J. Mark Dady
John D. Holland Scott E. Korzenowski
Barbara A. Bagdon
Jeffery S. Haff Andrew M. Malzahn
J. Michael Dady
Ronald K. Gardner, Jr.
Kristy L. Miamen
Dady & Gardner, P.A. lives and breathes multi-unit franchising— from the franchisees’ perspective!
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 2016, 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 130 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”
SERIOUS CRAFT BREWS • SERIOUSLY GOOD FOOD
SUPERIOR INVESTMENT OPPORTUNITY
Since 1976, Old Chicago Pizza & Taproom has been The Craft Beer Authority. We’ve been franchising for 20+ years, we’re in 24 states, backed by CraftWorks Restaurants & Breweries, and poised for aggressive nationwide growth.
WHY OLD CHICAGO, WHY NOW?
BEATING THE CASUAL DINING INDUSTRY IN GUEST COUNTS BY
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5,000 sq ft with addl. 1,000 – 1,200 sq ft of outdoor patio space
Be THE Craft Beer Authority in your neighborhood. Multi-unit opportunities now available.
303.664.4000 • OCFRANCHISING.COM
*Based on 20 recently opened locations featuring the new restaurant prototype.
Franchiseecontents ISSUE II, 2017
Multi-Brand 50 10
Multi-unit operators Matt Rusconi, Bob Middleton, Charles Loflin, George Tinsley Sr., and Chelsea Segura share their stories of franchising success. BY KERRY PIPES and DEBBIE SELINSKY
Multi-Brand 50 Rankings 42
Franchising’s annual list of top operators and their favorite brands
What a Concept! 46
So you want to build your business by adding another brand? BY HELEN BOND
Hire, Train, Retain 52
Become the employer of choice in your markets with these innovative ideas BY SARA WYKES
Captive Insurance 58
Insurance isn’t boring when you can turn your premiums into profits! BY EDDY GOLDBERG
MULTI-UNIT FRANCHISEE ISSUE II, III, 2017 2009
Departments CHAIRMAN’S NOTE
Welcome to the 2017 Multi-Franchising 6 Conference! ONLINE
What’s online @ mufranchisee.com 8
Columns CUSTOMER SERVICE
Advertising vs. Customer Service 64 Answer these 3 questions correctly and you will have an incredible 2017 BY JOHN DIJULIUS
Hiring Hourly Workers 66
Meeting your employees’ needs will help you meet your own BY PETER HARRISON
POS Security 68
Keeping your customers—and your business—safe BY TOM EPSTEIN
Is Your Franchisor in Play? 70
Managing your financials in light of a possible sale BY ROD BRISTOL
The Big Picture 72
Moving forward in the face of economic uncertainty BY CAROL SCHLEIF
Refranchising on the Rise 74
Selling corporate stores to franchisees benefits all BY DEAN ZUCCARELLO AND DAN COLLINS
FRANCHISE MARKET UPDATE
Optimist, Pessimist, or Anxious? 76
3 ways to view mixed 2018 economic signals BY DARRELL JOHNSON
MULTI-UNIT FRANCHISEE ISSUE II, 2017
Franchisee CHAIRMAN Gary Gardner CEO Therese Thilgen EXECUTIVE VICE PRESIDENT OPERATIONS Sue Logan CHIEF CONTENT OFFICER Diane Phibbs VICE PRESIDENT BUSINESS DEVELOPMENT Barbara Yelmene BUSINESS DEVELOPMENT EXECUTIVES Judy Reichman Jeff Katis EXECUTIVE EDITOR Kerry Pipes MANAGING EDITOR Eddy Goldberg CREATIVE MANAGER Kevin Waterman MAGAZINE DESIGNER Peter Tucker DIRECTOR OF TECHNOLOGY Benjamin Foley WEB DEVELOPER Don Rush WEB PRODUCTION ASSISTANT Esther Foley WEB PRODUCTION ASSISTANT Juliana Foley DIRECTOR OF EVENT OPERATIONS Christa Pulling SENIOR MANAGER, EVENTS & PRODUCTION Katy Geller SENIOR SUPPORT MANAGER Sharon Wilkinson PROJECT COORDINATOR Joanne Peralta SUPPORT COORDINATOR Leticia Pascal VIDEO PRODUCTION MANAGER Wesley Deimling GRAPHIC DESIGNER Cindy Cruz MARKETING ASSOCIATE Cameron Gustafson FRANCHISEE LIAISON SUPPORT Greg DelBene CONTRIBUTING EDITORS Rod Bristol Dan Collins John DiJulius Tom Epstein Peter Harrison Darrell Johnson Carol Schleif Dean Zuccarello CONTRIBUTING WRITERS Helen Bond Debbie Selinsky Sara Wykes ADVERTISING AND EDITORIAL OFFICES Franchise Update Media 6489 Camden Avenue, Suite 204 San Jose, CA 95120 Telephone: 408-402-5681 Fax: 408-402-5738 SEND ARTICLE INQUIRIES TO: email@example.com MULTI-UNIT FRANCHISEE MAGAZINE IS PUBLISHED FOUR TIMES ANNUALLY. Annual subscription rate is $49.00 (U.S.) FOR SUBSCRIPTIONS EMAIL firstname.lastname@example.org or call 408-997-7795 FOR REPRINT INFORMATION CONTACT FOSTER PRINTING AT 800-382-0808 www.fosterprinting.com
Welcome to the Conference!
ery few of us start out in franchising as large, multi-unit or multi-brand franchisees. I may have more than 700 units and numerous brands today, but when I started out I had one, financed by an SBA loan. In the years that followed, I always kept pushing forward, not allowing obstacles to block my path. We struggle, we learn, and we grow continually throughout our business careers, helped along by our franchisors and fellow franchisees. Yet no matter how much we learn or grow, there is always more. That’s the nature of the entrepreneur. Learning is one of the biggest reasons I’ve been a regular at Franchise Update’s Multi-Unit Franchising Conference. Now in its 17th year, the MUFC has become a mustattend event for any franchisee interested in growth and improving their operations. The conference kicks off on Sunday, April 23, with a charity golf event. In addition to providing a fabulous day on the course and the opportunity to network and have some fun, the event raises many thousands of dollars for charity. Sunday evening features a franchisee-only opening social at Carmine’s restaurant in The Forum Shops at Caesars Palace. It begins at 6 p.m. with a first-timer meet and greet with the MUFC Advisory Board, and opens up to all franchisees at 7. I’m excited about meeting and introducing our first keynote speaker on Monday morning: Marcus Lemonis, star of the CNBC show “The Profit,” as well as an accomplished and renowned businessman, investor, and philanthropist. Along with many other longtime fans, I’m looking forward to being inspired by his talk. Our Tuesday keynoter, Ronnie Lott, also is well-known with plenty of fans for his accomplishments as a Hall of Fame defensive star and 4-time Super Bowl winner with the San Francisco 49ers. Today his interests have turned to inspiring others to push through barriers to attain their goals, and to community outreach and philanthropic work. Another big reason I attend is the high quality of the educational sessions and panels. This year’s topics include how to be the employer of choice in your market; two sessions on securing financing (under $10 million and above $20 million); scaling your organization for growth; M&A as a growth strategy; evaluating FDDs; FACs and franchisee associations; remodeling; lease negotiations; and more. There’s something for everybody, whatever your current need, challenge, or interest.
MULTI-UNIT FRANCHISEE ISSUE II, 2017
There also is a general session on another important topic for 2017 and beyond: legislation and its impact on franchisees. The panel will include Aziz Hashim, last year’s IFA chair, longtime multi-brand franchisee, and managing partner of NRD Capital. Issues on the table include the NLRB’s joint employer rulings, overtime rules, healthcare reform, and minimum wage. Checking out new brands and suppliers also is a big reason I attend each year. The sold-out Exhibit Hall includes not only franchisors pitching the benefits of adding their brand to your portfolio, but franchise-focused vendors and suppliers whose offerings can solve many of your most pressing problems and boost your bottom line. Need advice? Tuesday afternoon features two “rooms”: The Money Room and The Law Room. The Money Room provides an opportunity to meet one-on-one with potential lenders to discuss financial solutions and get advice on funding your growth. The Law Room, new this year, is an opportunity to meet with franchise attorneys, also one-on-one, to discuss your specific concerns and get legal advice. The annual MVP presentation, where we recognize the achievements of our fellow multi-unit franchisees, is another highlight for me. Presented at a general session, the nearly dozen awards are for multi-brand growth, achieving the American Dream, community involvement, husbandand-wife team, innovation within a brand, and more. Wednesday morning’s closing session addresses ongoing external threats to the franchise business model, from over-regulation at the federal level to minimum wage hikes in cities. While last November’s election promised a relaxing of several onerous regulations, the new administration is off to a slower start than many had expected. We hope Washington improves and good changes start happening. Hosted by the IFA’s @OurFranchise and Franchise Action Network, the panel will include IFA Chair Shelly Sun, cofounder and CEO of BrightStar Care. Get involved! I’d like to wrap up by thanking all the previous MUFC chairs, including Michael Kulp, my immediate predecessor. I’m both humbled and proud to be part of this illustrious chain, to have grown so much from my days as a singleunit operator, now able to give back to those on the way up. I look forward to seeing you in Vegas!
Guillermo Perales CEO/Founder, Sun Holdings 2017 Conference Chair
Have Have your your sights sights set set on on Nashville? Nashville? In the last half of 2016, over a dozen franchises announced multi-unit expansions into the Nashville area.
Not every burger joint is the same, nor is every contractor. CIC, Inc. is a commercial general contractor who, like you, delivers a unique product with consistent results. • Concierge service • Expert pricing • Brand consistency • Time-tested processes • Dependable local subcontractors • Onsite superintendents • Our relationships with local codes move your job faster through permitting and inspections.
Who will you choose to help build your vision? You get one chance to build a location: entrust your brand to the contractor trusted by clients including Papa Murphy’s, Cheeseburger Charlie’s, Jersey Mike’s, Regus office space, Plato’s Closet, Golf Galaxy, and Comprehensive Pain Solutions.
www.cictn.com • 615-781-9550 • Founded IN this city by people who BUILT this city.
LAS VEGAS Sunday, April 23 – Wednesday, April 26
✓ CONFERENCES 2017 Multi-Unit Franchising Conference By the time you read this, you may have missed the 2017 Multi-Unit Franchising Conference, held this April 23–26 at Caesars Palace in Las Vegas. But don’t worry: we’re holding another one next year! Attendees at the 2016 conference agreed it was a highly useful and valuable experience and said they planned to return this year. Total attendance in 2016 topped 1,300 and included more than 550 franchisees who collectively accounted for more than 12,000 operating units, $8.5 billion in annual revenue, and more than 100,000 jobs. Registration for this year’s event was on pace to top that and set new records. This annual conference is a unique, must-attend opportunity to meet and learn from the best in the business, explore new brands, and soak up invaluable expertise at the educational sessions. Need some inspiration? Take a peek at the conference online to see the speakers and review the educational sessions. And sign up to keep current on developments for next year 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 multi-unit franchising, your one-stop shop to find: • New brand opportunities • Exclusive interviews • Networking opportunities • Operator profiles • Online edition and archives • Financing resources www.franchising.com/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
MULTI-UNIT FRANCHISEE ISSUE II, 2017
creating a new series of online videos of these franchisee leaders. We call them Empire Builders.watch.franchising. com/empire-builders/
✓FRANCHISE OPPORTUNITIES Looking for your next franchise opportunity?
Have we got the tools for you! Find articles on companies, concepts, industries, trends, and profiles—and search our features. Find franchisors looking for multi-unit franchisees, area reps, and area developers. Search by top opportunities, alphabetically, investment level, industry, state, and more at www.franchising.com
✓RANKINGS Check out our annual rankings of top franchisees and their multi-unit brands and find out “Who’s on first.” For this year’s Multi-Brand 50 rankings, see page 42. For the latest Multi-Unit 50 rankings visit www.franchising.com/ multiunitfranchisees/mu50.html ; and for the Mega 99 rankings visit www.franchising.com/multiunitfranchisees/ mega99.html
“Don’t just survive, thrive!”
Franchise Update Media’s 2017 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 www.franchising.com/ franchisors/afdr.html and www.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 www. franchising.com/multiunitfranchisees
STAYING IN THE GAME “There’s something rewarding about being productive. It’s challenging and never-ending but it’s important to do it while you have the energy so that, like an aging athlete, you can be in the game longer.” — Matt Rusconi, 14 Moe’s Southwest Grills, 3 Mooyah Burgers, Fries and Shakes, and 1 Experimac
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The information presented in this advertisement is general information only and is not intended as an offer to sell or the solicitation of an offer to buy a franchise. Certain jurisdictions regulate the offer and sale of franchises. If the offer or sale is regulated by any of these jurisdictions, we will not offer or sell you a franchise unless and until we have complied with all applicable requirements.
M U LT I - B R A N D BY KERRY PIPES AND EDDY GOLDBERG
Multiple Brands, Singular Success One is not enough for these franchisees!
ranchising is a tough business. There’s competition, overhead, rising costs, changing consumer tastes, social media, and now legislative and regulatory threats to deal with—while you’re busy hiring and training employees, updating your menu, remodeling your stores, and dealing with insurance, taxes, and suppliers. As that old TV commercial said, “But wait, there’s more.” There’s always more—which is why you have to love it to succeed. Multi-brand franchisees have the additional challenge of dealing with different systems, additional locations, and often different state and municipal laws and regulations. Not a piece of cake, even for the best. But as this issue’s interviews with multi-unit and multi-brand operators show once again, it takes passion, determination, and perseverance to overcome these obstacles. Good thing they love a challenge! Despite all these barriers to success (hey, who said business was easy?), there are many benefits to multibrand franchising. Financially, diversifying into different concepts spreads the risk by allowing operators to hedge their bet on any one brand. Personally, offering a variety of products and services and working with different kinds of people provides a sense of motivation and ongoing learning. Add to that the cross-pollination of best practices from different brands, which can be applied to their own organizations. We’ve pulled together a set of profiles that include a former pro athlete and a young, “Under 30” franchisee. These hard-working, dedicated operators represent a mix of small and large organizations, as well as different industries. The stories are united by their passion for great products and concepts, a customer-driven focus, their eagerness to provide jobs and advancement to their employees, and their burning desire to grow their business. • Matt Rusconi, who recently added a hot new tech franchise to his two restaurant brands, has a refreshing attitude toward work: he loves it. Already operating 14 Moe’s Southwest Grills and 3 Mooyah Burgers, Fries & Shakes, the 39-year-old Rusconi has added his first Experimac store, a UFG brand that focuses on Apple prod-
MULTI-UNIT FRANCHISEE ISSUE II, 2017
uct sales and repairs. While Rusconi still loves to get in the trenches with his teams, he’s working to “put the spatula down” and manage on a higher level. • Bob Middleton, our “cover boy,” is a self-made millionaire who operates Jersey Mike’s, Little Caesars, Sonic, and Del Taco franchises. He’s not only diversified brands, he’s diversified countries as he focuses on expanding Jersey Mike’s in Canada through a joint venture with the brand—and is shooting for 100 in 10 years there. His approach to risk is refreshing: “When I go into a business venture, I don’t ask how much money I can make. I ask, ‘If it doesn’t work out, how bad can it hurt me?’” • Charles Loflin, a longtime Pizza Patrón franchisee, just bought the brand—that’s right, all 92 stores including his own 33, adding “franchisor” to his resume. Through his 20-year friendship with Pizza Patrón founder Antonio Swad, Loflin also operates 70 Wingstops, the other brand Swad founded. Loflin, at 48, never sits still: when we spoke he was in the midst of opening six more Wingstops. • George Tinsley won 3 NCAA Division II basketball championships in college, played pro ball in the ABA, and worked alongside Colonel Harland Sanders for 3 years. During his transition from ABA star to KFC star, Tinsley says the Colonel gave him “the fever” for the restaurant business. Today, he has more than 60 units at street locations and airports, including Starbucks, Chili’s, Wendy’s, KFC, Pei Wei, P.F. Chang’s, Shula’s Bar & Grill, Cigar City Brewing, and Comfy Cow. • Chelsea Segura, our “Under 30” profile, could be the poster child for Millennial franchisees. With two locations already under her belt, this franchisee of The Little Gym may be the youngest seated at the table at executive meetings—but the energetic, hard-working 28-year-old has no doubt that being a franchisee can be the perfect career for young entrepreneurs willing to work hard and put in the time. And, since this is our annual Multi-Brand 50 issue, we’ve teamed up with FRANdata to provide some great data on multi-brand franchising. Turn to page 42 to see the rankings of the country’s largest multi-brand operators, along with the brands they’ve chosen.
AMERICA’S DINER. TODAY’S FRANCHISE.
DENNY’S IS ONE OF -------------------------------------------THE FASTEST GROWING BRANDS IN FULL SERVICE RESTAURANTS
“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." Dawn Lafreeda Denny's Franchisee, Owner/Operator of over 70 restaurants in 6 states
DENNYSFRANCHISING.COM OR CALL 800 304 0222
©2017 DFO, LLC 203 East Main Street, Spartanburg, SC 29319. This advertisement is not an offer to sell a franchise. An offer can only be made through a prospectus.
MULTI-BRAND BY DEBBIE SELINSKY
Restaurant operator adds an emerging tech brand
att Rusconi, who recently added a hot new tech franchise to his two restaurant brands, has a refreshing attitude toward work: he loves it. “There’s something rewarding about being productive,” he says. “It’s challenging and never-ending, but it’s important to do it while you have the energy so that, like an aging athlete, you can be in the game longer.” Rusconi, who owns three Mooyah Burgers, Fries & Shakes and will have 14 Moe’s Southwest Grills by year-end, was interested in pursuing a new venture when he came across Experimac, a concept focused on Apple product repairs and upgrades, pre-owned sales, and trade-ins. (Experimac is one of United Franchise Group’s eight brands.) “Experimac opened my eyes to a whole different world,” says Rusconi, 39, who, with his partner, has built 20 restaurants in Connecticut and New Jersey in 9 years. They opened their first Moe’s in 2008 and their first Mooyah in 2012. “I know that people appreciate value and want to know they’re dealing with a trustworthy business. Experimac lends NAME: Matthew Rusconi TITLE: Owner/co-owner COMPANY: Owner, MJR Holdings
and Rusty Hood LLC; Co-owner, Riverbank Operations
NO. OF UNITS: Moe’s Southwest Grill, 14; Mooyah, 3; Experimac, 1 AGE: 39 FAMILY: Wife Carrie and daughter
YEARS IN FRANCHISING: 9 YEARS IN CURRENT POSITION: 9
MULTI-UNIT FRANCHISEE ISSUE II, 2017
MULTI-BRAND “put the spatula down,” as Rusconi puts it. “I like to know I’ve done what they do and I hope they’re doing it better than I am, but I can’t be in 80 places at once. I’ve learned to manage on a higher level.” Part of that higher level is ensuring that his companies are part of the local community. All his businesses are involved in charitable work and supporting local sports programs. “Giving back is about more than business. It’s about contributing to the families and institutions that make up the communities in which we operate,” says the Connecticut native. When he was an NYU communications and marketing student, Rusconi served as an intern at Martin Scorcese’s production company before returning home to be near family, study for his MBA, and raise his own family. Looking ahead, he sees himself someday acting as an investor and mentor to young, talented entrepreneurs. One lesson he’ll teach them, no matter what their interests: “Do the right thing before legislation says you have to. You’ll be better off in the end.”
itself to both of those. Online, there are hundreds of ways to get computers—eBay, Amazon, Craig’s List,” he says. “You’ve got to know what’s going on. If you become part of a community and people know they’re not going to get scammed, there’s something there. We’re trying to get ahead of that idea and see where it goes.” Whether it’s burritos, burgers, or iPhones, Rusconi says he operates his diverse brands with the same business philosophy. “I see myself as a facilitator, a coach, a mentor. I want to give people the opportunity to do their jobs. I don’t micro-manage but I want to be there to work with them, side by side. For example, today we’re moving restaurant equipment, so I’m out there lugging stuff out. They could do it without me, but I’m there to help because I want them to know there is no position that is below anyone. Yesterday we had a big sponsorship with UConn women’s basketball, which had just won 100 straight games, and we offered $5 Burrito Day at Moe’s. I worked in a store for three hours.” It’s been a challenge to learn when to
PERSONAL First job: As a kid, I baled hay at a farm down the road. Formative influences/events: My dad was an entrepreneur who started an environmental lab the year I was born. He built it up and sold it and bought it again. Key accomplishments: Opening 20-plus franchises under age 40. I didn’t acquire any of them, but built every single one with four different brands: Moe’s, Mooyah, Wingstop, and Experimac. Biggest current challenge: Trying to be everything to everybody. Next big goal: I’ve had a great run in franchising and different industries. Next, I’d like to take a stab at an original business. I have something in mind, but it’s too soon to talk about. First turning point in your career: I graduated from NYU in 1999 and got a job in broadcast production and advertising. At 25½ , I decided to quit and come home to Connecticut to be close to family and start work on my MBA. Best business decision: Five years later, while I was working on my MBA part-time, I quit my job with Corporate America with my wife pregnant and got into business for myself as a franchisee for Moe’s Southwest Grill.
What’s your passion in business? My passion is getting small victories day to day, which drives me. I love creativity and branding and watching people on my team develop. When your team guys are firing on all cylinders at the same time, there’s nothing better. How do you balance life and work? As best I can. You try to create a balance, realizing that sometimes certain things are lopsided. I recognize it, readjust, and try not to stress over it. Guilty pleasure: Potato chips. Favorite book: The Cricket in Times Square, my favorite childhood book and one that I now read to my daughter. Favorite movie: I was an intern at Martin Scorcese’s production office, so I’ll say “The Departed.” What do most people not know about you? That someday, I’d like to be a high school soccer coach. Pet peeve: I’m not a big fan of laziness. I like to get things done and I don’t like to play politics.
Hardest lesson learned: Learning to balance my own goals and objectives with the brand’s goals and objectives.
What did you want to be when you grew up? A business owner because of my dad.
Work week: 24/7 is what’s needed. I go to bed early and get up early and work as needed.
Last vacation: Hiking in the Berkshires with my family.
Exercise/workout: I like biking—in the winter in the basement on my trainer, and in the summer outside with buddies.
Best advice you ever got: When going for a win, action always over argument.
MULTI-UNIT FRANCHISEE ISSUE II, 2017
Person I’d most like to have lunch with: My great-great-grandfather, Luther. I understand he was quite a sprinter and the guy who invented the three-point stance to start races.
WE HAVE THE MOMENTUM
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“ARBY’S HAS THE MEATS AND A WINNING FORMULA” -FORTUNE TM & © 2017 Arby’s IP Holder, LLC MN #F-5349. This advertisment is not an offering. An offering can only be made 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
MULTI-BRAND MANAGEMENT Business philosophy: To be a facilitator, coach, and mentor and give people the opportunity to do their jobs. Management method or style: I started hands-on, ran the restaurant. As I’ve grown, I’ve learned to facilitate and manage on a higher level. Greatest challenge: I want everybody to be happy and I want the job to get done, so we have to meet in the middle to achieve both those things. How do others describe you? Passionate, energetic, and driven, and I hope they’d say tough but fair. One thing I’m looking to do better: To improve the businesses and tighten up everything so that we’re facing forward and operating on all cylinders for the second half of 2017. How I give my team room to innovate and experiment: Good ideas come from everywhere, so I have an open door. We encourage people to speak up and offer ideas. We’re pretty transparent. If someone comes up with a great system or process, we implement it to help everybody. How close are you to operations? In the beginning, I was very close. Now I’m closer to those in charge of operations. What are the two most important things you rely on from your franchisor? A great supply chain and the opportunity to develop if you’re doing what you’re supposed to do. What I need from vendors: Timely invoicing, timely responses if there
are problems, and an open, honest relationship. Have you changed your marketing strategy in response to the economy? How? We’re always changing it. Right now, price is a huge deal in the world. E-commerce is a big deal, and if we’re smart, we pay attention to what customers are telling us. If we don’t, we’re going to run into trouble. How is social media affecting your business? Social media is alive and well, expanding every day. You have to evolve and understand that it serves a big purpose, but there’s still something to delivering inside four walls and great service. We keep it in mind, but it’s not everything. It’s another piece of the marketing/customer service pie. How do you hire and fire? I rely on our team to do this at the store level. I can’t overstep but I listen. I believe in letting them do their jobs. As for firing, we have our processes and we do it the right way by giving people notice and following through if they don’t follow through on their end. How do you train and retain? We have good training from our franchisors. We offer good benefits, fair work environments, and we’ve promoted from within from day one. How do you deal with problem employees? There’s a lot of documentation and discussion, and if things aren’t working out, at some point we make the call to move on. We take it on a case-by-case basis. Fastest way into my doghouse: Being unresponsive and betraying my trust.
BOTTOM LINE Annual revenue: $15 million to $20 million. 2017 goals: We’re going to clean up, shut down the bad ones, take our lumps, get new ones open, and move offices. We’re going to give other people opportunities on the executive side and step back from running the business to concentrating on new ventures. Growth meter: How do you measure your growth? Track year over year same store sales. Vision meter: Where do you want to be in 5 years? 10 years? In 5 years, I’d like to have my business firmly situated and running great. I’d love to be growing my original venture. In 10 years, I’d like to be on the investor side looking to other, younger entrepreneurs to mentor and help. How is the economy in your regions affecting you, your employees, your customers? Overall, it’s different in different pockets. It’s not news that the fast casual segment is pulling back, but that’s the time to get back to basics, work in the community, and get the best out of your partnerships from over the years. Are you experiencing economic growth in your market? Things are flat. How do changes in the economy affect the way you do business? We do what we need to do, buckle down and keep hustling. How do you forecast for your business? I don’t have a crystal ball, but I see our business firming up and growing slowly. What are the best sources for capital expansion? I’ve gone
MULTI-UNIT FRANCHISEE ISSUE II, 2017
through every one out there. I started with SBA loans (six to seven of those), rolled into nontraditional financing, a bank out of Minnesota, and then wrapped up into GE Capital as the first Moe’s franchisee they took on. When I started with Experimac, none of that mattered, so I went back to the SBA. Experience with private equity, local banks, national banks, other institutions? Why/why not? We’ve gone down the path of all of these. Now I’m happy to bootstrap with traditional funding (versus private equity). What are you doing to take care of your employees? We try to offer good health insurance, vacations, healthy incentive plans, vehicles and expenses for some, discounts on food, and the opportunity for growth. This goes down to hourly employees, too. How are you handling rising employee costs (payroll, minimum wage, healthcare, etc.)? We’ve tried to pay above to start, and by doing that it’s helped absorb rising costs. By being efficient and trying to retain good people, we’re already above it. It doesn’t pinch as badly as if we were doing the least possible. How do you reward/recognize top-performing employees? We offer bonus plans, but we also think it’s important to recognize in front of the franchisor and the team when someone does a great job. That means a lot. What kind of exit strategy do you have in place? I’d like to get the company and the people that make it work every day taken care of, pay down debt, get new ventures going, and eventually explore selling it to those who are running it inside or outside.
Our commitment to providing an affordable investment with world-class support is the essence of our turnkey proven franchise concept. Snap Fitness is expanding and offering club openings in select key territories. Don’t miss this opportunity to own your local market.
• Over 2 million members in 18 countries • Newly modernized innovative interior design • 2,000+ club locations open or in development worldwide • Attractive franchise growth incentives • Over a decade of fitness industry experience • Select territories available. Reserve yours today!
CONTACT US TODAY!
This brochure is not an offer for a franchise. Such an offer can only be made through our Franchise Disclosure Document. Contact us if you do not have a copy. Notice to prospective franchisees protected by the New York Franchise Sales Act: This is not an offering. An offering can only be made by prospectus first filed with the State of New York Department of Law, and such a filing does not constitute approval by the department. Minnesota registration F-4797. © Snap Fitness, Inc., 2411 Galpin Court, Ste 110, Chanhassen, MN 55317.
MULTI-BRAND BY DEBBIE SELINSKY
Master of Diversification
A business built on passion, focus, and determination
ob Middleton heard or read something years ago that stuck with him: Wealth is built by focusing on one thing and doing it well; wealth is preserved by diversifying. He considers that the best piece of advice he’s ever received. “I came around to diversifying so that one brand didn’t determine my success,” he says. That philosophy led him to where he is today, a successful franchisee for Jersey Mike’s Subs, Little Caesars Pizza, Sonic Drive-In, and Del Taco. With properties in Michigan and Canada, he’s even diversified out of the country. After 25 years in franchising and 35 years in the food business, Middleton has not slowed down. A self-made millionaire, he credits Richard Mueller with teaching him operations. Hired early on by Mueller’s RPM Pizza (Domino’s Pizza’s largest franchisee), Middleton discovered his skill for turning around unprofitable stores and soon found himself overseeing RPM’s restaurants in Canada and making a success of them. Then things changed. “There was a time when Domino’s Pizza could do no wrong. Then it fell out
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of favor and the company just couldn’t do anything right. I saw a lot of successful people forced to sell,” he recalls. RPM decided to get out of the Canadian market and offered Middleton first shot at its nine stores there. He bought five. Seven years later, he sold those units with the goal of building Domino’s in Michigan. “Then Little Caesars contacted me and wanted me to buy a bunch in Toronto. I figured it was easier and faster to take over and fix these than to build one at a time,” he says. Middleton, who lives in Rochester, Mich., says his brand and unit acquisitions have followed something of a pattern. “I only became a Domino’s franchisee as a result of it crashing and burning. I only became a Little Caesars franchisee eight years later because they were going through a difficult time,” he says. “When I’m making money, I diversify and build something else. I began with Del Taco in Michigan with the idea of putting it together with Sonic to get the best real estate deals. It’s worked for me.” Other business strategies have played a role in his success as a multi-brand franchi-
see. “I stick with food because that’s what I know. I was impressed by Warren Buffet when, even in the late ’90s, he didn’t get involved in technology because he said he didn’t understand it. I, too, only get involved in things I understand.” Middleton, who with partners has launched 15 employees as franchisees, also has structured his four brands as separate entities with four different eqNAME: Bob Middleton TITLE: Multi-unit franchisee COMPANY: OTB Pizza Company
(Little Caesars Pizza); Sharing the Bread (Jersey Mike’s Subs); PRGSD (Sonic Drive-In); Providential Restaurant Group (Del Taco)
NO. OF UNITS: 19 Little Caesars
Pizza; 15 Jersey Mike’s Subs; 3 Sonic Drive-In; 2 Del Taco AGE: 56 FAMILY: Wife Dawn and sons
Ryan and Zach
YEARS IN FRANCHISING: 25 YEARS IN CURRENT POSITION: 25
join A leader ----------------------in the growing
Mexican QSR+ segment
Now is the perfect time for your next bold business move. With 50+ years of proven operational success, and the unique brand position of fresh, made to order food sold through the convenience of a drive-thru, we're aggressively expanding in select markets across the U.S.
INVEST WELL WITH DEL TODAY!
*See item 19 of the 2016 Franchise Disclosure Document for details. This advertisement is not an offering or sale of a franchise.
MULTI-BRAND PERSONAL First job: Dishwasher. Formative influences/events: Having so many wonderful influences early on in my restaurant career—people who believed in me and in my potential and eventually guided me toward the franchising business model. Key accomplishments: Being invited to sit on several National Advisory Councils and President’s Councils for different brands I operate in. Earning awards at multiple brands for sales, marketing, and service and being named Franchisee of the Year for Jersey Mike’s Subs in 2016. Biggest current challenge: Recruiting and building the bench strength of middle management. This is an incredible industry with unlimited opportunity, but our society seems to deem this as a job of last resort. Nothing could be further from the truth. Fighting that perception is our industry challenge. Next big goal: Bringing Jersey Mike’s Subs to the Canadian market and growing that brand in Canada with the parent company. First turning point in your career: Becoming a manager in training for RPM Pizza, the largest franchisee of Domino’s Pizza. They were a great company to work for and I owe them a lot for my success. They were my introduction into franchising. Best business decision: To buy 22 existing Little Caesars Pizza stores in Canada. Hardest lesson learned: Most franchisors want you to think and feel that you are part of a big family, and even though they do their best to foster that environment, at the end of the day it is a business. It is always a business, and you cannot take it personally. Work week: When you love what you do, it is not work. When you are an owner, there is no such thing as a normal work week. You need to make sure you balance your work week, spend quality time with your family, and take care of your health. Having a balance is very important. Exercise/workout: My wife and I have a personal trainer we work out with two to three times a week. Best advice you ever got: Wealth is built by focusing on one thing and doing it well; wealth is preserved by diversifying. What’s your passion in business? Seeing people in my company develop and grow. I am passionate about giving back and giving my general managers the opportunity that I had, which was to become a franchisee. How do you balance life and work? I owe it to my wife. She is the only reason I have any balance at all. Guilty pleasure: Eating. I love food. Favorite book: Good to Great by Jim Collins. Favorite movie: “Remember the Titans.” What do most people not know about you? I like rap music from all the years of listening to it from my kids. Pet peeve: Negative people. What did you want to be when you grew up? An airline pilot. Last vacation: In January, an all-inclusive resort in the Riviera Maya in Mexico, with all the GMs of my Little Caesars Pizza stores. Person I’d most like to have lunch with: Warren Buffet.
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MANAGEMENT Business philosophy: Spend a lot of time up front researching the franchise you want to go into business with. Once you go into business, focus on executing the business model, not changing it. Management method or style: Focus on the culture: mentor, train, communicate the expectation, and get out of the way. Let managers manage. Greatest challenge: Not trying to control everything. How do others describe you? Passionate, focused, energetic, and determined. One thing I’m looking to do better: Be more patient. How I give my team room to innovate and experiment: I try to ask a lot of questions, ask for a lot of feedback from my team members, especially those closest to the customer. We try things based on the feedback, implement, and measure the results. We also search for the best practices from other franchisees who are doing a better job than we are. How close are you to operations? The bigger we grow, the harder it is. I make sure I stay close to my partners, my GMs, and my operational leadership team, and visit as many stores as I can, as often as I can. What are the two most important things you rely on from your franchisor? The continuous sharing on operational improvements, and the testing and implementation of marketing strategies. What I need from vendors: Reliability with a commitment to a long-term relationship that gives us both a competitive advantage. Have you changed your marketing strategy in response to the economy? How? Each brand I operate has a different marketing strategy for economic challenges. I cannot control the direction they take, so I focus on what I have more control over: operations inside the four walls. How is social media affecting your business? There has been a paradigm shift in marketing and, not surprisingly, social media is becoming a much bigger piece of the marketing budget in every brand I operate in. Mobile is huge today and it is very exciting to me. How do you hire and fire? We are always looking for talent and we use all of the usual vehicles for recruiting. Our most successful approach has been to develop organically when possible. We try to hire right so that we keep firing to a minimum. But when the fit is not right, or someone does something to be fired, we try to be honest, fair, quick, and move on. How do you train and retain? Each brand has its own training program. We work on executing the programs. I have found that the better you train, the longer they stay. Better training gives your team members more opportunity for advancement. We are always looking for ways to get better at training and retaining. It is one of the things we track closely, especially in the brands that are growing. How do you deal with problem employees? We look first to see if we dropped the ball at our end and did not train them right. Then we sit down and talk with them, try to understand what the issue is. We set the expectations, give the feedback, and if it is still not working out, we document and move on. No one wins if both parties are unhappy. Fastest way into my doghouse: Not caring about our customers and the people you work with.
Who is Paneraâ€™s main competitor?
How about you?
*Estimated initial investment to open, excluding real estate and real estate improvements. Panera Bread estimate investment based upon and disclosed in Item 7 of 3/25/16 Panera Bread FDD. Great Harvest investment based upon average cost of 2 hubs & 3 spokes disclosed in Item 7 of 3/9/17 Great Harvest FDD. **Profit is EBITDA. Panera Bread Avg. Sales and Profits based upon information disclosed in Item 19 of 3/25/16 Panera Bread FDD. We make no other representations about, and do not verify any aspect of Panera Bread franchise offering. Great Harvest Avg. Sales reflect the actual average annual gross sales for the year 2016 for 4 franchised hub bakery cafes and 5 franchised spoke cafes that opened on or before 6/26/2016. Of the 4 franchised hub bakery cafes 2 of the 4 exceeded the average sales volume of $896,326. Of the 5 franchised spoke cafes 2 or the 5 exceeded the average sales volume of$629,704. Great Harvest profits reflect average annual EBITDA for the year 2015 for 4 franchised hub bakery cafes. Of the 4 hub/spoke pairings in our system, 2 of 4 exceeded average EBITDA performance of $239,001. Great Harvest EBITDA based upon the sum of 2 hub and 3 spoke baker cafes. For me details, refer to Item 19 of our 3/9/17 Great Harvest FDD. A new franchiseeâ€™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.
MULTI-BRAND uity/operating partners. He also doesn’t move employees across brands. “Each brand has a different culture and I want to keep those pure,” he says. He has an interesting approach to risk, owing partly to his modest upbringing and to his experiences with brand fluctuations. “When I go into a business venture, I don’t ask how much money I can make. I ask, ‘If it doesn’t work out, how bad can it hurt me?’” Honored as Jersey Mike’s 2016 Franchisee of the Year, he says his next challenge with the brand is exciting. “We’ll open the first Jersey Mike’s store in Canada on April 19 in Kitchener, Ontario. It’s a joint venture with the founder and CEO of Jersey Mike’s, Peter Cancro. We’ll do the first six, and then I’ll become the area director, helping to oversee and grow Jersey Mike’s in Ontario. My goal is to have 100 stores there in 10 years with mostly franchisees.” Also ahead, Middleton and his partner and brother-in-law Bill Biga III, are committed to growing their Jersey Mike’s in Michigan to a total of 28 over the next five years. Middleton, who describes his recent honors and awards as humbling, insists that these belong to “everyone I work with,” he says. “We’re always looking to make sure we’re protecting the people in our company, that we’re doing things right. In today’s world, if you have more than a couple of units, you really do need to understand the rules of the game, so we’re very sensitive to doing our best to run a great company.” His older son Ryan, with a finance degree from Michigan State and an MBA from Wayne State University already is part of the company as manager of business processes—and as a franchisee in Middleton’s Jersey Mike’s Grand Rapids company and also in one of his Little Caesars companies. His other son, Zach, who currently attends Central Michigan University, will soon come on board. “Both of my sons have always wanted to work in the business. I didn’t go to college so they’re both going to be more educated than I am,” he says with a characteristic grin.
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BOTTOM LINE Annual revenue: $29.8 million. 2017 goals: Open 7 to 8 new restaurants. Growth meter: How do you measure your growth? By same store sales comps, same store transaction comps, same store income comps, EBITDA (cash flow valuations), and unit counts. Vision meter: Where do you want to be in 5 years? 10 years? My vision is a leadership team that continuously develops our people, with a focus on growing our brands profitably to create more opportunities for our best GMs to become franchisee partners with us. During the next 5 years, I would like to keep growing all the brands we operate, adding units when it makes financial sense. My biggest focus will be bringing Jersey Mike’s to Canada in a joint venture with the parent company. In the next 10 years I hope to have helped grow the brand to over 100 units in Canada, operated by franchisees. How is the economy in your regions affecting you, your employees, your customers? I have been doing this for a very long time. What I have observed is that it is a hard business to be in, and it has always been hard. But the political environment over the last decade has made things so much harder for all the people who work in this industry—the owners, the managers, and the hourly employees. The best way I know how to get through difficult times is to focus on the customers, the team members, and the company. Be as financially responsible as you can and try not to get too distracted by all the noise. Are you experiencing economic growth in your market? In Michigan yes, mainly because of the auto industry. However, in Ontario it is flat. How do changes in the economy affect the way you do business? It is a double-edged sword. When the economy is hot, it is harder to attract talent to this industry. When the economy is cold, the top line is challenging and it increases discounting. How you manage both of those scenarios can determine how well you do long-term. How do you forecast for your business? We use internal financial models we have created, based on what the unit economics look like for each brand. We look at the sales and customer count trend lines, project the estimated inflationary pressure we believe is coming, and consider what price increases we would consider taking, if any, and then input all this information into our financial model and plan our budget accordingly. We make adjustments to the forecasts as needed. What are the best sources for capital expansion? I have a great partner, Carl Chandler, who is our CFO and a CPA. He has been very successful at working with our local banks to secure our financing needs. Experience with private equity, local banks, national banks, other institutions? Why/ why not? We like having long-term relationships with all of our business partners, including banks. So we have a track record of sticking with the ones we started with. We keep them honest by bidding out the business periodically, but our partners value us as much as we value them. So far that approach has served us well. What are you doing take care of your employees? We take care of employees the most by being financially strong and growing. Because we grow most of our talent organically, it creates a lot of advancement. We take the best care of our GMs. We have a unique profit-sharing program designed to give them deferred compensation that they can use one day to get into business for themselves. Carl and I are proud to have helped at least 15 of our past general managers become franchisees. How are you handling rising employee costs (payroll, minimum wage, healthcare, etc.)? All of this is a challenge. We are paying close attention to what everyone is doing and relying a lot on what others are doing in the brands we operate in. There is no simple answer. The rules are changing and things are very inconsistent in the industry right now. How do you reward/recognize top-performing employees? We celebrate success at every opportunity we can. Our monthly manager meetings and our year-end celebrations are the most obvious way. What kind of exit strategy do you have in place? I am working hard on succession planning. I have family in the business and do not plan to exit for a very long time. I love what I do, and I am focused on developing the current leadership team to carry on long after I’m gone.
BY KERRY PIPES
Brand Champion! Pizza Patrón franchisee buys the whole system
harles Loflin first met Antonio Swad in 1997. Swad is the entrepreneur’s entrepreneur, the founder of Wingstop and Pizza Patrón. The two men hit it off and began communicating about the possibility of Loflin opening some Wingstops in his home state of Texas. Within a year, he had opened his first, in San Antonio. Since then he has built an empire of 70 Wingstops in Texas, New Mexico, and Arizona. But it was the move Loflin quietly made late last year that has turned heads. Loflin and Swad remained close over the years. Loflin had added Pizza Patrón stores to his portfolio and last December decided to go big: he purchased the entire 92-unit Pizza Patrón system from Swad. Eleven of the brand’s units are companyowned and Loflin operates 33 himself, with locations in Dallas, San Antonio, and Phoenix. “I am committed to both brands and NAME: Charles M. Loflin TITLE: CEO COMPANY: Pizza Patrón and San
Antonio Wings NO. OF UNITS: 70 Wingstops, 33
Pizza Patróns (and the entire 92unit brand) AGE: 48 FAMILY: Wife of 25 years and 2
children, daughter 14 and son 11 YEARS IN FRANCHISING: 20 YEARS IN CURRENT POSITION: 20
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MULTI-BRAND “I have worked hard to get where I am, but I had a lot of smart and caring people guiding me along the way.” their growth,” he says. “Purchasing the Phoenix area Pizza Patróns made great sense to me and my company because we were already growing the Wingstop brand in Phoenix.” In addition to owning the brand outright, Loflin also owns the development rights for the state of Arizona where he currently has 15 locations in Phoenix, 5 in Tucson, and 1 in Yuma. “I built a 3,200-square foot office for my team in Phoenix last summer and have an office person and a marketing person in the office full-time,” he says. Loflin believes his organization is the right partner to run these stores and to operate the brand as franchisor. “The infrastructure and the knowledge are there. We just have to execute like we always have,” he says. When we last profiled Loflin in Q4 2013, he had just entered the Phoenix market with the Wingstop brand. He was the first franchisee to take Wingstop out-
side the Dallas market and was keeping all 35 of his units humming along. He’s now doubled his number of Wingstops to 70, while operating 33 Pizza Patróns in addition owning the brand. A native Texan, Loflin is familiar with the Hispanic consumer and culture. “It’s a dynamic and growing demographic and I understand their love of the Pizza Patrón brand,” he says. And while he has no plans for major changes to the product line, he hopes to add some technology improvements to enhance the efficiency of the business. For example, he’d like to add online ordering and an app for the brand’s pizza-loving customers. Nearly tripling in size during the last four years and becoming a franchisor to boot, there’s no telling what lies ahead for Loflin. The multi-brand franchisee and franchisor never sits still: when we spoke he was in the middle of opening another six Wingstops.
PERSONAL First job: Washing dishes at a full-service restaurant. This is where the love of the food business started for me. I loved washing dishes. There was a task and a beginning shift and an ending. I could get instant gratification washing dishes and knew when I did a great job.
Developing the younger generation into hard-working people.
Formative influences/events: Antonio Swad, founder of Pizza Patrón and Wingstop. My mother who raised me and my sister.
Favorite book: Don’t have one at the moment.
Key accomplishments: My wife and my two children. Biggest current challenge: Spending quality time with my family. Next big goal: To grow the Pizza Patrón brand into something special. First turning point in your career: After I built my third Wingstop. Best business decision: To buy into Wingstop and then Pizza Patrón. Hardest lesson learned: Learning to trust and rely on others. Work week: 50 hours. Exercise/workout: I need to get back into a routine. My son plays competitive basketball and I help coach, so that helps a little. Best advice you ever got: One was to look people in the eye and shake their hand. Another was to listen and treat people how you wanted to be treated. I try to treat people as equals and encourage working as a team. It has made me very successful for the last 20 years. What’s your passion in business? The quality of our food and service.
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How do you balance life and work? It is tough, but I do not work weekends and try to be home by 5 or 6 most nights. Guilty pleasure: Cars and our lake house. Favorite movie: “The Hunt for Red October.” What do most people not know about you? I like to have fun. If I am not working I am with my family. I love the Dallas Cowboys and the San Antonio Spurs. Pet peeve: Not telling the truth and not trying in life. We are all here for a short time and we need to make the most out of what we were given. I do not mean by building an empire. Figure out your passion in life and fight to keep that fire burning for it. What did you want to be when you grew up? After I washed my first dish and I smelled the back of the house I knew I would always be in the restaurant business in some capacity. I have worked hard and smart to get where I am today, but I had a lot of smart and caring people along the way guiding me and having the faith in me to join me on this ride. Last vacation: Germany, Switzerland, and France. Person I’d most like to have lunch with: It still would be my grandfather!
MULTI-BRAND “We have a great incentive program for all employees, including cooks and cashiers. When the stores’ sales are good we all share in the success.” MANAGEMENT Business philosophy: Work hard and smart. Do not have lazy tendencies and treat people fair. Know that you need your guests, vendors, and employees to get to the finish line. You cannot have one without the other. Management method or style: Give people the tools they need. Tell them when they are doing good or bad and guide them when needed. I am not one who hides my feelings too easily. I’m always working on getting better but it is probably my biggest personal challenge. What are the two most important things you rely on from your franchisor? Honesty and integrity. What I need from vendors: Same as above. Have you changed your marketing strategy in response to the economy? How? Yes, we live in a digital age and the Millennials want everything fast and online or on their smartphone. How is social media affecting your business? Greatly through online
ordering. How do you hire and fire? Hire slow and fire fast. I am not in that position any longer where I do the day-to-day hiring and firing but sometimes you still get involved. I hate letting someone go but it is part of life when they are not meeting their potential. How do you train and retain? We have programs in place and keeping hard-working, honest employees engaged and communicating openly has helped us greatly. We still have a lot of work to do. How do you deal with problem employees? Communicate first their weaknesses and remind them why we are here in our company. Explain to them our goals and determine whether they want to be on our planet. If they do not, we will work together to get them on their planet. Fastest way into my doghouse: Lying, treating a guest poorly, dishonesty, or messing with our food. These have always been non-negotiable in my life.
BOTTOM LINE Annual revenue: NA. 2017 goals: Rebrand Pizza Patrón and grow a healthy franchise business model. Continue to develop Wingstops in the markets I am in. We have six under some sort of construction at this time. Growth meter: How do you measure your growth? By people and their success within our organization. Vision meter: Where do you want to be in 5 years? 10 years? In 5 years, have 400 Pizza Patrón franchises and 100 Wingstops. In 10 years, have over 1,000 Pizza Patróns. How is the economy in your regions affecting you, your employees, and your customers? It’s great in the states and markets we are in (Texas, New Mexico, and Arizona). I do not get caught up in the economy much. If you have a great product and a reasonable price your guests will come. Are you experiencing economic growth in your markets? Absolutely. How do changes in the economy affect the way you do business? If it changes you just make sure that you’re on the right track to take care of your guests’ needs. How do you forecast for your business? We do not forecast at the present time. We work on the fundamentals and feel the rest will take care of itself. What are the best sources for capital expansion? I have a great lender who saw the vision in both brands and believes in me and my growth over the years. He is in a unique position in the restaurant industry. We have
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also become friends over the years, which was nice for me. You can never have too many! Experience with private equity, local banks, national banks, other institutions? I have not. What are you doing to take care of your employees? All of the standard things like vacations, a 401(k), meals, and so on. We promote and train from within when we can, plus we have a great incentive program for all employees, including cooks and cashiers. When the stores’ sales are good we all share in the success. I have done this forever and truly think it is a huge part of our success. How are you handling rising employee costs (payroll, minimum wage, healthcare, etc.)? It is difficult and unfortunately, with rising costs you have rising menu prices. We try to keep the prices down but at times you must raise them. What laws and regulations are affecting your business and how are you dealing with it? None at this moment. How do you reward/recognize top-performing employees? The normal way, with bonuses and raises at times. I have been known to buy a trip or two over the years. I think a big part for people is just knowing they work for someone with honesty and integrity and knowing the vision. What kind of exit strategy do you have in place? I do not have an exit strategy at this time. I would like to work for a while but my wife and I love to travel, so as soon as my youngest is off to college I would like to work a little less. I have 6 years until that happens.
SUCCESS never tasted so good Schlotzsky’s®, one of the nations’s most dynamic fast casual restaurant concepts, is now offering franchise opportunities throughout the U.S. Schlotzsky’s represents a real opportunity to compete in a not so-crowded marketplace with a franchise product that stands out. Our commitment is to provide you with end-to-end support, cutting-edge technology, and ongoing service based on respect, trust, and dedication to the success of your business.
To learn more about this exciting growth opportunity and to schedule an appointment
visit schlotzskysfranchising.com or call 404-705-2051
We’ve been largely recognized by our peers. FastCasual.com
Top 50 Movers & Shakers 2014, 2016
Top 500 Chain Restaurants 2009-2015
Franchise 500 2009-2011, 2013-2017
Chain Restaurant Consumers’ Choice Food Taste & Flavor 2017
AT H L E T E S I N F R A N C H I S I N G BY KERRY PIPES
Former pro basketball star scores in franchising
eorge Tinsley has been a part of Kentucky Fried Chicken/KFC for more than three decades, so long that he had the opportunity to work alongside the brand’s now-legendary founder, Harland “Colonel” Sanders, for three years. That was back in the mid-1970s after Tinsley completed a short professional basketball career in the American Basketball Association (ABA). The Louisville native was a standout for the Kentucky Wesleyan college basketball team that won NCAA Division II championships in 1966, 1968, and 1969. He was a two-time All-American and was named the Most Outstanding Player in the 1969 tournament. Following his college career, he was selected in both the NBA and ABA drafts. He chose the ABA, where he played for the Oakland Oaks, Washington Capitals, Miami Floridians, Kentucky Colonels, and New York Nets. After his ABA career ended in 1972, Tinsley spent several years as a teacher and coach in Louisville. Destiny came calling in 1976 when the Louisville-based Kentucky Fried Chicken
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NAME: George Wm. Tinsley, Sr. TITLE: President, CEO COMPANY: PenGeo Inc., Tinsley Family Co., Tinsley
Group, GWT Consulting, Tinsley Bridgeman LLC
NO. OF UNITS: More than 60 at street and airport locations, anchored by Starbucks, Chili’s, Wendy’s, KFC, Pei Wei, P.F. Chang’s, Shula’s Bar & Grill, Cigar City Brewing, and The Comfy Cow. (We just closed a TGI Fridays we had for 23 years when our contract in the Tampa Airport ended). AGE: 70 FAMILY: Seretha S. (wife), Penni D. (daughter), George Wm. II (son) YEARS IN FRANCHISING: 33 as a franchisee, 8 at KFC
YEARS IN CURRENT POSITION: 33
Franchise Opportunities Store Count 700
$680K Average Annual Sales
*As of 12/31/16, there were 275 UBREAKIFIX locations in operation. As published in Item 19 of our Franchise Disclosure Document dated 3/31/17 these ﬁgures represent the actual, average total revenues for the calendar year ending 12/31/16 of all UBREAKIFIX company stores least two full years as of 1/1/16, and (iii) were still open as of 1/1/17 (13 stores in total). Of the included stores, four (or 31%) exceeded the stated average total operated by us or our aﬃliates that met the following criteria: (i) were company/aﬃliate-operated businesses as of 12/31/16, (ii) had been open for at revenues. 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. **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 t he Department of Law.
STORES OPENED STORES COMMITTED
AT H L E T E S I N F R A N C H I S I N G
PERSONAL First job: My very first job was in a chicken processing location in the East End of Louisville. Formative influences/events: Growing up as an adopted child, raised by an elderly woman who had one leg and could not read or write. The communities I lived in influenced me with survival instincts. Coaches, teachers, ministers, and community centers were my early mentors. Key accomplishments: There are so many things that I am thankful to have accomplished, it would take a book to describe them. Graduating from college and receiving so many honors while there, as well as honors after graduating, has probably been the highlight. My professional life as an athlete and business person comes very close. Last, having a wonderful family tops it off. The Almighty has blessed me more than I deserve. Biggest current challenge: We are developing three different airports with 20 different restaurants, along with closing down and remodeling 9 locations over a one-and-a-half-year period. Next big goal: Continue to grow and transition our business to my son and his leadership team. First turning point in your career: We lost our very first KFC restaurant in a fire. We were able to rebuild on site and double the business. Best business decision: Choosing a great location for my first KFC restaurant. Hardest lesson learned: When purchasing a business and not replacing the leadership team for purposes of building in my personal philosophy. We lost brand was searching for a training director. This was Tinsley’s entrée into franchising— and how he met and worked with Sanders, who had retired but was still working with the brand in a public relations role. “I got the fever for the restaurant business right then and there,” says Tinsley,
this business in 2 years. Work week: 6 days. Exercise/workout: 5 days a week, minimum. Best advice you ever got: Work hard and trust your instincts to go along with your professional training. What’s your passion in business? I am passionate about my employees and my guests. They go hand and hand. I am also very respectful and obligated to the communities we do business in. How do you balance life and work? This is extremely hard, because I love what I do and I love my family. Guilty pleasure: Taking work home. Favorite book: The book of life, where I build a new chapter every year about “Turning Obstacles 2 Opportunities.” Favorite movie: I like action suspense movies. No favorites here. What do most people not know about you? That I love challenges. Pet peeve: I hate negativity. What did you want to be when you grew up? A motivational speaker. Last vacation: Australia. Person I’d most like to have lunch with: Former President Obama.
who went on to spend 8 years as a KFC executive before switching sides and becoming a franchisee. In 1984, he and his wife Seretha opened their first KFC in Auburndale, Fla., then a second in 1986 in nearby Haines City, and have excelled as franchisees ever since.
Since then he has grown his portfolio beyond KFC to include additional brands. The Tinsley Family of companies now operates more than 60 units at street and airport locations that are anchored by Chili’s, Wendy’s, KFC, Pei Wei, P.F. Chang’s, Shula’s Bar & Grill, Cigar City
MANAGEMENT Business philosophy: Lead by example of excellence and don’t look back over your shoulder. Management method or style: Open communications. Greatest challenge: Life is full of challenges that I always attempt to turn into opportunities. How do others describe you? Leader, positive motivator, and inspirational. One thing I’m looking to do better: Learn from previous mistakes. How I give my team room to innovate and experiment: Always welcome their input, even when I know the answer or where I want to go with the problem.
What I need from vendors: Top-quality service and timely delivery. Have you changed your marketing strategy in response to the economy? How? Externally, led by the brand. Internally, we blend national and local advertising with belief in the focus of the marketing theme. How is social media affecting your business? Social media has been a tremendous help with getting positive messages and experiences out of a loyal base. It’s less expensive than traditional marketing when you need to get something out quickly and specific to your group. How do you hire and fire? We hire and you fire yourself. We have great tenure for our employees, therefore turnover is very low in most cases. How do you train and retain? We use the old school four-step method with new wrinkles added to the follow-through.
How close are you to operations? Very close, with hands-on relationships.
How do you deal with problem employees? They usually eliminate themselves.
What are the two most important things you rely on from your franchisor? Resources and leadership with the brand excellence.
Fastest way into my doghouse: Disrespect and poor attitude. Rudeness to guests and to teammates at work.
MULTI-UNIT FRANCHISEE ISSUE II, 2017
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"Having grown with the Bojangles’ family over the past 20 years, we are even more excited about the future. As we expand our brand, more and more families will be craving our flavors.” LET’S GET COOKING. CALL 800.908.5939 OR VISIT BOJANGLES-FRANCHISE.COM
© 2017 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.
AT H L E T E S I N F R A N C H I S I N G
BOTTOM LINE Annual revenue: NA. 2017 goals: Continue to grow our business in a smart fiscal manner, while looking for new opportunities. Growth meter: How do you measure your growth? Year over year, and by our community involvement where we do business. Vision meter: Where do you want to be in 5 years? 10 years? In 5 years, I want to be able to relax and allow my son and his leadership to expand our brands. How is the economy in your regions affecting you, your employees, your customers? All positive at this time. With the new leadership in government there is some uncertainty, but I remain positive.
What are the best sources for capital expansion? Banking, venture capital, and outside investors. Experience with private equity, local banks, national banks, other institutions? Why/why not? In the restaurant business, and particularly in the airport restaurant business, financing is a challenge. Therefore traditional banking is very difficult to accomplish. We look for creative ways to get things done by partnership investments and a mixture of all of the above. What are you doing to take care of your employees? All sorts of things, such as scholarships, savings, personal assistance, and educational opportunities.
Are you experiencing economic growth in your markets? Yes.
How are you handling rising employee costs (payroll, minimum wage, healthcare, etc.)? We have to bite the bullet because we cannot pass these costs on to customers.
How do changes in the economy affect the way you do business? Minimum wage changes always affect business. Also, medical policies affect business.
How do you reward/recognize top-performing employees? We reward monetarily, by acknowledgements with plaques, and by growth from within.
How do you forecast for your business? Budgets versus actual, projected growth versus last year.
What kind of exit strategy do you have in place? Transition to family is the main objective.
Brewing, and Comfy Cow. His brands dominate at Tampa International Airport, Miami International Airport, and Louisville International Airport. It’s the airport angle that has really differentiated Tinsley in his markets. Just last year, his company was named subtenant in a new 8-year contract to expand restaurant service at Louisville International Airport. HMSHost is the primary holder of the nearly $110 million contract. Together, the two companies operate 11 dining venues at the airport. Business is business, but Tinsley also understands the importance of community involvement. That’s why his organization has been actively in-
volved with the chamber of commerce and school district in Winter Haven, Fla., where the company is based. He and his wife Seretha have a long and admirable history of participation in giving back to their communities. At 70, Tinsley recognizes that transition is near. His son George II is actively involved in the organization and looks to be the company’s face of the future. “We intend to continue growing our company and preparing for my son to take over,” says Tinsley. Meanwhile, the company he started in 1984 with a single KFC and two employees (himself and Seretha) is well positioned to continue soaring in the airport market—and beyond.
SPORTS & BUSINESS What skills/experience from sports have carried over to operating a business? Athletics and competition taught me how to be prepared and execute a plan of action. I learned how to turn a loss into a win and how to deal with tough losses. Which do you find more competitive, sports or business? Business, because you are a leader, and sometimes you only get one shot at success. Why did you choose franchising as an investment option? Franchising has a developed operations plan of success and multiple resources to assist you when needed.
MULTI-UNIT FRANCHISEE ISSUE II, 2017
How did you transition from sports to franchising? Given my career path, it was fairly easy from the preparation standpoint. It does not hurt to work alongside the founder of KFC for 3 years, to learn from the bottom up. Having worked with hundreds of millionaires in the business, the blueprint was there. What was your greatest achievement in sports, and what has been your biggest accomplishment as a franchisee? In sports, my greatest honor was being inducted to five Halls of Fame and winning 3 NCAA Championships. In franchising my biggest accomplishments include being named Franchisee of the Year by KFC and TGI Fridays, and having the top sales volume for TGIF 9 years in a row.
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U N D E R BY DEBBIE SELINSKY
Thriving at 28
Hard work and long hours pay off for Chelsea Segura
helsea Segura signed her first franchise agreement with The Little Gym two months before she graduated from Louisiana State University with a degree in kinesiology. At the insistence of her hard-working, entrepreneurial parents, she’d worked during high school and throughout college. In 2010, Segura successfully launched her first business on her home turf in Lafayette, La., with her parents as partners. Five years later, she opened a second loca-
tion, The Little Gym of the Northshore, in Covington, La., just above Lake Pontchartrain. In addition to expanding her business, her goal was to offer her loyal employees the opportunity to move up. Segura, who is getting married in May, recently joined her brand’s Executive Advisory Committee. She also participates in The Little Gym’s charitable Big Hearts board and sits on the Reunion Committee. She may often be the youngest seated at the table at executive meetings, but the
energetic, hard-working 28-year-old with the “service heart” has no doubt that being a franchisee can be the perfect career for young entrepreneurs willing to work hard and put in the time. She’s also certain that younger franchisees can bring a lot to the table, especially when it comes to leveraging social media to grow and expand the business. “I work a lot with potential franchisees for The Little Gym, and I meet young franchisees who really have it together,” she says. “They also recognize that, through franchising, they don’t have to reinvent the wheel. So much has been done that makes our lives easier.” But that doesn’t mean franchisees for The Little Gym can’t be creative, she adds. “What I love about The Little Gym is that they have recommendations and they have guidelines. You can put your own spin on certain things, but not on others, for good reason. That trial and error is why I trust them.” Segura, who was introduced to The Little Gym when she took a part-time job there in college, says she actually fell into her perfect career. And, in an industry not always quick to use technology, she credits social media for much of her company’s success. “Social media is really fabulous for our business, especially with the reviews and NAME: Chelsea Segura TITLE: Co-owner COMPANY: Segura’s Prosperity
NO. OF UNITS: The Little Gym, 2 AGE: 28 FAMILY: Fiancé Tren LeBlanc;
parents and business partners Ronald and Tina Segura; brother and sister-in-law Tyler and Lauren Segura
YEARS IN FRANCHISING: 7 YEARS IN CURRENT POSITION: 7
MULTI-UNIT FRANCHISEE ISSUE II, 2017
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*Top 50% of Cafes. Based on calendar year 2016, 88 of 412, or 21.4%, of the Cafes gained or surpassed this sales level. This information appears in Item 19 of our Franchise Disclosure Document. Your results may differ. There is no assurance that you will do as well. This information 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 offering is by prospectus only. Currently, the following states regulate the offer and sale of franchises: California, Hawaii, Illinois, Indiana, Maryland, Michigan, Minnesota (File No. F-4953), New York, North Dakota, Oregon, Rhode Island, South Dakota, Virginia, Washington and Wisconsin. If you are a resident of or want to locate a franchise in one of these states, we will not offer you a franchise unless and until we have complied with applicable pre-sale registration and disclosure requirements in your state. New York State Disclaimer: This advertisement is not an offering. An offering can only be made by 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. CALIFORNIA DISCLAIMER: 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. © 2017 Tropical Smoothie Cafe, LLC. Tropical Smoothie Cafe, LLC 1117 Perimeter Center West, Suite W200 Atlanta, GA 30338.
U N D E R
PERSONAL First job: Babysitting. Formative influences/events: Being the first person in my family to graduate from college! I am also thankful my parents made me get a job at such a young age, and then keep one throughout college. Key accomplishments: Being nominated to take part in The Little Gym’s Big Hearts board, Reunion Committee, and being voted onto the Executive Advisory Committee most recently. Biggest current challenge: Getting team members to be more salesoriented. Next big goal: Reaching 400 students at each location. First turning point in your career: Opening up The Little Gym of Lafayette. The community really accepted, loved, and supported us. (They still do!) It gave me the confidence I needed to take my business, and eventually businesses, to the next level. Best business decision: Opening up our second location in Covington, La. Hardest lesson learned: I can’t do everything myself, or expect everyone to be perfect. Learning to delegate and not micro-manage really made my life much easier. Work week: I teach classes Monday and Tuesday mornings in Lafayette and Thursday evenings in Covington. Much of the business side of work is done at referrals from clients. Instagram has been great because it allows our members to follow us and us to follow them. For example, if a parent posts about a child who made great grades, we send them a congratulatory postcard in the mail. It brings our relationships to another level,” she says.
home on Wednesdays and Fridays. Exercise/workout: Walking 4 miles a day and taking occasional Lagree Fitness classes. Best advice you ever got: Hire slow, fire quick. It’s important to be mindful of your team and who you bring on. What’s your passion in business? The outcome. With The Little Gym, it’s so rewarding to watch the children grow and learn and to celebrate them. How do you balance life and work? I think the biggest key to having a work/life balance is having a great, reliable team in place. When I am not at the gyms, I don’t worry any more. I really trust and empower my team. Guilty pleasure: Binge watching Netflix shows. Favorite book: The Bible. Favorite movie: “The Lion King.” What do most people not know about you? I love to go to bed early! Pet peeve: Bad manners. What did you want to be when you grew up? My own boss. Last vacation: Seaside, Fla. Person I’d most like to have lunch with: Jimmy Fallon.
And Facebook has been a great advertising tool, she says. “We see people talking us up on Facebook, and we watch and boost the posts. You can see the results live, so it really makes us feel like our money is being well spent.” Her best advice to young people who
want to own their own Little Gym is, “Go there, work there, take your kids there. The big advantage is the room to grow. It’ll be sad for me when my team members move beyond our franchise, but I’m happy for them because they’re getting greater opportunities.”
MANAGEMENT Business philosophy: Love what you do. Management method or style: Hands-on, but I don’t like to micromanage. It’s much easier to have people do things for me—something I’ve learned over time. Greatest challenge: To train and retain good people. It’s disappointing to train someone, only to have them quit. How do others describe you? Organized, persistent, enthusiastic, and goal-oriented. One thing I’m looking to do better: Help my managers and employees grow in their personal lives. How I give my team room to innovate and experiment: If they have an idea, I love telling them to go for it! I also like to let them feel like they can’t completely fail or mess things up. We all make mistakes and everything is a learning process. “What’s the worst that could happen?” is something I often say, followed by “It’s all good!” How close are you to operations? I am at each location 1 to 2 days per week. What are the two most important things you rely on from your franchisor? Curriculum and our point-of-sale program. What I need from vendors: Things to make our daily operations more efficient.
MULTI-UNIT FRANCHISEE ISSUE II, 2017
Have you changed your marketing strategy in response to the economy? How? We put the majority of our advertising budget toward online marketing. How is social media affecting your business? It’s really beneficial. We love the ratings, referrals, and the results from social media marketing. It also allows us to reach out to our families and potential members on a personal level outside of the gym. How do you hire and fire? As mentioned earlier, I hire slowly and fire quickly. You have to make sure you are bringing on dedicated team members who are passionate and willing to put in the time to grow and learn. How do you train and retain? The Little Gym International has training systems that are incredibly efficient. We truly appreciate and value our employees. To retain employees, we work with them to set goals and offer incentives when those goals are reached. How do you deal with problem employees? We have a “See it, say it, move on” motto. When there is a problem, we address it and then move on with a positive attitude. Fastest way into my doghouse: Not following through with something, and not being professional and considerate.
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www.wienerschnitzel.com *This information is an average of unaudited gross sales shared by top 25% quartile of 317 open Wienerschnitzel restaurants for entire calendar year of 2016. **Same store sales and food costs are reflective of unaudited reporting shared by all Full and Limited franchisees in continuous operation from January 1, 2011 to December 31, 2016. Your estimated sales and operating costs can and will vary depending on how you run your business, among other factors. Please read the GGI Franchise Disclosure Document in its entirety. This information is not an offer to sell you a franchise. We will not offer you a franchise until such time we have complied with FTC disclosure requirements, and you have met our application and pre-approval process to be awarded a franchise license.
U N D E R
Finding the right franchise is vitally important, says Segura, who has nothing but praise for the 40-year-old educational and fitness gym for children and parents. In college, when she met with the owner at the Baton Rouge gym about a job, she was stunned. “I couldn’t believe what I was seeing. It combined all my gymnastics, cheerleading, and movement studies in one place. It was perfect for me!”
Segura says she’s been lucky to have had the complete support of her parents throughout the venture and still counts on her mom to give her the occasional tough pep talk. After her wedding next month, Segura says she’ll get back to work on adding a third location. For now, she’s staying steady and maintaining her company’s signature family environment. Alex Bingham, COO of The Little
Gym, says Segura is a young franchisee to watch. “Chelsea is one of our most passionate and driven franchisees. Her success derives from her dedication to making the lives of children and families in her community better, which aligns extremely well with The Little Gym’s overall mission,” he says. “We are so proud of Chelsea’s growth, and look forward to her continued success in our system.”
LIFE UNDER 30 How did you get into franchising at such a young age? I worked at The Little Gym of Baton Rouge throughout college at Louisiana State University, and I just knew this franchise concept was made for me. I wanted to bring it to my community at home. Was becoming a franchise something you’d planned on? It was not. I knew I wanted to be a business owner, and I could not imagine the challenges of doing it all on my own from scratch. I am very thankful for the support and rapport that TLG provides. Did you have a mentor or inspiration for getting into franchising? My mom has always been a small-business owner and entrepreneurial spirit. I have always admired this in her. I was lucky enough to have TLG fall into my life. What jobs, skills, and experience have helped you operate a franchise business? I would say my outgoing personality and big heart.
I’m a people person, and adore the families that walk through my gyms’ doors. These traits have allowed me to grow not only in my professional life, but also in the franchise world. I want to help the families we serve, the communities in which I belong, and other franchisees in The Little Gym system. What kinds of obstacles did you face in franchising at such a young age? Definitely a lack of experience in the business world. However, with the TLG training they were able to walk me through every step. How would you describe your generation? I think the people of our generation have a big heart and care about the well-being of other people. I believe that we also value ourselves and the importance of a life/work balance. Our generation is all about the experience: we want to enjoy life and be successful in our careers. Do you see franchising as a stepping stone or a career for you? Career—it was made just for me.
BOTTOM LINE Annual revenue: Approx. $670,000 (both locations). 2017 goals: $375,000 at each location. Growth meter: How do you measure your growth? Revenue is an obvious sign of growth. However, enrollment plays a major role as well. We like to see a 10 percent growth in revenue and enrollment each month compared with the previous year. Vision meter: Where do you want to be in 5 years? 10 years? I would like each location to be a 500-child, $500,000 gym within 5 years. In 10 years, I hope to step back a bit more from teaching to focus all my efforts on operations. How is the economy in your region affecting you, your employees, your customers? The past two years have been tough for South Louisiana. This part of the state is filled with oilfield workers, and with the oilfield being down and many people jobless, we have seen a rather large drop in enrollment, especially at our Lafayette location. Covington is experiencing a similar economy, though not as severe. Are you experiencing economic growth in your market? We started out 2017 very strong and are ahead at both locations compared with last year. People around here seem to be hopeful that the economy is on its way back up. How do changes in the economy affect the way you do business? We are much more conservative than we have ever been. We cut back on some small things like offering free t-shirts and providing balloons at birthday parties. We use less-expensive options for party goods. We also had to discount the program for a certain period of time, which is not something we
MULTI-UNIT FRANCHISEE ISSUE II, 2017
do too often. How do you forecast for your business? We shoot to grow 10 percent each month and each year, looking at enrollment and revenue. Experience with private equity, local banks, national banks, other institutions? Why/why not? We are from a small town and started with our local bank, which ended up being purchased by a national bank. The technology upgrade through that acquisition has been great. What are you doing to take care of your employees? We like to provide bonus opportunities each month by setting and achieving goals. We often cook for our team and provide team outings to let loose and bond. We create an inclusive family environment. It’s something that we are very proud of. How are you handling rising employee costs (payroll, minimum wage, healthcare, etc.)? We’ve always been super-conservative, but we continue to cut back in little ways. Keeping good employees is a blessing, but it also means they need raises every year. We have to make that a priority because we want to keep them for as long as we can. How do you reward/recognize top-performing employees? During key enrollment periods we have competitions and cash prize incentives. We try to do things year-round that let our staff know how much we appreciate them. We do gumbo for the annual Christmas party, and every May we have a crawfish boil where everyone gets a certificate of service and a personalized memento to make them feel special. What kind of exit strategy do you have in place? I’m too young to think much about it at this point!
We’ve got multiple reasons to franchise multiple stores. Not only are we a global icon, 7‑Eleven® offers a turnkey business model, the latest technology, a fast and easy application process, and plenty of room to grow. And of course, there’s more cash flow. If you have a vision for franchising multiple stores, take a closer look at 7‑Eleven. To learn more, visit Franchise.7-Eleven.com
© 2016 7‑Eleven Inc. All rights reserved. This is not an offer to sell a franchise. An offer can only be made in applicable states with authorized documentation. 7‑Eleven Inc.; P.O. Box 711, Dallas, TX 75221‑0711
1 NPC INTERNATIONAL PIZZA HUT WENDY’S KFC TACO BELL
1,478 1,254 220 2 2
2 TARGET PIZZA HUT COLD STONE CREAMERY
1,170 1,168 2
3 FLYNN RESTAURANT GROUP APPLEBEE’S TACO BELL PANERA BREAD
854 485 273 96
4 SUN HOLDINGS BURGER KING POPEYES LOUISIANA KITCHEN T-MOBILE GNC ARBY’S CICIS GOLDEN CORRAL KRISPY KREME AIRPORTS (MISC. BRANDS)
724 290 110 89 85 75 36 24 15 10
5 DHANANI GROUP BURGER KING POPEYES LOUISIANA KITCHEN
669 490 179
6 MUY BRANDS PIZZA HUT WENDY’S TACO BELL LONG JOHN SILVER’S
607 316 173 76 42
7 ARAMARK EINSTEIN BROS. BAGELS CHICK-FIL-A SUBWAY PAPA JOHN’S PANDA EXPRESS PIZZA HUT QUIZNOS TACO BELL FRESHII MOE’S SOUTHWEST GRILL QDOBA TIM HORTONS WHICH WICH CHILI’S RAISING CANE’S ERBERT & GERBERT’S SBARRO THE EXTREME PITA KFC STEAK ‘N SHAKE QUAKER STEAK & LUBE THE COFFEE BEAN & TEA LEAF WAHOO’S FISH TACO RITA’S ITALIAN ICE DUNKIN’ DONUTS COSI MOOYAH LA MADELEINE COUNTRY FRENCH CAFE PINKBERRY DENNY’S
556 123 115 68 41 35 30 21 18 18 16 9 9 8 6 5 4 4 3 3 3 2 2 2 2 2 2 2 1 1 1
MULTI-UNIT FRANCHISEE ISSUE II, 2017
8 PILOT TRAVEL CENTERS SUBWAY CINNABON WENDY’S ARBY’S TACO BELL DQ TREAT MOE’S SOUTHWEST GRILL PIZZA HUT CARVEL ICE CREAM SHOPPE CHESTER’S KFC HOT STUFF PIZZA
547 198 148 111 45 17 7 7 7 2 2 2 1
9 ARMY & AIR FORCE EXCHANGE SERVICES BURGER KING SUBWAY CHARLEYS PHILLY STEAKS POPEYES LOUISIANA KITCHEN TACO BELL ARBY’S EINSTEIN BROS. BAGELS WING ZONE BLIMPIE PIZZA HUT TACO JOHN’S CHURCH’S CHICKEN CAPTAIN D’S CINNABON DENNY’S DOMINO’S GODFATHER’S PIZZA
497 124 107 84 50 44 19 18 10 8 8 7 6 3 3 3 2 1
10 KBP FOODS KFC KFC/TACO BELL KFC/LONG JOHN SILVER’S KFC/PIZZA HUT EXPRESS KFC/TACO BELL/PIZZA HUT KFC/A&W
452 282 147 15 3 3 2
11 HARMAN MANAGEMENT KFC A&W LONG JOHN SILVER’S PIZZA HUT
394 257 116 18 3
12 SODEXO EINSTEIN BROS. BAGELS CHICK-FIL-A PIZZA HUT SUBWAY TACO BELL JAMBA JUICE ERBERT & GERBERT’S PAPA JOHN’S UFOOD GRILL BURGER KING QUIZNOS MOE’S SOUTHWEST GRILL MCALISTER’S DELI TIM HORTONS BLIMPIE HOT STUFF PIZZA QDOBA CHESTER’S
393 75 57 39 36 16 12 12 10 10 9 6 6 4 4 4 4 3 3
DQ TREAT MRS. FIELDS NATHAN’S FAMOUS QUAKER STEAK & LUBE THE COFFEE BEAN & TEA LEAF TONY LUKES A&W GODFATHER’S PIZZA SBARRO
2 2 2 2 2 2 2 2 2
13 HMS HOST BURGER KING NATHAN’S FAMOUS QUIZNOS PIZZA HUT THE GREAT AMERICAN BAGEL CINNABON POPEYES LOUISIANA KITCHEN FAMOUS FAMIGLIA PIZZERIA CHICK-FIL-A KFC PINKBERRY RUBY’S DINER TCBY LA MADELEINE COUNTRY FRENCH CAFE STEAK ‘N SHAKE MIAMI GRILL ATLANTA BREAD COMPANY A&W MANCHU WOK BAJA FRESH BLIMPIE GODFATHER’S PIZZA YEUNG’S LOTUS EXPRESS PANDA EXPRESS
373 61 51 35 22 20 16 14 9 7 6 5 4 3 3 3 2 2 2 2 2 2 1 1 1
14 JIB MANAGEMENT (YADAV ENTERPRISES) JACK IN THE BOX DENNY’S TGI FRIDAYS SIZZLER CORNER BAKERY CAFE EL POLLO LOCO
343 218 36 72 9 6 2
15 TACALA TACO BELL SONIC DRIVE-IN KFC
338 270 66 2
16 UNITED STATES BEEF CORP ARBY’S TACO BUENO
337 331 6
17 ADF COMPANIES PIZZA HUT PANERA BREAD KFC
299 283 15 1
18 THE COVELLI FAMILY LIMITED PARTNERSHIP PANERA BREAD DQ GRILL & CHILL/TEXAS DQ O’CHARLEY’S
295 280 9 6
19 K-MAC ENTERPRISES TACO BELL KFC GOLDEN CORRAL
294 271 17 6
MULTI-BRAND 28 QUALITY DINING BURGER KING CHILI’S
208 162 46
42 PACIFIC BELLS/WORLD WIDE WINGS TACO BELL BUFFALO WILD WINGS
141 112 29
29 FALCON HOLDINGS CHURCH’S CHICKEN LONG JOHN SILVER’S
184 140 44
44 APPLE GOLD APPLEBEE’S BURGER KING
138 134 4
29 MARLU INVESTMENT GROUP ARBY’S CHURCH’S CHICKEN LITTLE CAESARS TGI FRIDAYS JACK IN THE BOX SEARS OUTLET & APPLIANCE STORES SIZZLER
184 47 40 29 22 21 20 5
44 VALENTI MANAGEMENT WENDY’S CHILI’S
138 120 18
46 PALO ALTO TACO BELL PIZZA HUT KFC
135 83 36 16
31 CELEBRATION RESTAURANT GROUP/ CFL PIZZA/BRAVO FOODS PIZZA HUT TACO BELL
174 130 44
47 COTTI FOODS TACO BELL WENDY’S PIZZA HUT
134 89 89 2
32 DESERT DE ORO FOODS TACO BELL PIZZA HUT
170 112 58
48 SUMMIT RESTAURANT GROUP PIZZA HUT LONG JOHN SILVER’S
130 117 13
266 163 73 27 2 1
33 THE PANTRY SUBWAY LITTLE CAESARS DQ TREAT DQ GRILL & CHILL/TEXAS DQ CHURCH’S CHICKEN NOBLE ROMAN’S PIZZA HOT STUFF PIZZA
168 131 20 6 5 3 2 1
49 STAR PARTNER ENTERPRISES KFC A&W PIZZA HUT TACO BELL
127 104 13 5 5
50 SERVUS! LONG JOHN SILVER’S WENDY’S
123 88 35
24 AMPEX BRANDS KFC LONG JOHN SILVER’S
246 188 58
34 JRN KFC PIZZA HUT
165 155 10
25 FUGATE ENTERPRISES PIZZA HUT TACO BELL
242 175 67
26 COMPASS GROUP USA PAPA JOHN’S EINSTEIN BROS. BAGELS QUIZNOS PANDA EXPRESS SALSARITA’S FRESH CANTINA JAMBA JUICE MOE’S SOUTHWEST GRILL NATHAN’S FAMOUS TACO BELL DENNY’S TIM HORTONS WENDY’S BURGER KING PINKBERRY SBARRO BOJANGLES’ CHILI’S COSI IHOP ILLY JASON’S DELI SMASHBURGER TOSSED UNO DUE GO
237 54 40 12 10 7 6 6 6 5 4 4 4 3 3 3 2 2 2 2 2 2 2 2 2
35 SUNDANCE TACO BELL KFC PIZZA HUT A&W
154 139 9 4 2
36 NATIONAL FOOD SERVICES POPEYES LOUISIANA KITCHEN BURGER KING
27 CHARTER FOODS TACO BELL LONG JOHN SILVER’S A&W KFC
209 129 66 12 2
20 SIZZLING PLATTER LITTLE CAESARS DUNKIN’ DONUTS SIZZLER
291 246 27 18
21 LUND BROWN GROUP HARDEE’S CARL’S JR DUNKIN’ DONUTS TACO BELL
286 274 10 1 1
22 TA OPERATING POPEYES LOUISIANA KITCHEN SUBWAY GODFATHER’S PIZZA TACO BELL PIZZA HUT BURGER KING HOT STUFF PIZZA WENDY’S QUIZNOS DQ GRILL & CHILL/TEXAS DQ NOBLE ROMAN’S PIZZA RITA’S ITALIAN ICE SUPER 8 TIM HORTONS
267 62 48 38 38 32 29 5 3 2 2 2 2 2 2
23 LOVE’S TRAVEL STOPS & COUNTRY STORES SUBWAY CHESTER’S HARDEE’S DQ TREAT TACO JOHN’S
TOP 25 BRANDS OF THE 2017 MULTI-BRAND 50 1
150 131 19
36 VKC GROUP SUBWAY GREAT AMERICAN COOKIES PRETZELMAKER MOOYAH TWISTERS TCBY
150 123 14 6 3 3 1
POPEYES LOUISIANA KITCHEN
38 DOHERTY ENTERPRISES APPLEBEE’S PANERA BREAD
149 107 42
39 RESTAURANT MANAGEMENT CO. PIZZA HUT LONG JOHN SILVER’S
148 135 13
10 PANERA BREAD
11 LONG JOHN SILVER’S
13 LITTLE CAESARS
14 EINSTEIN BROS. BAGELS
15 JACK IN THE BOX
16 CHURCH’S CHICKEN
40 BRIAD RESTAURANT GROUP WENDY’S TGI FRIDAYS
147 86 61
19 TGI FRIDAYS
41 INTERFOODS OF AMERICA (SAILORMEN) POPEYES LOUISIANA KITCHEN BURGER KING
144 130 14
21 PAPA JOHN’S
42 APPLE INVESTORS GROUP BURGER KING WENDY’S
141 87 54
23 CHARLEYS PHILLY STEAKS
76 Source: FRANdata
MULTI-UNIT FRANCHISEE ISSUE II, 2017
BY HELEN BOND
ADDING NEWBRANDS Successful franchisees tell how they do it
o you want to build your business by adding another brand? Maybe two? While the ROI must make sense, seasoned multi-brand franchisees say the key to franchise happiness begins with finding the right fit, from values and culture to matching personal and financial goals with the brand’s. “I think you have to find brands you can be passionate about, brands you love. Not every brand is right for every place,” says Michael Solomon, who operates three Capriotti’s Sandwich Shops in Las Vegas with two more on the way, along with two Great American Cookies in Kentucky and another in Tennessee. The entrepreneur even launched his own brand, Wingtime, late last year. Michael Solomon
MULTI-UNIT FRANCHISEE ISSUE II, 2017
Dallas-based multi-brand franchisee Eric Werner agrees that making the right choice of both brand and market is more important than ever, particularly in the restaurant business. “The QSR landscape today is significantly different than 10 or 15 years ago. There are a ton more franchises out there and it is more competitive,” says Werner, who owns seven different brands, including 48 Subway restaurants in Texas. He says an extensive market and competitive analysis is a critical element of a franchise buyer’s due diligence. The ability of today’s prospective investors to find and evaluate data on franchise systems has been a game changer. Wouldbe franchisees can investigate brands in print and online to explore different in-
dustries, gain valuable insights into the franchise world, and create a short list of brands to pursue. And FDDs provide invaluable information about litigation, franchisee obligations, turnover rate, financial performance, and more. Just ask Solomon, who purchased his first franchise in 1994. “The difference in the amount of information you can get yourself and from the franchisor from 1994 to 2017 is like a joke,” he says. “There is the ability for you to get anything you ever wanted to know about a franchise. But the important thing is you have to know what you are looking for. You can get lost in all the information.” Start with yourself Uncovering the right answers to the right questions begins with a little selfevaluation. What kind of franchise do you want to operate? Do you have the infrastructure in place to add new brands, or must you add overhead? What skill sets do you bring to the table? How much income do you need? How will that new brand fit in with or affect your current operation? Can you afford it today, or is it better to wait another year? Whatever the question, in addition to the financial aspects of adding a new brand, before investing first establish your personal and quality-of-life goals. “It is very important to know how you want to be,” says Wine & Design multiunit franchisee Amanda Owens. “If you want to buy into a franchise where you can be an invisible owner, that’s great. If you want to buy into something that you need to be involved in day-to-day, you need to be prepared to make those sacrifices.” With two small children, Owens was looking to step away from the grind and
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Visit owncheckersfranchise.com/update or Call 888-913-9135 © 2017 Checkers Drive-In Restaurants, Inc. 4300 W. Cypress St., Suite 600, Tampa, FL 33607. 1. Per Item 19 in Checkers & Rally’s 2016 Franchise Disclosure Document. Same-store sales results are measured by combining 2016 FDD and 2015 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 file number F-4351 in the state of Minnesota. In New York, an offering can only be made by a prospectus filed first with the Department of Law, and such filing does not constitute approval by that Department. 20170024
ADDING NEW BRANDS Eric Werner
demands of corporate life. She launched her franchise search with a mission to bring a brand with entertainment value to her hometown of Clayton, N.C., a small town undergoing a downtown revitalization and planned development not far away. Owens opted for Wine & Design, based in nearby Raleigh, and opened her first franchise in 2013. “The Internet was my main go-to tool,” she says. “From a personal perspective, I reached out through social media to gauge interest in our market and the experiences of those who had attended an event of a paint-and-sip franchise. I was able to research other models’ FDDs and compare.” And of course before signing, she had her business attorney review the brand’s FDD. Owens, who now operates three Wine & Design territories in North Carolina, was drawn to the concept, the initial training, and the franchisor’s focus on continued support. The network operated more “like a family of franchisees and expressed a hunger to evolve and keep innovating,” she says. “Day-to-day expectations to create a cohesive experience across all units was equally important. I also knew that Wine & Design was a fairly young model, and that there would be potential for growth outside of our initial studio.”
MULTI-UNIT FRANCHISEE ISSUE II, 2017
How bad do you want it? When Todd Fetter began looking to buy into his first franchise brand, the Ohio entrepreneur and father of five was certain of two things: “We loved sports and we loved wings,” says Fetter, who now owns seven Buffalo Wings & Rings, with three more slated to open this year. No stranger to weighing the risks and rewards of an investment, Fetter’s ventures include mortgaging everything, even a lawnmower and his wife’s van, to buy his first company. While money remains the bottom line in any deal, Fetter’s initial move into franchising was out of his comfort zone. “I’m not that guy to find something you love to do and make money,” says Fetter, who signed with Buffalo Wings & Rings in 2009 and spent the next four years looking for the perfect site. “I’m the guy who buys something to make money and then love it. This was me stepping out of my norm.” Fetter narrowed his list after discovering Buffalo Rings & Wings during an online search. He found territories available in his own backyard, and a franchisor with a home base just two hours away in Cincinnati. Along with financials, Fetter checked out the competition and what customers were saying about the brand on Facebook, Yelp, and TripAdvisor. And, before even attending a discovery day, Fetter and his wife spent plenty of time eating the food. “You’ve got to do your reconnaissance,” he says. Amanda Owens
Evaluating the brand Werner recommends would-be franchise investors look for innovative brands with consistent results. Along with his 48 Subways, his portfolio includes Wingstop, Little Caesars Pizza, The Catch, LA Sunset Tan, and Beverly Hills Rejuvenation Center (his most successful franchise investment to date). When Werner evaluates a new brand, he considers current trends and whether the concept is growing within its sector. Then there’s the question of established versus emerging brands. “There are two ways to look at it: the high risk of getting in at the very beginning on a newer concept, or the low risk of proven concepts,” says Werner. “There are pros and cons to both.” Newer concepts, he says, provide opportunities to dictate better franchise agreement terms for future growth and territories if the brand takes off. Established brands may mean growth is more limited, but they offer a track record of proven success and name recognition when entering new markets. Once Werner locks in on a specific franchisor, he conducts a kind of SWOT analysis, evaluating the strengths and weaknesses of the potential investment, competitive threats, if a brand must do a lot of volume to make money, and the percentage and number of multi-unit franchisees in the system. “If that is high, it means they are so successful that people want more,” he says. When assessing a brand, due diligence
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ADDING NEW BRANDS doesn’t stop with the franchisor. A franchisor’s strength (or weakness) can be found in the happiness and financial health of its franchisees. Speaking with as many franchisees as you can is a critical, yet much neglected step in the evaluation process. Meeting franchisees face-to-face provides invaluable insights into the day-to-day life of a brand. “They are in the same boat you are, they see the same things, and 90 percent of you are having the same experience,” says Solomon. Existing franchisees can share the pros and cons of the business, including how long it took to reach profitability, if costs are in line with expectations, training, marketing, support, and how a franchisor resolves conflicts with its franchisees. “The first thing I do is go through the franchisee list. My favorite people to call—if you can get hold of them— are the people who left the system,” says Solomon. “You have to take what they say based on perspective, but they will tell you the good, the bad, and the ugly. You have to read between the lines and talk to enough people so you feel like you have a good feeling for the system.” Culture counts Doing your homework before signing on also includes ensuring that the brand’s values and culture are a good fit with your own. This includes the corporate office and its relationship with franchisees, as well as the company’s social and charitable activities. In the end, says Owens, who sits
Todd and Audra Fetter
MULTI-UNIT FRANCHISEE ISSUE II, 2017
on Wine & Design’s franchise advisory council, finding the right fit means more than financial success. “Make sure a franchise brand fits into your lifestyle and your beliefs,” she says. “Also, that it fits into the community or market you want to bring it into. If you bring something into a market where it is needed, but it doesn’t align with how you feel and you are not 100 percent engaged, you aren’t going to get the full benefit of owning a business.” What if it breaks? Existing franchisees also can help you better understand many of the critical details involved in running the business. Common questions to ask include: Are you making money? What is your view on leasing versus owning? How hard or easy is it to attract good employees in your market? Can you share a bad scenario and tell me how you and corporate resolved the issue? “Everything is great when it is good,” says Fetter. “The bottled beer cooler doesn’t break Monday through Friday—it always breaks on the weekend. In those situations, who do you call?” These days, Fetter, whose business is a family affair, is happy to say good things about the brand to any prospect. He’s learned a lot since opening his first Buffalo Wings & Rings in March 2013, when he was optimistic but realistically cautious as he embarked on his brand new venture. “I was still unsure. What if we had the
one store in the history of the earth that we open and no one comes? You have a big loan and a lot on the line and I had never been in the restaurant business,” he says. “I learned it was pretty much like any other business in that you have to watch your labor and costs.” His conservative approach gave the first-time franchisee a chance to test the waters of his franchisor’s ongoing support before adding another unit—a key element potential investors should investigate, he says. “Do they really support you, or is that just a sales pitch? If they hadn’t been there for me and supported me when I had questions, sending people in and helping me along the way, I never would have done a second one, much less seven or 10.” What if things go south? There will be times when a deal doesn’t work out as expected, despite all the best intentions and due diligence both sides invested. Whether it’s internal factors, external ones, or both, it’s wise to have a Plan B. Before he invests, says Werner, he makes certain he has an exit strategy. “If I get in, how am I going to get out?” Werner also has developed a strategy to increase his odds of success: he has transitioned from the traditional multiunit franchisee model to an 80/20 concept, in which he provides 20 percent ownership and a guaranteed salary to a managing owner. “I try to recruit high-caliber talent or someone who has been with me for years,” he says. “The brand runs better because I can’t focus on everything by myself—and I don’t have to worry about it because I know someone else is worrying about it for me.” Solomon looks for commonalities among brands to build operational efficiencies with expansion. Yet, no matter which brands they choose, buyers must approach any investment with open eyes and realistic expectations about the franchisee-franchisor relationship. “There are a lot of misconceptions about what a franchisor does and doesn’t do,” he says. “A franchisor is kind of like a consultant—kind of there and kind of not. You have to understand what your franchisor is willing to do for you. Your franchisor can’t balance your books for you, and they can’t tell you whether to hire or fire. The franchisor is someone who gives you guidelines, but they can’t run your business for you.”
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BY SARA WYKES
BECOME THE EMPLOYER OF CHOICE IN YOUR MARKETS
fter 25 years in the restaurant business, Mike Richey knows that an offer of a dollar more per hour from a competitor can be too much for an employee to refuse. Richey, who operates five Golden Corrals, wishes his employees well when they leave. But that’s not the end of the story. A couple of weeks later he calls them to ask if they’d like to return to their old job—a practice that has paid off for him over the years. “People are flattered that we care enough to call,” says Richey, who once worked at Golden Corral corporate as a mid-level director. “We start by asking if they’d like to come back for at least one day a week, on whatever time off they have from their new job.” After about two weeks, Richey says, the honeymoon with the new job is over. Also, it takes about four weeks before an employee is officially terminated in his company’s records system. Employees who return before that window closes retain their accumulated paid vacation time. For employees with five years’ tenure or more, that amounts to three weeks. “We don’t call everybody back,” says Richey. “We focus on the best and rely on our unit managers to make that call, but one in three people we call do come back.” Richey’s come-on-back call is an effective response to one piece of the classic triad of key operational challenges multiunit franchisee organizations confront: recruiting, training, and retaining the best people. Conquering this challenge requires thinking beyond the traditional, whether through “day in the life” job videos that appeal to Millennials, or
MULTI-UNIT FRANCHISEE ISSUE II, 2017
private Facebook groups for employees to exchange problem-solving tips and advice. We looked around for other innovative approaches to solving the employment “big three” and found several ideas worth sharing. Finding the best Social media platforms have become the go-to first step for recruiting hourly workers. Sites such as LinkedIn can be useful for higher-level jobs, but Brent Veach, whose 40 Del Taco restaurants make him the brand’s largest single franchisee, turns Brent Veach
to other online recruitment websites to find hourly employees. These include PeopleMatter, Snagajob, and Indeed— and he updates his ads regularly. He also offers his employees bonuses for successful referrals. And in this perhaps overly digital age, he adds another old-school technique: he posts notices for available positions in the windows and on the counters of his restaurants. These eye-catching notices, seen by thousands of people who visit his restaurants, tap into a pool of potential employees already familiar with the brand. Familiarity is also at the core of another effective employee recruitment tool. Brandon Hill was just out of high school when he began working at Pinch A Penny Pool Patio and Spa stores, which today has more than 230 locations. He stayed with the franchise, rose through the ranks, and became part owner of multiple Pinch A Penny locations in Florida. Today Hill and his wife, Mackenzie Hill, own two locations in Louisiana, where he is duplicating his own path to success for his employees by considering them as high-priority candidates for advancement. “Promotion from within has been our most effective tool,” says Hill. “We’ve had great success in moving our hourly partners to certification as trainers, then to hourly shift leaders, and, finally, to management.” He says half the open positions he posts are filled by current employees, a fact potential new hires find attractive. Seeing the opportunities for promotion from within, he says, “inspires our people to strive for that next position—and that’s great for the quality of our operations, as well as morale.”
©2016 Firehouse Subs
#1 America’s Most Loved Fast Food Restaurant Business Insider
#1 Top Sandwich Chains Restaurant Business
#1 Consumers’ Choice for Food Quality Technomic’s 2016 Consumers’ Choice Awards For Chain Restaurants (Fast Casual)
To own a franchise, visit FirehouseSubs.com/Franchising or call 877.887.8330.
A ST R AT EG IC INI T I AT I V E OF T HE IN T ER N AT ION A L FR A NCHISE A S SOCI AT ION
SINCE 19 91
Finders Keepers Brandon and Mackenzie Hill
Martha Moore and her family opened their first The Little Gym in 1996. They now own four gyms in North Carolina, South Carolina, and Tennessee. Moore could have continued to only use standard job posting websites, but about a year ago she added video to her array of recruitment tools. Videos appeal to a generation raised on them, and Moore has found them an effective hiring tool. The Little Gym’s recruitment videos feature employees talking about their jobs and demonstrating what their typical day is like. “Video gives people an insight into what we’re about. It piques their interest. It also answers a lot of questions they may have,” she says. And, she adds, “It brings in great candidates.” Acing the interview Some franchise owners are crafting their employee interview process with long-term retention in mind. Richey has learned that relationships between employees and managers are an important element in building great job performance for the teams at his restaurants. He is looking for managers who understand that and value the connections they make with their team members. “One of our interview questions is ‘Should you have close relationships with your employees?’ Most people say no. What we’re listening for is ‘Yes.’ We ask them how they would foster a sense of family among their co-workers. We are looking for people who are out of the ordinary. That’s the kind of folks we want to hire.” Brooke Wilson and her husband Les have been quite successful with their five
MULTI-UNIT FRANCHISEE ISSUE II, 2017
“Video gives people an insight into what we’re about. It piques their interest. It also answers a lot of questions they may have."
Two Men and a Truck franchises in North Carolina and Georgia. (See their MVP profile in MUF Q3 2016.) Since opening their first franchise in 2004 as newlyweds, they’ve learned that the standard interview questions can miss an element they see as invaluable in finding the right people to work for them. “Listen, listen, listen,” she counsels, in a twist on the old real estate axiom. “You have to recognize the needs of applicants to determine if you can combine them with your needs. We want to find people whose goals fit well with what our franchise can offer,” she says. “We take the time to discuss not just immediate job openings, but to set out the steps in a career path that could help them accomplish their professional and life-balance aspirations.” This up-front discussion of a pathway for advancement can go a long way in both hiring and retaining good employees. Training tips and tools Moore, like most franchisees, draws on the comprehensive online training program from her franchisor. Then she begins to supplement that. “We immerse our new employees in our company culture by having different team members mentor them in different aspects of their job,” she says. “We also use role playing to teach and we send employees to training workshops selected especially for them.” Team members also have a Facebook group, open only to employees, which acts as an additional resource for them to share ideas, ask for suggestions, or celebrate accomplishments. “You don’t have to reinvent the wheel,” she says, “but we are constantly evolving.”
INGREDIENTS FOR SUCCESS TECH ADVANTAGE • One standardized POS system with mobile app and online ordering for all stores • Proprietary app helps you manage your business with “real time” sales figures, labor & more
IMPRESSIVE SALES GROWTH • 27 quarters of consecutive same store sales growth*
EXPERIENCED LEADERSHIP • Executives average 30 years of industry experience
FIRST IN FLAVOR • The originators of Flavored Crust® Pizza with 8 customizable crust options • 100% mozzarella cheese • Dough made freshly daily right in-store
ESTABLISHED BRAND WITH TERRITORIES AVAILABLE • Over 30 years of franchising
INDUSTRY RECOGNITION • Technomic’s 2017 Consumers’ Choice Award Winner for “Overall Takeout Capabilities” • Entrepreneur Franchise 500 (2013-2017) • 2017 Top Franchises - Franchise Business Review
To learn more go to franchising.hungryhowies.com or call us today at 248.414.3300 *Results measure company-wide same store sales figures for each calendar year 2010 through 2016. Excludes store sales from units in the State of Florida, units which are not obligated to and do not report sales to Hungry Howie’s, and units which opened and or closed during each calendar year period from 2010 through 2016.
Finders Keepers It all begins with discovering what an employee’s goals are, both short and long term, and letting them know that the brand’s growth plan for them will be developed around those goals whenever possible, says Moore. “When you invest in your employees, it comes back a thousand times, even if they don’t stay with The Little Gym forever.” Todd Jackson, whose growing Newk’s Eatery portfolio is on target to make him the 69-unit chain’s largest franchisee by 2019, knows that up-to-date technology is essential to effective training. “We use HotSchedules for communication and scheduling. Getting a message to a manager from the staff or the other way is so much easier than in the past,” he says. “We also use Schoox online digital training. We’re using it more and more. All of our training is now done on tablets or pads.” In part that’s driven by his awareness of how his younger employees respond to technology. “Interactive versions of register training, line builds, and other tasks connect more directly with a new generation that enjoys interacting in a way they are used to,” he says. Jackson has found video an effective tool for training beyond just teaching an employee how to do a job. “We can continue culture building by showing our new employees videos of their peers explaining what the culture means to them and how the new hire can live our values.” Schoox, he says, also monitors whether training actually is taking place in the unit. “It helps us make sure our new hires are being taken care of.” Todd and Sonia Jackson
MULTI-UNIT FRANCHISEE ISSUE II, 2017
Brooke Wilson Retaining the best Benefits and bonuses are obvious motivators to keep employees happy, but money isn’t everything. Experience has taught successful employers and managers that simple gestures—such as saying hello and goodbye and thank-you to employees— have a powerful positive impact. “If someone feels valued, they will stay,” says Jackson. “Everyone talks about this, but it is true.” Moore has established a practice that encourages teams at each location to create their own code of honor. “If you have a group of people who are unified in what they want to achieve, they are going to be more successful,” she says. Team-building activities, chosen by each team, are an important part of creating a culture at her locations. One team held a pre-Super Bowl event that challenged
employees to “hike” a roll of toilet paper into trash baskets. The winners received their choice of gift cards or a certificate for an hour off work. Sometimes managers will surprise their teams by thanking them for a job well done and treating them to lunch. “We work hard but we want to have opportunities for fun, and we want team members to see that from the start,” she says. And, in one more nod to her many part-time employees, Moore has moved away from viewing the static work schedule as inviolate. “We find that our team members value flexibility,” she says. “So when we can, we provide flexibility to work with their schedules if they are in college or even just want to be able to watch their child’s soccer game or piano recital. To them this flexibility is a job benefit.” And a good way to keep great employees working for you. “We let people know we appreciate them,” says Richey. “They work long hours and the job is physically demanding. We also encourage our managers to let people know how they’re doing, instead of cutting their hours if they’re not doing a good job. We sit down with people and find out what’s going on.” For example, students might need extra time off during finals, or someone supporting a family might want the first crack at extra hours. But that won’t happen unless managers take the time to learn more about their employees than their names and shifts. “If you know people and care about them, you will do the right thing for them,” says Richey.
THE WORLD’S MOST INNOVATIVE
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• 28% Average EBITDA • 60 years combined experience • Consistent profits all year round • Non-toxic alternative to conventional dry cleaning • Item 19 Disclosure
For more information, contact: 1.866.462.6996 • firstname.lastname@example.org
BY EDDY GOLDBERG
INSURANCE TURNING AN EXPENSE INTO A PROFIT
fter 9/11, Mike Borchard watched his annual insurance premiums for his 15 Carl’s Jr. restaurants in San Diego more than triple, from about $300,000 to about $1 million. Borchard, an attorney, and his partner, a restaurateur with some Carl’s Jr. locations of his own and about a dozen Denny’s, had heard about captive insurance and began to look into it. “We didn’t know a lot about them, but were told a captive insurance company could help us reduce our costs and control workers’ comp and our future exposure,” says Borchard. After about a year of speaking with lawyers and insurers to learn more about how captives work and if they were a viable option, they met Everett Newman, who was able to explain the concept and help them create the Restaurant Franchise Captive Program (RFCP). Basically says Newman, managing vice president at York Alternative Risk Solutions, a captive is “an insurance company created and fully owned by one or more non-insurance companies to insure the risks of its owners.” Its two primary benefits are the ability to recoup a percentage of your insurance premiums, and the ability to exercise greater control over how claims are settled. He says captive members like that control almost as much as the money they get back. “Insurance companies make a lot of money on your business from the premiums you pay. So why not get into a program where you pay the same premiums, but instead of the insurance company getting the underwriting profits, you get them. You’re paying the same money but you’re getting a significant part back,” says Newman. “In our RFCP program, members
MULTI-UNIT FRANCHISEE ISSUE II, 2017
on average have gotten back 30 percent of what they paid in.” Borchard, whose M&N Foods now operates 56 Carl’s Jr. restaurants, became a founding member of the RFCP, set up through York and serves as president. Borchard says that through the program, he’s been able to recoup about 40 percent of his annual premium of approximately $1 million Captives are not for the faint-hearted, however, nor for the impatient. It takes an initial investment that puts capital at risk, and takes about 4 years to start paying off. But for a franchise organization that takes safety seriously and is willing to invest the money on the front end, the payoffs down the road can be tremendous.
Borchard says getting into the program was one of his best decisions as a business owner. In fact, he says, it’s done more to enhance his profitability than any other single thing he could have done. RFCP: how it began The RFCP, a program of York Risk Services Group, began in the midst of California’s “hard market” in 2004, when workers’ comp insurance rates were skyrocketing and many businesses failed or left the state. After Borchard and his partner collaborated with Newman to form the RFCP, they began writing insurance in July 2004 with $2.4 million in premiums. The franchisees’ primary goal was to gain control of their insurance costs through greater access to claims management and by focusing on improved safety practices. And they succeeded: in the dozen-plus years since the program’s inception, they were able to drive down the cost of their workers’ comp, general liability, and property insurance to the lowest levels they’d ever experienced. Today the program, now in its 13th year, has 35 franchisee members with approximately 2,000 locations in 30 states. Total premiums now exceed $22 million. Over its first 12 years, the RFCP had a loss ratio of 33.7 percent (industry norms are in the 55 to 60 percent range) and has returned more than $10.8 million in profits to its members. Returns in the captive are calculated based on each member’s individual experience. If a member has no losses in a policy year, they can have their full loss fund premium returned, less any risk sharing among members. Investment income is distributed to each member on a prorata premium basis. Historical investment
A FIT FOR EVERYONE.
This father and son team are part of a diverse group of franchisees that includes professional athletes, doctors, lawyers, C-level executives, multi-brand entrepreneurs and even a pop star. They’ve all chosen Retro Fitness to grow and expand their portfolios.
Bob Polizzano & Bob Polizzano Jr. Retro Fitness Franchise Owners, Philadelphia, PA
Investor-friendly model. Flexible, manager-run business with a streamlined and simple set of operations.
AVERAGE CLUB SALES AVERAGE CLUB EBITDA TOP CLUBS HAVE OVER
$2,175,471 $851,008 6,200 MEMBERS
as seen on
The average gross sales, EBITDA, and membership ﬁgures for the top 10% of Retro Fitness clubs as published in Item 19 of the Retro Fitness 2016 Franchise Disclosure Document. This is not an offer to sell a franchise. Offerings made by prospectus only. ©2017 Retro Fitness LLC. All rights reserved.
C A P T I V E I N S U R A N C E
BENEFITS AND RISKS Mike Borchard, who co-founded the Restaurant Franchise Captive Program in 2004, on the pros and cons of becoming a member of a captive insurance company:
BENEFITS 1. A captive is the only way to turn what presently is only an expense on my P&L into a potential profit center. Any money that I pay in I have the potential to get back. My company’s return is over 40 percent. That’s a fair amount of return. In 5 years that’s not a bad deal. So it’s financially lucrative. 2. When you get involved in a captive you have the ability to create a much safer work environment. We have a very intense safety program, and I think a safer employee environment is a happier employee environment. And because you have money at risk, you’re really paying attention to safety, and everyone is engaged in the program. 3. From an adjusting standpoint you have a lot more control, so there are fewer opportunities for what I would call runaway claims. What we try to explain to people, and what happened to me, is that when you’re in a fixed cost program with an adjuster, as I was in the state fund, I had no control on claims that should have been closed out and gone. In the end I paid for it with my mod rate. With a captive you have the ability to keep your mod rate lower and make your adjusting far more effective. As a lawyer and an operator, I really enjoy that piece. 4. When you’re part of a captive, you’re far less subject to the fluctuations of the market. Our captive is judged by how we’re doing. So if we’re doing well, our increases are less, which provides a little bit of a hedge against a runaway market. In a hard market the best place to be is in a captive.
RISKS 1. The biggest is that a captive entails some extra financial risk and is not a short-term venture. If you think you’re going in for a year or two or three, then a captive is not for you. You’re making a commitment to put some capital at risk and be in it for a minimum of 5 years. 2. You have to be willing to put some capital at risk and some people don’t want to do that, to take the risk of someone having a terrible injury. There’s always the potential of having some larger liabilities, of having more money at risk than you would if you’re in a fixed-cost program. 3. You have to work at being safe. In a fixed cost program if you get lazy it’s not going to hit your P&L that year. Whereas in a captive if you’re lazy you will feel the effects right away. So you have to be willing to make a commitment that you as a company are going to really promote a safe environment and work hard at safety in your business.
MULTI-UNIT FRANCHISEE ISSUE II, 2017
returns are in the 2 to 4 percent range. “Because 60 percent of what they pay in their premiums goes into the loss fund to pay claims, that is really their money,” says Newman, “and to the extent that they don’t pay claims they get that money back.” Of the 40 percent that goes to expenses, about 25 percent goes to insurance and reinsurance companies, and 15 percent to claims management, program management and other operational costs such as safety programs, Everett Newman monitoring existing members, and screening new ones. “We decline a lot more people than we accept,” says Newman. Other brands of franchisees in the program include Burger King, IHOP, Jack in the Box, KFC, Long John Silver’s, Qdoba, Round Table Pizza, Sizzler, Sonic, Taco Bell, TGI Fridays, Wendy’s, Wingstop, and Zaxby’s. York provides the claim adjudication and claim oversight for the captive, with full input and required approval from members before settling a claim. “We serve at the pleasure of the members and are accountable to them,” says Newman. For example, when a member has a claim that York is trying to settle, York sends them an email requesting settlement authority. That email contains two documents: a Word file that outlines York’s strategy for settling the claim, what they think the value of that claim is, why they want to settle it, and why they want to settle it for that amount; and an Excel document showing how that settlement was derived, and the same for the reserves. “It’s very transparent,” says Newman. Compared with traditional insurance companies, he says, “There’s a lot more transparency in terms of how claims are reserved and settled. There are no surprises.” Newman says many insured parties are frustrated with their carriers because there’s not that level of communication. “In this program, because the loss fund money is really your money, you get to participate in that decision,” he says. Members have the opportunity to provide input and ask questions. “That’s a huge benefit to the members,” he says. Once consensus is reached, York proceeds to settle the claim.
C A P T I V E I N S U R A N C E
FROM DONUTS TO DOLLARS
ohn Batista, a Dunkin’ Donuts franchisee with 23 units in Rhode Island, grew up in the brand. His father bought into Dunkin’ in the early 1970s and passed his stores down to Batista’s older brothers and sister. After college, Batista became a franchisee himself. He first heard about captive insurance from his brothers, who attended a presentation by a broker about 4 or 5 years ago. “I’ve known Dunkin’ Donuts my whole life, but I knew nothing about insurance except how to file claims and pay premiums,” he says. “It was a really foreign concept to us, so we started doing some research.” As they learned more about it, captive insurance made sense on several levels. But Batista had to overcome two big concerns: 1) it required a fairly substantial capital investment that put his money at risk, and 2) his lack of knowledge about insurance. “But I learned quite a bit and was able to overcome that through research and interviews,” he says. What Batista did know was that he wanted the captive to be member-owned and exclusively for Dunkin’ franchisees who had the same issues and could share best practices about workplace safety to keep claims down. As he investigated further, he found two Dunkin’ franchisees in New Jersey who had already started just such a captive. “They had done all the legal work and only needed more franchisees to bring premium into the mix because insurance companies need a certain amount of premium to make a captive viable,” he says. “It was fortunate for us that we found them, and fortunate for them too because they needed members.” He describes the company they formed, Alternative Solutions Insurance Company (ASIC), as a “small, fledgling captive insurance company that just got started.” ASIC began writing policies in November 2015. Today it has 8 franchise groups as members with about 175 total units and will have aggregate premiums of around $2 million by year-end. There are many different kinds of captives, he says, and since joining ASIC, he’s helped create the structure of the company. “Our captive is somewhat unique in that we offer franchisees the option to buy shares in the company and share in profits down the road, or just become a member of the captive and buy insurance through us.” For Batista, the two biggest benefits of being in a captive are: 1) More money. For example, he says, if you’re in a traditional insurance program performing well and your losses are low, at the end of the policy term the insurance company keeps whatever profits remain. In a captive, those profits are distributed back to its members. “That’s
MULTI-UNIT FRANCHISEE ISSUE II, 2017
the biggest reason why anyone that could be in a captive should be in one,” he says. 2) More control. “When you have more control over the claims handling process, you have more control over things like what reserves are set at, which can be very important because an insurance company that has reserves can write off those reserves and invest that money,” he says. Captives, he says, are generally a little bit more conservative about reserves. “You set them a little bit lower because they affect us as the client in a lot of ways. Higher reserves lead to increased premiums in subsequent years, and they also affect our insurance mod, which is used to calculate premiums.”
“When you are in a captive, you are hoping to receive profits back in the long term. The only way to ensure that is to manage your losses,” says Batista. “So when you’re in an insurance program like this, you manage safety better because you want to make sure you’re earning that profit back. In turn, you’re running a safer business for employees and for customers.” If you’re not in a captive and have a claim, he says, you can take the attitude that the insurance company will pay for it. Not so in a captive. “When you’re the insurance company paying for it, you look at claims quite a bit differently,” he says. “The secret ingredient to a group captive like ours, where you have multiple owners, multiple members, is that you start sharing best practices, looking to each other for advice, and working collectively as a group to manage losses. It becomes a very big part of what you do.” The potential downside, heRevision says, isDate: 2-28-17 that the members of the captiveRevision take onphase: 1AS risk that had previously been covered by an outside insurClientthat Job #: N/A ance company. “As an insurer, the risk is large losses could lose money for the company,” he says. “If there is naJob #: BHB4505D McGuffi risk, it’s the insurer’s risk of losses.” Also, there’s a little bit more work involved than paying someone else toDocument manage type: Print ad your insurance, he says, depending on how involved you Size: 7.375"w x 4.625"d want to be. Publication: There’s also the fact that members tie up capital they Franchise Times could have used for growth and don’t see returnsInks: for years. 4CP “Captive insurance is definitely a long-term play. It’s not Creative Director: KV something you can bounce in and out of,” he says. “For us it’s as simple as this,” says Batista: “As a busiCreative Lead(s): JD ness owner, we face so many headwinds, and they seem to grow in quantity and strength every year. So ifAccount there’s Exec(s): NO an opportunity to look into anything that will allow you to Insertion: retain more profit or create more profit, it really behooves Materials due: 3-3-17 you to do so.” But in the end, the upside of getting back 30 to 40 percent of his annual insurance premium convinced Batista the risks were worth it. With ASIC now in its second year, time will tell if his investment pays off.
Multi-Unit Franchisee Magazine Names 11 MVP Award Winners Multi-Unit Franchisee magazine is proud to once again honor franchisee excellence at our annual Most Valuable Performer (MVP) Awards ceremony at this year’s MultiUnit Franchising Conference, April 23–26 at Caesars Palace in Las Vegas. This year had a whirlwind of impressive nominations. The 11 honorees have demonstrated outstanding performance in growing both their organization and their brands. These power operators, innovators, and creative thinkers keep raising the bar for all of franchising. 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.
Influencer Award for Husband & Wife Team: Todd & Audra Fetter of Buffalo Wings & Rings for demonstrating growth, perseverance, and excellence as a team. Noble Cause Award: Bret Stewart with Auntie Anne’s, Cinnabon, and Schlotzsky’s for his dedication and passion toward those in need. Single Brand Leadership Award: Johnny Weber has successfully proven his support and leadership with the Sport Clips brand. Veteran Entrepreneurship Award: Kevin Kelly for outstanding performance and leadership by a veteran with the Planet Fitness brand.
Multi-Brand Growth Award: John Ponczoch from TA Restaurant Group has successfully achieved multibrand expansion with hundreds of brands.
American Dream Award: Anand (Andy) Patel for achieving remarkable success in the U.S. with multiple brands including Applebee’s, Burger King, IHOP, Pizza Hut, and Travelodge.
Community Involvement Leadership Award: Karen Morse from Ben & Jerry’s has been selected for her continuous community service and setting an example for others to follow.
Innovation Award: Mitch York for bringing a new and unique opportunity to Maui Wowi Hawaiian Coffee & Smoothies.
Mega Growth Award: Eddie Rodriguez from JAE Restaurant Group has proven himself a leader in the expansion and growth of the Wendy’s brand. Spirit of Franchising Award: Mark Friedman has demonstrated exceptional performance and provided invaluable community aid while successfully representing the Senior Helpers brand.
You see endless possibilities. We do, too.
Pro Athlete Influencer Award: Brendon Ayanbadejo for exceptional drive and performance with Orangetheory Fitness. All winners will receive their prestigious awards at the 17th Annual Multi-Unit Franchising Conference, where more than 1,700 attendees will honor their success in franchising.
Whether you’re looking to grow or address short term financial needs, our experienced franchise professionals are ready to deliver the strategic advice and financial resources to help make your vision a reality. Visit bmoharris.com/franchisefinance to learn more.
Banking products and services subject to bank and credit approval. BMO Harris Commercial Bank is a trade name used by BMO Harris Bank N.A. Member FDIC
MULTI-UNIT FRANCHISEE ISSUE II, 3/3/17 201710:28 AM
CustomerService B Y
Advertising vs. Customer Service Do you know where your sales come from?
nswer these 3 questions correctly and you will have an incredible 2017:
Where do your sales come from? What is your company’s biggest expense? Which has a better ROI, advertising or customer service?
1) Where do your sales come from? Leaders love to talk about revenue streams by showing graphs and charts with the breakdown of sales categories. It is important to know the percentage of sales generated by products or services and to monitor trends, especially the growth and decline of your business revenue. However, there is one critical component that every business has in common, which is never discussed: 100 percent of your sales come from one place—your customers! When you look at it this way, it sheds a stronger light on why companies need to put more emphasis on building an incredible, consistent customer experience that becomes your number-one competitive advantage and helps make price irrelevant. 2) What is your company’s biggest expense? Another major focus of executive leaders is analyzing the company’s P&L to determine where the company is overspending, being wasteful, and how to reduce expenses to drive more profit to the bottom line. However, the company’s biggest expense does not show on your P&L, at least not directly—it is hidden. There is no line item for poor customer service, but nothing may have a greater impact on your bottom line than dissatisfied customers. It can dramatically cause loss of sales, decline of company reputation, lack of new customers/referrals, increased returns and refunds, increased discounting, more service recovery, higher advertising expense, lower morale, higher turnover, increased hiring, and more training, which further perpetuates a poor customer experience. It is imperative that every person in your company understand that your biggest expense is
MULTI-UNIT FRANCHISEE ISSUE II, 2017
Now is the time to shatter the myth that advertising delivers a higher ROI than customer service.
significantly more expensive than building an incredible customer experience. In an article on Our Social Times (“Can online customer service deliver a higher ROI than marketing?”), Tom Eggemeier, EVP of global sales at Genesys, shared that the company’s annual global marketing and advertising spend was $500 billion—versus $9 billion on customer service. Compare that with the percentage you spend on marketing and advertising versus customer service. Are you penalizing brand loyalty?
Are you constantly offering incentives for “New Customers Only”? What about rewarding the customers who have been loyal to your business for years, who do business with you regularly, no questions asked, and refer others? Some important facts to remember: • Repeat customers spend more than new customers. • Repeat customers give higher satisfaction scores. • Repeat customers refer more than new customers do. • You need five new customers to produce as much as one repeat customer. Further, an Adobe report (“The ROI from Marketing to Existing Online Customers”) stated the following: • A 5% increase in customer satisfaction can increase a company’s profitability by 75%. • 80% of your company’s future revenue will come from just 20% of your existing customer base. Conclusion
dissatisfied customers. 3) Which has a better ROI, advertising or customer service? Now is the time to shatter the myth that advertising delivers a higher ROI than customer service. Each year, every department in every company fights for an increase in their budget, determining what they are allowed to spend in the coming year. In the advertising versus customer service budget debate, the only way to win the battle is to prove which budget will produce a better ROI for the company. In 2016, the fact that this is even still a debate is a sign of old-paradigm thinking by too many senior executives. The shortsighted obsession of constantly bringing new customers/traffic to your business is
What if we reversed the spending on advertising and customer service? Companies spend millions creating and advertising their brands, yet the customer’s actual experience is what drives brand perception. If you take really good care of your existing clients, they will generate more new customers than any kind of advertising campaign ever could. 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. Contact him at 216-839-1430 or email@example.com.
A LEADER FRANCHISE OPPORTUNITIES IN Sacramento, CA, Duluth and Rochester, MN and Puerto Rico
FRANCHISE OPPORTUNITIES IN Atlanta, GA, Phoenix, AZ and Los Angeles, CA
BUILD A WORLD-CLASS BUSINESS WITH DUNKIN’ BRANDS Convenient, high-quality and affordable products Industry-leading Franchisee support Fresh and innovative store concepts
Learn more at www.dunkinbrands.com Contact us at 781-737-5530 • firstname.lastname@example.org © 2017 DD BR IP Holder LLC. All rights reserved.
People BY PETER HARRISON
Hiring Hourly Workers Meeting their needs will meet your own
ere at Snagajob we live and breathe the hourly worker experience. Through our ongoing research and daily engagement with workers, we saw a real need for resources to help guide them through their employment journey. What we heard from workers is that most of the resources they could find were focused on salaried jobs or, if hourly, on the knowledge worker. In a partnership with LinkedIn, we examined our respective data to determine patterns that might be helpful for both workers and employers. Our goal was to provide the first in a series of resources that reveal the best options and pathways available to hourly workers most likely to lead them to fulfilling, long-term employment and faster career advancement. In addition, we aimed to offer employers fresh insight into what motivates and engages hourly wage workers, to help reduce turnover and better engage and advance them. Here are six of our key findings. 1) Most hourly workers are young, but older workers have more education. We found that 71% of hourly workers are under 30. This makes sense when you consider the most common reasons people choose hourly work, such as helping to pay for school or to start their careers. However, when we looked at education levels, the findings were more surprising. While younger hourly workers naturally have less education than older hourly workers, we found that 45% of hourly workers over 30 have some post-secondary education, with 15% having a bachelor’s degree or higher. 2) When it comes to hiring speed, sandwich shops and sports stores lead the pack. For many hourly workers, getting a job quickly is the difference between being able to pay the bills or not. That’s why we analyzed hiring speed (the time between submitting the job application and the first day on the clock) across several industries. We found that, on average, restaurants hire within 27 days compared with 33 days in retail (some restaurants average as low as 15 days). Although retail takes six days longer on average, certain retailers, such as sports and furniture stores, are more similar to restaurants in
MULTI-UNIT FRANCHISEE ISSUE II, 2017
Employers and workers are best served when the employer tries to understand their hourly workers’ needs.
terms of hiring speed. 3) Telecom, grocery stores and casual dining keep employees longest. The length of time employees stay at a company can indicate how engaged they are at work. We analyzed how long employees stay as a surrogate for their engagement level and found that telecom, casual dining, and grocery employers have the highest levels of hourly worker engagement. Sports retailers, beverage, and fast food employers have the lowest. It’s likely that wage differences have an impact here, but we didn’t consider that in our analysis. 4) While most hourly jobs are entrylevel, restaurants have more growth opportunities than retail. Analyzing the level of experience of millions of hourly workers, we found that the vast majority of jobs in both the restaurant and retail industries are entry-level. Looking deeper, we found that the restaurant industry has a greater proportion of managerial roles. This makes sense considering that 90% of restaurants have fewer than 50 em-
ployees. Lots of small shops means less middle management and thus a greater proportion of opportunities at the bottom and top. In contrast, there are fewer managerial, but more entry- and mid-level opportunities, in retail. 5) The average time it takes to get promoted varies widely by employer type. Hourly employers in beverage, crafts, and furniture get promoted to managerial positions the fastest, within two years on average. Workers in telecommunications and casual dining get promoted to managerial positions the slowest, more than three years on average. While some restaurants promote in as few as 15 months or as long as three-and-a-half years, the spread within each subcategory is much less. For example, we could expect all pizza shops to promote around the same time. This consistency likely is due to large chains dominating the restaurant industry and having standardized promotion tracks. 6) Many hourly workers invest in higher education. Since college graduates earn twice as much as non-college graduates it’s not surprising that so many hourly workers go back to school. Of the hourly workers who pursue education after starting their hourly job, approximately three quarters get bachelor’s degrees or above and one quarter earn associate’s degrees. Looking into what these workers study, we found that while business is most popular, healthcare, IT, and engineering are growing fastest. Hourly workers commonly study the arts, social sciences, and communications too, but these fields are losing popularity. That’s it for now, but our hope is to continue to publish more data that will: 1) help hourly workers find the right job fits that lead to a better quality of life with a clear path to advancement; and 2) help hourly employers understand what motivates and fulfills their workers so they can find ways to provide that. We firmly believe that both employers and workers are best served when the employer tries to understand their hourly workers’ needs and provide them with a path for growth. Peter Harrison is CEO of Snagajob where he leverages technology to reimagine the future of work through instant and quality connections between workers and employers. Last year, the company had a direct hand in hiring more than 3 million people.
Technology BY TOM EPSTEIN
POS Security Keeping your customers—and your business—safe
ou’d have to be living in a cave in the Himalayas with no Internet to not know about all the data hacks going on in the world today. So why is it that with all the advances in technology and security software that bad people can still gain access to your data? At FPN, we are most concerned with the ability for others to gain access to your customer data through your POS system. Recently, we had Visa tell us that there may have been an event at one of our customer’s franchise locations in Florida. Visa did not specify the exact way the hacker got in, only that they wanted the customer to immediately stop using their POS system for payments. Needless to say, not taking payments from customers is not an option for any business that wants to stay in business. Until the customer figured out what had happened, the safest advice we could give them for running credit card transactions was to send them a standalone credit card terminal that communicated only through a phone line. Remember those? Black cord attached to an old heavy phone that sits on a desk somewhere. Really? A phone line was safer? What about EMV chips, wireless routers, firewalls, and anything else you can think of to insert here? We all know at this point that every year, to validate your PCI security, you must take that Self-Assessment Questionnaire (SAQ) everyone hates; and if you use the Internet to process transactions (which almost everyone does now) you must do network scans a minimum of once per quarter. Let’s take a look at what we are seeing with the franchisees who process with us and who—even though they may be doing all those things—are still not quite compliant and remain vulnerable. All versions of the SAQ (there are several depending on how you process) ask: Are you running your POS system on the most up-to-date software available? You must answer “Yes” to pass the SAQ, so you do. (Please note: Answering yes does not make you compliant!) It might
MULTI-UNIT FRANCHISEE ISSUE II, 2017
Just because we all enjoy advances in technology and security does not mean we can abandon common sense.
make you feel better, but you really must look at this. We are still seeing many franchisees running their POS system on older versions of Microsoft that are no longer supported by the POS providers. Typically, if you are on XP or older, your POS provider cannot install the necessary security patches—which makes you non-compliant. We also see many franchisees still running older versions of their POS software. Many feel the old version still works, so why spend the money on an upgrade? Because if you don’t and get hacked, your POS partner will not accept any responsibility. You will be on your own. Another POS issue we are seeing: Your POS software is 100 percent up to date and your hardware is running the latest version of software, but you need to have
your POS company “remote in” to figure out an issue. If your POS company does this with screen-sharing software, they are opening a channel into your POS. While it is certainly acceptable for them to do that for short periods, you must uninstall this software once the service has been completed, since that channel may still be there and someone else might find it. Also, if you’re using remote access this way on a regular basis to see what’s going on in your stores when you’re not there, you should stop. Your routers at the store and your POS may be 100 percent secure, but what about at home or on the road when you log in from your phone or computer? Do you have the same security protocols there? I doubt it. The other big issue we see is with security cameras. Many franchisees today like to set up a security camera to watch employees remotely while they are out of the store. How do you think you are getting that video feed on your phone? It’s coming from an open port on your router. If you have an open port, that means other people can use it to either snoop through your POS system or implant malware or a virus. Let’s say you’ve already figured that out and put the security camera on a separate router, or maybe you have a very secure firewall preventing data from moving between ports. Where are you most likely pointing the camera? Right, at the register—the exact place where card numbers can be viewed. Even if your camera is on its own router it could be compromised, allowing a hacker to see card numbers as they are accepted behind the counter. The moral of the story: Just because we all enjoy advances in technology and security does not mean we can abandon common sense. We must rely on what we already know and make sure that we continue to train and teach our people the security basics. 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 email@example.com or 866-420-4613 x1103.
2/23/17 3:41 PM
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Finance BY ROD BRISTOL
Is Your Franchisor Looking for a Buyer? Unifying financials for a possible sale
or a very long time, franchisees and franchisors maintained an arm’s-length relationship: the franchisee sent the franchisor a sales report and a royalty check each month and the franchisor pretty much left them alone. Whether or not your multi-unit business was profitable hadn’t really been a big concern of theirs, as long as they got the royalty check each month. This “old school” approach to the franchiseefranchisor relationship is obviously is not the case for all franchisors. Lately, however, some franchisors have become more aggressive in trying to get monthly P&L statements from their franchisees to make sure their units actually are making money. You see, right now, in boardrooms of many franchise networks there are a lot of “deleted expletives” going on about not having that information in hand—a result of the desire of those franchisors to sell to a private equity firm, and the private equity firm requiring proof of unit-level franchisee profitability. Maximizing system value
To maximize the value of their franchise network for a potential sale, franchisors must prove franchisee profitability and demonstrate high unit-level economics—the foundation of every successful franchise network. So where do they start, and what is one of the first indications that your franchise network might be up for sale? It begins with either the implementation of (or refocusing on) one of the most fundamental financial tools required by every successful franchisor genuinely trying to drive franchisee unit profitability. It’s such a simple tool, and it is so often overlooked or undermined by lack of discipline. It’s called the chart of accounts. [Ed. Note: Chart of accounts definition, from Investopedia: “A listing of each account a company owns, along with the account type and account balance, shown in the order the accounts appear in the company’s financial statements. ‘Chart of accounts’ is the official accounting term for the display of this infor-
MULTI-UNIT FRANCHISEE ISSUE II, 2017
benchmark studies, which ultimately help drive performance groups, the single most effective process for driving change and profitability available to a franchisor. It all begins with a chart of accounts, and preferably the requirement for franchisees to use a standard accounting package such as QuickBooks for their bookkeeping. This standardization improves and streamlines training, field support, and ultimately, franchisee success. The most sophisticated franchise networks provide a chart of accounts, a QuickBooks accounting package, and have processes in place to receive accurate, timely financial information from their franchisees each month. (This information also enables franchisors to deploy field staff more effectively and point them to where they are needed most.) Benchmarking financials
As more franchise founders look for exit strategies, driving unit-level profits becomes a necessity. mation, which includes both balance-sheet accounts and income-statement accounts. The chart of accounts shows assets, liabilities, equity, revenues, and expenses, all in one place and broken down into subcategories. Each chart in the list is assigned a multi-digit number to help identify the account type (e.g., all asset accounts might start with the number 1).”] Oh, the excuses we hear! “I gave it to them but no one ever uses it.” Or, “They take it to their accountants who change it to suit their own professional tastes.” Etc., etc., etc. Unit-level economics
The great value of being part of a franchise network is the opportunity to work together as franchisor and franchisee to drive up individual unit-level economics and, as a result, the entire network’s profitability and ultimate value. To achieve that, everyone must do things in the same way, financially. This foundation allows the franchise network to complete
Another sign your franchisor may be serious about selling is the implementation of a benchmark study. If the franchisees in a network are truly profitable, the fastest way for a franchisor to demonstrate that to a prospective buyer is through the completion of an independent, thirdparty benchmark study that verifies the profitability of franchisees in the network. While this information remains confidential regarding the names of individual franchisees, the aggregated report can provide a franchisor with the needed verification of positive unit-level economics in the network required by the due diligence team of the private equity firm. These kinds of benchmark studies have also proven to be extremely valuable for any franchisor looking to expand their Item 19 in their FDD. As more and more franchise founders look for exit strategies that will maximize their value in the private equity marketplace, driving unit-level profits becomes a necessity, which ultimately benefits the entire franchise network. Rod Bristol is executive vice president at Profit Mastery. For over 30 years, franchisors and franchisees have improved their financial performance and unit profitability by following the Profit Mastery process: financial training, benchmarking, and accountability/ bankability modeling. Learn more at www. profitmastery.net, 800-488-3520 x13 or email firstname.lastname@example.org.
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3/13/17 1:35 PM
InvestmentInsights BY CAROL M. SCHLEIF
The Big Picture Many factors are at play in 2017
he new presidential administration wasted no time jumping in, even before Inauguration Day. A steady stream of potential cabinet appointees was ushered in and out of Trump Tower in New York City, accompanied by the most intense media scrutiny we can recall for an incoming administration in recent memory. Amidst the headlines and high volume of executive orders, domestic stock markets moved to new highs—and kept right on going. Many corners of the fixed-income markets, however, declined sharply, pushing yields all along the curve upward, presuming the net result of anticipated early policy actions would lead to stronger growth, higher inflation, bigger deficits, a stronger dollar, or some combination of them all. While we suspect the outlines of early initiatives will become clearer in the coming months, we also expect that getting some aspects of campaign promises through a philosophically divided Congress, a cautious judiciary, and a skeptical public will be a more arduous process than many expected. Thankfully, it appears that an improving set of economic statistics, coupled with high levels of business and consumer confidence, provides a reasonably solid fundamental foundation to underpin the equity market’s post-election advance. On the consumer front, labor statistics are strong as seen in the January DOL report, which showed 227,000 jobs created (compared with consensus expectations of 180,000 to 190,000); and more people entering the labor force drove the participation rate to above 61%. Wage growth, at 2.6% YOY, continues to run above inflation in that January release. According to several reports, consumer balance sheets remain in better shape, with overall total net worth reaching cycle highs and debt-service ratios declining. On the business front, the housing market appears to remain strong. According to the Census Bureau, building permits in January were running at 1.285 million—up 4.6% over December and nearly double the rate at which they bot-
MULTI-UNIT FRANCHISEE ISSUE II, 2017
tomed in the wake of the financial crisis. Housing starts were down compared with December, but up more than 10% from January 2016. Anecdotal evidence and a variety of recent news releases point to businesses looking to expand in the U.S. and to ramping up capex and hiring plans. For its part, the government appears to be contemplating a number of different spending programs, including ramping up defense and infrastructure spending, as indicated by the White House’s release of its budget priorities. Irrespective of the fate of infrastructure spend emanating from the national level, a number of voter-led infrastructure initiatives passed in last fall’s elections that will lead to local jobs and spending. The housing market remains strong, and energy prices have rebounded to levels more conducive to steadiness. The University of Michigan Consumer Confidence Index hit an alltime high of 98.5 in January. Further, investor sentiment has turned positive for the first time in nearly a decade, according to various polls by the American Association of Individual Investors. Despite the recent upturn, we believe the optimism is not yet at the bubble stage one would expect before an imminent top being formed. Many pundits have noted the extreme lack of volatility in markets, despite rising interest rates, a strong dollar, and the wide variety of divisive political headlines. We suspect much of this resilience lies in the fact that net money flow into stocks has turned positive for the first time in many years as institutional and retail investors reallocate assets from alternative strategies and fixed-income assets into stocks. It’s important to note that the supply of publicly available shares for purchase is down by more than one-third since peaking in 1997 and stands approximately where it was in 1982. Thus, increased demand on restricted supply has helped push stocks higher, even though absolute valuations seem stretched to some. Despite the positive progress and lack of classic bubble indicators so far, we do
expect volatility to rise at some point this year, as it has been abnormally low for a very long time. All told, 2017 has a broad variety of factors at play, potentially positive and negative, that investors should be watching closely: • Bond yields, bond prices, and inflation – If fixed-income investors start panicking in a big way as they see losses in their portfolios, bond yields could be forced much higher than “normalizing” rates of inflation would deem fair. To the extent those higher rates find their way back into loan pricing, it could slow business. • Large company margins – The economy shows signs of strengthening with the unemployment rate below 5%, which is lower than the Fed’s stated “full employment” level. Energy prices are up relative to last year, and healthcare costs are higher too, so large company corporate margins could be under pressure. • Tax rates – Small and mid-cap companies could benefit if either personal or corporate margins (or both) are reduced. They could also benefit from reduced regulation and increased activity. • Employment and wages – Small businesses are the largest job creators, so this could be positive. They are more nimble in their ability to institute wage increases. • Tariff and trade policy – Media coverage and congressional/executive rhetoric could continue to worry trade partners and prompt retaliatory measures. • The dollar – If it stays strong, this could provide an additional headwind for exporters and large companies. If it weakens, it’s a tailwind, easing some margin pressure. With uncertainty there is always opportunity. The markets have been boosting consumer confidence and investor sentiment is positive, so we will continue to climb over the wall of worry as we start seeing initiatives become clearer. Carol M. Schleif, CFA, is deputy chief investment officer at Abbott Downing, a Wells Fargo business that provides products and services through Wells Fargo Bank and its affiliates and subsidiaries. She welcomes questions and comments at firstname.lastname@example.org.
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ExitStrategies BY DEAN ZUCCARELLO AND DAN COLLINS
Refranchising Gains Selling corporate stores benefits all players
ranchising has proven to be a successful business model across a wide spectrum of industries using multi-unit retail distribution. At its heart, franchising allows everyone to focus on what they do best: manage, support, and grow the brand in the case of the franchisor, with franchisees focused on delivering a high-quality, consistent product or service to the ultimate customer. Refranchising (the sale of franchisorowned units to new or existing franchisees) allows franchisors to address both financial and strategic goals in their business by optimizing the mix of company and franchised ownership. Refranchising has been a hot topic in the restaurant industry in particular, with a number of national chains executing large-scale refranchising initiatives over the past 5 years. The Cypress Group led most of these large-scale refranchising programs. We see this activity continuing for the foreseeable future, likely spreading to multi-unit segments outside the restaurant industry. Historically, most franchised restaurant concepts have operated under an ownership structure that had the franchisors owning and directly operating a “material” percentage of their overall system. While this ownership percentage has varied from brand to brand, it was historically significant, generally in the 25 to 50 percent range. The thinking was that this level of ownership meant franchisors would lead by example, essentially showing their franchisees how to operate the business. Additionally, this direct ownership was seen as the best way to align the interests of the brand and its operators. As it has matured, the chain restaurant business has become much more complex. Increased competition, governmental regulation, changes in the workforce, and consumer preferences have made the business more challenging today than ever. Many chains have concluded that new thinking is needed to address today’s environment, with refranchising initiatives becoming an important brand strategy. Although franchisors have historically fine-tuned
MULTI-UNIT FRANCHISEE ISSUE II, 2017
their ownership of units, today’s refranchising initiatives tend to be larger and have more strategic implications. In recent restaurant initiatives, we have seen franchisors go as far as zero company-owned restaurants. The trend toward larger and more sophisticated restaurant franchisees has helped operators deal with the more complicated business we see today. It also has created demand for large-scale refranchising initiatives in national systems such as Wendy’s, Burger King, Applebee’s, and TGI Fridays. So can refranchising be a “win/win” for franchisors and franchisees? In our experience the answer is yes—if designed and executed correctly, with benefits for both franchisor and franchisee. Franchisor benefits
Franchisors gain in several ways: faster system growth, improved financial metrics, and retaining valued home office employees by providing them with more chances to advance. Specific benefits include: • Capital redeployment to system growth initiatives • Ability to optimize capital structure • Reduced volatility in revenue, earnings, and free cash flow • Comp sales growth driven by a renewed focus on menu, marketing, technology, reimage initiatives, etc. • New unit growth with expanded franchisee footprint, ideally in combination with new prototypes and corporate initiatives including enhanced real estate and construction resources, incentives, etc. • Entrepreneurial/growth opportunities for brand employees Franchisee benefits
Franchisees, most often larger ones, also benefit from refranchising initiatives, as seen in the increase in large-scale deals described above. Specific benefits include: • Improved financial metrics by leveraging existing overhead • Ability to improve unit-level profits • Growth in a franchisee’s core brand from both acquired units and their fran-
chisor’s brand initiatives • The opportunity to add units in a supplemental brand or brands • Enhanced career paths for their people, from GMs and managers to frontline employees Conclusion
Ultimately, we believe refranchising is here to stay. These initiatives have the ability to revitalize and improve the operational strategy of major franchised organizations. Franchisors undergoing the process are finding a renewed sense of purpose, and are focusing on innovations and brand management without having to worry about daily restaurant operations. Franchisees are granted the opportunity to grow their portfolios large enough to be able to streamline operations, leading to greater efficiencies, sophistication, and success. When designed and executed correctly, refranchising encourages partnership with strong players, whether new or existing franchisees, creating a stronger overall system and growth opportunities for all involved. And, while restaurant refranchising initiatives remain a hot topic, we expect to see the discussion quickly expand into non-restaurant, multi-unit retail systems that can benefit from the same sort of dynamics experienced in restaurants. 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 more than 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 303680-4141 or email@example.com. Dan Collins joined the Cypress Group as a principal 3 years ago, following 35 years of experience in the restaurant and financial service industries. Before that he was SVP and treasurer of The Wendy’s Company. Contact him at 303-680-4141 or firstname.lastname@example.org.
FranchiseMarketUpdate BY DARRELL JOHNSON
Optimistic, Pessimistic, Or Just Plain Anxious? Mixed economic signals loom for 2018
ill 2018 be a year for optimism, pessimism, or anxiety? Every year has its opportunities and challenges. The question is how the balance shifts from year to year. I find 2017 to be fairly predictable with the balance, at least from a business perspective, clearly shifted toward a tailwind, although not as strong as some had expected (and most of us had hoped). However, I try to provide a longer forecast horizon because most of you are making strategic, not tactical decisions. With that in mind, let’s try on each hat—optimistic, pessimistic, and anxious—and see how it looks. • Optimist. With an optimistic hat on, the franchise business community is feeling pretty good right now. Many of the issues of most concern, notably the ACA and some of the rules from the Labor Department, are in the process of being reconsidered by a Republican Congress and White House. Add the possibility of tax reform and increased infrastructure spending in a low interest-rate environment and the picture for 2018 looks rosy indeed. • Pessimist. The pessimistic hat looks pretty good as well and, as is typically the case, has more points to consider. We are near full employment. Labor shortages, especially in more skilled positions, are becoming more problematic for employers to fill, exacerbated by immigration policy rhetoric. We are in the second-longest economic expansion in the post-WWII era, exceeded only by the technologydriven 1991–2001 period. All eleven expansions had several things in common, the most significant being is that they all ended. Some ended with dramatic events, like the bursting of the dotcom and real estate bubbles. Others just ran out of energy, which is more likely the path we
MULTI-UNIT FRANCHISEE ISSUE II, 2017
currently are on. For most of this long expansion growth has been anemic. It won’t take much of a slowdown for the expansion to reverse course. Recognizing this, lenders are starting to tighten their credit boxes and evaluate credit risks more
infrastructure spending will come about. There are plenty of additional topics for the anxious crowd to consider. After last November’s election the Labor Department rulings that most concerned the franchise community appeared headed for quick change. Now it’s clear that any changes to these rulings will take time as they move through the regulatory and court processes. What’s far less clear today is just how much they may change. No anxiety assessment is complete without considering world events. It’s not hard to argue that the world has become a little less safe in the past year. Country risks in many parts of the globe are rising. Even our trading partners are becoming less friendly as talk of trade barriers becomes a central focus. My opinion
conservatively. Even if government stimulus in the form of tax policy and infrastructure spending is enacted, it will take at least a year for the effects to be felt. Pessimists say it is unlikely we will see a tax reform debate until late 2017, following the failed attempt at healthcare reform, and it may take the better part of the year to come up for another vote in Congress. If tax reform and changes in infrastructure spending do happen, they are likely to run on somewhat parallel paths. However, the timing of their consideration and likelihood of any substantive change are unlikely to have an economic impact until 2018 or later. • Anxious. Finally, I will try on the anxiety hat. People in this camp can find many concerns with all of the above, and more. Both the stock and bond markets are sending mixed signals—mostly based on different forecasts of whether (and if so, how quickly) healthcare, tax reform, and
When the signals are this confusing, the anxiety hat fits best. How then should you factor such a forecast into your business decisions? If you depend on retail customers, keep an especially close eye on consumer confidence. I’d also pay attention to household debt, which was clearly out of control and dramatically affected the 2008 recession. It rose in 2016 after being fairly flat for the previous three years. While it still stands at 3.3 percent less than the Q3 2008 peak of $12.68 trillion, it is at high levels again, this time fueled by student debt and auto loans. Taking business risks is fundamental in a capitalist society. Any aggressiveness in doing so, however, should be conditioned on your near-term outlook for your products and services. In the environment we currently are in, being a bit more thoughtful than the recent past required makes sense to me. That implies investing a bit more effort in market research, competitive and comparative analysis, and planning. 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 703-7404700 or djohnson@fran data.com.
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The public and policymakers need to understand franchising. Our purpose
@OurFranchise is an industry-wide campaign created to spread the word about the value of franchising and share the stories of men and women just like you, who are leading the way as franchisors, franchisees, and franchise employees. The franchise business model has been proven time and time again to work, but it’s threatened when the public and politicians don’t understand how it operates to benefit local, independent franchise establishment owners and their communities. Putting a spotlight on real leaders succeeding with the franchise model is how we’ll ensure franchising is stronger than ever before.
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Help us keep the momentum going
Since our launch in June 2016, we’ve reached 1.7 million people through outreach efforts, including events in key cities and states, where we spoke directly with business owners, employees, policymakers, and the media. Additionally, we’ve reached people across America through our website and social media channels, digital advertisements, and the promotion of We the Franchisees on Politico – but there is much more work to do. As a franchisor, franchisee, or franchise vendor, you are a leader in your community – and we need your support, now more than ever.
You benefit by joining
By joining @OurFranchise, you’ll get access to exclusive stories and resources that can help grow your franchise business, educate employees at all levels about the franchise business model, and share the economic importance of franchising with consumers. You will also have the opportunity to share your franchise success story with your peers. Visit AtOurFranchise.org Contact Erica Farage, Senior Director of Political Affairs and Grassroots Advocacy and Multi-Unit Franchisee Engagement International Franchise Association firstname.lastname@example.org (202) 662-0760
This is just the beginning
Make sure you stay up to date with the campaign’s latest efforts through email updates and social media. Visit our website to read and share the latest stories of franchisors and franchisees making an impact in their communities. Become a franchise advocate to help ensure Americans, now and in the future, have the opportunity to start franchise businesses. Take the lead today!
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rsification, master of dive Bob Middleton, begins Canada venture
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Multi-Brand 50 Bob Middleton, master of diversification, embarks on a Canadian venture. Multi-unit operators share their stories of franchis...
Published on Jul 7, 2017
Multi-Brand 50 Bob Middleton, master of diversification, embarks on a Canadian venture. Multi-unit operators share their stories of franchis...