Deals for McAlister’s, AAMCO, Russo’s
Christina Berry, who’s been working in restaurants since she was a teen, is a talented trainer. She’s so good, in fact, that her former employer, Biglari Holdings, dispatched her to lead Steak ‘n Shake opening teams in the U.S. and in Cannes, Ibiza and Dubai.
Yet Berry has long dreamed of owning her own franchise, though like many dreamers she lacked the ability to bankroll it. “The financing was the biggest part. I would have needed help with that,” she says.
Berry got help after meeting Orlando-based developers Mark Graff and Jeff Paulsen. The pair were looking for a restaurant franchise for a new shopping center in Clermont, Florida, and made the 30-year-old QSR veteran their operating partner in a four-unit McAlister’s Deli deal.
The partnership, dubbed Good Eats, is also considering sites in Celebration, Winter Garden, MetroWest, Dr. Phillips, Lake Nona and Kissimmee. Also on the partners’ radar is the estimated $51 million Lee Vista Promenade, a major retail center scheduled to open this year near Orlando Airport.
Berry, meanwhile, is enamored of the soon-to-open first location, a free-standing unit near the National Training Center. The 37,000- square-foot fitness facility, which attracts thousands of amateur and professional athletes each year, is also part of a hospital and university complex, where McAlister’s units typically do well.
“The area is not over-saturated. There’s Denny’s, Waffle House and Panera,” Berry says, before recalling a nearby Chick-fil-A. “They have a great location.”
Thomas and Rhonda Scott are AAMCO’s largest franchisees, operating nine shops and planning to open three or four more in Tulsa and Oklahoma City over the next three years. Given the size of their franchise, you might expect that one or both had automotive repair backgrounds.
“That would be a bad guess,” declares Thomas, most recently a corporate turnaround specialist. Rhonda, trained as a dental hygienist, recently quit a job selling high-tech dental equipment.
The last of their four children graduated from college in May, and the peripatetic couple decided to settle down in Tulsa, where Rhonda’s aging parents live.
The Scotts didn’t intend to have a portfolio of nine auto repair shops. “Our objective was only to have one AAMCO,” Thomas recalls, “and spend time with the family. Yet once we were able to turn the first around, we went to the second one.”
The Horsham, Pennsylvania-based franchisor quickly took notice of their sales growth and profitability and suggested the Scotts add more units. “All we had to do is change the thought processes of taking care of the customer and not chasing money. There’s more to life than just making money,” Thomas, a devout Christian, claims.
Well, not quite. Thomas’ many years as an operations consultant in the field of injection molding taught him that identifying waste is also crucial. “Man, machine, material and methods,” he says. “Those four all contribute to waste. When you have them aligned, you become efficient and productive.”
In fact, the Scotts initially considered opening an injection molding facility and were hunting for a building in Tulsa when they noticed AAMCO. Realizing a muffler shop cost only slightly more than a single piece of injection molding equipment, they changed strategy. The Scotts, meanwhile, decline to detail how they’re financing the growth of their empire except to say debt is involved.
Today, the Scotts’ real estate strategy depends largely on location data supplied by the franchisor, which includes identifying ZIP codes with 200,000-plus cars. The couple also is attempting to outdo dealerships, their biggest rivals—an effort that, in turn, depends on careful hiring. “Our biggest challenge is finding associates who have the same values and ethics as Rhonda and I,” Thomas says.
Pizza and vapor
“I don’t see those places as competition,” says Russo’s New York Pizzeria franchisee David Martinez, referring to the advent of fast-casual pizza. “I see Pie Five, say, more as competition for Subway than for us.”
Martinez, who opened his first franchised restaurant in 2009, in McAllen, Texas, has so far opened two more of the full-service eateries, in Mission and Corpus Christie. He has plans to open another in nearby Harlingen, if he can find a second-generation site.
Martinez, the son of Presbyterian missionaries, helped his family turn around its Christian bookstore chain before deciding to get into the restaurant business via franchising. His mother, of Sicilian descent, gave her approval after eating at one of the company restaurants in Houston.
“Anthony literally cooked everything on the menu and brought it out to us,” Martinez recalls, referring to Anthony Russo, who founded the 30-unit chain in Houston. After moving to Texas in 1978, Russo’s family opened Russo’s Italian Restaurant. Martinez was one of the first franchisees.
Like many franchisees, Martinez maintains ties to his local bank, which has backed his restaurant ventures. The bank president and his wife are regulars at his McAllen outpost, he says.
The entrepreneurial-minded businessman opened his restaurants—so far two endcaps and an inline unit—for about $300,000 apiece in second-generation sites.
There’s a steady and loyal supply of labor in his McAllen and Mission outposts given the low cost of living there. In Corpus Christi, which has a much higher cost of living, it has been difficult to find and keep workers. “People who cross the border go to Houston, San Antonio and Dallas to look for work. They don’t go to Corpus Christie,” he explains.
In addition to being a franchisee, Martinez has recently become a franchisor after founding Fire Vapes, a McAllen-based electronic cigarette enterprise. The company has opened three stores so far in south Texas. In June, when I spoke to Martinez, he was about to release a franchise disclosure document.
He’s enthusiastic about store-level financial results, telling me that company stores margins run about 30 percent. He claims “payback” on the Corpus Christie location, which opened last November, was six months.
Customers, it turns out, spend on average a hefty $35 per visit. “You have to keep refilling that liquid,” Martinez notes, referring to the flavoring component. “Buy three tanks at a time, and that’s $30 right there.”
David Farkas has covered the restaurant industry for 25 years as a reporter and food writer. Submit your company’s development agreements to him at firstname.lastname@example.org.