Multi-Unit Franchisee Magazine - Issue II, 2016

CUSTOMER SERVICE ■ TECHNOLOGY ■ FINANCE

Multi-Unit

MULTI-UNIT FRANCHISEE

Franchisee ISSUE II 2016

M U L T I - B R A N D

MULTI-BRAND

5 0

Former NFL linebacker Bryan Scott tackles franchising with Title Boxing Club

INSIDE:

■ OUT-SOURCERERS Mastering the art of hiring out

■ CONSOLIDATION Big franchisees are getting bigger!

■ MULTI-BRAND 50

Top operators ranked by size and brands

ISSUE II 2016

SEE INSIDE:

APRIL 26-29, 2016 ■ LAS VEGAS muf16-2_cover.indd 1

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John D. Holland Scott E. Korzenowski

J. Mark Dady Barbara A. Bagdon Jeffery S. Haff

J. Michael Dady Ronald K. Gardner, Jr. Kristy L. Zastrow

Dady & Gardner, P.A. lives and breathes multi-unit franchising— from the franchisees’ perspective!

Y

ou are nimble, creative, and the very definition of an American success story. Your singular focus is, and should be, running your business.

Our singular focus is representing franchisees in every facet of their relationships with their franchisors.

For over 20 years, Dady & Gardner, P.A. has done nothing else. Because of this laser-like focus, and our extraordinary commitment to excellence, the lawyers at Dady & Gardner, P.A. have been ranked as the top franchisee lawyers in America by every publication that does such a ranking, including Chambers USA 2015, which ranks our named partners, J. Michael Dady and Ronald K. Gardner, as two of the three best franchisee lawyers in America. This type of recognition comes from the ten dedicated lawyers at Dady & Gardner having more than 120 years of combined experience in doing nothing but representing franchisees.

The franchisors that you deal with rely on the advice

of lawyers who know and understand franchising. In your relationships with your franchisors, shouldn’t you be doing the same? As a multi-unit operator, your risks are simply too high to be doing anything less.

Whether you are contemplating expansion, contraction, succession issues, or are faced with an immediate and unexpected challenge with respect to the conduct of your franchisor, let Dady & Gardner put their knowledge to work for you.

We urge you to contact us for our complimentary report “Top Ten Things That a Franchisee Should look for in a Franchise Agreement.”

For more information, contact us at 612-359-9000 or visit our website at www.dadygardner.com.

Dady & Gardner, P.A. 5100 IDS Center 80 South Eighth Street Minneapolis, MN 55402

“Putting utting fr franchisees anchisees and dealers f i rst for over er 20 year years”

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Multi-Unit

Franchiseecontents I S S UE II, 2016

MULTI

BRAND

COVER STORY

Multi-Brand 50 12 Eight multi-unit operators—Brent Collier, Mills Sinclair, Charles and Jesse Keyser, Brian Smith, Bryan Scott, Michael Knobelock, and Jerry Heath— share their stories on business, customers, technology, and the future.

BY KERRY PIPES and HELEN BOND

LISTS

Multi-Brand 50 Rankings 60 Franchising’s annual list of top operators and their favorite brands

FEATURES

Consolidation Nation 64 Multi-brand operators just keep on growing. Here’s how they do it!

BY EDDY GOLDBERG

Out-Sorcerers 72 Working with third parties is easier—and more popular—than ever

BY HELEN BOND

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MULTI-UNIT FRANCHISEE IS S UE II, III, 2016 2009

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$3,675,560 $506,874 AVERAGE ANNUAL GROSS SALES PER STORE OF THE TOP 1/3RD FRANCHISED STORES1

RECORDED AVERAGE ANNUAL EBITDA OF THE TOP 1/3RD AFFILIATE STORES2

PETS ARE RECESSION RESISTANT • $58 billion industry and growing3 • 20 consecutive years of growth3 OWN YOUR OWN PET SUPPLIES PLUS FRANCHISE

I CR EAT D E MA N E YO U D.

CA S H I N

.

• America’s Favorite Neighborhood Pet Store • 330 stores in 26 states with great territories available • “We’ve been with Pet Supplies Plus for 20 years and have 36 stores.

The Pet Supplies Plus system is ideally suited for pet lovers-entrepreneurs who want to open multiple units that are manager run.”

– Steve Adams

Celebrating 26 years

For more information, contact Steve Olson at 734.793.6532 or visit us online at www.pspfranchise.com

PSP Franchising, LLC, 17197 N. Laurel Park Drive, Suite 402, Livonia, MI 48152 1 This advertisement is not an offer to buy a franchise. An offer to buy a franchise can be made by prospectus only. Item 19 of PSP Franchising, LLC’s 2015 FDD provides that $3,675,560 is the average gross sales achieved by the “top third” of PSP franchisees (measured by gross sales), which consists of 40 franchised PSP stores during the measurement period beginning 12/29/13 and ending 1/3/15. Your results as a new franchisee may differ. Of the 40 “top third” franchise PSP stores, 15 PSP stores, or 38%, exceeded the average “top third” annual gross sales.

2 Item 19 of PSP Franchising, LLC’s 2015 FDD provides that $506,874 is the average EBITDA reported by the “top third” of affiliate-owned PSP stores (measured by gross sales), which consists of 38 PSP stores during the measurement period beginning 12/19/13 and ending 1/3/15. Your results as a franchisee may differ. Of the 38 “top third” affiliate-owned PSP stores, 12 stores, or 32%, exceeded the “top third” average EBITDA. 3 According to the APPA: http://www.americanpetproducts.org/press_industrytrends.asp. ©2016 Pet Supplies Plus. All rights reserved.

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Departments CHAIRMAN’S NOTE

The 2016 Multi-Unit Franchising Conference is almost here! 6 ONLINE

What’s online @ mufranchisee.com 8

Columns CUSTOMER SERVICE

Compassion and Empathy 93

The two most powerful words in customer service

BY JOHN DIJULIUS

PEOPLE

Millennial Psychology 94

5 ways to bring out the best in tomorrow’s managers

Franchisee CHAIRMAN Gary Gardner CEO Therese Thilgen EXECUTIVE VP OPERATIONS Sue Logan EXECUTIVE VICE PRESIDENT Diane Phibbs VICE PRESIDENT BUSINESS DEVELOPMENT Barbara Yelmene BUSINESS DEVELOPMENT EXECUTIVES Jeff Katis Judy Reichman EXECUTIVE EDITOR Kerry Pipes MANAGING EDITOR Eddy Goldberg CREATIVE DIRECTOR Peter Tucker DIRECTOR OF TECHNOLOGY Benjamin Foley WEB DEVELOPER Don Rush WEB PRODUCTION ASSISTANT Esther Foley TECHNOLOGY PRODUCTION ASSISTANT Juliana Foley

BY JASON CONRAD

MANAGER, SOCIAL MEDIA Cheryl Ryan

TECHNOLOGY

SENIOR SALES, EVENT & OPERATIONS SUPPORT MANAGER Sharon Wilkinson

Safety First! 96

Reassessing the security of your POS system

SENIOR PROJECT MANAGER, MEDIA AND BUSINESS DEVELOPMENT Christa Pulling

BY TOM EPSTEIN

MARKETING ASSISTANT, SPEAKER LIAISON Katy Geller

INVESTMENT INSIGHTS

FRANCHISEE LIAISON, SUPPORT COORDINATOR Leticia Pascal

Managing Uncertainty 98

What could go right, what to watch, and what’s different this time

BY CAROL SCHLEIF

FINANCE

The 7 drivers of gross margin 100

Small steps taken over time will boost your profits

BY ROD BRISTOL

EXIT STRATEGIES

De-consolidation 102

Can mega-franchisees become too big?

BY DEAN ZUCCARELLO

FRANCHISE MARKET UPDATE

Expertise on Call 104

Making multi-unit knowledge more available

BY DARRELL JOHNSON

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Multi-Unit

CREATIVE PRODUCTION ASSISTANT Phi Le VIDEO PRODUCTION MANAGER Wesley Deimling CONTRIBUTING EDITORS Rod Bristol John DiJulius Tom Epstein Darrell Johnson Steve LeFever Julie Moreland Carol Schleif Jim Sullivan Paul Wilbur Thomas J. Winninger Dean Zuccarello CONTRIBUTING WRITERS Debbie Selinsky Helen Bond 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@fumgmail.com MULTI-UNIT FRANCHISEE MAGAZINE IS PUBLISHED FOUR TIMES ANNUALLY. Annual subscription rate is $49.00 (U.S.) FOR SUBSCRIPTIONS EMAIL sharonw@franchiseupdatemedia.com or call 408-997-7795 FOR REPRINT INFORMATION CONTACT FOSTER PRINTING AT 800-382-0808 www.fosterprinting.com

MULTI-UNIT FRANCHISEE IS S UE II, 2016

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Chairman’sNote

See You in Vegas!

T

he 2016 Multi-Unit Franchising Conference, the year’s premier event for multi-unit and multibrand operators, is shaping up to once again raise the bar. I am humbled to be part of this event and believe strongly that this conference will exceed the expectations of everyone who comes.

If attending this year for learning or motivation, you are in for a treat. On Wednesday, one of the world’s most recognized and dynamic speakers, Jim Collins, author of Good to Great and Great by Choice, will be speaking about the foundations of building great organizations. This alone will be worth the price of admission. His message on building greatness that lasts has always resonated with me. His common-sense approach is applicable, provokes new thought, and inspires action.

On Thursday morning Joe Theismann, former NFL quarterback, sports commentator, speaker, and restaurateur will address and inspire this year’s attendees with a power-packed message on building winning teams.

Those attending for the networking opportunities, capital solutions, or new brand opportunities are also in for a treat. The Exhibit Hall—sold out 3 months earlier than ever before—will offer multiple opportunities for operators to meet with 200 franchisors and suppliers eager to put their brands, products, capital, technology, and services on display. These exhibitors, along with more than 30 conference sponsors, will be competing for the attention of an anticipated 600 multi-unit franchisees, whose businesses run the gamut from restaurants to consumer products to retail and service brands.

The subject matter for the educational breakout sessions will include attracting, developing, and retaining talent; capital acquisition for businesses of all scales; preparing to buy or sell a business; the do’s and don’ts of selecting brands; and many more, chosen by our Conference Advisory Board of multi-unit franchisees.

“The Money Room”—a new session for franchisees seeking development or expansion capital— makes its debut this year, providing franchisees with a unique opportunity to meet one-on-one with capital sources to discuss real-time partnerships and turn ideas into action.

Other attractions include a charity golf tournament on Tuesday, Franchise Update’s annual MVP Awards, and franchisee-only events that include a “Meet & Greet” for first-time attendees. Public policy sessions will include panels on the NLRB and its joint employer rulings, minimum wage, SBA lending, and overtime rules. There also will be a panel on building partnerships with professional athletes, who represent a potential new source for capital, brand recognition, and expansion.

Our speaker and panel lineup is as dynamic and diverse as ever, full of those who have gained experience through having done it. The opportunity to learn from the most experienced, successful franchisees, legal resources, lenders, brokers, and brand executives will be delivered in a format that allows attendees to choose topics relevant to their business and current challenges. Whether you’re attending out of curiosity or with a very specific agenda, the talent, content, and efficient format of this event will deliver.

Nearly every franchise I speak with talks about their desire to grow their business, yet few of them actively do. “If it is important to you, you’ll find a way. If not, you’ll find an excuse.”

See you in Vegas!

Michael Kulp President/CEO KBP Foods

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MULTI-UNIT FRANCHISEE IS S UE II, 2016

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"Denny's is an iconic American brand that delivers on the American dream. When I started with Denny's at 16, I was a food server. Today, I'm one of the largest franchisees in the system. If that's not the American Dream, I don't know what is."

"As a new franchisee, I was drawn to the leadership position Denny's has in family dining. I love the food, the people and the growth potential. No other brand has this much to offer!"

Donnell Thompson

Dawn Lafreeda Den Denny's Franchisee, Owner/Operator of over 70 restaurants in 6 states

Den Denny’s franchisee, former McDonald’s franchisee, 12-year NFL veteran

“As a multi-concept owner with over 200 restaurants, I am very happy with the performance of Denny's since I became a franchisee. Denny's is the perfect complement to my restaurant portfolio."

Anil Yadav La Largest Jack in the Box franchisee in the U.S. and Largest Denny's franchisee in California

Denny’s is celebrating over 60 years of growth and today, more than 90% of Denny’s restaurants are owned and operated by franchisees. Our commitment to long-term market share growth is supported by the industry’s leading program offering up to

$1 MILLION OF INCENTIVES FOR NEW & EMERGING MARKETS.

BE A PART OF AMERICA'S DINER. BECOME TODAY'S FRANCHISEE. DENNYSFRANCHISING.COM

800.304.0222

©2016 DFO, LLC 203 East Main Street, Spartanburg, SC 29319. This advertisement is not an offer to sell a franchise. The savings estimate of up to $1 million is based on the potential savings of developing, opening and operating six Denny's restaurants under the New and Emerging Markets incentive program, in comparison to developing, opening and operating six Denny's restaurants without the incentive program. The estimated savings include reduced royalty fees calculated using the $1,493,000 average unit volume of franchised Denny's restaurants nationwide in 2014, as published in Item 19 of Denny's 2015 Franchise Disclosure Document. Of the nationwide franchised outlets whose data was used in arriving at the 2014 franchised restaurant sales figure, 601 franchise units, or 43% of the franchised restaurants, actually attained or surpassed the indicated sales results.

Individual restaurant sales performance will vary. There is no assurance that you will do as well or achieve the estimated potential savings. You must accept this risk. See Denny's Franchise Disclosure document for complete program details, including restrictions such as applicable geography and development time frames. Limited time only.

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FRANCHISE OPPORTUNITIES

Looking for your next franchise opportunity? Have we got the tools for you! Find April 27–29, 2016 Caesars Palace, Las Vegas

CONFERENCES Multi-Unit

Franchising Conference Ahead!

It’s time to mark your calendar and start planning to attend the annual Multi-Unit Franchising Conference. This year’s MUFC is from April 27–29 at Caesars Palace in Las Vegas.

The charity golf tournament the day before, on April 26, at the Arroyo Golf Club at Red Rock, means fun in the sun for a good cause. Last year’s attendance topped 1,300— including more than 550 franchisees who accounted for more than 12,000 operating units, more than $8.5 billion in annual revenue, and provided jobs for more than 100,000 people. Meet your peers, explore new brands, and soak up the educational sessions. Need a further reminder?

Take a peek back at the 2015 conference at www.multiunitfranchisingconference.com

ONLINE Multi-Unit Community Grows Check out our community-based website for multi-unit operators. It’s your exclusive look into the world of multiunit 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/multiunitfranchisees

NEW ONLINE VIDEOS EmpireBuilders.tv Expands

Great entrepreneurs build great organizations. They possess a knack for making smart business decisions, building great teams, and creating successful companies.

But as we’ve learned from years of interviewing successful multi-unit franchisees, they’ve also struggled, doubted, and made more than a few mistakes—yet they’ve soldiered on, persevered, and ultimately come out on top. To provide a deeper sense of their journeys, insights, and personalities, we’re selecting franchisees from our most inspiring print interviews and creating a new series of online videos of these franchisee leaders. We call them Empire Builders. www.franchising.com/empirebuilders

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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

RANKINGS Check out our annual rankings of top multi-unit franchisees and their brands and find out “who’s on first.” This

issue has our annual Multi-Brand 50 rankings. For the Multi-Unit 50 rankings go to www.franchising. com/multiunitfranchisees/mu50.html. To see the Mega 99 rankings, go to www.franchising.com/ multiunitfranchisees/mega99.html.

PUBLICATIONS

“Don’t just survive, thrive!”

Franchise Update Media’s 2016 Annual Franchise Development Report, and the best-selling book, Grow to Greatness by top franchise consultant Steve Olson, offer invaluable tips for franchise sales success and unit growth in today’s economy. To order, visit franchising.com/ franchisors/afdr.html and franchising.com/ franchisors/growtogreatness.html.

QUICKLINK For a one-click link to articles

in this magazine and to past issues of Multi-Unit Franchisee magazine, visit franchising.com/multiunitfranchisees

BOXING WORKOUTS THAT TRANSFORM LIVES

“Title Boxing Club is more than just helping people get back into an old pair of jeans or develop a six-pack.

It’s more about transforming lives by creating a healthy and sustaining lifestyle.”

—Bryan Scott, former NFL linebacker who operates 2 Title Boxing Clubs in Atlanta

MULTI-UNIT FRANCHISEE IS S UE II, 2016

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FROM $2,000 TO $20 MILLION Financing that’s quick, easy and affordable.

I found Direct Capital to be professional, timely & competitive.

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FROM $2,000 TO $20 MILLION Financing that’s quick, easy and affordable.

The Direct Capital process is seamless and painless.

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MULTI

BRAND

One Brand Beyond Multi-brand stars keep on shining

A

BY KERRY PIPES AND EDDY GOLDBERG

nyone who’s operated a franchise business knows it takes a lot of hard work to attain (and maintain) a high level of success and profitability. Life changes dramatically with expansion from 1 or 2 to 5 or 10 units and beyond, with new challenges presenting themselves at each stage of growth.

Multi-brand franchising, a growing trend for some time, has many important advantages, most notably diversification, which spreads risk across different geographies, industries, and economic cycles. Signing on with different systems allows operators to learn from the best and apply those lessons across different brands, and many thrive on the stimulation and variety that working with several brands provides.

We all know business is really about people—the people who start businesses, the people who work in those businesses, and the people who buy from those businesses.

That’s why each year we search long and hard to assemble a unique group of multi-brand franchisees whose stories are dynamic, engaging, and offer instructive models of success.

This issue profiles eight hard-working, dedicated multi-unit operators representing small to large organizations. Their stories are unique, yet have common threads: a passion for great products and concepts, a customerdriven focus, an eagerness to provide jobs and opportunities to their employees, and a burning passion to grow their business and support their communities.

FRANdata has been supplying us with data on multibrand franchising for 9 years now. Their list of the 50 largest multi-brand franchisees in the U.S. begins on page 60, along with a list of the 25 most popular brands.

Here’s a preview of what you’ll discover in the following pages: • Brent Collier loves tourists—at least the ones who eat in one of his 16 restaurants, located strategically along a 25-mile stretch in East Tennessee featuring attractions ranging from Dollywood to Gatlinburg to Great Smoky Mountains National Park. The area draws about 15 million visitors annually, and Collier estimates that one in three ring up a tab at one of his restaurants each year.

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• Mills Sinclair spent two decades in the financial industry before serendipity and an eye for an opportunity led him into franchising in the form of Abby’s Pizza, a 36unit chain in the Northwest he acquired in 1988. Today he also is a franchisee of Golden Corral and Sonic DriveIn and likes to own the land beneath his restaurants.

• Jesse and Charles Keyser, 39 and 35, are brothers who bring a sibling harmony to their franchise operation.

They’ve parlayed their mutual respect and complementary strengths into a business that now includes Sport Clips, Little Caesars, and Oxi Fresh Carpet Cleaning, leveraging their youth, energy, and social media savvy into a $10 million business.

• Brian Smith has been in the franchised restaurant business for 26 years. Today the former Subway franchisee operates 11 Popeyes and recently signed on with Captain D’s to build (hold your breath!) 50 restaurants by 2026. He also sells rural land for Mossy Oak Properties in Missouri, Kansas, and Oklahoma. When he’s not working, he loves to spend time on his farm.

• Bryan Scott, who spent a decade in the NFL as a linebacker, always knew there would be life after football.

After hanging up the pads, he wasted no time getting into Title Boxing Club as a franchisee. He has two locations open and plans for five more. Additionally, he is co-owner of Noene USA, which sells a line of high-tech, ultra shock-absorbing insoles.

• Michael Knobelock was no stranger to multibrand franchising when we first profiled him in 2010.

He’s also no stranger to expansion. Since we last visited, he has added Captain D’s and Sears Appliance & Hardware stores to his arsenal of brands, which also includes Church’s Chicken, Little Caesars, and his own full-service seafood and steakhouse restaurant, Dekker’s Mesquite Grill.

• Jerry Heath was busy with his Hungry Howie’s locations and had just gotten into the Jimmy John’s brand when we profiled him in 2010. Since then he’s more than doubled his Jimmy John’s locations to 12, with 2 more set to open this spring, and has been busy remodeling and relocating his Hungry Howie’s units.

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MULTI

BRAND

BY DEBBIE SELINSKY

Southern Hospitality Multi-restaurant host keeps tourists well fed

B

rent Collier earns his bread and butter from tourism. His 16 restaurants from 7 different brands offer something for everyone— from a fun or romantic fondue dinner at The Melting Pot to Sunday afternoons for the family at Golden Corral.

NAME: Brent Collier TITLE: President COMPANY: Collier Restaurant

Collier is a restaurant baron in an unusual market: a 25-mile stretch of an Eastern Tennessee tourist area that includes Dollywood, the mountain resort city of Gatlinburg, and Great Smoky Mountains National Park, the most-visited national park in the country. The area attracts around 15 million tourists a year, and Collier estimates that about one-third of them eat at one of his restaurants.

“Probably 90 percent of all our business is tourist-based. They’ll come four or five

times a year—many have a time share or a vacation home around here—and they’ll stay for three or four days on average,” says Collier, a Sevierville, Tenn., native and president of Sevier County’s largest restaurant group.

“They’re not at the beach for a week where they’ll stop at Walmart or Sam’s and buy groceries. That means they’re eating out for every meal. Three meals a day times three days equals nine opportunities for them to sit at one of our tables, all of

Group

NO. OF UNITS: TGI Fridays, 3; Golden Corral, 2; Corky’s Ribs & BBQ, 1; The Melting Pot, 1; Quaker Steak & Lube, 1; Smoky Mountain Pancake House, 1; Flapjack’s Pancake Cabin (independent), 7; Gatlinburg Convention Center Food Service AGE: 60 FAMILY: Wife Ashley; 2 daughters,

Lori Collier and Elise CollierMassey

YEARS IN FRANCHISING: 23 YEARS IN CURRENT POSITION: 20

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MULTI

which are a little different.” That formula has been a winning one for Collier, who at one time had the world’s No. 1 Country Kitchen (he no longer has a franchise with this brand) and No. 1 Golden Corral.

Collier and his brothers and sister grew up on a farm “so poor that my father had to sell it and go back into the military to make ends meet,” he recalls. “He sold it to a sand company and it became a sand factory.” The family spent two years in Germany while their father served in the U.S. Army but came back to Sevierville soon afterward.

“My father’s background was as a country peddler. He’d sell a skillet to a farmer in trade for a gallon of milk and three chickens. So we all grew up being able to trade and barter,” Collier says. “When he began doing real estate in Pigeon Forge, he’d look at us and say, ‘We need a restaurant’ or ‘We need a motel here.’ Since we had our contractor’s license, my brothers and I would build it. In November, we’d go into construction mode and have it open

by Memorial Day.” As it continued to grow, the family business had a unique way of sharing the wealth. “We’d buy a piece of property in the area and build that entity and then, whoever had the least number of busi-

“My father’s background was as a country peddler. He’d sell a skillet to a farmer in trade for a gallon of milk and three chickens. We all grew up being able to trade and barter.” nesses got that one.” At one point, Collier had two motels, a water slide, two restaurants (his first was the Smoky Mountain Pancake House, built in 1976 and owned by the family), and was in charge of the carpenters in the construction crew.

All the businesses the family opened were independent. “When they’d give me restaurants, I’d study all the journals. That was when ‘branding’ was the word—it was all about branding,” he says. “I can recall talking to my siblings and saying, ‘We need to take these restaurants and brand them instead of being independent.’”

BRAND

The family shared the combined stake in their tourism businesses from 1968 until 1988, when they separated their operations into divisions. His brother and sister oversaw motels and wineries, while another brother was in charge of campgrounds and motels.

Collier got what he wanted: the restaurants. “I wanted to be in all the food categories, from fine dining to casual to family to buffets to fast food to donuts,” he says. His first franchise was with Country Kitchen, and Golden Corral came soon after in 1994. “It took me two or three years to get our Golden Corral to No. 1 in the world. We knocked Orlando out as No. 1. Then a couple of years later, Kennesaw, Georgia, knocked us out,” he says.

Next he looked for a major casual theme restaurant franchise. That came in the form of Corky’s Ribs & BBQ, which he located next to his Golden Corral. “Corky’s was a little bit different enough so we didn’t cannibalize ourselves,” says Collier. On the heels of his tremendous success with Golden Corral, he built another, then TGI Fridays, The Melting Pot, and Quaker Steak & Lube.

There was a method to his madness— one that might not have worked in a different location, he says. “I tried to keep things as diverse as possible, going into brands that wouldn’t compete with the

PERSONAL First job: Bus boy at Trotters Restaurant in Pigeon Forge at the age of 12.

Exercise/workout: Hiking, walking.

Formative influences/events: My father had a military background and so I was influenced by that training, expectancy, and attention to time and task.

Best advice you ever got: Focus on what you are good at.

Key accomplishments: Owning the No. 1 Country Kitchen and the No. 1 Golden Corral in the world.

Biggest current challenge: Opening outside Tennessee.

Next big goal: Growing Old Chicago Pizza & Taproom, a new brand for us, which we’ll open in the Myrtle Beach area. This will be our first restaurant outside Tennessee.

First turning point in your career: Focusing my business on restaurants— not hotels, campgrounds, water slides, or construction.

Best business decision: Signing up with Golden Corral in 1994.

What’s your passion in business? Being the best I can be and encouraging others to do that.

How do you balance life and work? I don’t—there’s too much work.

Guilty pleasure: Wine.

Favorite book: Anything by John Maxwell.

Favorite movie: “Jesse Stone.”

What do most people not know about you? I once owned the world’s largest water slide. It was in Pigeon Forge and was three different tracks for over a mile of sliding.

Hardest lesson learned: Not to build the restaurants too big. You have a tendency in a seasonal market when you’re just at max capacity to want to build bigger, but then the other four to six months you’re not at capacity. You have to consider that.

Pet peeve: Slackers.

Work week: About 60 hours.

Person I’d most like to have lunch with: Warren Buffet.

What did you want to be when you grew up? Successful.

Last vacation: Biking and walking in Hilton Head, S.C.

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4/2/16 2:22 PM

The Captive Insurance Program Opportunity

By Everett Newman, Jr.

Most corporate buyers of insurance have heard the terms “Captive Insurance” or “Captive Insurance Program”. However many business owners, including franchisees, franchisors, and their associations, may have differing levels of understanding of this concept.

The goal of this article is to help readers gain clarity on the subject of captive insurance programs and provide basic knowledge on just how a captive program could benefit their business performance and profitability.

WHAT IS A CAPTIVE? A captive is an insurance company created and wholly owned by one or more non-insurance companies to insure the risks of its owners (example: a group of franchisees, a franchisor, or their association could form a captive). Captives are a form of self-insurance (with full reinsurance protection) where the insurer is owned wholly by the insureds. They are typically established to meet the risk management and insurance needs of its owners or members.

One of the main reasons businesses form a captive program is to earn underwriting profits and investment income based on the performance of their individual company. Because members have the potential to earn underwriting profits and investment income, participation in a captive insurance program is viewed as one way to transform the insurance expense line of a P&L into a profit source.

A SUCCESS STORY: THE RESTAURANT FRANCHISE CAPTIVE PROGRAM The Restaurant Franchise Captive Program (RFCP), an exclusive program of York Risk Services Group, is an excellent example of a group captive that was formed for the benefit of restaurant franchisees. This program began in the midst of California’s “hard market” in 2004, at a time when workers’ compensation insurance rates were skyrocketing and many businesses failed or left the state.

Two franchisees – one a Carl’s Jr. and the other a Denny’s – partnered to start the RFCP and began writing insurance business on July 1, 2004. The primary goal of this venture was to gain control of their own insurance costs. By getting access to claims management and embracing safety services, these two franchisees were able to drive the cost of their workers’ compensation, general liability and property insurance down to the lowest level they’d ever experienced. In the 11 years since inception, the RFCP has delivered: • A successful, growing captive insurance program with over $23 million in annual premiums • $10.4 million in underwriting returns to members • Historical loss ratios of 30 percent compared to 55-60 percent industry norms (this is the ratio of claims costs to premiums paid, so lower is better!)

• Over 2,000 locations in over 30 U.S. states • Over 20 restaurant brands insured in the program

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A CAPTIVE PROGRAM THAT EXCEEDED ALL EXPECTATIONS The RFCP program has more than exceeded the expectations of its members when first formed in 2004. Thanks to the efforts of members working with their program manager and broker to manage claims and safety issues, members have received millions of dollars in underwriting profits, turning a business expense into a profit center.

A founding member of the RFCP told us, “Getting into the RFCP was one of the best decisions I’ve made as a business owner. I have been in the program since its start in 2004, and the RFCP has done more to enhance my profitability than any other single thing I could have done.”

Among the benefits to franchise owners: • Underwriting Profits that directly enhance your company’s profitability • A market-competitive insurance rate • Superior Safety and Claims Management Services that reduce your claims frequency and drive costs to the lowest possible level • Comprehensive coverage designed to meet the insurance requirements of your franchisor (for Workers’ Compensation, General Liability, Property & Auto Coverage) • Full insurance and reinsurance protection from an “A” Rated insurance carrier • Greater control and say in how your claims are managed • The lowest net cost for insurance, which provides a competitive advantage in the franchisee marketplace Captives are the fastest growing segment of the commercial insurance marketplace. Chances are a captive could be a good fit for your company and satisfy your insurance needs. For many franchisees, franchisors, and their associations, a captive program would provide a greater degree of control over insurance costs while also providing a welcome new profit stream.

Everett Newman, Jr, CIC. is the managing vice president for York Alternative Risk Solutions

2/23/16 4:23 PM

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MULTI

BRAND “We try to stay local. We work in the community and invest in the community and use local vendors.”

MANAGEMENT

Business philosophy: Be persistent.

What I need from vendors: Good customer service and competitive prices.

Management method or style: I simply hire the best people I can.

Greatest challenge: Maintaining good numbers.

Have you changed your marketing strategy in response to the economy? How? Yes, by using more social media.

How do others describe you? Driven.

How is social media affecting your business? We’re trending up.

One thing I’m looking to do better: Train the family to take over.

How do you hire and fire? We hire good people and fire after giving three strikes before they’re out.

How I give my team room to innovate and experiment: Tell them their goal, and then expect them to execute.

How close are you to operations? Fairly.

How do you train and retain? We give good people goals and support them.

What are the two most important things you rely on from your franchisor? A good image and strong marketing—like the Golden Corral ad, “Best Buffet in the USA” with Jeff Foxworthy.

Fastest way into my doghouse: Lying, cheating, stealing.

first brand. Because I was in a small area, I couldn’t do a large number of the same brand. I had to have small numbers of a lot of different brands.”

The simplest of his brands to operate (and he doesn’t consider any of them easy) is his own brand, Flapjack’s Pancake Cabin, “because 80 percent of all the ingredients or sales are based on 20 items.

It’s the easiest, but it’s not that easy. You can really mess up breakfast, I can tell you right now,” he says.

The most complex is Golden Corral with its buffet, because all of it is done from scratch, says Collier. “There’s so much prep and just a lot of loving care that goes into it. That’s why it does so well—because there’s so much effort and concern put into it. And there are a huge number of options.”

How do you deal with problem employees? By first coaching and then giving them three strikes.

Collier says he generally doesn’t share employees and managers across brands.

“Most are so specialized that we want to keep key employees in the one they’re affiliated with. We do have several managers who are cross-trained among brands, and we have so many employees—about 1,000 during season from Easter through New Year’s—that if a disaster happened, we could still offer fast, friendly service, hot food that should be hot and cold food that should be cold. It’s persistence and following the basics,” he says.

He has continued the family business tradition with his daughters, both of whom worked in his restaurants from an early age. Lori Collier, his elder daughter, works in finance and operations. Elise CollierMassey, his younger daughter, works in

human resources and public relations. Her husband, Beau Massey, works in operations with CEO Cary Zimmerman.

Today Collier, at 60 an avid hiker who loves the area’s 900 trails, says he’s tried to retire twice. “I know they could do it without me, but I guess it was me trying to wiggle my way back in,” he says.

His newest challenge is to build his first out-of-state restaurant: an Old Chicago Pizza & Taproom franchise in the Myrtle Beach, S.C., area. “That area has a similar tourist market and demographics to ours,” he says. “I’ve been thinking about going outside the state for 10 or 15 years, and so we took this opportunity. In addition to that Old Chicago Pizza in Garden City, South Carolina, we’re going to open a Flapjack’s Pancake Cabin there.”

BOTTOM LINE Annual revenue: $30 million-plus.

What are the best sources for capital expansion? Banks.

2016 goals: Opening restaurants out of state.

Experience with private equity, local banks, national banks, other institutions? Why/why not? We try to stay local. We work in the community and invest in the community and use local vendors, so we borrow in the community.

Growth meter: How do you measure your growth? By profit and smooth operations.

Vision meter: Where do you want to be in 5 years? 10 years? I want to be retired and letting the kids run the business.

How is the economy in your region affecting you, your employees, your customers? Things are good. Everybody’s doing better.

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What are you doing to take care of your employees? Paying them well.

Are you experiencing economic growth in your market? Yes.

How are you handling rising employee costs (payroll, minimum wage, healthcare, etc.)? With menu pricing and budgeting.

How do changes in the economy affect the way you do business?

Sevier County (a major tourist area) is pretty much recession-proof.

How do you reward/recognize top-performing employees? Bonuses and advancement.

How do you forecast for your business? By looking at the history of the numbers and by strong budgeting.

What kind of exit strategy do you have in place? Everything is in place to transition to the next generation.

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GROWTH, PROFITABILITY, & 20+ FRESH INGREDIENTS $1,239,512 AVERAGE TOTAL ANNUAL GROSS SALES 630+ RESTAURANTS AWARDS

AVERAGE EBITDA $192,856* (15.6%)

2011-2016 ENTREPRENEUR FRANCHISE 500® 2014-2015 QSR® BEST FRANCHISE DEALS 2013-2015 ENTREPRENEUR FASTEST-GROWING FRANCHISES 2013-2015 THE QSR TOP 50

For more information, contact: 404.705.2051 • requests@moes.com *Figures reflect averages for 163 franchised restaurants that were in operation continuously for 3 or more years and that provided us with complete financial information for the full calendar year of 2014, as published in Item 19 of our April 2015 Franchise Disclosure Document. These averages are based on a 52-week annual period from January 1, 2014 through December 31, 2014. Of these 163 restaurants, 71 restaurants (or 44%) attained or exceeded the average total gross sales and 69 Restaurants (or 42%) attained or exceeded the average EBITDA. A new franchisee’s results may differ from the represented performance. There is no assurance that you will do as well and you must accept that risk. This offering is made by prospectus only. This information is not intended as an offer to sell. We will not offer you a franchise until we have complied with disclosure requirements in your jurisdiction. FOR THE STATE OF NEW YORK: This advertisement is not an offering. An offering can be made only by a prospectus filed with the Department of Law of the State of New York. Such filing does not constitute approval by the Department of Law. FOR THE STATE OF CALIFORNIA: These franchises have been registered under the Franchise Investment Law of the State of California. Such registration does not constitute approval, recommendation or endorsement by the commissioner of corporations nor a finding by the commissioner that the information provided herein is true, complete and not misleading. Moe’s Franchisor LLC, 5620 Glenridge Dr. NE, Atlanta, GA 30342.

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BY DEBBIE SELINSKY

Burgers, Buffets, and Pizza

Former securities dealer finds security in franchising

M

ills Sinclair is a man living life on his terms. He’s equally at home on the golf course at his Arizona home in Scottsdale, on the beach at his Mexican vacation home, or sitting in a corner of one of his restaurants on Sunday “watching families interact in ways they don’t often do anymore.”

A Chicago native who grew up in Ari-

zona, he also has the best of both franchising worlds: he’s not only a franchisee of Sonic Drive-In in Oregon and Golden Corral in Arizona and Idaho, he’s also the franchisor of his own brand, Abby’s Legendary Pizza, in Oregon and Washington.

Sinclair comes from a family of inventors (his grandfather invented the first vending machine to sell hot coffee), but as a young

man he gravitated to finance. He earned his degree from Arizona State University in 1969 and went to work for Young, Smith and Peacock, an investment banking and brokerage firm that was a member of the New York Stock Exchange. In 1983, he started his own broker-dealer firm, which he sold in 1992.

As often happens, Sinclair wound up in the restaurant business through serendipity. While working on real estate and tax advantage deals for Abby’s, at the time a 9-unit regional chain of pizza parlors in the Pacific Northwest, he saw great potential and in 1988 acquired the brand. He knew little about operating restaurants but felt he could learn, and his financial expertise gave him an edge. Abby’s has grown from 9 restaurants in 1988 to 36 today, all in Oregon and Washington.

Sinclair awarded franchises to two people who had been with the company for a long time, but didn’t add more franchisees NAME: Mills Sinclair TITLE: Franchisee of Sonic Drive-In and Golden Corral; franchisor of Abby’s Legendary Pizza COMPANY: Abby’s Inc., and LLCs

for Sonics and Golden Corrals

NO. OF UNITS: Sonic Drive-In,

5; Golden Corral, 4; Abby’s Legendary Pizza, 34 AGE: 69

FAMILY: Daughters Megan and

Maddie

YEARS IN FRANCHISING: 28 YEARS IN CURRENT POSITION: 28

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because, he says, he “wanted to control the concept.”

As he was growing Abby’s, he began to look for other opportunities. About 15 years ago, he signed on with Golden Corral. “I thought that becoming a franchisee for Golden Corral would give me a multiple of capital invested. They had a restaurant under construction in Boise, Idaho, so I bought it from the company,” he says. “I didn’t realize at the time how difficult and complicated it is to run a Golden Corral, but I was able to hire the right people and our four restaurants in Idaho and Arizona have done well.”

Eight years ago Sinclair began to look at Sonic because the brand had not yet come to Oregon or Washington, or even California, he says. “It was something new for the area, and we had the whole infrastructure already set up in the Northwest.

“If I just wanted robots, I wouldn’t be hiring anybody.

You’ve got to respect people you hire and give them the ability to do the job.”

All our maintenance, administration, and vendors were there, so it was easy to assimilate another concept into the Northwest market. We opened the first Sonic in Southern Oregon around 2007–2008.” Today he has five Sonics in the Beaver State.

Throughout his career, Sinclair has believed in the importance of owning the real estate his businesses sit on. “When you own your real estate, you’re building equity as well as getting sales,” he says.

That would be his best advice for wouldbe franchisees, he says. “Owning real estate can control your destiny. If it doesn’t work and that location is a dog, you can do something with it if you own it. If you lease it, you have to pay for it and live with it.”

Sinclair was trying to get one of his daughters involved in the business, but about a year ago she came to him and said, “Dad, would it be all right if I don’t work for you? I want to be a teacher, go back and get my master’s degree.” “Is that really what you want to do?” he asked. When she said yes, Sinclair responded, “Then do it. You have to go where your heart is and with what makes you happy.”

PERSONAL First job: As I kid, I worked in a gas station and at other odd jobs.

respect, not be their friend. If they respect you, they’ll work for you.”

Formative influences/events: My grandfather, Bert Mills, was an inventor and a big influence on my life. He lived to be 94, and in the waning years of his life we talked a lot about how he grew up, what he saw, and what he accomplished.

What’s your passion in business? What I like most is to go to one of our restaurants on the weekend or after church on Sunday and sit in the corner and watch families come in with their kids and interact. In today’s crazy world, it’s one of the only times a family sits and talks to each other. That’s what makes me happy.

Key accomplishments: I had membership in the stock exchange, was in the securities business, and ended as vice chairman of the board for the NASD. I owned and sold three or four different firms before all the automation occurred.

Biggest current challenge: Wrestling with minimum wage and Obamacare and still holding prices and keeping the business going.

Next big goal: To retire at some point.

First turning point in your career: In the early 1980s, I was in the deal business, doing real estate and tax advantage deals with Abby’s Pizza, a company that was interesting because it included lots of real estate and was operating businesses that were making money. It was in the Northwest, an area of the country that had not yet exploded, that was still a bit sleepy and unheard of. So I seized the opportunity not just to own the real estate but to run the business more efficiently and make it pay off. When I bought Abby’s in 1988, there were nine restaurants. Now I own 34 and we have two franchisee locations.

Best business decision: Probably buying Abby’s at the time because it opened doors for a lot of different things. I still do real estate development (I own a golf course) and I’m a franchisee.

Hardest lesson learned: To allow myself to fail once in a while. It’s something you have to experience. You can’t hold onto everything. There’s a time you have to just walk away.

Work week: As needed. I work some every day and travel a lot back and forth between my home in Scottsdale and the Northwest.

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How do you balance life and work? I’m 69 and I still enjoy doing what I’m doing. It doesn’t feel like work. The people you interact with, your relationships with your employees (we have about 1,400), the travel—it’s all part of life.

Guilty pleasure: My best afternoon is sitting, having wine, and looking at the golf course.

Favorite book: I read all the time. Most of it is just entertainment. I like mysteries.

Favorite movie: “The Bucket List” with Jack Nicholson and Morgan Freeman.

What do most people not know about you? Not a lot of people know that I’m a little too caring and emotional about things.

Pet peeve: Working with people who are not prepared for the workplace, and it’s because of schools today. I’m looking at resumes of people who can’t write or spell or do math. What we’re doing is putting uneducated people without basic skills into the workplace. It’s criminal as far as I’m concerned.

What did you want to be when you grew up? In high school, I wanted to get into finance but I started out in the school of architecture, where I spent two years before I admitted I couldn’t draw a picture. I even took art classes, but I had to realize that was not where I was going.

Exercise/workout: I ride a bike when I can and golf.

Last vacation: In December, I was at my place in Loreto, in Baja California. I’m getting ready to go back.

Best advice you ever got: From my grandfather, who told me, “You can’t be everybody’s friend. When you’re managing people, you have to gain their

Person I’d most like to have lunch with: Ronald Reagan. I knew his son and met him a couple of times but never had a chance to really talk to him.

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“I tell my crew, ‘I don’t care how bad it is, I just have to know.’”

MANAGEMENT Business philosophy: Two things: You have to be a good seller and you need to leave a little on the table for somebody else.

Management method or style: I’m a consensus builder. It works for me.

Greatest challenge: Finding good employees.

How do others describe you? People think I’m a lot more authoritative than I really am, but they respect me and call me when there’s no other way to get something done. They know I care.

One thing I’m looking to do better: I’d love to play golf better.

How I give my team room to innovate and experiment: I try to hire people who are right for the job and qualified to do the job, then give them direction and let them get the job done. If the job gets done, I don’t insist they do it the way I would. If I just wanted robots, I wouldn’t be hiring anybody. You’ve got to respect people you hire and give them the ability to do the job. If there’s a problem, fix it. If not, let them do it their way.

How close are you to operations? Pretty close.

What are the two most important things you rely on from your franchisor? Strong marketing and promotions, and the ability to bring innovation and new products to the table.

What I need from vendors: Competitive prices, reliability.

Have you changed your marketing strategy in response to the economy? How? Getting into social media has been our biggest change. In

pizza, we do 85 percent TV, but we’re adding more money to the social media budget and just hired somebody dedicated to that. Our customers skew a little older, but now more of the 50-and-older group are using social media. With Sonic, we’re using social media quite a bit. We ran a social media–only special last week and it did really well. Golden Corral just started putting together a club so we’ll see how that goes.

How is social media affecting your business? Positively so far. The more we do it, the better results we’ll see.

How do you hire and fire? In my position I only hire a few people, and I look for experience, ability, and personality. I fire reluctantly, but do it quickly if it’s not working. You’re not doing either of you a favor by letting it go on.

How do you train and retain? Each concept has a formal training program for employees. Golden Corral and Sonic are e-training, and Abby’s is digital and on-the-job. We retain by paying a decent salary, paying for uniforms, offering a scholarship program, and bringing them along so they’re qualified to do other jobs with a better path to higher wages.

How do you deal with problem employees? We work with them and give them a chance, but if they can’t do it we have to pull the trigger.

Fastest way into my doghouse: Not telling the truth. I tell my crew, “I don’t care how bad it is, I just have to know.” It’s harder to deal with if I’m blindsided.

BOTTOM LINE Annual revenue: $48 million to $50 million (total for all brands).

2016 goals: To up sales comps and lower costs.

Growth meter: How do you measure your growth? In sales, year over year, week over week. We have the numbers to show all that.

Vision meter: Where do you want to be in 5 years? 10 years?

I don’t mind working another 5 years and finding someone who can take it over with a little direction, maybe put money in and earn an equity position. In 10 years, I’d like to be sitting on the beach in Mexico and enjoying everything I spent a long time earning.

How is the economy in your regions affecting you, your employees, your customers? The Oregon economy has gotten better in the last few years; things are starting to flatten out. The problem with Oregon is that minimum wage is going to be up to $14.50 in Portland over the next 5 years, and there’s now 30 days of paid family leave for employees. Things are becoming tougher.

Washington is similar. Things are different in Idaho and Arizona. Arizona is growing a lot again, and this year we’re experiencing up sales comps.

Are you experiencing economic growth in your markets? Yes. How do changes in the economy affect the way you do business?

With employee costs going up, we have to be a lot quicker in making decisions as to wage and labor costs. Automation, in orders or whatever else, to move some employees out of the equation is going to be more important as we move forward.

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How do you forecast for your business? By really seeing what last year was like, what the economy was like, what the weather was like. The pizza parlors have been around for 51 years (they started them in 1964), so there’s a lot of history there.

What are the best sources for capital expansion? Internally generated funds is one. Equity markets are not available for mid-sized companies like ours. We do our real estate financing through major banks and capital groups.

Experience with private equity, local banks, national banks, other institutions? Why/why not? Local banks are the best source, and we’re lucky to have good local relationships. They know you and you know them, so there are no surprises.

What are you doing to take care of your employees? All the standard things: vacations, meals, healthcare.

How are you handling rising employee costs (payroll, minimum wage, healthcare, etc.)? We have to raise prices, and we’re looking to automate our system wherever we can.

How do you reward/recognize top-performing employees? All our managers and everybody from that level up receive bonuses on profitability.

What kind of exit strategy do you have in place? I wish I had one. If you’re small, there are lots of opportunities. And if you’re large, there are lots of opportunities. There aren’t a lot of buyers looking at that $40 million to $50 million middle group, unless they need to get into an area.

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Want to know our secret ingredients?

[ heart ‘n soul ]

Ask Kristal B. from Atlanta, GA, Franchise Owner since 2005, with 4 locations Franchise Owners like Kristal are the secret to our success. They are leaders in their communities and brand ambassadors for our famous food and Southern hospitality. They put their heart and soul into helping their restaurants thrive. Learn how our customized floor plans and flexible menus can be just the right ingredients for you.

LET’S GET COOKING. CALL 800.217.4819 OR VISIT BOJANGLES-FRANCHISE.COM

© 2016 Bojangles’ International, LLC. This franchise sales information does not constitute an offer to sell a franchise. The offer of a franchise can only be made through the delivery of a Franchise Disclosure Document (FDD).

Currently, the following states regulate the offer and sale of franchises: California, Hawaii, Illinois, Indiana, Maryland, Michigan, Minnesota, New York, North Dakota, Oregon, Rhode Island, South Dakota, Virginia, Washington, and Wisconsin. If you are a resident of one of these states, we will not offer you a franchise unless and until we have registered the franchise (or obtained an applicable exemption from registration) and complied with the pre-sale disclosure requirements that apply in your jurisdiction.

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BY DEBBIE SELINSKY

Sibling Harmony

Leveraging their differences to build a company

I

n some ways, brothers Jesse and Charles Keyser, 39 and 35, are very different, and that’s good. So are their three brands—Little Caesars, Sport Clips, and Oxi Fresh Carpet Cleaning—which also is good. They’ve built their business over the past decade by leveraging Jesse’s salesmanship and drive, Charles’ operational skills and passion for food, and their combined social media savvy into a steadily expanding franchise company.

“Charles is my counterbalance,” says Jesse. “He’s a more conservative person. He makes sure I can go out and open doors at a quick pace without us getting into financial trouble. Before we sign a lease, we talk about it. If we both feel good, we do it. If one doesn’t, we put it on hold.”

Their division of duties has Charles in charge of operations for Little Caesars (their first franchise) and Oxi Fresh, which the brothers signed on with in 2014 after being impressed by the brand at the MultiUnit Franchising Conference. Jesse, a single father of two, handles operations for Sport Clips, their largest franchise with 14 units and more in the pipeline.

The competitive atmosphere between the brothers when they were growing up in a small town in Illinois has been laid to rest. “We both have different skill sets NAMES: Jesse and Charles Keyser TITLE: Co-owners COMPANY: Keyser Enterprises NO. OF UNITS: 14 Sport Clips; 5

Little Caesars; 5 Oxi Fresh Carpet Cleaning vans AGE: Jesse 39, Charles 35 FAMILY: Jesse has two children,

Katja and Gunnar; both are single YEARS IN FRANCHISING: 11

Charles (left) and Jesse Keyser.

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YEARS IN CURRENT POSITION: 11

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WE’VE GOT YOUR BACK Checkers & Rally’s has got your back when it comes to bold and flavorful food, amazing value for our guests, and a price-engineered menu that continues to deliver profits to our franchisees.

■ Five Consecutive Years of Same-Store Sales Growth ■ Checkers & Rally’s Fries Ranked #12 ■ Ranked #1 Multi-Unit Restaurant Franchise3 ■ 71.4% Return on Investment1 —Year 1 Profit $297,1701 “What is most impressive about Checkers is that they will do everything in their power to help franchisees succeed.”

— Aby Mohamed, Illinois Multi-Unit Franchisee

Over 30 years of experience, 800+ restaurants, and top-tier availability in all major US markets

Visit owncheckersfranchise.com/update or Call 888-913-9135 © 2016 Checkers Drive-In Restaurants, Inc. 4300 W. Cypress St., Suite 600, Tampa, FL 33607. 1. Per Item 19 in Checkers 2015 Franchise Disclosure Document. Same-store sales results are measured by combining 2015 FDD and 2014 FDD data. 2. Per Yahoo!.com Fast Food French Fries Taste Test Winner Gets an Asterisk article 3.Per Franchise Business Review 2015 Top Multi-Unit Franchises Report. 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 fi le number F-4351 in the state of Minnesota. In New York, an offering can only be made by a prospectus fi led first with the Department of Law, and such filing does not constitute approval by that Department. 20160377

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and we both enjoy success,” says Charles.

“Knowing that our success depends on each other has created a mutual respect. We’re not the same person and don’t attack situations in the same way, so we have more opportunities to solve problems.”

By the time Jesse graduated from Southern Illinois University in Carbondale, he’d begun working for some friends who had started a successful dot.com company. “I was making a lot more money working in technology and that was important to me, so I left grad school after six weeks,” he recalled. “I told Charles to go ahead and graduate, and that I’d spend those years saving money so we could go into business

together. Since he was interested in food and the restaurant business, I suggested that he go for a degree in restaurant/hotel management. When he graduated from Southern Illinois, we bought our first Little Caesars. After a year, I quit my job to help Charles open our second store.”

The Keysers came to franchising after some good advice they received while looking at restaurants. “Our original idea was to buy out the existing pizzeria we’d eaten at in college,” says Jesse. “It was a great product and we liked the location, but it had been mismanaged and was in a death spiral. As we were planning to talk to the owner about buying it, one of my bosses at

the tech company said, ‘Your first business needs to be franchised. It’s an already established system and it will teach you to run a business.’ That made perfect sense to us.”

The brothers began to look at pizza franchises, and since they were still young enough to think Carbondale was the “center of the universe,” as they put it, they asked about locations there. After some initial stumbles, they found Little Caesars online.

“We didn’t know much about them because there were none in our area. They’d just started doing the $5 pizza deal, which was so brand new it wasn’t even on the national website yet. We thought that was such a hot concept that we opened our first restaurant

PERSONAL First job: De-tasseling corn in Hoopeston, Ill., when we were kids.

Formative influences/events: Jesse: Having a franchise rep sit us down, be frank, and tell us we were not running our business in a way that would make them feel comfortable granting us a second location. We were young and could throw out tons of excuses, but they were all shut down with, “It doesn’t matter.” Because of that one meeting, we looked at the way a company should be run completely differently. It gave us the discipline and motivation to open units faster than our peers.

Key accomplishments: Owner of the Year for Sport Clips, New Franchisee of the Year for Oxi Fresh Carpet Cleaning.

Biggest current challenge: Jesse: Deciding which market to go into next, or what concept to look at next. Just because you have the ability to chase after a good deal doesn’t mean it’s a great deal for you in the long run.

Charles: Both Little Caesars and Sport Clips are brick-and-mortar concepts, while Oxi Fresh is not, so my biggest challenge right now is learning the best way to operate Oxi Fresh.

Best advice you ever got: Jesse: “Don’t spend any time looking for Mrs. Right; spend all your time being Mr. Right—she will find you.” (Joe Sickles, Theta Xi fraternity). Charles: Make the pain of doing it wrong greater than the pain of doing it right.

What’s your passion in business? Jesse: Developing people and building new locations. Charles: Creating an atmosphere that empowers our people.

How do you balance life and work? Jesse: Each quarter I choose days in the week when I purposely stay out of the office. My goal is to add more days out of the office each quarter as I get more efficient at running my business. Charles: I schedule free days for personal business. On those days, I don’t check emails and I set my phone to ring only from key people in my company in case of an emergency.

Next big goal: After building out our existing brands, we want to create a new business that is multi-location and designed to be franchise-feasible, whether it’s franchised or not.

Guilty pleasure: Both: Long weekends in New Orleans!

First turning point in your career: Being able to pay ourselves after the second location opened up.

Favorite movie: Jesse: “Tombstone”; Charles: “The Thomas Crown Affair.”

Best business decision: Hiring and developing area managers before they are really needed.

Hardest lesson learned: Jesse: Think before you speak. I have said a lot of things to a lot of people that at first I thought was the best advice possible, only to have it blow up in my face because I didn’t take the time to understand everyone I was dealing with wasn’t exactly like me. Charles: Trust but verify.

Work week: Jesse: I take one full week out of every four weeks to travel to each region we have locations. We have meetings with anyone and everyone that has a key to one of our locations (any level of management). We spend half the time talking about the last four weeks’ numbers, and the other half in leadership development as well as goals for the next four weeks. Other than that, I can be found in my office, Starbucks, or on my sofa at home with my laptop doing research on best practices on recruitment, marketing, and organizational development. Charles: I work five or six days a week.

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Exercise/workout: Jesse: Monday through Friday at 5:20 a.m., mostly weight training and long-distance running. Charles: I take an hour out of work in the afternoon to work out.

Favorite book: Jesse: Outwitting the Devil by Napoleon Hill. Charles: It’s Your Ship by D. Michael Abrashoff.

What do most people not know about you? Jesse: I was a college cheerleader. Charles: I love to cook! Cooking is a huge release for me. Normally I focus on one cuisine at a time until I have learned a lot about it and its history. Right now I’m finding Spanish cuisine amazing.

Pet peeve: Jesse: People who do not show up on time. If you can’t show up on time, you can’t be counted on. Charles: When leaders blame others.

What did you want to be when you grew up? Jesse: An attorney.

But once in college I had fraternity brothers pull me aside and say, “You can talk, you should do sales and make way more than an attorney.” Charles: A professional mountain climber.

Last vacation: Bahamas last year on a trip from Sport Clips for being Owner of the Year.

Person I’d most like to have lunch with: Jesse: John Paul DeJoria (billionaire entrepreneur, Paul Mitchell co-founder). Charles: Sylvester Stallone.

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F I R ST M OV E R A D VA N TAG E FO R T H E L A R G E ST N E T W O R K O F P R E M I U M G R O U P P I L AT E S ST U D I O S I N T H E W O R L D .

E X EC U T I V E M O D E L / S E M I - A B S E N T E E

S CA L A B L E SIMPLE HUMAN RESOURCES

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R EC U R R I N G R E V E N U E WA N T TO L E A R N M O R E ?

C L U B P I L AT E S F R A N C H I S E . CO M NUMBER OF STUDIOS SOLD TO DATE*

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120+ 39.7%

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* This total Includes Studios with signed Franchise Agreements and Studios committed to be developed under signed Development Agreements as of March 1st, 2016. ** Please see Item 19 of the Club Pilates Franchise Disclosure Document (FDD) with the issuance date of April 14th, 2015, as amended October 28th, 2015 for more details. Some Studios have sold and earned this amount. Your individual results may differ.

There is no assurance you’ll sell or earn as much. Your results may vary upon the location of your Franchised Business. Your results may also vary because you will be establishing and operating a start-up business.

This advertisement is not an offer to sell, or the solicitation of an offer to buy, a franchise. Club Pilates franchises are offered solely by means of the franchise disclosure document issued by Shaun Grove at Club Pilates Franchise, LLC, 3185 Pullman Street, Costa Mesa, CA 92626, (949) 346-9794. Certain states and foreign countries have laws governing the offer and sale of franchises. If you are a resident of one of these states or foreign countries, Club Pilates will not offer you a franchise unless and until it has complied with all applicable legal requirements in your jurisdiction. Please consult with your franchise seller/broker for an updated list of jurisdictions where franchises can be sold.

Copyright© 2016 Club Pilates, LLC. ALL RIGHTS RESERVED.

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in 2005,” Jesse says.

Within 3½ years they opened four Little Caesars in Southern Illinois and Western Kentucky. “That was a great choice,” Charles says. “Even though 2008 and 2009 were rough, we still excelled. Little Caesars has created such a niche for itself, serving everyone from a single person to a large family—and they’re committed to value.

For the last 7 or 8 years, they’ve been voted the best value in America in QSR surveys.”

After they opened their fourth Little Caesars, Jesse’s wife at the time wanted to move from the medical field to being a Valpak franchisee. Jesse worked with her, doing cold calls on hair salon owners and trying to discuss their advertising options.

“Every owner I called was extremely rude,” he says. “I thought that if they’re this rude to the public in general, they’re probably not meeting the needs of their customers.”

The brothers’ response was to sign a contract in 2010 with Sport Clips to open 26 units in 5 states (Illinois, Missouri, Kentucky, Michigan, and Indiana). They’re now more than halfway to that goal and are in the process of relocating to the St. Louis area to make that rapid growth more manageable.

“Hair salons are in a completely different market from Little Caesars,” says Jesse. “Sport Clips is not the lowest-priced product, but you have a more personalized, one-customer/one-employee relationship.”

The Keysers were attracted to their third brand, Oxi Fresh, because of the “brand recognition with the word Oxi,” the very specific answers they received to their questions from the franchisor, and the company’s technological savvy. “What they’re doing on the back end from the tech perspective is light years ahead,” says Jesse. In Septem-

ber 2014, the brothers bought out the St. Louis market, which dovetailed nicely with what they were already planning for their other two brands.

Asked why they chose three such diverse brands, the brothers say the answer is simple. “Charles and I learned early on with our first restaurant location that the fundamentals people taught us about how a real business runs and looks could apply to any type of industry,” says Jesse. “It’s like plug-and-play for us at this point. We offer amazing customer service and added value to what we’re charging.” One key to their success has been the philosophy that they can’t be at all locations all the time, he adds.

“That’s why we find inspired people to live out our mission when we’re not around.”

They also credit their multi-unit, multibrand success to their use of social media.

“When we talk about social media, Twitter

MANAGEMENT Business philosophy: “Up-N-Out” is the philosophy we have developed where we are constantly developing people to move up in our organization—or out of our organization to pursue great opportunities with another organization. They never leave to work for a competitor because the skills we teach them are so applicable that the opportunities with us are huge for them. If you think of how an organization is structured, almost always like a pyramid, everyone at one level can’t move up to the next level—there isn’t room for everyone. So we have the culture that if you give us your best while you are with us, we will invest in you the same as we would for someone who professes to be a lifer. Does this cause us to spend time and money on people whom we may not get the best return on investment from? Possibly, but when you get a phone call a year after someone leaves your organization to pursue a great opportunity and they call to personally thank you for teaching them things they wish their parents did, it is by far the greatest accomplishment we could think of—not to mention that while they are with us they kill it with customer experience and leadership!

Management method or style: Create systems that make the majority of the work force look like they are top performers when initially they joined our team as average players. Then develop those people to realize their full potential and truly become top performers.

Greatest challenge: Staying ahead of the curve in leadership development.

We constantly are reading and meeting with people we can learn from on the subject. As you feed your team members with more knowledge and skills, their appetite grows and the questions they ask become more complex and deeper. We have to constantly sharpen our ability to broadcast a vision that inspires and drives people to grow and thrive.

How do others describe you? Jesse: Driven, well-read, with lots of bravado. Charles: I had to ask some others this question. They said I am a great listener who holds others accountable but still makes them feel like I have their back.

One thing I’m looking to do better: On-boarding all our team members better. The first 15 percent of the process determines 85 percent of the overall success.

How I give my team room to innovate and experiment: We are rigid

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with following systems, but we have regular meetings that are frank where we simply ask, “What is working and what isn’t?” If a good idea comes up, we talk about it and make the decision to pilot it before we roll it out company-wide. If it’s successful, we roll it out company-wide, giving credit to the team member who came up with the idea, how it has evolved, and how it has been tested and proven.

How close are you to operations? Jesse: I am actually proud to say that we don’t do site visits very often. I do have face-to-face meetings with every team member who has a key to any of our locations every four weeks. I rely on area managers to make frequent site visits and manage day-to-day operations. I focus exclusively on leadership development and grand openings.

What are the two most important things you rely on from your franchisor? A strong marketing plan and support, and R&D of new products and vendors.

What I need from vendors: Streamlined processes to order and support.

Have you changed your marketing strategy in response to the economy? How? Jesse: Yes. We focus so much on Internet marketing now.

Print, while not dead, isn’t getting the same ROI as it once did. Charles: Great operations is also key to our success.

How is social media affecting your business? It’s allowing us to have direct contact with more of our customers. We have learned that when it’s handled correctly, we have the power to turn issues into opportunities.

How do you hire and fire? We fire very few people. Most who leave us do so because they are not a good fit, and it’s painfully clear to everyone. When we hire, we are looking for people who like to be challenged and want to grow.

How do you train and retain? When training, we teach “reasons, not rules.” We found that when a new team member understands the “why” behind a policy first, the rule becomes easy to manage.

How do you deal with problem employees? We’re quick to address issues.

Fastest way into my doghouse: Treat a fellow team member or customer poorly.

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MULTI

BRAND about your business.”

The ambitious brothers, who have dreams to build a second home in their beloved New Orleans, counsel would-be multibrand franchisees to start at the beginning.

“Our advice is to open several locations of the first brand and get comfortable with remote management before worrying about taking on a second brand. It’s easier to have two locations with the same brand than one location of one brand and one of another,” says Jesse.

“The other secret, which Charles handles for us, is to make sure your financials are very clean and understandable to other people. You need to know where you stand, and you don’t want to get your financials thrown back at you.”

and Facebook, this is where we see advertising moving to,” says Jesse. “Two hundred years ago, each community had a butcher, a baker, and a candlestick maker, and every business was based on location and word of mouth. If you weren’t the better of the two butchers, you wouldn’t get much business.

“Then came mass broadcast and national brand creation. You could tell only two or three people about your product and still out-advertise any negative word of mouth.

Now, because of Twitter, Yelp, Facebook, and the review sites, we’re going back to where customers are trusting reviews from other users more than fancy ads on TV. This is the next level of marketing online: controlling your reputation by giving good service and encouraging fans to tell others

BOTTOM LINE Annual revenue: $10 million.

2016 goals: Open more Sport Clips locations while growing same-store sales in mature stores, and doubling the number of vans for Oxi Fresh.

Growth meter: How do you measure your growth? Same-store sales up over the same quarter last year.

Vision meter: Where do you want to be in 5 years? 10 years? In 5 years, we want to continue to grow the three concepts we own in same-store sales and total number of locations. We’d like to have a second home in New Orleans, and start a fourth concept to keep us fresh and in the “still learning” mindset. In 10 years, we want to have over 100 units of all our concepts combined.

At that point, we’ll be self-financing most of our growth. At the 10-year mark, we will have already developed people to run each of our concepts, and we’ll move to the “investor” category mentioned in the book Rich Dad’s Cash Flow Quadrant

by Robert Kiyosaki.

How is the economy in your regions affecting you, your employees, your customers? We aren’t experiencing any issues with the economy.

We do think that the customer base has become more frugal in how they spend discretionary income. They are demanding a bigger bang for their dollar. Everything we do as an organization, from the time the customer walks into one of our locations to the time they leave, is about building value. You can only do that if you train your team to do that consistently.

Are you experiencing economic growth in your market? All of our locations are up over last year and have trended like that for several years.

How do changes in the economy affect the way you do business? Jesse: They don’t. We started out in rural markets where you didn’t see big swings up or down in the economy. With little to no population growth in these markets, we have had higher-than-average PSAs (per store averages) for our brands because we simply focus on executing as close to perfect as we can, and always take the hard look in the mirror on what could we do better. When we move into markets where the population density is greater, it feels like it’s so much easier for us. I equate it to living and training in high elevations where the oxygen is thin, and then coming down to sea level to compete with everyone who lives and trains at sea level.

How do you forecast for your business? We determine what we want

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to be up for the year as a percentage of net sales. Then we walk it backwards to determine what we estimate the average tickets will be and how many team members we need to serve that number of clients. It boils down to hiring and training the right people to handle the increase in business. We have never been afraid to spend money on marketing to drive in new customers when we feel the operations inside the four walls are as good as can possibly be.

What are the best sources for capital expansion? Local banks have been great to us. We are at the tipping point where many of our upcoming projects can be self-funded.

Experience with private equity, local banks, national banks, other institutions? Why/why not? We have always used local banks. We like the relationships and the fast decisions we can get back.

What are you doing to take care of your employees? A large percentage of our team members start with us at entry-level positions. We are not fans of them always being at that level, but the only way they can advance is if they are trained and developed beyond what their current responsibilities require of them. We try to do that for them so they can advance.

How are you handling rising employee costs (payroll, minimum wage, healthcare, etc.)? We have always been a big fan of over-developing our team members. We do have some turnover as we help develop them beyond the position they are in, and they leave to advance their personal careers if we don’t have room to promote them at that moment. But it also makes those team members and the ones who stay with us long term way more productive than their counterparts in competing companies. We feel we can keep labor costs down by increasing productivity and the average ticket.

How do you reward/recognize top-performing employees? We have all of management compensated by performance. Every week “Top 10’s” and other awards are given to locations and individual team members.

What kind of exit strategy do you have in place? Jesse: I have young children and Charles and I are both single. I don’t have any definite plans on my kids working directly in the business and taking it over one day, but they are being raised to be stewards of the corporation where they will be able to train and hire people to run the day-to-day operations, while following wherever their own passions may lead them—in or outside of the company.

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* Includes Studios with signed Franchise Agreements and Studios committed to be developed under signed Development Agreements as of June 16, 2015. ** As disclosed in Item 19 of the CycleBar Franchise Disclosure Document (FDD) dated January 6, 2015. This figure reflects the actual EBITDA before royalties achieved during the period from January 1, 2014 to December 31, 2014 for a Studio in Wellesley, MA (61.61%) and in Royal Oak, MI (61.64%), which were the only two Studios that were in operation for the entire 12-month period. Some units have achieved these results. Your individual results may differ. There is no assurance that you’ll earn as much. See the FDD dated January 6, 2015 for additional details.

This advertisement does not constitute a franchise offering which may be made only after your receipt of our Franchise Disclosure Document, which first must be filed with certain states. Contact CycleBar Franchising, LLC, 7720 Montgomery Road, Suite 200, Cincinnati, Ohio 45236 to request a copy of our FDD. Copyright© 2015 CB IP, LLC. ALL RIGHTS RESERVED.

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BY DEBBIE SELINSKY

Brands To Believe In Going long with Popeyes and Captain D’s

N

umbers and research notwithstanding, veteran franchisee Brian Smith chooses his brands using his gut instincts. “I like to go with things I believe in and know I can sell,” says the Arkansas family man.

That’s why it wouldn’t be surprising to find the jovial Smith on any given day attired in his Mossy Oak camouflage attire

while he chows down on seafood at Captain D’s or chicken at Popeyes Louisiana Kitchen in his hometown of Springdale, Ark. Smith is an avid outdoorsman and hunter and longtime fan of Mossy Oak camouflage clothing, so when the company began to market real estate specializing in selling farm hunting land and other rural property, he got on board in 2008.

“I didn’t even have to clean out my closet because I’ve always worn Mossy Oak. I had confidence in them, and I had bought and sold farms my whole career,” Smith recalls. “Early on, I bought a 10acre property for $6,000 and sold it for $14,000, which enabled me to buy my first business.” Today he has 11 Mossy Oak Properties offices spread across Missouri, Kansas, and Oklahoma.

He also threw in his lot with restaurant franchises Popeyes and Captain D’s because he loves the products and believes in the brands. It’s no accident that his first Popeyes and his first Captain D’s were built in his hometown of Springdale, where Smith’s neighbors are the Duggars of reality TV fame.

In 1990, he and a friend were introduced to franchising when they bought a Subway.

“Our franchise number was 1252—that’s how early in the game we were with them.

There were only six in our state then, so we scraped the money together to buy one in Little Rock. We didn’t know how we’d NAME: Brian Davis Smith TITLE: CEO COMPANY: SmitCo Eateries &

SmitCo D’s

NO. OF UNITS: 11 Popeyes Louisiana Kitchen (2 more in development); 1 Captain D’s (plus 1 in construction and a contract for 48 more); 11 Mossy Oak Properties (Missouri, Kansas, Oklahoma) AGE: 48 FAMILY: Wife Debra; children Bo,

20; Ashton, 15; Josie Kate, 14; Jon Davis, 10

YEARS IN FRANCHISING: 26 YEARS IN CURRENT POSITION: 26

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MULTI-UNIT FRANCHISEE IS S UE II, 2016

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build it out, but I have a philosophy that I use all the brains I have and borrow as much as I can, so we finally got it open,” Smith says. “I see being a franchisee as owning part of a consumer’s mind. It’s a path to quick growth.”

At one point, Smith and his partner owned 12 Subways. They sold them off gradually, wrapping up in 2002, and signing an area development agreement with Popeyes.

Again, his gut had come into play. “When we opened a Subway in Monticello, Arkansas, there was a Popeyes next door. The first time I ate there, I knew right then that I could sell this. The food was phenomenal.

It’s addictive,” says Smith.

Smith came upon his second restaurant brand by virtue of a member of the Captain D’s sales franchise team who “kept bugging” him about it. “I got so tired of her calling that I said I’d have a look at the brand. We didn’t have one close by so we went out in February 2015 to meet the Captain D’s folks in Nashville,” he recalls.

“I’d not had their food in years, but I went down based on our research, in-

“My philosophy has always been, ‘I can see this community without our brand, but could never see the brand without the community.’” cluding the fact that Captain D’s has been around since 1969 and we wanted to go with an established franchise for a second restaurant brand,” he says. “I learned that Phil Greifeld had re-invented the brand in a way that was absolutely amazing. We loved the new grilled platform and the batter-dipped fish. Great product, great new building look, great leadership—and I was blown away by the quality of the food for the price and amount of food.”

Having come near the end of his current Popeyes contract (he’ll be finished with

new builds in about 18 months), Smith said he knew Captain D’s was a great way to “dilute risk, grow in some of the markets we’re already in, and generate revenue.”

His first Captain D’s opened in Arkansas in December 2015, and another is under construction. Smith’s contract calls for a total of 50 Captain D’s restaurants by 2026.

In between acquiring and building Popeyes and Captain D’s franchises, Smith and his company became involved with Mossy Oak. The commission-based franchise requires little overhead and is a great, well-known brand, he says. “My thought was that the worse the world becomes, the more people will want to go into the country and buy their own piece of heaven on earth. Mossy Oak has done a great job of leveraging a brand to grow a new business model. We love it.”

That love is evident in Smith’s enjoyment of his farm in Missouri: a retreat where he and his family regularly host hunting and fishing weekends. The real estate business fits in just fine with Popeyes and Captain D’s, where the Smith family eats regularly.

“We’re our own best customers,” he says.

PERSONAL First job: Golf course greenskeeper for three summers when I was 17, 18, and 19.

What’s your passion in business? Finding great up-and-coming brands and growing them in new markets.

Formative influences/events: A very easy question: Without a doubt, it was meeting the Lord on March 13, 1997, and becoming a believer in Jesus Christ.

How do you balance life and work? I have a farm in Southwest Missouri that is my place of refuge. I carry my family and friends there for special times like Christmas and Thanksgiving and many other events and fun times.

We hunt and fish on the farms there. We actually just had our annual rabbit hunt where we harvested 80 rabbits. We had many friends and business associates come for the three-day hunt. Each time I leave the farm, I tell my farm manager Steven, “I am just trying to get back here.”

Key accomplishments: 1994 Subway Franchisee of the Year and being recently elected to the President’s Advisory Council for Captain D’s.

Biggest current challenge: Land and construction costs without a doubt.

Next big goal: To grow the Captain D’s brand in a big way: 50 new restaurants by 2026.

First turning point in your career: When I sold our Subways in the early 2000s to pursue the Popeyes development in Northwest Arkansas.

Best business decision: Selling the Subways to pursue a Popeyes Louisiana Kitchen development.

Hardest lesson learned: That the Krystal Burger brand didn’t work in Northwest Arkansas.

Work week: Each day starts with quiet time and K-Love satellite music when I am at home. On Tuesday morning all the numbers for the previous week are in, and I analyze them before an Above Store Leader conference call at 9 a.m.

I hold construction call meetings at some point each week. I am involved in my local church on Sundays so I am there when I am in town. The rest is a moving target since my world revolves around growth and operations.

Exercise/workout: Monday-Friday workouts at Planet Fitness.

Best advice you ever got: To slow down and enjoy life.

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Guilty pleasure: Lying in my bed at night stuffing my face with candy right before going to sleep.

Favorite book: The Bible.

Favorite movie: “Smokey and the Bandit” or “Scarface.”

What do most people not know about you? I have this fear of spiders and I will not stay in what I call “rat holes” that could have spiders crawling around.

Pet peeve: Smudges on windows and door glass.

What did you want to be when you grew up? I wasn’t really sure to be quite honest.

Last vacation: Moon Palace resort in Cancun, Mexico, in July 2015 with my family.

Person I’d most like to have lunch with: Mark Cuban of TV’s “Shark Tank” fame.

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BRAND MANAGEMENT

Business philosophy: Always live by our core values, then focus on building a great brand, great leadership, great sites, and continuous development of all leadership and team members. We strive to grow sales and the brand through great customer experiences and we expect success.

Management method or style: Surround myself with talented people, pay them well, have high expectations, and inspect what I expect.

Greatest challenge: Overcoming the lack of great sites, the cost of land, and construction costs.

How do others describe you? That’s a funny question. I would say driven, bold, and high energy.

One thing I’m looking to do better: Be more patient and manage my time better.

How I give my team room to innovate and experiment: Because we operate franchise brands, there is only so much innovation and experimentation we can do. But I will say that everything outside of the brand’s standard is fair game, and we highly encourage it.

How close are you to operations? Very close. I am heavily involved in the opening of all new restaurants. I do my best to get in my restaurants to see my people, but the growth of recent years has not allowed me to as much as I would like.

What are the two most important things you rely on from your franchisor? Innovation and brand growth.

What I need from vendors: Timely deliveries and quick responses to my needs.

Have you changed your marketing strategy in response to the economy? How? This is an area that we let the franchisor drive since we send marketing dollars to them. I will say we prefer TV over all others and vote for that vehicle. We have always been committed to supporting our local schools and organizations through food donations. My philosophy has always been, “I can see this community without our brand, but could never see the brand without the community.” We give relentlessly. We believe our biggest marketing tool is our next customer.

How is social media affecting your business? We don’t really have a gauge to tell because we don’t have store-level social media. But I will tell you that social media has an effect on our business. I’m glad it’s there.

How do you hire and fire? Everything is based on metrics and measurable expectations. If you don’t meet them, you will be successful elsewhere.

How do you train and retain? I have a chief people officer I work closely with who does nothing but secure talent, assess our current leadership and team, and hold our Above Store Leaders and GMs accountable for developing all of our people. He holds team-building exercises several times a year.

How do you deal with problem employees? We don’t—we cut the “cancer” very quickly. Our expectations are very clear so there isn’t much room for excuses. We do attempt to save them from being terminated, but it is not a long process.

Fastest way into my doghouse: Run poor numbers and not focus on the customer’s experience.

BOTTOM LINE Annual revenue: $21 million.

2016 goals: Open 3 Popeyes and at least 2 new Captain D’s.

Growth meter: How do you measure your growth? By our samestore comparable sales.

Vision meter: Where do you want to be in 5 years? 10 years?

In 5 years, I want 20 new Captain D’s open, and in 10 years, 50 open. I’d like to have 25 Mossy Oak Properties offices opened by 2026 and have other brands growing.

How is the economy in your region affecting you, your employees, your customers? We are based in a very strong economic area where most folks enjoy a level of good living.

Are you experiencing economic growth in your market? Yes. We are based in a thriving area that is the home of Walmart and many other corporations, such as Tyson Foods.

How do changes in the economy affect the way you do business?

Like most successful businesses, we are more careful with each move when times are tight.

How do you forecast for your business? I wish I had a Harvard degree when it comes to some things such as forecasting. Unfortunately I don’t, and I have to rely on my gut instincts a lot when it comes to the markets I am looking to develop a brand in, and in our ability to place great leadership there and find acceptable locations.

What are the best sources for capital expansion? We have found lo-

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cal banks and money from folks like GE Capital user-friendly for us.

Experience with private equity, local banks, national banks, other institutions? Why/why not? Private equity most of the time is for largerunit franchisees so we have no experience there. We have worked with local banks because they know our brands and operational capabilities. We have no experience with national or other institutions.

What are you doing to take care of your employees? We pay our Captain D’s team members $10 an hour, and our Popeyes team members $9 an hour with hopes to increase them to up to $10 by the third quarter. We pay our GMs 10 percent of the profits, which pushes total compensation for GMs at our high-volume restaurant upwards of $80,000, and our Above Store Leaders can earn in excess of $100,000.

How are you handling rising employee costs (payroll, minimum wage, healthcare, etc.)? We are taking small menu increases coupled with a focus on food costs to help offset the rise in labor costs. The fear of us all is the public paying two to three times what we are selling our food for now to offset the cost of labor or mandates that could be coming soon. It ends up as the end-user’s tab for the most part.

How do you reward/recognize top-performing employees? We recognize a “Team Member of the Period,” a quarterly award. It is voted on by their peers and the leadership teams in each restaurant.

What kind of exit strategy do you have in place? I don’t currently have an exit strategy in place. I am still growing the brands. An exit will take care of itself when that time comes.

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Freaky Fast

CONCEPT Freaky Good

NUMBERS $1,367,810* 25.78%* $270,355* AVERAGE GROSS SALES

AVERAGE FOOD AND PAPER COSTS

800.546.6904

AVERAGE NET PROFIT FROM OPERATIONS (IN $)

OWNAJIMMYJOHNS.COM

*Figures reflect averages for fifteen (15) affiliate-owned restaurants that opened before January 1, 2010 as published in Item 19 of our April 2015 Franchise Disclosure Document. These averages are based on a 52-week annual period from January 1, 2014 through December 30, 2014. Of these fifteen (15) restaurants, 9 (60%) had higher gross sales, 6 (40%) had higher food and paper costs and 6 (40%) had higher net profit percentage during the reported period. The financial performance representation contained in Item 19 of our April 2015 Franchise Disclosure Document also includes (1) average system–wide gross sales, average franchise gross sales, and the number and percentage of restaurants exceeding these averages during the referenced period and (2) average gross sales, average food and paper cost, and average net profit percentage information during the referenced period for nine (9) affiliate-owned restaurants that were opened after January 1, 2010 and before January 1, 2014.

A new franchisee’s results may differ from the represented performance. There is no assurance that you will do as well and you must accept that risk. This offering is made by prospectus only.

©2015 JIMMY JOHN’S FRANCHISE, LLC ALL RIGHTS RESERVED.

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MULTI

BY KERRY PIPES

BRAND

PRO ATHLETE

Packaging a Punch NFL vet invests in Title Boxing Club

F

ormer NFL linebacker Bryan Scott has two things on his mind these days: 1) building a successful chain of Title Boxing Club franchises in the Atlanta area, and 2) overseeing the company he co-owns, Noene USA, which sells a line of high-tech, ultra shock-absorbing insoles. If his track record is any indication, he’ll be successful.

Scott was a second round draft pick of the Atlanta Falcons in 2003. He spent the next decade in the NFL playing defensive back and linebacker for the Falcons, New Orleans Saints, and Tennessee Titans before winding up his NFL career with the Buffalo Bills. Like most athletes who reach the professional level, he says he loved it and was honored to play successfully for so many years. But unlike many of his peers, Scott knew there was life after football.

Following his retirement in 2013, Scott was eager to begin his business career. “Football is not a career, it’s a job,” the 34-year-old likes to say. “The fundamentals of success are the same no matter what field you work in,” he says. “Hard work and dedication will get you where you want to go.”

One of his relatives had a chance encounter with the European president of the Swiss company that makes the NoNAME: Bryan Scott TITLE: Owner COMPANY: Title Boxing Club NO. OF UNITS: 2 AGE: 34 FAMILY: Married with 3 girls and a

baby girl on the way YEARS IN FRANCHISING: 1 YEARS IN CURRENT POSITION: 1

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BRAND ATHLETICS What skills/experience from sports have carried over to operating a business? The ability to work with people from all different walks of life and come together to win.

Also, that no-quit mentality. All I know how to do is work.

Which do you find more competitive, sports or business? I think they are both equally as competitive and cutthroat.

ene insoles. One thing led to another and Scott became Noene’s U.S. distributor. If any of this sounds familiar, you may recall seeing him on TV’s “Shark Tank,” where he was offered $200,000 by Mark Cuban and Daymond John for a 30 percent stake in the company. He accepted.

Scott, who wanted to continue his involvement in the fitness arena, discovered Title Boxing at an NFL Networking Event. “I had been in sports all my life and just knew I wanted to stay in the fitness world, and thought I could help others who were interested in fitness too,” he says. The brand’s centers offer total body boxing and kickboxing fitness workouts

that energize, strengthen, and challenge members. “I thought this might be a good fit for me, and there was an existing franchisee in Atlanta who was looking to sell his two units,” Scott says of his locations in Alpharetta and Johns Creek.

Scott took the keys to the clubs in December 2014 and has been busy learning the ropes and building his business ever since. And he’s in his clubs daily. “I’ve got about 10 part-time employees at each location, and I am actively involved teaching classes myself,” he says. His two locations currently have more than 250 members.

His agreement with the brand calls for 5 more locations in the Atlanta area.

Why did you choose franchising as an investment option? I am a true playbook guy.

I don’t want to spend time reinventing and trying to figure out. Give me my instructions and I will go from there.

How did you transition from sports to franchising? It was a very smooth transition.

I wasted very little time once I knew I was done playing, and began looking into different options.

What was your greatest achievement in sports and what has been your biggest accomplishment as a franchisee? I am proud of my 10-year NFL career, but I don’t know if that is considered my greatest accomplishment.

As far as business goes, it’s way too early for that.

PERSONAL First job: Basketball camp counselor, age 15.

Formative influences/events: Certainly my mother and father. My dad was an oral surgeon and my mom took care of our family and also worked in his office. They instilled values and moral standards in me that I rely on to this day.

What’s your passion in business? People. How can I help make you the best version of you?

Key accomplishments: College graduation, 10-year NFL career, Buffalo Bills Walter Payton Man of the Year Award 2012, multi-unit owner of Title Boxing Club, co-owner of Noene USA.

How do you balance life and work? That is my biggest struggle. I am still working on that one.

Biggest current challenge: Finding balance between work and home.

Favorite book: The Maxwell Daily Reader: 365 Days of Insight To Develop the Leader Within You and Influence Those Around You by John Maxwell.

Next big goal: Hit higher revenue points in each business.

Guilty pleasure: “The Walking Dead” TV series.

Best business decision: Still working on that one.

Favorite movie: “Coming to America.”

Hardest lesson learned: There are always unforeseen obstacles, and it doesn’t matter how much you plan, you have to be flexible enough to adapt quickly.

What do most people not know about you? I play a couple of different instruments all by ear… piano, guitar, drums, and sing just a little.

Pet peeve: Laziness.

Work week: I spend six to seven days a week in my two clubs. I’m an active, hands-on manager. I do some of the training myself, and if I have a class that begins at 5:15 a.m., I’m up at 4:15 to get ready. As a franchisee, I also handle administrative issues and am always looking for ways to grow my business.

What did you want to be when you grew up? A fireman.

Exercise/workout: Boxing.

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Best advice you ever got: Just because you can do something, doesn’t mean you should.

Last vacation: Cruise to the Bahamas.

Person I’d most like to have lunch with: This may sound funny, but probably my wife. We are so busy these days we just don’t have time to spend together like we should.

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This advertisement is not an offer for a franchise. Such an offer can only be made by the franchisor through its Franchise Disclosure Document. ©Lift Brands, Inc. 2411 Galpin Court, Suite 110, Chanhassen, MN 55317.

MULTI

BRAND

Like most successful people, Scott believes it’s important to give back to his community. He also is a self-taught musician who has always loved music and plays several instruments. He parlayed those two interests into founding the nonprofit “Pick Your Passion” Foundation for the Arts, which encourages underserved children to participate in the visual, culinary, and

“Hard work and dedication will get you where you want to go.”

performing arts.

When all is said and done, Scott finds a deeper meaning to what his business is really all about. “Title Boxing Club is more than just helping people get back into an old pair of jeans or develop a six-pack,” he says. “It’s more about transforming lives by creating a healthy and sustaining lifestyle.”

MANAGEMENT Business philosophy: Know as much as you can about your business, but only do what you are good at and build a team to handle the rest.

Management method or style: I try to mimic Arthur Blank, owner of the Atlanta Falcons. He always had an open door policy and he really wanted to know what was going on in his players’ lives. He would ask, “How can I help you in life?” That influenced me and I try to do the same with my people. I don’t want this to just be a job for them, but a career.

Greatest challenge: Probably balancing personal and business life. It’s tough.

But it’s also a challenge knowing how best to grow my business, building consistency, finding solutions, and working through problems.

How do others describe you? I guess it depends who you ask. What is most consistent is “genuine.”

One thing I’m looking to do better: Boy, now this could make a long list.

I’d like to become more efficient with my time.

How close are you to operations? Very. I am in my clubs just about every day.

What are the two most important things you rely on from your

franchisor? I am a guy who needs that playbook. I rely heavily on the franchisor for a lot of things. If I had to choose two, it would be operating system and marketing strategy.

What I need from vendors: To supply all the boxing equipment, retail, etc.

How is social media affecting your business? Social media has been great. It’s definitely a huge piece when it comes to marketing.

How do you hire and fire? We have a simple process in place when it comes to hiring, and the process could take anywhere from 1 week to 3 months, depending on the individual. I have only had to terminate one employee so far, and I can say it was my least favorite part of the job.

How do you train and retain? The training process always begins with a series of videos that must be watched. Then we have them shadow employees, and our GM does a great job with the entire training process. To retain employees, I believe giving them an opportunity to work in a fun environment where they can grow is key.

How do you deal with problem employees? We use a merit system.

Fastest way into my doghouse: Having to be told something repeatedly.

BOTTOM LINE Annual revenue: $200,000.

2016 goals: To double our annual revenue.

Growth meter: How do you measure your growth? By three metrics: memberships, personal training, and retail sales.

Vision meter: Where do you want to be in 5 years? 10 years?

In 5 years, the plan is to be building out the 7th Title Boxing Club location in the Atlanta area.

How is the economy in your region affecting you, your employees, your customers? This is hard for me to answer because I’ve only been operating the clubs for just over a year now. Come back in a couple of years and I’m sure I can fill you in.

Are you experiencing economic growth in your market? I’m not sure how much is related to our local economy, but we have doubled our sales in just one year of operations.

How do changes in the economy affect the way you do business?

It’s still too early in the game for me to tell.

How do you forecast for your business? By keeping a close eye on what’s working and what’s not working. For example, I saw that we needed to

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cut back on the marketing expenses we had at one of our clubs. That helps me identify what to do going forward.

Experience with private equity, local banks, national banks, other institutions? Why/why not? I have self-funded my business.

What are you doing to take care of your employees? All of my employees are commission-based earners. There’s no earning cap here for them.

I try to provide opportunities for them to be more than employees and to become partners in this business as we grow.

How are you handling rising employee costs (payroll, minimum wage, healthcare, etc.)? Right now, all my employees are part-time. But as we grow I would like to be able to offer a 401(k) plan and other benefits. It’s important for me to take care of my employees.

How do you reward/recognize top-performing employees? All of our employees are commission-based with no cap, so the harder they work the more they see.

What kind of exit strategy do you have in place? That’s a good question. I’m still young and very new to franchising. But I do realize that I will need to address this at some point. For now, I’m actively involved in operating my clubs and in growing them, and that’s where my focus is.

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YOUR BIG BREAK Average Annual Sales

$577K $121K

Average Annual Pre-Tax Profit

Contact Brynson Smith

877-224-4349

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*As of 12/31/14, there were 99 UBREAKIFIX locations in operation. As published in Item 19 of our Franchise Disclosure Document dated 4/8/15, as amended 7/8/15, these figures represent the actual, average total revenues and net profit (cash basis, before interest, income taxes, amortization and depreciation) for the calendar year ending 12/31/14 of all UBREAKIFIX stores operated by us or our affiliates that met the following criteria: (i) were company/affiliate-operated businesses as of 12/31/14, (ii) had been open for at least two full years as of 1/1/14, and (iii) were still open as of 1/1/15 (18 stores in total). Of the included stores, eight (or 44%) exceeded the stated average total revenues and nine (or 50%) exceeded the stated average net profit. A franchisee's results may differ from the represented performance. There is no assurance that you will do as well and you must accept that risk. The figures do not include revenues or expenses for franchisee-operated UBREAKIFIX Businesses as we cannot verify and/or control the level or type of expenditures made by individual franchisees. The net profit figure also does not reflect royalty, advertising and other franchise fees that franchisees pay to us and must be deducted to determine a franchisee’s net profit. **This information is not intended as an offer to sell, or the solicitation of an offer to buy, a franchise. If you are a resident of or want to locate a franchise in a state that regulates the offer and sale of franchises, we will not offer you a franchise unless we have complied with the applicable pre-sale registration and disclosure requirements in your state. This advertisement is not an offering.

An offering can only be made in NY by a prospectus filed first with the Department of Law of the State of New York; such filing does not constitute approval by the Department of Law.

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8/17/15 1:00 PM

MULTI

BY KERRY PIPES

BRAND

RECONNECT

Texas-Sized

Michael Knobelock is well on his way to 100 units

T

hey say everything’s bigger in Texas.

It’s definitely bigger for Texan Michael Knobelock, whose Houstonbased MSK Enterprises operates nearly 70 franchise locations spread across 4 different brands and 7 states. Since we profiled him 5 years ago, Knobelock has added Captain D’s and Sears Appliance & Hardware stores to his Church’s Chicken and Little Caesars stores. He also has his own restaurant, Dekker’s Mesquite Grill, located in an affluent suburb of his hometown, along with plans to start building his own Italian restaurant this year.

He’s come a long way since the 1980s, when he borrowed $10,000 from his parents to re-open a shuttered convenience store in Houston. He succeeded in that early business venture, which he eventually sold, and in 1992 used the proceeds to open his first Church’s in Houston—becoming the first Church’s franchisee in the city. “I loved the Church’s Chicken brand,” he says. “I ate there, and I knew I could sell that.” In the nearly 25 years since, he has continued to NAME: Michael Scott Knobelock TITLE: Owner/CEO COMPANY: MSK Enterprises NO. OF UNITS: 41 Church’s

Chicken, 21 Little Caesars, 3 Sears Appliance & Hardware, 2 Captain D’s, 1 Dekker’s Mesquite Grill (independent) AGE: 54 FAMILY: Wife Patty and 2

daughters, Torrey and Kally YEARS IN FRANCHISING: 25 YEARS IN CURRENT POSITION: 25

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BRAND

“I have to hire good employees, provide clear job descriptions, and give them the tools to accomplish their jobs.”

PERSONAL First job: Sold subscriptions for the Houston Post newspaper.

myself. It’s worked out well.

Formative influences/events: My grandfather and my parents.

What’s your passion in business? Development and growth.

Key accomplishments: Opening my first business at the age of 23.

How do you balance life and work? Having a great team around you helps keep things running smoothly at work and allows time for family and life.

Biggest current challenge: Federal regulations.

Next big goal: Continued development of our brands.

First turning point in your career: When I acquired my first Church’s Chicken in 1992.

Best business decision: Diversification of my brands.

Work week: Six days a week. I spend Sunday with my family.

Exercise/workout: No. Best advice you ever got: My grandfather told me to go into business for add more Church’s locations and today he dominates the market with 41 units.

As Knobelock’s franchising empire continued to expand, it was time to reconnect and ask him to tell us about the changes.

Today, in addition to his 41 Church’s, he operates 21 Little Caesars, 2 Captain D’s, and has diversified beyond food with 3 Sears Appliance & Hardware stores. His own concept, Dekker’s Mesquite Grill, is a full-service seafood and steakhouse restaurant serving upscale Southern fare and

Guilty pleasure: Hunting at my ranch near Laredo on the Rio Grande River and internationally in places like Zimbabwe and Namibia.

Favorite movie: “Top Gun.” Pet peeve: Bad landscaping.

What did you want to be when you grew up? An entrepreneur.

Last vacation: Safari in Africa.

Person I’d most like to have lunch with: My grandfather, so he could see what I’ve accomplished.

drinks in the Houston suburb of Fulshear.

He’s also expanded geographically and is now in 7 states (Texas, Arkansas, Alabama, Florida, Mississippi, North Carolina, and Virginia) since adding 2 Captain D’s in Mississippi and buying 11 Church’s in North Carolina and Virginia from a retiring franchisee. His next move is to open a couple of Captain D’s closer to home.

Franchisors have taken notice of Knobelock and have him firmly on their radar. “I get approached all the time about

my interest in additional brands,” he says.

“That happened with Captain D’s a couple of years back. When I started investigating, I couldn’t believe how much the brand had changed and repositioned itself since I remember going there as a kid.” He says the expanded menu of boiled and baked fish and other fresh alternatives to the traditional fried fish dishes made him take notice. “I love the fast-casual approach they now have, and I’m looking to bring a couple of locations to Houston.”

MANAGEMENT Business philosophy: A culture of internal promotion. I have to hire good employees, provide clear job descriptions, and give them the tools to accomplish their jobs. It is very important to give employees career opportunities by promoting from within.

Management method or style: Fast-paced and results-oriented. I hold people accountable for their actions by being straightforward and clear when discussing what and when actions should be taken.

Greatest challenge: Overcoming the challenges of multi-state regulations.

How do others describe you? Passionate, driven, tenacious.

One thing I’m looking to do better: Have more fortitude.

How I give my team room to innovate and experiment: Not to micro-manage and allow them the freedom to be creative.

How close are you to operations? With technology I am able to stay in touch on a daily basis. I spend much of my time looking for acquisitions and ways to grow the company.

What are the two most important things you rely on from your franchisor? Training and product innovation.

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What I need from vendors: Partnership mentality.

Have you changed your marketing strategy in response to the economy? How? The three main brands are value-driven brands. We are constantly changing based on regional competition and LSM opportunities.

How is social media affecting your business? Customers now have a more direct line to us and we have a more direct line to the customer. We listen to the feedback and make adjustments when necessary.

How do you hire and fire? We use many sources for candidates. We rely on places like local job service centers. When we part ways with an employee, we ensure that all local and federal guidelines are followed so the parting employee will still be a loyal customer.

How do you train and retain? We follow the established training systems for each brand. Good training will lead to retention.

How do you deal with problem employees? Coaching them directly about the opportunities that are presented.

Fastest way into my doghouse: Procrastination.

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BRAND

“We’ve got plenty to keep us busy, and I like it that way.”

All this activity and growth have kept his construction department hopping. He had previously told us that he can do about 90 percent of the building himself, which allows him to do it for about half the cost a typical franchisee would have to pay to get started. Since 2011 his crew has been busy reimaging some Little Caesars stores and are preparing to do the same for some Church’s locations.

“We can get things done quicker and save money,” he says. They recently finished an addition to Dekker’s that added more

than 70 seats and a bar that can now be used for private parties and receptions— and don’t forget the outdoor deck. He says there’s more building on the horizon. His Dekker’s has done so well that he has plans for an Italian restaurant on a plot of land overlooking a river in suburban Houston.

“We are looking to get that under way this year,” he says.

When he’s not working, Knobelock loves to get away to relax and hunt at his ranch on the Rio Grande near Laredo. “It’s full of white-tailed deer, wild hogs, and other

wildlife,” he says, providing him with a great opportunity to unwind and spend time with his family. He and his daughter have traveled to Africa for exotic safaris and hunts.

Another African trip, this time to Namibia, is in the works.

He still loves his work and has no intention of letting up anytime soon. “We plan to keep building Church’s Chicken and Little Caesars locations as well as continuing to handle the reimages,” he says.

“We’ve got plenty to keep us busy, and I like it that way.”

BOTTOM LINE Annual revenue: $60 million.

2016 goals: We are seeing commodities relief, so we are sharing that with the customer to increase transactions and help improve incremental profits.

Growth meter: How do you measure your growth? Last year we measured by average check. This year we are measuring transactions as we are seeing commodities reduced.

Vision meter: Where do you want to be in 5 years? 10 years?

In 5 years, 100 stores. In 10 years, I’d like to transition the business over to my children.

How is the economy in your region(s) affecting you, your employees, your customers? In our home base of Houston we are hoping the oil industry will rebound. The Affordable Care Act caused many of our employees to go from one full-time job to two part-time jobs. The unemployment rate still has not decreased in many of the inner city markets compared with the national average, thus our customers have less discretionary income to spend with us.

Are you experiencing economic growth in your market? No. How do changes in the economy affect the way you do business?

It depends on all the economic variables. We focus on controlled growth by taking advantage of profitable opportunities, while improving our margins and maintaining adequate cash reserves.

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How do you forecast for your business? Through complex models we have used in the past and input from all levels.

What are the best sources for capital expansion? I prefer to use GE Capital.

Experience with private equity, local banks, national banks, other institutions? Why/why not? We’ve used local and national sources of funding. We use local banks when possible to help our community. But we use GE Capital to help with cash flow.

What are you doing to take care of your employees? Paying competitive wages and making sure we provide a clean and safe environment. We also provide advancement opportunities.

How are you handling rising employee costs (payroll, minimum wage, healthcare, etc.)? We have reduced the hourly workforce from predominantly full-time to predominantly part-time.

How do you reward/recognize top-performing employees? We have quarterly bonuses for our salaried employees. We do period sales incentives for our hourly employees. We have done yearly holiday bonuses.

What kind of exit strategy do you have in place? To hand over the reins of operations to the next generation in my family.

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MULTI

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BY KERRY PIPES

Winning Combination Pizza and subs fuel growth for Jerry Heath

W

hen we last profiled Jerry Heath in 2010, the Michigan native was busy operating 11 Hungry Howie’s pizza restaurants and had recently become involved with Jimmy John’s, opening 5 units. As you might expect with an entrepreneur in the franchise business, things have changed.

“I’ve sold two Hungry Howie’s, relocated my first store, and opened one new store,” says Heath. “I’ve also remodeled two of my older locations and will have the rest

54

of them remodeled by the end of 2016.”

But it’s with the Jimmy John’s brand that things have really taken off for him. He’s more than doubled his number of units since 2010, opening six new Jimmy John’s with another scheduled to open within weeks.

In all, he now operates 9 Hungry Howie’s and 12 Jimmy John’s (with two more set to open, one in May and one in June).

All this growth has taken his annual revenue from around $7 million in 2010 to $16 million last year.

Heath says he has been very strategic with his business plan. In 2014, he recognized he had two underperforming Hungry Howie’s stores. “They were in a couple of smaller markets and were not doing well.

I wanted to concentrate on the more profitable markets,” he says. So he sold them.

Then came the relocation and the remodels. “It was time to renew my franchise agreement. I had to either do an extensive remodel or move one store, so I decided to move it about 1½ miles down the street to

MULTI-UNIT FRANCHISEE IS S UE II, 2016

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“I still love making pizza.

A few of my store managers have been with me for almost 20 years, so it’s fun to get in the stores and work a busy Friday night with them.” a much better location,” says Heath, who made the move and opened the new store in January 2014.

A renewing franchise agreement also called for remodeling one of his locations, while another was “just looking old and tired,” he says. “It was an old pizzeria when I took it over, so the layout wasn’t ideal.

The store shut down for a week and we did a complete remodel along with some layout changes.”

On the Jimmy John’s side of his business, he’s added half a dozen additional locations since 2010 and is set to open in two more by mid-year. All are located in suburbs around Grand Rapids. His involvement with the brand began in 2011 when he purchased an existing Jimmy John’s store. Following that, he bought an existing location that had been shuttered, remodeled it, and opened back up for business in 2012. As he

continued to add stores, he also added real estate to his portfolio. “I purchased land and built brand-new freestanding drivethru buildings in Wyoming and Walker.

These are my first locations where I am my own landlord.”

NAME: Jerry Heath TITLE: President COMPANY: J & J Foods NO. OF UNITS: 9 Hungry Howie’s, 12 Jimmy John’s Sandwiches (plus 2 in construction) AGE: 45 FAMILY: Wife and 2 daughters YEARS IN FRANCHISING: 21 YEARS IN CURRENT POSITION: 21

When it comes to Heath’s business moves, the numbers tell it all. “My Hungry Howie’s average unit volume has increased by double digits each of the last 4 years,” he says—and attributes that to an improved economy in Grand Rapids and a great team of area and store managers. “On the Jimmy John’s side, I’ve doubled the number of stores and sales have been increasing every year between 5 and 10 percent,” he says—and credits a great operating partner and talented GMs for those results.

Adding stores and employees and boosting the bottom line has kept Heath busy, and it’s not going to stop anytime soon, he says. Following his new store openings, this summer he’s due to refresh his first Jimmy John’s location. “I am always looking to expand, so hopefully I will locate a few more great sites to build some new stores,” he says.

PERSONAL First job: I delivered The Detroit News when I was 11 years old.

Formative influences/events: My dad refinanced his house to get the money to open our first Hungry Howie’s. I would not be where I am today without his help.

Key accomplishments: Hungry Howie’s 2003 Franchisee of the Year, and Jimmy John’s Top Comping Operator with 6 or more stores in 2015.

Biggest current challenge: The unemployment rate in West Michigan is very low, so it’s been a challenge finding enough quality part-time employees.

Next big goal: To open more stores—30 restaurants is the goal.

First turning point in your career: Growth and expansion of my business: adding to my first store and moving into a multi-unit phase, and scaling the systems and management structure for greater growth.

Best business decision: To get involved with two of the best franchise systems.

Hardest lesson learned: I settled for a less-than-ideal location for one of my first stores just to get it open. The sales were not there no matter what we tried, and I eventually had to shut the location down.

56

his wife Sarah about doing so. They wanted me to get my college degree before they would allow me to franchise.

What’s your passion in business? I still love making pizza. A few of my store managers have been with me for almost 20 years, so it’s fun to get in the stores and work a busy Friday night with them.

How do you balance life and work? I do work a lot, but having a flexible schedule is great. I have plenty of time to spend with my family.

Guilty pleasure: In-N-Out Burger.

Favorite book: I don’t have a favorite book, but my favorite author is John Grisham.

Favorite movie: “Ocean’s Eleven” What do most people not know about you? I’ve been a private pilot for 13 years.

Pet peeve: The winter weather in Michigan.

Work week: I commute to Grand Rapids from the east side of the state two to three times a week and work out of my home office the remainder of the week.

What did you want to be when you grew up? When I was 12 years old I went to work for a day with Steve Jackson at one of his Hungry Howie’s and had the time of my life. From that day forward I wanted to own my own Hungry Howie’s.

Exercise/workout: I run five to six times per week, play softball, and golf.

Last vacation: A relaxing trip to Florida with my family.

Best advice you ever got: When I first decided I wanted to open a Hungry Howie’s, I was speaking with Steve Jackson (president of Hungry Howie’s) and

Person I’d most like to have lunch with: Lynsi Snyder, owner of In-N-Out Burger. I would try to talk her into making me the first franchisee.

MULTI-UNIT FRANCHISEE IS S UE II, 2016

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MULTI

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“I am transitioning a lot of our print advertising to social media.”

MANAGEMENT Business philosophy: I treat my employees how I would like to be treated. I’m a pretty nice person, probably too nice sometimes. I provide a great work environment.

Management method or style: To me it’s important to create a work environment that promotes teamwork, open communication, and honesty. I like to catch people doing things right—rather than always looking at the wrong. It builds confidence within our employees and adds energy to the stores.

Greatest challenge: Making sure I have the right people in the right places to grow my business.

How do others describe you? I think most would describe me as fun, caring, generous, and loyal.

One thing I’m looking to do better: I would like to be a better leader and less of a manager.

How I give my team room to innovate and experiment: Being part of two quality franchise systems, there isn’t much need to come up with new products.

The proof is in the success of both brands.

How close are you to operations? I’m in contact with my area managers multiple times throughout the day, discussing operational tasks as well as other critical business activities.

What are the two most important things you rely on from your franchisor? Great products and great marketing are the keys to our success— which Hungry Howie’s and Jimmy John’s do very well.

What I need from vendors: Timely delivery and quality products, and at a fair price.

Have you changed your marketing strategy in response to the economy? How? The economy has really rebounded in Grand Rapids, so I really haven’t had to do anything out of the ordinary with the marketing. Delivering a timely and well-executed product to our customers is the key.

How is social media affecting your business? I am transitioning a lot of our print advertising to social media. It’s much easier to target and connect with specific groups of customers.

How do you hire and fire? My team tries to take their time hiring new employees. If they have a bad apple, they like to remove that person from our system as soon as possible. Hire slow. Fire fast.

How do you train and retain? In such a fast-paced environment it’s critical for our employees to be comfortable to execute successfully. We try to give our employees the tools to succeed from the beginning. Well-organized systems and processes provide our employees with a map to that success, building confidence and courage to step up into new roles. Retention is built on trust and opportunity, as well as having quality managers who lead by example. We think this reminds all that opportunity is there to grow within our company. An energized, fun work environment helps a great deal as well.

How do you deal with problem employees? Personally, I don’t have to that often. I have a great team of area managers who are great with people. They try to work with the problem employees and their store managers to resolve the issue in a professional manner.

Fastest way into my doghouse: Lazy or dishonest team members.

BOTTOM LINE Annual revenue: $16 million.

2016 goals: $20 million.

Growth meter: How do you measure your growth? By the number of new stores I open and average sales per unit. I am putting the finishing touches on the fourth and fifth Jimmy John’s locations I’ve opened in the last six months, so my growth expectation is pretty high right now.

Vision meter: Where do you want to be in 5 years? 10 years?

In 5 years I would like to have 30 locations in operation, and in 10 years I would like to be living somewhere warm.

How is the economy in your region affecting you, your employees, your customers? The economy in Grand Rapids has really rebounded in the last 4 years. We just had our busiest year ever, so I would say it’s good to all of us.

How do changes in the economy affect the way you do business?

We keep doing the only thing we know how to do: deliver fast, fresh, quality products to our customers. When you deliver exceptional customer experience, people will come, no matter what the economy is doing.

How do you forecast for your business? I project sales and profit goals at the beginning of each year based on previous sales and continued growth initiatives.

58

What are the best sources for capital expansion? With our latest expansion, 33 percent of the total investment was funded on our own, with the rest borrowed from a local bank.

Experience with private equity, local banks, national banks, other institutions? Why/why not? I have a great relationship with a local bank.

Compared with all of the other methods I’ve used over the last 21 years, it has been the easiest.

What are you doing to take care of your employees? I provide them with a very generous bonus system, a fun working environment, and health insurance.

How are you handling rising employee costs (payroll, minimum wage, healthcare, etc.)? Unfortunately we’ve had to raise our prices to cover these costs, but our food is still a great value for the quality products our customers receive.

How do you reward/recognize top-performing employees? We always try to promote from within our company.

What kind of exit strategy do you have in place? I don’t have plans on exiting anytime soon.

MULTI-UNIT FRANCHISEE IS S UE II, 2016

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209

160 107 42 5 3 2 1

20 QUIZNOS

185

21 CHICK-FIL-A

177

22 A&W

169

23 GODFATHER’S PIZZA

165

24 CINNABON

133

25 PAPA JOHN’S

114 Source: FRANdata

MULTI-UNIT FRANCHISEE IS S UE II, 2016

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BY EDDY GOLDBERG

Consolidation Nation LARGE FRANCHISEES CONTINUE EXPANDING

I

n the world of multi-unit franchi- people on the money side what they’re sees, the big keep getting bigger. In seeing, and what they look for in a poour Multi-Brand 50 rankings (page tential franchise acquisition.

60), which we began publishing in 2008, the number of units operated by The multiplier effect both the top 5 and top 10 franchisees has “We’ve doubled our size twice,” says climbed steadily since 2010, following a Shoukat Dhanani, president of the Dhapost-recession drop-off when franchi- nani Group in Houston. The first time, sees retreated from growth and instead in 2012, with about 80 Burger Kings in focused on operational efficiency and the Houston area, the company acquired selling or closing under-performing units 101 Burger Kings in the Northeast. In (see table below).

November 2014, the company doubled Also during the past decade: many again, acquiring 255 more Burger Kings franchisors worked hard to refranchise from Heartland Foods. Today his comtheir corporate stores; a generation of pany’s total unit count is up to 651 (490 Guillermo Perales retiring franchisees with sizable portfolios Burger Kings and 161 Popeyes Louisiana sold them, whole or in part, to other large Kitchens). “We’re still around, and we’re operators; and to help grease the skids for still sane,” he laughs. hard to duplicate.” Sun Holdings now all these asset transfers, bankers relaxed Guillermo Perales, founder and owner operates 649 units in all. their underwriting criteria, alternative of Sun Holdings, says last year was an Greg Flynn, founder and CEO of Flynn lending sources sprang up, and the cof- extraordinary one for growth at his com- Restaurant Group, also had a good year. fers of private equity firms (overfilled and pany. He acquired more than 150 stores, He added a third brand, Panera Bread, searching for investment opportunities) built about 25 new ones, and remodeled becoming the brand’s first new franchisee expanded their strategic and acquisitional about 30 more. “It was an active year in 10 years. Today with 807 total units in sights from franchise brands to franchisee where acquisitions and development fell 28 states—498 Applebee’s, 259 Taco Bells, into place,” he says. “It was a good year, and 50 Paneras—his company is the largorganizations.

And the big kept getest restaurant franchisee ting bigger. in the U.S. According to FRAN“Our approach has been data, between 2011 and The number of units controlled by the top 5 and top 10 franchisees in to be very focused within 2015 the largest 100 fran- our annual Multi-Brand 50 rankings has continued to rise, following a a smaller number of conchisees added units more post-recession drop-off. cepts and be geographithan twice as fast as francally diversified We had Year Largest Top 5 Top 5 Avg. Top 10 Top 10 Avg. chising as a whole: while nothing but one concept 2016 1,499 4,839 968 7,273 727 total unit growth among for 14 years—Applebee’s— the 100 largest franchisees and became an expert in 2015 1,400 4,228 846 6,233 623 was 6.1 percent during that that” says Flynn. And when 2014 1,232 3,931 786 5,781 578 period, for all of franchisit comes to financing, he 2013 1,158 3,651 730 5,409 541 ing it was 2.9 percent (see adds, “lenders love that page 66). we’re geographically di2012 1,155 3,565 713 5,127 513 We asked several of the versified.”

2011 766 3,092 618 4,722 472 country’s largest franchisees Only after becoming 2010 676 2,259 452 3,760 376 about their growth stratea “category killer” with gies—how they did it, how Applebee’s did he begin 2009 839 2,594 519 4,011 401 they manage it, and how they exploring other brands.

2008 812 2,707 541 6,740 674 funded it. We also asked two “We made that decision

Multi-Brand 50, 2008–2016 by Number of Units

64

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“There’s no greater potential for return on your initial investment than with a Batteries Plus Bulbs franchise.

There are multiple revenue streams and we sell products that all residents and businesses need.”

—Dustin Myers, Multi-Unit Franchise Owner

$1,347,376 average net revenue (Top 25% of stores)*

51%

27 Consecutive Years of Same-Store Sales Growth!

multi-unit operators

5.08%

same store sales growth average (Last 3 years)**

53%

average merchandise margin***

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*Net revenue average of $1,347,376 is based on the net sales average for the 159 stores that represent the top 25% of all 639 stores open during the entire 2015 calendar year. Of those 159 stores, 55 stores (or 35% of the 159 stores in the top quartile) met or exceeded the net revenue average (or 8.6% of the 639 stores open during the entire 2015 calendar year). **See Item 19 of our 2014, 2015 and 2016 FDDs for average annual same store net revenue percentage increase numbers used to compile 3 year average annual same store net revenue percentage increase and for further details. ***See Item 19 of our 2016 FDD for further details. These figures are only estimates of what we think you may earn. There is no assurance you will do as well.

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Consolidation Nation

Greg Flynn

in 2011, undertook a very strategic survey of the whole industry, and chose Taco Bell.” His reasons included how the brand dominates its niche and its strong management team. His strategy to stay focused in concepts and diversify geographically is clearly working for him: his company has a 33 percent compound annual growth rate since its founding in 1999, and a $1.8 billion sales run rate.

Perales, who has grown his company from a single Golden Corral financed with an SBA loan, took a different approach to growth, concentrating his holdings geographically in Texas and Florida, but signing on with many different brands.

Today his holdings include Golden Corral, Burger King, Popeyes, Arby’s, Cicis, Krispy Kreme, and T-Mobile, along with 10 restaurants in airports, and he was

Multi-Unit Growth by the Numbers

When it comes to third-party funding, private equity firms today are focusing more on franchisees because franchisors have extremely high valuation multiples, says Anthony Crews, director of research at FRANdata. Franchisees, he says, offer a safe investment that can scale, and multi-unit operators are attractive targets because they have large capital requirements for growth and are capital-hungry. Finally, he says, a large franchisee’s assets are salable individually or in groups, providing a fund with a defined exit strategy from the start.

1) Multi-Unit Franchisees Continue To Grow The percentage of units owned by multi-unit operators has grown steadily since 2007.

2007

2011

2015

Units owned by single-unit franchisees

49%

47%

46%

Units owned by multi-unit franchisees

51%

53%

54%

2) Growth in Units Owned by Multi-Unit Franchisees The number of franchisees owning more than 25 units increased by 92 in the past 5 years, while the number owning more than 50 units increased by 52.

2011

2015

2–25 units

37,719

41,675

26–50 units

446

486

51+ units

236

288 Source: FRANdata

3) Growth Among the Largest 100 Franchisees At 6.1 percent, the compound annual growth rate for the 100 largest franchisees was more than double the rate (2.9 percent) for all of franchising from 2011 through 2015. Total units controlled by the top 100 franchisees increased by 5,245, or about 27 percent.

Total units (largest 100) % of all units

2011

2015

CAGR

19,785

25,030

6.1%

5.8%

6.5% Source: FRANdata

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busy working on an 80-unit deal when interviewed for this story.

“It’s impossible to make money with a few units. The only way to make money is through scale,” he says. “Each brand grows organically and by acquisitions.

We keep pushing each of the brands with remodels and acquisitions for ones that are growing.” And the ones not growing?

He sells them, or tries to.

His approach is to dominate his markets by buying and building as many units of a single brand as he can in each, allowing him operational efficiencies, as well as control over the marketing and brand image in that DMA. In a 2012 interview in Entrepreneur magazine, he said, “Owning the market allows you to close, move, and build stores, and to set uniform pricing and promotions without ruffling the feathers of customers who notice different deals at different locations, or have disagreements with other franchisees. It’s only one price, one promotion, one message.” Perales added, “When you have the whole market you can do what you think is the right thing.”

While highly effective—Perales was named the IFA’s 2015 Entrepreneur of the Year, and his company is trending toward $600–$700 million in sales—his approach is not for everyone.

“For me that’s too much diversification. I can’t keep my eye on that many brands,” says Dhanani, whose 651-unit empire includes only two brands. He prefers an approach more like Flynn’s: many units with a small number of brands and a large geographical spread. While he has 108 Burger Kings in the Houston area, he also has 100 in New England, and the 255 units he acquired from Heartland further diversified his holdings into several new markets, including Chicago, Minneapolis, and Omaha.

“Even if Texas is in a down cycle, we’ll still have plenty of areas doing well,” he says. While last winter was rough in some parts of Texas, he says, his other markets are doing well. And contrary to popular perception, he adds, the Houston market, where his company is based, is not only not in a slump, “it’s doing great.”

So why these two brands? He’s been in the Burger King system for the past 21 years and has done well with it. In 2009, with his brother Amin Dhanani (see his profile in the Q3 2015 issue), he bought 19 Popeyes in Houston and San Antonio.

“We thought Popeyes was a brand that

MULTI-UNIT FRANCHISEE IS S UE II, 2016

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Consolidation Nation had potential,” he says. And with Cheryl Bachelder on board as CEO since 2007, he said, “She was making all the right moves and we thought, ‘Maybe we should get on the bandwagon with Popeyes.’” In 2012, they added 49 more and today have 161.

On the franchisor side, that’s a strategy Applebee’s and Panera have embraced: fewer, larger franchisees who are experts at operating the brand and have proven themselves capable partners focused on building the system.

This makes sense from the franchisor’s point of view as well as the franchisee’s, says Perales. If he were a franchisor, “I would rather have a few franchisees that are strong. There’s value for franchisors to have stronger franchisees,” he says.

Russ Umphenour “I don’t think there’s a right or wrong way to do it. It depends on how you want to build your business,” says Russ Umphenour, managing partner at 15C, LLC, following 6 years as CEO of Focus Brands.

“The key is building the infrastructure to be able to handle it—not only operations and marketing, but real estate, finance, construction, and all that goes with it,” says Umphenour, founder and CEO of the RTM Restaurant Group, which he grew to 775 Arby’s over 32 years before selling it to the franchisor in 2005. He’s also the chair of Chicken Salad Chick and a 10-unit franchisee of Shane’s Rib Shack.

Finding funding At the Dhanani Group, the company funded its growth through cash and banks, and has never used private equity. Why not?

“Too much interference, too much control, and money is expensive from them,” says Dhanani. “If we can fund our own

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growth, why use private equity?”

On the other hand, private equity was “very helpful for us to get started,” says Flynn. Since starting the company in 1999, he has had two different private equity partners, GS Capital Partners and Weston Presidio. His first big acquisition of 64 Applebee’s in 2001 made him the first to attract a significant private equity investment into a franchise business. “We couldn’t have done that without private equity. Both were great partners,” he says.

However, in 2014, he left the world of private equity funds behind. “We brought in a pension fund as a partner,” he says, and recapitalized the company. The Ontario Teachers’ Pension Plan invested about $300 million and, together with Flynn and his senior management team, acquired the stakes owned by the private equity funds. Flynn was now the first to attract direct pension investment into a franchise business.

Flynn says he’s now “taking the next logical step, bypassing the middleman” with the direct investment from the pension fund. Another advantage, he says, is that whereas private equity funds have a 5- to 10-year horizon to build and sell their investments, this is not the case with the government-run pension fund, which has more than $170 billion in assets and is in for the long haul.

Perales, who funded his first franchise with an SBA loan in 1997, has come a long way. To fund his ongoing acquisitions and take advantage of strategic buying opportunities, he assembled a bank syndication loan a few years ago. “It gave us a lot of capacity to get money at a low

Tom Wells

price,” he says. “It’s a no-brainer when rates are very cheap and you can buy at a reasonable price.”

In addition to capital, private equity firms with experience in franchising can also contribute their management and financial savvy to franchise brands and franchisees alike. One reason behind their growing interest in franchisee organizations, says Tom Wells, vice president at BIP Capital in Atlanta, is that “valuations in the franchisor market have gotten crazy.” This has made franchisees’ valuations very reasonable by comparison. Thus, as private equity firms have grown more comfortable on the franchisor side, they’re now seeing franchisee valuations and cash flows as reasonably stable platforms for a healthy return on capital, he says.

“It’s a lot less risky to invest in cash flow versus building a new location,” says Wells. Add in an existing customer base, and it can be highly profitable for a fund to invest in a franchisee, renovating stores they can improve quickly, and then contributing their management expertise to help the franchisee expand.

“Roark pioneered this in the franchisee space with Focus,” says Wells. “You can create really competent management teams to run the different brands with best-in-class talent, reduced overhead costs, and best practices between brands.”

BIP Capital’s franchise brand investments currently include Tropical Smoothie Café and Tin Drum Asiacafé The BIP Franchise Accelerator, a division of BIP Capital, not only provides advice to franchisees of those two brands, it provides funding through BIP Franchise Finance, a $20 million internal financing program to help franchisees in its portfolio get the money they need to grow. Formally launched in January, the program will supply up to 80 percent for existing franchisees to open new locations. Also, with the commercial real estate market tightening, this fund can preapprove a loan, accelerating funding for a new unit, allowing franchisees to nail down prime locations and the franchisor to open more stores through its better franchisees.

Can you get too big?

“No,” says Dhanani. “To me, at this point where we are, I believe we can manage twice as much as we have today. At some point you can get too big, but I don’t think we’re halfway there,” he says.

“Larger comes with larger responsi-

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Consolidation Nation Private Equity and Restaurants

P

rivate equity firms have shown increased interest in restaurant companies in the past 10 or 15 years, says Steve Rockwell, managing director of consumer investment banking focused on restaurants at BTIG. One reason, he says, is that traditional retail has become less attractive as an investment, mainly because brick-and-mortar retailers are at risk due to the rise of the Internet.

“Investors are recognizing the restaurant industry’s attractive investment characteristics,” says Rockwell, noting that nationally known brand names have “incredible power,” including consumer awareness, predictable unit-level economics, and established cash flows.

The model for established restaurant brands and their franchisees has been proven over the years, backed by data from hundreds or thousands of locations to support financial claims to investors and lenders alike. And as large operators become larger, “The risk of investing in a franchisee is generally less than investing in a younger brand,” says Rockwell.

“Some scale is important to most private equity investors because they have a lot of money to put to work. The more money they can employ in one investment, within reason, the higher the interest level,” he says.

“Many private equity firms want to develop a large company and have a strategy to use the acquisition of a franchisee as a platform to add additional franchisees to leverage their G&A, get economies of scale, and grow the value of their investment,” Rockwell says. “You need only one CEO or COO, whether you have 20 or 100 locations. There is definite value in that strategy.”

Restaurants with real estate are a further draw for private equity because following an acquisition they can do a sale-leaseback on the property, significantly lowering the cost of a transaction and preserving capital for additional deals.

An example is NRD Capital Partners (part of the private equity fund established by longtime restaurant franchisee and 2016 IFA Chair Aziz Hashim), which did precisely that last summer. After purchasing 121 Frisch’s Big Boy Restaurants in an estimated $175 million deal, NRD sold the real estate beneath 19 Cincinnati-area restaurants to a real estate investment trust for nearly $47 million in a sale-leaseback Steve Rockwell deal under which NRD will continue to operate the restaurants.

Overbuilt for growth BIP Capital, an investment firm based in Atlanta, is one of those private equity firms gearing up internally for growth, primarily on the franchisor side, to support its investments in Tropical Smoothie Café and Tin Drum Asiacafé—with plans for further growth in the franchise space.

“We’ve overinvested in infrastructure for franchise development, support, and building revenue through the system,” says Tom Wells, vice president at BIP Capital, who also leads BIP Franchise Finance, the $20 million fund mentioned earlier.

In general, he says, private equity firms today have a lot of capital to put to work and can overbuild their infrastructure with the intent of adding new brands and/or franchisees to leverage their capacity, as well as their growing knowledge about franchising. “Their returns are nice, particularly for franchisee private equity firms that know the space well and have built great teams,” he says.

His company, he says, is looking to invest in emerging brands, targeting those with 10 to 100 units. “We give them capital and tell the entrepreneur-founders we can do all the things they don’t like to do, such as training, franchisee issues, etc. We have the infrastructure in place to help them do that easily and quickly,” he says.

When a brand reaches 10 to 50 units, he says, the founder tends to run around putting out fires. “That’s when then you have to build a real team,” which he says is not only hard to do, but expensive—which is where BIP Capital comes in.

The approach is the same on the franchisee side, he adds—finding franchisee organizations that could use this same type of help to grow. “Private equity firms have figured out that as they build the infrastructure and expertise, they can operate the franchisee better than the small franchisee could.”

70

bilities,” he adds. “It’s not everybody’s cup of tea to manage multiple markets across the country. If you’re going to do it, try it with one market first and see how you do. It’s not for everybody, I can tell you that.”

Umphenour concurs, adding that a lot of franchisees can grow from 5 to 10 or from 20 to 30 units, “but to make the next jump to triple digits is a different game.”

Perales says many other franchisees are growing at a faster rate than he is.

But do they have the infrastructure in place to handle the increased numbers?

“For us to add 100 is not as heavy,” he says, as for a smaller franchisee to grow from 20 to 40 or 60 units.

“You’re under the influence of your franchisor; but 90 percent is under your control. And once you get to a certain scale, you have a regular dialogue with the franchisor and are very interactive with them,” says Flynn.

“Anyone can do what we’ve done,” he adds. “Success in the restaurant industry is mostly a function of running your restaurants well. If you do that, capital will be available.” And that means paying attention to every detail.

“I don’t think you get big unless you do the small well,” he says.

And while there’s always concern about debt compared with cash flow when looking to grow, Umphenour says two factors are critical in building a franchise company: choosing the best sites for each brand, and choosing the right GMs and operating partners.

“If you get those two decisions right and are not leveraged too highly you can build a company and be successful,” he says.

Then there’s the leadership factor—who the leader is, how well they do their job, and how their individual goals fit with the organization. A good leader, he says, understands the business, how to run a company, is skilled at bringing along and growing strong people, and can attract leaders across all disciplines. “Like so many other things, it comes down to individual leadership, the decisions you make, and the people you surround yourself with. I’m a big fan of having big dreams.”

One final piece of advice from Umphenour: “Have fun. If you’re not having fun at what you do, working with people you enjoy, go somewhere else.”

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800.640.7125 | huddlehousefranchising.com 1 2015 Fiscal Year average Annualized Unit Volume growth vs. prior year, for top 20% Evolution design performance vs. non-Evolution design performance; 10 of the 21 top 20% Evolution design restaurants (104 Evolution design restaurants in total), which is 47.6% of the 21 top 20% Evolution design restaurants and 20. 29% of all 104 Evolution design restaurants, achieved this metric. 2 2015 Fiscal Year top 20% of Reporting Franchised Restaurants based on EBITDAR as a % of Sales (as a percentage of the reported Sales for the 153 Reporting Franchised Restaurants). Some outlets have sold this amount. There is no assurance you will do as well. See Item 19 of our August 10, 2015 Franchise Disclosure Document. Copyright © 2016 Huddle House, Inc. This does not constitute an offer to sell a franchise. The offer of a franchise can only be made through the delivery of a Franchise Disclosure Document (FDD). Certain states require that we register the FDD in those states. This communication is not directed by us to residents of any of those states. Moreover, we will not offer or sell franchises in those states until we have registered the franchise (or obtained an applicable exemption from registration) and delivered the FDD to the prospective franchisee in compliance with applicable law.

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BY HELEN BOND

Out-Sourcerers MASTERING THE ART OF HIRING OUT

F

ranchisees of all sizes are increasingly The options are endless discovering that business goes better Outsourcing is a natural avenue for franwith outside help. Many have found chisees, in many ways mirroring the franthe key to bottom-line success is to chise model. And thanks to technology focus on what they do best and find the that erases geographical boundaries and right fit to outsource the rest. provides ready access to highly qualified Former corporate controller and CPA professionals, the options for lowering Joel Karg has the know-how to tackle any operational costs and freeing up time for financial function at his multi-unit Sky building the business are more plentiful Zone franchise. He also knows enough to than ever. Outsourcing can be used to hand off time-consuming tasks to some- serve short- or long-term needs, to foone else.

Karg and his franchise part- Glen Johnson ner David Beckett have chosen to outsource the payroll, tax, human resources, information technology, and social media marketing needs of their Columbus, Ohio-based company, which operates three parks in Dayton and Pittsburgh, with a fourth under construction.

Going outside for help has allowed the duo, who honed their franchise management chops as executives at Stanley Steemer, to spend less time pushing paper and more hours strategically growing their indoor trampoline park business.

“We work hard, we don’t ever take our foot off the accelerator. But you have to be in tune to see if there is a better way. Am I doing the best I can? Should I do this or have someone else do it?” says Karg. “We are boots-onthe-ground people, but every time we have taken a step back and handed something over it has worked out well for us.”

72

cus on a special project or market, or to handle daily tasks to keep the office running smoothly.

And these days, the options are endless. Payroll, accounting, lead generation, social media marketing, and more can be outsourced through a third-party provider, often through the cloud (software-as-aservice). Franchisees also are turning to outsourcing for site selection, legal needs, sales, vendor negotiations, human resources, as well as task-oriented work such as taxes or web design.

Franchisees also can rack up savings by using trusted third parties to eliminate the need to hire additional staff for such positions as bookkeeping, and by employing virtual administrative assistants, or even temporary C-level executives.

“Outsourcing is something we are always talking and thinking about,” says Tropical Smoothie Café franchisee Glen Johnson, president of Little Rock-based Tropical Tango. “Even within the outsourcing companies we are currently using, we are always seeing if there is a better option.”

With 15 Tropical Smoothie Cafés in Arkansas and Oklahoma and expansion plans for Texas, he included outsourcing in his business plan from the start, contracting payroll services when he opened his first café in 2011. As his portfolio grew, so did his outsourcing needs. Over the years he has

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NATIONWIDE OPPORTUNITIES FOCUS MARKETS North Carolina & Georgia

*Results measure company-wide same store sales figures for each fiscal quarter over the previous year’s fiscal quarter. The measuring period is March 22, 2010 through December 28, 2015. Excludes store sales from the State of Florida. Not all individual stores experienced the same results. New franchisees may have results that differ. This advertisement is not an offer of a franchise. Franchises are offered and sold only through a Franchise Disclosure Document. STATE OF CALIFORNIA: THESE FRANCHISES HAVE BEEN REGISTERED UNDER THE FRANCHISE INVESTMENT LAW OF THE STATE OF CALIFORNIA. SUCH REGISTRATION DOES NOT CONSTITUTE APPROVAL, RECOMMENDATION, OR ENDORSEMENT BY THE COMMISSIONER OF CORPORATIONS NOR A FINDING BY THE COMMISSIONER THAT THE INFORMATION PROVIDED HEREIN IS TRUE, COMPLETE, AND NOT MISLEADING. STATE OF NEW YORK: THIS ADVERTISEMENT IS NOT AN OFFERING. AN OFFERING CAN ONLY BE MADE BY A FRANCHISE DISCLOSURE DOCUMENT FILED WITH THE DEPARTMENT OF LAW OF THE STATE OF NEW YORK. SUCH FILING DOES NOT CONSTITUTE APPROVAL BY THE DEPARTMENT OF LAW OF THE STATE OF NEW YORK. MINNESOTA STATE REGISTRATION NUMBER F–2873.

Hungry Howie’s Pizza & Subs Inc., 30300 Stephenson Highway, Suite 200, Madison Heights, MI 48071, 248-414-3300.

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OUT-SOURCERERS looked outside for accounting, human resources, bill paying, site selection, vendor and lease negotiations, co-op management, and advertising.

And with eight new stores scheduled to open this year, Johnson will consider any outsourcing tool that leads to quicker, better decisions, cost savings, and back office efficiencies.

“It all comes down to return on investment, and to me, time is the most valuable thing,” he says. “If it’s cheaper for someone else to do it, takes less of your time or your team’s time, and if the end result is as good or better than what you can do internally, then it’s worth looking into outsourcing.”

“If I’m in the back office writing checks, I’m not with the customer and I’m not seeing the competition, new products, or what the market has to offer,” says Mike Alia, a 17-year multi-unit franchi- Mike Alia see of Gloria Jean’s Coffees.

“All we have in this business is time. If we waste time doing the little things, we can never grow the business,” says Alia, who outsources payroll, accounting, and real estate functions.

Spend money to make money Outsourced contractors provide multiunit franchisees with the most up-to-date technology, as well as providing scalability, saving on both staff hires and the need for internal maintenance time and expense.

“I’ve run into plenty of folks along the way who tried to keep payroll in-house to save a dollar or so,” says Karg. “I knew right out of the gate that it is not something you want to invest your time in. It is such a commodity-type service that you end up wrapping up too much time and money, and the filing penalties and things of that nature are just not worth the risk.”

Along with hard cost savings, increased efficiencies, and the invaluable “soft” cost benefits of time to focus on growth and productivity, outsourcing can provide additional intangibles that may have previously seemed out of reach for smaller or early stage franchisees. For example, creating an outsourcing team can give a small company

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the feel of a larger one and provide access to a higher level of talent—even more vital if the franchisee lacks the expertise of more seasoned operators.

“What you are getting is a panel of experts in their fields,” says Karg. “You are using their knowledge, rather than saying ‘I have to know it all.’ I don’t have to know it all. I just need to have access and business relationships with folks who are good in those areas. Unless you are a really large company, it is really hard to cover all the disciplines you need to cover on your own.”

And as franchisees expand into multiple brands or markets that require new or expanded procedures and processes, outsourcing to gain needed expertise can be increasingly critical to the success of their new venture.

Alia, who operates four Gloria Jean’s stores in three different markets in Indiana and Wisconsin, relies on outside lease negotiators to make sure he gets the best deal possible. “They know the financials of the malls, the traffic, the competition, and the market,” he says. “They are experts and charge a small amount of money for what they really do.”

In-house or outsource?

Many factors go into the decision of whether to keep a task in-house or to use an outside source. Where do you spend your time? How critical to your business is the job, function, or task? Are you able to let it go? And especially for smaller or startup franchisees, can you afford it at all at this stage?

Tom Burtzlaff, president of CMIT Solutions of Columbia, a provider of IT outsourcing services, looks to contractors to help him run his own business. A franchisee of two territories near Columbia, Md., and an area developer for four additional territories in Central Maryland and Northern Virginia, he outsources legal services, accounting, payroll, human resources, bookkeeping, benefits administration, and telemarketing.

“As a multi-unit franchisee, it can be easy to be dragged into the day-to-day administrative aspects of your business,” he says. “I always say that our team’s most important value is to work on the business, not in the business.”

Burtzlaff recommends creating a list of tasks that must be accomplished each week for the business to thrive. “Highlight the tasks that someone else could do more efficiently. Then begin the outsourcing search to find who can provide those services to help the business reach new heights,” he says.

Baskin-Robbins franchisee Gary Yarbrough believes in a “must be present to win” philosophy for his four San Diego area stores. So he uses contractors for taxes and legal help and established a creative tie with a local college for marketing assistance.

Yarbrough says he has been able to keep payroll in-house, but with two new stores in the works, he expects that to change. “If I don’t have time to get out in the neighborhood and help market my place, and the accounting is keeping me from being free, I have to hire a bookkeeper,” he says.

Taking a hard look at business operations also can help a franchisee know when not to outsource a function. Outsourcing might not be the right choice if a specific

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As a restaurant concept proven over 23 years, Pancheros Mexican Grill has embarked on an agressive expansion plan. Franchise development is a major part of that plan. ®

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OUT-SOURCERERS tem. Franchisees also can save time and money by selecting a single provider that can integrate multiple services, such as bookkeeping, accounting, and payroll.

Tropical Smoothie’s Johnson has switched payroll services to a company with easier-to-use software and is in the process of outsourcing bill paying to more seamlessly handle invoices in three states.

He also is taking advantage of the franchisor’s decision to hire in-house real estate specialists to help franchisees manage brokers and assist with site selection and negotiations. He used to pay an outside company for that service. “By corporate bringing everything in house, it is saving us money,” he says.

Tom Burtzlaff operational or logistical task is too difficult to integrate into a third party’s process or system, the service doesn’t create enough value to justify the cost, or if what you want to outsource is too important to delegate to someone who doesn’t have a vested interest in your success, says Tropical Smoothie’s Johnson.

Maximizing the benefits Outsourcing a previously hands-on task does not mean the franchisee can be handsoff. It is not uncommon for businesses to outsource a service without managing the results.

“You have to trust and verify,” says Alia.

“Trust who you are working with and, every once in a while, verify that they are giving you the best and most competitive

service in the market.”

“We use the term managing at 30,000 feet, versus managing in the weeds,” says Karg. “What you are doing is taking yourself out of the weeds on a certain task that is time-consuming and keeping a thumb on it. You still have to manage it. You can’t put it on cruise control.

Outsourcing should take you a fraction of the time to manage.”

He views Sky Zone third-party contractors as business partners. “Even though they may not be on our payroll, they are very much a part of our business and we want them to know everything that is prudent,” he says. “The devil is in the details. If you don’t communicate changes, the changes don’t get made holistically. If you aren’t keeping everyone in the loop, it ends up affecting something negatively.”

Getting the most out of outsourcing means frequently evaluating operations and making adjustments as needed. Sky Zone, for instance, added social media marketing in 2015 and is in the process of bringing a portion of IT services back inhouse to most efficiently troubleshoot and serve technical issues inside its parks.

Gary Yarbrough

Finding outsourcing Once the decision to outsource is made, Burtzlaff suggests taking advantage of existing business and professional relationships to find the best third party for your needs. “Our HR partner is also one of our clients and has referred us to several other clients as well. In addition, we often recommend our HR partner to other businesses looking to outsource in that field.

Outsourcing truly can be a win-win for all parties involved,” he says.

“We’ve found extreme success with this tactic,” he adds. “Our accountant recommended our current bookkeeper, our healthcare broker recommended our payroll company, and our franchisor’s marketing team recommended our telemarketing company.”

In addition to referrals from other business owners, trade associations, and online marketplaces, franchisors also can be a source for less-expensive outsourcing than may be found locally, or provide reliable referrals for contractors who have worked with other franchisees in the sys-

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IGI R O E TH

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4/1/16 11:16 AM

Why I choose to attend the Multi-Unit Franchising Conference each year Choosing how to spend your time may very well be one of the greatest challenges that you face as a franchise business owner. For those with larger organizations, this challenge presents itself as “resource allocation,” and can leave you feeling less productive than you did as a smaller operator.

In smaller organizations, perhaps more appropriately thought of as “where you are most needed.” I often find that when the answer to this simple question becomes too difficult, that it is actually the root of a much more problematic issue. A lack of focus.

Michael Kulp Multi-Unit Franchisee KFC, Pizza Hut President/CEO, KBP Foods 262 Units

Over the years, one of the most effective ways that I have steered clear of falling into the trap of going through the motions or becoming victim of the day to day monotony of the business, is through the very careful selection and attendance of conferences such as the Multi-Unit Franchising Conference.

It is a time for me to gain a renewed excitement for the new ideas that exist among my colleagues, to learn from many accomplished experts, and to plan how I might apply a variety of content shared at such events to the strategies or challenges that our business faces.

More specific to this conference, it has allowed me to evaluate new and emerging brands in a very efficient manner, and learn about the evolving nature of the franchise model in today’s business environment.

I find a renewed energy and sense of urgency when wrapping up my time at this conference each year. It “sharpens my saw” so to speak, and without exception, I always find that I leave this event with a greater focus on where I’m headed and what I should be spending my time against, than when I arrived. Gaining an edge regarding my clarity and focus has been invaluable to our growing business, and well worth my investment of time and money to attend this annual staple event!

Cheers, and hope to see you at this year’s conference!

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KEYNOTE SPEAKERS SPEAKERS Jim Collins is a student and teacher of leadership and what makes great companies tick.

Having invested a quarter century of research into the topic, he has authored or co-authored six books that have sold in total more than ten million copies worldwide. They include: GOOD TO GREAT, the #1 bestseller, which examines why some companies and leaders make the leap to superior results, along with its companion work GOOD TO GREAT AND THE SOCIAL SECTORS; the enduring classic BUILT TO LAST, which explores how some leaders build companies that remain visionary for generations; HOW THE MIGHTY FALL, which delves into how once-great companies can self-destruct; and most recently, GREAT BY CHOICE, which is about thriving in chaos – why some do, and others don’t – and the leadership behaviors needed in a world beset by turbulence, disruption, uncertainty, and dramatic change.

Jim Collins

Best-Selling Author of Good to Great and Lecturer on the Subject of Company Sustainability and Growth

Driven by a relentless curiosity, Jim began his research and teaching career on the faculty at Stanford Graduate School of Business, where he received the Distinguished Teaching Award in 1992. In 1995, he founded a management laboratory in Boulder, Colorado, where he conducts research and engages in Socratic dialogue with CEOs and senior leadership teams.

In addition to his work in the business sector, Jim has passion for learning and teaching in the social sectors, including education, healthcare, government, faith-based organizations, social ventures, and cause-driven non-profits.

In 2012 and 2013, he had the honor to serve a two-year appointment as the Class of 1951 Chair for the Study of Leadership at the United States Military Academy at West Point.

Jim holds a bachelor’s degree in mathematical sciences and an MBA from Stanford University, and honorary doctoral degrees from the University of Colorado and the Peter F. Drucker Graduate School of Management at Claremont Graduate University. He is an avid rock climber, with one-day ascents of the north face of Half Dome and the 3,000 foot south face of El Capitan in Yosemite Valley.

Joe Theismann is one of the greatest Quarterbacks to have ever played the game. Joe attended the University of Notre Dame where he received All-American honors and was the runner-up in the Heisman Trophy balloting in 1971.

A 12-year NFL veteran, Joe played in 163 consecutive games and holds several Washington Redskin team records including career passing yards and completions. Joe’s success on the field led him to being named the NFL’s Most Valuable Player in 1983. Joe also led the Redskins to two consecutive Super Bowl appearances, including a Super Bowl XVII victory. Joe has spent the last decade working for ESPN on their NFL broadcast, including spending time as a broadcaster for Monday Night Football. Currently, Joe works for the NFL Network doing their show called Playbook.

Joe Theismann

Former NFL Quarterback, Sports Commentator, Corporate Speaker & Restaurateur

Joe has been heavily involved in helping the health and welfare of children. In fact, his generosity and selflessness led him to be named the NFL Man of the Year in 1982 based on his dedication to support the community.

REGISTER NOW online at: multiunitfranchisingconference.com or call 1-800-289-4232 ext 202

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WHY

YOU SHOULD ATTEND Going into its 16th year, the Multi-Unit Franchising Conference continues to be the premier event for multi-unit franchisees looking to expand their businesses. This lively event is designed to be a platform for continued education and sets the stage for upcoming trends that can inspire you as a franchisee, with new ideas to immediately apply to your business. Gain access to the franchise leaders that have made their mark in the industry and set a precedent for aspiring franchisees to follow in their footsteps.

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Continued Education / Powerful Agenda We take a different approach when developing the content for this conference. Our goal is to deliver substantial information that you as a franchisee, can take home and immediately apply to your business model.

Our dynamic agenda is designed to inspire new ideas that stem from the trial and errors presented by various industry leaders. We craft our panels and select speakers positioned within countless segments of the industry. The 2016 event will offer programs targeted to various sizes of franchisee organizations, as well as topics of importance to multi-unit franchisees today.

Peer-to-Peer Networking Attending this conference will give you direct access to the industry’s frontrunners, up and comers and gogetters. This is the only event where franchisees can meet and mingle with other multi-unit, multi-concept franchisees of organizations outside their personal networks. Join your peers, share experiences and get your questions answered. Begin the process of building strong relationships within the industry. Whether you are with a large fully established enterprise, or with a smaller organization looking to grow, this is where long-term connections are created.

Franchisee Only Events Each year, the Multi-Unit Franchising Conference offers a variety of meet and mingle events for franchisee attendees only. Take this opportunity to network and meet other franchisees like you in a relaxed and comfortable environment. The 2016 event kicks off with a New Franchisee Attendee Meet & Greet cocktail party with our franchisee advisory board members. If you are an up and coming organization and looking for some guidance, this is a don’t miss occasion to gain some insight directly from these industry leaders.

Inspiration With the amount of talent and experience attending this conference, it’s easy to get inspired. Discover new ways to better understand what’s working and what’s not working for your business. Whether you are looking to add units, secure capital or grow your infrastructure this event will cover it all. This conference will re-energize your spirit and get you excited about growing a successful business.

Speaker Roster Our speaker roster is comprised of some of the best, most experienced franchisees in the industry. These talented individuals represent the many perspectives of the franchise spectrum. They are happy to share and discuss their experiences in order to help you learn and grow your business.

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FRANCHISEE ONLY EVENTS First-Timer Franchisee Meet & Greet Tuesday, April 26th 6:00pm - 7:00pm Carmine’s Restaurant, Caesar’s Palace Forum Shops Welcome first-time franchisees! Join your franchise peers for cocktails, hors d’oeuvres, and some lively conversation at our opening franchisee-only event. Mix and mingle with our Multi-Unit Franchising Conference Advisory Board, consisting of some of the most experienced franchisees in the industry. Relax and get your questions answered, all while kicking off your conference experience at the fabulous Carmine’s Restaurant, located in the Caesar’s Palace Forum Shops. This event is exclusive to franchisees.

Franchisee Opening Social Tuesday, April 26th 7:00pm - 9:00pm Carmine’s Restaurant, Caesar’s Palace Forum Shops Grab a cocktail and mingle with your industry peers! This year’s conference Chairman Michael Kulp, and our conference Advisory Board, invite all attending franchisees to join them for an exciting evening of networking and cocktails. This exclusive social event is the perfect way to jumpstart your conference experience at the lovely Carmine’s Restaurant.

Franchisee Networking Luncheon Wednesday, April 27th 12:00pm - 1:30pm Network and share ideas with other multi-unit franchisees during our franchisee-only luncheon. Discover new ideas and best practices, and develop relationships with business owners facing the same challenges.

REGISTER NOW online at: multiunitfranchisingconference.com or call 1-800-289-4232 ext 202

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AGENDA AT A GLANCE TUESDAY, April 26: Pre-Conference Activities 11:00am – 5:00pm

Golf Tournament – Arroyo Golf Club

6:00pm – 7:00pm

First Timer Franchisee Only Meet & Greet – Carmine’s Restaurant

7:00pm – 9:00pm

Franchisee Only Opening Social – Carmine’s Restaurant

WEDNESDAY, April 27: Full Conference 7:30am – 8:30am

Continental Breakfast

8:30am – 10:45am

Opening General Session Welcome – Therese Thilgen, CEO, Franchise Update Media Michael Kulp, Multi-Unit Franchisee of KFC, Pizza Hut & Conference Chairman Keynote Speaker Speaker -- Jim JimCollins, Collins, Best-Selling Keynote Best-Selling AuthorAuthor

10:45am – 11:45am

General Session – Panel of Multi-Unit Franchisee Pros - Growth Session

12:00pm – 1:30pm

Franchisee-Only Luncheon

12:00pm – 1:30pm

Franchisor & Supplier Luncheon - 5 Multi-Unit Franchisee Deal Killers

1:45pm – 2:45pm

Addressing the Challenges Securing $10M & Under Financing

Protect Your Eroding Bottom Line

Attract & Recruit Good Talent

3:00pm - 4:00pm

Infrastructure Evaluation Securing Capital – & Execution Lender Facts for $20M & Over Financing

Retain & Grow Good Talent

4:00pm – 7:00pm

Opening Cocktail Reception in Exhibit Hall – Exhibits Open

7:30pm

Dinner On Your Own

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AGENDA AT A GLANCE THURSDAY, APRIL 28: FULL CONFERENCE 8:00am – 9:00am

9:00am – 11:00am

Breakfast General Session - Michael Kulp, Multi-Unit Franchisee of KFC, Pizza Hut & Conference Chairman Industry Trends – Darrell Johnson, President & CEO, FRANdata MVP Awards Multi-Unit Franchisee – Most Valuable Performer Awards Keynote Speaker -Joe Joe Theismann, Former NFL Quarterback Theismann

11:00am – 12:00pm

General Session Panel – How To Select A New Brand

12:00pm – 2:00pm

Lunch in Exhibit Hall – Exhibits Open

2:15pm - 3:15pm

M&A #1Buying A Business

Labor Environment – NLRB, Minimum Wage

Mobile & Loyalty Marketing

3:30pm - 4:30pm

Franchising Under Attack But Still Thriving

M&A #2 – Selling a Business

Professional Athletes in Franchising Tapping into a New Source of Capital and Brand Expansion

4:30pm – 7:00pm

Closing Cocktail Reception in Exhibit Hall – Exhibits Open

7:30pm

Dinner On Your Own

FRIDAY, APRIL 29: FULL CONFERENCE 8:30am – 9:00am

Breakfast in Session Room

9:00am – 10:30am

Closing Session – Open Forum with Successful Multi-Unit Franchisees

REGISTER NOW online at: multiunitfranchisingconference.com or call 1-800-289-4232 ext 202

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FULL AGENDA TUESDAY, APRIL 26: PRE-CONFERENCE ACTIVITIES 11:00am – 5:00pm

Golf Tournament – Arroyo Golf Club

3:30pm – 7:00pm

Registration Open

6:00pm – 7:00pm

First Timer Franchisee-Only Meet & Greet – Carmine’s Restaurant Kick off your conference experience at this event, exclusive to first time Multi-Unit Franchisee attendees.

Join the Multi-Unit Franchising Conference Franchisee Advisory Board for refreshments, great conversation and helpful hints to maximize your conference experience.

7:00pm – 9:00pm

Franchisee-Only Opening Social – Carmine’s Restaurant Join your franchisee peers at Carmine’s for the opening networking function. Meet your peers and catch up with old friends and enjoy appetizers and drinks in the relaxing environment of Carmine’s.

WEDNESDAY, APRIL 27: FULL CONFERENCE 7:00am – 7:00pm

Registration Open

7:30am – 8:30am

Continental Breakfast

8:30am – 10:45am

Opening General Session Welcome – Therese Thilgen, CEO & Co-Founder, Franchise Update Media Michael Kulp, Multi-Unit Franchisee of KFC, Taco Bell & Conference Chairman Keynote Speaker –- Jim Collins Jim Collins Jim Collins Collins is is aa student student and and teacher teacher of of leadership leadership and and what what makes makes great great companies companies tick. tick.

Jim

10:45am – 12:00pm

General Session Panel of Multi-Unit Franchisee Pros With Jim Collins – Growth Evaluation & Implementation Join the panel of some of the brightest, most successful multi-unit franchisees as they discuss key points from Jim Collins’ presentation. They’ll discuss how Jim’s insights can help them grow their businesses and how they plan to implement them.

Facilitator: Gary Robins, Franchisee Super Cuts Panelists: Aziz Hashim, Franchisee, Popeyes Louisiana Kitchen; Michael Kulp, Franchisee, KFC & Taco Bell; Carin Stutz, President, McAlister’s Deli, Jim Collins, Keynote Speaker

12:00pm – 1:30pm

Franchisee-Only Luncheon: Network and share ideas with other multi-unit franchisees during our franchisee-only luncheon. Enjoy lunch and great conversations with your peers from throughout the franchise industry. You’ll meet franchisees that share the same challenges as you.You’ll share growth ideas and make new contacts.

12:00pm – 1:30pm

Franchisor & Supplier Luncheon - 5 Multi-Unit Franchisee Deal Killers

1:45pm – 2:45pm

Concurrent Breakout Sessions Addressing the Challenges for Securing $10M & Under Financing You’re ready to grow your organization but find it challenging to find small loans. Your plan calls for a loan of under $10 million. What criteria do you need to address to position your organization favorably with lenders? This session will address needs, clarify facts and provide guidance for securing small loans.

Facilitator: Douglas Soloman, Strategic Relationships Representative, Direct Capital Panelists: Glen Johnson, Franchisee, Tropical Smoothie Café; Jeffrey Kolton, Founder & Principal, Franchise Market Ventures; David Harrison, Franchisee, RNR Tires

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FULL AGENDA Protect Your Eroding Bottom Line There are many outside factors impacting the bottom line today – minimum wage, health care, cost of goods, etc. How can you manage the bottom line to ensure that you continue to operate profitable operations? Learn strategies franchisees have implemented to help maintain profitability in the current environment.

Facilitator: Tra Williams, Franchisee, Dairy Queen Panelists: Harsh Ghai, Franchisee, Dairy Queen, Burger King & Taco Bell; David Ostrowe, Franchisee, Blaze Pizza; Jeffrey Tews, Franchisee, Brightstar Care Attract & Recruit Good Talent Finding good talent is more challenging today than it ever has been. The number of employment opportunities continues to grow while the pool of potential employees is stagnant. What programs and strategies are working to find and recruit the best talent?

Facilitator: TBD Panelists: Gene Erdman, Franchisee, Pizza Hut; Susan Rather, Franchisee, Brightstar Care; Brent Veach, Franchisee, Del Taco 3:00pm – 4:00pm

Infrastructure Evaluation & Execution Your vision is to grow your organization through additional brands and/or locations. Don’t miss the critical step of assessing your infrastructure to ensure you’re prepared to grow. Join this discussion of key business segments to review, learn how to evaluate results and build your growth plan.

Facilitator: Dave Goebel, Franchisee, Pie Five Pizza Panelists: Steve Adams, Franchisee, Pet Supplies Plus, Amin Dhanani, Franchisee, Popeyes Louisiana Kitchen; Jason Judson, Franchisee, TWO MEN & A TRUCK Securing Capital – Lender Facts for $20M & Over Financing Getting the big bucks is a big animal. Financing is available for the right group with the right criteria.

Learn what the lender community considers “the right” criteria and how you can present your organization to attract the big bucks.

Facilitator: James Short, Director of Food Franchise Finance, BVVA Compass Panelists: Eduardo Diaz, Franchisee, Burger King; Jeff Davis, Franchisee, Arby’s; Roland Spongberg, Franchisee, El Pollo Loco Retain & Grow the Best Talent You’ve found good talent, now how do you help them grow and meet their goals? What programs will help your multi-unit managers grow into stronger performers? How can you support their growth paths while building your bench strength for future growth? Keeping good talent will help grow your organization while they grow. What are the keys to develop and retain good talent?

Facilitator: Mark Plomaritus, Franchisee, Colors on Parade Panelists: TJ Schier, Franchisee, Which Wich; Tony Simpkins, Franchisee, Sonic Drive-In; Brooke Wilson, Franchisee, TWO MEN & A TRUCK

4:00pm – 7:00pm

Opening Cocktail Reception – Exhibits Open

7:30pm

Dinner On Your Own

THURSDAY, APRIL 28: FULL CONFERENCE 7:00am – 7:00pm

Registration Open

8:00am – 9:00am

Continental Breakfast

REGISTER NOW online at: multiunitfranchisingconference.com or call 1-800-289-4232 ext 202

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FULL AGENDA THURSDAY, APRIL 28: FULL CONFERENCE 9:00am – 11:00am

General Session Gary Gardner, Chairman, Franchise Update Media Michael Kulp, Multi-Unit Franchise of KFC, Pizza Hut & Conference Chairman Industry Trends – Darrell Johnson, Franchise Economist, President & CEO, FRANdata MVP Awards – Multi-Unit Franchisee Most Valuable Performer Awards Keynote Speaker Theismann Keynote Speaker Joe Joe Theismann One of the greatest Quarterback’s to have ever played the game.

11:00am – 12:00pm

General Session Panel – How To Select A New Brand

Join this panel of multi-unit franchisee movers and shakers who continue to grow. They’ll share the key motivations and criteria to selecting a new brand.

Facilitator: Tom Garrett, Franchisee, Burger King Panelist: Eric Werner, Franchisee, Beverly Hills Spa & Subway, Matthew Kelly, Managing Director, North Point Advisors, Dave Goebel, Franchisee, Pie Five

12:00pm – 2:00pm

Lunch in Exhibit Hall – Exhibits Open

2:15pm – 3:15pm

Concurrent Breakout Sessions Mergers & Acquisitions #1 – Buying A Business

What type of plan do you follow to win the acquisition of an existing business? How do you determine the business is the appropriate business to grow your enterprise? What diligence, selection criteria and process should you follow to make a good decision?

Facilitator: Dean Zucarello, Founding Partner, Cypress Group Panelists: Shirin Kanji, Franchisee, Rent-A-Center, Firehouse Subs & Burger Fi; Giovanna Konig, Franchisee, Church’s Chicken, Hardee’s, Picadilly, LJS; Derek McDowell, Managing Partner, Boyne Capital

Labor Environment – Impact of NLRB, Minimum Wage At The Local Level

Have the newfangled advocacy groups targeted your enterprise? These groups are taking aim at franchisee enterprises at an increasing rate. Do you have a plan in place for your enterprise should this happen to you? What do you do and whom should you turn to for help? Learn from franchisees that have been on the receiving end of localized politics by advocacy groups.

Facilitator: Robert Branca, Franchisee, Dunkin Donuts Panelists: Dave Andelman, CEO, Phantom Gourmet; Dan Ponder, Franchisee, Hardee’s; Cicely Simpson, EVP, Policy & Government Affairs, National Restaurant Association

Mobile & Loyalty Marketing

Mobile commerce and loyalty programs are hot! Consumer use continues to grow and franchisees are experiencing an increase in visits and revenues. So what’s working? Join our panel to learn best practices for increasing revenues by using these consumer friendly tools.

Facilitator: Nicole Kleppe, Franchisee, Sonic Drive-In Panelists: Jesse Keyser, Franchisee, Sport Clips & Oxi Fresh; Les Wilson, Franchisee, TWO MEN & A TRUCK

3:30pm – 4:30pm

Franchising Under Attack, But Still Thriving:

Have recent and proposed legislation and regulation impacted franchisees? – The purpose of this session is to educate franchisees, and engage them through discussion about recent and proposed legislative and regulatory activity that affects franchising in general, and franchisees in particular. Chuck Stempler, multi-unit Alpha Graphics franchisee, Elizabeth Taylor, VP of Federal Government Relations and Public Policy and Dean Heyl, VP of Government Relations and Public Policy at the IFA, will kick off the session with a 30-minute review of legislative and regulatory actions. We will follow with a panel discussion including heavy audience participation.

Speakers: Elizabeth Taylor, VP Government Affairs and Public Policy & Counsel, IFA; Dean Heyl, VP State Government Affairs and Public Policy & Counsel, IFA; Chuck Stempler, Franchisee, AlphaGraphics

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FULL AGENDA Hot topics to be discussed include: Joint Employer status: It’s not just NLRB actions that should concern you – other federal agencies and state legislatures are causing problems.

Minimum wage/Predictive scheduling issues: The battle to raise the minimum wage and predictive scheduling and how these discriminatory proposals will impact your business.

Department of Labor proposal: Overtime Rules -- How this affects your employee’s exempt/non-exempt status, what tasks your managers can and cannot do, and how this impacts your pay structure.

SBA Lending: An update on the efforts of the Small Business Administration to facilitate and streamline lending to franchisees.

Proactive State Legislation: Learn what is being done to clarify the franchisor and franchisee relationship.

Mergers & Acquisitions #2 – Selling A Business

Planning an exit strategy for all or part of your enterprise requires careful planning. This panel shares the steps to take to position your business for a sale or merger. What do you need to do to make your business attractive to a potential buyer and maximize your valuation and minimize your exposure? Learn from the experts.

Facilitator: Daniel Connolly, Managing Director, Joyal Capital Management Panelist: Mark Schostak, Franchisee, MOD Pizza, Applebee’s & Del Taco

Professional Athletes in Franchising: Tapping Into a New Source of Capital and Brand Expansion

This session will give insights to multi-unit franchisees looking for new ways to expand and grow their footprint beyond the traditional avenues. The speakers will discuss partnerships with professional athletes looking to leverage their personal brand and capital. Hosted by Michael Stone, former NFL athlete and founder the Professional Athlete Franchise Initiative (PAFI), and moderated by Stan Friedman, co-founding Advisory board chair of PAFI and a 28+ year franchise veteran. This session will provide a glimpse into a whole new world of possibilities for established franchisees to further expand and grow.

Facilitator: Stan Freidman, Co-Founder, Professional Athlete Franchise Initiative Panelists: Alan Boomer, Franchisee, Retro Fitness, Omar Simmons, Founder, Exaltare; Michael Stone, Founder, Professional Athlete Franchise Initiative 4:30pm – 7:30pm

Closing Cocktail Reception in Exhibit Hall – Exhibits Open

8:00pm

Dinner On Your Own

FRIDAY, APRIL 29: FULL CONFERENCE 8:30am – 9:00am

Registration Open

8:30am – 9:00am

Breakfast in Session Room

9:00am – 10:30am

Closing Session – Open Forum with Successful Multi-Unit Franchisees

If you have questions you’ve always wanted to ask the brightest, most successful franchisees and didn’t know how to reach them, we have the forum. Our panel of experts share their experiences and answer your questions. Don’t miss this closing session – you won’t find access to this type of information anywhere else!

Facilitator: Mara Fortin, Franchisee, Nothing Bundt Cakes Panelists: Greg Cutchall, Franchisee, Popeyes Louisiana Kitchen & Sonic Drive-In; John Hotchkiss, Franchisee, Little Ceasars & Firehouse Subs; Cheryl Robinson, Franchisee, Supercuts; Tony Lutfi, Franchisee, Church’s Chicken & TGI Friday’s Breakfast is included with this session.

REGISTER NOW online at: multiunitfranchisingconference.com or call 1-800-289-4232 ext 202

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2016 Multi-Unit Franchisee Magazine is proud to once again honor franchisee excellence with our annual Most Valuable Performer (MVP) Awards.

We are looking for the best and the brightest franchisees - the power operators, the innovators, the creative thinkers who demonstrate outstanding performance in growing both their organization and their brands. MVP Award winners will receive VIP passes to the 16th annual Multi-Unit Franchising Conference in Las Vegas, where they will be treated like franchisee royalty and recognized on stage during the general session. In addition, they will also receive an exclusive profile in Multi-Unit Franchisee Magazine, a feature on mufranchisee.com, and an impressive award to display back in their office. ***Nominations Due: February 15th, 2016*** To qualify, multi-unit franchisees must have at least five operating units, and have been in a franchise system for a minimum of two years.

Multi-unit franchisees can nominate themselves or fellow multi-unit franchisees. Franchisors are encouraged to nominate outstanding multiunit franchisee performers in their systems.

Nominations Categories: Mega Growth Leadership For achieving excellence in growth and expansion.

Spirit of Franchising Award For extraordinary and enduring performance, growth, and community giving.

Influencer Award for Husband & Wife Team For demonstrating excellence in the franchising industry as a husband & wife team.

Single Brands Leadership Award For achieving brand leadership with a single brand.

Innovation Award For bringing a new and unique contribution to their brand.

Veteran Entrepreneurship Award For outstanding performance, leadership and innovation by a veteran.

Community Involvement Leadership Award For providing an example for others to follow in franchise success.

Multi-Brand Growth Leadership Award For achieving brand leadership in multibrand expansion.

Noble Cause Award For passionate, unwavering support for those in need.

American Dream Award For achieving remarkable success in the United States.

All nominations are strictly confidential.

Questions? Contact Christa Pulling christap@franchiseupdatemedia.com

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This year’s Multi-Unit Franchisee Conference returns to the beautiful Caesars Palace hotel.

We hope you enjoy your stay. The grandest of Las Vegas hotels, Caesars Palace is famous worldwide for its magnificent beauty and impeccable service.

Room Block Expires APRIL 4TH, 2016 Palace Tower Guest Rooms $179 per night - single/double These guest rooms are situated directly above the conference space with direct elevator access to the MultiUnit Franchising Conference space. The Palace Tower guest rooms are more spacious in size, with modern dĂŠcor and recently renovated. These spacious, modern and recently renovated rooms are going fast. Book now to secure your Palace Tower guest room. *Please note we do NOT work with third party agency room brokers. If you are contacted by them do not go through them to book your room.* For reservations call 866-227-5944 to book under Multi-Unit Franchising Conference. Callers can also use our special group code. To access, please identify as an MUFC attendee and use the code: SCFUM6 Guests may also book using this unique web link to get your group rate.

After April 4th, 2016, the group rate will be offered based on hotel availability only.

REGISTER NOW online at: multiunitfranchisingconference.com or call 1-800-289-4232 ext 202

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WHY TO SPONSOR Each year, the Multi-Unit Franchising Conference brings together over 550 multi-unit franchisees looking to expand their businesses. Sponsoring this event brings your brand to the forefront of these industry professionals.

This conference provides a substantial opportunity to showcase your services and expertise. You have the option to choose a sponsor opportunity, exhibit booth or both. All of which provide an excellent way for you to increase your brand awareness to multi-unit franchisees attendees.

PLATINUM SPONSORS

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GOLD SPONSORS

MULTI-UNIT FRANCHISEE LUNCHEON

FRANCHISEE ONLY OPENING PARTY

FRANCHISOR & SUPPLIER LUNCHEON SPONSOR

REGISTER NOW online at: multiunitfranchisingconference.com or call 1-800-289-4232 ext 202

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Exhibitor Franchisors 9Round 30 Min Kickbox Fitness Aaron’s, Inc. AFC Urgent Care (Doctors Express) Amazing Lash Studio Another Broken Egg Cafe Arby’s Restaurant Group Arooga’s Grille House & Sports Bar Back Yard Burgers Bar Louie Batteries Plus Bulbs Billy Sims Barbeque Bojangles’ Famous Chicken ‘n Biscuits Boston’s Restaurant & Sports Bar Brewster’s Chicken BrightStar Senior Living Franchising Brixx Wood Fired Pizza Broken Yolk Cafe Bruegger’s Bagels Bruster’s Real Ice Cream Buddy’s Home Furnishings Buffalo Wings & Rings Burger 21 BurgerFi International Camp Bow Wow Captain D’s Capriotti’s Sandwich Shop, Inc. Charter Fitness & SPENGA Fitness Checkers & Rally’s Restaurants, Inc. Chronic Tacos Church’s Chicken Cicis Pizza Cinnabon CKE Restaurants Holdings, Inc. Colors On Parade Corner Bakery Café Costa Vida, Fresh Mexican Grill Dairy Queen DEL TACO Denny’s, Inc. Dessange Group North America Dog Haus Dogtopia DRNK coffee + tea/QWENCH juice bar Dunkin’ Brands Earl of Sandwich East Coast Wings & Grill Fazoli’s Restaurant Group Firehouse Subs First Watch Restaurants Fuzzy’s Taco Shop G6 Hospitality Giordano’s Global Franchise Group GNC Golden Corral Grabbagreen Ground Round Grill & Bar Growler USA – America’s Microbrew Pub Gyu-Kaku Japanese BBQ Restaurants Hooters of America, LLC Huddle House HuHot Mongolian Grill Hungry Howie’s Pizza Hurricane Grill & Wings

IceBorn, an Ice House America Franchise Interstate All Battery Center J.D. Byrider Franchising, LLC Jackson Hewitt Tax Service Jersey Mike’s Subs Jimmy’s Egg Jimmy John’s Gourmet Sandwiches Johnny’s Italian Steakhouse® Jon Smith Subs Krispy Kreme la Madeleine Liberty Tax Service Marilyn Monroe Spas Massage Envy Spa Massage Green Spa MASSAGE HEIGHTS body+face McAlister’s Deli Moe’s Southwest Grill MOOYAH Burgers Fries Shakes MRS. WINNER’S CHICKEN & BISCUITS Newk’s Eatery OneClick Cleaners Oxi Fresh Carpet Cleaning Pancheros Mexican Grill Papa Murphy’s Take ‘N’ Bake Pizza Penn Station East Coast Subs Pet Supplies Plus Pi Pizza Pieology Pizzeria Pita Pit USA Pollo Campero Popeyes Louisiana Kitchen Primrose Schools Quaker Steak & Lube R Taco RedLine Athletics Rita’s Italian Ice RNR Tire Express Rosati’s Pizza Russo’s New York Pizzeria & Russo’s Coal Fired Italian Kitchen Salsarita’s Fresh Cantina Save-A-Lot Food Stores Schlotzsky’s Bakery Café Scooter’s Coffee Senior Helpers Shakey’s USA, Inc. Shoney’s Restaurants SiempreTax+ Sky Zone Trampoline Park SmashBurger Smoke’s Poutinerie Inc. Smoothie King Snip-Its Sonic Drive-In Steak ‘n Shake Sub Zero Ice Cream & Yogurt Taco John’s Taziki’s Mediterranean Cafe The Coffee Bean & Tea Leaf® The Greene Turtle Sports Bar and Grille The Joint Chiropractic The KASE Tide Dry Cleaners Togo’s

Toppers Pizza Tropical Smoothie Café uBreakiFix Village Inn Walk-On’s Bistreaux and Bar Watermill Express Franchising, LLC Wayback Burgers Which Wich? Superior Sandwiches Wienerschnitzel/Tastee Freez Wing Zone WINGSTOP Zaxby’s Ziebert ZIPS Dry Cleaners Exhibitor Suppliers 1851 ACILITY, LLC ADT Business ApplePie Capital Balboa Capital BBVA Compass Bematech Brixmor Property Group Bulk TV BuzzigoSocial Capital Lending Solutions, Inc. CityGro Comcast Business Direct Capital Directed Equity, Inc. Einbinder, Dunn & Goniea, LLP Entrepreneur Media FastrackHR, a division of Mckenzie Chase Management Franchise Business Review Franchise Update Media FRANdata Corporation FSV Payment Systems Global Cash Card Granite Telecommunications Guggenheim Retail Real Estate Partners Harland Clarke - TranSource High Line Funds INFINITI HR International Franchise Association Jive Communications Jobaline Joyal Capital Management LevelUp LookOurWay Marlin Franchise Finance Group Modern Business Associates Modernistic N3 Real Estate Patriot Creative Group Paycor Promio Poster Guard® Compliance Protection from HRdirect ResourceOne International Restaurant Facility Management Association Retail Data Systems RFCP SiriusXM- Music for Business Small Box Energy, Inc.

SnagAJob.com SOCi, Inc. talentReef The Rawls Group – Business Succession Planners TriNet Waste Harmonics LLC Watchfire Signs Worldpay Keynote Speaker Sponsor Popeyes Louisiana Kitchen Arby’s Restaurant Group Advisory Board Meeting Sponsor FRANdata Corporation Modern Business Associates The Rawls Group – Business Succession Planners SnagAJob

Regions Insurance, Inc. Money Room Sponsor ApplePie Capital Balboa Capital BBVA Compass Capital Lending Solutions, Inc. CBC Real Estate Group Harbour Capital Corporation High Line Funds Marlin Franchise Finance Group N3 Real Estate Spirit Realty Capital Texas Capital Bank Wells Fargo

Bronze Sponsor Best Franchisee of the World Blue Coast Burrito CBC Real Estate Group COMPEL4 CreativEnergy MVP Awards Sponsor DISH Network Uncle Madio’s Pizza Joint Donatos Pizza Eagle Eye Networks Franchisee Conference Tote El Pollo Loco Bag Sponsor F.C. Dadson Jersey Mike’s Subs Farmer Boys Restaurants Fish Consulting Conference Guidebook Jiffy Lube Sponsor Johnny Rockets FranchiseGrade.com Lo-Lo’s Chicken & Waffles/Las Vegas Escalator Metal Strips Localbiz360 FranchiseGrade.com MFV Expositions Midas International and Big O Tires Stair Graphics Sponsor MOD Pizza Papa Murphy’s Take ‘N’ Bake Pizza MSA Worldwide PIZZA PIE CAFE Lanyard Sponsor POSsible POS Fisher Zucker LLC Retail Solutions SBARRO Cube Sign Sponsor Smiling Moose Rocky Mountain Deli Arby’s Restaurant Group Spirit Realty Capital Texas Capital Bank Agenda At A Glance Sponsor The Human Bean Modern Business Associates The Pizza Press TOPPER’S CREAMERY Coffee Cup Sponsor Trion Group, A Marsh & McLennan First Watch Restaurants Agency, LLC Company Wells Fargo Registration Sponsor Wing Nutz Jamba Juice ZUUS Workforce Mobile App Sponsor uBreakiFix

GOLF SPONSORS

Golf Reception Sponsor Annual Buyer’s Guide Cover Tropical Smoothie Café Card Sponsor Golf Hole Sponsors IceBorn, an Ice House America Benetrends Franchise Denny’s East Coast Wings & Grill Magazine Cover Card Hot Dish Advertising Sponsor Midas International And McAlister’s Deli Big O Tires Chairman’s Dinner Sponsors Blink Fitness Franchising Inc.

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CustomerService BY JOHN D I J U L I U S

“Compassion”& “Empathy” Powerful words in customer service

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think the two most powerful words employees need to have permeating through their consciousness are “compassion” and “empathy.” When you genuinely serve with compassion and empathy, your customer service is on a completely different level. The challenge is, How do you teach compassion and empathy? How do you make them more than just buzzwords and platitudes?

The top world-class customer experience organizations constantly put their employees in the shoes of the customer.

When your employees really understand the plight of the customer—what the customer is going through, their daily battles—it starts to crystallize for them the critical importance of the customer experience they deliver, as well as the level of genuine caring they show each customer.

• Customers are not rational. Emotions overpower and manipulate our reasoning, and emotion leads to action.

Customer experience can trigger a wide array of emotions that can have a great influence on repeat business. Sometimes we don’t know why we like going to a certain place, but something drives us to stop there. We make logical reasons about why, defending the fact that it is based on convenience or something else. But the truth is that a business that delivers a unique experience has emotional capital that can be subconscious. On the other hand, when we hear of a brand and have negative thoughts, most often the case is that one time a poor experience left a permanent negative stamp on our mind.

• It is rational to be irrational. One of the most confusing and frustrating things to employees is the unreasonable way customers can react to something that seems so minor. However, when a customer has expectations—not unrealistic expectations, but simple ones about what it will be like to do business with

you—and the business fails to deliver, that customer can get emotional. For instance, the customer could be having a stressful day, counting on the one company they can always trust (these are typically your best customers), yet this one time they not only didn’t get to escape, their stress level increased. Even though it may have been the first time the company messed up with a particular customer, that customer can react emotionally. It is critical that

When your employees really understand the plight of the customer it starts to crystallize for them the critical importance of the customer experience they deliver. customer emotions be part of employee service-recovery training—especially for dissatisfied customers. Once employees understand there is a good probability of a customer reacting emotionally instead of rationally, they won’t take it personally and are better able to make a brilliant comeback.

• Anti-no zone. My employees don’t need to ask permission to do anything for a customer except use the word “no.”

And to my knowledge, we have never given permission. It doesn’t mean everything is a “yes,” but “no” is the word heard most often in business. Train your employees to eliminate it, treat it like a swear word, and focus on alternatives. An article entitled “Stop Trying To Delight

Your Customers” in the Harvard Business Review demonstrates the power of removing the word “no” from your company’s vocabulary. Ameriprise Financial asked its customer service reps to capture every instance in which they were forced to tell a customer “no.” While auditing the “no’s,” the company found many dated policies that had been outmoded by regulatory changes, systems, or process improvements. During its first year of “capturing the no’s,” Ameriprise modified or eliminated 26 policies. It has since expanded the program by asking frontline reps to come up with other process efficiencies, generating $1.2 million in savings as a result.

• How hard do you make it for your customers to resolve issues? A study from the HBR article shows the level of frustration customers have to go through when trying to solve a problem: • 56 percent reported having to reexplain an issue • 57 percent reported having to switch from the web to the phone to solve a problem • 59 percent reported expending moderate to high effort to resolve an issue • 59 percent reported being transferred • 62 percent reported having to repeatedly contact the company to resolve an issue.

• The “AskOnce” promise. Another great example from the article explains how some companies are making low effort by the customer the cornerstone of their service value proposition. South Africa’s Nedbank instituted an “AskOnce” promise, which guarantees that the rep who picks up the phone will own the customer’s issue from start to finish.

The immediate mission is clear: leadership must train front-line employees on mitigating disloyalty by reducing the effort customers must make.

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, Chickfil-A, Ritz-Carlton, Nestle, PwC, Lexus, and many more. Call him at 216-839-1430 or email info@thedijuliusgroup.com.

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People BY JASON CONRAD

Millennial Psychology Bringing out the best in your up-and-comers

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s I’m sure you’ve noticed in your dealings with Millennials, there can be significant differences between their attitudes and those of the Baby Boomers.

What makes Millennials tick? How do their minds work, and how can we use that understanding to increase productivity in our businesses? Do Millennial leaders buy into the cliché portrayal of their generation as self-entitled, impatient, and erratic in the workplace? How do Gen Xers and Baby Boomers view these individuals as they rise within management ranks and take on leadership roles?

Millennials have much higher levels of perceived self-importance than their predecessors, typically brought on by the protection and emotional cheerleading of their Boomer parents. They crave career growth and progression and search not only for success, but also for meaning in their jobs and everyday lives. That doesn’t mean they are controlled by a sense of entitlement. It also doesn’t mean they’re not willing to work hard to achieve outcomes for their employers and to meet their own personal goals. It just means they are intrinsically motivated by different factors that require a slightly different management style.

So, what’s the strategy? How do we play to their (or our) differences and maximize their true potential? Whether you’re managing Millennials or you are a Millennial managing others, it’s no longer a question of what makes this generation different— it’s a question of how we maximize this generation’s talent now that it’s becoming the largest cohort in the workforce. Here are five tips on how to make that happen.

1) Cultivate trust. Through their adoption of digital and mobile technologies, Millennials have become accustomed to having access to information, and expect as much from their superiors. They also expect to be treated as an important part of the business, regardless of age. Cultivate a sense of trust by allowing greater data access, opening up communication between your departments and hierarchies, and wrapping your communication in respect. Consistently tying

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the strategic agenda to projects, initiatives, or tasks will also help drive a sense of trust within this group.

2) Give them meaning. Remember, Millennials want to feel meaning in their work. For some, this means helping them understand how their role affects the bigger picture. For others, it’s letting them know,

“Millennials have much higher levels of perceived self-importance than their predecessors, typically brought on by the protection and emotional cheerleading of their Boomer parents.” sincerely, that they are valued members of the team, and that their ideas are important.

Regular, company-wide meetings help ensure not only organizational transparency, but also an opportunity for Millennials to express their own ideas. Let them lead the implementation of those (good) ideas and you might be amazed at how productive and inspired this “can-do” group will become. It’s worth noting that if they don’t find workplace fulfillment with you, they will look for it somewhere else.

3) Challenge them. Millennials are problem-solvers and adept with newer technologies. As executives and managers, our job is to keep our employees engaged. By giving Millennials tasks and projects that test their problem-solving ability, you will inspire through enabling, and they will feel they have a vested interest in the success of their project. Layer this with companywide recognition of their efforts, and you have a recipe for success.

4) Let them get distracted. Millennials

have an infamous reputation for being distractable, constantly seeking new challenges and stimulation. This typically manifests in their seeking employment elsewhere after being with your company for just a short time. Try indulging this distracted mindset. If they are successful employees with an urge to move to a new city or industry, encourage that growth and let them know they’re welcome back if they decide to return. Closed-door policies are a thing of the past, and companies that allow their employees to test the waters elsewhere will ultimately improve their retention through loyalty. Millennials can be incredibly loyal. By meeting them on their level, you will gain their respect, hard work, and dedication.

5) Remember their work ethic is different. Maintaining the status quo because “we have always done it this way” and the concept of “paying your dues” feels like a sign of disrespect to Millennials (justified or not). They are willing and eager to break the rules and take risks, and see this as a learning opportunity. Also, the “work to live” mentality abounds in this group. Balance is important. If given a promotion throws off their work/life balance, Millennials may turn it down. They no longer believe in a work day with success based on hours expended; they want to be evaluated on output, not input. That doesn’t mean they aren’t willing to invest the hours required to yield a desired output. Nor does it mean they are lazy, as the media tends to portray them.

It means they are focused on efficiency, value, and the opportunity cost of lost time.

In simple terms, both Millennial and non-Millennial managers should focus on a few key areas with this group. Honor their optimism, their collaborative nature, and their desire for development. Realize that they are willing to work hard for what yields value; that they have an aversion for time-wasting procedures; and that they are the next generation of executives to lead our organizations. Those who are the most successful with shaping this generation into future leaders will see the biggest return on their talent investments.

Jason Conrad is vice president of marketing for PeopleMatter. Call him at 877-300-6222 or email to info@peoplematter.com.

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4/5/16 11:25 AM

Technology BY TOM EPSTEIN

Safety First

Reassessing your POS system

T

he October 1, 2015 deadline for EMV-capable POS readers has come and gone. And much like Y2K 16 years ago, the world did not end and most POS systems are still working just fine.

As I am writing this, only about 40 percent of credit or debit cards in the marketplace even have the EMV chip on them, a number expected to reach only around 65 percent by year-end. Banks are dragging their feet on shipping these cards. After all, why would they rush to flood the market with cards that shift the liability from you to them?

In addition, even if a consumer does have an EMV chip on their credit or debit card, about 60 percent of POS terminals are still not enabled to accept them. While we may be seeing EMVcapable terminals installed, the software has not yet been turned on because of programming issues.

With Visa’s Technology Innovation Program (TIP), any merchants including “Level 4” businesses (those doing fewer than 1 million Visa or MasterCard transactions per year, i.e. the vast majority of franchisees) would be exempt from the much-hated Annual Self-Assessment Questionnaires if they can accept 75 percent or more of their total transactions using the chip technology. However, based on the penetration numbers above, this is not likely to happen until first quarter of 2017 at best.

One of the issues that has slowed adoption from the merchant side is both merchant and consumer unhappiness with the time it takes for an EMV transaction.

Typically, it takes just 1 or 2 seconds for a swiped transaction at a POS terminal.

But with the EMV cards, consumers must dip or insert their card into the terminal and leave it in the device for about 20 seconds, greatly slowing transaction times. Imagine how this has affected the QSR industry, where speed of transaction is of the utmost importance.

Nobody really wanted to deal with this last October as they were moving into the busy holiday season. I think the

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speed-of-transaction issue may ultimately push more franchisors and franchisees to start paying attention to contactless NFC technology. Almost all terminals shipped with EMV capabilities also have an NFC reader that allows for the faster (and some might argue, even safer) Apple Pay, Android Pay, and Samsung Pay NFC transactions.

The silver lining is that franchisors are finally taking a look at their payment technology landscape and taking this seriously.

With the holidays over, I think many CTOs are now pushing to get this done.

And even if it is impossible to reach that 75 percent threshold until perhaps early to mid-2017, the transactions that do get processed this way will be safer than the swiped ones.

Who supplies your software?

Another issue I am looking at now is the new Qualified Integrators & Resellers

(QIR) certification from the PCI Security Standards Council. This is an assurance that third-party service providers and integrators meet the PCI Data Security Standard (PCI DSS). Why should you be concerned about this, since it should really be an issue just for your POS vendors?

Here’s why. I’ve been speaking with franchisors for years about their homegrown software and the need to get PCIcertified. In the past, these in-house systems were never mentioned specifically in any PCI regulations, but I certainly felt there could be some liability if such a system were hacked.

Many service concepts, such as carpet cleaners, handyman brands, and other mobile franchises have developed their own software combining CRM, estimating, and even links to a payment portal.

If your franchisor has a technology fee that covers this, or charges you a direct monthly fee for software, a good attorney for a consumer group that got hacked would not have to work very hard to prove that your franchisor was a third-party reseller (since they are not connected to you by a tax ID number, in essence forced you to use the software, and is charging you for it).

The deadline Visa has set for all Level 4 merchants to use only certified QIRs is January 2017, about 9 months away.

Since it is no easy task and sometimes a bit expensive, I would recommend to all franchisors using their own proprietary software for credit or debit card transactions to jump on this certification right away.

The silver lining with EMV is that franchisors and their CTOs are finally taking a look at their payment technology landscape and taking this seriously. With more than 400 separate breach cases in 2014 investigated by the FBI, this issue is not going away anytime soon, and in fact seems to becoming more common.

Tom Epstein is CEO and founder of Franchise Payments Network, an electronic payments processing company dedicated to helping franchisors and their franchisees improve system performance, increase revenue, and reduce expenses. Contact him at tomepstein@franchisepayments. net or 866-420-4613 x1103.

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2016 MUFC Brochure 78-92 Aaron’s, Inc. 5 Batteries Plus Bulbs 65 Big O Tires 57 Blue Coast Burrito 99 Bojangles’ Restaurants, Inc. 27 Brixx Wood Fired Pizza 63 Broken Yolk Cafe 67 Burger 21 99 Captain D’s 57 Charter Fitness 14-15 Checker’s & Rallys Restaurants 29 Club Pilates 31 CycleBar 35 Dady & Gardner, PA IFC Del Taco 59 Denny’s 7 Direct Capital 10-11 Dogtopia 69 Donatos Pizza 33 Dunkin Donuts Brazil BC Dunkin’ Brands 37 Entrepreneur Media, Inc. 101 Farmer Boys Food Inc 69 Firehouse Subs 49 FRANdata Corporation 103 Fuddruckers Inc. 39 Giordano’s 95 GNC 13 Golden Corral Buffet & Grill 51 GrabbaGreen 71 Huddle House, Inc. 71 Hungry Howie’s Pizza 73 IceBorn, an Ice House America Franchise 97 International Franchise Association IBC Jimmy John’s Gourmet Sandwich Shops 41 Liberty Tax Service 43 Lift Brands 45 Marco’s Pizza 67 Marlin Franchise Finance Group 73 Massage Green Spa 59 MassageLuXe 9 McAlisters Insert Midas International Corporation 53 Moe’s Southwest Grill 21 NAPA AUTO PARTS 65 Pancheros Mexican Grill 75 Perkins Restaurant & Bakery 99 Pet Supplies Plus 3 Retro Fitness 1 Saladworks 63 Save-A-Lot Food Stores 23 Schlotzsky’s Bakery & Cafe 25 Scooter’s Coffee & Yogurt 75 Shakey’s USA, Inc. 77 Sky Zone Trampoline Park 55 SPEEDEE OIL CHANGE & TUNE-UP 61 The Coffee Bean & Tea Leaf 99 The Coffee Beanery 99 The Joint Chiropractic 61 uBreakiFix 47 UFood Grill 77 Wing Zone 97 York / RFCP 18-19 Zaxby’s Franchising 55 ZIPS Dry Cleaners 95

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InvestmentInsights BY CAROL M. SCHLEIF

Managing Uncertainty Trends to watch in 2016

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fter an extended period of complacency, markets have whipsawed in 2016. Will this level of heightened volatility continue? Does it signal an impending recession? We think the answers may well be “probably” and “we think not.” Let’s look at what could go right, what to watch, and what might be different in 2016.

What could go right?

• Many macro components underpinning the solid nature of the U.S. and global markets remain in place, including reasonable retail sales, solid consumer sentiment, strong housing activity, high employment percentages, and improved corporate and consumer balance sheets.

• Central banks outside the U.S. remain accommodative, encouraging exports and supporting business trends in the EU and elsewhere.

• China’s progression toward a consumption-based society is proceeding rapidly.

Recent reports show consumer spending now makes up 65 percent of China’s GDP (vs. 50 percent in 2014)—an amazingly fast shift for such a massive economy. A better balance between consumption and production is a more stable platform for continued long-term growth.

• U.S. demographics, with Millennials now the largest contingent of both the general and the working-age population, have positive implications for a wide range of industries.

• The majority of the negative impact to corporate earnings and capital expenditures from the steep decline in oil prices has already been seen. (Energy company earnings within the S&P 500 were down to $17.40 in 2015 for example vs. $41.40 in 2014.) Even if energy prices fall further, their impact on S&P 500 earnings will be muted by their relatively small representation. The bulk of the economy benefits from lower oil prices, though much of that benefit comes with a lag.

• The sharp downtick in equity prices globally, even as earnings have come in largely as expected, has brought valuations down toward more reasonable levels.

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While not overtly cheap, they are in better alignment with current fundamentals than they were even late last year.

Areas to watch • Technical indicators still show that equities are vulnerable. Defensive sectors such as utilities and consumer stocks continue to lead (adverse), but short-term improvements can be seen in down-and-out sectors such as materials (positive). The bottom line with unfavorable technical trends during periods of market plunges is that equities could be one poor data point, headline, or awkward comment from the Fed away from another sharp retreat to the downside.

• Should volatility remain high, it could begin to weigh on Main Street. If the pessimism grew widespread enough to pressure consumption and corporate capital expenditures, it could cause deterioration in the underlying fundamentals.

Given that stocks/investments are more broadly owned now than they were a couple of decades ago, this issue bears close monitoring.

• The fact that the U.S. is in the midst of an election cycle with no incumbent president to reelect only adds to the general sense of angst. Candidates have a vested interest in making each citizen disgruntled about the status quo, in an effort to be swept in on a platform promising change.

• Capital, which had been on a worldwide search for yield, is seeking safer havens. The high-yield debt market suffered in late 2015, and the growth versus value equity tilt has reversed itself in early 2016 as investors seem intent upon hunkering down.

What’s different this time?

Investment industry veterans are quick to point out that it’s “never different this time.” Yet secular trends take shape and play out over long periods. We are in the midst of a confluence of intersecting secular changes (technological, demographic, geopolitical, and social sensibility norms) that could influence investing and portfolio construction in the coming decades.

While it’s tough to accurately predict precisely how they will play out, they bear observation.

• Central bankers in most developed and emerging markets have driven yields on government debt to below zero in an attempt to revive economic activity in the wake of the Great Recession. The degree of intervention in global capital markets has been so huge that few remember what life was like without this experiment in place. Having never been here before, it’s tough to call what comes next when this intervention ceases.

• Technological advances have picked up steam and the era of big data, machine learning, artificial intelligence, and everything connected to everything else is upon us. Most traditional business models are in some form of destruction.

• Demographics: Japan (aging rapidly); China (one-child policy coming to a halt); and the U.S. (Millennials now the largest segment of population). As these trends take hold, changes—in consumption; in preference for ownership versus participation in the sharing economy; in comfort with technology; in spend down versus accumulation of wealth; and in the need for advanced medical care and solutions—will instigate changes to regional economies.

• Daily noise in the markets, prompted by computerized trading, large pools of money invested through hedge funds and other blind pools, tighter restrictions on Wall Street firms’ ability to take positions into inventory, and the dismantling of the specialist system is likely to continue. As we have noted, however, this interim volatility creates opportunity for those with a tight grip on fundamental value and an ability to move tactically.

While predicting markets is a frustrating and often fruitless endeavor, focusing on the aspects of portfolio construction one can control, and being ready to move tactically, can pay off in the long run.

Carol M. Schleif, CFA, is regional chief investment officer at Abbott Downing, a Wells Fargo business that provides products and services through Wells Fargo Bank, N.A. and its affiliates and subsidiaries. She welcomes questions and comments at carol.schleif@abbotdowning.com.

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4/2/16 1:01 PM

Finance BY ROD BRISTOL

Growing Gross Margin Small steps taken over time boost profits

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o you know the seven drivers of gross margin? More important, do you know how to actually manage them in your business? Let’s look at each one in turn—and they are remarkably similar in virtually any kind of operation.

1. Not taking cash discounts on payables. “2%/Net 10.” It doesn’t seem like a lot, does it? However, if you have the cash available, not taking discounts will affect your gross margin. Two full percentage points off your cost of goods sold items can have a significant “add up” effect if you are consistent with this on a long-term basis. If you don’t have the cash available, you need to address other issues in your operational processes to generate the cash to enable you to take those discounts, and to participate in other opportunities as they come along. Cash is still king, and as the economy continues to be of concern cash accumulation is highly advised.

2. Low productivity. Every operation can improve how they do what they do.

No exceptions. It doesn’t matter if you are operating at the highest labor efficiency in your network, there is always room for improvement. One way to achieve this is to get everyone within your labor line item on board with driving up your production or service efficiencies. People enjoy competition, and creating new ways for staff to engage in friendly competition usually results in labor savings that drop straight to gross margin.

3. Poor inventory control. The only thing that sucks up cash faster than poorly managed receivables is poorly managed inventory. Excess inventory directly affects gross margin. This also can be true in a service-based business where your “inventory” is the number of hours you are buying every day. How you deploy those hours is critically important if you want to maximize your gross margin. Your most expensive people should be working on your highest revenue-producing projects, and your least expensive people should be delivering results on your lower revenue-producing activities. As it turns out, exactly the opposite is often true— and no one is paying attention.

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4. Shrinkage. I often tell the story about the hotel I stayed in that actually posted on the bathroom mirror the price you would be charged if you wanted to “buy” various items from the room. Actually, there were a number of great deals: the sheets were cheaper than at Costco!

So who steals in a business? At any given time almost anyone can be tempted. Managing that temptation by careful inventory and stock controls is critically important in maintaining a culture of accountability and honesty.

Careful inventory and stock control is critically important in maintaining a culture of accountability and honesty.

5. Bookkeeping errors. Where do you first learn that something is wrong in your business? Is it in your head? Usually not. You usually feel it first in your gut.

When you get that feeling, don’t ignore it because you are probably right. Bookkeeping errors can come in the form of theft or incompetency that can lead to jail, divorce, or even an early grave. We have an excellent checklist I’m happy to make available if you feel there is something wrong in the accounting activities in your business. Just shoot me a quick email and I’m happy to send it along.

6. Poor pricing. We teach a wonderful tool called “break-even” that enables a business owner to “measure the paranoia” of a price increase. When you realize how much less you can sell and still make the same amount of money if you raise your price, this knowledge is truly empowering—and has enabled many business networks to improve gross margin as a result of careful, consistent price increases.

7. Poor buying. It is easy to get lazy and not react quickly when our costs increase, and they always do. When I owned my printing company I often consulted with other owners around the country who hadn’t bothered to look at their paper invoices, only to discover later that over a 12-month period they had a 4 percent increase in their costs. Not paying attention costs gross margin. All business owners are busy, but another mistake is to not take the time to check that your trusted vendors aren’t gouging you as you extend your long-term relationships with them. An excellent exercise is to strive for a 2 percent decrease in all of your cost of goods sold items annually. It takes work and commitment, but once again that 2 percent drops directly to your gross margin.

Finally, one of the most important elements of Profit Mastery is the concept that gross margin is not usually affected by a large (5 to 10 percent) change in your costs or a dramatic increase in sales.

Improving those numbers is a result of management, taking care of business every day, and making a small (1.5–2 percent) improvement in many line items—which ultimately drives up gross margin.

Rod Bristol is executive vice president at Profit Mastery. Learn more at www. profitmastery.net, 800-4883520 x14 or write to bristol@ profitmastery.net.

MULTI-UNIT FRANCHISEE IS S UE II, 2016

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4/27/15 1:53 PM

ExitStrategies

BY DEAN ZUCCARELLO

Too Big To Sell?

Reassessing unlimited multi-unit growth

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onsolidation is perhaps the single most significant trend we have seen in the restaurant industry over the past decade.

It is easy to understand why franchisees and investors have chosen this direction.

Under the right leadership, consolidation leads to greater predictability of operational results and returns through economies of scale, implementation of modern technology, market control, and fixed-cost leverage. We have entered into the era of the “mega-franchisee,” but as these entities become ever more massive, is there a case to be made for these organizations to strategically divest assets, becoming smaller over time?

There are two catalysts for where a mega-franchisee could find deconsolidation the best course of action: 1) when it reaches an inefficient tipping point in the context of day-to-day operations, or 2) when it becomes more beneficial to break apart the whole to maximize shareholder value as it relates to an exit strategy.

Clearly, big can become too big. As we see with large company-operated brands, inefficiency can erode the entrepreneurial enthusiasm and control that originally fueled these businesses. It is true that on the way to scale, there are great efficiencies and performance boosters attributed to streamlined leadership, professionalized systems and procedures, and direct accountability. At some point however, size can have the opposite effect. Inefficiency through decentralized control and oversight may lead to inferior performance and loss of accountability, as well as unnecessary growth of supervisory and G&A costs.

The franchise model has always thrived on a close hand of control and oversight, ensuring above-average performance.

Technology deployed across operations, human resources, finance, and marketing has largely been the most influential force in this equation. It has helped operators move up the point of diminishing returns, but to date has not removed the tipping point from the equation.

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At this juncture, returns are hampered, growth slows, and operators could find themselves forced to simplify in order to reignite the core business and/or correct balance sheet issues.

Maximizing shareholder value is another catalyst for dividing restaurant assets. Whether an organization has reached its point of diminishing returns or not, there is real value in breaking a megafranchisee into multiple parts upon a sale or other exit strategy. In some cases, the massive scale of a mega-franchisee’s holdings could give this company control over multiple, distinct market geographies. This presents the seller with a couple of challenges—and therefore opportunities for buyers.

First, there is the chance that no qualified buyer can be found for a business of such a large size. Second, even if a buyer is found, there is no guarantee that the franchisor will share the seller’s sense of optimism about the buyer’s qualifications and the sale’s perceived risk to the system. Additionally, in today’s market, small and medium-sized franchisees are bidding most aggressively on individual, adjacent markets with minimal G&A assumptions attached to their valuation.

So, while the entire transaction would likely require a large institutional private equity buyer who would look to the historical oversight expenses, smaller individual market buyers might help drive more margin to the pro forma EBITDA they are buying. It’s also worth noting that individual buyers might see other storelevel P&L opportunities in purchasing assets out of the mega-franchisee that are particularly attractive to them given their geographic interest and structure.

This essential argument bears some similarity to what has gone on with corporate refranchising over the last 5 years, with new buyers finding unique individual market opportunities and subsequently paying a premium price for them. Franchisors are selling those assets at a discount to where the brand itself trades. In return for that step down in valuation, they get a predictable royalty

stream and diminish future capex requirements. In contrast, the mega-franchisee seeking the same kind of divestiture by separating markets may actually see a step up in overall value by selling their markets individually.

There are a number of takeaways from the ideas expressed here. First, we expect to see continued consolidation.

The best operators will certainly continue to leverage their infrastructure and technology to push the bounds of what it means to be in the top 200. However, this consolidation is not without a limit, creating additional consolidation opportunities for smaller, nimbler buying groups.

We frequently hear that these groups are frustrated by losing deals to the megafranchisee, but we advise that time and patience will afford opportunity just as it has with refranchising.

Additionally, there is the “risk and reward” factor concerning the franchisor.

As franchisees pursue further growth, we do see some franchisors taking steps to limit the risk associated with concentration. Some franchisors have imposed caps on the number of units one franchisee can acquire. Others have taken a more aggressive role in the transaction approval process by limiting private equity participation or by exercising their right of first refusal to control the deconsolidation process, subsequently reselling the individual markets of the mega-franchisee.

The most important conclusion you can make is to control your own destiny as it relates to your M&A activity. As a mega-franchisee, ensure that you understand the value of the whole versus the parts; and as a smaller buyer, make sure you are prepared to be nimble when megafranchisee transactions take place.

Dean Zuccarello is CEO and founder of The Cypress Group, a privately owned investment bank and advisory services firm focused exclusively on the multi-unit and franchise business for 25 years. He has more than 35 years of financial and transactional experience in mergers, acquisitions, divestitures, strategic planning, and financing in the restaurant industry.

Contact him at 303-680-4141 or dzuccarello@cypressgroup.biz.

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9/16/15 2:13 PM

FranchiseMarketUpdate

BY DARRELL JOHNSON

Expertise on Call?

Making multi-unit knowledge more available

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couple of years ago we worked with a really big search engine client to help them better understand and approach the franchise community. Their epiphany (which we in franchising all know) is that franchising is a business model, not an industry.

Until then they had been frustrated in both their vertical industry sales efforts and in the efforts of their regional sales partners to crack the franchise code. They knew success would lead to hundreds of millions in sales. They now are realizing it. I mention this because multi-unit operators (MUOs) have a similar set of characteristics: like franchise brands, they frequently span industries with the same basic attributes.

Sometimes stating the obvious provides new perspectives. Here the obvious perspective is to consider MUOs their own community, something Franchise Update has been instrumental in creating over the past couple of decades. Having their own MultiUnit Franchising Conference (later this month) and dedicated magazine are two important components in creating that community. It seems to me a third component might involve technology.

I really didn’t give this much thought until I had several hours of conversation with Wyatt Nordstrom, CEO of Maven, a technology company that appears to be providing an interesting solution to what I think might be a key capability needed in the MUO community. To be clear, I am endorsing neither Wyatt nor Maven.

However, I support the concept behind Maven as it applies to MUOs and their needs.

Before I explain the implications of that conversation, we need to be clear about the issue we are solving for. In other words, what are the needs of MUOs that might be satisfied with technology that reinforces the multi-unit conference and magazine?

FRANdata get lots of questions and research inquiries from MUOs. Some of the questions lead to research projects because

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the answers require a fair amount of information and analysis to arrive at an answer or a set of options. However, many questions lead to relatively short responses— franchise-related questions usually around who, how many, and where. MUOs asking these types of questions typically are seeking guidance and direction, hoping to get the answers in phone calls and emails rather than reports and studies. Most of the time we are able to respond with some degree

of helpfulness. The distinction between a short response and a research project is how much time it takes us to come up with the answer. The more work we have to invest, the more likely it will lead to a research project rather than a quick data or knowledge response.

Time is money and MUOs are typically impatient, demanding, and smart.

When they pose a question, most of the time it is framed in such a way that they expect a quick answer. That brings me back to Wyatt, Maven, and the concept underlying his company. He starts with the belief that the fastest way to learn is to get people who know stuff to tell you.

Sometimes you need quick insights. He calls that microconsulting. Other times you have deeper needs. He calls that

extended consulting: bigger bursts of expertise such as workshops and seminars, research and analysis, and in-person engagements.

As I understand it, their business model is built around qualified experts (mavens).

Mavens can be people inside your organization or outside experts, whose areas of expertise are collected in the system and made available to client subscribers.

Subject experts surface depending on the questions being asked. The subscription provides a certain amount of access to external mavens. I believe there is no charge for internal mavens, as they are probably down the hall from you. I assume the value of the profile software for internal mavens is in identifying people on your team with a skill or experience you would not have known about otherwise.

Essentially, the idea is to have a software system keep track of the knowledge and expertise that employees, partners, members, customers, vendors, and consultants have that is (or could be) valuable to you.

The software matches the question to the experts, and you end up with a short and timely answer to your question. For instance, Maven claims an average turnaround time of 1 hour.

How would such a concept work in franchising? Quite well, I suspect. Want to know how a potential brand might fit with your portfolio? Want to know who to ask or talk to about expanding in another city? With a pool of MUOs in such a network, their expertise would cover almost any operational franchise question. Expand this with outside experts and you would have the ability to get many questions answered quickly, efficiently, and accurately.

I again note that I’m not endorsing a particular company, but rather the concept behind such a network. Done well, this could become a powerful third component inside the MUO community. Let me know what you think.

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.

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Join the Movement Are You a FAN? Franchise businesses need to come together and speak with one, consistent, strong and collective voice on behalf of our great industry. IFA has launched the Franchise Action Network (FAN), to mobilize the franchise industry to be that voice. By joining the FAN, we will unite all of our voices within franchising with a strong message about the positive impacts of the franchise business model in every community across the country.

Make your voice heard and join in this fight by signing up for the FAN today!

www.FranchiseActionNetwork.com If you have any questions about this new initiative, please do not hesitate to contact IFA’s Senior Director, Political Affairs & Grassroots Advocacy, Erica Farage at efarage@franchise.org or 202-662-0760.

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