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Flexibility is watchword, at Club Pilates and Huddle House


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David Farkas

To the uninitiated, Pilates equipment plausibly looks like tools of torture. Yet growing numbers of Americans pay professionally trained instructors to help contort themselves on these strange devices.

While precise statistics are hard to find, today an estimated 16 million Americans practice Pilates or yoga. Some 25,000 studios attest to their popularity.

Among them is Costa Mesa, California-based Club Pilates, a 400-unit chain founded in 2007 and a franchisor since 2012. Its website boasts its purpose is to “challenge students at every level and target exactly what you want to work on most.”

Franchisee and instructor Keely Watson says improving spinal mobility, core strength and lateral movement are common desires of members among her three studios, many of whom are in their 50s and 60s.

Watson, a former semi-pro paintball player, earned a comprehensive Pilates certification after working for several years as an events coordinator for a marketing firm. She eventually met Club Pilates founder Alison Beardsley, like Watson a San Diego State University grad.

Beardsley at the time was expanding the concept, and in 2013 Watson and another instructor became the fourth franchise. They opened their studios in affluent areas of Orange County. They financed each unit, which runs from 1,400 to 2,000 square feet, using mostly savings. Watson and her partner recently parted ways, and new equity partners have stepped in.

Though the space is small, the price tag for equipment is large. The bed-like Reformer, star of the show, costs $3,600. A studio needs a dozen. The XO Chair and various other devices, including ropes and pulleys, run about $1,000 each. Watson, who used equipment financing, adds it costs from $158,000 to $225,000 to open a studio.

In December Watson and her new partners agreed to open three more units in Orange County over the next 18 months, including one in Irvine.

Growing Sonic (again)

Sonic Drive-In franchisee Buddy McClain likes to do business with regional banks. That’s because he knows (and feeds) the people who make the loans. “I saw one of my bankers this week in the parking lot of one of my restaurants,” he recalls.

But surely national lenders have come calling? After all, McClain and his partner Bruce Vaughn operate 96 Sonics and plan to open at least 40 more throughout Florida, Alabama and Mississippi.

“They came and made decent offers,” McClain allows, “but we really like the local contacts. Guys in Boston aren’t eating in my restaurants.”

McClain, 61 and a native Mississippian, has been a Sonic franchisee since his early 20s. Forming partnerships along the way, he oversaw more than 100 units by the mid-aughts.

That’s when he sold his interests to focus on the three aforementioned states.

Today, he also lectures on entrepreneurialism at universities in the South. “I do it to sell the entrepreneurial spirit of America,” he says. “But I’m also recruiting. I usually pick up one or two people who say if he can do it, maybe I can, too.”

He also advocates that managers invest sweat equity (and later equity) in their restaurants on the way to becoming Sonic franchisees themselves.

McClain, who owns 85 percent of MVP Sonic Group, is now focused on opening restaurants in south and central Florida. He says Sunshine State units are costlier and therefore produce a smaller return. “More overhead and soft costs,” he says, “more engineering and architectural stuff. It’s not just land and building costs.”

McClain prefers to own property versus leasing, yet is stuck with ground leases in South Florida because land owners don’t want to sell. Meanwhile, he’s been paying anywhere from 3 times to 5 times EBITDA (gross earnings) to acquire mostly older Sonics, which he sometimes must raze and replace. New Sonics, with their emphasis on technology, boost sales from 30 percent t 60 percent, he claims.

Declares McClain: “We are trying to get AUVs to $1.5- to $1.6 million in the next few years.”

Flexibility, the selling point

Huddle House, the 24-hour, Southern-inspired family restaurant franchise, made a big impression on new franchisee Mike Lokhandwala. To be sure, the 31-year-old fast-food veteran (Wingstop, Popeyes, Church’s Chicken) liked the incentives that lowered his franchise and royalty fees.

Yet what also impressed him was format flexibility. “The real estate team have been creative and come up with inline and end cap units,” he says, referring to the franchisor.

“They’ve become flexible and are not only focused on free-standing buildings.”

He believes an inline unit “would be an ideal build-to-suit with the landlord” because the brand name could be used to “maximize the TI dollars,” also known as tenant improvement.

Lokhandwala is a seasoned operator, having grown up helping his dad manage a franchised Church’s Chicken in Atlanta and becoming a Wingstop franchisee in 2010. Last fall, he signed up to develop Huddle Houses in south Georgia. The first, an acquisition, opened in Valdosta.  

“The brand is pretty successful in smaller towns with populations of about 5,000. The competition is limited and unit economics match up with market,” he says, adding the brand’s formula works well given the reasonable investment.

Lokhandwala is nonetheless adding his own revenue generator during lunch: curbside service. “What I learned is that breakfast is running at potential. So then we have n opportunity at lunch by providing this tactic,” he explains. Customers call a dedicated phone line at the restaurant to place an order that’s ready when they arrive. It debuts in March, in Valdosta.

“There’s a small investment but we have a pretty reasonable goal in mind,” he maintains, “increasing sales annually by $25,000 to $40,000.”

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 dfarkas99@gmail.com.

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