Our writers were there in force, at FT’s spring conference, and report the highlights
Jimmy John’s Dealmakers appearance was one of the highlights of the Franchise Times Finance & Growth Conference in Las Vegas March 13-15.
A&W moves beyond Yum-owned years
Five years after its franchisees purchased the brand from Yum Brands, A&W is in growth mode with store prototype updates, menu changes, attracting new franchisees and spreading the word that one of the world’s oldest franchised brands is back in the game as it nears its 100th anniversary.
COO Paul Martino said, “A&W is a brand that needs no introduction” sharing his childhood experiences in California. Traveling the country to visit franchisees, often wearing his logo clothing, he often hears from strangers about first dates, first jobs or Saturday nights at the frozen treat and “all-American food” purveyor.
While there are many challenges, like co-branded locations with former Yum Brands that will continue, Martino said franchisee control is also very unique in the industry, but ensures that “literally no decision big or small … is not made without collaboration of our franchise board.”
Saying there’s “no exit strategy” for this kind of ownership structure, he said everyone in from franchisees up to its C-suiters are dedicated to the brand and making sure it’s prepared for its next 50 years of operations.
After several years of stabilizing the brand and reassuring its franchisees, he added the most important goal is growing profitable same-store sales that will solve many of the brand’s challenges while enabling growth both within the United States and abroad.
The brand opened 9 new locations in 2015, 15 new locations last year, and for 2017, he projected it will open a minimum of 20 new restaurants, inside the United States.
On the food side, “discounting is not an option for us,” he said, adding its focus has been on improving food quality, new frozen treats that have produced significant financial results, and improved social marketing, including its National Root Beer Float Day, which boosts the brand’s online engagement into the top brands in the franchised food industry.
“We like to talk about what we’ve accomplished rather than what we were going to accomplish,” Martino said. “Our brand is back.”
Bill Koleszar, American Family Care’s CMO.
American Family Care boasts reduced costs
At more than 170 locations and serving more than 2 million patients each year, American Family Care has become a major medical care provider. And it’s growing fast; company President Randy Johansen reported a 34 percent year-over-year comparable sales growth and strong unit growth too.
“By the end of this year we’ll be at 220 units,” said Johansen. “All of which are in the pipeline. And in 2017, we’ll have 8 million patient visits and total revenue of $560 million.”
Some of that growth comes from standard franchise sales, but it’s been enhanced by a new corporate headquarters where most of the system lab tests are done as well as training and all the support infrastructure. Cost-cutting was a major strategy as well; new franchise locations now break even in just nine months.
“Credentialing, training and lowering facilities costs helped push that breakeven point,” said Johansen. “It’s a pretty impressive movement.” The brand hopes to surge ahead with aggressive franchise growth and partnerships with health networks and hospitals.
Charlie Graves, Athletic Republic.
New programs pump up Athletic Republic
Athletic Republic “translates human potential into human performance,” said CEO Charlie Graves, offering individualized, sport-specific training for athletes at every level from youth and high schoolers to those pursuing collegiate and professional careers.
“Performance sports training is just that, training. We’re not their coach,” explained Graves. Instead, “we deliver an athlete to the coach that’s ready to perform.”
Founded in 1990 and franchising since 2006, Athletic Republic finished 2016 with 115 locations and aims to expand its footprint this year by co-locating with physical therapy clinics and targeting multi-unit heath and fitness operators as franchisees.
Four core training programs—Acceleration, Endurance, AR-Fit and Recovery—are complemented by the addition of high school team training, weight training, and NFL Scouting Combine-specific training, plus retail products such as Athletic Republic Conditioning Cords used by NFL quarterbacks and MLB pitchers. This year the company will also launch its concussion recovery program.
The company has propriety equipment, Graves noted, including a treadmill the goes up to 30 mph, and is a recognized brand among elite athletes, having trained NFL players such as Darren McFadden and Melvin Gordon, and numerous Olympians.
Franchisees are active owners, many of whom continue to work full time, and utilize marketing to build relationships with area coaches, booster clubs and parents. The average startup cost is $200,000; average revenue varies depending on the market size, from $180,000 to $535,000. Those revenue numbers, noted Graves, are from 2015, before the introduction of several daytime programs and a corporate wellness offering he expects to lift revenue.
Auntie Anne’s President Heather Neary portrayed her brand as a business miracle.
Auntie Anne’s touts the ‘power of more’
Calling its twisted-up business model a “modern day business miracle,” Auntie Anne’s President Heather Neary told the story of a brand started in 1988 out of economic necessity that is now up to more than 1,600 locations in 48 states and 25 countries.
“We’re singularly focused on a fresh, hot, golden brown pretzel and fresh lemonade that’s still made with the original recipe,” she said, before extolling the brand’s slow but steady growth streak that has made the concept a success today.
“These numbers could be higher,” Neary said, adding the brand is exceptionally choosy about who it selects to enter the system. While it is 65 percent mall-based, Auntie Anne’s is looking at non-traditional locations for unit growth, including airports, train stations, travel plazas, Walmart in-store locations and universities, which it views as a major opportunity for the future.
Speaking of her team’s strong focus on unit-level economics, she said that’s a result of accepting there are “a lot of things we can’t control, but this we can.” To that end, Auntie Anne’s has reduced the cost of store remodels and new builds, as well as leaning on vendors to help stabilize or reduce the cost of goods for its franchisees.
In concert with refreshed locations, the company has put a significant emphasis on the experiential aspect of in-store visits, as well as engaging social media and digital channels. Neary added the company’s mobile app has more than 1 million users, along with heavily trafficked social media channels.
“We believe in the power of more,” she said, summing up its energetic focus on expansion. “Even though we’re 29 years old, we act like children, because we’re constantly innovating.”
Batteries+Bulbs is enduring if not sexy
In an agenda dominated by food brands, Russ Reynolds, CEO of Batteries+Bulbs, shed some light on why his retail brand is a good financing fit. “We’re not sexy, but we’re predictable,” Reynolds said. And they’re immediate. “Amazon Prime doesn’t do you any good when you have a power outage”—or when your car won’t start and you have a meeting at work in 15 minutes. Batteries+Bulbs stores have more than 20,000 SKUs (stock keeping units) for batteries and 12,000-plus SKUs for light bulbs. In addition, they repair cracked screens for smart phones and tablets.
They can offer personal attention delivery services can’t, Reynolds said, such as installing the purchased batteries in watches or electronics and replacing and disposing of lithium batteries (which have been in the news lately thanks to hoverboard fires). “Half of what we sell is governed by shipping regulations,” he said. There are 696 stores open, with systemwide sales of $571 million. Same-store sales were up 7 percent in 2016. The potential market for the concept, he said, is 2,800+ stores. The loan size they’re seeking, he said, is $150,000 to $250,000 with a term of five to seven years.
Neil Newcomb, Brixx Pizza.
Brixx Pizza shoots for that first-date crowd
Loosely modeled around a casual restaurant in Colorado ski country, Brixx Wood Fired Pizza is a nine-year-old concept launched by high-end restaurateurs looking to retain the best of full service, while cutting out everything that wasn’t needed to create an ideal guest experience. As presented by brand President Neil Newcomb, Brixx is now up to 33 units with 20 percent of its sales coming from craft beer and wine.
“Alcohol is the greatest thing since sliced bread,” Newcomb said of its successful cocktail program. “You tip that tap and out pours money.” Now with 24 craft beers on tap at every restaurant in the system, he added keeping fancy beers front and center allows the brand to capitalize on its customers’ high-end beer cravings, while keeping the Budweiser and Miller products hidden out of view just like soda and tea—something everybody has, but few need to advertise.
Its pizza selections are equally crafty, he said, including “esoteric” ingredients like Thai-style chicken and fresh rosemary—even though pepperoni and cheese remain the most popular choices, especially for kids. Brixx also offers gluten-free pizzas, which the company views as another winner.
“We don’t look at gluten free ... as a static number,” Newcomb said. “Every time we sell a gluten-free pizza there’s probably two or three entrees that follow that gluten-free pizza in.”
Compared with the range of upstart fast-casual pizza brands, Brixx is different, he said, due to its full-service dining concept that includes a host stand, table service, three distinct day parts and $14 check averages. All of its locations are open until 1 in the morning, which undoubtedly boosts those alcohol sales. In addition, its customer base is divided into equal thirds between millennials, generation X-ers and baby boomers, which he said is particularly enviable for the category.
Newcomb added its restaurants are “great for a first date, not so great for a one-year anniversary.” That wasn’t a problem, he said, because “there are a lot more first dates than one-year anniversaries.”
Buffalo Wings & Rings insists on club status
Somewhere at every sports stadium there is a quiet little respite between the nosebleeds and the drunken masses: the club. Legend has it there are no lines, the food is worth the cost and you can have a real conversation over a good beer.
Few will ever see that storied place, but Buffalo Wings and Rings CEO Nader Masadeh turned those legends into a friendlier sports-themed concept. Note, it’s not a bar. “We’re the club level sports experience,” insisted Masadeh. “They are what we call the sports bar, we are what we call a sports restaurant.”
Masadeh was part of a new management group that took over in 2005, reimaging the brand and preparing it for growth. Now, the Cincinnati-based restaurant counts 55 locations in the U.S. and 16 abroad. It serves never-frozen burgers and wings breaded to order as well as other chef-inspired recipes.
But don’t expect breakneck growth. To ensure operators are great at what they do, the company requires all operators serve as a general manager in a location for five years. But with an average of $2.45 million sales at the top 20 locations, prospective operators might be happy to wait.
Chicken Salad Chick has come a long way
After showing his promotional video to applause, Chicken Salad Chick CEO Scott Deviney mused, “When I showed this a few weeks ago at our franchisee conference, it got a standing ovation. It’s a little bit different crowd here.”
Deviney may not have had them on their feet, but he did have their ears as he told what he said was the back story of the brand that everyone already knew: The chicken salad chain was started by stay-at-home mom Stacy Brown as a way to pay her bills. When the health department shut down her ability to sell out of her own kitchen, she rented a space and by 1 p.m. on the first day sold out of the 40 pounds of chicken salad she had prepared.
Their core customers (Deviney called them “heavy users,” but in deference to those customers being primarily female, we changed the wording to “core”) come in several times a week for their chicken salad fix. The system is 80 percent franchised, with systemwide sales of $54+ million. Because the franchisor believes in the system, Deviney said the plan is to continue to open company-owned stores keeping a 20/80 mix.
Average unit volume is $1 million with an average seat count of 80 in 2,730 square feet. The chain is in eight states with plans to open 20 to 30 restaurants this year. “Our best accolade is the franchisee owners calling us to open more restaurants,” Deviney said.
Cinnabon taps warm and fuzzy nostalgia
Joe Guith, president of Cinnabon, is fired up by the brand’s recent renaissance involving brighter, fresher stores, a redesigned logo and social media performance that places the mall-heavy treat store into the top echelon of QSR brands among millennials.
“We don’t know what the future holds, but we’re taking steps to ensure we’re prepared for it,” he said, adding the group of young adults is “the largest and most important demographic from a spending standpoint.”
Guith outlined four different priorities, including updated restaurants, a refreshed menu, improved communication with guests and technology upgrades to help its franchisees capitalize as this group moves into economic dominance. Saying it’s been 15 years since big changes at Cinnabon, he added the changes were long overdue.
The new stores, Guith said, are a “cross reference” between a French patisserie and a home kitchen, connecting with younger consumers who may remember parents cooking Cinnabon-branded products in their homes for a dash of warm and fuzzy nostalgia.
Other in-store updates include a greater focus on merchandising, more digital technology and minimizing costs so Cinnabon 2.0 costs no more than the original.
On the food side, the bite-sized BonBites line has improved customer frequency, delivered higher margins and lower food costs for franchisees. Next, he said, the focus moves to its premium beverages, which resulted in tweaks to “pull out a lot of cost” for ‘zees and customers alike.
Addressing the elephant in the room, Guith said “malls aren’t going away,” but said the brand is pivoting toward non-traditional locations including airports, transit stations and travel centers to reach hungry travelers wherever they are.
He closed the presentation with video of clips from Better Call Saul, The Late Late Show and Two Broke Girls, among others, featuring Cinnabon. The CEO said its high-profile virality is keeping the brand top of mind for millennials on down.
CoreLife COO Scott Davis pitched the brand beyond millennials
CoreLife Eatery wants guests to share food
Every restaurant brand is trying to figure out what millennials want to eat and how. But it’s not just millennials who know how to pronounce quinoa (KEEN-wah) that gravitate to the health-forward CoreLife Eatery, according to COO Scott Davis.
“It’s not just about millennials,” said Davis. “We see folks like military folks, state troopers all day long, people that need to be healthy come into CoreLife.”
The concept sees about $1.4 million AUVs according to the most-recent FDD and the average check is about $12. Davis said they expect to have 30 restaurants by the end of 2017—they’ve currently signed a handful of franchisees to help grow the brand.
While the food pulls from multiple demographics, there are a few things tailored for millennials and their cohorts. Davis said they put a special emphasis on presentation to keep customers doing paid marketing on social media.
“We live in this food-obsessed world. Everybody is thinking about how they share their food,” said Davis, referring to picture-posting on Instagram and elsewhere. “If you’re in the space today and people aren’t sharing your food, you’re not winning.”
With some aggressive social marketing, Davis said they kick off new restaurants with 8,000 to 10,000 followers to create social media critical mass.
Mobile ordering is on the way as well. In an initial rollout, mobile orders surged to 7 percent of orders without any marketing. Davis said they were prepared for the delivery future by designing the option for two lines (one delivery, one in-house) to stay ahead of demand.
Cowboy Chicken CEO Sean Kennedy said he was “blown away” the first time he tried their wood-fired chicken.
As the spit turns for Cowboy Chicken fate
The not-so-secret weapon at Cowboy Chicken is right out front when guests enter: a dozen or so golden-brown rotisserie chickens, turning over a wood fire. That’s just like founder Phil Sanders, also known as Cowboy Phil, used to do it, cooking rotisserie chicken in his backyard to delicious perfection.
“The first time I tasted Cowboy Chicken I was blown away,” said Sean Kennedy, president and CEO, who bought the Dallas-based brand, started in 1981, with partners a couple of years ago. “We’re old-fashioned. We’re still cooking with wood. We try to keep everything simple.”
Cowboy Chicken has 22 locations in five states: Texas, Oklahoma, Nebraska, Louisiana and Alabama. He estimates they’ll open eight to 10 stores in 2017.
In 2015, Kennedy hired a research firm to quiz guests about what they liked and didn’t like about Cowboy Chicken. The food was universally loved. The interiors, “not so much,” Kennedy said. They developed a new logo, new branding and designed a new prototype that opened in 2016.
They’ve also rolled out a new app that’s becoming popular, proving that not everything at Cowboy Chicken is old school. “I make the joke, we’re so old-fashioned we’re still cooking with wood,” he said. “But if you look under the hood, we employ a lot of technology.”
Del Taco puts fresh food front & center
Four years ago Del Taco set out to reposition itself from a price value brand to one seen through a quality value lens, combining its convenience and speed with working kitchens preparing fresh ingredients to ultimately provide a better guest experience, explained Steve Brake, Del Taco’s CFO and executive vice president.
The everyday value proposition of its Buck and Under menu “cements our heavy user,” Brake said, while an evolving upper-end menu allows customers to “trade up” for items with fresh-grilled chicken and steak, slow-cooked pinto beans and pico de gallo made from scratch. Check averages sit at $7.12, Brake noted, while the average unit volume is $1.41 million.
Part of Del Taco’s new campaign includes more of what Brake called “freshness coolers” in restaurants to display ingredients such as fresh avocados and blocks of cheddar “so the customer sees it.”
“The freshness coolers really help drive the believability of our freshness claims,” said Brake, especially to the millennials.
Del Taco is focused on growth in the western third of the country, where it sees opportunity to infill markets with 300-plus locations, along with active emerging markets in Florida, Georgia and South Carolina. Potential franchisees have $500,000 in liquid capital, $1 million net worth and commit to developing a minimum of five units.
Del Taco won the 2016 Franchise Times Deal of the Year award for its merger with Levy Acquisition Corp., the shell company controlled by Chicago restaurateur Larry Levy, and its subsequent refinancing of debt and debut on the public markets.
Pushing West, Dunkin’ looks to build brands
Consumers drink billions of servings of Dunkin’ Donuts coffee each year but an increasing number of those caffeinated cups aren’t coming from Dunkin’ stores, explained Jason Maceda, and that’s where the company sees one opportunity among many. Dunkin’ has grown its consumer packaged goods presence in recent years, said Maceda, VP of finance, with its K-cups and pounds of coffee sold in grocery stores, and is about to launch its first line of bottled coffee drinks through a partnership with Coca-Cola.
Franchisees share in 50 percent of the profits from these CPG lines, Maceda said, which is an extension of Dunkin’s strategy of recognizing the contributions of its ‘zees in continuing to expand the overall reach of the Dunkin’ and Baskin Robbins brands. “We know we’re not going to build more stores if our ‘zees aren’t profitable,” said Maceda, and Dunkin’ Brands has an entire team dedicated to unit economics, along with a profitability subcommittee.
Systemwide sales reached $10.8 billion in 2016, with revenue at $829 million. A traditional Dunkin’ store has an AUV of $1.1 million while a Baskin Robbins location is at $345,000. More than 400 new Dunkin’ Donuts stores opened last year versus nine Baskin Robbins, but Maceda noted he expects the Baskin brand to “grow significantly in the next couple of years.”
Dunkin’, likewise, is pushing into new territories. There’s one Dunkin’ store per 8,700 people in its core New England markets, versus one store per 66,000 people in emerging markets. “So we think we can double our footprint in the United States given the opportunity in the West,” said Maceda, and outside its core markets Dunkin’ works with franchisees to gradually increase royalties up to its standard 5.9 percent.
Capital needs for 2017 include $263 million for new builds, plus $99 million for Dunkin’ Donuts remodels
Customized experience is Elevated’s objective
The Elevated Brands has been working the wellness segment even harder than before. Its flagship brand, Massage Heights, now counts 148 “retreats” and according to CEO Glenn Franson, the brand is poised to top $110 million in systemwide sales in 2017.
Franson said as the brand grows, new options are coming, including a highly customized experience that will be the future package for the spa. “We talked to guests,” said Franson. “What we heard from them most was that they’d like to customize the experience.”
In two successful design tests, guests can customize their music, lighting, scents and find new services and membership packages. Franson said he hopes to have 145 locations updated over the next three to five years.
Since announcing the acquisition of The Gents Place at the Franchise Times Finance and Growth conference last year, Elevated Brands has put some of that growth energy behind the new concept. The Dallas-based company is tapping into the $5 billion men’s grooming market.
Franson said while they were looking to add a brand, nothing quite clicked until The Gents Place came in with star partner Emmitt Smith in tow, a money-making membership model and $1 million to $1.4 million AUVs (which Franson said was about three times the national average). Now the brand founded by plucky and impeccably groomed young entrepreneur Ben Davis is taking off among franchisees.
“In the last 45-60 days, we’ve awarded nine territories,” said Franson. “The goal is to award 140 licenses in the next five years.”
Fastsigns CEO Catherine Monson put out the call for new brands to bring under their umbrella.
FastSigns shops for new players to buy
Bursting with energy as she answered the self-posed question of “Why are we here?,” FastSigns CEO and President Catherine Monson said the sign and digital content franchise is on the hunt for franchisee financing, the brand is looking for new franchise concepts to acquire and, perhaps most significantly, “because our franchisees make so much money.”
Now up to 650 locations in nine countries, Monson attributed the brand’s growth to fat margins, strong franchisee support and some of the highest franchisee satisfaction numbers in all of franchising.
She added FastSigns is working toward four key strategic objectives: increasing franchisee profitability, boosting customer volumes, boosting the value of the brand and moving those sky-high franchisee numbers even higher in the coming years.
“This is not your father’s sign company, this is not your father’s banner company,” she said. “We are more than fast, more than signs.”
Extolling the brand’s move beyond physical signage and into digital content and branding, Monson said its embrace of visual ideas is going to ultimately be much more significant for the brand than traditional signage.
Getting granular as she delved into average unit volumes and growing margins and easier hours than several other franchised categories, she added FastSigns implemented a new point-of-sale system that has integrated email marketing, allowing its franchisees to reach more prospects and customers.
“We have a saying around our office,” she said. “Success is a function of superb execution of the basic fundamentals.”
Fazoli’s 3.0 aims to turn a new page
Fazoli’s story reads like a long novel, declared Carl Howard, CEO. “The beginning was great,” he said about the Italian restaurant chain founded in 1998 in Lexington, Kentucky. “The middle, you would close the book and put it on the shelf it was so horrific.”
Since he joined as CEO a couple of years ago, he’s been intent on re-making the brand and getting franchise sales going again.
“We’re uniquely positioned,” he said, “between QSR and fast casual, and we compete strictly on food and service, not price. We’re not afraid to take price. Nobody can do what we do on a $7.20 price point.”
Fazoli’s has 214 locations, mostly in the Midwest, including 91 franchise locations and 123 company-owned.
Howard is calling the latest chapter Fazoli’s 3.0. “How many have heard of Panera 2.0? That’s the moxie, and we’re going to do it one better,” he said, referring to Panera Bread’s widely publicized and successful effort to re-boot that brand. “We will be the second chain, larger than 100 units, to have no artificial ingredients” by this June.
(Panera was the first, he said.)
Fazoli’s had more than 87 artificial ingredients before on its menu, so it was a “massive” effort to get to zero. “We’re putting a lot of money into this and frankly, food tastes better.” In other words, Howard is working toward a happy ending for Fazoli’s.
Freddy’s strives for hospitality culture
“We will not be a company that is run by the POS system,” declared Andrew Thengvall, senior vice president of Freddy’s Frozen Custard & Steakburgers, the restaurant chain founded in 2002 in Wichita, Kansas, with 250 units across the United States.
He was talking about Freddy’s emphasis on hospitality, which he says is fostered by general managers who gain bonuses based on store profits, and who are also offered the opportunity to buy into stores.
Thengvall recalls his first week at Freddy’s, when he toured stores with one of the restaurant’s co-founders, Bill Simon. “And he starts picking up stuff in the parking lot. And I thought, Wow, this guy is picky. We walked the store with the GM, and that made an impression on me,” he said.
Today, when he goes to a Freddy’s with his kids, “we pick up napkins off the floor. We pick up French fries,” he said. “We discuss with our GMs across the system, look at this from a guest’s perspective. If something’s broken, they should fix it,” and not worry about ringing up a new order of French fries, for example, if it’s dropped on the floor—just take care of the guest.
“If you want hot fudge on your steakburger, we will do that for you,” he said.
The message permeates all the way through the ranks, he said, and he showed a video of a TV news story to prove it. A cashier took a little kid’s order and waited while he nervously counted up his dollars and coins to buy a custard—but he didn’t have enough. So the staffer pulled out his own credit card and paid for it himself.
Later the staffer got a note from the boy’s mother, thanking him for making the family’s day. Taped to the bottom of the note was a $100 bill, and that really good tip made the staffer’s day—and likely will stay in the Freddy’s hospitality hall of fame for a long time to come.
Fuzzy’s Taco rolls with NRD Capital
Aren’t there enough fast-casual Mexican restaurants? President Mel Knight of Fuzzy’s Taco Shop gives a resounding “No!”
NRD Capital thought the same. The private equity group headed by storied former Popeyes franchisee and IFA chairman Aziz Hashim bought a majority stake in the business in March of 2016. Since then, it’s grown by 90 restaurants to 115, and plans for another 30 in 2017. Sales are up since then too, even in a tough restaurant environment. Knight said it’s only getting better.
“The next FDD will show that in 2016 it was exceeding $1.5 million,” said Knight, referring to average unit volumes stated in its franchise disclosure documents. “Our goal is to get it over $1.6 million, and we’re confident we’ll get there.”
At the core, the Texas-based concept features Baja tacos, burritos, salads, all-day breakfast and a strong beverage component. Knight said new digital tools would make all the non-core logistics a little easier. Digital menus just rolled out and a fully digital recipe guide keeps things simple (and easy to update) in the back of the house.
As for real estate, Fuzzy’s has partnered with Forum Analytics to bring a little clarity to the real estate world. “All of our growth has been on grassroots decisions and demographics so now we are able and capable of identifying better sites along with those analytics around real estate specifically,” said Knight.
Reinvention rings phones at Gatti’s
Opening his presentation with some selfdeprecating humor, Gatti’s Pizza President Michael Poates said, “this physique takes hard work” when talking about his love for the Austin, Texas-based company he purchased in June of 2015.
Calling it a seasoned brand, alluding to its founding in 1964, he said Gatti’s is a restaurant on the yeast-fueled rise that’s not in search of a specific customer demographic, but instead is solely focused on attracting families to its large restaurants that include large menus, wine and beer for the parents and a significant number of games for the children in tow.
Focusing on smaller towns and rural environments rather than expensive urban parcels, he said the brand’s priority is offering a “humble, great product” in underserved and less expensive markets.
“This works in any town,” Poates said. “We really see some advantage looking at rural real estate opportunities. If you start to drive for more expensive real estate, you have to price yourself in accordance with that.”
Gatti’s locations are large, ranging from 7,000 to 20,000 square feet. In recent months, the brand has boosted its technology with online and Facebook ordering, a national loyalty and gift card program, and an increasing focus on its social media marketing channels.
“Out goal was to go back in time rather than into the future and find a place where this company began,” he said of their efforts to refocus the brand under its new ownership. “Our goal in launching the franchise campaign … is to find the guests who had great memories with this brand and reengage—we think the brand is absolutely ready for that and our phone are already ringing.”
Great Harvest tries hub-and-spoke model
A hub-and-spoke approach is the new expansion idea at Great Harvest Bread Co., described by Eric Keshin, president and co-owner, which has 193 stores and systemwide sales of $103.3 million in 44 states.
Established in 1976, Great Harvest started as stand-alone bread bakeries. That evolved in 1998, when operators started selling sandwiches. Three years ago, when Keshin bought in, the primary concept was a bakery/café that seats 25 to 30 people.
“But most recently we’ve evolved this. We will bake it in the hub,” also known as the bakery/café, “and we now will open spokes, where we’ll sell all the stuff baked in the hub,” he said.
Before the franchise agreement stipulated that one store would have a 10-square-mile territory, but the new hub-and-spoke model will allow operators to gain capacity.
“Now it will be a way for a person to leverage their investment by opening more cafés,” Keshin said. “We can support two to three spokes from all these existing stores.”
Growler USA jumps on the Craft Beer Craze
Dan White saw an opportunity to define the American brewpub experience, and as the founder and CEO of Growler USA he’s looking to do just that. With its combination of up to 100 taps and a food menu tailored to pair well with beer, “we feel we have the right product in the right place at the right time,” said White as he noted there are more than 5,000 micro and craft breweries in the country producing hundreds of styles of beer.
Launched in 2013, Growler USA began franchising in 2015 and now has 12 locations open with another 15 on tap by the end of the year. Franchisees select the beers (and hard ciders, draught wines and even craft sodas) for their locations and develop relationships with the breweries in their region to create a community around craft beer. In addition to certified cicerone training, franchisees train at the company-owned location in Centennial, Colorado, which doubles as an R&D lab and is across the street from Growler USA’s headquarters. The company’s selection process is supported by FranConnect, a move White said was made after they realized many potential candidates ultimately weren’t qualified.
“I think some people have watched too many episodes of ‘Cheers,’ because everybody wants to be Sam Malone working behind the bar,” said White.
The total investment range to open a Growler USA pub ranges from $556,148-$895,519. Locations require 2,500 to 3,000 square feet of retail space, including back-of-house operations, though no prior food or restaurant experience is needed.
Growler USA locations are on track to do $1.2 million in sales, said White, and growth continues at an “exponential rate.”
“We’re inventing the American pub category and we’re writing the playbook,” he said.
Home Franchise CEO Shirin Behzadi.
Long record for Home Franchise Concepts
Three brands make up Home Franchise Concepts, explained CEO Shirin Behzadi, and they’re a combination of the tried-and-true and the new.
Budget Brands, a window coverings service where franchisees come to customers’ homes to fit their shades, is the oldest, begun in 1992 and now with 1,086 territories in North America.
Tailored Living began in 2007, and provides whole-home organization from closets to garages. There are 205 territories sold in North America.
Concrete Craft is the newest concept, acquired in 2015 after a private equity investor provided new capital for the brand, and offering decorative concrete for pool decks to fireplaces. Behzadi is pursuing more acquisitions, too, under the home services umbrella.
Behzadi rattles off one more eye-popping statistic: year over year, they routinely sell more than 100 franchises annually—not an easy pace to set, especially for a brand celebrating its 25th anniversary this year.
Huey Magoo’s looks to ‘strike gold’ again
“I’ve always loved a great, great chicken tender,” said Andy Howard, “and I was looking for my next life.”
The former executive vice president at Wingstop, who helped grow the chicken wing chain from 80 stores to more than 600 (today that number is 1,000-plus), found that next life with a little four-unit restaurant company in Orlando, Florida.
Along with fellow former Wingstop execs Michael Sutter, Wes Jablonski and Bill Knight, the quartet bought Huey Magoo’s Chicken Tenders in November 2016 because, as Howard said, “the sky’s the limit of what we can do with this little brand.”
Howard, now the CEO, said he’d like to see 25 locations open by 2020 through a combination of strip center restaurants and express units on college campuses, in airports and other non-traditional venues. Those restaurant footprints range in size from about 2,000 square feet to 500 square feet, allowing flexibility as Huey Magoo’s pursues real estate and explores partnerships with large foodservice operators such as Aramark, which just signed a deal to take over as the franchisee of the Huey Magoo’s at the University of Central Florida. “We’re thrilled” with that deal, Howard said, and with the potential for growth through Aramark.
That campus location is doing about $900,000 in sales, while the other three strip center locations have annual sales of more than $1.1 million.
Like Wingstop, the Huey Magoo’s model is meant to be simple, Howard said, and previous restaurant experience isn’t required of franchisees. At Huey Magoo’s, “all we do is chicken tenders,” said Howard. “Fresh, made to order, simple focus, only tenders. We do ‘em three ways: hand-breaded, grilled or sauced.”
Huey Magoo’s founders Matt Armstrong and Thad Hudgens retained an ownership interest in the company and will become multi-unit franchisees.
“Can we strike gold again like we did with Wingstop? I hope so, and I think we can,” said Howard.
La Madeleine grows with refranchising
La Madeleine French Bakery and Café, the French-themed bakery concept under the Le Duff umbrella, is embarking on a major refranchising effort with support from The Cypress Group, which specializes in restaurant and franchise investment banking. Under the initiative, the brand will refranchise 38 of its 83 corporate locations in the Houston, Atlanta, Austin, Washington, D.C., and Louisiana markets, and is seeking potential buyers such as successful multi-unit operators of other brands as well as existing La Madeleine franchisees who can use the acquisition of the restaurants as a solid base for growth.
La Madeleine had grown conservatively in recent years, mainly with corporate restaurants, said CEO John Cahill, “so the thought is if we take on some large franchise partners we can double our size pretty quick.” The refranchising deals will be contingent on the franchisees adding stores over the next five years.
The restaurants have an average unit volume of $2.4 million and six years of comp growth, Cahill said, and benefit from four distinct dayparts: breakfast, lunch, midday and dinner. A loyalty program and online ordering were launched during the last year as two key pieces to continued growth.
Long John Silver’s quality obsession
James O’Reilly, president and CEO of Long John Silver’s, gets two questions over and over: What are you going to do to turn around the seafood chain, and why do you think it will work?
That’s life when you’re tasked with turning around a chain founded in 1969 in Lexington, Kentucky, which now has 1,000 locations in 43 states.
O’Reilly’s answer to the first question is to emphasize the quality of the core product.
“We’re obsessed with quality. This is the very best in seafood quality: wild caught, all-natural 100 percent Alaskan cod,” he said, and they have a new marketing campaign to spread the message.
O’Reilly is also bullish on the chain’s new re-image program, which costs $150,000. “It’s a very, very tightly engineered remodel,” with new equipment that leads to higher product quality and better throughput, he said.
“It’s gotten momentum in our system and the reason for that is the investment is so reasonable.” At the first two test stores, sales are up 16.5 percent at one and 24 percent at the other.
As for the second question, he believes his plan is going to work “because it always works,” when legacy brands go back to their roots and focus on the core product and core customer.
“We’re not getting fancy,” he said. “We’re not trying to innovate our way to greatness. We’re not trying to market our way to greatness with gimmicks.” O’Reilly hopes his chain’s performance numbers will soon provide him with the perfect answer to those perennial questions.
Marco’s Pizza wants 200 more stores
The history of Marco’s Pizza dates back to 1978, when founder Pat Giammarco launched the first location in Toledo, Ohio. But, said President Bryon Stephens, the brand’s growth really got started in the mid-2000s, when Jack Butorac joined the company and he and Stephens adjusted the business plan to put franchising at the forefront.
Stephens noted Marco’s has more than doubled its store count since 2012, to 815 locations in dozens of states, plus Puerto Rico, India and the Bahamas. That goes along with a similar doubling of total systemwide sales since 2012, to $499 million in 2016. The company reported AUVs of $705,880 in 2016.
“And we’re looking to open 200 stores over the next two years,” said Stephens, all despite “facing some pretty strong headwinds wanting to grow in the pizza category.”
Presenting in front of franchise lenders and investors, Stephens said Marco’s Pizza would need about $50 million in funding to open those 200 locations, which would include new company-managed store opportunities wherein the franchisee acts more as an investor versus operator.
A “technology migration project” is also in the works to convert the company’s three legacy point-of-sale systems to one system at a cost of about $15,000 per store.
Paul Macaluso of McAlister’s Deli.
McAlister’s focus is people, product, place
As the first presenter, McAlister’s Deli’s President Paul Macaluso could have been the lead off banter at the conference, but he takes his concept very seriously. “We’re passionate about bringing people together,” he said. “Neighborhood restaurants are more than places to eat, they are community-gathering places, each with their own story to tell, where people can linger and enjoy the comfort of great food in great company.”
Known for its sandwiches, sweet tea and giant spuds (“basically two potatoes put together”), McAlister’s is part of Focus Brands’ stable of restaurant chains. It was founded in Oxford, Mississippi, in 1989, and started franchising in 1994. “We have high brand awareness,” Macaluso said. There are 392 restaurants in 28 states, of which 33 opened in 2016. The beauty of being part of Focus, Macaluso pointed out, is they can leverage purchasing power as well as share top talent.
While the deep bench of Focus is valuable, “our secret is the strength of our franchisees,” Macaluso said. They are looking only for multi-unit operators with experience in the food sector and the financing to develop three-to-10 units in a three-to-seven year timeframe. Around $2.49 million is the average net sales for the top quartile of 275 franchised restaurants. The average initial investment for a free-standing unit is around $1.2 million, while an express unit rings in at $290,000.
Moe’s Southwest Grill seeks outlaw ‘zees
The Moe in Moe’s Southwest Grill isn’t a person, but rather an acronym: Music, Outlaws, Entertainers, said President Bruce Schroder. The music centers on the restaurants’ “Dearly Departed” soundtrack, which only features great artists who have, well, departed —“the past year was a bumper year for dead artists,” Schroder said.
The “E” is for entertainment by local musicians, and the “O” depicts “the outlaws who are our franchisees.” “We are an unapologetic brand that isn’t afraid to break down boundaries,” he said. “Our franchisees are our heroes in disguise doing good in their communities.” Employees don’t get a spot in the acronym, but they are referred to as “roadies” who have a sense of belonging to a band of merry men and women and who make the customers feel like rock stars. The assembly line of fresh ingredients are selected by customers and rolled into endless combinations, which Schroder said means guests “are never going to get tired of the food.” There are no freezers or microwaves, a testament to the food’s freshness, he added. Moe’s is owned by Focus Brands.
Mooyah CFO Michael Morales.
Strong owners key to success for Mooyah
As Michael Morales showed images of Mooyah’s restaurant dining area, the company’s CFO pointed out one thing the inviting, modern design didn’t have: booths. Mooyah Burgers, Fries & Shakes wants to be a top choice among youth sports teams and families, Morales explained, and doesn’t want any seating constraints for its customers.
Based in Plano, Texas, Mooyah is in its 10th year and has more than 100 locations in 19 states and 10 countries. Morales highlighted the brand’s leadership, including co-founder Rich Hicks, who’s developed other restaurant brands including Tin Star and Ojos Locos Sports Cantina, along with COO Michael Mabry, who Morales said has worked just about every job in the restaurant industry and was a Mooyah franchisee. The brand continues to grow sales, with the top 75 percent of the system at almost $900,000 AUV and the top 10 percent at $1.5 million.
“We’re competing with everyone else for real estate,” Morales acknowledged, and so Mooyah has a national brokerage partnership with CBRE to help ‘zees find sites.
That’s part of Mooyah’s effort to put franchisee success at the forefront because, as Morales said, “we’re only going to be as strong of a franchise community as this team is.”
Old Chicago’s ‘Hall of Foam’ creates loyalty
Old Chicago Pizza and Taproom is just one of the brewery/casual-dining restaurants under CraftWorks Restaurants and Breweries, but it’s the one that CEO Srini Kumar singled out to present to lenders. CraftWorks has 206 restaurants in 40 states.
The beer business had been in decline, Kumar said, but the popularity of craft beers has stabilized the industry for the past five years. While Old Chicago has great food, it’s the beer loyalty program that has kept the customers’ seats on stools. “We believe we have the first loyalty program,” Kumar said. “It’s 35 years old and 30 percent of our business is through the loyalty program.”
To that end, the menu is beer-friendly food, and the servers are educated so they can suggest additional choices based on what the customer is drinking or on what he or she says they’d like to be drinking. The aspirational part of the brand is getting admitted to the Hall of Foam, a distinction for people who have downed 110 different brews (we should probably clarify that customers don’t drink all 110 during one sitting, thus setting up a need for return visits).
The average customer is 24 to 40 years old with an income over $75,000. Buying habits, especially concerning the test items, are tracked so the most popular items make it onto the next season’s menu. “The time is right for expansion,” Kumar said about Old Chicago. “Last year was the single largest growth on the corporate side, and this year will be the year for franchisee growth.”
Pollo Campero counts on robust customers
Citing millennials and Hispanic consumers as its customer base, Pollo Campero President and CEO Tim Pulido said he has a handful of key objectives he hopes will bring the Guatemalan chicken purveyor into the mainstream with American consumers.
Started in 1971 and still family-owned, Pollo Campero is now backed by a “well capitalized corporate parent with tons of capital committed to grow the brand long term,” Pulido said. During 2016, its U.S. sales broke through the $100 million barrier, which is impressive considering that its first stateside location opened in Los Angeles in 2002.
The CEO added it’s a “very different perspective” bringing a Latin American brand into the United States, rather than the other way around that’s a more timeworn path in franchising. It is now up to 71 total locations in the country, 43 of which are corporate-run units.
He cited average unit volumes of $1.78 million, $110 million in systemwide sales and 20 consecutive quarters of positive same-store sales growth for its American presence that’s concentrated in California, the Gulf Coast, Southeastern states and the East Coast, especially the mid-Atlantic states.
“I’ve been in the restaurant business for well over 30 years, and it’s hard to get this consistent record of growth year over year,” he said. “Pollo Campero is definitely resonating.”
The company is working to refresh “dated and disconnected” stores—a process that is well underway—and developing a global brand strategy that will allow accelerated development to continue reaching its so-called “cross-cultural millennials” who have been attracted to the brand.
ROI is in driver’s seat at Penn Station Subs
The train had pretty much left the station after Papa John franchisee Craig Dunaway and his partners stumbled across Penn Station East Coast Subs. “Everything we do is focused on return on investment,” he said. “We fell in love with the food and became franchisees.” What they liked, he explained, were the hand-cut fries, hand-squeezed lemonade and 15 grilled sandwiches, 25 percent of which are Philly cheesesteaks. “We can do cold sandwiches well,” he said, but they really distinguish themselves with grilled sandwiches. Dunaway increased his store count to 15 before buying into the company.
The brand just finished a nine-month project with a consulting firm to find out what customers were saying about them. What they found is that “people have a passion for the brand.” Brand awareness was 90 percent in areas that were heavily penetrated with stores, but there was also a passion for the brand when the stores were few and far between. Average sales per unit are $797,541 and while “we’re on the app bandwagon, we are not a brand that likes to discount,” he said. The average sale is $9.
The new ideal for most franchises are large multi-unit operators, but “we believe in the owner as close to the counter as possible,” Dunaway said. In 2016, there were 310 locations in 15 states, operated by 89 managing owners. Because management is focused on ROI, the POS numbers are analyzed and key points of information dissimulated for operators. Those late in reporting their sales receive a “$75 slap on the wrist.” Comp sales are up, he said, and a royalty incentive program has been implemented in underpenetrated markets to stimulate growth.
Renue Systems works hard on hotel niche
Read a few business books and they’ll generally say find a niche and work hard in it. For Renue Systems, that means one thing only: cleaning hotels really well. “Renue is really not flashy or showy; it’scomposed of hard-working, down-to-earth people that want to win,” said David Grossman, president of the brand.
He said by focusing on services like upholstery and drapery cleaning, smoke cleanup, mattress deep cleans and everything else specific to hotels, franchisees are able to stay busy in a defensible niche.
“We like hotels because frankly they’re challenging, they’re open 24-7, so we’re always working in a live environment,” said Grossman.
By adding a new service every year (escalator cleaning is what the team is working on now), the brand solves the cleaning infrastructure problem for hotels in a cost effective way. That’s why Renue is a preferred vendor for Marriott, Hilton and Wyndham.
Grossman said the low-overhead service model has potential to double in size in the U.S. via large, protected territories.
Russo’s founder Anthony Russo touted Rachael Ray as a brand enthusiast.
Russo’s restaurants remain high on pie
The son of Italian immigrants, Anthony Russo learned to cook the family recipes while growing up. When the family moved from New York to Texas, they opened a pizzeria and Russo learned to toss dough. As a young man he opened his first restaurant, a New York-style pizzeria in Houston, where his mantra was, “If it isn’t fresh, don’t serve it.”
In 2008, he expanded the concept with a more upscale version of the restaurant serving coal-fired pizza. “Rachael Ray said it was one of the best tasting pizzas out there,” he said about the popular TV chef. All the food is made from his recipes, “recipes that haven’t changed in 25 years, because they work,” he said. And everything is made from scratch.
The two brands—Russo’s New York Pizzeria and Russo’s Coal-Fired Italian Kitchen—combine for 50 stores, with total systemwide sales of $50 million. The average check is $22 to $30. The ideal candidates are single- and multi-unit oparators with the resources to spend $450,000 to $1.1 million in total capital requirements.
There are 40 new, custom-build restaurants under development agreements, with five domestic and four international units under construction. “We are not a cookie-cutter franchise,” Russo pointed out. One distinction is that fresh mozzarella is made in front of the customers, which not only provides some entertainment value, but also reinforces the idea that the food is fresh and made on the premises.
School of Rock CEO Dzana Homan said “we put on a show to teach music.”
School of Rock sounds all the right chords
If you’ve seen the movie “School of Rock” featuring Jack Black, you know the story of the franchise. Paul Green started School of Rock in 1998, and soon developed an unusual approach to teaching music, by having them prepare and put on concerts. By 2005 he found an investor and began franchising.
“Children engaging in performance were highly motivated to stay in the program,” says CEO Dzana Homan. “We don’t teach music to put on a show. We put on a show to teach music.”
By the time Homan joined in 2014, however, “as a corporation we were not profitable.” Unit economics were not where they needed to be. So Homan embarked on a “listening tour” of franchisees, to find out the best practices to spread throughout the system.
“We worked on brand alignment and marketing excellence,” she said, “and developed a way to measure the cost of every item.” She believes School of Rock is back on solid footing, with average revenue of company schools at $500,000 and 23 percent profitability; franchisee-owned schools beat that mark, she said. It’s a growth path that would make Paul Green, not to mention Jack Black, proud.
Sharkeys Cuts for Kids CEO Scott Sharkey presides over two haircare brands.
Sharkey’s Cuts aligns with Walmart stores
When you’re the namesake for a cartoon shark, everyday life is a little silly. But when that cartoon shark helps ink a deal with Walmart, things get serious. “I’m not sure how I got into this silly business, but it’s not silly anymore,” said Scott Sharkey, founder and CEO of Sharkey’s Cuts for Kids.
Sharkey presides over two hair styling brands, one dedicated to entertaining kids and another for the whole family. The brand, tailored for passive owners for $135,000 to $150,000 to get a unit started, recently got access to Walmart and a massive captive market of shoppers.
“Of the 30 salons they opened up, we were No. 2 for the first two months,” said Sharkey, who added he’s looking to fill another 150 Walmart locations with franchisees.
Now the brand is investing heavily in technology beyond the Xboxes and video package that entertains customers. New investments in online booking have brought mobile to 68 percent of appointments with a plan for 75 percent next year.
‘Glow nights’ are one draw for Sky Zone
Sky Zone’s revenue has skyrocketed to $375 million in systemwide sales in 2017. “That’s a lot of jumping,” says Jeff Platt, CEO, whose father started the first trampoline park, and along with it an industry, in 2004 in a warehouse in Las Vegas.
“It truly has become an industry, and it all started with a single location, in a very rundown warehouse, with no air conditioning, right here” in Las Vegas. Platt says there are 700 trampoline parks around the world, with 200 of those expected to be Sky Zone units as of the end of 2017.
Platt says they are working on “Sky Zone 2.0,” and they’ve built a corporate prototype with 28,000 square feet of play space. “We have climbing, we have jousting pits, you can slam-dunk the basketball,” and much more. Open since October, results have been “fantastic,” he claimed. The new park generated $460,000 of revenue in one month, January 2017, he says. It costs $1.2- to $2.9 million to open a Sky Zone park, with average unit volumes of $2.38 million, he said.
Platt said they’re always looking for ways to enhance the experience of their “Generation Z” customers, which now includes a new glow-in-the-dark program for jumping through the night. Technology, too, is under test, so people can use Sky Zone-installed cameras to record their great moves on the trampoline, for example, and then share them with friends on social media.
To those who say trampoline parks are a fad, and people will get sick of jumping, Platt pushes back. “People want to be active,” he says, and that’s never going to go out of style.
Jerry Hancock wowed (and cooled) the crowd with a demonstration of SubZero’s technology.
SubZero has getting attention down cold
Jerry and Naomi Hancock get people’s attention in a unique way: They haul a big metal can onto the stage and spray the room with liquid nitrogen. That’s also the 300-degree-below-zero element they use to make ice cream before their customers’ eyes in less than a minute.
Their franchise is SubZero ice cream with the tagline Delicious + Science, and they have 50 units open. They started the franchise out of desperation, when the New York Burrito franchise they bought wasn’t performing well. “We were sinking fast,” said Naomi, a former junior high English teacher and park ranger, so they started asking their customers what else they wanted.
The answer was ice cream, but their financial advisers said it was a very bad idea to open an ice cream shop, “unless it was different,” said Jerry, who is a chemist. After a year of product development, their process was set, and they’ve even secured a patent for it.
Naomi describes it this way: “Imagine an ice cream store without a single freezer, and you have made-to-order ice cream right before the customer. People never get tired of seeing their ice cream made right before their eyes. Once they see SubZero they don’t want to go anywhere else.” She adds catering for weddings, birthday parties and other special events is a growing part of their revenue, as are educational talks for schools.
The Hancocks were on the hit TV show Shark Tank in 2012, when they had 16 units, where they also sprayed the judges with nitrogen, and then made them customized ice cream that all deemed delicious. Although they didn’t get an investment deal, they got loads of exposure—and now they’re working to employ their attention-getting schtick to attract franchisees.
Sylvan Learning rides STEM ‘freight train’
Sylvan Learning CEO John McAuliffe started his presentation saying “our presentation is going to be different,” especially because he wouldn’t be talking about food or craft beer like many of the conference presenters. Instead, he focused on the results of reinventing the franchised childhood education provider.
“If you think you know Sylvan, think again,” McAuliffe said. “We’re the youngest 37-year-old company out there … because over the last couple of years we’ve brought in new technology, new content, a new roadmap, a new business plan and a new vision.”
With a massive international footprint, the brand is up to 700 “points of presence” in North America, the Middle East and a handful of Asian countries. Delving into its brand reinvention, he added the brand has made a big investment in technology to allow iPad-based curriculum delivery and a new focus on STEM classes—science, technology, engineering and mathematics—to prepare its students for life in the modern, global economy.
McAuliffe said much of its in-house changes are a result of in-depth research that has changed the brand from top to bottom, including a smaller footprint for future stores, lower costs for franchisees, a new satellite concept, reduced fees and increased convenience for the parents who bring their children into the Sylvan system.
In a unique move that further humanized the brand, its CEO showed individual slides of Sylvan’s leadership team with tidbits about their work and how it has made a tangible difference in the company’s latest business model.
To spread the word about its changes, it has begun advertising on Sirius satellite radio, and enabled more localized marketing enabled through hiring three local marketing firms to develop and measure the effectiveness of new promotional efforts to drive growth.
“We do an enormous amount of research and focus group sessions,” he said. “Now, our digital marketing is more sophisticated than any of our competition.”
With more portable and flexible technology now in place, McAuliffe said this enables franchisees to expand beyond their brick-and-mortar locations to reach a wider audience of students through satellite locations.
United Franchise Group CEO Ray Titus introduced eight concepts.
United Franchise has eight brands to tout
United Franchise Group’s CEO Ray Titus should at least have tried to request more than the allotted 20 minutes to make his pitch, because he introduced eight separate concepts that ranged from the best known of the brands, Signarama, to the company’s first foray into food with Jon Smith Subs to Venture X, a shared office space. The eight brands in the 31-year-old holding company combine for a total of 14,000 locations in 80+ countries.
Signarama is the oldest child and the largest, with 800 stores. EmbroidMe, with 275 stores and revenue of $10 million, just recently changed its name to Fully Promoted, because “no one would get to EmbroidMe through an Internet search” when looking for embroidering names on promotional products, Titus said. Other concepts are Transworld Business Advisors; SuperGreen Solutions (energy efficient products); Eperimac (trade-ins and repairs on used Apple products); consultancy Accurate Franchising; and Paramount Tax and Accounting, which is opening its first unit this year.
While the concepts appear to fit into a variety of niches, there is synergy between the brands, plus a shared sales force. Titus confided the reason for speaking at the conference was “to get financing and to make a surprise visit to our new office in Las Vegas.”
Wahlburgers marries celebrity with food
After a rousing video featuring heartthrobs and actors/singers Mark and Donnie Wahlberg, Wahlburgers’ CFO Patrick Renna took the podium to a nice round of applause. Renna thanked the crowd, because “people are genuinely disappointed when I’m the one who steps up on stage.”
The celebrity brothers, along with their chef brother, Paul, have signed on for their seventh season of a reality show about the behind-the-scene antics at Wahlburgers. They are the star power behind the 14-unit brand that prides itself on serving chef-driven food on a bun. “It marries celebrity cachet and proven chef-restaurateur credibility,” Renna said.
The chain’s Facebook page (260,000-plus fans) and Twitter feed (121,000 followers) do well on their own, and even better when combined with Mark’s 3.29 million Twitter followers and Donnie’s 1.35 million. That’s a lot of social media firepower. The youngest of the three brothers, Paul, opened a fine-dining restaurant first, followed by Wahlburgers a few doors down in their home turf of Dorchester, Massachusetts. The fine-dining restaurant was a nod to the food he likes to cook; the hamburger joint to the food he likes to eat.
Although the number of units open is modest, there are 20 to 25 openings planned for 2017 and 339 units under agreement, Renna said. In addition, Wahlburgers Asia Pacific has signed an agreement to open 200 restaurants across Asia, Latin America and Oceania. Nontraditional units do well in airports, and the large-format restaurants, which include a full bar, are going into venerable locations such as Sunset Boulevard in Los Angeles and Times Square in New York City.
Walk-On’s ready to run with expansion
When Brandon Landry and Jack Warner opened the first location of Walk-On’s Bistreaux and Bar in 2003, “we weren’t very good restaurateurs,” admitted Landry.
“What was important to us was good beer, hot chicks and lots of TVs,” said Landry as he told the story of the sports bar concept he developed with former Louisiana State University basketball teammate and fellow walk-on Warner when the two were in their early 20s.
A lot has changed since that first restaurant opened in Baton Rouge, Louisiana, including the exit of Warner, who was bought out by New Orleans-based businessman Rick Farrell, and the addition of New Orleans Saints quarterback Drew Brees as a partner with a 25 percent stake. Walk-On’s adjusted its brand strategy to take a “food-first mentality,” Landry said, and offer a menu highlighting Louisiana dishes such as crawfish étouffée and what it calls VooDoo Shrimp, shrimp stuffed with cream cheese and pickled jalapeños, wrapped in bacon and chargrilled.
“That’s a big point of differentiation for us,” said Landry. Walk-On’s also started franchising and now has four corporate locations and seven franchised, including the first restaurant outside its home state from franchisees in Lubbock, Texas.
That location, said Landry “is tracking at about $7 million” in sales since opening in fall 2016, while average unit volumes are at $5.3 million.
Wendy’s Director Angela Coppler shared innovative real estate tactics.
Wendy’s innovates on real estate selection
Showing off gleaming pictures of its reimaged store designs, Wendy’s director Angela Coppler said the prohibitive cost of building fresh has led the brand to convert former Burger Kings, retail storefronts and even banks as it seeks to add new locations without breaking the piggy bank.
Now nearly 50 years old, with more than $10 billion in annual sales, Wendy’s is on a mission “to drive more customers to our restaurants more often.” New units and refreshed locations are a key part of its plans to accelerate growth following 16 consecutive quarters of North American same-store sales growth.
“It’s important to us that we continue to focus on our mission, to drive brand evolution and … focusing in on our quality product,” Coppler said.
With a recent Twitter spat with a snarky guest questioning the validity of its “fresh, never frozen” tagline, she added the company has doubled down on its fresh-beef messaging in advertising and social media channels that have seen a spike in followers in the wake of the good press. It now has more than 8 million Facebook followers.
Three out of four Americans eat a hamburger every week, she said, providing motivation to “take advantage of every one of those opportunities.”
Its goal is adding 1,000 new restaurants by 2020 by transforming its franchise operation through the refranchising of 1,000 company-owned units. Its ongoing re-imaging program has already transformed more than 30 percent of its locations, with a goal of hitting 40 percent by the end of 2017.
For new builds, Wendy’s has reduced the total investment by $300,000, compressed the footprint, integrated more technology, reduced build time and cut restaurant energy use by 20 percent.
“This smaller platform really opens up a number of new opportunities—smaller places and smaller towns,” Coppler said.
Even though Wendy’s is massive, with more than 6,500 units, she said the words of its founder, Dave Thomas, still ring true: “I never wanted to be the biggest, I wanted to be the best.”
Tax policy is hot topic at conference
The fight for tax reform is just starting in Washington, D.C. For tax gurus Dennis Monroe and Rick Gibson of law firm Monroe Moxness Berg, it’s an exciting time. “This could be a once in a generation opportunity to change the tax code versus the baby steps and short-term provisions of the past few decades,” said Gibson.
But what will come out of the Republican-controlled Congress is anyone’s guess. Possibilities include a new overall corporate tax rate, which now ranks as the third highest general top marginal corporate income tax rate in the world as of 2014 when it hit 39.1 percent (35 percent federal, plus state rates).
Changes could include the repeal of estate taxes, tweaks to alternative taxes, and more, so what to do? Wait, defer and deduct. “We don’t know when this is going to take place, is it going to be retroactive, middle of next year?” said Monroe. “The idea that we have is accelerating deductions and eliminating income as best you can.”
There are various other more complex possibilities for businesses to stay in a holding pattern. But in general, pile up the deductions, build cash reserves and get by on what you can and avoid any large gifts. “It’s not going to get any worse,” said Monroe. “If you can wait, I certainly would on capital gains.”
Once the tax code is changed, there will be plenty to do, and barring any major meltdown on Capitol Hill, rates will be changing sooner rather than later. “Pretty much everyone agrees that the tax code should be revised,” said Gibson.
SBA loan approval is in flux
A major change to U.S. Small Business Administration lending rules (yes, another one) means a lot of confused borrowers and a lot of work for franchised companies grappling with financing via SBA.
In January, the SBA put out new guidelines that would bring the oversight of franchise systems under the purview of the government instead of traditional franchise ledgers.
But another tweak to the rules makes addendums approved by the SBA in 2015 or 2016 still apply. That’s a win for the franchise industry, but there is still a lot of work to do.
“This really hits home for a lot of brands and prospective franchisees if they are relying on SBA financing. Without this addendum or a previous one, they will not quality for SBA lending,” said Nick Jellum, president of Anastasi Jellum, a law firm whose main client base is lenders to franchises. “At this point in time there must be a verification or addendum for every franchisee location that is utilizing SBA financing.”
Now it’s up to franchisors and general counsels to make sure every contract is up to snuff. The SBA has created a mailbox to see if a 2015 or 2016 addendum was reviewed. If not, a new addendum must be created and approved before any new SBA lending.
As those stacks of addendums flutter around the office, Jellum warned not to get too comfortable with this work in progress. “The SBA made it very clear that these rules are temporary, so we all can look forward to more rules going forward,” said Jellum.