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Foreign investors fuel Rodizio owner


David Farkas

Illustration by Jonathan Hankin

The great thing about franchising is that it gives just about anyone (after a financial vetting) the chance to make good of someone else’s idea. In the case of Terry and Jackie Chan, 36 and 41, respectively, make that three ideas.

The Orlando-based couple has signed franchise agreements with Rodizio Grill, Buffalo Wings and Things and Boardwalk Fries Burgers Shakes. They did so while raising $10 million from foreign investors.

Their investment capital flowed through the Employment Fifth Preference (EB-5), a 26-year-old program administered by U.S. Citizenship and Immigration Service. According to USCIS’s website, EB-5 “is reserved for business investors who invest $500,000 to $1 million in a new business that will create or maintain at least 10 full-time U.S. workers within two years.” In return, investors and their families become eligible for green cards. Investment from China dominates.  

The Chans raised the funds while obtaining franchise rights for eight Rodizio Grills. Terry says a Rodizio Grill costs about $1 million to build. The Brazilian steakhouse concept is a lower-priced model ($39.99 per person at dinner) than rivals Fogo de Chao ($52.95) or Texas de Brazil ($47.99). “We want you to be here once a month,” Terry says.

The concept’s party-like, all-you-can eat atmosphere plays to large groups. An event manager in each location — Carmel, Indiana; Liberty Center, Ohio; and Cleveland—seeks business from nearby companies. Customers are also informed they’re welcome to celebrate family events here. The units run from 7,500 to 9,000 square feet and seat about 250. Roughly 60 percent of Rodizio’s sales come from such events (depending on the season), the Chans say.

Real estate matters. The Cleveland outpost, next to busy movie theaters but nonetheless partially hidden, concerns them. “We looked at that site for a year-and-a-half,” recalls Terry, who rationalizes the decision to open by calling it a “destination restaurant.”

Yet the site, a former Champps, has the right demographics, according to the Chans. The ideal location for Rodizio is “to be on the inside of a green donut with a blue hole.

The green part represent $75,000 and under households and the blue hole, above $75,000. We want to be on the inside of the donut where green touches blue,” Terry says.

From zor to zee

“I’d been pondering doing something on my own, and this was an area of business I’d never touched,” recalls Mike Shattuck, 60, who most recently spent 10 years at Focus Brands helping international franchisees open restaurants. By “area” he means being a franchisee himself.

Voila! The foodservice veteran recently agreed to open six Tropical Smoothie Cafes over the next five years. “I started looking for stable concepts with growth prospects,” he tells me. “But the main thing for selecting the brand was, I had to like the product.”

Shattuck’s deal was, in a sense, hard-wired. He’s well-known to the private equity group, BIP Opportunities Fund, that has controlling interest in the brand. Tropical Smoothie’s CEO, Mike Rotondo, also worked for Shattuck’s former boss, Russ Umphenour. Shattuck nonetheless wanted to go through the franchise process like any other candidate. “I did not leverage openly,” he maintains, referring to his connections. “I wanted to be Mike Shattuck, franchisee prospect.”

Simplicity mattered to Shattuck, meaning no large footprint, big staff or lots of equipment. The buildout cost, he estimated, would run from roughly $250,000 to $300,000. He wanted “a simple operating platform that had a well thought out operating system in place,” he says.  Tropical Smoothie Cafe met his requirements.

To finance his first two locations, both in Atlanta suburbs, Shattuck is tapping an SBA-approved loan. “It’s a little cumbersome from an administrative point of view—and a lot of paperwork. But it gets you a really good rate,” he says.

The first unit opened last month in Presidential Commons, an aging mall in Snellville. “It’s a strip center between two scenic highways. There’s a nice retail mix, and lots of schools and a medical complex nearby,” says Shattuck, adding some  40,000 to 50,000 cars pass by daily. The location, a former Italian eatery, is slightly bigger than the average Tropical Smoothie.

A master of disaster

Customers only call Restoration 1 franchisee Darric Mitchell when disaster strikes— say, when a pipe breaks in your house while you’re on vacation and the water runs for, oh, three or four or five days.

“Pipes break summer and winter,” says Mitchell, 47, who used to sell new cars. “Hopefully the homeowner is home when it breaks. We’ve had jobs with four feet of water in a house.” Even he sounds shocked at that.

Mitchell, who is handy, notes the remediation business appealed to him. Four years after signing his first franchise agreement, he now oversees (with two operating partners) three Restoration 1 outposts, all in New Jersey.

Costing about $150,000 to open a location, typically warehouse space, a successful outpost bills in excess of $50,000 a month, according to Mitchell, who claims two of his businesses easily surpass that sum.

Mitchell looked at other franchise business before choosing remediation. “I’m a handy type of guy. I can fix things in my home, so I could understand this type of work,” he says. But he had never launched a business.

The franchisor “gave me the basics to start the business successfully,” he recalls. “You have all the structure, the forms, the contracts, the procedures to get paid by insurance companies.”

Homeowners insurance makes the remediation business possible.

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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