The pandemic has brought a new group of prospective franchisees to the forefront, leaving franchisors wondering how to interact with these buyers and what the future of franchise development looks like moving forward.
During a Restaurant Finance Week session last week, three franchise development and sales executives shared their predictions and tips on the post-COVID new normal of franchise development: Joe Sieve from Inspire Brands, Madison Jobe of Wingstop and Tray Doster from Zaxby’s.
Sieve, vice president of franchise development for the parent company of Arby’s, Buffalo Wild Wings, Rusty Taco, Sonic and Jimmy John’s, stayed away from talking about Inspire’s recent acquisition of Dunkin’. Instead, he touched on how the key to being both recession-proof and now pandemic-proof is the ability to pivot as consumer habits have changed with regards to off-premises and digital. He’s also “leveraging the existing franchisee testimonial. With every brand there’s the story of how they navigated the pandemic,” Sieve said. Prospective franchisees want to know how your brand handled shutdowns, took care of existing franchisees and how you reopened while implementing best practices.
“We put a pause on everything. All our pending deals in March came to a halt, because it wasn't the priority. Survival became the top, as well as supporting franchisees and operators,” Sieve said. Inspire didn’t pick up franchising again for Jimmy John’s and Rusty Taco until late second quarter, and they even updated their Item 19 for Jimmy John’s to reflect their recovery and resiliency from COVID-19.
Jobe, chief development officer of Wingstop, said the brand was among the first of chains to close dining rooms, which it did during the third week of March ahead of any executive orders. They felt it was the right thing to do for customers, team members and franchisees, and dining rooms remain closed today.
“Our philosophy is, we were the first one to close dining rooms and we’ll probably be among the last to reopen dining rooms,” Jobe said, a fair tactic for the brand since pre-pandemic, 80 percent of sales came from off-premises channels. “To convert that to 100 percent off-premise was not a big leap for us than others, so our challenges were different.”
Wingstop had prospective ‘zees in the pipeline pre-COVID, but they weren’t doing a lot to move forward with anything well into April, Jobe added. Since then, they’ve seen two different types of people interested in the concept: franchisees of other brands, including multi-unit and single-unit operators looking to diversify, and a larger influx of people who were displaced from their positions due to COVID, hospitality backgrounds and not.
“That’s not a typical prospect for Wingstop, we have more that typically add as a portfolio, but we’ve seen our two buckets ramping up and have actually signed a couple new franchise deals, and we do not sign a lot of people anytime on an annual basis. Our existing franchisee base mostly accounts for our growth,” Jobe said.
Doster, director of franchise sales at chicken concept Zaxby’s, noted that pre-COVID, 62 percent of its business came from the drive-thru. Zaxby's saw transactions go down, but the average check go up as buying habits changed and more people were ordering to take home to their families. The company's franchise development plan includes having prospective franchisees speak with an existing franchisee to hear their experiences of what worked and what didn’t during the pandemic. Zaxby’s is also seeing some multi-unit operators want to double down on their portfolio, he said.
With 908 stores open and three locations for sale, Doster said Zaxby’s hasn’t seen any franchisees try to leave the system, though they have had dialogue with a few lower-performing ‘zees about potentially selling.
“Even though winter is coming, we’re very optimistic,” Doster said. “Consumers told us they want to dine out and can only stay home for so long, or they get cabin fever. We have to meet guests where they are and execute at a high level to obtain market share. If we’re able to provide a great product and service, our customers will come back.”
Watch the full session in the Restaurant Finance Week portal. Register and watch for free.