Coming on strong at Moe’s SW, Rush Bowls and Retro Fitness
“We’re looking at a new normal—very slow growth and just managing your business well is how we’re looking at it,” said Moe’s Southwest Grill franchisee Mark Monroe, having been reminded of the static foodservice outlook for 2017 from two foodservice research firms.
And yet, no one witnessing the growth of Monroe’s franchise group would discern anything but optimism about this year and beyond. When we spoke in mid-February, Monroe was in the middle of integrating the 31 Moe’s he’d recently acquired from franchisees in south and central Florida and North and South Carolina.
His company, 59-unit Sterling Restaurants, is now the largest franchisee in the system. A recent $35-million bank financing helped pay for the additions to his stable.
Monroe isn’t a newcomer to a far-flung, multi-store empire. In the late 1990s he founded a ball-caps chain, opening 49 company stores in Georgia, Alabama, Florida, Louisiana and Mississippi. After selling Hat Shack in 2007 to a large competitor (for a reported $16.6 million), Monroe eventually bought a single Moe’s unit in Atlanta and was off to the races.
Why Mexican restaurants? Monroe’s research showed macro trends favored Mexican fast-casual. The idea of franchising also appealed. It would allow him to still pull the entrepreneurial levers of finance, operations, HR and real estate while leaving the conceptual aspect, like building design, to the franchisor.
“In my mind, I pay five percent a year for that. It’s like outsourcing it” to a third party, he added.
Growth has been mainly through acquisition. Monroe concedes acquiring restaurants lowers the monetary reward, yet it also reduces the risk of making real estate mistakes. So he’s willing to pay a higher price for a unit assuming sales and store operations are solid.
“It’s already done a certain amount of business, and I feel like I’m a good operator and I should be able to operate the unit as well as you did,” he explained.
Nonetheless, he has carte blanche to develop units in his 30-market empire. “Moe’s just said, ‘Find good real estate and make a good decision,’” he noted.
Bowls to Nashville
In January, Nashville Business Journal’s “Crane Watch” showed that nearly 190 cranes loomed over construction sites in the metro area. Riverfront redevelopment, apartment complexes, company headquarters, parking garages, condos and sprawling retail centers were among the projects.
For new Rush Bowls franchisee Jason and Erin Wilkins, who’ve agreed to open three units in the fast-growing metro, it’s good news. It means the slots they’d like to tap in Nashville should be filled with employed millennials who want a quick and healthful meal.
Designed to fulfill that desire, the 13-year-old concept features bowls filled with blended fruit, vegetables, nuts, granola, honey, tea and a variety of other natural ingredients too numerous to list. Its founder, former investment banker Andrew Pudalov, also launched a wholesale business in 2011 from Boulder, Colorado, headquarters.
Recently, the veteran Carl’s Jr./Hardee’s franchisee Buddy Brown partnered with Pudalov. They opened a second Rush Bowls in Denver’s LoHi district and agreed to franchise the brand.
Enter the Wilkins, the system’s first franchisees. Jason, a former healthcare executive with an MBA, says he and Erin (currently a healthcare executive) maintain a healthy lifestyle, so the product itself appealed to them.
The Wilkins first considered a fitness franchise. But the capital investment restrained them. They meanwhile looked at fast-casual franchises before picking Rush Bowls. The per-unit cost to open runs from $192,000 to $351,500 (exclusive of the $69,999 development fee for a three-pack).
“The concept seemed simple enough for someone who doesn’t have a foodservice background,” said Jason of the 800-square-foot unit. The couple intends to self-finance the first unit. Their first lease, in an up-and-coming area known as the Gulch, was close to being signed in February. He added the first unit should be open by August if permitting goes smoothly.
Fit to franchise
Rob and Lisa Madison, a husband-wife team, are well into franchising. In fact, they opened their first fitness center, called Powerhouse, in Brick, New Jersey, in the late ‘90s. But gyms go in and out of favor—and the Madisons eventually bailed, though not before changing its name “to soften it up,” Rob recalled.
In 2009 the pair signed a new franchise agreement with 150-unit Retro Fitness, based in West Colts Neck, New Jersey. Since then, the couple has opened eight gyms, in Brick, Wall, Bayville, Lacey, Bayonne, Jersey City, Piscataway, New Jersey—and one in Aston, Pennsylvania.
Development has been financed through SBA loans and with an equipment lease company. The Madisons have served as their own general contractor for all the work.
The couple converted two gyms from other brands and built five from scratch. The most recent is a refresh of an existing Retro. All-in costs run from $1.6 million to $1.8 million per gym, Rob said.
“I’ve been coming on pretty strong,” added 50-year-old Rob. “I’m going to take a break for a while and get the most out of each one of these.”
The couple’s strategy has been to stay close to their home. Four of the gyms run along the Jersey shoreline. Three are less than an hour’s drive. The gym in Aston, however, is an hour-and-45 minutes away. “That’s kind of tough,” Rob acknowledged.
Still, franchisor-provided software keeps track remotely of the unit’s performance. “You get voids, refunds and alerts—you name it,” Rob happily declared.
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 email@example.com.