Crossing Border to Canada, Restaurant Brands Share Insights
Lewis Gelmon, Jeff Young and Greg Delks share their international franchising experience during an RFDC panel November 13.
“International light” is how some restaurant brands view Canada when they think about expanding outside the United States, and while the market is certainly attractive and shares many similarities with its southern neighbor, that doesn’t mean franchisors can simply drop their concept in without considering all aspects of the business.
Firehouse Subs learned this after it signed an area representative agreement to expand in Ontario, and the brand shared some lessons and insights during a panel at the Restaurant Finance & Development Conference.
“We didn’t know what we didn’t know,” said Greg Delks, Firehouse Subs’ VP of global and non-traditional development.
“We can open restaurants in the U.S. like clockwork,” he continued, but, as they learned, “the devil is in the details,” and the establishment of a supply chain proved challenging as Firehouse worked through issues with product labeling—“We had to get dual labeling, things like spices, paprika has to be labeled separately”—and pricing. While Firehouse initially wanted to source its meats and cheeses from within Canada, it was unable to find comparable products at the price point it needed “and the brutal reality is, we’ve really taken it on the chin,” said Delks. To help its franchisee in Ontario, Firehouse subsidized royalties for more than a year until it figured out how to get products there affordably.
A major lesson: “You’ve gotta pay attention and listen to understand the local nuances,” said Delks. In Canada, the area rep also adjusted its qualifications to find the right franchisees, increasing the liquid capital requirement to $150,000, up from $80,000 in the U.S., and increasing the franchise fee to $30,000 from $20,000 in the U.S.
Restaurant franchises must balance the preservation of their American brand identity with adapting to Canadian culture, advised Lewis Gelmon, the master franchisee for Johnny Rockets in Canada. Gelmon, who grew up in Calgary and moved to Southern California in 2007, said he was a big fan of the brand’s Americana positioning and “felt it would instantly be a success” in his native country.
“Don’t try to Canadianize it too much,” said Gelmon. For Johnny Rockets, that’s meant giving customers the same restaurant experience and food they’d get in the U.S. while being mindful to make slight adjustments in marketing to ensure messaging is straightforward and less playful. “You’ve gotta call it like it is,” said Gelmon.
The Restaurant Finance & Development Conference continues through Wednesday afternoon at the Wynn hotel in Las Vegas.