Franchises made their investment case to financiers
Black Bear Diner
Twenty-three years after starting the company with $15,000 that came, in part, from selling his boat, Black Bear Diner CEO and co-founder Bruce Dean said he never thought he would be here at the helm of a successful brand that’s suddenly breaking out and epitomizing the American Dream.
“We never figured we were going to be what we are, and thank goodness for the customers that walk into our door every day,” he said. “Every customer means something.”
Jen Chaney and Chad Hartnett of Scooter’s Coffee discussed their efficient drive-thru model, among other things, at the conference May 7-9
The Mount Shasta, California-based diner concept opened 21 new locations in 2017 and is on track to add 21 more this year, at a minimum, with an average unit volume of $2.6 million—“which may not seem like a lot,” he added, before noting that in family dining it represents the very top of the industry.
Striking out into the heartland with a new location in Oklahoma City, Dean said that location was particularly meaningful for the brand’s leadership team, as it marks the brand’s farthest-flung location, which will act as a hub as Black Bear expands in the coming years.
Compared with other diner concepts that are more heavily weighted toward breakfast, Black Bear’s three dayparts are split with 32 percent at breakfast, 37 percent over lunch and 31 percent at dinner.
Like many brands in recent years, Black Bear attracted the attention of private equity with the 2016 partnership inked with PWP Growth Equity that is fueling the brand’s eastward push.
“I give these talks occasionally,” he said in closing. “Family dining is often the poor stepchild of the industry … but the reality is over $13 billion of business is done in family dining every year and I believe there’s a huge white space for us.”—TK
British Swim School
Rita Goldberg was a former national swimmer before founding British Swim School in a derelict Victorian house in her home country of England back in 1981. Goldberg said her drive to start the school was a result of her experience as a swimming instructor and her dislike for the way young people were taught to swim.
Stephen Smith of Hotworx says virtual instructors help to reduce labor costs
“I developed a method that wasn’t heard of, to actually teach very young children to survive in water, not just swim,” she said. After that introduction, she shared her traumatic experience opening her first non-franchised locations in Florida, where one worker died on the job. “I didn’t want to build anymore, but I also wanted to grow the business, so I looked at what could be done and began to look at empty pools, pools that were never used”—which resulted in franchising, and finding under-utilized pools rather than building new, expensive pools from the ground up.
Whether it’s a fitness club or apartment complex, Goldberg said there are countless such pools across the country, in almost every market large and small, and that incorporating them into the British Swim School’s business plan was the key to making the numbers work and building a highly profitable enterprise from a category that, at first blush, may not seem like a splashy moneymaker.
Franchised since 2011, the school now has 175 pools open and 84 franchisees in 21 U.S. states, as well as territories in Canada and Turkey. “We want the business person who wants to not only do an incredible job and save lives,” she said. “We also want someone who wants to earn a lot of money.”—TK
On the wellness spectrum where services range from clinical to beauty, Elements Massage “leans closer to the clinical end,” explains CEO Jeremy Morgan.
CEO Shirin Behzadi of Home Franchise Concepts
“We’re really anchored in the therapeutic benefits that massage can provide,” says Morgan, calling that out as a point of differentiation. While other franchised massage brands are leaning heavily toward skincare and other beauty services, Morgan’s Elements Massage wants to innovate.
The Englewood, Colorado-based massage concept, part of WellBiz Brands, launched its Elements Innovation Lab to test new services such as cupping massage and float tanks before it considers introducing such options to franchisees. The company this spring also announced the establishment of a separate business unit, Elements Corporate Ventures, to purchase, operate and build corporate Elements Massage studios. And it just purchased five locations in the Denver metro from its franchisees to further that innovation goal, says Morgan.
With 247 locations, Elements is focused on smart growth: In 2017 the brand saw 17 percent year-over-year growth and is “really built on the strength of that membership model, selling new memberships and retaining our members extremely well,” notes Morgan.
Elements has a 76 percent Net Promoter Score, bolstered by a month-to-month approach to member contracts Morgan says is “as consumer friendly a membership agreement as exists in this space.”
Top locations are pulling in $1.5 million in topline revenue, and units open for five years are making about $150,000 to the bottom line after building up their membership base. Like many of the franchises presenting at the conference, the brand wants to attract more multi-unit owners—owners it says have $100,000 more in profit and 10 percent higher profit margins than single-store owners.
Giovanna Koning is CFO of TGI Fridays
“Great consumer product, attractive financial returns and something that’s easy to operate—Elements very strongly delivers against all three,” says Morgan. —LM
At rock-bottom unemployment, it’s a great time to be in the staffing business. Last year, Express Employment employed 540,000 people by doing a few things differently than other staffing agencies.
The biggest difference is franchisees don’t focus solely on the mega corporations and the arduous task of doing business with them. It’s just so much work to navigate the RFPs, the bureaucracy and to add much to a company that has a sophisticated employment department already.
And since other staffing agencies are going through all that, franchisees can form strong relationships with the local business community.
“We own the mid-market,” said David Lewis, VP of franchising at Express Employment Professionals.
Lewis said that’s also the reason the company eschews multi-unit operators—one of the few franchises that isn’t going after this sophisticated segment of operators. It’s just a question of focus—if someone is focused on big sales or big accounts in another market, they won’t be the neighborhood employment spot.
Aslam Khan is CEO of TGI Fridays, and they discussed new growth plans for the legacy brand
“The national turnover rate is 25 percent a year, so a 100-employee company is going to have about two employees a month,” said Lewis. “If I have a multi-unit operator he or she cannot have a personal relationship with that 100-person company.”
That intentionally close relationship for the company’s 800 franchisees seems to work. The average mature office reports topline sales of $6.4 million, with first-year revenue a little over $1 million. There’s an expanding list of verticals starting with staffing and covering printing, events management and supply chain integrations for small business. —NU
Honey Do Service
Brad Fluke, CEO and founder of The Honey Do Service, which sends general contractors to your house to take care of all homeowner needs, owns two corporate stores for two good reasons. “They pay me well and I enjoy the money,” he said. And he uses them to test new products before they’re rolled out to franchisees.
A few examples: A second-year warranty, which about one-third of customers wish to buy to add on to the standard one year. “That’s pure profit,” he said.
Also Tom’s Toolbox, an on-the-spot proprietary estimating tool that was tested for a year and a half and rolled out about nine months ago. Operators can tell people exactly what it will cost to replace a toilet or fix a window, and it “works on their phone and prints from their truck,” Fluke said.
Wan Kim is CEO of Smoothie King
“Our guys are selling 60 to 65 percent of what they bump into. We like to be the last one in your house, because we know the four or five other people you called haven’t shown up,” or if they did they had to get back to the customer later to give an estimate.
And an internship program, which is helping the brand create its own managers. “We took a good employee, made them great, gave them something to look forward to after two years, when they would own their own branch. And now other franchise owners have rolled that out,” he said.
Honey Do began franchising in 2008, and now has 26 units represented by 12 storefronts, mostly in the Southeast. Four units opened in the first quarter of 2018, he said. He’s targeting 71 communities in the Southeast that “are on our radar” for expansion. —BE
Wendy’s beloved founder, Dave Thomas, passed away in 2002, but he’s still quotable. Wendy’s Chief Development Officer Abigail Pringle peppered her comments on the chain’s franchise program with: “As Dave said, ‘profit’s not a dirty word.’” And, “As Dave said, ‘If something’s not broken, break it.’” And his best known quote: “Take care of your business and your business will take care of you.”
Abigail Pringle of Wendy’s
Thomas would be proud of the organization he founded. Its goal is still to “become the world’s most thriving and beloved restaurant brand.” Not the biggest, but the best, Pringle stressed. Big, however, is relative, because the quick-service chain has north of 5,700 units in just the U.S. Average unit volume systemwide is $1.61 million.
One-third of closures are relocations to areas where the customers are going, she said, adding they have been able to create a number of different real estate options from their original stand-alone model, including endcaps and co-development.—NWM
What does it take to earn college-bound athletes $315 million in scholarships? For Athletic Republic, it means scientific, personalized training.
B. Good always served real food made by people, not factories, but the chain that started business as a healthy burger restaurant really took off when it introduced a kale salad to the menu.
Boston’s Pizza is neither all pizza nor connected to Boston; it’s gourmet, made-from-scratch food that’s two concepts under one roof—a sports bar and a family restaurant.
Denise Fenton is co-founder of R Taco
The first bite of Capriotti’s cheesesteak sandwich would ultimately lead to Ashley Morris buying the brand in 2008 and becoming CEO, and he says, “As you can imagine, I was born in L.A., grew up in Las Vegas. I didn’t know what a cheesesteak was. Boom, I try this thing, life changed.”
Husband-and-wife duo Landon and Kat Eckles focused on USDA-certified organic ingredients as the foundation for their Clean Juice franchise.
CoreLife Eatery President Scott Davis said his fast-casual brand aims to help customers avoid “fast food alley” on short lunch breaks with healthier food from responsible ingredients and what he called its “scratch kitchens.”
How does D.P. Dough do nearly half its business after midnight? Staying open “Crazy Late” helps, as does speaking the language of the brand’s core customer.
Scott Fischer bought the 30-year-old Dippin’ Dots and turned it around by going first to the impulse market that led to getting his new-age ice cream into grocery and convenience stores and schools.
After acquiring the Ponderosa/Bonanza chains, FAT Brands’ hearty stable of restaurants allow the chain to cross-pollinate franchisees’ portfolios with burgers, wings and steaks with a salad bar add-on.
Founder Ray Margiano said demographics are on his side as his Foot Solutions looks to expand beyond 100 units in 14 countries and help aging customers feel better on their feet.
Andrew Gruel of Slapfish talked sustainable seafood
“What’s really exciting about Freddy’s is we have great results, we have lots of great restaurants across the country but we have a lot of white space,” says Andrew Thengvall, senior VP of strategic growth at Freddy’s Frozen Custard & Steakburgers, touting the brand’s low royalties—4.5 percent—and high AUV of $2.1 million as it seeks multi-unit franchisees to expand in the northwest and northeast.
Franchising since 2007, Fuzzy’s Taco Shop is keeping the chill vibes rolling two years after opening its 100th location and attracting big-money backing from NRD Capital.
Multi-unit investment partners are the key to Great Harvest Bread’s growth strategy, says President and CMO Eric Keshin, and the brand, with 225 locations, sees opportunity to develop more than 2,000 restaurants across the country.
What does it take to achieve 1,175 percent sales growth? For Happy Tax, it’s making tax time a little less awful with a handful of novel innovations in the $19 billion industry.
The Hotworx model of using virtual instructors to teach its infrared studio fitness classes means lower payroll and fewer headaches for franchisees, says founder Stephen Smith, who notes the concept is simple, easy to operate and poised for growth.
Still primarily located in the Southeast, Newk’s Eatery CFO Tom Marshall said its large, diverse menu positions the brand well as new locations and third-party delivery boost the franchisor’s sales.
Matt Crumpton is CEO of D.P. Dough, and he told an engaging tale about very-early-morning carb runs at his college-centric brand.
The virtual office member “is the sexy part of the business, that’s where the profit is,” says Mark Hemmeter, CEO and founder of Office Evolution, who added “you’ve all heard of the sharing economy and we’re smack dab in the middle of that.”
Salomon Mishaan, founder of OXXO Care Cleaners, says the traditional industrial presses used in dry cleaning shops actually ruin clothes, but his franchise uses a different method: “With us we hand iron, industrial hand ironing but it makes it efficient and easy, but the best thing is the clothes don’t get burnt and the creases don’t get put in permanently.”
Tropical Smoothie Cafe is attempting to grow franchisee average unit volumes by a big margin, including an emphasis on efficient operations.