No discount concern for Denny’s ‘zee; calculated growth for BK owner
Illustration by Jonathan Hankin
I was recently perusing Yelp ratings for a Denny’s in Murrieta, California, a residential community of 115,000 people in Riverside County. Several reviewers who liked the restaurant had singled out two servers for high praise. I figured the outpost must belong to Denny’s franchisee David Beshay. After all, Beshay Enterprises is headquartered in Murrieta.
Nope, said Beshay during a phone interview in mid-April. It wasn’t his. But he had opened a Denny’s in town a week earlier. Did you at least poach one of those servers, I jokingly asked. He laughed, then boasted: “I don’t poach anybody. People come to us because of our reputation.”
His reputation must be good judging by the numerous awards his company has collected from three of the four brands he franchises. The company website, for instance, notes Beshay won Denny’s President’s Award for “achievements and outstanding commitment to Denny’s as a multi-unit franchise owner.” Jack in the Box and Corner Bakery have also bestowed awards upon him.
Beshay wanted to talk about Denny’s (he franchises 35 units). But with Jack in the Box’s franchisee problems back in the news via an April press release calling out the formation of a franchise advisory council, it’s the first thing I ask him about. After all, he operates 185 units and will open two more in Oceanside and San Diego over the next 18 months.
“We still remain upset about the lack of leadership and staffing at the local level and severe G&A cuts,” he said, the “we” referring to the chain’s National Franchise Association. The franchisor “still remains in their position: ‘You don’t need a chief marketing officer and every organization is doing these” general and administrative cuts.
Meanwhile, Denny’s could scarcely have a more enthusiastic supporter. Beshay, who operates units in 10 states, signed on to the iconic brand (without a development agreement) four years ago and has so far built five and acquired 30. Unit economics were the main draw. “It is a good investment,” he said, and added he likes to own real estate where possible.
Moreover, the leadership team, led by CEO John Miller, held great appeal. So did the various unit footprints, which allowed Beshay to open a Denny’s in an endcap in Chula Vista, California, his first outpost.
I asked him if the brand’s constant discounting was a concern. “Discounting isn’t a bad word,” Beshay insisted, “and I don’t describe it as ‘discounting.’ I describe it as ‘value.’ If you provide a great experience, service and food in a remodeled facility, the value proposition increases. And that is one thing Denny’s has done very well.”
His first Popeyes Louisiana Kitchen opened this spring in Riverside County, where he has development rights along with San Diego County. The brand, which he said is under-penetrated in Southern California, made sense for another reason: “I wanted a concept that’s complimentary to my portfolio and helps support my growth plan. And their labor model is friendlier than other brands.”
Strategic, calculated growth
“In 2020, we’re looking at two new builds,” said Burger King franchisee Mike Laird of Laird Management. “We are conservative and grow in a strategic, calculated way. We want to make sure we are not over-levered.” The Phoenix-based company, which operates 32 Burger Kings in Arizona, will likely open those restaurants in and around Tucson.
Laird’s conservatism might sound familiar. Such caution is now commonplace among multi-unit franchisees who are worried about opening costly new stores amid oversaturated markets and increasingly severe labor shortages. According to restaurant research firm TDn2K, “We face the perfect storm of fewer working teens, increasing turnover of managers and employees, fierce competition from retail and a crisis of employee engagement.”
“This is probably the toughest labor market that we have ever had,” Laird, 40, told me. He cited the gig economy, which has encouraged millions of young people to become freelance workers, as contributing to those woes. “Those are the folks that used to work for us. Now they can turn on [a ride-share] app on their phone and make extra money,” he said.
In an effort to devote more time to human resources, Pam Bakker, Laird’s controller and HR director, recommended the company purchase accounting software to improve the efficiency of certain procedures. The Sage Intacct software “has multiple integrations available and we are still working through some of those,” she said. “But we have reduced our monthly close in half. We were at 20 days. We are at 10 days now. And that’s due to some of the additional functionality of the accounting software.”
Arizona is one of nine states that requires employers to use E-Verify, the federal government’s online system to verify whether a job applicant has legal identity and authorization to work in the U.S. (Utah, Tennessee, Mississippi, Alabama, Georgia, Virginia, and North and South Carolina comprise the rest.)
Bakker, who oversees the process at Laird Management, said the company’s “tentative non-confirmation” (or TNC) rate is low. “We will have one or two TNCs a month, and last year we hired 1,000 people,” she said, and then added the rejections likely contained a mistyping on the application. “For us, E-Verify is the security that we’re doing it right, and we’re not going to put 700 people out of a job.”
The penalty for hiring an undocumented person is harsh. According to the state’s website, state law allows “a county attorney to bring a civil suit to suspend or revoke business licenses if a business intentionally or knowingly hired an ‘unauthorized alien’ worker.”
Noted Laird: “We’re very sensitive about our name getting out there with immigration—just from a PR standpoint.”
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 firstname.lastname@example.org.