A neophyte tackles Bruster’s, while an old pro takes on 64 Sonics
Illustration by Jonathan Hankin
Dan Tarkoff is stepping into his first franchise venture—an ice cream shop called Bruster’s Real Ice Cream. Yaron Goldman is launching his fourth—the iconic Sonic Drive-In. Though their experience level differs dramatically, both franchisees expect to grow their respective brands and reap financial rewards.
Goldman, incidentally, is becoming a familiar voice in this column; this is his third appearance. The first was in January 2013 as he was opening his 35th McAlister’s Deli in Clemson, South Carolina. The second was in February 2016, explaining why he agreed to open 25 MOD Pizzas in the Carolinas. “It’s the unit economics. You have a 2,200-square-foot box that can do AUVs north of $1 million. The investment is low,” he said at the time.
This past April his company, SD Holdings, became a Fuzzy Taco franchisee, a fast-casual brand controlled by NRD Capital, a private equity firm whose CEO is former multi-unit franchisee Aziz Hashim.
That led me to ask the 43-year-old operator, who owns 80 percent of SD Holdings, if he would like to partner eventually with a private equity firm. “We are always talking to people,” Goldman said. “It’s good to have my name out there. But we want to find the right partner. We have been doing this for 20 years.”
Right now, however, his task is organizing the company around the August acquisition of 64 Sonic Drive-Ins spread throughout 40-some towns in Alabama, Tennessee, Georgia and Virginia. Then, there’s agreement to open 20 new Sonics over nine years in the same markets.
Although details of the transaction weren’t released, Goldman said he paid a single franchisee a multiple of between 4.5 to 5.5 times EBITDA (or gross income) for the existing units—all of which had been recently re-imaged before the sale. The only significant capital expenditure issue that looms, he added, is the addition of drive-thrus to a yet-to-be-determined number of restaurants.
“Drive-thru units have significant sales volume differences than those that don’t, in general,” declared Goldman. He estimated drive-thru installs cost between $100,000 and $150,000 each.
Goldman sounds enthusiastic about his new lender, franchise loan specialist Pacific Premier Bank. He credited Sonic with making it (and others) available. “The great thing on this deal with Sonic is it opens us to more financing. We were lucky enough to have several alternatives in terms of lenders,” he said, describing his new lender’s rates and terms as “great.”
The deal was eight months in the making after a year-and-a-half scouting for an acquisition. Goldman liked Sonic’s unit economic model and its iconic brand. But marketing really impressed him. “Sonic punches a lot higher than their weight with marketing,” he declared. “When you have that kind of power, you can make quick turns in the market to alleviate negative sales. So I like that a lot.”
The ice cream neophyte
Now meet Dan Tarkoff, 59, a former marketing executive who worked in the “electrical and low-voltage product” industry before signing on to open five Bruster’s in Phoenix.
When we spoke by phone in mid-August, the Chicago native was securing financing (an SBA loan) to open the first unit in Arrowhead Shopping Center. Bruster’s website says it costs between $275,000 and $325,000 to open a Bruster’s. Franchisees pay a $30,000 fee; the royalty is 5 percent and advertising another 3 percent.
“I was not looking to own land but to lease,” said Tarkoff, who is building on a pad, “but I couldn’t find what I needed.”
The center does well catering to blue-collar and low-middle income customers, offered former restaurant marketer and Phoenix resident Lowell Petrie of Results Thru Strategy. “If it’s a good product, people will pay a little premium for it,” he noted, adding ice cream is a “good gamble” in the city.
Tarkoff certainly considers Bruster’s a premium play, having lived for 17 years in Pittsburgh where the chain was founded and is headquartered. His daughter in fact worked in a nearby unit while in high school. “I was very familiar with the brand and quality of the product,” he told me.
Still, Tarkoff was exploring other types of franchises in his quest to own a small business in Phoenix (where his mother lives). Car washes, dry cleaners and fitness centers came and went. Given the hot climate, he zeroed in on frozen yogurt. But his research revealed that the market for frozen yogurt has peaked. Not only that: “There’s very little differentiation among yogurt stores despite what franchisors say.”
That’s when the idea for ice cream hit him. He thought of Bruster’s, wondering if they were franchising in the Southwest. In fact, a Bruster’s franchisee operates a unit in the southeast region of Greater Phoenix, outside the highway loop that circles the city. Tarkoff’s territory is inside it and, he claimed, protected from intrusion from either the franchisor or another Bruster’s franchisee.
An architectural firm has put him in touch so far with three general contractors who will submit bids for his first unit. Tarkoff concedes he remains in the dark about the details of construction and permitting: “I’m new to this, so I don’t have a good sense of how it happens. My hope is to open in the spring, but we will see how long it takes.”
Yet asked to name his biggest challenges Tarkoff sounds like a battle-scared veteran. “It’s getting the right location,” he declared. “And marketing. From what I hear, not enough people are willing to spend the money needed to drive business and generate awareness.”
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.