How Living Large brands aim to boost unit sales
Young franchises have plenty of opportunities to make mistakes, particularly when it’s time to boost franchise sales and start wooing potential candidates.
Perhaps they haven’t accurately figured out how much time, money and effort it really takes to break even and make a profit as a franchisor.
Or they haven’t established the criteria of a qualified franchisee and don’t know when to walk away.
Many emerging brands have dreams of reaching dozens or even a hundred units in their first couple of years, but franchise sales predictions aren’t always accurate. A new report by FranchiseGrade throws some cold water on those dreams: Only one out of five start-up franchises, or 20 percent, reached 100-plus locations and that was after their eighth year of franchising.
Twenty-three percent had 26 to 50 locations after six years in business, and 29 percent of franchises had only one to 10 locations after six years. After two years in business, 65 percent of franchises had no locations; 27 percent had one to 10; and only 1 percent had more than 100. Ouch.
This month we learn how our three Living Large brands are approaching franchise unit growth—and why they think their methods will work.
“We probably spend a disproportionate portion of our time talking about our quality training and our people.” — Levi Dinkla, Digital Doc
Digital Doc’s President Levi Dinkla is opting for the broker route to increase franchise sales. With 35 franchise locations open and more than 50 sold across 18 states, Dinkla believes it’s the way to go to introduce the digital device repair brand to new markets.
Working with several broker networks “seems to be the best route for potential franchisees to feel good about the purchase and for us, too, to feel another party has validated the candidate,” says Dinkla.
The groups Digital Doc uses all focus specifically on working with franchises and the company is able to tell the brokers exactly the candidates it’s looking for.
“That way people’s interest and qualifications are more in line with what we’re looking for,” says Dinkla. “One hand feeds the other.”
Digital Doc is focusing its efforts on multi-unit ownership, awarding agreements for three stores and up as a way of not just extending the brand’s footprint but also securing owners who are well-capitalized and enhance the stability of the system.
Franchisees with multiple locations have “more depth on their bench to keep growing,” says Dinkla, and having a higher store count ensures that if there is employee turnover it has less of an impact on the business because the ‘zee can pull talent from other locations.
When it comes to attracting qualified prospects, Dinkla notes quality breeds quality.
“We probably spend a disproportionate portion of our time talking about our quality training and our people,” he explains. “We really stress our quality in every aspect and our proposition to franchisees is we’ll help them stand out and rise above the competition.
"We want to make the sale and grow the concept,” continues Dinkla, “but if you sell three to the wrong candidate you’re getting yourself into a bad spot early on.”
Digital Doc also has the backing of parent company Highland Ventures, which with its commercial property division has the real estate expertise to assist franchisees with finding the right storefront, something that’s especially important in a new market.
“That’s so crucial for the first one—get that familiarity and high visibility to attract customers and attract employees,” says Dinkla.
“Certainly my family’s background is something I’m super proud of—and it lends itself to a certain level of trust.” — David Morton, DMK Burger Bar
Leverage industry expertise
DMK Burger Bar founder David Morton is eschewing the broker route in favor of direct conversations with franchise candidates, a strategy that’s all about putting the Chicago-based power trio behind the brand’s expansion front and center.
“To me, it’s the notion of tell me not who you are but with whom you walk,” says Morton. “And with a leadership team of me, Michael Kornick and David Grossman, our names are well known, especially on a local basis, and we’re most eager to find partners close to home.”
Kornick is a five-time James Beard-nominated chef, and franchise sales expert Grossman has worked with large national brands such as Subway and most recently developed the Freshii brand in Chicagoland with more than 40 locations. Morton, meanwhile, is the son of Morton’s Steakhouse founder Arnie Morton and has developed eight other restaurant concepts under the DMK Restaurants umbrella.
“Certainly my family’s background is something I’m super proud of—and it lends itself to a certain level of trust,” says Morton.
Since the launch of its franchise program last fall, DMK is tapping into its existing connections, people Morton says have been following the company for years, waiting for the opportunity to help it expand. As the year progresses Morton says DMK will be “very active in the franchise community,” attending industry expos and other shows aimed at entrepreneurs.
“We don’t have a blanket strategy just to sell. We want people with experience and the same aspirations as us,” says Morton. “I view us as an HR company disguised as a restaurant company, so our growth strategy is really all about the people.”
Outside Chicago, growth markets include Columbus, Ohio, and Milwaukee, Wisconsin, cities Morton says have vibrant urban areas and where he has industry contacts.
"To some extent it’s a numbers game—we’re not going to want everyone and not everyone is going to want us.” — Andy Howard, Huey Magoo's
For seven-unit chicken tender restaurant concept Huey Magoo’s, two recent hires are meant to put some polish on the brand’s franchise sales efforts. The Orlando-based company recently brought on franchise development consultants Dan Collins and Paul Zielinski to assist with statewide and eventually nationwide expansion.
“I just wanted a real professional to be selling for us,” says Howard. “I will always be the final decision maker as president and CEO but I wanted a true, true professional who could devote the time more than I could to selling franchises.
“We’re still early on, so it’s not necessarily an easy sell,” continues Howard. “So to have someone who believes in what we’re doing and knows what we’re all about … these guys have the experience.”
Collins has more than 30 years of experience in the restaurant industry, including business and franchise development for brands such as Arby’s, Johnny Rockets, Hurricane Grill & Wings, BurgerFi and Kenny Rogers Roasters.
He’ll focus on franchise sales of strip center restaurants while Zielinski, whose background is in non-traditional foodservice development, will work to expand Huey Magoo’s presence on college campuses and in airports.
Huey Magoo’s is also leveraging the networks and contacts of its ownership, a group of former Wingstop executives who, led by Howard, bought the concept from its founders in 2016. The franchise sales strategy also includes exhibiting at select industry shows and tapping into professional social channels such as LinkedIn, which Howard says is proving to be a good lead generator.
“To some extent it’s a numbers game—we’re not going to want everyone and not everyone is going to want us,” says Howard. “But we’re not ever going to rush into anything just because we want to take the money.”
Howard doesn’t see the need to offer reduced development fees or other incentives to reel in franchisees “because then everybody is going to want a one-off deal if they see someone else got one.” Instead Huey Magoo’s offers what Howard feels is an appealing package with a strong marketing program and grand opening assistance.
Laura Michaels, managing editor, reports the progress of three emerging franchisors through an entire year of unit sales and growing pains. Join the discussion and contribute your brand's best practices in her LinkedIn group, Franchise Times Insights. Upcoming topics are: navigating legal matters, selecting sites and building field staff. Reach her at firstname.lastname@example.org.
Be selective. Too often, says Mark Siebert, franchisors try to market to the franchise community without doing any preliminary research or developing a well-thought-out plan. “Everyone has an opinion on what works, but the fact is there is no silver bullet,” says Siebert, CEO and senior franchise consultant at iFranchise Group. “Messages should convey the franchise’s unique value proposition and be specifically
crafted to appeal to a select audience of prospective franchisees.”
You can grow fast and still grow right. Start with granting franchises in your geographic area, advises Bob Gappa, founder and CEO of consulting firm Management 2000. “We use a hockey stick as a growth metaphor,” says Gappa. “The bottom of the hockey stick represents slow and steady growth, ensuring the franchisor knows what they are doing to help ensure franchisees get a solid and successful start and the franchisor has solidified their new franchisee training, site selection and pre-opening process, secured supplier relationships, ensured the operations are documented properly, etc. Then they can move to rapid growth.”
Support, support, support. “Nothing sells like franchisee validation, so if you’re failing to support existing franchisees but still pushing for growth, it’s going to hinder your efforts,” says Siebert. “Make sure there is a strong support structure in place before you start to grow, and if a franchisee is only marginally qualified, learn to walk away.”
Avoid temptation. “Do not give in to the temptation to not make a franchisee be in full compliance from the beginning,” says Gappa. “When the franchisor lets a franchisee off the hook of compliance, it means the franchisor is not serious about compliance. When this genie is let out of the bottle it is very hard to get the genie back in the bottle."