Fancy car put dreams in young man’s head
When he spotted his dad’s boss pulling up to their house in a new Corvette, the proverbial light bulb blinked on above young Charles Keyser’s head. It ended up sparking an entrepreneurial journey years later.
“I remember he owned the business and gave us a ride, and that was the seed for us. I’m glad we kept that fire going,” he recently mused, referring to business partner and older brother Jesse.
Today, the ambitious pair operate 12 Sport Clips, five Little Caesar Pizza units and (most recently) a four-van Oxi-Fresh franchise. The brothers will soon re-locate from Carbondale, Illinois, to St. Louis, Missouri. There, they plan to increase the number of vans to eight by year-end, thereby doubling sales volume. They also intend to add four or five Sport Clips to the fold.
The carpet-cleaning business, unlike foodservice or barbering, doesn’t require much overhead. “If you’re leasing your upfront costs, then the cost of operating the business is pretty minimal,” Jesse, 39, explained.
The two, who’ve talked about going into business together since boyhood, launched their company in their hometown of Carbondale (pop. 26,000) shortly after Charles graduated from Southern Illinois University in 2004. “We entered the franchise world with the mindset of being very large operators,” Charles, 35, noted.
Franchising pizza made sense given the university is in Carbondale. So Charles, who majored in hospitality management, did an internship with a local Papa John’s franchisee, spurning a professor’s advice that he intern at Disney World or another large resort.
When they began looking for a pizza franchise, Little Caesar wasn’t on their radar. The deal for their first choice, however, fell apart when the franchisor abruptly insisted the brothers open out-of-state. They refused to move. Little Caesar, by contrast, was accommodating.
It wasn’t the only hurdle the pair faced. Their first banker thought the Keysers were opening units too quickly. “He would try to slow-roll the loan process without telling us he wasn’t giving us the loan,” Jesse remembered. The brothers sought options instead: “We went out and found other banks that looked at our P&L and said, ‘You’re killing it. How many do you want to do?’”
By the way, Charles guest-lectures on entrepreneurship in his former professor’s class at SIU.
No need for loans
Veteran Huddle House franchisee Mark Little, on the other hand, wants no part of a bank loan if he can help it, which means he won’t add another restaurant to his collection of 15 in northeast Mississippi until late this year.
“The fact is, you can get along fine in this business by not incurring debt if you are a good operator and can pay your rent,” he explained. “I do not want to incur debt at any significant level.”
The former convenience-store operator quickly adds he isn’t against financing, per se. He carries a revolving line of credit, in fact. It’s debt-to-equity ratios “of three to four to five times” that scare him. If you go out 50 percent or 70 percent, you’re probably never going to get into trouble,” he maintained. But putting up less equity than that can cause major headaches, he added.
Little knows trouble. Tumbling gas prices put his convenience store operations on the ropes. “The margins on retail gasoline had gone to nothing. It was difficult for us. That’s why we decided to sell out of that business,” he declared. He sold the last of his 37 stores this summer to a consolidator.
Before launching the Huddle House franchise in early 2000, Little had attempted to sell branded chicken and pizza inside his convenience stores without much success. “We needed free-standing units,” he said. Huddle House’s 24-hour model and customer base mirrored Little’s retail enterprise. When four nearby Huddle Houses became available with a district manager in tow, he bought them.
An easy bet
The nearly $63 million Mohegan Sun Casinos raked in for food and beverage revenue in 2014 was a tiny increase, percentage-wise, over 2013, though better than nothing, 2014 had nonetheless been a rough year for the enormous Connecticut-based gaming operation, with management blaming the decline on “a result of lower gaming revenues at Mohegan Sun.”
In fact, dwindling revenue had been a problem for several years as gamblers reined in spending during a post-recession economy. To stem the fall-off, in 2011 a Mohegan executive named Phillip Cahill gathered a few colleagues and created Mohegan Holdings. The small group reckoned the tribal enterprise could boost its revenue via acquisitions and foodservice-related franchising. The franchise units, which could be easily bank financed, would operate in cities and towns in the Northeast.
Their initial choice bombed after the franchisor was sold and the franchise development halted. Cahill, a longtime CPA, didn’t hire a broker, figuring he had the bona fides to identify another suitable franchise. He also depended on a team member whose family included Dairy Queen franchisees. Not long after, Mohegan Holdings inked multi-unit agreements with Smashburger and Jersey Mike’s Subs.
Jersey Mike’s was an easy call for Cahill, who grew up in Hartford eating “grinders” in a beloved sub shop as a kid. “It amazed me that they sliced meats and cut lettuce and tomato so consistently each time. It was a great experience,” he remembered. “When I first saw Jersey Mike’s, I said, ‘This is the same thing as that grinder.’”
Mohegan Holdings agreed to open 12 Jersey Mike’s in Connecticut, Rhode Island and Massachusetts. Three have opened so far. “Are we going to make millions? Probably not, unless we have 100 of them. But there is opportunity for tribal members to be in a business other than the casinos,” he said.
David Farkas has covered the restaurant business for 25 years as a reporter and food writer, and writes about development deals in The Pipeline in each issue. Send your franchise’s development agreements to him at firstname.lastname@example.org.