Multi-Unit Franchisee Magazine - Issue IV, 2018 by Franchise Update Media

PEOPLE n INVESTMENT INSIGHTS n FINANCE

Multi-Unit

Franchisee ISSUE IV 2018

Dominator Operators Success stories from 7 franchisees

INSIDE: n BEST SUPPORTING ROLE Field support: Does your franchisor have your back?

n MINORITY MARKETING How brands can do better at connecting with different cultures

n MSA FRANCHISE RANKINGS Franchising’s largest U.S. markets and the operators who dominate them

With 59 Bojangles’ Jeff Rigsby feeds customers in 5 states

Multi-Unit

Franchiseecontents I S S UE I V, 2018

dominators

COVER STORY

Dominator Operators 10 There are a million stories in the big city of franchising. Here are seven. Mike Young, Bill Noble, Andrew Weinstein, John and Patti Prichard, Jeff Rigsby, Adrian Gonzalez, and Alex King each took a different path to franchising—from a major league baseball career to a Black Hawk helicopter pilot. All have learned hard lessons and have something to teach the rest of us. BY HELEN BOND & KERRY PIPES

LISTS

Franchising’s Top MSAs 46 The country’s top franchise markets and the operators who rule them

FEATURES

Field Support – Demand the Best! 48 Franchisees speak out on what they want from franchisors BY SARA WYKES

Niches, Minorities, and Special Markets 54 How to effectively target your marketing to distinct groups BY EDDY GOLDBERG

MULTI-UNIT FRANCHISEE IS S UE IV, III, 2018 2009

Inspire Franchising Joe Sieve | Vice President, Franchise Development Franchising@InspireBrands.com

Departments CHAIRMAN’S NOTE

Everyone’s looking for workers! 6 ONLINE

What’s online @ mufranchisee.com 8

Columns CUSTOMER SERVICE

Own the Relationship 56 Making the customer feel important BY JOHN DIJULIUS

PEOPLE

Holiday Hiring 58 5 tips for finding the employees you need BY JIM MONROE

MARKETING STRATEGIES

Digital and Traditional! 60 Finding the right balance in your media budget BY ADAM PIERNO

INVESTMENT INSIGHTS

Keep Calm—But Watchful 62 Maintaining your balance as the world turns BY CAROL SCHLEIF

FINANCE

To SBA or Not To SBA? 64 For larger loan amounts, definitely not! BY ROD BRISTOL

EXIT STRATEGIES

Are You Ready? 68 A 9-step checklist for selling units BY DAVID OSTROWE

FRANCHISE MARKET UPDATE

5 Multi-Unit Trends 70 Keeping current with a shifting landscape BY DARRELL JOHNSON

MULTI-UNIT FRANCHISEE IS S UE IV, 2018

Multi-Unit

Franchisee CHAIRMAN Gary Gardner CEO Therese Thilgen EXECUTIVE VICE PRESIDENT OPERATIONS Sue Logan CHIEF CONTENT OFFICER Diane Phibbs VICE PRESIDENT BUSINESS DEVELOPMENT Barbara Yelmene BUSINESS DEVELOPMENT EXECUTIVES Krystal Acre Jeff Katis Judy Reichman EXECUTIVE EDITOR Kerry Pipes MANAGING EDITOR Eddy Goldberg CREATIVE MANAGER Kevin Waterman MAGAZINE DESIGNER Peter Tucker DIRECTOR OF TECHNOLOGY Benjamin Foley WEB DEVELOPER Don Rush WEB PRODUCTION ASSISTANTS Esther Foley Juliana Foley DIRECTOR OF EVENT OPERATIONS Christa Pulling SENIOR MANAGER, EVENTS & PRODUCTION Katy Geller SENIOR SUPPORT MANAGER Sharon Wilkinson PROJECT COORDINATOR Joanne Peralta SUPPORT COORDINATOR Leticia Pascal VIDEO PRODUCTION MANAGER Wesley Deimling GRAPHIC DESIGNER Cindy Cruz FRANCHISEE LIAISON SUPPORT Greg DelBene CONTRIBUTING EDITORS Rod Bristol John DiJulius Darrell Johnson Jim Monroe David Ostrowe Adam Pierno Carol Schleif CONTRIBUTING WRITERS Helen Bond Sara Wykes ADVERTISING AND EDITORIAL OFFICES Franchise Update Media 6489 Camden Avenue, Suite 204 San Jose, CA 95120 Telephone: 408-402-5681 Fax: 408-402-5738 SEND ARTICLE INQUIRIES TO: editorial@franchiseupdate.com MULTI-UNIT FRANCHISEE MAGAZINE IS PUBLISHED FOUR TIMES ANNUALLY. Annual subscription rate is $49.00 (U.S.) SUBSCRIPTIONS Email subscriptions@franchising.com or call 408-402-5681 FOR REPRINT INFORMATION CONTACT FOSTER PRINTING AT 800-382-0808 www.fosterprinting.com

Chairman’sNote

E TE V A A S D E H T 27, 24-

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R, MA MUFC 2019: Sneak Preview

n many, if not most of the markets in our At next spring’s Multi-Unit Franchising Cony B ted country these days, a common challenge Presenference you will have the opportunity to meet, for franchisees is finding enough good listen to, and learn from industry experts who people to help run their business. This is have found successful ways in their business to not an exclusive issue for the hospitality busiattract, recruit, and retain their workforce. We ness. My distributors tell me that finding truck can all look in the mirror and ask ourselves if we 2 0 o drivers—even with incentives, good pay, and are being the best employer we can be. What f 2 In t. sor 232 ex n o benefits—is can we do better? And once we find out, how do Sp 289.4 becoming more and more of a chal0. 80Not lenge. to mention agriculture, meat packwe do it—and then keep on doing it? ing, and the trades like plumbers, electricians, I recently attended the annual planning meetand carpenters. ing of the conference’s advisory board, where we get together to choose the Some days I think the younger agenda, panel discussions, gengeneration all want to be doctors, eral session topics, and keynote lawyers, engineers, computer speakers. It was exciting to sit in pros, or own their own YouTube a room with so many successchannel. Good for them! But they will all need hotels to stay ful, highly motivated multi-unit in, restaurants to eat in, homes franchisees—kind of a preview of to live in, and a steady source of what’s in store next spring times food to their table! several hundred. I remember growing up that In addition to sessions and most of my high school friends panels on hiring and employhad jobs. I have to think that’s ment, many more franchise-relatthe minority now. Maybe it’s a ed challenges and opportunities good thing that because of a stronger economy are in store to help you succeed and grow your their parents are doing better than parents from franchise business. Topics we discussed includmy generation, allowing their children to spend ed sessions on regulations and legislation, local more time in sports and school activities, or onstore marketing, unit-level profitability, developing leaders in your organization and stores, sucline playing video games. I think most people would agree our immigra- cession strategies, and more. Look forward to seeing you there! Caesars tion situation is and has been a mess for years. I have to think that a country built by immigrants Palace, Las Vegas, March 24–27, 2019. could figure out an organized, controlled immigration system that actually works. If properly done with work permits, proof of employment, proof of paying taxes, and effective monitoring we could make it a positive thing for our Greg S. Cutchall country. And I am sure this would cost less than President, CEO building a wall. Cutchall Management Company 18 @2 0

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MULTI-UNIT FRANCHISEE IS S UE IV, 2018

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3FRANCHISE OPPORTUNITIES Looking for your next franchise opportunity?

3 CONFERENCES 2019 Multi-Unit Franchising Conference Planning is well under way for the 2019 Multi-Unit Franchising Conference, to be held March 24–27 at Caesars Palace in Las Vegas. Attendees at the 2018 conference enthusiastically told us it was a highly worthwhile experience, filled with tips and tactics they were eager to take home for immediate implementation in their organization. Just one example, from Rodney Shaver, a multi-brand franchisee of La Madeleine French Bakery and Buddy’s Home Furnishings: “I have been to this conference for the last 5 years and I find the content relevant, useful, and timely. The breakout sessions allow you to pick the topics that best support the needs you have at a particular time.” This annual gathering is a unique, must-attend opportunity for multi-unit franchisees to meet and learn from the best in the business, explore new brands, and soak up invaluable expertise at the panels and sessions—not to mention the plenty of networking opportunities and more than 200 exhibitors with the latest solutions to your current challenges. Stay in touch with developments as the year progresses and keep current at www.multiunitfranchisingconference.com

PARTNER WELL “This may not sound like a key business accomplishment, but believe me, it is. Assuming a person wants to get married, I think the single most important decision you can make in your life is who you marry. I could never have accomplished being a franchise owner without my wife’s unconditional support.” —Mike Young, 22 Panera Bread, 6 Freddy’s Frozen Custard & Steakburgers

Have we got the tools for you! Find articles on companies, concepts, industries, trends, and profiles—and search our features. Find franchisors looking for multi-unit franchisees, area reps, and area developers. Search by top opportunities, alphabetically, investment level, industry, state, and more at www.franchising.com/opportunities

3RANKINGS

This issue contains our annual Dominators list, which shows the MSAs with the most franchised units and the largest franchisees by state and by region. To see our Mega 99 rankings of the largest multi-unit organizations and their most popular brands, go to www.franchising.com/topics/rankings/mega_99/

LISTEN UP! “The best feedback you can get is talking to your customers—they will let you know how things are.” —Jeff Rigsby, 59 Bojangles’, 2 Salsarita’s, 1 Donatos Pizza

SAVE THE DAT

3PUBLICATIONS

“Don’t just survive, thrive!”

Franchise Update Media’s 2018 Annual Franchise Development Report and the best-selling book Grow to Greatness by leading franchise consultant Steve Olson, offer invaluable tips for franchise sales success and unit growth. To order, visit afdr.franchiseupdate.com and www.franchising.com/ franchisors/growtogreatness.html

3QUICKLINK

For a one-click link to articles in this magazine and to past issues of Multi-Unit Franchisee magazine, visit www. franchising.com/magazines/multiunit_franchisee

3ONLINE Multi-Unit Community Grows MAR, 24-27, 2019 KNOW WHEN Check out our community-based website for multi-unit operators. It’s your exclusive look into the world of multi-unit franchising, your one-stop shop to find: • New brand opportunities • Exclusive interviews • Networking opportunities • Operator profiles • Online edition and archives • Financing resources www.franchising.com/topics/multiunit_franchising/

MULTI-UNIT FRANCHISEE IS S UE IV, 2018

“Have fun, but when it is time to get serious and focused, know to flip the switch.” —Adrian Gonzalez, 6 Jersey Mike’s Subs, 5-time MLB All-Star

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dominators

Dominator Operators

7 franchisees trace their route to success

his issue’s profiles of multi-unit franchisees include one of Panera Bread’s first franchisees; a West Point graduate with 60 Pearle Vision locations; a 30-year-old Smoothie King franchisee with 14 stores and 8 more in various stages of development; Fantastic Sams’ largest franchisee—a husband-and-wife team, high school sweethearts who have been married 41 years; a revisit to a Bojangles’ franchisee (cover) who now has 59 restaurants in 5 states; a former MLB All-Star who acquired 6 Jersey Mike’s in Southern California with an operating partner; and a 29-year-old franchisee of Freddy’s Frozen Custard & Steakburgers who, although a new franchisee, has been working in the brand’s stores since he was a teen. Each represents a different path an entrepreneurial-minded person can take to become a multi-unit or multi-brand operator. Between them, they operate almost 200 units, with more under development. As we’ve noted before, multi-unit operators are a unique breed, fun to interview, and inspiring to read about. Some control their markets by having a large number of units from different brands, some by operating many units of a single brand, and many are the top-performing operators in their regions. No matter how they do it, they dominate where they operate. Once a year we devote an issue to these hard-working, successful franchisees. As usual, they’re an interesting mix, but the results are similar: a combination of grit, determination, and perseverance has led each to success and domination with their chosen brands and markets. Here are this year’s “Dominators”! • Mike Young, one of Panera Bread’s first franchisees, says he owes his entry into franchising to his father-in-law, who introduced him to Saint Louis Bread, which soon became Panera. Twenty years later, Young operates 22 Paneras and has added 6 Freddy’s Frozen Custard & Steakburgers, with a 7th set to open by year-end. • Bill Noble, whose Pearle Vision empire is now up to 60 locations, took an unconventional route to franchising. He’s a West Point grad and former Black Hawk helicopter pilot with an MBA from Harvard Business School. In 2014, with

MULTI-UNIT FRANCHISEE IS S UE IV, 2018

financial support from his West Point classmates, he bought 10 corporate stores, and it’s been solid growth ever since. • Andrew Weinstein believes he was meant for the world of big business. The Florida-based Smoothie King operator owns 14 Smoothie Kings, with 8 more in development in New York, Florida, and Georgia. “I want to get to 50 stores,” he says, “and in 10 years, look back at 50 restaurants as just the start.” • John & Patti Prichard, with 24 Fantastic Sams salons, are the brand’s largest franchisees—but had no idea until recently. “I didn’t even know until I was at the MultiUnit Franchising Conference and ran into Fantastic Sams people and they told me,” he says. “My approach wasn’t to be the largest franchisee, it was to have 15 to 30 salons and we will see from there.” • Jeff Rigsby had 21 Bojangles’ in 2 states when we profiled him in 2010. Today he has 59 in 5 states, along with 2 Salsarita’s and 1 Donatos Pizza. His goal is to add 15 more restaurants by the end of 2019 and to own 100 stores within the next 5 years. “I’ve been in the business for 40 years now, and the key to my passion has been the mentors I’ve had over the years,” he says. • Adrian Gonzalez, best known as a 5-time MLB All-Star, winner of four Gold Gloves for his fielding, and a fearsome hitter with more than 300 career home runs, is now batting 1.000 with the 6 Jersey Mike’s stores he bought in Southern California. “I have to think about the future, and this is one of the things I will be doing,” says the 36-year-old, who says he will be much more active as a franchisee once he retires. • Alex King may be only 29, but the Freddy’s Frozen Custard & Steakburgers franchisee has been a part of the throwback brand since he was a teenager. He’s coming up on the 2-year anniversary of opening his first Freddy’s and has a third on the way for next spring. “I started out with Freddy’s at an entry-level position, so I can relate to employees on all levels,” he says. And once again we’ve teamed up with FRANdata to bring you the 2018 listing of the MSAs with the most franchised units, along with a listing of the dominant franchisee organizations in each region and state.

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Magazine 2

Visit owncheckersfranchise.com/Update or Call 888-913-9135 ©2018 Checkers Drive-In Restaurants, Inc. 4300 W. Cypress St., Suite 600, Tampa, FL 33607. 1. Per Item 6 in Checkers & Rally’s 2018 Franchise Disclosure Document (FDD). 2. Best Franchise Deals by QSR Magazine 2018, 2017, & 2016. Written substantiation will be provided on request. This advertisement is not intended as an offer to sell, or the solicitation of an offer to buy, a franchise. It is for information purposes only. The franchisor, Checkers Drive-In Restaurants, Inc. is located at 4300 West Cypress Street, Suite 600, Tampa, Florida 33607, and is registered as file number F-4351 in the state of Minnesota. In New York, an offering can only be made by a prospectus filed first with the Department of Law, and such filing does not constitute approval by that Department. 20181076

dominators

BY HELEN BOND

All in the Family Early Panera franchisee adds Freddy’s

s one of the first franchisees of Panera Bread Co., Mike Young still recalls the kitchen table conversation he had with his fatherin-law more than 20 years ago. That talk ultimately led him to invest in a small, bread-focused restaurant chain—and a life-changing career decision. “I would love to say I discovered Saint Louis Bread Company, which became Panera Bread, all on my own, and that I had this incredible business acumen,” says Young, operating partner of the 22unit Panera Bread of Iowa. “It was my father-in-law who said, using his words, ‘I think this dog can hunt. Do you want to get in on it?’ The best decision I ever made was saying ‘Yes.’” After opening their first Saint Louis Bread Company in May 1997, the chain, acquired earlier by Ron Shaich’s Au Bon Pain Co., would a year later be renamed Panera Bread Co., a move that repositioned NAME: Mike Young TITLE: Operating partner, Panera Bread of Iowa; Franchisee, Freddy’s Frozen Custard & Steakburgers COMPANY: Panera Bread of Iowa,

Freddy’s franchisee

NO. OF UNITS: 22 Panera Bread; 6 Freddy’s, with a 7th set to open by year-end AGE: 54 FAMILY: Married 31 years to wife

Lisa; 4 kids: Steven, 27, Katie, 26, Bill, 23, and Mitchell, 21

YEARS IN FRANCHISING: 20 YEARS IN CURRENT POSITION:

16 as operating partner for Panera Bread; 4.5 as a Freddy’s franchisee

MULTI-UNIT FRANCHISEE IS S UE IV, 2018

dominators

“It was my father-in-law who said, using his words, ‘I think this dog can hunt. Do you want to get in on it?’ The best decision I ever made was saying ‘Yes.’ ” PERSONAL First job: Working concessions at the local “Single A” minor league baseball games where the Cedar Rapids Kernels play.

Exercise/workout: I exercise Monday through Friday from 5:00 to 5:45 a.m. Weights and running.

Formative influences/events: My parents have always influenced my professional career and success and so has my father-in-law, who is actually the majority partner in the Panera Bread of Iowa franchise. My father-in-law has taught me a great deal. One event that really shaped the path of my career was joining the family business and becoming an owner of my dad’s security guard business when I was in my late 20s. It helped me realize all of the challenges that come with being a business owner and the sacrifices you must make to succeed. It really prepared me to become a restaurant franchisee.

Best advice you ever got: Related to managing people, “Feed the horses. Lose your losers.” We try to hire nothing but superstars. When you find that you have made the right decision and have a superstar on your team, you need to take care of that superstar every way you can. It’s hard to find superstar employees, so it’s extremely important to keep them. Feed the horses. On the other hand, every now and then you end up with someone on the team who does not care about the success of the business, brings a poisonous attitude to the job, and does not care about their teammates or the guests. You need to lose these people quickly. Lose the losers. If you keep them around because you tell yourself you are short-staffed, or they will get better, etc., you will find that your superstars will quit. They don’t want to work side-by-side with people like this, so they go elsewhere. If you don’t lose your losers quickly, you will end up with a staff of nothing but losers.

Key accomplishments: This may not sound like a key business accomplishment, but believe me, it is. Assuming a person wants to get married, I think the single most important decision you can make in your life is who you marry. I could never have accomplished being a franchise owner without my wife’s unconditional support. She steps in whenever needed, from running cash registers and busing tables in the dining room to interviewing and onboarding new employees, and so much more—all without being on the payroll. When she isn’t helping with the business, she’s managing everything that comes with having a family of four kids. My business success is directly correlated to her support and participation. Biggest current challenge: Like all in the restaurant industry, labor is the current challenge. The unemployment rate in Iowa is the second-lowest in the country, so it’s even more challenging here to find great people and to keep them around. Next big goal: I plan to begin teaching my son Steven all that I know, so one day he can assume the CEO role for my Freddy’s locations. He is currently the director of operations and oversees the day-to-day for all of our Freddy’s. First turning point in your career/best business decision: Saying yes to my father-in-law when he asked me to join Panera Bread of Iowa. He offered me an opportunity that I never would have gotten on my own. He brought me into the world of restaurant franchising.

What’s your passion in business? Through franchising with Freddy’s and Panera, I have the opportunity every single day to make a positive impact on many lives. Knowing that I am associated with two restaurant concepts where people absolutely love the food and look forward to visiting is what fuels my passion for what I do. I don’t want to let them down. How do you balance life and work? Frankly, I was much better at balancing life and work when my kids still lived at home. I strived to rarely sacrifice the time I spent with my family and children for work. Now that my kids are not around as much, I find myself struggling to balance life and work. Fortunately, my wife is also a go-getter and is often helping with our Freddy’s business, which allows us to spend time together. She also does an excellent job of making sure I am balancing life and work by taking it upon herself to schedule social time, fun time, vacations, and more for us. If it were not for her, I would struggle even more with balancing life and work. Guilty pleasure: Junk food. Favorite book: The Da Vinci Code by Dan Brown.

Hardest lesson learned: You can’t do everything yourself. I thought I needed to do it all at the beginning and did not hire staff soon enough, nor did I let my staff do 100 percent of what I was paying them to do. I thought I needed to be in on every decision and know about everything going on in all facets of the business. As a result, I spent too much time on things that were not using my full capabilities or best use of time.

Favorite movie: “The Sandlot.”

Work week: Monday through Friday beginning at 6:15 a.m. until however long it takes to wrap up the day. I usually finish no earlier than 6:00 p.m. and no later than 7:30 p.m. On Saturdays, I work from 7 a.m. to noon. On Sundays, it depends. I usually work a couple of hours from 8 a.m. to 10 a.m. and aim to keep it at that.

What did you want to be when you grew up? A cop. My grandpa was a police officer and so was my dad.

MULTI-UNIT FRANCHISEE IS S UE IV, 2018

What do most people not know about you? I was born in Stuttgart, Germany. Pet peeve: Slow drivers who drive in and block the fast lane and won’t get over.

Last vacation: Eight days in Italy in March 2018. Person I’d most like to have lunch with: Jesus Christ.

dominators

“We don’t hire, we recruit! We sell working at our restaurants as aggressively as we sell how great our food is.” MANAGEMENT Business philosophy: Hire talented people, set expectations, and share the vision, goals, and KPIs. Then get out of their way. Management method or style: See directly above. Greatest challenge: Finding talented people to begin with, but then beyond that, making sure you have talented people who can work well with each other. One disadvantage to having talented and confident people on your team is that they all have their own great ideas, and this can lead to team dysfunction and conflict. How do others describe you? Fair, open-minded to the ideas of others, respectful of others, but not afraid to ask tough questions when they need to be asked. One thing I’m looking to do better: Eliminate all of the duties and tasks that take me away from my highest and best uses. I spend too much time managing email, participating in conference calls that don’t require my presence, reviewing reports that others should be more concerned about, and solving problems that others should be solving. How I give my team room to innovate and experiment: I’ve found that the easiest way to do this is to simply tell my team members that they are empowered to come up with, and test, their own ideas. And then when they do, don’t chastise them when things did not work out exactly as they had hoped. How close are you to operations? As we’ve grown, not as close as I used to be, that’s for sure. I still pay attention to the big things: sales growth, food and labor cost, hospitality/friendliness, cleanliness, order accuracy, and speed of service. What are the two most important things you rely on from your franchisor? First and foremost, the food. Our franchisors must keep our food nothing less than what it is now: craveable. Second, I rely on them for great marketing. We rely on our franchisor to make sure they are truly marketing the brand in a way that causes people to want to come to our restaurants. the brand to become the fast-casual cafe empire it is today. Young, whose only previous brush with the food industry was working the concession stand every summer in high school for a minor league baseball team in Cedar Rapids, was a quick study and no stranger to hard work. Later, armed with an accounting degree from the University of Iowa, he worked in finance for several companies before joining his father to help grow a security guard business he’d founded. Young learned the restaurant business in a similar fashion, earning his way up the

MULTI-UNIT FRANCHISEE IS S UE IV, 2018

What I need from vendors: One of the few disadvantages of the franchise business model is that you deal with “approved” vendors. Some of these approved vendors can become arrogant. They know they are our only option, so they are less responsive than they should be to our problems and concerns. Have you changed your marketing strategy in response to the economy? How? Our focus has always been on local store marketing, and that will remain our focus for now. How is social media affecting your business? It affects you most when you’ve disappointed a guest. Some guests use social media to tell a lot of people very quickly about your mistake. So you need to make an extra effort to check in with guests while they are still in your dining room or in your drive-thru lanes. You need to fix problems there, before guests leave and have the opportunity to turn to social media. How do you hire and fire? We don’t hire, we recruit! We have to sell working at our restaurants as aggressively as we sell how great our food is. To do that, we have phenomenal recruiters working in our human resources department, and we use recruiting firms as well. How do you train and retain? We train using our franchisors’ training programs. We retain by hiring store managers who know how to create fun while getting the job done. Pay, benefits, perks, etc. all help with retention. But nothing helps more than a general manager who knows how to make the job as fun as it can possibly be for our team members. How do you deal with problem employees? We always start by giving them the benefit of the doubt. We communicate with them, coach and ask what we can do to help. Sometimes we succeed in turning the problem employee around, and sometimes we don’t. Fastest way into my doghouse: Being a jerk to others. Being difficult to work with, not respecting those you work side-by-side with, and thinking your ideas are the only good ones. Life is too short to work with jerks.

corporate ladder over four years opening new stores and working as an assistant manager, general manager, followed by two years as a district manager. “I wanted to learn everything about this business, and I wanted credibility,” says Young. “It is hard to tell GMs there is a better way of doing things when you haven’t done them yourself. I also didn’t want to be the son-in-law of the primary owner who just sort of walked into this position and didn’t know what the heck he was talking about.” Today, Young’s growing portfolio also includes six Freddy’s Frozen Custard &

Steakburgers, a family brand co-founded by another pioneering Panera franchisee. “When we first started Saint Louis Bread, within a year we were Panera Bread,” says Young. “No one in Iowa knew who Saint Louis Bread or Panera Bread was, so we had a whole lot of brand building to do. Now 20 years later, Panera Bread is considered one of the best restaurant concepts around—and, really, in the history of restaurants.” When the time came to expand with another brand, Young stuck close to his operating playbook to leverage a strong infrastructure and fulfill his dream of

dominators

“As a franchisee, I am not straying far from the Panera Bread success formula.” owning a burger joint. After researching 20 burger-ice cream concepts, Young says he loved the food and the retro, fun feel of Freddy’s. Freddy’s co-founder Randy Simon, part of Panera Bread’s second franchise group, spent 24 years in the Panera system until he sold his 34 restaurants last year to lead Freddy’s as president and CEO. Founded in 2002, Freddy’s is named for Simon’s father “More than anything else, I thought the product was the most craveable, combined with the fact that I knew the Freddy’s people and had a lot of trust in the senior management of the franchisor,” says Young. “If it weren’t for Panera, I would not be doing what I am doing with Freddy’s. As a franchisee, I am not straying far from the Panera Bread success formula.” Young says it is has been fun to be part of Panera’s journey to a nationally known brand—acquired in July 2017 by

JAB Holding Co., launching a new growth partnership and ending a 26-year run as a public company and the best-performing restaurant stock of the last two decades. “We are very happy with both brands, so we are going to build a lot more,” says Young. “If I come across a brand that I think has great food and great leadership at the franchisor level, we will do more brands.” Young, a father of four, is now watching history repeat itself: he’s had his own family sit-down about the franchise business. And now, after spending time with a Fortune 500 company, his eldest son Steven is hard at work as director of operations for Freddy’s. “Don’t think you have to think of all of the great ideas by yourself,” advises Young. “If people around you have already done it and been through the hard knocks, you can learn a heck of a lot from them.”

BOTTOM LINE Annual revenue: $60 million. 2018 goals: 5 percent sales growth for Freddy’s; 3 percent for Panera. Growth meter: How do you measure your growth? Same store year-over-year comparisons. Vision meter: Where do you want to be in 5 years? 10 years? We hope to continue to build new locations. For Freddy’s, in 5 years we hope to build another 7 restaurants for a total of 14 locations. In 10 years, we want to be at a total of 20 to 25 locations. For Panera, we would like to build another 5 locations over the next 5 to 10 years, giving us a total of 27. How is the economy in your region affecting you, your employees, your customers? Iowa is the second-lowest in the country when it comes to unemployment, so it’s tough for everyone throughout the state. Put simply, we are in need of more employees to alleviate the workload for our existing employees. When we are short-staffed, employees have to take on extra responsibilities. With a full staff, we can provide even better service for our customers. Are you experiencing economic growth in your market? Some trade areas are growing, and some are not. How do changes in the economy affect the way you do business? They don’t really. We need to provide great food fairly quickly and accurately from warm and friendly employees in a sparkling clean environment. Changes in the economy have no effect on that. How do you forecast for your business? Unfortunately, there is no

exact science to forecasting. We look at trends both regionally and nationally, and we look at what’s going on locally, such as new businesses coming to the areas and local community events that may increase or decrease traffic. What are the best sources of capital for expansion? Local and national banks. Experience with private equity, local banks, national banks, other institutions? Why/why not? We’ve only done business with local and national banks mainly because the banks in the area know we are a very good investment for them, so we tend to get very competitive interest rates. What are you doing to take care of your employees? We ask our employees what is most important to them, and that’s what we try to provide. The large majority have told us they want the opportunity to receive bonuses, the opportunity to be promoted, the opportunity to participate in decision-making, and of course, competitive pay and benefits. So that’s what we provide. How are you handling rising employee costs (payroll, minimum wage, healthcare, etc.)? For now, we are absorbing these costs, but eventually we will have to raise prices. How do you reward/recognize top-performing employees? We increase pay, provide bonuses, recognize them in company publications, and because Freddy’s is growing, we have the luxury of offering promotions. What kind of exit strategy do you have in place? No plans to exit yet, so no strategy in place, other than to train my son to learn all that I do.

MULTI-UNIT FRANCHISEE ISSU E IV, 2018

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BY HELEN BOND

Clear Visionary

60 locations in 4 years, with more to come!

earle Vision multi-unit operator Bill Noble, a graduate of West Point and former UH-60A Black Hawk helicopter pilot, credits “courage and access to capital” for his swift growth as a first-time franchisee. Today, with 60 Pearle Vision locations and more on the way, Noble is one of the brand’s largest and fastest-growing franchisees. “Not a lot of people are comfortable taking risks,” said Noble in an interview with Pearle Vision profiling his success with the brand. “I’m very competitive, and I truly believe in the sayings, “Go big or go home” and “Be bold, be daring, or be gone.” Noble, who also earned an MBA in general management at Harvard Business School, saw an opportunity to build a big business as his own boss with the 2014 purchase of 10 corporate Pearle Vision locations—backed by an investor group that is almost all affiliated with West Point in some way. “I have West Point classmates from the Class of 1986, football teammates, and alumni from other classes who constitute over 85 percent of the invested capital in the company,” says Noble. Fittingly, he has named his company West Point Optical Group. Comfortable with scale and armed NAME: Bill Noble TITLE: Founder and CEO COMPANY: West Point Optical

Group

NO. OF UNITS: 60 Pearle Vision AGE: 55 FAMILY: Wife Lauralee, 5 children

ages 9 to 26

YEARS IN FRANCHISING: 4 YEARS IN CURRENT POSITION: 4

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at three companies: McKinsey & Company (associate consultant), Harrah’s Entertainment (senior vice president and general manager), and Cintas (assistant vice president). The support of Pearle Vision’s leadership team encouraged Noble to make the leap into the world of franchising and assume ownership of multiple Pearle Vision locations throughout Ohio—a perfect fit with the brand’s aggressive plans to convert its corporate-owned

with a wealth of experience in retail operations, Noble was primed for growth from the start. His background includes work with well-known retail brands including The Limited, Toys R Us, Lord & Taylor, Walmart, Famous Footwear, and Luxottica, where he spent two years with Pearle Vision’s sister brand, LensCrafters, as senior vice president of stores and brand planning. Before that, he spent nearly a decade learning a different set of business skills

PERSONAL First job: I started working at my father’s flower shop when I was seven. I got my first true job at a local grocery store in Albany, Georgia, as a courtesy clerk when I was 16. I wore a white shirt and a tie every day and would help shoppers to their car with their groceries. Key accomplishments: My parents always stressed the importance of doing well in school. As I look back on my life and career, graduating from West Point and Harvard Business School are high on my list of accomplishments. These two experiences prepared me for my career and paved the way for me to be able to excel. Biggest current challenge: With 60 Pearle Vision locations and more on the way, I work on finding a healthy balance between work and home life. I love being with my family and participating in my kids’ activities and sporting events, but I also love being a part of the day-to-day business. I don’t want to fail as a father, husband, or business owner, so I’m careful to make decisions on how I spend my time. Best advice you ever got: There have been several mentors throughout my academic and business careers. But being from humble beginnings in South

Georgia, something that has always stuck with me is: Never allow anyone else to define your goals and dreams. I remind myself that I’m the only one who can limit myself, not others. What’s your passion in business? I enjoy all the different aspects of retail, like leadership, sales, and interpersonal skills. And in the optical industry, we have the opportunity to make an impact in someone’s life through their ability to see. We are truly changing people’s lives. Annual eye exams are wonderful predictors of overall health. We have countless examples where our doctors have uncovered serious medical issues through our optical exams and imaging. We are doing well and doing good at the same time, and that is a great combination. How do you balance life and work? Work/life balance is a constant work in progress for me. I want to do it all when it comes to business and family, and I constantly struggle to find the balance that satisfies the needs of the business and the needs of my family. Favorite movie: “Which Way is Up?,” a Richard Pryor comedy from the 1970s.

MANAGEMENT Business philosophy: My experiences at West Point shaped me into the man and business leader I am today. West Point instilled three core values of duty, honor, and country that have been the cornerstone of my ethical code and value system over the past 35 or so years. Duty speaks to the importance of getting the mission completed successfully and fulfilling all of my obligations. A sense of honor compels me to conduct myself honorably and ethically in all aspects of my life. Country is pretty self-explanatory, but it speaks to me about America being a land of freedom and opportunity where many thousands of veterans have made the ultimate sacrifice to protect our way of life. How I give my team room to innovate and experiment: Our team is on the same page when it comes to our goals and priorities, so I trust them to experiment and bring new ideas to the table that will help us grow and better serve our patients and customers. This could be a simple update to a current process or the start of a new project. I surround myself with smart, innovative

MULTI-UNIT FRANCHISEE IS S UE IV, 2018

team members, so I expect them to challenge my thinking to propel the business forward. How close are you to operations? We’re a small, lean business, so I’m heavily involved in operations alongside my team. I’m not a micromanager. I give my team space to do their jobs. I feel it has to be a collaborative environment, where each team member is valued and contributes to the dayto-day success of the business. I subscribe to the old saying, “The devil is in the details.” What are the two most important things you rely on from your franchisor? Pearle Vision’s brand name is widely recognizable, and the franchisor invests to increase brand awareness, which helps us in our local markets. The second would be that Pearle Vision offers us the opportunity to build a strong business that offers franchisees a business model where growth is rewarded.

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“While the marketing synergies and economic benefits of scale are certainly important, it is our people who really make the difference.” eye care centers to franchises and grow its national footprint. As Noble’s portfolio has burgeoned, so have the goals he and his team set for the company each year. The mission for 2018 is 10 percent sales growth, 15 percent profit margin increase on net sales, and a 5 percent rise in patient exams. Noble says he runs a lean employment model, with the primary philosophy of right people, right place, right time. He looks to hire the best employees in the industry, assembling a team of people invested in the company’s success and where store managers own 5 percent of

the business. “You hear so many people in retail management say that you have to treat a store like you’re an owner,” said Noble in his Pearle Vision profile. “We took it a step further and we made them owners. So we can say it and back it up by giving them equity.” These days Noble, who points to his experiences at West Point for shaping him as both a man and business leader, is busy rallying the troops for more growth. The father of five, whose wife Lauralee is vice president of human resources for West Point Optical Group, plans to continue

opening new locations in the company’s key DMAs. “Our success has been most evident in those markets where we have three or more stores and can leverage our topperforming associates to drive business results,” says Noble. “While the marketing synergies and economic benefits of scale are certainly important, it is our people who really make the difference.” For Noble, doing well while doing good has proven to be a winning combination. “How do you put a value on being able to see clearly?” he asks. “We are truly changing people’s lives.”

BOTTOM LINE 2018 goals: Our team sets three new goals each year. This year our goals are to see 1) 5 percent exam growth; 2) 10 percent sales growth; and 3) 15 percent profit margin on net sales. Every initiative we launch has to bring us closer to making these three goals. We will set new goals in Q4 for 2019. Growth meter: How do you measure your growth? By the number of locations we open each year and by the same store sales performance of each location. Vision meter: Where do you want to be in 5 years? 10 years? We started 2014 with 10 locations and will be ending 2018 with 60-plus locations open. So in the near future we are focused on looking at our business as a whole and evaluating and fine-tuning our processes and systems. Looking ahead, we want to continue opening new locations in our existing key DMAs of Ohio, Michigan, Indiana, Pennsylvania, Arizona, Colorado, and Northern Florida. How do changes in the economy affect the way you do business? One of the many good things about the optical industry is that all peo-

MULTI-UNIT FRANCHISEE IS S UE IV, 2018

ple need eye care, and that’s not going to change. Whether it’s a child needing their eyes examined or a 40-year-old coming in for the first time, proper eye care will remain a need. So it does make the industry somewhat recession-resistant. We haven’t seen any negative impacts of the economy on our business. The trend is positive. What are you doing to take care of your employees? Our primary philosophy is right people, right place, right time. Our employment goals are to hire the best employees in the industry in key DMAs. We run a lean employment model, so it’s important that our stores are staffed with the right people at the right place and at the right time. To celebrate our employees, we convene an annual meeting in early December each year, where we invite all of our full-time employees to review our current-year accomplishments to date, prepare for our busiest two weeks of the year, and share our vision and operating goals for the following year. This meeting helps us nurture our culture and ensure that all our employees understand the role they must play in our success.

dominators

BY HELEN BOND

Living the Dream Healthy lifestyle and healthy growth

moothie King multi-unit franchisee Andrew Weinstein believes he was meant for the world of big business. And if his rookie years are an indication of what the future holds, the Florida-based operator is off to a great start on the road to living his entrepreneurial dream. Armed with a vision for growth and a passion for the product, Weinstein owns 14 Smoothie Kings, with eight additional stores in development in New York, Florida, and Georgia. He sees tremendous opportunity to expand with the brand, both through acquisitions and organic growth and a mission to inspire healthy living. “I want to get to 50 stores,” Weinstein says. “We believe in servant leadership and support, systems, and tools. And we believe we have the ability to grow as a brand, our team, and as individuals in this company.” Since opening his first store in Coconut Creek, Florida, Weinstein teamed up with business partner Barry Edwards to ink a flurry of franchise deals. Most recently, he acquired nine existing stores in Atlanta and opened the second of seven locations planned in Long Island, New York—a move taking him back to his roots. Weinstein, who is from Syosset, New NAME: Andrew Weinstein TITLE: Partner COMPANY: AB Smoothie LLC NO. OF UNITS: 14 Smoothie Kings, 1 under construction, 7 in development. AGE: 30 FAMILY: Wife Licia YEARS IN FRANCHISING: 5 YEARS IN CURRENT POSITION: 2

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PERSONAL First job: McDonald’s. I was a crew member and loved the drive-thru! Formative influences/events: My wife, my dad, my business partner Barry Edwards, and a few basketball coaches over the years. Key accomplishments: Our mission is to inspire people to live an active and healthy lifestyle. Smoothie King allows us to achieve our life’s mission and our goals of making a good living. Biggest current challenge: Trying to find the right real estate in the markets where we operate. Next big goal: To open 50 stores and develop and have an impact on as many lives as we can. First turning point in your career: Selling my first restaurant. Then, when my wife fell in love with Smoothie King as a guest, it changed everything. Best business decision: Walking into Smoothie King and ordering a Peanut Power Plus. Hardest lesson learned: That you can’t turn around everything and everyone. The only thing you can do is your best. Work week: I usually go to the gym at 6 a.m. I get back to the home office at 7 a.m. and answer emails and start checking reports. I usually get in the car and head out to stores mid-morning and hang through lunch. After lunch I head back to the office or keep visiting sites, depending on if I am on the road or not. Exercise/workout: I run a few times a week. In between, I play bas-

ketball and lift weights. I try to work out five days a week—it really keeps me going. Best advice you ever got: To focus on three things: hard work, great people, and God’s help. What’s your passion in business? To serve each other (the team), the guests, the community, and give the ultimate guest experience. How do you balance life and work? I try to finish work by 6 p.m. every day so I can spend time with my wife and our dogs. Guilty pleasure: Cheeseburger with ketchup and extra onions from McDonald’s. Favorite book: Rich Dad Poor Dad by Robert Kiyosaki and Sharon Lechter. Favorite movie: “Shawshank Redemption.” What do most people not know about you? My last name is Jewish and my dad is a rabbi, but I am actually Christian. Pet peeve: To see guests waiting in line. What did you want to be when you grew up? Hah! A firefighter or UPS driver. Last vacation: The Exumas, Bahamas. Person I’d most like to have lunch with: Tom Garrett at GPS Hospitality. He has a great company and exhibits great leadership.

MANAGEMENT Business philosophy: Serve first, serve fast, and serve with a smile. Management method or style: I let the managers run their stores and I serve them in any way they need. It inspires growth and creates an ownership mentality in the store. We also lean on our managers to get to know who the customer is in each area, because there are all different walks of life coming through the door, so we really rely on our team.

What I need from vendors: To be on time so I don’t have to field the “Where is my truck?” call.

How do others describe you? Fun, energetic, hard working. Great basketball player (LOL).

Have you changed your marketing strategy in response to the economy? How? I used to think Facebook was the end-all for marketing, but it is really hard to make a splash on there unless you devote most of your resources to it. We have been successful with EDDM mailers and local sampling of our product.

One thing I’m looking to do better: Be more organized. As we grow, it is becoming harder to manage the growing reams of paperwork. My wife usually gets on me for this, so I will, no doubt, improve.

How is social media affecting your business? Social is a big part of our approach, but when it comes to marketing it all can’t be in one bucket, so we reach out through a variety of tactics.

How I give my team room to innovate and experiment: We are in a franchise system, so it’s hard to innovate with new products. That said, our teams come up with new smoothies all the time that are fun and exciting and they always recommend them to the guests. Any ideas they have, we always listen to and allow them to try in their store. If it’s a winning idea, we always try to roll it out!

How do you hire and fire? We hire with LinkedIn, Indeed, and walkins. We don’t fire. I always say, “You fire yourself.”

How close are you to operations? Very close. Every day I am in the stores and on the phone talking to teams and vendors, trying to achieve excellence.

How do you deal with problem employees? We usually try to coach people and guide them to the water. It’s up to them to drink.

Greatest challenge: Finding the right people for the right roles.

What are the two most important things you rely on from your franchisor? Training support and tools to make operations simple, and the ability to grow organically and through acquisitions.

MULTI-UNIT FRANCHISEE IS S UE IV, 2018

How do you train and retain? Smoothie King has a great training platform that makes it really easy for everyone to get on the same page and quickly. We retain by putting people first.

Fastest way into my doghouse: To be on your phone when a guest walks in.

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“Our mission is to inspire people to live an active and healthy lifestyle. Smoothie King allows us to achieve our life’s mission.” York, walked into his neighborhood McDonald’s on his 14th birthday to apply for a job and began “working every chance I could,” he says. The captain of his community college basketball team, a sport he still loves to play, Weinstein is a natural leader. “I have always loved leadership and the essence of a team.” Now the entrepreneur is busy building his own team with a legacy brand he’s had a soft spot for since he was a kid. He fondly recalls attending New York Knicks basketball games with his father where, after the game, they would head to the Smoothie King beneath Madison

Square Garden to grab an Angel Food smoothie before boarding the Long Island Rail Road home. Weinstein’s rediscovery of the chain a decade later—thanks to his wife—came just as he was moving on from his first burger franchise investment where, he says, he learned a lot and was able to sell for a good amount of money. He became an avid fan again and eventually a franchisee of the brand, which he credits with helping him lose weight and live a more active and healthy lifestyle. “I am a loyal user,” says Weinstein. “Smoothie King has changed my life significantly in

more ways than just money.” Bullish on growth, Weinstein is set to build on Smoothie King’s continued healthy evolution as a brand focused on “Cleaner Blending,” a proprietary approach to using more whole fruits and vegetables and removing added sugars and artificial ingredients from the smoothie recipes. “I have always had a great vision for big business,” says Weinstein. “I would like to, one day, be the guy with a lot of restaurants that people would like to have lunch with to talk about the industry—and in 10 years, look back at 50 restaurants as just the start.”

BOTTOM LINE Annual revenue: We have taken over all our stores this year, so we estimate between $6 million and $7 million for year one. 2018 goals: To open one location in Massapequa, New York, and, hopefully, finish the year with a few more acquisitions. Growth meter: How do you measure your growth? More flags in the ground and through same store sale comps. Vision meter: Where do you want to be in 5 years? 10 years? In 5 years we would like to be at 50 restaurants. In 10 years, I would like to have surpassed our 5-year goal and be able to give the opportunity to our teammates to own their own restaurants. I believe mentorship is what it’s all about and would like to help our team grow their businesses. If this opportunity comes before 10 years, that’s cool too. How is the economy in your regions affecting you, your employees, your customers? Right now, everything is going well and people are happy. At Smoothie King, we sell a healthy meal in a cup that is easy to eat on the run and costs between $5 and $6. I think that is a winning ticket in any economy. Are you experiencing economic growth in your market? We operate in three different states—New York, Florida, and Georgia. In New York, it is always booming with jobs and the wages are going up so everyone has extra cash (or so they think, until everything becomes more expensive) to buy food out of the house. Boca Raton, Florida has a lot of snow birds who come back in the winter, along with the college students, and that makes for great winter months in that area. Atlanta is new to us, so I don’t have an answer, but we know it is one of the fastest-growing cities and we are excited about our opportunity there. How do changes in the economy affect the way you do busi-

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ness? We continue to serve first, serve fast, and be the joy in everyone’s day. We believe if we do these things right and have a clean store, we will continue on our growth path. How do you forecast for your business? We try to hit a 10 percent growth in same store sales. What are the best sources of capital for expansion? We have used a few different vehicles over the years, but I have found the processes very challenging. Experience with private equity, local banks, national banks, other institutions? Why/why not? Our company is new, so local banks have been a snag for us to this point. As we grow, and become more of a mature company, we will look to partner with banks. What are you doing to take care of your employees? Every member in the organization has the opportunity to earn more money every month through bonuses—from members to leaders of the company. We also love to drop pizza in on Fridays. Everyone loves pizza! How are you handling rising employee costs (payroll, minimum wage, healthcare, etc.)? It just seems like it’s going to be what it’s going to be, and rising costs won’t change. With that being said, we staff our stores to grow and retain and to serve each other and the guest. How do you reward/recognize top-performing employees? We bonus our teams and always show them appreciation for their service. What kind of exit strategy do you have in place? I don’t have one at this time, besides eventually selling stores to our team, as I noted above. We are growing and hoping to grow to be one of the largest franchisees in the system.

dominators

BY HELEN BOND

Fantastic Success

Balancing faith, family, and business

antastic Sams franchisee John Prichard has never been a “growth for growth’s sake” kind of franchisee. Until recently, the Twin Cities-based owner of 24 Fantastic Sams and two upscale Camille Albane salons wasn’t even aware that he was the brand’s largest franchisee.

“Never crossed my mind at all,” says Prichard, whose company, Kingdom Business, Inc. is a team effort with his partner Patti Prichard—who also is his high school sweetheart and wife of 41 years. “I didn’t even know until I was at the Multi-Unit Franchising Conference and ran into Fantastic Sams people, and

they told me.” While Prichard may humbly acknowledge their success, he has always been serious about the value of hard work and strategic growth. “I understood right away that in franchising you need to have a strategic plan in mind on what you want to accomplish,” he says. “My approach

NAME: John and Patricia “Patti” Prichard TITLE: Franchise owners COMPANY: Kingdom Business, Inc. NO. OF UNITS: 24 Fantastic Sams, 2

Camille Albane AGE: John, 63, Patti, 61 FAMILY: 3 adult children (1 daughter, 2

sons), 4 grandchildren (2 girls, 2 boys, and twins expected in January) YEARS IN FRANCHISING: 14 YEARS IN CURRENT POSITION: 14

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“It is very difficult to balance life and work, but we make it happen... We try to make it to our grandchildren’s activities because family comes first.” PERSONAL First job: John: We both had our first real jobs at a Red Owl grocery store. I was stocking shelves at 75 cents an hour. Before that, I mowed lawns and had paper routes. Formative influences/events: John: My dad passed away when I was 17, and that was the formative event that led me to my faith in Christ. Patti took that journey with me in high school, and it has shaped and influenced everything we’ve done since. Patti: Accepting Christ in high school was a formative event, as was marrying my high school sweetheart. Together, we raised three children and started Kingdom Business, Inc. Key accomplishments: John: Becoming the largest franchise business in the Fantastic Sams system has probably been the most recent key accomplishment for both of us. Patti: Raising great kids, building the business, and staying married have all been great accomplishments. Biggest current challenge: Patti: Staffing 26 salons is a challenge. There are not enough hair professionals in the industry right now. Next big goal: John: We would like our business to be debt-free. Patti: Beyond that, we would like to retire to a life of serving others and enjoying our grandkids. Major turning point in your career: John: Moving from being a CPA at a large firm to working at a local bakery company. I gained a lot of business and management experience in my 24 years at the bakery company, and I eventually became the chief operating officer. It gave me what I needed to go into franchising and operate my own business. Patti: When I realized that I had the opportunity to make a difference in the lives of so many people. We currently employ more than 250 hair professionals. Best business decision: John: Asking Patti to join me in this business early on was absolutely the best business decision I’ve ever made. She is a great people person. She handles the operations side of the business, and she is a wonderful mentor for our employees. Hardest lesson learned: Patti: You learn to care and be a part of so many people’s lives, but it is a career for all of us and they move on. Work week: John: Our salons are open every day of the week except Sunday. When the doors are open, we’re working. We have the flexibility to take time to be involved in our children’s and grandchildren’s lives, but we are also available all the time for our staff. Exercise/workout: John: I have a Fitbit, and I try to get 15,000 to 20,000 steps a day. I don’t always make it, but I always try! We both love walking and playing golf, and I walk when I play golf, so those steps count.

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Patti: We also love to play pickleball! It’s a paddle sport that’s similar to badminton and table tennis. Best advice you ever got: John: Don’t fear failing in business. When you have a passion about what you’re doing, you can’t fear failing. Patti: Separate the behavior from the person. Their behavior is due to life, but the person is who God created. What’s your passion in business? Patti: My passion is to help our employees remain passionate about their careers. We want to give them the tools to be successful. John: We also see this as an opportunity to serve God. We named our business Kingdom Business Inc. to help us remember whom we are serving. How do you balance life and work? Patti: It is very difficult to balance life and work, but we make it happen. We plan family vacations and we get away for several weeks each year. Our positions allow us enough flexibility to be able to work anywhere. We try to make it to our grandchildren’s activities because family comes first. Guilty pleasure: John: Junk food. Patti: Sweets and Chico’s. Favorite book: Both: The Bible. Favorite movie: Patti: “Mrs. Doubtfire.” John: “It’s a Wonderful Life.” What do most people not know about you? John: I’m a night owl. I love staying up late. Patti: I struggle with depression. I give everything my best, and I am really hard on myself. When things don’t work out, I take it personally. Pet peeve: Patti: People who talk with their mouths full. John: Slow drivers on the freeway, especially in the left lane. What did you want to be when you grew up? John: When I was little, I wanted to be a professional basketball player. I wasn’t any good, but it seemed like fun. By the time I was in high school, I knew I wanted to go into accounting and business. I had a passion for that pretty young in life. Patti: I always wanted to be a wife, mother, and nana. Last vacation: This summer, we spent a week at a resort on a lake in northern Minnesota with the entire family. Person I’d most like to have lunch with: John: I would love to have lunch with Jack Nicklaus. He’s the best golfer ever, a successful businessman, and a good family man. Patti: I’d most like to have lunch with my prayer friends. We have been together for 35 years. We laugh, cry, celebrate, mourn, and love each other unconditionally.

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“Our marketing isn’t just aimed at attracting consumers— we also want to be attractive to talented hair professionals.” MANAGEMENT Business philosophy: John: The only way to succeed is to create an environment where everyone can succeed. We focus on our staff and what it will take for them to be successful in whatever we’re doing. Management method or style: Patti: I try my hardest to lead by example. Being a leader also means being a coach and a mentor. However, it’s important not to get caught up in any drama while helping to solve problems. I’m just as much a coach and a mentor as I am a leader. Greatest challenge: John: Finding the right balance of being a leader and giving our employees the freedom to do their jobs is an open-ended challenge. It boils down to hiring skilled people, trusting them, and holding them accountable. Part of the challenge for us is to make sure we’re providing the tools staff members need to succeed and effectively motivating them to achieve their goals. How do others describe you? John: They hopefully see me as a very loyal and respectful manager. They definitely know I’m a man of faith. Those are the key things. Patti: I’m described as a passionate and caring leader who goes above and beyond. One thing I’m looking to do better: John: This relates to our greatest challenge. How can we be better leaders to help our people be successful? That’s what we want to do as a business. We also want to make sure we show our employees how much we appreciate them, beyond simply giving them kudos. How I give my team room to innovate and experiment: Patti: I try to give our leadership team room to share and give ideas. I am always asking our team members for their opinions. How close are you to operations? John: Patti runs the operations, while I provide the business strategy and planning. We work together on operational challenges to come up with solutions, and Patti executes those solutions with her team. What are the two most important things you rely on from your franchisor? John: We rely on Fantastic Sams for branding and marketing, as well as education. The corporation sets the branding message, and that influences how guests and hair professionals see our salons. There is a shortage of wasn’t to be the largest franchisee, it was to have 15 to 30 salons and we will see from there. I was really focused on achieving that goal and having successful salons—not just opening salons to open salons.” As chief financial officer and later COO of a large, third-generation familyowned bakery, Prichard learned the art of strategic planning, annual goal-setting, and adjusting those goals when needed. And when the family wanted to get out

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hair professionals right now, so we rely on our franchisor’s brand messaging to be attractive to stylists. And although we have our own educator, it’s important to receive education from the Fantastic Sams staff. That’s imperative to help the members of our team grow and succeed. What I need from vendors: Patti: Our vendors need to provide marketing support, stylist incentives, and education. The vendors are important to help draw talented hair professionals into this great career opportunity. Have you changed your marketing strategy in response to the economy? How? John: We’ve changed our marketing strategy in response to the shortage of hair professionals. Now, our marketing isn’t just aimed at attracting consumers—we also want to be attractive to talented hair professionals. There is less couponing and discounting and more brand awareness. How is social media affecting your business? John: Social media provides a good marketing channel for us. It also provides a platform to connect with and recruit hair professionals. How do you hire and fire? Patti: We have staffing directors who recruit and hire for us, and everyone gets a thorough orientation. On the other side, we have a five-step program that works everyone through a process before we let them go. We are all about believing in the person and helping them change the behaviors that would otherwise cause them to lose their employment. How do you train and retain? John: We have a two-day class for new employees and a full-time educator who consistently works with our stylists. Retention is built around ensuring our employees have successful careers and feel they can grow. We provide strong benefits, schedule flexibility, and advanced education. How do you deal with problem employees? John: We meet with them and try to work through their issues. We try to turn their challenges around to a success. Fastest way into my doghouse: Patti: Creating drama rather than solving problems. John: Having a negative attitude and negatively influencing others in the workplace.

of most of the business, he helped sell off the divisions and made his own exit after 24 years. The Prichards quickly gravitated to the idea of owning a business themselves and liked the stability of the hair care industry, Fantastic Sams’ solid business model, and the support the franchisor provided. Founded with a “three pack” of salons in 2004, their company has evolved into a true family enterprise. While John

focuses on the finances and the big picture, Patti focuses on operations, with their eldest son and daughter-in-law in strong supporting roles. Prichard says that learning to balance the family element of the business was a learning process. The key, he says, was “respecting our family and love for each other more than our results in business.” With Fantastic Sams now one of the world’s largest full-service hair care franchises, the Prichards are turning their

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“In good times and bad times, people still want their hair to look good.” attention to growing their sister brand, Camille Albane, also owned by Dessange Group North America. The Prichards are the first and only U.S. franchisees of the upscale brand, with two salons open in the Twin Cities area, part of a five-unit development agreement. The couple is also glad to share their experience with fellow Fantastic Sams operators. “We are very involved with other Fantastic Sams franchisees in the Twin Cities and around the U.S. to help position the brand overall as the top full-service hair salon brand in the U.S.,” says Prichard. “There are excellent opportunities to grow the brand system-wide.” Prichard believes that hair care, in

addition to being largely recessionresistant, is a vibrant and growing sector, where the people who work in it love helping others feel and look good. Providing proper, ongoing training to those service providers is a key to their growth, yet he says this is often a weak spot in the industry. “There are a lot of people who get into this industry who are not coached, mentored, or taught how to be successful so they can stay with it,” he says. “Not that we have it all figured out, but that has really been an emphasis. With that comes more longevity and less turnover with us than in the industry. I think in this industry in particular, that has helped us be successful.”

BOTTOM LINE Annual revenue: $9.5 million. 2018 goals: John: To see a 3 percent annual sales growth. Patti: We would also like to better serve our employees and help them grow. Growth meter: How do you measure your growth? John: Through overall sales as well as individual salon performance metrics. That includes seeing growth in all of our services and product sales. Vision meter: Where do you want to be in 5 years? 10 years? John: Patti wants to have more freedom with our grandkids. From a business standpoint, we want to be debt-free, and we plan to keep growing. Patti: In 5 years, I hope to be spending more time volunteering and on nana duty. Even more so in 10 years! How is the economy in your region affecting you, your employees, your customers? John: No matter the economic climate, it doesn’t cause significant swings in our business. In good times and bad times, people still want their hair to look good. Are you experiencing economic growth in your market? John: Yes, and I think that’s mainly because we have a strong, established brand in our market and we’re a full-service hair salon. How do changes in the economy affect the way you do business? John: Sometimes we’ll see a growth in our customer counts when the economy is down because we are a full-service hair salon with fair prices. When the economy is good, there may be fewer people entering the salon industry since they have more opportunities. How do you forecast for your business? John: We forecast each salon monthly and annually and we combine them. We don’t have those significant changes in response to the economy, so our results typically match our expectations.

What are the best sources of capital for expansion? John: In the banking climate, it is SBA-backed lending. It’s fragmented outside of that. Some people may tap into personal lending. Experience with private equity, local banks, national banks, other institutions? Why/why not? John: I’ve done most of my lending with local banks, and most of that has been SBA-backed loans. It has been a good experience overall, and I think that comes from having good banking relationships and keeping them well advised on results. What are you doing to take care of your employees? Patti: We treat them like family. Our salons are closed on Sundays so everyone can spend time with their families and focus on their faith. We offer them paid vacation, health benefits, 401(k), advancement opportunities, and leadership training. How are you handling rising employee costs (payroll, minimum wage, healthcare, etc.)? Patti: We have had to raise our prices to cover our rising costs. How do you reward/recognize top-performing employees? Patti: We always want to recognize our employees for their hard work, so we acknowledge their successes and personal accomplishments on our private Facebook page and in our company newsletter. Top-performing employees are given certificates, bonus pins, and thank-you notes. We also have contests and incentives to encourage strong performance. And, of course, personal recognition goes a long way. What kind of exit strategy do you have in place? John: There really isn’t an exit strategy. We’re a family business and we see that continuing into the foreseeable future. We do have a plan in place for our business to continue if something happened to Patti and me. Patti: I plan to find a replacement for myself in the next few years. My husband is a lifer—he doesn’t plan on exiting until death do us part!

MULTI-UNIT FRANCHISEE ISSU E IV, 2018

dominators

C E N N O C RE

BY KERRY PIPES

Triple Player

Focusing on operations, people, and community

hen we first met Jeff Rigsby in 2010, he was a successful multi-unit operator with 21 Bojangles’ locations. Back then, the father of three boys told us he was an operations guy who loved being in his businesses because, he said, “The best feedback you can get is talking to your customers—they will let you know how things are.” There must be something to Rigsby’s strategy because over the past 8 years he has expanded from 21 stores and a single brand in the Carolinas to 62 locations, two more brands, and a presence in three additional states: Georgia, Tennessee, and Kentucky. His newest brands are Salsarita’s (2) and Donatos Pizza (1). His goal today is to add 15 more restaurants by the end of 2019 and to own 100 stores within the next 5 years. All of this growth has required Rigsby to beef up his organization’s infrastructure. Putting his money where his mouth is, he recently moved his corporate team into a new office where they are focused on handling the company’s growth—and preparing for more. As could be expected, his growth has presented new challenges. “Our culture in all of our restaurants is important,” he says, which is why he and his team are NAME: Jeff Rigsby TITLE: Franchise owner, CEO,

president

NO. OF UNITS: 59 Bojangles’, 2 Salsarita’s, 1 Donatos Pizza AGE: 56 FAMILY: Married 37 years with 3

sons and 3 grandsons

YEARS IN FRANCHISING: 40

working in franchising, 17 as a franchisee

YEARS IN CURRENT POSITION: 18

MULTI-UNIT FRANCHISEE IS S UE IV, 2018

focused on trying to hire and retain the best people they can. “But as we grow into more markets, keeping the culture, inclusion, and values that are the core of our success is our biggest challenge—and opportunity.” Throughout, Rigsby remains devoted to his family and to the communities where his restaurants operate. “As much as we

want to be successful, we want to be able to support the community,” he says. “Our goal is to do business with a purpose and to do right by all of the people involved.” He’s also proud to have one of his sons working right alongside him. Oh, and Rigsby is no longer just the father of three sons—since 2010 he’s added three more units, all grandsons.

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“My business is like my hobby, so it never really feels like work.” PERSONAL First job: A paper route when I was 13. Formative influences/events: I’ve been in the business for 40 years now, and the key to my passion has been the mentors I’ve had over the years, including my father. Many of my colleagues were seasoned franchisees who were also strong mentors to me. Randy Kibler, Bojangles’current CEO and president, has been a huge influence on me in my time with the brand. Key accomplishments: I’m proud of the strong career I’ve had. Before I joined the Bojangles’ team, I worked at KFC for 15 years where I was able to advance my career and receive the Key Award as one of the top 10 managers in the country. In 1994 I started at Bojangles’ and worked my way up to director of operations. From there, I became a multi-unit franchise owner. The highlight of all of this has been my ability to grow my restaurants. This is something I’m most proud of. Biggest current challenge: Keeping the Bojangles’ culture fluent in all of our restaurants. I want the best people out there in my restaurants. But as we grow into more markets, keeping the culture, inclusion, and values that are the core of our success is our biggest challenge—and opportunity. Next big goal: To reach 100 restaurants in the next 5 years. First turning point in your career: When I became the director of operations at Bojangles’, because that’s where I started developing my passion for the brand and had a lot of occupational growth. I would also say becoming a Bojangles’ franchise owner was also a turning point, because I was able to use everything I had learned on the corporate side in my own business.

Best advice you ever got: “Take care of the people who take care of your business.” This also applies to taking care of the community, because when you help the community they in turn give you their loyalty—and that is the key to long-term success in any market. We always try to be very cognizant of supporting everyone in the business, whether it is the customer, employee, or vendor. We try to do right by all parties involved. What’s your passion in business? My passion for the business relates to the people. Every time we build a restaurant we create opportunities for people. When we go into communities, we have a platform for doing great things. As much as we want to be successful, we want to be able to support the community. Our goal is to do business with a purpose and to do right by all of the people involved. When you do that, everything falls into place. The loyalty gets better, and the business gets better. It is what gets me out of bed in the morning. How do you balance life and work? My wife helps me a lot with balancing life and work, and I try to spend a lot of time with our family. We go on vacations together and I try to be home early in the evening. I also integrate family into the business, which allows us to spend time together. My business is like my hobby, so it never really feels like work. We also try to help our employees with their work/life balance. It can be tough, especially in the restaurant industry, so we definitely make it an important focus for our employees as well. Guilty pleasure: Bojangles’ food, specifically our Cajun Filet Biscuits.

Best business decision: Becoming a franchise owner at Bojangles’.

Favorite book: Winning by Jack Welch.

Hardest lesson learned: There were a few site selections where I trusted my gut instead of doing the research and following the systems in place. And those locations really struggled for the first few years. Eventually they worked out, but I learned to always follow the procedures put in place, because that’s what leads to success.

Favorite movie: “The Godfather.”

Work week: Usually, I work five days a week. I visit the restaurants early in the morning, and then I get into the office around 10 a.m. and head home around 6 p.m. I probably clock in 55 to 60 hours a week.

What did you want to be when you grew up? I wanted to own my own business.

Exercise/workout: I try to do the treadmill every day, but my biggest workout is playing with my grandchildren.

What do most people not know about you? I am a roller coaster enthusiast. Pet peeve: Laziness.

Last vacation: Paris and London in July 2018. Person I’d most like to have lunch with: Vince Lombardi.

MANAGEMENT Business philosophy: Taking care of people who take care of business. Developing our people to achieve great results. Trying to set people up for success. It is all about the people for the success of the company. Management method or style: Get the best people. Empower, listen, coach, and support them. Set standards for them to grow. We grow as a company through the growth of our people. Greatest challenge: Getting the culture, mission, and vision to be spread throughout the whole company. How do others describe you? As a caring person who has very high standards and expectations. I think my employees would say that I care about

MULTI-UNIT FRANCHISEE IS S UE IV, 2018

them and am very approachable. They know we are going to take care of them if they take care of the business. One thing I’m looking to do better: I continue to evaluate the business as we grow. I would like to continue growing our infrastructure. How I give my team room to innovate and experiment: Regular communication. When we do decision-making it is always in a group environment, and leaders are given an opportunity to try new things. We want everyone to know they have a voice. I think our people feel very empowered to make decisions, as long as we all communicate on how we do those things. continued

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“My goal is to reach 100 stores in the next 5 years.” M A N A G E M E N T, c o n t i n u e d We are always asking for everyone’s opinion so we can get better. How close are you to operations? I’m fairly involved in operations, but not as much as I used to be. We have weekly operations meetings. I visit the restaurants every day and am constantly talking to our two operations officers. My passion is in operations and I try to stay as connected as possible. What are the two most important things you rely on from your franchisor? To keep the operation sound, and to keep the brand relevant. What I need from vendors: To be true partners and work with our business on how we can continue to make our partnership a win-win situation for all. Have you changed your marketing strategy in response to the economy? How? Yes, our marketing strategy has changed a little bit. Consumers are changing the value message. I think people want the total package: a good restaurant, good service, and good food, all at a value price. The message stays consistent with the quality of everything we’re doing. How is social media affecting your business? With mobile apps and online ordering, people want their food quick and they are using their phones to order. They also can review us online. So we try to stay very engaged online. You need to be out there promoting your company and business, now more than ever.

How do you hire and fire? We hire the best people. We try to do a lot of recruiting from within. We try to approach any issue with learning and developmental processes. Usually when people leave they fire themselves, because we have given them all the tools to make it work. Many people say it is hard to find good people, but it’s harder to keep good people. How do you train and retain? We have a training process and a specific training team that tracks progress of the restaurants. A lot of that goes with the idea of setting people up for success and coaching managers on creating an environment where people feel comfortable communicating. One of our biggest missions is to have a positive impact on everyone who works for us, whether it’s high school kids working part-time or those trying to move up within the company. We want to make sure we treat them all well. We are looking to roll out a tuition reimbursement program, and have whole store bonuses. Retention is far more important than the recruiting. How do you deal with problem employees? When we have issues with an employee it usually comes from a bad attitude. So our approach is to pull them aside, coach them, and try to get them to turn their attitude around. If that does not work, usually the person terminates him or herself. Fastest way into my doghouse: Act like you don’t care and give a lot of excuses.

BOTTOM LINE Annual revenue: $85 million. 2019 goals: To add 15 restaurants by the end of the year. Growth meter: How do you measure your growth? Several ways: top sales to previous year, market share, market value, especially looking into our core markets, and unit growth. Vision meter: Where do you want to be in 5 years? 10 years? My goal is to reach 100 stores in the next 5 years. How is the economy in your regions affecting you, your employees, your customers? Everywhere we are operating, the economy is growing stronger, which means more restaurants are being built and customers have more choices, which drives up competition. But when customers have more choices, they look for the best value. They want better food, better service, and better dining experiences. Our employees also have more choices of where to work. We tackle this by focusing on retaining our employees and adding value to their work, which in turn helps our sales to grow. Are you experiencing economic growth in your markets? Yes. How do you forecast for your business? We look at different things that affect the upcoming year: the economy, what the competition is doing, and our new restaurants we are building. We put our yearly budget together in October and focus on mirroring the economy’s positive growth. What are the best sources of capital for expansion? Local banks. Any time we enter a new market we develop close-knit relationships with local banks. Experience with private equity, local banks, national banks, other institutions? Why/why not? We haven’t been in a position where we have to use private equity groups. We tend to shy away from private equity groups because they don’t know your business as well, and you end up

paying a lot more for your money. Instead we focus on local banks because we are able to foster a more intimate relationship with them and help ourselves get established in the community. What are you doing to take care of your employees? We offer our employees fair compensation and many opportunities for career advancement. Additionally, we offer an excellent benefits package that includes a 401(k), vacation time, dental, health, and life insurance. We also offer a bonus program and focus a lot of energy into creating an environment where they can be successful. How are you handling rising employee costs (payroll, minimum wage, healthcare, etc.)? We try to hire the best people and are competitive in our wages. We want to be the employer of choice for our employees in terms of pay and benefits, because we wouldn’t want to hinder great talent from joining our team. The better the people we have, the better the business is going to do. How do you reward/recognize top-performing employees? We have a monthly bonus program and are always looking for new, creative ways to reward our top performers. We have an end of the year banquet where we give out rewards and recognize those who have had a great year. We give out awards for best in sales, retention, and a restaurant of the year award that our managers are always very excited about. This is a huge deal for us because we all get to dress up and have a nice meal together to celebrate our people’s success. Additionally, we give managers a week at our beach house each year. We are always looking to incentivize our team members, because we see that when they feel like they are recognized for their hard work, they are able to reach even better results. What kind of exit strategy do you have in place? I have a few ideas in mind. I love this business and am not ready to retire.

MULTI-UNIT FRANCHISEE ISSU E IV, 2018

AT H L E T E S I N F R A N C H I S I N G BY KERRY PIPES

A-Gon Goes 6-for-6!

Former MLB star is batting 1.000 as a franchisee

drian Gonzalez is a five-time Major League Baseball All-Star and fourtime Gold Glove Award winner. And now the longtime San Diego Padres star first baseman, currently a free agent, is also a Jersey Mike’s franchisee. This past February, Gonzalez purchased six Jersey Mike’s stores in San Diego County and teamed up with his operating partner, Ken Nicola, who oversees daily operations. Gonzalez has three Jersey Mike’s locations in Oceanside, two in Carlsbad, and one in Encinitas and says he plans to open five more in the next five years. “I have to think about the future, and this is one of the things I will be doing,” says the 36-year-old Gonzalez, who says he will be much more active as a franchisee once he retires. Gonzalez says he always wanted to be a professional baseball player. He was selected by the Florida Marlins as the first overall pick in the 2000 draft. The Marlins traded him to the Texas Rangers, where he made his MLB debut in 2004. Following the 2005 season, the Rangers traded him to the San Diego Padres. It was in San Diego that he began racking up awards. He spent the better part of a decade with the Padres, where he was a three-time All-Star and a two-time Gold Glove winner. In 2009, he led the majors in walks with 119 and hit 40 home runs for the first time. He went on to play with the Red Sox, Dodgers, and Mets and is currently a free agent. In his 15-year MLB career, Gonzalez hit .287 with 317 home runs. He says two things drew him to Jersey Mike’s: the freshness and quality of the food, and the brand’s reputation for

giving back to the community. “I love the fresh ingredients and how everything is sliced right in front of you,” he says. “Jersey Mike’s is a top sub sandwich enterprise.” And the brand’s “Sub Above” commitment to community and charity work also struck a chord with him. “My wife Betsy and I love helping and being part of the community,” says Gonzalez. “We are happy to be a part of a company like Jersey Mike’s that has built making a difference into their business plan.” This past March, all of his stores participated in the brand’s annual “Month of Giving” and, along with 32 other locations in the San Diego area, raised $248,494 for Rady Children’s Hospital. Gonzalez may be new to franchising, but the drive and determination that made him an All-Star in professional baseball is sure to lead him down the path of success in franchising. NAME: Adrian Gonzalez TITLE: Franchisee COMPANY: Jersey Mike’s Subs NO. OF UNITS: 6 Jersey Mike’s AGE: 36 FAMILY: Wife Betsy and two daughters, 6 and 4 YEARS IN FRANCHISING: 1 YEARS IN CURRENT POSITION: 1

PERSONAL First job: Professional baseball player. Key accomplishments: In baseball, I have accomplished a few personal awards: Gold Gloves, Silver Slugger, etc. Biggest current challenge: To manage everything in life with my baseball career. Next big goal: To have a healthy and successful baseball season. First turning point in your career: When I was traded from the Texas Rangers after the 2005 season to the San Diego Padres, where I was able to play every day for the first time in my career. Hardest lesson learned: To always take care of your money. Even family can take advantage of you if you are too careless with it. Work week: Baseball is a 7-day-a-week job. Exercise/workout: With baseball, we exercise on a daily basis.

MULTI-UNIT FRANCHISEE IS S UE IV, 2018

Best advice you ever got: Have fun, but when it is time to get serious and focused, know to flip the switch. What’s your passion in business? To grow and be connected with the right people and companies. How do you balance life and work? By taking one situation at a time. Guilty pleasure: Chips and a good salsa. Favorite book: The Bible. Favorite movie: “Tombstone.” What do most people not know about you? I love to spend time with my family. What did you want to be when you grew up? A professional baseball player. Last vacation: Puerto Vallarta, Mexico.

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AT H L E T E S I N F R A N C H I S I N G

SPORTS & BUSINESS What skills/experience from sports have carried over to operating a business? Work hard and never let any obstacle stop you from accomplishing your goal. Which do you find more competitive, sports or business? Sports is very competitive, but business can be as well.

MANAGEMENT Business philosophy: It’s all about the team. We make sure that every team member is trained properly, and that they know how important it is for us to provide our customers with a “Sub Above” experience. Management method or style: I make sure that my teams get all the training and leadership they need. Then I trust them to execute in the way that they have been trained. Greatest challenge: Balancing baseball on the East Coast and Jersey Mike’s on the West. How do others describe you? Passionate. One thing I’m looking to do better: Perfect making a sub—Mike’s Way, that is! The slicer is something to be respected and I’ll go through the same training as my team. How I give my team room to innovate and experiment: I encourage team members to share ideas. How close are you to operations? Ken Nicola is an outstanding operating partner who knows the Jersey Mike’s business inside and out. I just came on board recently and am learning quickly. What are the two most important things you rely on from your franchisor? Support and communication, and Jersey Mike’s provides both. My area director is a great resource, and there are many different departments at the corporate office that provide support: marketing, training, operations, real estate, public relations, etc. These people are all excellent at what they do. What I need from vendors: Responsiveness, fairness, and quality. Have you changed your marketing strategy in response to the economy? No. How is social media affecting your business? It’s a great way to showcase the brand. How do you hire and fire? We hold auditions for new team members and look for great energy and a positive outlook. We can train for the rest. We hope to make our Jersey Mike’s such a great place to work that they love their position and would not want to do anything to put it in jeopardy. How do you train and retain? Peter Cancro, Jersey Mike’s founder and CEO, describes Jersey Mike’s as a training company. It’s all about providing a “Sub Above” experience to our customers, and that means focusing on training. This covers more than making a sub. We also teach about the history and giving culture of Jersey Mike’s, operational excellence, how to build strong customer relationships, and more. It’s about recreating the experience customers had in the very first shop at the Jersey Shore more than 60 years ago. How do you deal with problem employees? We believe in immediate feedback, which we hope leads to improvement.

MULTI-UNIT FRANCHISEE IS S UE IV, 2018

Why did you choose franchising as an investment option? It was not any franchise—Jersey Mike’s comes with a great name and brand. The fact that they have a great giving component sealed the deal. My wife and I like to do a lot of charity work in the community. How did you transition from sports to franchising? The same way I deal with everything else in life, one decision at a time.

BOTTOM LINE Annual revenue: N/A. 2018 goals: To continue connecting with the local community and growing. We are happy to join a company like Jersey Mike’s that has built making a difference into their business plan. Growth meter: How do you measure your growth? By the number of stores we open every year, and by our year-over-year sales. Since I have owned these stores, they have seen an improvement in sales. Vision meter: Where do you want to be in 5 years? 10 years? Our immediate focus is on opening at least five more Jersey Mike’s locations in the next 5 years. How is the economy in your region affecting you, your employees, your customers? We are fortunate to have a devoted following in San Diego. Are you experiencing economic growth in your market? We focus on offering a great quality product, excellent service, and giving back. That is what helps us grow. How do changes in the economy affect the way you do business? Jersey Mike’s has been around since 1956. We stick with what we know works: we provide an authentic, high-quality sub sandwich and give back to our local communities. It’s a winning strategy. How do you forecast for your business? We look at trends in our own business, in our own stores. We compare this to what is happening in the sandwich sector, as well as the quick service sector. We do a pretty good job with this most of the time, but when things are different we make adjustments. What are the best sources of capital for expansion? Financial institutions and investors. What are you doing to take care of your employees? Health insurance and profit sharing for my leaders. How are you handling rising employee costs (payroll, minimum wage, healthcare, etc.)? Like everybody else, we are raising our prices to maintain balance. We let our customers know that we want to treat our employees well, which in turn gives them a “Sub Above” experience. How do you reward/recognize top-performing employees? We have recognition systems within each store and within the organization. We do provide profit-sharing bonuses. What kind of exit strategy do you have in place? I just came on board so don’t have an exit strategy right now.

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UNDER

BY KERRY PIPES

Young, Experienced, and Growing From busboy to multi-unit operator

lex King may be only 29, but the Freddy’s Frozen Custard & Steakburgers multi-unit operator has been a part of the throwback brand since he was a teenager. The Kansas native worked at a Freddy’s in Wichita all through high school and continued during college while attending Wichita State University. King found he liked business and quickly made his way through the ranks from busboy to cook, then manager to operator. The young entrepreneur, along with his brother Stuart and two other friends— all with experience at Freddy’s—decided they liked the brand so much they would pool their money, look for an open territory, and open their own. They settled on Indianapolis and opened in late 2016. At this early stage, King is still heavily involved in day-to-day operations—and looks forward to the day he’ll be able to work more on the business than in it. He’ll have to: his goal is to open 11 more Freddy’s in the next 7 years. As an operator, King believes he has a unique perspective about his employees. “I started out with Freddy’s at an entry-level position, so I can relate to employees on all levels,” he says. “I know the importance of developing employees and strive to build great relationships with our team members.” NAME: Alex King TITLE: Franchisee NO. OF UNITS: 2 Freddy’s Frozen

Custard & Steakburgers AGE: 29 FAMILY: Married with newborn

daughter; brother is a business partner YEARS IN FRANCHISING: 2 YEARS IN CURRENT POSITION: 2

MULTI-UNIT FRANCHISEE IS S UE IV, 2018

FRESHEN UP YOUR

FRANCHISE PORTFOLIO

5 YEARS STRAIGHT

OF SALES GROWTH*

OVER

560

“Del Taco’s leadership team is incredibly strong. They’re guided by data-driven decisions that have measurable results for the brand.”

RESTAURANTS IN 14 STATES

1,497,155

Brent Veach Multi-Unit Franchisee since 1999

AVERAGE UNIT SALES*

DELTACOFRANCHISE.COM

(949) 462-7379

* Figures are for freestanding franchisor-owned restaurants. In FY 2013, 147 or 51% had average sales ≥$1,207,784; in FY 2014, 144 or 51% had average sales ≥ $1,278,853; in FY 2015 143 or 51% had average sales ≥ $1,376,622; in FY 2016, 137 or 48% had average sales ≥ $1,459,541; and in FY 2017, 139 or 48% had average sales ≥ $1,497,155. See Item 19 of our May 2018 Franchise Disclosure Document for more information. There is no assurance that you will do as well, a new franchisee’s results may differ from the represented results.

under30

Two years into life as a franchisee and King couldn’t be happier. He says he has relied heavily on grassroots marketing and strongly believes in being involved at the local level. “We spend a lot of time finding ways to get involved in the community,” he says. One of his favorite endeavors is hosting “give back nights,” where a portion of sales is donated to local organizations. His stores also have been actively involved in supporting veterans groups. But business is not the only thing that’s

“We pulled out a map of the United States and determined where we would like to move together to open Freddy’s locations of our own. ”

been growing in King’s life. Last summer his wife had their first child. He says the experience has been great, and he’s been spending the majority of his free time with his newly expanded family. King is a young gun on the rise. His first Freddy’s, which opened in December 2016, has experienced double-digit growth in sales in 2018. He’s also been busy this year preparing for his next Freddy’s, which he’s aiming to open in late spring next year.

PERSONAL First job: Busboy at a Ground Round in Wichita. Formative influences/events: Starting at Freddy’s at a young age and learning the opportunity for growth with the brand. Key accomplishments: Working my way up through Freddy’s in Wichita at the corporate locations was a huge accomplishment for me—especially as someone who hadn’t graduated college at the time. I started as a cook in Kansas at 16 and worked at Freddy’s through high school and college at Wichita State University, where I worked my way up to manager. My brother, Stuart King, introduced me to Freddy’s, where I met Blake Epperson when I started as a cook. Soon after I started, I got my buddy Alex Kent a job too. A few years ago, the four of us realized we wanted to franchise and invest our money in the brand instead of school. We pulled out a map of the United States and determined where we would like to move together to open Freddy’s locations of our own. We landed on Indianapolis and here we are today. Biggest current challenge: Getting enough growth to take on the market by storm. It’s a challenge to expand quickly while also building and maintaining a strong team of staff that will stay with our company and grow as we do. When a new restaurant opens, a lot of time needs to go into employee recruitment, while simultaneously needing to manage the existing restaurants. Next big goal: Right now I’m heavily involved in the operations aspect of the restaurants, so eventually I’d like to step out of operations a little more and gain a wider scope of our presence in Indiana. Our goal is to open 11 more Freddy’s restaurants in the next 6 to 7 years. First turning point in your career: Going from an hourly team member to a salaried manager. The role not only gave me additional responsibility, it also changed my mindset when it came to my career. I went from someone who did basic day-to-day tasks to someone who managed a business. It immediately changed my frame of mind and helped me focus on the bigger picture. Best business decision: Franchising, honestly. For a long time I worked for Freddy’s in Kansas and eventually took ownership of managing a restaurant as a single-store manager. Franchising allowed me to become my own boss. Hardest lesson learned: Plans often go awry. You can plan as much as you can with all aspects of the business such as staffing, developing real estate, construction, and everything else, but more often than not there is going to be a wrench thrown in your plans and you need to be able to adapt. Work week: I spend about 50 hours inside the restaurant and 5 to 10 out-

MULTI-UNIT FRANCHISEE IS S UE IV, 2018

side the restaurant working on the bigger scope kind of things. I’m very handson with the day-to-day operations of our second location and handle a lot of the in-store logistics such as staffing, scheduling, placing orders, etc. Exercise/workout: Not right now. My wife just had our first baby in July, so I spend the majority of my free time with my family. Best advice you ever got: One of my managers told me, “Hard on spec, easy on staff.” This means to make sure things are done the way they are supposed to be done, while making sure your team is treated well and coached the right way in doing those things. What’s your passion in business? Originally, I started with an interest in accounting. I really enjoyed financial accounting, numbers on paper, how they represent your business and how vendors use numbers to judge a business. This started my passion for business, although recently I’ve been drawn to the managerial side of it. How do you balance life and work? This is tough for sure. Becoming my own boss and not having someone to specifically report to has been challenging, as I need to set my own goals at work and accomplish them. It’s also difficult as the owner to say I need to go home and call it a day. With a new baby at home it’s easier to step away from operations to get home, but I need to make it more of a priority to take time to be with family. Guilty pleasure: Video games. I still find myself turning on the Xbox. Luckily my wife is supportive. Favorite book: Game of Thrones books. Favorite movie: All the “Star Wars” movies. What do most people not know about you? I listen to heavy metal. People meet me and think of me as a country boy coming from Kansas, but I listen to some pretty hard rock. People are usually surprised when they hear what I’m listening to. Darkest Hour is my all-time favorite. Pet peeve: Disorganization. What did you want to be when you grew up? An artist. I actually enrolled in art classes, art theory, and art history when I started college. I spent about a week in classes and decided to change. Last vacation: Family vacation to Louisiana to visit my wife’s family. Person I’d most like to have lunch with: Joe Rogan.

under30 “Freddy’s does a great job in weeding out the franchisees who look at it as an investment rather than a career. This helps the brand maintain its great reputation.” MANAGEMENT Business philosophy: Freddy’s has a motto: Give ’em the pickle! Meaning if the guest orders extra pickle (a free condiment), just give them the pickle. Don’t fret about the extra costs. If that pickle means the guest is happy, then it’s well worth it—especially if it helps turn them into a regular. But this philosophy can be applied to more than just pickles. Another philosophy I use daily (I’ll call it “the 2-by-4”) I learned from Freddy’s COO Scott Redler. Scott often mentioned placing a 2x4 on the ground in the doorway. At first, you will stub your toe and trip on the 2x4. Over time, you will learn to step over the 2x4 until it becomes second nature, and eventually you stop noticing it all together. The idea here is that the 2x4 signifies a problem. Deal with the problem and fix it because it won’t go away on its own. Management method or style: Hard on specification, easy on staff mentality. I like to lead by example, set expectations, and approach situations like a leader rather than a boss.

changed or implemented. What I need from vendors: Reliability. It bothers me when I have to manage my vendors if they fail to uphold their end of the deal. Have you changed your marketing strategy in response to the economy? How? We haven’t done a lot of marketing in the two years we’ve been here. We have more of a grassroots approach, which we learned from our time at the corporate locations in Kansas. Typically, we spend a lot of time finding ways to get involved in the community. We love to host “give back nights” where we donate a portion of sales to an organization. We also are very involved with veterans associations. Freddy is a World War II veteran, so we like to pay homage to that. How is social media affecting your business? Social media has a great effect on our business. It holds us more accountable for everything we do, knowing a guest can comment and post feedback online for anyone to see. It’s so easy for a guest to communicate to a business about their experience, which makes us more aware of their needs and how to better serve them. We always take the feedback we receive seriously and learn from it.

Greatest challenge: Retaining staff and showing them that there are opportunities for growth within the brand if they work hard. Sometimes entry-level employees can’t grasp their own potential within the brand. But because I personally started out with Freddy’s at an entry-level position I have the ability to relate and motivate employees on all levels. I know the importance of developing employees and strive to build great relationships with our team members. How do others describe you? Driven and hard working. One thing I’m looking to do better: To have a more hands-off approach to the management of my locations. I need to do better at not managing my managers as closely and allow them to make their own mistakes in order to learn from them. How I give my team room to innovate and experiment: By giving my team members the room to try new ideas of their own. How close are you to operations? Very close. I spend 50 hours a week in the restaurant. What are the two most important things you rely on from your franchisor? Marketing the brand in the right way to the right franchisees, as well as to consumers. Freddy’s does a great job in weeding out the franchisees who look at it as an investment rather than a career they will be involved in. This helps the brand maintain its great reputation. We also rely on the corporate team to stay innovative by taking new ideas and letting them unfold for the franchisees. For instance, sharing new technologies, putting calories on menus, and sharing regulations we need to be aware of. With everything we do running the restaurants as a franchisee, it’s hard to pay attention to those things, so it is extremely helpful to have the corporate team share what needs to be

absolute last option.

How do you hire and fire? We try to look for the best candidates possible. We recruit on social media and run advertisements on hiring sites. When it comes to entry-level positions I feel that we do very well. As far as terminating, we don’t do that easily. It’s a decision we put a lot of consideration into. We believe that turning someone over is the

How do you train and retain? Freddy’s has a great training program in place. From what I’ve experienced personally and how I’ve trained our team members, the training program is very in-depth. We have a 10-day training program for every new employee. That’s 10 days of working with a dedicated trainer. Managers learn how to do every role from cashier to cook as well as the philosophy and management. When it comes to retraining we have our employees go through it again as a refresher. This keeps the information and knowledge fresh. How do you deal with problem employees? There are two ways you can approach a problem employee. We can cut our ties when the issues arise, or we can take the other approach and figure out the source of the problem and come up with a plan to work through the issue to make things better for the employee and us. Every situation I’ve encountered has been different. An employee must want to help themself for this to be successful. Fastest way into my doghouse: If I’m trying to help you but you don’t want to help yourself.

MULTI-UNIT FRANCHISEE ISSU E IV, 2018

under30 “I’ve committed everything to this, and I don’t see myself exiting the Freddy’s brand any time soon.” UNDER 30 How did you get into franchising at such a young age? It happened naturally. Starting out as an entry-level employee and growing with the brand, I really fell in love with the concept and wanted to continue to grow within it. Was becoming a franchise something you’d planned on? Not originally. Did you have a mentor or inspiration for getting into franchising? My biggest mentor is the current vice president of operations, Ben Simon. Ben is actually Freddy’s grandson. He was instrumental in guiding me through the process of becoming a franchisee and showed me the real upside of franchising. He was sad to have us leave the corporate system but was extremely supportive and excited that we became franchisees of Freddy’s. What jobs, skills, and experience have helped you operate a fran-

chise business? The hands-on learning I experienced as I rose through the ranks at Freddy’s. I learned everything as I went. What kinds of obstacles did you face in franchising at such a young age? Having the capital or just cash in general. Being so young I haven’t had years to accumulate a decent amount yet. We were lucky to have a great investing partner that has allowed us to take this on. How would you describe your generation? My mother recently retired after 35 years with her company. You don’t see that anymore. For my parents and grandparents, it was easy to be a lifelong employee at a company. My generation is looking for opportunities to carve out their own career and become their own boss. Do you see franchising as a stepping-stone or a career for you? It is a career for me.

BOTTOM LINE Annual revenue: $4 million. 2018 goals: Happy to say our first restaurant, which we opened in December 2016, has experienced double-digit growth in sales in 2018. This is a huge accomplishment as one of our goals was to really grow the restaurant. We would like to see the second location continue to experience this same growth after its honeymoon period comes to an end. For the remainder of 2018, we plan to continue developing our third and fourth restaurants, and beyond. Right now, we are aiming to celebrate the opening of our third location in late spring 2019. Growth meter: How do you measure your growth? By the growth I see in others around me. If I can grow my team members into managers and help them rise through the ranks, I consider that a personal growth accomplishment in myself. I also measure growth tangibly by being able to grow sales versus cutting costs. Vision meter: Where do you want to be in 5 years? 10 years? Originally, I wanted to retire as soon as possible by 40 or 45. Now I realize I need a project to work on, so I want to continue to grow Freddy’s and our restaurants in Indianapolis. Further down the road I’d like to find a hobby for myself that I can devote more of my time to, potentially getting back into art. How is the economy in your region affecting you, your employees, your customers? The economy in Indiana is very strong. The governing body is very smart and strategic in what they do for the state. A lot of industries and big names are located here, which puts more pressure on our brand since we have a lot of local competition. We strive to “wow” every guest who walks through our door to keep them coming back. Are you experiencing economic growth in your market? Yes, definitely. The Greenwood and South Indianapolis areas are growing like crazy with construction of businesses and new restaurants all over the place. Our Carmel location is right next to Westfield, which was voted one of the best places to live in the country. How do changes in the economy affect the way you do business? Freddy’s is foolproof as far as the economy is concerned. Our craveable food and welcoming atmosphere create a reliable customer experience no matter the state of the economy, but when people have the luxury of dining out we are a great option.

MULTI-UNIT FRANCHISEE IS S UE IV, 2018

How do you forecast for your business? We use a lot of history to forecast our business. Coming from being a single-store manager I didn’t have experience in forecasting what a new restaurant might do. I’m learning as I go. There is a great real estate team at Freddy’s to help as well. We look into local competitors to help us get an idea of a particular site and what annual income may be. What are the best sources of capital for expansion? Right now it’s been SBA or bank options. We have some investors as well, private sources as capital. Experience with private equity, local banks, national banks, other institutions? Why/why not? It depends which one you go to. We’ve talked to lots of different banks and have had different experiences at each. The ones we are with now are very easy to work with and pro-Freddy’s. They are also familiar with the franchise model and work with other franchisees. Luckily, we have also been introduced to private sources in Indiana. What are you doing to take care of your employees? First and foremost, providing a great atmosphere for employees. We strive to uphold a positive culture within our restaurants so our employees enjoy coming to work. We also offer a competitive pay rate—every employee makes more than minimum wage. We also have opportunities for incentives and bonuses. How are you handling rising employee costs (payroll, minimum wage, healthcare, etc.)? We haven’t increased prices since we opened in 2016, which is quite a long time to not raise prices. Eventually we will need to reflect the rising employee costs in our prices, but it is a difficult thing to do. We try to maximize all of our current resources, take advantage of every sale, and be as efficient as possible when it comes to staffing. How do you reward/recognize top-performing employees? Opportunity. Making sure employees understand the opportunity in front of them. We reward employees with promotions and raises as they earn them. We also have various fun competitions throughout the year and reward with cash or prizes. We want to make it fun. What kind of exit strategy do you have in place? I don’t have one in place. For me, I’ve committed everything to this, and I don’t see myself exiting the Freddy’s brand any time soon.

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FRANCHISED UNITS

LOS ANGELES-RIVERSIDE-ORANGE COUNTY, CA NEW YORK-NORTHERN NEW JERSEY-LONG ISLAND, NY-NJ-CT-PA CHICAGO-GARY-KENOSHA, IL-IN-WI WASHINGTON-BALTIMORE, DC-MD-VA-WV DALLAS-FORT WORTH, TX HOUSTON-GALVESTON-BRAZORIA, TX SAN FRANCISCO-OAKLAND-SAN JOSE, CA ATLANTA, GA BOSTON-WORCESTER-LAWRENCE, MA-NH-ME-CT PHILADELPHIA-WILMINGTON-ATLANTIC CITY, PA-NJ-DE-MD DETROIT-ANN ARBOR-FLINT, MI PHOENIX-MESA, AZ SEATTLE-TACOMA-BREMERTON, WA MINNEAPOLIS-SAINT PAUL, MN-WI MIAMI-FORT LAUDERDALE, FL DENVER-BOULDER-GREELEY, CO TAMPA-ST. PETERSBURG-CLEARWATER, FL SAN DIEGO, CA ST. LOUIS, MO-IL CHARLOTTE-GASTONIA-ROCK HILL, NC-SC ORLANDO, FL PORTLAND-SALEM, OR-WA CLEVELAND-AKRON, OH SACRAMENTO-YOLO, CA CINCINNATI-HAMILTON, OH-KY-IN SAN ANTONIO, TX LAS VEGAS, NV-AZ INDIANAPOLIS, IN KANSAS CITY, MO-KS RALEIGH-DURHAM-CHAPEL HILL, NC AUSTIN-SAN MARCOS, TX PITTSBURGH, PA NORFOLK-VIRGINIA BEACH-NEWPORT NEWS, VA-NC NASHVILLE, TN COLUMBUS, OH MILWAUKEE-RACINE, WI JACKSONVILLE, FL SALT LAKE CITY-OGDEN, UT HARTFORD, CT OKLAHOMA CITY, OK GREENSBORO-WINSTON-SALEM-HIGH POINT, NC WEST PALM BEACH-BOCA RATON, FL RICHMOND-PETERSBURG, VA GREENVILLE-SPARTANBURG-ANDERSON, SC LOUISVILLE, KY-IN NEW ORLEANS, LA MEMPHIS, TN-AR-MS GRAND RAPIDS-MUSKEGON-HOLLAND, MI KNOXVILLE, TN BIRMINGHAM, AL OMAHA, NE-IA DAYTON-SPRINGFIELD, OH CHARLESTON-NORTH CHARLESTON, SC

LARGEST FRANCHISEES BY STATE 19,439 18,764 11,741 10,590 9,708 8,452 7,989 7,942 7,749 6,851 6,233 5,635 5,386 4,874 4,515 4,504 4,194 4,020 3,772 3,493 3,439 3,416 3,271 3,083 2,965 2,932 2,927 2,900 2,851 2,816 2,771 2,677 2,599 2,595 2,527 2,357 2,176 2,035 1,962 1,923 1,823 1,786 1,761 1,742 1,641 1,606 1,552 1,437 1,437 1,422 1,325 1,272 1,242

MULTI-UNIT FRANCHISEE IS S UE IV, 2018

STATE (and D.C.)

LARGEST FRANCHISEE

ALABAMA ALASKA ARIZONA ARKANSAS CALIFORNIA COLORADO CONNECTICUT DELAWARE DIST. OF COLUMBIA FLORIDA GEORGIA HAWAII IDAHO ILLINOIS INDIANA IOWA KANSAS KENTUCKY LOUISIANA MAINE MARYLAND MASSACHUSETTS MICHIGAN MINNESOTA MISSISSIPPI MISSOURI MONTANA NEBRASKA NEVADA NEW HAMPSHIRE NEW JERSEY NEW MEXICO NEW YORK NORTH CAROLINA NORTH DAKOTA OHIO OKLAHOMA OREGON PENNSYLVANIA

TACALA/BOOM FOODS SUBWAY DEVELOPMENT OF ALASKA DESERT DE ORO FOODS K-MAC ENTERPRISES SOUTHERN CALIFORNIA PIZZA HARMAN MANAGEMENT DHANANI GROUP MITRA QSR; NICKOLAS NISTAZOS; RYAN S GROUP KONSTANTINO SKRIVANOS SUMMIT RESTAURANT GROUP GPS HOSPITALITY KAZI MANAGEMENT NPC INTERNATIONAL DHANANI GROUP FLYNN RESTAURANT GROUP NPC INTERNATIONAL ROTTINGHAUS FRAUENSHUH HOSPITALITY GROUP GPS HOSPITALITY CAFUA MANAGEMENT COMPANY DAVCO RESTAURANTS HK ENTERPRISES FORWARD CORP; STARBOARD GROUP BORDER FOODS NPC INTERNATIONAL NPC INTERNATIONAL HIGH PLAINS PIZZA CARPENTER CONCEPTS TERRIBLE HERBST CONSTANTINE SCRIVANOS BRIAD RESTAURANT GROUP B & B CONSULTANTS KONSTANTINO SKRIVANOS JAMES HUMPHREY MIDWEST SUBWAY DEVELOPMENT THE COVELLI FAMILY LIMITED PARTNERSHIP WING FINANCIAL SERVICES GBMO CARROLS RESTAURANT GROUP

UNITS

110 24 143 83 260 89 32 15 20 215 98 41 37 167 126 49 172 60 122 34 101 70 65 77 126 101 22 48 85 42 74 68 134 175 23 138 98 59 64

2018 Dominators

LARGEST FRANCHISEES BY STATE STATE/TERRITORY

LARGEST FRANCHISEE

UNITS

RHODE ISLAND

THE JAN COMPANIES

SOUTH CAROLINA

APPLE GOLD; CAROLINA RESTAURANT GROUP; SOUTHEAST RESTAURANTS

SOUTH DAKOTA

VELARDE

TENNESSEE

SW DEVELOPMENT OF EAST TN

TEXAS

SUN HOLDINGS

510

UTAH

SIZZLING PLATTER

VERMONT

ARISTOTLE SOULIOTIS

VIRGINIA

BODDIE-NOELL ENTERPRISES

WASHINGTON

OIL EXPRESS

WEST VIRGINIA

LITTLE GENERAL STORE

WISCONSIN

WISCONSIN HOSPITALITY GROUP

WYOMING

HIGH PLAINS PIZZA

174

104 22

ulti-unit, multi-brand operators continue to grow— and they’re getting bigger every year—a trend that continues to accelerate as these “dominators” grow their portfolios through acquisitions, building new units, refranchising, and scooping up successful units from retiring franchisees. Banking on their good credit, solid infrastructure, and track record, today’s dominators are creating historically large franchisee organizations, as the rankings from FRANdata show. Today’s dominators are sophisticated, savvy, and experienced at managing organizations with hundreds of units, often spread across several states, regions, or even the entire U.S. They also understand that all success is local and about unit economics: one customer and one sale at a time. They create jobs by the hundreds and thousands, hiring young employees and providing a career path for them to grow. They do business with local suppliers—lots of them. And they give back to their communities on a large scale, encouraging their employees to support local organizations and charities. No franchisee gets to the top without years of hard work, sacrifice, perseverance, and an unwavering desire to be the best. So congratulations to this year’s dominators!

LARGEST FRANCHISEES BY REGION REGION

UNITS EAST

(DC, DE, MD, NJ, NY, PA, WV) CARROLS RESTAURANT GROUP KONSTANTINO SKRIVANOS ADF COMPANIES TARGET CORP. HMS HOST MUY BRANDS

204 163 143 141 124 124

(CT, ME, MA, NH, RI, VT) CONSTANTINE SCRIVANOS CAFUA MANAGEMENT COMPANY DHANANI GROUP HK ENTERPRISES CARLOS P ANDRADE

ROTTINGHAUS NPC INTERNATIONAL UNITED STATES BEEF K-MAC ENTERPRISES LOVE’S TRAVEL STOPS & COUNTRY STORES

UNITS

115 98 97 88 76

(AZ, NV, NM) DESERT DE ORO FOODS B & B CONSULTANTS TERRIBLE HERBST STINE ENTERPRISES SUBWAY DEVELOPMENT OF LAS VEGAS

330 258 227 142 140

(AK, CA, HI, OR, WA) HARMAN MANAGEMENT SOUTHERN CALIFORNIA PIZZA G & M OIL CO TARGET CORP. FLYNN RESTAURANT GROUP

PLAINS 277 275 260 172 160

REGION SOUTHWEST

152 118 85 73 64

WEST

(IA, KS, MO, NE, ND, OK, SD)

275 260 253 215 197

SOUTH

MOUNTAIN WEST (CO, ID, MT, UT, WY) NPC INTERNATIONAL HARMAN MANAGEMENT SIZZLING PLATTER UNITED STATES BEEF ALVARADO CONCEPTS

UNITS NEW ENGLAND

MIDWEST (IL, IN, MI, MN, OH, WI) FLYNN RESTAURANT GROUP CARROLS RESTAURANT GROUP DHANANI GROUP TARGET CORP. MUY BRANDS

REGION

143 117 96 74 62

(AL, AR, FL, GA, KY, IA, MS, NC, SC, TN, TX, VA) NPC INTERNATIONAL SUN HOLDINGS MUY BRANDS KBP FOODS JAMES HUMPHREY

914 635 413 373 363

Source: FRANdata Note: Data based on most current FDDs.

MULTI-UNIT FRANCHISEE ISSU E IV, 2018

BY SARA WYKES

OUTSTANDING IN THE FIELD SUPPORT WHAT FRANCHISEES NEED FROM THEIR FRANCHISORS

hen Mark Plomaritis opened his first Colors on Parade automotive repair franchise almost 25 years ago, the franchisor gave him two weeks of training. The newly minted franchisee embarked on his new business venture without much else to support the endeavor. “You lived or died on your ability to stick it out,” he says today. Plomaritis did stick it out, and is now an area developer for the brand in Orange County, California.

Mark Plomaritis

MULTI-UNIT FRANCHISEE IS S UE IV, 2018

Over the years, support for new franchisees has evolved. For brands with a strong support system, it has become a competitive advantage so important that a good number of prospective franchisees look closely at what kind of support they can expect from a franchisor—and then choose a brand based in no small part on the quality of that promised support. Still, prospective franchisees should not expect every franchisor will provide top-quality support. Younger brands won’t necessarily have a fully developed toolbox of support or staff and may encourage their first franchisees to become actively involved in creating a support system most useful to them. Larger, more established brands may distinguish themselves and enhance their vitality with outreach to franchisees as a preventive against stagnation and as a way to increase AUVs and system growth. One way or another, however, franchisees appreciate the kind of support that’s dependable, interactive, and that raises the odds of their success. More than just data and training, the best franchisor support, franchisees say, is also characterized by relationship-building that recognizes and builds on the brand passion shared by both parties. Early days Jim Hannan joined the RTM Restaurant Group (once Arby’s largest franchisee with nearly 900 units) early in his franchising career, shortly after earning his undergraduate degree in management. He

Jim Hannan was disappointed with the brand’s level of support back then. But its absence raised his awareness of its value. “We did a lot ourselves—and we were paying royalties,” he says. Arby’s support has improved greatly since those earlier days, says Hannan, now vice president of operations for Team Schostak Family Restaurants. His recent work at Schostak

O U T S TA N D I N G I N T H E F I E L D S U P P O R T has included the turnaround of 62 Burger Kings and the expansion of the company’s Del Taco and Mod Pizza holdings. Mod Pizza had operated for about 10 years, he says, developing just 15 restaurants, all company owned. But by 2013,when the brand had grown to 380 locations, owned by just nine franchisees, it was time to scale up the support. Over time, Hannan says, Mod became more collaborative and open to listening to the more experienced voices coming from Team Schostak. The advantage of that exchange is beneficial to both franchisee and franchisor, he says. “We can all learn from each other, and we have leveraged some of our brands with what we’ve learned from other brands.” Chickens and eggs Jake Alleman, COO of the Cojak Restaurant Group, a franchisee of Another Broken Egg and Chicken Salad Chick, has seen franchisor support from both ends of a brand’s stage of development. Alleman, who worked at the first Another Broken Egg in Mandeville, Louisiana, nearly 20 years ago, was the brand’s first franchisee and part of its learning curve as its franchisee support system evolved.

“I knew how to run a restaurant, but there’s a difference between working there and owning the business. The first day was not easy.” —Jake Alleman

MULTI-UNIT FRANCHISEE IS S UE IV, 2018

Today he operates 13 locations. “Looking back, I learned a lot from that,” he says. “I knew how to run a restaurant, but there’s a difference between working there and owning the business. The first day was not easy.” His experience with Chicken Salad Chick was, understandably, very different as the brand was more mature and had extensive support systems in place when he considered becoming a franchisee. “On their discovery day we got to meet everyone in charge of their prospective fields, including site selection, marketing, operations, and ongoing support. You had all these people in the room who took you through what an average day was like. You get that support every time,” he says. “People are smart, but they may not know how to run a restaurant,” says Alleman. “They have a program in place, a guide to get us started. That was one of the reasons we invested in Chicken Salad Chick.” Now, with a decade of franchisee experience under his belt, Alleman has come to appreciate the depth of support a franchisor can provide. Chicken Salad Chick runs a “university” to train workers with ongoing updates, in addition to operating a social media platform with live information about improvements customers want. “I won’t say it’s all done for you, but there’s someone walking along with you,” he says. “We also have regional field consultants who come to the store and we can pick their brains. It’s boots on the ground and very informative.” Beyond these very practical tools, though, Alleman likes the feeling that his franchisor thinks of him as more than just a cog in a large business machine. “I can call the CEO. And when my dad passed away, someone from the company came to the funeral. That was above and beyond.” From franchise sales to operator Mike Walls, co-founder and executive director of CNM Homecare, a franchisee of Caring Senior Service, was the brand’s franchise development manager from 2009 to 2016, responsible for managing the entire franchise award process. However, as a franchisee he soon discovered gaps in his knowledge about operating his locations—and that his needs changed as his ownership continued.

“Even if the franchisor takes a short-time hit, I feel good at the end of the day that they are looking out for my interests.” —Mike Walls In the beginning, franchisor support to accomplish the strenuous licensing process was crucial, but he knew he could count on that support to keep him on track. Then other tasks took on importance—tasks he didn’t know much about. “As we began to grow, our challenges changed. I was in sales, I was fluent in CRMS and tracking leads, and all of a sudden there’s billing and payroll and bookkeeping, things I didn’t have to worry about before. Your support needs change.” Later, when one of his locations was not doing well he knew he could count on his franchisor’s help. “I reached out to the CEO and said ‘Here’s what I’m up against, and here’s what I’m thinking I should do.’ He said to close it. So here’s the CEO, who derives additional income from each franchisee, saying ‘We’re afraid that if you continue down this path it will jeopardize your core business, and we don’t want to put it at risk. We can always go back and re-launch at some other time.’” It was tough, says Walls, but it was good advice. And it reminded him that it’s easy to get caught up in the day-to-day—and helpful to have a support team with a big picture perspective to back you up.

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O U T S TA N D I N G I N T H E F I E L D S U P P O R T “Even if the franchisor takes a shorttime hit, I feel good at the end of the day that they are looking out for my interests,” he says. And for Walls, that sealed the deal. “When you know the franchisor has skin in the game like you do, that speaks volumes.”

SUPPORT CHECKLIST

endy Skaalerud, an area developer for Orangetheory Fitness in Colorado, offers a set of questions for prospective franchisees—and some of her own thoughts about the best answers. Her perspective also includes more than a decade as co-founder of Capital Lending Solutions, a consultancy focused on franchise financing. The company has worked with more than 200 franchisees and facilitated more than $135 million in capital. Purchasing your first franchise is quite often an intimidating process, says Skaalerud. Franchisees, she says, should ask, “What concept is right? Which are fads versus staples? How much investment will it take? Will I lay awake at night in fear of failing?” Two additional and important questions to consider: What is your level of passion for the concept? And what is the integrity of the franchisor and its management team? Skaalerud compares signing an FDD to signing a marriage license. It’s a longhaul relationship, she says, so take the time to get to know your potential partner. She believes the best support from a franchisor should include: • credibility of the brand through commitment to compliance and maintaining consistency across the network • clear expectations and accountability for all franchisees or area representatives • a strong training program with ongoing, continuing education • a commitment to innovation and market relevance • effective time management in new product and marketing promotion rollouts • a team of advisors for legal, site selection, and site development • human resources support (which could be an HR department or part of an intranet) that includes employee handbooks, compensation guidelines, all HR supporting documents, a termination letter template, and other key personnel material. In addition, technology should also be up to par, kept as current as possible, and include the following: • a POS system that is streamlined and easy to use, with an excellent customerfacing mobile app • an easily accessible intranet allowing for easy internal communication, marketing documents, archived documents and materials, brand logos, etc. • reporting platforms that allow quick operational snapshots and comprehensive applications to assist owners in driving KPIs. Skaalerud also recommends that a franchisor’s marketing and creative department support is geographically relevant and brand consistent. Social media and PR support are also critical to overall success—and when it comes to marketing today, perhaps the largest factors in the success of each local franchisee. Last and far from least, she says, potential franchisees should look for realtime support from a franchisor help desk that can respond to low-level needs in 24 hours or less—and with quicker support for high-priority issues. “I can’t stress enough the importance of availability and accessibility of the corporate office in time of need,” says Skaalerud.

MULTI-UNIT FRANCHISEE IS S UE IV, 2018

Got it covered, thanks TJ Schier had developed a going concern as president and founder of Incentivize Solutions and SMART Restaurant Group, building a portfolio of exactly the kind of support materials that franchisors and franchisees need. When he decided to buy his first franchise, Which Wich Superior Sandwiches, he didn’t need marketing support from the franchisor. In fact, he was happy to build all its training materials—and he knew where to focus his energy. “The great franchisors have far more effective teams around marketing and planning,” Schier says. “The franchisors that struggle are the ones that don’t have the right people out in the field working

“The franchisors that struggle are the ones that don’t have the right people out in the field working on the right stuff." —TJ Schier

O U T S TA N D I N G I N T H E F I E L D S U P P O R T on the right stuff. You must have field and operations consultants who can truly build. Those are the ones that have great training tools beyond the initial first unit opening.” Franchisors also must understand that support for franchisees must keep up with the rapid changes in technology across all lines of the business, Schier says. For instance, much of employee training can be done online—and marketing research can be done much more quickly. “You can walk in with a tablet and get instant feedback,” he says. The brands that have figured out how to leverage technology to get the right information out and keep things updated are the ones that succeed today. Finally, he adds, franchisors must figure out their financial model and how to make their franchisees successful by following that model and providing strong support. Support from the start Support from her franchisor is what got Debra Sawyer through her early—and very ambitious—days as a new Sport Clips franchisee. When she started, Sawyer had a day job and two young children, yet managed to open four stores in 18 months. Sport Clips gave her a checklist. It was detailed and followed a logical order she says. “It definitely helped and it moved things along.” It was designed for a first-timer, too. “The list let me make sure I wasn’t overlooking anything—like do I have the bank account, federal ID number, phone service, and Internet,” she says. “There were things they were telling me that were obvious, but some things were not, like a list of recommended sources.” Along with the list, she had phone time with the franchisor’s support team, who would ask her about any issues she was having. She also found that her feedback to the franchisor was listened to—and respected. By the time she was opening her 21st store more than a decade later, that support had changed. “The material on the list was more technology-driven because everything is so much more computerized,” she says. “One item used to be a clipboard, but you don’t need a clipboard for people to sign in anymore.” And marketing recommendations for the salons no longer include magazine subscriptions. “Everyone uses their phones now,” she says.

Debra Sawyer Sawyer also likes the classes the franchisor offers for her team members, especially a core class that targets new employees. These classes do more than just tell those new employees what to do, she says. “They explain who we are and why we do what we do. It is important for new team members to understand the franchise—even why we vacuum up hair instead of sweeping—and that these aren’t things someone just woke up yesterday and decided.” Playing your part When he opened his first Dunkin’ Donuts franchise in 2013 in an Omaha suburb, Bryce Bares did not begin his franchising career with years of business experience under his belt. Far from it. Instead, Bares, founder of QSR Services, came armed with a B.A. in music theory and composition from Amherst College and a J.D. from Boston College Law School. He’s since grown to 11 Dunkin’ stores and has signed agreements to expand further. But, he says, his growth would not have been so smooth without what he calls “excellent support in both operations and site selection.” And that level of support is what drove his choice of Dunkin’. “For my first few stores, the brand was heavily involved in training and provided a lot of guidance in identifying target trade areas and feedback on specific sites, such as potential access issues,” he says. “The Dunkin’ Brands operations team flew out to Nebraska to support my first store opening, and I can safely

say it would have been a train wreck if they hadn’t been there.” One of the advantages of a large system like Dunkin’ is that they have accumulated tons of data on what works and what doesn’t since their founding in 1950. But it’s still up to the franchisees to listen and take advantage of the franchisor’s advice and experience. “After my first few stores opened successfully, the brand started to trust us and gave us more independence and leeway, but I’m sure they would have provided more support had I needed it or asked,” says Bare. Like many established brands, Dunkin’ has an online training system for new employees, manuals that cover every facet of restaurant operations, and full national and local marketing support, he says. Bare also appreciates that the relationship is not just one way: Dunkin’ has a system where franchisees choose representatives to meet regularly with the brand executives to provide feedback on what’s working and what’s not. “Dunkin’s support is fantastic, but it’s important to remember that in franchising it is the franchisee’s role to run the business,” he cautions, noting two common mistakes he’s seen his fellow franchisees make: “They ignore the collective experience of the franchisor, and they expect the franchisor to run their business for them,” he says. “Franchisors certainly make decisions that affect franchisee operations and profitability, but it’s critical for franchisees to remember that, ultimately, it’s up to them to run a good and profitable operation.”

Bryce Bares

MULTI-UNIT FRANCHISEE ISSU E IV, 2018

BY EDDY GOLDBERG

Justice for All

“Are you treating me differently because of the way I look?”

his September, at 7:45 on a Friday morning, campus police at the University of Massachusetts-Amherst received an anonymous call reporting a “very agitated” black man walking into the school’s administration building carrying a large, heavy duffel bag. The entire building was shut down while the man was questioned by the police, and… nothing. False alarm. The man was a 14-year employee in the school’s Disability Services office and was heading to his job after his daily workout at the campus gym, as he usually did. Interviewed afterward by the campus paper, he said he was wearing a salmon-colored shirt, gray dress pants, black shoes, and carried a black Under Armour bag on his right shoulder. “No one else gets racially profiled in my office, just me. I’m the only black male who works in our office,” he told the reporter. He also said this was not the first time this had happened to him on the campus. So why did the anonymous caller feel the need to call the police? Subsequent coverage reported that the man is legally blind, which could explain the “agitated” description: he looked different in yet another way. A term that might explain the phone call is one we’ve been hearing more often lately, something called “unconscious bias.” Everyone has unconscious biases (beliefs about the world that determine our attitudes and behaviors toward others). Popularized by Nobel Prize winner Daniel Kahneman through work with longtime partner Amos Tversky, unconscious bias is part of our brain’s basic wiring, of our survival mechanism: Is that person coming my way a friend or a threat? Although we may be unaware of these beliefs, everyone has them—despite our best intentions. They form from birth, influenced by our environment and socialization: parents, family, school, friends, media, personal experiences, etc. One result is cultural stereotypes—and racial profiling. With work, you can change these

MULTI-UNIT FRANCHISEE IS S UE IV, 2018

biases—or at least your behavior—but that takes a conscious effort over time. And these unconscious biases affect the choices people make in hiring managers and employees, and in how they treat customers.

Marketing to different groups

potential problems—and word spreads, for better or worse, throughout the community. “When you have an inclusive approach to everything that you do, you minimize the chances you’ll make a misstep,” he says. While understanding unconscious MFHA: Making a difference bias and representation is easy to disWhich is all a long-winded way to in- cuss, implementing it can be much more troduce you to the work of Gerry Fer- complicated, especially in today’s social nandez, president and founder of the and political atmosphere. “In this enviMulticultural Foodservice & Hospital- ronment of incivility, people don’t know ity Alliance (MFHA), an affiliate of the how to talk to people who don’t look like National Restaurant Association. Now in them,” he says. “Talk to the people you its 20th year, MFHA’s mission is to build want to reach—ask and listen.” “culturally intelligent brands and leaders.” A good first step, he says, is to develop Franchise members include McDonald’s, an intentional outreach strategy. “One of Brinker, Buffalo Wild Wings, Darden, the most important things franchisees can Dunkin’ Brands, Yum Brands, do is have a multicultural comFirehouse Subs, Denny’s, Culmunity engagement strategy ver’s, Golden Corral, Texas that is culturally correct,” says Roadhouse, Sonic, TGI FriFernandez. And one of the best days, and more. ways to do that is to work with One of MFHA’s goals is to your employees to develop a help brands hire and market incommunity outreach roadclusively in culturally sensitive map. And if your employees ways, both to market to their are not representative of your target customers—whether by customers, find other ways to ethnic or racial group, gender, Gerry Fernandez learn about them. sexual orientation, age, etc.— Also, consider outreach and to employees through their hiring through social media. Fernandez says policies and practices. social media usage by blacks, Latinos, and Asians is frequently higher than for “Representation” whites. “Social media should be a real part This raises the issue of what Fernandez of how you reach multicultural markets,” calls “representation.” One of the best he advises. Still, the best way to learn about culways to prevent cultural misunderstandings (e.g., the Philadelphia Starbucks in- tures and communities different from your cident this past April) is to hire managers own—and to begin unwinding your biases, and employees who look like (represent) conscious or not—is by meeting them your customers, who speak the same lan- face to face as individuals, says Fernanguage, literally and culturally. dez. Look to participate in local festivals Problems can arise when people from and fairs, gay pride events, schools, sports one culture operate restaurants that serve teams, churches, mosques, synagogues, people from another culture. “If you open community service organizations, and restaurants in Latino or black communi- other local groups. And everyone loves ties and all the managers are white, that’s gift certificates, discounts, and giveaways. a recipe for a problem,” says Fernandez. “That is a sustainable way to reach “If there’s an issue, you have someone people who are likely to use your prodwho doesn’t have any commonality with uct,” says Fernandez—and to attract comyour culture.” munity members to work in your stores. Representation, he says, is critical, as “People who practice hospitality need it helps with improved customer service, to take a leadership role,” he says. “That’s employee recruiting, and in defusing our job: to practice love of a stranger.”

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JOHN DIJULIUS

Own the Relationship! “Give more” by listening more

here is absolutely no greater skill that can be acquired and constantly worked at that can have a bigger impact on us personally and professionally than the ability to build an instant rapport with others, whether they are an acquaintance, customer, co-worker, or a total stranger. Everyone you come in contact with has an invisible sign above their head that reads: Make Me Feel Important! Studies have repeatedly shown the happiest people are the ones with the most meaningful relationships. However, developing relationships and building rapport are not taught anywhere. Too often we can be guilty of treating people we come in contact with as a transaction, or as a private audience to hear about what is happening in our world—totally missing an opportunity to make a connection that can potentially enrich both lives. As a result of us being in the midst of the touchscreen era, we have significantly fewer face-to-face interactions and our people skills are eroding. Nothing will ever replace looking directly into someone else’s eyes and building a genuine connection. How many of you agree with the following? People don’t listen with the intent of understanding; they listen with the intent of replying. Scientists have found it takes a minimum of 0.6 seconds for the brain to formulate a response to something heard. Then they studied hundreds of conversations and found the average gap between people talking was 0.2 seconds. How can people be responding in one-third the time than the human brain will allow? Obviously, people are formulating their responses long before the other person is done talking. It is human nature to be preoccupied and consumed with what is happening in our world. However, to build a connection with someone, our goal must be that the other person leaves feeling better for having interacted with us by putting the majority of the focus on them. When we

MULTI-UNIT FRANCHISEE IS S UE IV, 2018

aren’t anxious to tell our story and we can be totally present with someone, that is when the magic happens. Jim Rohn once said, “The greatest gift you can give someone is the gift of your attention.” How many of you feel that you are pretty good at building rapport with others? Just because you know someone’s

Everyone you come in contact with has an invisible sign above their head that reads: Make Me Feel Important! name doesn’t mean you have built rapport. Here is how you can prove that you have built rapport with someone during a conversation. You should know two or more things about their FORD: Family: Are they married? How old are their kids? Occupation: What do they do for a living? Recreation: What do they do for fun, with their free time? Dreams: What are their long-term goals? What’s on their bucket list? If you can tell me two or more facts about their FORD, you not only have a relationship, you own the relationship. FORD represents people’s hot buttons, what each individual cares about most in their world. FORD is what they are passionate about, what makes them light up when asked. Constantly using FORD keeps the focus of the conversation on them. The best way to make this a part of your daily habit is to create a system for collecting and retrieving people’s FORD, whether in a notepad you carry, your phone contacts, an app, or in a database on your computer. Many of our clients who have call centers use FORD desk pads. Now we don’t

want anyone asking a customer calling in to schedule an appointment about their FORD. That would be like a stalker checklist. But as most of you know, you don’t need to ask because people tend to overshare. They will say, “I need to reschedule my 3 p.m. appointment on Wednesday because my daughter’s high school soccer team just made it to district.” However, too often we quickly respond, “Okay, how about Thursday at 4?”, ducking and dodging away from the excellent FORD opportunity being thrown at us because we are too task-focused. Instead, when we capture that FORD and she comes in on Thursday, we can greet her by saying, “How did your daughter’s soccer team do at districts?” Forgetting that she’d ever mentioned it, she responds, pleasantly surprised, “How did you know?” When you are able to show genuine interest in someone, with the goal of building a relationship instead of trying to get something out of them, the friendship ends up being the greatest reward. The best way to build long-term sustainable relationships is to Give More. I have tried to build my life’s purpose around these two words. We live in a very cynical society: the deal is, or our agreement says, you do A, B, and C and I do X, Y, and Z. However, most people wait and make sure the other person does their part first. What I try to practice, and teach my employees and my boys is do X, Y, and Z first—and throw in W, even though it wasn’t part of the deal. Give more than the deal says, more than what is expected. That means if you borrow your neighbor’s pickup truck, you return it cleaner and with more gas than when you got it. To build meaningful relationships I invite you to focus on others’ FORD and to Give More in all your relationships. John R. DiJulius III, author of The Customer Service Revolution, is president of The DiJulius Group, a customer service consulting firm that works with companies including Starbucks, Chick-fil-A, Ritz-Carlton, Nestle, PwC, Lexus, and many more. Contact him at 216839-1430 or info@thedijuliusgroup.com.

People BY JIM MONROE

Holiday Hiring Blues? 5 tips to find the employees you need

he latest monthly job figures confirm what most employers already know: it’s going to be another challenging year for retailers, restaurants, caterers, and hotels looking to staff up during the upcoming holiday season. Overall, the strong economy is proving to be a double-edged sword for companies that rely heavily on an hourly workforce. The good news is that business indicators are looking strong through the end of the year, which means that sales will increase as people eat out, buy things, and travel for both business and pleasure. But with unemployment already at historic lows and the economy continuing to add jobs at a healthy pace, the competition for skilled hourly workers is ratcheting up even higher in what already is a tight labor market. Snag is the largest online marketplace for hourly jobs in the U.S., matching our network of some 60 million job seekers with 300,000 employer sites nationwide. We recently partnered with Wakefield Research to develop the Snag Holiday Hiring Report for 2018. We surveyed 1,000 employers in the retail, restaurant, and hospitality space to get a snapshot of what to expect during the upcoming holiday hiring season. The majority of employers we spoke with said that to meet the needs of their business they will have to hire more hourly workers during the fourth quarter than they did last year—with 86 percent saying they expect to face serious challenges in filling these temporary roles. A lack of qualified workers and competition from other employers are their major concerns. Restaurant servers, dishwashers, cashiers, bussers, line cooks, hostesses, and delivery drivers will be in the greatest demand between now and the end of the year. 5 holiday hiring strategies Here are some of the strategies employers are using to cope with the tightest labor market in nearly two decades, and to make themselves an employer of choice

MULTI-UNIT FRANCHISEE IS S UE IV, 2018

for a workforce that has plenty of choices. • Get a jump on the competition. Employers tell us they’ve ramped up their holiday hiring earlier than ever before. In previous years, the bulk of seasonal hiring took place in October. This year, the number of employers who began recruiting as early as mid-August has nearly tripled over last year.

Employers can reap huge benefits simply by making sure they’re providing people with a great place to work.

• Expand outreach. A majority of employers (62 percent) have increased their use of social media to recruit hourly workers this year. • Increase wages. Two-thirds of employers say they expect the hourly wages they pay seasonal employees will increase this year, driven in part by minimum wage hikes in many states and localities. Major retailers, including Walmart, CVS, Costco,

and Target also have announced increases to their minimum wage. • Benefits and perks. To attract workers, 77 percent of the employers we surveyed said they’ll be offering perks and benefits including paid time off, training opportunities, child care, tuition stipends, health insurance, and even transportation reimbursement. Starbucks, Walt Disney, Walmart, Taco Bell, Chipotle, and Lowe’s are among the companies now paying for their hourly workers to earn a college degree or other educational certificate. • Flexible work options. Cava and Five Guys are among the companies partnering with Snag in the rollout of our new on-demand shifts service, which enables employers to find skilled workers for shifts that go unfilled because of turnover, callouts, or surges in demand. This allows employers get the workers they need when they need them most, while workers gain flexibility and greater control of their schedules. It’s a great solution for hourly workers looking to augment their existing hours, or who need to schedule their work around school or family obligations. What else can employers do to recruit and retain the workers they need? Our research tells us that employers can reap huge benefits simply by making sure they’re providing people with a great place to work. Logic dictates that when people like their work environment, they are more likely to stick around longer, reducing turnover expenses. And it turns out there’s another financial upside to providing a positive working environment. Snag recently analyzed data for a client with hundreds of retail locations across the U.S. and found that stores with lower turnover enjoyed 3 percent higher sales on average. It turns out the old business adage that happy workers equal happier customers is true. Treat your employees well and your business will benefit in more ways than one. Jim Monroe is chief experience officer at Snag (renamed from Snagajob in April), whose mission is to put people in the right-fit positions so they can maximize their potential and live more fulfilling lives. Learn more at www. snag.co.

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15 MULTI-UNIT FRANCHISEE ISSU E IV, 2018

MarketingStrategies BY ADAM PIERNO

Digital and Traditional Media Finding the right balance in your budget

he marketing media want you to believe there can be only one victor: traditional or digital media. They write headlines like “Is Facebook TV the Cable Killer?” It’s all framed like a title fight. Great for clicks, but not so realistic—or all that useful for franchisees. The truth is half as sensational but twice as difficult. Media is a carefully measured scale that needs to be weighed out, especially when budgets are small. Forget about an even distribution of digital media against traditional media. The balance brands are striving for is not a fifty-fifty split of budget. It’s a balance of the media components that meet the goals of the business. Even experienced marketers forget that every form of media has strengths and weaknesses. True, digital is everywhere, as proven by the people at the coffee shop. Digital is fantastic for its ability to target people precisely, be served in context, and, of course, be measured. This is why franchisees love digital, right? They can see exactly how effective they’re being with specific groups. But the big question with digital is this: When was the last time you clicked on a banner ad? The medium is small but intrusive. It’s rarely welcomed or appreciated by the audience it is served to. Traditional media, on the other hand, is great for reaching big, broad audiences and delivers higher impact and emotion. People still hang print ads up on their walls. And they still talk about commercials they like at the water cooler (even if they’re doing so less often). But besides anecdotal feedback, it’s awfully hard to measure the results of TV or print directly. We wish media were simpler. Much simpler. We seek both big audiences and conversion. But research into different

MULTI-UNIT FRANCHISEE IS S UE IV, 2018

media formats only tries to sell digital versus traditional or vice versa, instead of helping us understand the elements needed for the success of our business. The lines between digital and traditional are blurring. For example, take audio. If someone is in their car listening to the FM radio, an ad they hear for the local gym is part of the traditional radio buy. Let’s say the person is streaming the feed of that same show on their iPhone

People still hang print ads up on their walls. And they still talk about commercials they like at the water cooler. as a podcast. When the same ad is played at the same point in the show, it is considered part of a digital buy. Why? And why should this matter? Franchisees just want to drive traffic into their locations, not worry about how to classify the media format that may have done it. The case against television is that it is expensive as a percentage of the total media plan. But marketers love digital video for its ability to tell a visual story and communicate on an emotional level. Hmm... What about a show like “Empire” that shows up on Fox with real-time commercial pods and is then run later on Hulu with different, unskippable ads at a similar cost per thousand? The prevailing wisdom is that Facebook advertising is less expensive than

television advertising. However, it’s all a matter of scale. If you are buying very small, specific audiences this is true. But if you were to buy television commercials during a given NFL game airing nationally, the cost would be fairly similar to the cost you would pay to reach the same audience at the same frequency on Facebook. Because nobody uses the Facebook platform that way, the comparison never gets made. But which would be a better use of your money in building your franchise business? People have been preaching for 10 years that traditional media is dead. Google and Facebook first killed newspapers, then print, and finally television (somehow radio survived!). Curiously, they’re all still around. When Google needs to advertise, they don’t rely on Google ads. For example, when Google launched its premium version of YouTube (called a “cable TV killer,” by the way), they did it on prime-time television during the World Series. There they were, next to Budweiser, State Farm, and Chevrolet. When Facebook was taken to task for its user data policies, where did it go to turn public opinion and lure people back to the platform? Hint: they didn’t run ads on Facebook. Or Google. Or Twitter. They ran print ads in major market newspapers and on network television. Facebook is a powerful tool for brands, to be sure. But even Facebook recognizes that mass reach is critical for certain types of messages. Digital alone is not the only way to build your business. If Google and Facebook are looking at traditional media to help boost their own giant products, there is certainly a role in the media plans for franchise businesses like yours. The key, as ever, is knowing where the balance is—based on the customer in question and the objectives of your business. Adam Pierno is chief strategy officer at Santy Marketing, where he helps clients drive positive change by bringing together media, social media, digital, mobile, and product-based thinking and audience understanding. Contact him at 888-679-3685 or www.santy.com.

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Investment Insights BY CAROL M. SCHLEIF

Keep Calm, But Keep Watching & Listening Maintain your balance amid global concerns “Worry is a thin stream of fear trickling through the mind. If encouraged, it cuts a channel into which all other thoughts are drained.” —Arthur Somers Roche

or much of 2018, investors have shrugged off a variety of concerns (e.g., trade wars, geopolitical tensions, and kinks in the global supply chains) by focusing on the solid nature of most global economics. The pace of the U.S. economy, in particular, has remained in steady growth mode, with consumer and business spending, housing stock turnover, auto sales, employment, and other factors illustrating ongoing strength—thus creating a positive base for the market’s growth-biased viewpoint. By late summer, higher stakes emerged, as trade difficulties, particularly with China, mounted rather than receded. Initial signs of slowing global growth rates in key export countries and contentious outcomes from key meetings with longstanding partners (NAFTA negotiations, the G7 Summit), as well as the initiation of tariffs (both here and corresponding retaliatory ones), seem to have prompted angst among business leaders and market participants alike. The potential for the synchronous global uptick that has driven the “growth trade” in the past 18 to 24 months has been called into question as trade tensions have escalated and global capital flows have exited other countries and currencies. The U.S. dollar strengthened, forcing other currencies, such as the Turkish lira, lower; and negatively affected emerging market assets, especially those of countries most reliant on exports, as well as those heavily dependent on oil exports. A thin stream of worry can work its way into a broader swath of impact. If current worries translate into delayed business activity, the effect could ultimately ripple more broadly throughout the economy, slowing the pace of the current uptrend. While fiscal policy has obviously turned more expansionary, monetary policymakers are gradually removing liquidity from

MULTI-UNIT FRANCHISEE IS S UE IV, 2018

the global system, potentially leading to a muting of the stimulating aspects of recent tax cuts and U.S. government spending increases. Investors don’t like unknowns. It can be somewhat straightforward to outline the direct impacts of tit-for-tat tariff moves

and counter moves, but understanding the second- and third-tier effects and how they move through markets will take time and must be considered on a case-by-case basis. There already is anecdotal evidence of some individual manufacturers being helped by the early steel and aluminum assessments for example, even as other businesses that use imported products are being forced to raise prices and cut production. Supply chains are much too intricately woven to be able to be redirected in short order. In turn, understanding how all the aspects add up—netting those who benefit and those who don’t—will be a challenge. When second quarter numbers were reported in July and August, most came in higher than expected. As reported by Reuters, for example, aggregate S&P 500 profits in the second quarter increased 23 percent from Q2 a year ago on revenues

that advanced nearly 10 percent. While reassuring, those numbers already are in the past, not to mention widely anticipated and theoretically largely discounted in share prices. And as important, investors followed attendant conference calls closely for comments regarding wage pressures, heightened transportation costs, and tariff impacts. Investors seemed to pay especially close attention to whether or not specific companies and industries were able to pass along a portion of these costs as price increases. Pricing power has been largely nonexistent for more than a decade, but it seems to be making a reappearance in a broad swath of corporate America. U.S. business and consumer sentiment remain strong, as do numerous hard data indicators of activity. When business leaders and consumers are feeling more confident, they make decisions to buy houses, cars, change jobs, and increase plant productivity based on that optimism. Similarly, we suspect it will be the soft data that begins to wane first—although pollsters will tell you there is often a disconnect at turning points between what people and businesses say they are going to do and what they actually end up doing. Bottom line We will be watching and listening closely as both economic and quarterly earning numbers come in over the remainder of 2018 and into the new year. We will be watching and listening for signs of pain at the margin or potentially for improved pricing power among U.S. companies. If the trade issues cause increased supply to be created in the U.S. and prompt additional employee training and technological deployment, the intermediate- to longer-term results could be quite positive. For now, the wisest course of action is to remain calm, but watchful. Stay invested, but focus on higher-quality assets, solid diversification, and making balanced versus overweighted allocation decisions. Carol M. Schleif, CFA, is deputy chief investment officer at Abbot Downing, which provides products and services through Wells Fargo Bank and its affiliates and subsidiaries. She welcomes questions and comments at carol.schleif@ abbotdowning.com.

Finance BY ROD BRISTOL

To SBA or Not To SBA? For larger loan amounts… not!

Scenario 1 Let’s assume that you’re going to borrow $2 million with loan terms of more than 1 year. The duration of the loan does not affect the loan guarantee fee, so if you’re seeking to reduce your monthly payment, perhaps it is in your best interest to extend the loan as far as possible. In this case, the SBA-guaranteed portion of that loan (75%) is $1.5 million. The SBA loan guarantee fee is going to be 3.5% on the guaranteed portion, or $52,500. They’re going to add an additional guarantee fee of 0.25% on the remaining $500,000, which comes to $1,250. So you get to pay a loan guarantee fee of $53,750 for the pleasure of borrowing $1.5 million that’s guaran< 7 years) teed by the SBA.

t’s the general opinion among the Technically, the SBA charges the SBA multi-unit franchise owners I speak loan guarantee fee to your friendly bank, with that the credit crunch is easing, but your banker is allowed to (quite even as interest rates are rising. If happily) pass this fee on to you, the boryou have a proven track record of creating rower. You then get to repay the fee with and sustaining profits with your units and the funds from your loan, which means can demonstrate that in a professional adding it to the total amount of the loan loan proposal to your friendly bank, it is and/or part of the monthly payment. highly likely you will get the money you The amount of the fee depends on seek. So assuming all that, here’s a question Loan Size Standard 7(a) for you: What kind of (Repayment term money should you get? There is a com9.25% (5% + 4.25% markup) Scenario 2 monly held idea that < $25,000 SBA-guaranteed loans Now let’s take a look at 8.25% (5% + 3.25% markup) current interest rates. are the best way to go. $25,000 – $50,000 And on the surface As of this writing, the 7.25% (5% + 2.25% markup) prime rate is 5%. At left they look appealing. > $50,000 However, if you are are the interest rates on a successful multi-unit operator, it’s the size of the loan. The SBA guarantees SBA 7(a) loans for August 2018. So on the $2 million loan, if you can highly likely you’re going to be looking 75% of loans in excess of $150,000; then, for financing in the range of $1 million for amounts up to $700,000, it charges a borrow at prime plus 2.25% with your to $3 million. When you’re looking for 3% fee on the portion of the loan they bank and you are creditworthy enough loans in that amount, it’s important to are guaranteeing. For amounts greater to not need the SBA loan guarantee, take a second look at the fee structure than $700,000, the fee is 3.5%; and for you just saved yourself $53,750. You’re and current interest rates. any guaranteed portion above $1 mil- welcome! When you add on the 3.5% fee that lion, they add on an additional 0.25%. comes with a sizable SBA loan, sometimes This is for loans with terms longer than Rod Bristol is business that can make a difference in whether 12 months. development manager at or not that loan is the best choice for Fastsigns International. Preyou. Let’s take look at some numbers. viously he was executive vice president at Profit Mastery. Contact him at 214-3465637 or rod.bristol@fastsigns.com

MULTI-UNIT FRANCHISEE ISSUE IV, 2018

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ExitStrategies BY DAVID OSTROWE

Are You Ready? A 9-step checklist for selling units

ou think you’re ready to sell? You’re mad and frustrated with your franchisor? They don’t care or understand your struggles? Maybe you’re ready to retire or just to do something else. When is the best time to sell? Do you know what your concept is worth? The worst time to sell is when a broker or another franchisee calls and makes you an offer. This can literally leave millions on the sidelines. What would you do differently if you knew the world would end in 30 days? Think about it. No savings! Maximize your spending and die broke. More realistically, if you’re thinking of selling your franchise in the next two years, start planning now. It’s simple stuff. 1. Clean up your financials. No personal spending of any kind. No boats, planes, or cars. Present the buyer with clean financials that leave no doubt as to what they’re buying. I reviewed another franchisee’s P&L recently. The company was paying for everything. He charged every personal credit card and household expense to the business. This lowered his profitability and cut the value of his company by almost 50 percent. These financials should map directly back to your tax returns with detailed explanations on any discrepancies. Present a three-year growth and development plan. This will assist the buyer in negotiating a favorable position with the franchisor and their bank. Hold the buyer by the hand. Let them know of successes and difficulties within the organization. Share your learning and struggles. This will set up the buyer for success. 2. Have a realistic expectation on your valuation. Talk to other franchisees and industry brokers on current values. Talk to franchise lenders on what values they are seeing. Understand the struggles a buyer may face with funding. This will directly affect the purchase price and terms. 3. Are you selling your real estate? Do you know the cap rates associated

MULTI-UNIT FRANCHISEE IS S UE IV, 2018

with your brand? I track the real-time value of my business by concept. Every period, I’ll track the real-time marketable value so I know the perfect time to potentially sell or reinvest. 4. Make sure 100 percent of all revenue is properly posted on the P&L. It should match the royalty and sales tax reports to the penny. 5. Run your cost of goods. Hold managers accountable to your ideal cost. Watch waste, spillage, and free items. Keep in mind that every penny you save

What would you do differently if you knew the world would end in 30 days? Think about it.

will hit the bottom line. This will increase your EBITDA and your purchase price. 6. Cut any unnecessary labor and overtime. Replace poor salaried managers with lower-paid shift managers. You typically hire professionals to help you grow. If you’re selling out, replace them. 7. Do what the “big boys” do. All franchisor and broker offerings put together a confidential information memorandum or a “book of business.” This offering will contain every aspect of the sale, including a non-disclosure. The last thing you want is for your employees to hear about the sale from anyone but you. In reality, there is little to no change to anyone’s employment status, but employees will feel betrayed and will focus on nothing but the pending transaction. Include the proposed transaction and structure. Consult with your CPA on the tax implications of your sale. 8. Develop a plan for your next steps. What will you do for a living? How will you invest the proceeds? I recently spoke with an owner who was selling out. His plan was to take a position with the buyer at a package considerably below what he was earning. He had no idea how much money he was currently earning. When he added his salary, car, bonuses, and “perks,” it was more than three times what he thought he was earning. I’ve personally sold entities and moved the proceeds to outside investments that completely failed. Remember, you’re an expert in what you used to do, not in what you’re going to do. 9. Learn how to say no. If the deal isn’t perfect, walk. Years ago, I was tripping over “red flags.” I was so focused on the transaction and the dream of doing something else that I ignored little comments, weird behavior, employee concerns, and numerous other issues. I moved forward and within 90 days, the buyer had stripped out all the cash and assets. It took two years and several hundreds of thousands to resolve. David Ostrowe is a multiunit, multi-brand franchisee whose companies include Blazing Partners, 180 Business Solutions, and O&M Restaurant Group.

FranchiseMarketUpdate BY DARRELL JOHNSON

Shifting Landscape 5 trends changing multi-unit franchising

s we head toward 2019 how should we describe today’s multi-unit (MU) and multibrand (MB) operators? I suspect the answer to that question is about to change. Let’s look at what’s happening to this very important part of the franchise business model and see if we can understand what it means for the future. MU expansion within brands Over the past 30 years, we have seen the rise of MU operators where today they control the majority of franchised unit activity in the U.S. Until recently, MU growth mostly focused on new unit expansion, with an occasional acquisition of units from smaller operators in the same system (many with franchisor encouragement to take over troubled units). However, we’re increasingly seeing economic scale factors drive active consolidation in some brands. We’re also seeing where the conditions exist for consolidation in brands not yet showing much activity, where single and small MUOs are being acquired by other, usually larger, MU operators. Some of our research assignments for capital providers in the past year have been focused on identifying brands that are expected to see rising consolidation. MB expansion within markets In the past decade or so, MU operators became MB operators at an increasing rate. From our conversations with many MB operators, we’re told that’s happening for several reasons. Some say it’s simply for business risk diversification. Others say it’s because there’s a lack of territory availability for their primary brand in their preferred geographies. When MU operators gain experience and knowledge in a specific geography or market, they will often choose to expand into a new brand within that same market, rather than expand into a new market with the same brand. After all, they reason that what they know best is their local market. And what they’ve learned

MULTI-UNIT FRANCHISEE IS S UE IV, 2018

is how to execute the franchise business model, not just a specific brand’s business model. Regardless of the reasons, there is a large and growing number of MB businesses today. MB expansion across industries While most franchisors want to keep their MU operators in the fold, franchisors have actually accelerated the trend toward MB movement across industries. Many franchisors have franchise agreements that essentially prevent franchisees from signing agreements with other brands in the same sector. Therefore, MB operators are crossing sectors, for instance QSR to casual. However, these types of agreement restrictions have encouraged MB operators to also cross industries, such as food to fitness. In effect, today’s MB operators are experienced franchise business model operators, so a new sector or industry is less relevant to their likelihood of success than their expertise as a franchisee. From active to passive MU investors Another, more recent, trend has been the rise in sizable franchisee investments by third parties, such as PE firms, family foundations, and hedge funds. We have seen a significant increase in such firms seeking our help to define specific characteristics that lead to identifying potential MU and MB businesses, either as minority, majority, or full buy-out transactions. If capital costs remain relatively low, this trend will become more common. MU investors going upstream The combination of economic scale and lots of capital available has led to a relatively new trend: investors are more frequently asking us to help evaluate brands earlier in their life cycles for possible investment opportunities. We have observed this through the types of brand analysis that PE firms, lenders, and, more recently, MB operators themselves, have asked us to do. With more than 300 new brands a year seeking to grow using the franchise

business model, the question posed to us is how to pick the winners before it’s obvious they are winners. As we comb through decades of franchise data, we are beginning to find some predictors of emerging brand success that are helping our MB investor clients find new opportunities. The appeal is obvious: wide-open territories, fresh approaches to consumer trends, the ability to negotiate better franchise agreement terms—and, in yet another new trend, the emerging brand growth boost of investing in both franchised units and the franchisor at the same time. This last point is an example of the growing separation of operator investor and passive investor. We’ve had passive investors in franchisee businesses for decades, but they have generally been relegated to family and friends. We’re now being asked by larger investor classes, such as PE firms and wealth management firms, to assist in putting capital into larger MB operators as minority or majority investors. Investor groups are showing up in many varied ways. We have recently been approached by several real estate firms to help them find brands that align with the specific demographics they seek around their sizable development projects. In yet another twist on the real estate market, we were asked by a business group that assembles multi-pad properties to help put the right mix of franchised businesses on them to create the lease stream that allows them to sell the underlying properties at specific cap rates to REITs. At the center of all these trends sits the multi-unit operator. Clearly, MU operators have been taking on many varied forms we’re just beginning to recognize. Instead of talking about MU operators as a group, I suspect soon we’ll start differentiating them across all these versions of what we are starting to recognize as clear trends today. Darrell Johnson is CEO of FRANdata, an independent research company supplying information and analysis for the franchising sector since 1989. He can be reached at 703-740-4700 or djohnson@ frandata.com.

TOGETHER, WE ARE FRANCHISING

FEBRUARY 24-27 | MANDALAY BAY | LAS VEGAS, NV JOIN THOUSANDS OF YOUR PEERS Make your plans now for the premier event in franchising — the International Franchise Association’s Annual Convention. Franchise professionals representing different fields of interest and various industries from around the world will unite to set the course for the future and grow their brands. No matter your unit size or experience, there is something for everyone. Don’t miss out on this chance to network while expanding your skills and register today!

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