work in
tandem. We have a franchise group in the Midwest that has Wendy’s, Long John Silver’s, Papa
John’s, and ours. On the West Coast, one franchisee is also the largest Carl’s Jr. franchisee.”
But there are limits. “We will not allow
some other brands that serve a similar menu
and have the same operating characteristics,
like Steak n Shake, or a brand that is heavy on
breakfast. That’s not viewed as a complementary brand,” says Dunn.
Geography and timing can also factor in for
both parties. “I think it depends on your franchise candidate and the individual requirements
around the country. Denny’s is fairly mature, so
someone in the L.A. basin may do only one
store because of other rights with existing franchisees. If they go somewhere else, though, they
could build multiple units over time.”
The Nashville market, where Denny’s is a
long way from the saturation point, says
Dunn, is one example of where a franchisee
with other brands in the area could do well
with a multiunit development deal.
Weighing the intangibles
A track record, solid net worth, and ready
funds may be essential to a successful franchise
operation, but some franchisors are quick to
point out that there are intangibles to consider
that can be just as important—if not more so.
“It’s not so important they have the food
experience,” says Don Fertman, Subway’s director of development. “In our case it’s a simple operation.” However, he says, if a candidate understands how a franchise works and
has experience with the franchisor-franchisee
relationship, “it diminishes or eliminates a significant learning curve.”
Prior experience working within the constraints of a franchise system most often increases the chances of franchisee success, he
says, but for some entrepreneurs it’s still an issue. “Having that worked out in advance is an
advantage,” he says.
Fertman is also sensitive to the potential
downsides of selling a successful franchisee an
additional brand. “Experience has shown that if
the operation, particularly in a new market or
country, does not show expected profitability
within a relatively short time, the franchise
owner tends to revert focus to the previously acquired brand that is already providing income.”
Poor sales results early on, he says, can become a
self-fulfilling prophecy if new owners then decide to concentrate on their previous brands.
When recruiting developers, says Fertman,
the issue of attention diversion becomes even
more of a concern. “It’s essential that those developing a new territory give complete focus to
one business—and that business be their major, if not sole, source of income, to ensure
that the full potential of that concept has the
best chance to be fulfilled.”
Peter Wright, director of franchising at Panera Bread, says divided attention also can result
from timing. Recruiting franchisees with experience and a corporate structure in place is
great, but it could pose a problem if they’re in
expansion mode with their existing brands. “If
someone is developing other concepts and
wants to develop ours at the same time, they
could be splitting their focus. It’s tough enough
to get one concept and develop that,” he says.
Panera has a seven-figure liquidity requirement, but getting started requires a lot more
than sufficient capital. “Obviously a lot of people have money in mind,” says Wright. “But if
their primary motivation is making money, it’s
not a great lead indicator. You want to see passion for the brand and the products; you want
to see people who share a lot of our values
about the business, who love being in multi-unit restaurants.”
Plan for growth
The best way to get started adding a new
brand to a multiunit or multi-concept operation, says Bob McDevitt, senior vice president of
franchising for Golden Corral, is to have a reasonable expansion plan mapped out in advance.
McDevitt says franchisees may want to start off
with one, two or three stores, building up to
about five locations at a relatively quick pace.
“In years past, we’ve had situations where
we’ve sold large blocks of territory. Given the
pace of development today, large blocks can
take a long time to develop,” he says.
For a franchise like Golden Corral, upfront
costs are steep. “As a concept,” he says, “it’s rather
expensive for land, building, and equipment.”
The price tag for those items runs $3.5 million to
$4 million—then add the franchise fees.
“We have successful people from other industries,” he says. “We don’t find that positive
or negative.” But a franchisee with outside experience would need an operating partner with
a resume that includes hands-on experience.
“If you don’t know what you’re doing,” says
Popeyes’ Feilmeier, “there’s a huge risk.”
One example of those with plenty of money and no experience are the dot-com millionaires looking to branch out. But, says Haner.
“It’s not retail, and there was no team-building. So that would get discounted somewhat.
It’s not what we do.”
However, he says, “We have people out of
the gas and convenience business that have
built multiple units, relying on training and
support, and those are skills that can transfer
into building restaurants. How do they represent the learning experience? Then we determine how that translates.”
The final challenge
For franchisors, getting the attention of the
right multiunit operators is a huge challenge.
“It’s easy to identify them, but it’s not so easy to
talk to them,” says Dunn. “You can get lists of
other franchisees in those other brands, and
then you have to get your message to them in
various ways. We send them information, some
type of striking direct mail campaign.” Also, he
says, “You could go to the type of events they
go to, typically where they’re looking for money. That could be a trade show environment,
and then you have to look for affinity groups
and use some traditional networking methods.”
“The people we’re searching for are in a
very defined group,” says Feilmeier. “As you
can imagine, we’re also not the only people
calling on them. Most others want the same
kind of person. Thank goodness we have a
great brand and a product that people like to
eat.” AD
