Five Skills for Successfully Turning Ideas Into Reality

Posted on October 20, 2021October 20, 2021 by Franchise Strategist

5 skills for successfully turning ideas into reality

(BPT) – People across the world have tackled immense challenges since the start of the global COVID-19 pandemic, from social isolation to financial burdens, in a distanced and digitally enabled world. As a result, many important projects were put on hold. But at the same time, many people took the opportunity to make bigger and better plans — and are ready to make these dreams a reality.

In a recent global survey conducted by Project Management Institute (PMI), nearly four in five consumers (79%) said they consider 2021 to be a “do-over,” and an even greater number, 86%, plan to work harder this year to bring their ideas to life.

“The pandemic disrupted countless 2020 plans, but many leaders and innovative thinkers used the time wisely to map out their next moves,” says Mike DePrisco, chief operating officer for PMI. “As more communities and organizations across the globe cautiously turn to recovery and revival, teams are increasingly focused on turning their stalled projects into reality.”

But turning ideas into reality doesn’t come easy. Whether you’re looking to level up in your career, kick-start a new project or create a completely new business, PMI outlines the power skills you need to continue advancing:

1. Communication

Effective communication maximizes success and minimizes risk. It involves not only conducting outward-bound communication, but also listening, taking feedback, understanding nonverbal cues, and interpreting what is meant versus what is said. In a team setting, communication helps team members stay on the same page as they work toward success.

2. Empathy

Empathy allows team members to build greater trust and connections — with each other and with other stakeholders — by helping them understand the wide range of people and work styles they encounter. Empathy also strengthens teams by helping team members feel appreciated and heard.

3. Collaborative leadership

A collaborative leadership style is more effective in inspiring and bringing team members together in pursuit of a shared vision and common goals. Collaborative leaders recognize that each member of the team has something to contribute — in executing a plan and in helping shape objectives.

4. Innovative mindset

An innovative mindset ensures teams are applying new ideas and fresh perspectives to how they organize work and address the myriad obstacles that emerge when turning ideas into reality. An innovative mindset also allows teams to remain agile and pivot more quickly in the face of challenges.

5. Purpose-driven goals

Having a for-purpose orientation helps minimize risks and ensures the organization’s values and commitment to social good are infused in all aspects of project design and implementation. Clear goals also empower changemakers to use their skills to bring about positive social change within teams, companies and communities.

To learn more about these skills and effective project management, visit PMI .org/Make Reality, a virtual hub of inspiration with the tools you need to get started on your next big, bold idea. Find support and inspiration from changemakers across the globe turning their ideas into reality; determine your changemaker persona; and view PMI courses that help you take your project or idea and Make Reality, such as KICKOFF, a free, 45-minute digital course and toolkit that guides learners through the basics of project management with bite-sized content and downloadable templates they can quickly implement on the job.

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Learn more about turning your idea into a nationwide franchise click here: www.franchisegrtowthsolutions.com

JACK IN THE BOX, RELAUNCHING ITS FRANCHISING EFFORT

Posted on October 19, 2021October 20, 2021 by Franchise Strategist

JACK IN THE BOX, RELAUNCHING ITS FRANCHISING EFFORT
By Gary Occhiogrosso – Founder and Managing Partner – Franchise Growth Solutions

Today I have the pleasure of sharing insights from, Darin Harris the CEO of Jack in the Box. Founded by Robert Peterson in 1951, Jack in the Box is one of the earliest fast-food restaurants. Innovative for its time, the Jack in the Box brand was built with the “drive-thru” in mind. The brand was the first to use a two-way speaker system for its drive-thru ordering. Today the brand continues to evolve as it relaunches its franchising effort to expand into new markets and capitalize on its 70-year history and resilience.

Although today, Jack in the Box operates just over 2,200 locations, there were not many in the New York area when I growing up. However, we were fortunate to have a local Jack in the Box in Flushing, Queens. The iconic brand was a staple in my teenage years. It was very routine to stop in for some tacos and burgers with my buddies after a late night out. I recall Jack in the Box had a unique drive-thru ordering kiosk. It was actually “Jack” popping out of the box, ready to take my order. I remember the clown-faced “Jack” staring at me as my friends and I placed our orders, certainly a challenge if you suffer from Coulrophobia, the fear of clowns.

With prior franchisee disputes settled, Darin Harris, CEO of Jack in Box, reveals the issues and challenges in relaunching the franchising effort. From gaining trust with the existing franchise community to focusing on unit-level economics to a new prototype restaurant, the brand is poised for a franchising reemergence.

Gary Occhiogrosso: You took the reins of Jack in the Box at the onset of the pandemic in April 2020; what drew you to the brand, and what was your initial vision for growth?

Darin Harris: Prior to Jack in the Box, I was CEO of IWG Regus; however, most of my career was spent in the restaurant industry, building brands through franchising, operations, and more. I always noted the potential that Jack in the Box had, and I’m proud of the strides we’ve been able to take so far.

We’re looking to build what I call “Jack’s House,” which starts with our foundation focused on culture, people, innovation, and technology. We really want to shape a caring high-performance culture by serving our people, guests, and franchisees well. We also want to build brand loyalty, drive operational excellence, grow restaurant profits and expand our reach. To do that, we needed to evolve our leadership team. We’ve hired a new CFO, CMO, COO, CPO, and a Chief of Franchise and Corporate Development to help take Jack in the Box to the next level. Additionally, we’ve focused on repairing the franchisor/franchisee relationship and announced the relaunch of our franchise development program earlier this year after a decade of hiatus. All of this creates a blueprint for Jack in the Box’s future, which aims to help grow total revenue, optimize return on invested capital, increase EBITDA, and create long-term shareholder returns.

Occhiogrosso: What were some of the obstacles you faced upon becoming the CEO? How did you prioritize initiatives when taking the helm during such a challenging time for the foodservice industry?

Harris: First and foremost, we needed to rebuild trust with our franchisees. We looked to re-energize our franchisees and develop meaningful relationships with each of them. Our franchisees are our family, and we needed to ensure they felt that way. After speaking with our franchise system and rebuilding the executive team, we looked to relaunch our franchise development program. Current and prospective franchisees have the opportunity to franchise and grow with Jack in the Box following the relaunch of the franchising program. We’re thrilled at the initial response as 2/3rds of our current franchisee network have expressed interest in growing. Prospective franchisees are very interested, as well.

We also needed to focus on unit-level economics, building a development strategy, digital strategy, and refreshing our guest research to ensure we’re meeting guests’ needs. Our four-pillar strategy will help guide us through the execution of each initiative. These include building brand loyalty, driving operational excellence, growing restaurant profits, and expanding our reach as a whole. These driving factors, coupled with the talented leadership team we’ve been able to build over the past several months, have aided my ability to lead every step of the way.

Amid the pandemic, we made a lot of the right decisions to ensure we were meeting our guests where they wanted to be met. Our model has proven to help us through the pandemic, and we’re fortunate that our drive-thru and third-party delivery strategy was executed well to help build sales at our locations. The first year at Jack in the Box has been exciting, and I’ve never had more fun in my career. Our restaurants are successful, and I love the people and personality behind Jack in the Box.

Occhiogrosso: Why was strengthening the franchisee/franchisor relationship important to you from the start? How did you go about doing this?

Harris: I’ve always viewed a company’s franchisees as its partners in strategy, and from the beginning, I knew we needed to re-energize that relationship at Jack in the Box. We cannot succeed unless our franchisees succeed, so it was important to get to know our franchisees and develop those meaningful relationships from day one. Once I accepted the position, I immediately started contacting our franchisees and spoke with about 25 of them. I wanted to hear the challenges they’ve had in the past and how they felt like we could improve, but most importantly, get to know them personally and learn about their families.

At Jack in the Box, we want to constantly strive to ensure our franchisees are equipped with the resources necessary to drive meaningful growth. The franchisee/franchisor relationship has significantly improved, so much so that 66% of our current franchisee network have expressed interest in growing. We’re really excited about the progress we’ve made and look forward to working with our franchisees as we grow in current and new markets.

Occhiogrosso: After Jack’s decade long hiatus from franchising, what motivated you to relaunch the franchise development program?

Harris: Over the past 18 months, we’ve proven that we are pandemic-resistant, and we’re eager to grow with our current franchisee network, as well as prospective owners. In fact, our existing franchisees had been wanting to expand for years, but the timing wasn’t right for corporate. While we currently rank first or second in unit count within our competitive set for 8 of our top 10 existing markets, we know there is a tremendous amount of whitespace to grow in existing and new markets.

The decision to relaunch our franchise development program began with reenergizing our franchisees and building those relationships, as I mentioned earlier. We believe there’s potential for another 1,500 restaurants in our existing footprint alone and 29 states remain untapped. The growth opportunity for Jack is enormous, and to grow, we need to work with our franchisees.

Occhiogrosso: While Jack in the Box is a longstanding brand in the QSR space, the competition in its sector continues to grow. How has the brand managed to report record-breaking sales the past few quarters?

Harris: It’s been an exciting time at Jack in the Box. Our guests are making more premium item purchases, and that helped increase system same-store sales 10.2% in Q3 2021. Franchise same-store sales grew 10.3% in Q3, with a balanced contribution from both average check and transactions. We’ve made the right pivots amid the pandemic and leaned into off-premise and menu innovation to help drive sales, which led to a historic start in 2021. Consumers are also using our mobile app more than ever, with our customer database growing by nearly 60% the since the start of the pandemic. We also launched our first loyalty program recently that consumer have been responding well to.

Another area of focus for us has been driving incremental sales with menu items like Tiny Tacos and our chicken sandwiches and chicken strips, which has helped raise system-wide sales and AUVs.

As we shift toward core premium entrees, we are observing an increase in items per order reflecting larger parties and fueling an increase in the average check. Our quarter over quarter growth has been remarkable to watch, and it’s a privilege to be part of the success. We look forward to building upon this momentum.

Occhiogrosso: Jack in the Box recently rolled out a new low-cost and drive-thru only prototype. How do you and your team plan to implement this new prototype into the development strategy? How does it play into the trends we are currently seeing in QSR dining?

Harris: Jack in the Box was the first major fast-food chain to develop and expand the drive-thru concept, so it’s in our DNA to grow utilizing the drive-thru. Our new prototype is off-premise only, featuring a lane for drive-thru and a lane for online pick-up and third-party delivery. With our drive-thru sales skyrocketing amid the pandemic, and restrictions lifting nationwide, the new prototype aligns with evolving consumer preferences. We believe that as we continue to progress out of the pandemic, off-premise will remain a preferred method of consumption for many of our guests, and we want to ensure we are meeting and exceeding their expectations.

Occhiogrosso: In what ways do you believe the new prototype will accelerate Jack in the Box’s growth?

Harris: The new off-premise prototype is targeting a reduction of development costs by approximately 20%. The first two prototype locations are slated to open in fiscal year 2022. Understanding that consumer trends and demand are evolving, we needed to build a prototype that makes it easier for our guests to access the brand. Off-premise is going to remain a preferred method of consumption for many guests, and this prototype fits their expectations. Additionally, 95% of our stores have at least one of the four major delivery providers (DoorDash, GrubHub, Postmates, Uber Eats), with 80% of them using at least three of the four. With the introduction of our new prototype, we’re committed to a strategy focused on driving delivery and off-premise sales while making our brand more easily accessible to our guests.

We’re excited about this prototype and development in general. In 2020, we opened 27 restaurants—the most in the past 20 years. We’re also looking at the possibility of non-traditional restaurants and signed a deal with Reef Kitchens to open eight dark kitchens. We’re focused on reaching a 4% annual restaurant growth by 2025. The future at Jack in the Box is extremely bright, and we’re thrilled to ramp up development.

My take-away from this interview is simple; the restaurant industry must continue to innovate to meet the ever-changing consumer trends due to a range of issues, from Covid to work habits to generational lifestyles. Darin Harris and the Jack in Box brand continue to be innovative in the Quick Service Restaurant segment.
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About Darin Harris. He began his role as Chief Executive Officer in June 2020. He was previously CEO of North America for flexible working company, IWG PLC, Regus, North America, from April 2018 to May 2020. Most notably, Harris is the former Chief Executive Officer of CiCi’s Enterprises from August 2013 to January 2018. For just under five years, Harris also served as Chief Operating Officer for Primrose Schools from October 2008 to July 2013. He previously held franchise leadership roles as Senior Vice President at Arby’s Restaurant Group, Inc, from June 2005 to October 2008 and Vice President, Franchise and Corporate Development at Captain D’s Seafood, Inc., from May 2000 to January 2004. He was also a prior franchise operator of multiple Papa John’s Pizza and Qdoba Mexican Grill restaurants from November 2002 to June 2005. Harris has more than 25 years of leadership experience in the restaurant industry encompassing operations, franchising, brand strategy and restaurant development.

FLAWED STRATEGIC THINKING THAT DRIVES SERIOUS FRANCHISE LEADS TO DISQUALIFY YOU

Posted on October 19, 2021October 20, 2021 by Franchise Strategist

Flawed Strategic Thinking That Drives Serious Franchise Leads to Disqualify You

By Paul Keiser
I Show Franchise Business Developers and Brokers How to Automatically Find Serious Leads

The leading reason we’ve found causing serious leads to disqualify brands and brokers from consideration is a lack of strategic thought, time and attention given to 21st Century aspects of franchise business development. As an industry, franchise business development methods are mired in tactics over 25-years old. It takes serious reflection and change to adapt to emerging 21st Century franchise buyer behavior and their very different expectations.

Here are five inter-related company cultural and strategic issues that, if ignored, cause serious leads to disqualify you from consideration.

Recognize Franchise Business Development is a Business within a Business
As they begin to scale, franchisors and brokers often struggle with business development. That’s because the knowledge and experience to do it well aren’t part of the operations or customer excellence skill sets of many owners and investors.

Franchise business development is actually a business within the larger franchise business with different needs. Recognizing this, and then properly staffing, funding and executing around a set of realistic goals can put you on a sustainable pathway to success.

Unfortunately, too many try to fix a faltering franchise business development program with band-aids; neglecting the thought needed to find the root causes of problems, not just surface symptoms.

Why…because it’s easy. Tactical solutions make everyone feel good. In fact, re-imagining a 21st Century version of franchise business development requires digging deeper.

To meet the challenge, three strategic areas critical to franchise business development must harmonize:

Storytelling
Finding and Nurturing Serious Leads
Intelligent Pipeline Management
Think of each of these areas as a leg of a stool. If the legs aren’t aligned, then the stool teeters and totters making it useless.

Do nothing and watch as serious leads disqualify you.

Inertia Kills Brands and Brokers
Many brands and brokers become paralyzed by the breadth and depth of change needed to adapt to the changing macro environment of franchise business development. The smaller the brand or broker the more daunting the challenges.

Smaller brands and brokers aren’t often blessed with tens of thousands of dollars laying around to “experiment” or try something new; so, fear stifles decision-making.

But time kills deals. Time also kills brands and brokers unwilling to adapt. It’s time to step up and either hire or develop the skills to upgrade franchise business development methodologies. The market isn’t waiting. Brands and brokers that grab an early mover advantage will prosper; while laggards will fall by the wayside.

Do nothing and watch serious leads disqualify you

Lack of Expertise
The skill sets needed to address both franchise business development technology and people’s evolving behavior doesn’t necessarily reside in most franchisors and brokers, who are often solo practitioners. Many franchisors have consumer marketing pros or agencies supporting franchisees. However, these same highly-talented people are inexperienced in the “black arts” of franchise business development and the psychological journey a serious lead embarks on in the Internet Age. You hired them to drive traffic into your stores and restaurants; not recruit franchisees. And likely they do a very good job for you.

Giving franchise business development insufficient support or forcing business developers to work with meager lead generation budgets or whatever software is around or cheap is commonplace. That’s a lazy approach and speaks to a lack of understanding of how to successfully grow a franchise business development powerhouse.

Ownership and leadership need to step up and either acquire or outsource the knowledge needed to reliably scale the business.

Do nothing and watch serious leads disqualify you.

The Internet Upends Traditional Notions of Franchisee Recruitment
Every generation from 1995 forward has been reshaped by the Internet. Consumers complete almost 75% of brand research for high-end goods and services on the web before making a call or a visit. They expect transparency. Your storytelling needs to meet a higher standard of excellence or these serious leads will just move on. So, ask yourself, do you tease or hide information or do you educate on your franchise business development website?

Text messaging has rapidly changed the franchise business development communication landscape. Today’s serious leads comfortably text back and forth with your business developer before engaging. What does that do to old-fashioned “dialing for dollars” models? Which leads are more engaged and serious?

Your franchise website is now expected to tell your whole story. It’s not just a brochure anymore or a landing page to get a form filled out. You’re forced to dig deeper to articulate your competitive differentiation. A test: if you can put your name on a competitor’s website, then something’s wrong with your story.

All brands are coming to grips with ever rising lead generation costs. Can we harness the vast potential of social media and online advertising to create affordable serious leads prospect? Can these newer channels become a game changer or are they just one more money drain? How do these leads convert into your pipeline compared to other channels?

Do nothing and watch serious leads disqualify you.

Leads Now Have the Power

Leads now control the research process. In fact, 75% of their research is already done before first contact. Serious leads expect complete and transparent information about brands. So, a solid story and a dedicated franchise business development online presence are now table stakes with serious leads. These serious leads engage when they’re ready; not before. So encourage them to do that by delivering a brand education experience that gets them emotionally and rationally invested in your franchise opportunity.

Do nothing and watch serious leads disqualify you.

Franchise Pipeline Solutions (FPS) helps new and emerging franchise brands find their most serious leads using an integrated pipeline management system. It combines enterprise-class CRM with multi-channel Marketing Automation, 1:1 and bulk text messaging, behavioral scoring and auto call scheduling. Our proven approach has been in worldwide use for over eight years.

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About the Author:
Paul Keiser has over 40 years of experience franchise development, social media and online lead generation, email nurture, marketing automation and brand storytelling. Today he makes his living giving precious time back to franchise brand business developers and franchise brokers by helping them find serious leads so they focus on more of the right people and do more deals.

FRANCHISORS AND FRANCHISEES MUST LEARN TO DEAL WITH CHANGE

Posted on October 18, 2021October 20, 2021 by Franchise Strategist

Franchisors and Franchisees Must Learn to Deal with Change

By Ed Teixeira

FRANCHISING, — Ed Teixeira is Chief Operating Officer of Franchise Grade and was the founder and President of FranchiseKnowHow, L.L.C. a franchise consulting firm.

If there is one thing that the Pandemic taught us, especially those in the franchise industry, is that certain events both large and small require change. It is a given that the recent Pandemic represents extraordinary change having last occurred 100 years ago. Franchise brands face frequent challenges requiring change including, a formidable new competitor, franchisee resistance to certain promotional programs, declining franchise system growth or a public relations problem like when the Subway Foot Long Sub, was found by a customer to be less than a foot long. When these situations arise, franchisors and franchisees must be equipped to implement change to meet the challenge.

Expect that franchisors will be required to implement changes to their franchise program from time to time some minor and some major. When a franchisor wants to make a change, based upon the magnitude of the change, it should be communicated to the franchisees before the change is implemented providing advance notice.

* Using the franchise advisory council as a sounding board

* Giving franchisees the courtesy of knowing about the change

* Providing the franchisee community an opportunity to respond

* Enlist select franchisees to help mold the change and avoid a confrontation

Some changes are routine in nature and can be implemented as per an existing policy. For example, a revision or clarification to a procedure in the franchise operations manual. Major changes that may have a direct impact on franchisees demand special attention. In certain cases, the change may not be that significant, but rather the perception by franchisees is that the change is the beginning of “more to come.”

Examples of Important Changes Include:

1.Changes to franchise agreements that significantly revamp contract terms, including renewal terms, royalty fees and default conditions. These changes may cause particular concern among franchisees that will be looking to renew their franchise agreement.

2. Changes in marketing or advertising programs which would represent a major departure from the current program.

3. Changes in the direction of the franchise strategy that involve applying resources to a new venture or business.

One of the most effective methods to establish and implement a major change is to involve the Franchise Advisory Council or marketing committee which includes franchisee and company representatives. These committees allow for a dialogue between the franchisor and representative franchisees which can help to foster positive franchise relations and establish a buy-in from existing franchisees.

When franchisors implement a major change that lacks franchisee involvement or advance notice it can be a recipe for trouble. To maintain positive franchise relations before implementing an important change the franchisor should gauge how the change could affect franchisees by obtaining feedback from franchisor field staff and select franchisees.

If feedback indicates a strong resistance to the change, the franchisor should consider the situation, and avoid unnecessary confrontations by being flexible. Change is an important aspect of all relationships especially in the world of franchising. It is important that the franchisor and franchisees conduct business within a climate of change that is positive and considers the needs and objectives of both parties.
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About the Author: Ed Teixeira
Ed Teixeira is a recognized franchise expert with over 35 years experience in the franchise industry. He has served as a corporate executive for franchise firms in the retail, manufacturing, healthcare and technology industries and was a franchisee of a multi-million dollar home healthcare franchise. Ed is the author of Franchising From the Inside Out and The Franchise Buyers Manual. He has participated in the CEO Magazine Roundtable Meetings with business leaders from around the country and spoke at a number of venues including the International Franchise Expo and the Chinese Franchise Association in Shanghai, China. Over the course of his career, Ed has been involved with over 1,000 franchise locations and launched franchise concepts from existing business models. Ed can be contacted at 631-246-5782 or [email protected].
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FRANCHISE YOUR BUSINESS: www.franchisegrowthsolutions.com

franchise, royalties, profits, expansion — Click Here To Learn About Franchising Your Business

8 Key Costs To Consider When Opening A Restaurant

Posted on September 1, 2021September 3, 2021 by Franchise Strategist

8 Key Costs To Consider When Opening A Restaurant
By Gary Occhiogrosso – Managing Partner – Franchise Growth Solutions

Two of the most frequent questions I’m asked at a seminar, workshop, or when teaching a restaurant development course at New York University are; “how much money do I need to open a restaurant, and how do I get the money?” This is the first installment of a two part article answering those questions.

Before we can address how to fund your restaurant, we need first to understand what we’re building and its cost. The type of restaurant you’re opening will determine the amount of money you need. In addition, the kind of restaurant will affect the type of funding and who may have an interest in investing or supplying a loan. Additionally, you’ll need to evaluate how much of your own money you need to provide. That’s because part of the process necessary to convince an investor, banker, or private lender is that you’re genuinely committed to the project. You know the expression, “put your money where your mouth is”

For the sake of this discussion, let’s say you’re opening a fast-casual restaurant. Not a franchise but an independent concept that you have developed on your own. This type of project may require a conventional business loan or an SBA loan. In many cases, investors other than family and friends may not be interested in investing in a brand new concept with no track record of success. It becomes further complicated if this is your first foray into the restaurant industry.

Fast-casual restaurants typically cost between $250,000 and $400,000 to “turn the key” and open the doors for business. The various costs associated with opening a restaurant will range depending on factors such as location, size and condition of the space, everything from security deposits to the reserve capital you’ll need to carry possible shortfalls the first few months you’re open.

Investment Costs to Consider

* Professional fees: This is usually necessary to set up your business entity, whether a corporation or LLC. Also, you’ll want to have a lawyer review any lease you may sign to rent a space where you will construct your new restaurant.
* Security deposits: This may be one to three months of rent paid to your landlord. In addition, many utility companies require deposits to set up electric, water, and Internet connections.
* Equipment: The cost for all of your kitchen equipment. Items include hoods, grills, ovens, stoves, stainless steel prep tables, shelving, hot tables, cold tables, a Point of Sale (POS) system, and a walk-in refrigerator. In addition, small wares, things like scoops, ladles, fry baskets, flatware, dishes, glasses, and other small items you need to prepare your menu and serve your guests. Now let’s move to the front of the house. Additionally, you’ll be looking at furniture and fixtures, countertops, workstations, tables, chairs, decorative shelving, and other items. These are the items you use in the front of the house to create the environment that will best suit the concept you’ve created.
* Leasehold improvements: In most cases, this will be your most significant expense. Leasehold improvements are generally construction costs for electrical installations, hood venting, plumbing, heating, and air-conditioning. These items are referred to as “the mechanicals.” And let’s not forget building one and, in many cases, two ADA-compliant bathrooms. Also, installing the proper ceiling, flooring, millwork, painting walls, and other elements that we typically think of as construction. On a side note, you can take advantage of opportunities due to the abundance of restaurants that have closed during the pandemic. These empty restaurant spaces are referred to as “second-generation restaurant spaces.” You can save thousands of dollars if you find and secure a space that was formerly a restaurant. In many cases, you will find the mechanicals have remained in the building. These second-generation restaurant spaces help to reduces your cost if you don’t need to install a hood, venting, plumbing, electrical, and restrooms.
* Signage: Properly identifying your restaurant will mean you will need to sign for your storefront. Also, consider that you may need lighted signs in the windows and other signage throughout the restaurant.
* Start-up inventory: This is probably the most extensive inventory order you’ll ever place. This initial order is for food, paper, beverages, and other supplies you’ll need in your restaurant daily. You’ll replace these inventory items as you use them, but when you first start, you’ll need to stock your restaurant from scratch with every single thing for the first time.
* Grand Opening Advertising: This is an item that most restaurateurs neglect. You’ll want to launch your restaurant by making a big splash in the neighborhood. To do this, you need the proper budget for social media, print, and other forms of advertising & marketing so you can get the word out.
* Reserve Capital: As I mentioned earlier, you will need to reserve cash in the bank. This reserve cash is required to meet shortfalls that may occur when you first open your new restaurant. You may not break even for months. Therefore, it would be wise to be prepared to cover payroll, inventory, utilities, and other costs incurred as you operate.

Understanding the actual cost of opening your restaurant is vital. An investor or bank will want to see that you’ve applied critical thinking to the project by taking time to evaluate the start-up cost honestly. In addition, you will need to prepare a business plan and projections to secure bank financing or satisfy an investor. Properly evaluating the required investment will lead to accurate budgeting these key startup costs.

So now that you have an understanding of cost, you should be prepared for a banker or investor to inquire how much of your own money you’re willing and able to invest into your business. In many cases, the SBA, private lenders, or conventional loans through a bank will require that you supply somewhere between 15% and 25% of the total amount necessary. As an example, if you project a cost of $400,000 to open your new restaurant, you will need between $80,000 and $120,000 in cash. Your cash investment demonstrates to the bank or investor that you have “skin in the game. “I have never seen a bank or investor finance a new restaurant 100%.
Now that we’ve covered the investment information necessary to open a new restaurant, we’ll tackle the second question in our next article. We’ll dig into funding methods such as a conventional business loan with a bank, an SBA loan, a private investor, and of course, family and friends.

About the Author:
Gary Occhiogrosso is the Founder of Franchise Growth Solutions, which is a co-operative based franchise development and sales firm. Their “Coach, Mentor & Grow Program” focuses on helping Franchisors with their franchise development, strategic planning, advertising, selling franchises and guiding franchisors in raising growth capital. Gary started his career in franchising as a franchisee of Dunkin Donuts before launching the Ranch *1 Franchise program with it’s founders. He is the former President of TRUFOODS, LLC a multi brand franchisor and former COO of Desert Moon Fresh Mexican Grille. He advises several emerging and growth brands in the franchise industry. Gary was selected as “Top 25 Fast Casual Restaurant Executive in the USA” by Fast Casual Magazine and named “Top 50 CXO’s” by SmartCEO Magazine. In addition Gary is an adjunct instructor at New York University on the topics of Restaurant Concept & Business Development as well Entrepreneurship. He has published numerous articles on the topics of Franchising, Entrepreneurship, Sales and Marketing. He was also the host of the “Small Business & Franchise Show” broadcast in New York City and the founder of FranchiseMoneyMaker.com
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FRANCHISE YOUR BUSINESS TODAY: www.franchisegrowthsolutions.com

THE LABOR CRISIS – HELP IS ON THE WAY!

Posted on September 1, 2021September 3, 2021 by Franchise Strategist

THE LABOR CRISIS – HELP IS ON THE WAY!
By Roger Lipton

The labor crisis is more than obvious. The contributing factors are open to debate. Is it the fear of Covid (from working indoors and/or being in close contact with customers and other employees), the need to stay home with the kids who are not back in school full time, or the lack of urgency (thanks to government assistance) to earn the dollars that will balance the family budget.

Here’s a data point for you. Call it “anecdotal”, not statistically relevant, but FWIW: On the conference call of an Indiana based restaurant chain, the CEO reported:

“…the labor shortage is real, but the causes grossly misrepresented….”

“…the hourly workforce in restaurants is and always has been in large part transitory and part time. A significant percentage of these part time folks work for extra household income, extra spending money, for income while they’re attending college or for any other reasons.

However, when you flood the economy with stimulus checks, monthly unemployment bonuses, extra food assistance debit cards, IRS refunds and the elimination of rent eviction, a lot of incentive to work part time for extra cash is eliminated.”

Here’s the data point:
“Indiana had opted out of the additional government unemployment bonus payments, which resulted in an immediate resurgence of applications at our restaurants, but this was quickly squashed when the court challenges reversed that decision.”
The following conclusion is the hope for the industry.

“With the federal program set to expire in September, we’re hoping that the labor market revives some after Labor Day”.
Call it anecdotal, just one CEO’s opinion. You can recoup the higher wage rates, as you must, with higher menu prices, but you can’t get that far without a kitchen and service crew. Sounds like relief from that standpoint is not far away.
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About the Author:
Roger Lipton is an investment professional with over 4 decades of experience specializing in chain restaurants and retailers, as well as macro-economic and monetary developments. After earning a BSME from R.P.I. and MBA from Harvard, and working as an auditor with Price, Waterhouse, he began following the restaurant industry as well as the gold mining industry. While he originally followed companies such as Church’s Fried Chicken, Morrison’s Cafeterias and others, over the years he invested in companies such as Panera Bread and shorted companies such as Boston Chicken (as described in Chain Leader Magazine to the left) .
He also invested in gold mining stocks and studied the work of Harry Browne, the world famous author and economist, who predicted the 2000% move in the price of gold in the 1970s. In this regard, Roger has republished the world famous first book of Harry Browne, and offers it free with each subscription to this website.
In the late 1970s, Roger left Wall Street to build and operate a chain of 15 Arthur Treacher’s Fish & Chips stores in Canada. In 1980 he returned to New York, and for the next 13 years worked at Ladenburg, Thalmann & Co., Inc. where he managed the Lipton Research Division, specializing (naturally) in the restaurant industry. While at Ladenburg he sponsored an annual Restaurant Conference for investment professionals, featuring as keynote speakers friends such as Norman Brinker (the “Babe Ruth” of casual dining) , Dave Thomas (Wendy’s) , Jim Collins (Sizzler & KFC), Jim Patterson (Long John Silver’s), Allan Karp (KarpReilly) and Ted Levitt (legendary Harvard Business School marketing professor, and author). Roger formed his own firm, Lipton Financial Services, Inc. in 1993, to invest in restaurant and retail companies, as well as provide investment banking services. Within the restaurant industry he currently serves on the Board(s) of Directors of both publicly held, as well as a private equity backed casual dining chains. He also serves on the Board of a charitable foundation affiliated with Israel’s Technion Institute.
The Bottom Line: Roger Lipton is uniquely equipped as an investor, investment banker, board member and advisor, especially related to the restaurant, franchising, and retail industries. He has advised institutional investors, underwritten public offerings, counseled on merger transactions, served on Board(s) of Directors, public and private, been retained as an expert witness, conducted valuation studies and personally managed a successful investment partnership, all specializing in restaurants/retail. He has studied great success stories over the last 40 years, from McDonalds to Shake Shack. Even more important he has watched scores of companies stumble and sometimes fail. It is this insight that Roger brings to this website. His post, dated 9/30/15, called “VISIT THE GRAVEYARD…..” lists a long list (though only a sample) of companies that have come and gone over the length of Roger’s investment career. This platform is his way of maintaining a dialogue with other professionals in the field, improving his own investment results, and remaining well informed on industry issues.
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Franchise your business today: www.franchisegrowthsolutions.com

Franchisor Focus – 10 Ways an Earnings Claim Can Help Grow a Franchise System

Posted on September 1, 2021September 3, 2021 by Franchise Strategist

It can assist a franchisee to more easily obtain financing, especially if it’s for a new or emerging franchise brand. Franchisors often offer a “negative disclosure” in this section, which means that no financial projections or representations regarding future or past financial performance are provided.

Franchisor Focus: 10 Ways an Earnings Claim Can Help Grow a Franchise System

By Ed Teixeira – VP Franchise Grade, Author, MA Economics, Industry Partner Stony Brook U. and member of Advisory Board Pace U. Lubin School of Business.

Those of us who have spent years working in franchising may recall when a small number of franchisors made an Item 19 financial disclosure. It’s been reported that 20 years ago less than 20% of franchisors made a financial performance representation (FPR) or earnings claims in their FDD.[i] Over the course of the past number of years that number has increased considerably and a recent review of over 2,500 Franchise Disclosure Documents by Franchise Grade found that 65% of franchisors provided an FPR in their Item 19. The FPRs vary from average franchisee revenues to a more detailed disclosure of average franchisee profits.

This change in Item 19 disclosure represents one of the most important alterations regarding the information a prospective franchisee receives in the FDD. Whether a franchisor is a startup or established, they should provide an FPR. In fact, a new franchisor with one company operation can make an FPR (subject to FTC and state disclosure regulations) and this information should be provided to prospective franchisees.

Some franchisors fail to do an FPR either because they lack attractive information to present, don’t want to invest the time in establishing the allowable process for obtaining and disclosing the information. Or they may fear a franchisee lawsuit which can be avoided by using competent and qualified franchise legal counsel.

An FPR isn’t just another FDD disclosure. More importantly, it can help franchisors to recruit, qualify and close more franchise transactions.

Here are 10 Reasons How an FPR will help:

The FPR can be used in franchisee recruitment materials and advertising to highlight notable franchisee financial results.

The availability of an FPR can separate a franchisor offering from a competitor who fails to provide one.

It allows for a more open discussion with a franchise candidate pertaining to how they expect to achieve the positive financial results in the FPR. This could be a useful tool for qualifying franchisee candidates.

A candidate can use the FPR as a basis to develop a more accurate and useful business plan and financial projections.

It can enable a prospective franchisee to analyze and construct their key performance indicators (KPIs) and to establish the probability of achieving their financial goals.

An FPR can establish franchisor transparency which strengthens the franchisor’s credibility.

It helps provide the most important information prospective franchisees are always interested in obtaining–namely “How much can I make?”

It can assist a franchisee to more easily obtain financing, especially if it’s for a new or emerging franchise brand.

Franchisors often offer a “negative disclosure” in this section, which means that no financial projections or representations regarding future or past financial performance are provided. This in turn often means that franchisees must consider earnings potential based on other factors.

When a franchisee is interested in selling their franchise an FPR can help support those franchisees financials and the overall franchise system performance.

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[i] International Franchise Association 50th Annual Legal Symposium May 7-9, 2017 JW Marriott Washington, D.C

About the Author: Ed Teixeira
Ed Teixeira is a recognized franchise expert with over 35 years experience in the franchise industry. He has served as a corporate executive for franchise firms in the retail, manufacturing, healthcare and technology industries and was a franchisee of a multi-million dollar home healthcare franchise. Ed is the author of Franchising From the Inside Out and The Franchise Buyers Manual. He has participated in the CEO Magazine Roundtable Meetings with business leaders from around the country and spoke at a number of venues including the International Franchise Expo and the Chinese Franchise Association in Shanghai, China. Over the course of his career, Ed has been involved with over 1,000 franchise locations and launched franchise concepts from existing business models. Ed can be contacted at 631-246-5782 or [email protected].
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FRANCHISE YOUR BUSINESS: www.franchisegrowthsolutions.com

DO YOU NEED A TAX ID? HOW TO OBTAIN AN EIN

Posted on August 1, 2021September 3, 2021 by Franchise Strategist

DO YOU NEED A TAX ID? HOW TO OBTAIN AN EIN
By TOM SCARDA, CFE Founder of FRANCHISE ACADEMY
🔑Education 🔑 insight 🔑 inspiration – Have you been working from home and don’t want to go back to your office? Have you tasted freedom and want out of the corporate rat race? We should talk. No Sales, No Kidding.

After you incorporate or form an LLC, the IRS will issue a federal tax ID to your small business. This tax ID is also known as an employer identification number, or EIN.

What is an EIN? Let’s take a closer look at this federal tax ID, key areas where having an EIN may benefit your business, and how to obtain an EIN if you were not already issued this tax ID.

What’s an EIN?

An EIN is essentially a social security number (SSN) for a small business.

This tax ID is nine digits long, similar to that of an SSN, with a primary purpose of legally identifying your business. Entrepreneurs may use their SSN or an EIN on paperwork pertaining to their company. Some entity formations, like sole proprietors, use their SSN for business tax purposes. Incorporated formations, like limited liability companies (LLCs), have the choice to use their SSN or an EIN.

More often than not, incorporated businesses will use their EIN. This is because an EIN is slightly less sensitive than an SSN. As such, business owners may choose to use an EIN in lieu of an SSN. Choosing this tax ID acts as a safeguard to ensure the safety of their personal identity. It also helps to keep entrepreneurs in compliance with U.S. tax laws.

How Do I Know I Need an EIN?

There are several aspects of small business where it’s necessary to file for an EIN. Here’s where this tax ID can benefit your company.

Opening a business bank account. Having a business bank account allows small business owners to keep their personal and professional finances separate. Most U.S. financial institutions require a certified copy of an EIN prior to opening a business bank account. An EIN also makes it easier to establish a business credit profile, separate from the owner, and build business credit.
Forming an LLC. If you have already formed an LLC, then you were issued an EIN — and may skip ahead in reading. However, if you are planning to form an LLC keep in mind that the IRS will issue you an EIN. You will also need to obtain an EIN if you choose to incorporate as another entity formation, such as incorporating as a corporation or forming a partnership.
Hiring employees. Here’s where an EIN benefits both employees and the business owner. If your business plans to hire employees, it is a requirement to obtain an EIN. This allows the IRS to track your business and ensure it collects payroll tax. On the flip side of the coin, once a business has been incorporated the business owner is technically considered an employee. As such, you will need to obtain this tax ID — for future employees within the business as well as your own status within an incorporated business.
Besides the aforementioned three bullet points, EINs may benefit businesses in even more ways. You will need to obtain an EIN to establish pension, profit sharing, and retirement plans. This tax ID may also be used when filing annual tax returns. In the event you decide to change your organization type, filing Form 8832 Entity Classification Election will ensure your entity is able to retain its EIN, even if its legal structure has changed.

How Can I Obtain an EIN?

Obtaining an EIN is a fairly straightforward process. You can apply for an EIN online, through the mail, by fax, or even over the telephone with the help of MyCorporation’s trusted team of professionals.

Before you begin the filing process, however, please note that you must determine if your business is eligible for an EIN. The principal business must be located in the United States or its U.S. territories. The true principal officer or general partner must also possess a valid tax ID. This may be an SSN, an EIN, or an individual taxpayer identification number (ITIN). Finally, if your small business is not already incorporated or formed as an LLC then it must file to incorporate as a legal formation for their organization.

The Value of Having an EIN

Having a tax ID allows you to take your business to new, exciting heights while remaining in compliance with tax laws. As an added bonus, once you obtain an EIN you have it forever because EINs do not expire.

Conduct your due diligence prior to filing for an EIN and reach out to a legal professional prior to filing if you have any questions. Once you obtain your EIN, remember to treat it similar to that of an SSN. Keep this ID in a safe place to protect it and use it in areas required by your business.
Deborah Sweeney is the CEO of MyCorporation.com which provides online legal filing services for entrepreneurs and businesses, startup bundles that include corporation and LLC formation, registered agent services, DBAs, and trademark and copyright filing services. You can find MyCorporation on Twitter at @MyCorporation.

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About Tom Scarda:
Tom is now a nationally recognized small business and Certified Franchise Expert (CFE), motivator and dynamic speaker. Tom has authored three books: Franchise Savvy, The Road to Franchise Freedom and The Magic of Choosing Uncertainty: How to Manage Change, Embrace Fear and Live a Fulfilled Life.

30 years ago, searching for his inner drive, Tom left college and submerged himself in the motorcycle underworld in lower Manhattan. This made his mother worry. It was the first time Tom chose uncertainty over the status quo.

After four years of life in the outlaw motorcycle subculture in NYC, Tom got a haircut, took a shower and landed a respectable job in the New York Subway system. After more than 13 years in the subway Tom became frustrated with the bureaucracy and politics. So he quit his job and left his pension behind to pursue his dreams of business ownership. This also made his mother worry.

In 2000, he purchased a smoothie franchise, which he built into three units and sold five years later for a considerable profit. He was the #1 franchisee of the year in Maui Wowi Smoothies in 2002. He purchased a second franchise in 2006 called Super Suppers and failed miserably in that franchise concept. The lessons he learned from failure is what makes him such an expert. Tom has owned and operated both franchised and non-franchised businesses and has years of knowledge and wisdom to share with you.

WHO BUYS A FRANCHISE?

Posted on August 1, 2021August 2, 2021 by Franchise Strategist

WHO BUYS A FRANCHISE?
By TOM SCARDA, CFE (Posted with permission)

A very high percentage of people who choose to invest in a franchise usually do it as a second, third or fourth career. Most franchise owners are corporate refugees who have escaped their cubical and the blight of corporate America to control their destiny and grab their piece of the American dream.
Many people also invest in a franchise as an investment vehicle and a way to diversify their investments and gain a tax shelter. Some franchises allow for keeping a full-time job as the franchise owner builds their franchise. These types of franchises are called manager-run franchises. A word to the wise, many companies will tell you that they can be run absentee or have a manager in place. However, they may be just trying to sell you a franchise. Ask for the percentage of franchise owners who are currently operating in that manner. Then ask for an email introduction to each one or at least a list of those owners so you can call them and validate that the operation works without them being there.

In addition, you don’t have to have experience in the industry of the operation you buy into. As a matter of fact, many times, the franchisor prefers if you have no experience or exposure to the industry. If you do, you will likely bring baggage and bad habits to your operation. An excellent franchise company will train you in best practices for their industry.
As an example, if you have a barber or beautician’s license, you may not be granted a franchise in a hair cutting concept. See, the franchise knows that if you can act in the worker’s role or be the technician, you’ll slowly slide into that position and not be the CEO or CFO of your franchise. Once that happens, you plateau in the business, revenues become flat, and you have essentially bought yourself a job.

Many people come to me and say, “I’m an accountant, I want to open an HR Block, or I love to bake, so I want to open a Nothin’ Bunt Cakes. Interestingly, Nothing Bunt Cakes want managers and leaders who can translate their corporate experience into building a significant franchise operation. They will then hire great bakers to do the daily grind. They do not want folks who like to bake.
Work on the business, not in the business

The phrase, ‘work on your business not in it,’ is the central tenet of franchising and successful business ownership, even outside of franchising. As you look at franchising, you’ll realize that the barrier to entry is low in many cases. However, the barrier to scalability is very high. Many non-franchised business owners own a store and make it happen every day. Many times, that owner is frazzled because they are good at a specific task in an operation. Whether it’s managing people, sales, marketing, or specific duties such as being the baker or the auto mechanic. It’s rare that any one person is good or can have the time in a day to be good at everything.

My advice is to drop employee mentality and start thinking like a business owner. Usually, an employee is focused on one or a few items within a business, and that is what they are paid for.
If you become a business owner, you are the Capitan of the ship, and you have deck hands running the operation of the boat.

Like the Capitan of a ship, a business owner focuses on the big picture and directs that ship toward the intended port or its goals in the case of business. The owner should have a leadership mentality and be or get comfortable delegating.

It’s said that the most valuable commodity to a human is time, and you can buy time. However, in a well-run business, you can buy time. You are leveraging other people’s time, thereby giving you time to do other things. Some of your time could be geared toward building the business by marketing or networking. Or having a staff ultimately gives you time for your family, extended vacations, or just enjoying your hobbies and passions. With a properly run business, you can really by time. I call that success.
#FranchiseOpportunities #controlyourdestiny #changeyourlifetoday

About TOM SCARDA, CFE
—————————–
Tom failed in a franchise. That is why you need to talk with him. Easily avoid the mistakes he made.

Tom is now a nationally recognized small business and Certified Franchise Expert (CFE), motivator and dynamic speaker. Tom has authored three books: Franchise Savvy, The Road to Franchise Freedom and The Magic of Choosing Uncertainty: How to Manage Change, Embrace Fear and Live a Fulfilled Life.

After selling his smoothie operation and closing down Super Suppers, Tom started helping people figure out if franchising is for them and not make the mistakes he made. Tom previously hosted “The Franchise Hour” radio show in New York City. He currently Hosts two Podcasts and has been featured in dozens of magazines and newspapers and is a sought-after radio and TV guest. His mom has stopped worrying.

Born and raised in Brooklyn, NY, Tom was named one of the top 50 business leaders on Long Island by Long Island Business News. Tom lives on Long Island, NY with his wife of 32 years, Gina, Darla the BernaDoodle and a few chickens. He is the proud father of two grown children and a new Grandfather. He enjoys flying airplanes in his spare time and still appreciates old school Harley-Davidson choppers and tattoos. (OK, mom still worries a little).

Tom’s mantra is “There are no wrong turns, just different experiences.” However, some folks just move in circles. Tom believes that everyone has a passion sleeping within his or her soul. Tom’s mission is to help people harvest their own passion for the betterment of the world. He inspires people to surf on the edge of their comfort zone and choose uncertainty over unhappiness.

🔑Education 🔑 insight 🔑 inspiration – Have you been working from home and don’t want to go back to your office? Have you tasted freedom and want out of the corporate rat race? We should talk. No Sales, No Kidding.

FULL SERVICE CASUAL DINING – WE GO TO SCHOOL WITH GENE LEE, CEO OF DARDEN (DRI)

Posted on August 1, 2021August 2, 2021 by Franchise Strategist

Darden’s most recent reporting period was their fourth quarter, ending at the end of May. Their two largest chains are Olive Garden and Longhorn Steakhouse. Important, but less material, are Cheddar’s Scratch Kitchen, Yard House, The Capital Grille, Season’s 52, Bahama Breeze and Eddie V’s.

FULL SERVICE CASUAL DINING – WE GO TO SCHOOL WITH GENE LEE, CEO OF DARDEN (DRI)

BY Roger Lipton

Gene Lee, and his management team at Darden (DRI), provide about the most candid description of current fundamentals among the publicly held full service casual dining companies. Not only are their reported results about the best in the industry, but they describe, on their quarterly conference call, how and why. Our summary below is of “best practices”, as produced by Darden, and the outlook as presented within their conference call on June 24th.

GENE LEE’S SCRIPTED COMMENTARY

Gene Lee, CEO, commented that they have begun to see demand come back strongly. They are relying on Technomic for industry data, which quantifies the casual dining industry at $189B in 2020, down from $222B in 2019. Though the industry has shrunk by 10% in units during the pandemic, Darden believes the industry will at least regain the 2019 level, implying that AUVs could be higher than before. Not mentioned was “price”, but that would obviously contribute to higher nominal sales.

Lee considers that the Darden business model has improved over the last year. “We’ve invested in food quality and portion size….made investments in our team members to ensure our employment proposition…..and we invest in technology, particularly within our to-go capabilities, to meet our guests growing need for …the off premise experience.”

RICARDO CARDENAS’ (COO) SCRIPTED COMMENTARY

Ricardo Cardenas, President and COO, described the operational simplification effort, which has improved execution and strengthened margins. Even as dining rooms have reopened, off-premise sales have remained strong, proving to be “stickier” than expected. During Q4 off-premise was 33% of sales at Olive Garden, 16% at Cheddar’s and 19% at Longhorn. Technology within online ordering has improved to-go capacity management and curbside delivery. During the quarter 64% of Olive Garden’s to-go orders were placed online and 14% of Darden’s total sales were digital transactions. Nearly half of all guest checks were settled digitally, either online or on tabletop tablets or via mobile pay. Cardenas described the effort to recruit and retain operational talent, claiming no systemic issues. Supply chain issues have also been largely avoided.

RAJESH VENNAM’ (CFO) SCRIPTED COMMENTARY

Rajesh Vennam, CFO, described how SSS compared to pre-Covid (2019), improved from negative 4.1% in March to positive 2.4% in May and positive 2.5% in the first three weeks of June. Though to-go sales have seen a gradual decline, this has been more than offset by in-store dining. In the fourth quarter, CGS was 90bp higher (investments in food quality and pricing below inflation), labor was 190bp lower (320 bp of simplification efforts, partially offset by wage pressures). Marketing was 200 bp lower. Restaurant EBITDA margin was at a record EBITDA of 22.6%, 310bp higher than pre-Covid. CGS inflation is expected to be about 2.5% and hourly labor inflation at about 6%.

QUESTION AND ANSWER DISCUSSION

Gene Lee talked further about the “employment proposition”. The store level margin allows for adequate wages, along with promotion of a thousand team members per year into management. When questioned about store level margin expectation, CFO Vennam indicated that store level EBITDA in the short term is expected to be 200-250 bp better than in 2019, with pricing of 1-2%, lower than CPI inflation of about 3%, but full year margin (ending 5/22) has yet to play out. Commodity inflation of 2.5% for the year will be 3.5-4.0% in the first half, expected to tail off to roughly flat by Q4. Chicken and seafood are elevated, also cooking oil and packaging, a little bit in dairy.

Lee feels that the throughput improvements, including menu simplification, allow for more sales capacity from this level. Mother’s Day sales were a record and mid-week capacity is not fully utilized. Consumer behavior is not yet normalized, so the mix between dine-in and off-premise is still uncertain.

When questioned about the sales improvement “flattening” in May and June, CFO Vennam pointed out that promotional levels are not as heavy now as in ’19, obviously helping the operating margins even with sales just modestly higher. Gene Lee commented later that the current advertising is generic, removing all incentives and discounts, with record operating margins, so marketing decisions going forward will obviously be carefully considered. Later in the call, Gene Lee talked about the Fine Dining segment also improving (a little later than Olive Garden and Longhorn) from down 12 in March to down 6 in May.

COO Cardenas described how technology is reducing “friction” in the guest experience, as well as for team members, making ordering and pickup easier. To further improve the process within the restaurant, a revamp of the point of sales system is planned.

Gene Lee talked about the potential to improve direct marketing to new digital customers, especially with the newly acquired ordering preferences. Lee emphasized the effort to improve the craveability of the menu, at the same time simplifying and improving the core items.

Relative to the addition of additional brands, Lee expressed great satisfaction with the improved returns within the existing portfolio. While not ruling anything out, he seemed to feel that there is substantial opportunity to profitably invest internally.

GENE LEE OPENS UP A LITTLE FURTHER

When pushed about why the sales recovery within Darden is not as fast as elsewhere, Gene Lee’s response was telling. “Because we’re not participating giving away food to third-party channels…not discounting heavily….not discounting cash through selling gift cards….we put up 25% fourth quarter restaurant margins….that’s what we’re focused on. A lot has changed…..virtual brands….guys, you got to get off this……this (Darden’s portfolio of brands) is the best business in casual dining, not even by a little bit anymore…..our guests are loving the experience ….they love the changes that we made….but we’re not chasing an index and we’re not chasing where we were in the past. We love our position today.”

Lastly, when questioned about what the new normal will look like, Gene Lee summarized by saying: “I think we’ve still got another six to nine months to understand (if we don’t have any more problems with Covid) what are going to be the normal behaviors….and then you start developing your market plans and you get tactical on how to get these folks into your restaurant or use you as an off-premise occasion.”
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ABOUT THE AUTHOR:
ROGER LIPTON is an investment professional with over 4 decades of experience specializing in chain restaurants and retailers, as well as macro-economic and monetary developments. After earning a BSME from R.P.I. and MBA from Harvard, and working as an auditor with Price, Waterhouse, he began following the restaurant industry as well as the gold mining industry. While he originally followed companies such as Church’s Fried Chicken, Morrison’s Cafeterias and others, over the years he invested in companies such as Panera Bread and shorted companies such as Boston Chicken (as described in Chain Leader Magazine to the left) .

He also invested in gold mining stocks and studied the work of Harry Browne, the world famous author and economist, who predicted the 2000% move in the price of gold in the 1970s. In this regard, Roger has republished the world famous first book of Harry Browne, and offers it free with each subscription to this website.

In the late 1970s, Roger left Wall Street to build and operate a chain of 15 Arthur Treacher’s Fish & Chips stores in Canada. In 1980 he returned to New York, and for the next 13 years worked at Ladenburg, Thalmann & Co., Inc. where he managed the Lipton Research Division, specializing (naturally) in the restaurant industry. While at Ladenburg he sponsored an annual Restaurant Conference for investment professionals, featuring as keynote speakers friends such as Norman Brinker (the “Babe Ruth” of casual dining) , Dave Thomas (Wendy’s) , Jim Collins (Sizzler & KFC), Jim Patterson (Long John Silver’s), Allan Karp (KarpReilly) and Ted Levitt (legendary Harvard Business School marketing professor, and author). Roger formed his own firm, Lipton Financial Services, Inc. in 1993, to invest in restaurant and retail companies, as well as provide investment banking services. Within the restaurant industry he currently serves on the Board(s) of Directors of both publicly held, as well as a private equity backed casual dining chains. He also serves on the Board of a charitable foundation affiliated with Israel’s Technion Institute.

The Bottom Line: Roger Lipton is uniquely equipped as an investor, investment banker, board member and advisor, especially related to the restaurant, franchising, and retail industries. He has advised institutional investors, underwritten public offerings, counseled on merger transactions, served on Board(s) of Directors, public and private, been retained as an expert witness, conducted valuation studies and personally managed a successful investment partnership, all specializing in restaurants/retail. He has studied great success stories over the last 40 years, from McDonalds to Shake Shack. Even more important he has watched scores of companies stumble and sometimes fail. It is this insight that Roger brings to this website. His post, dated 9/30/15, called “VISIT THE GRAVEYARD…..” lists a long list (though only a sample) of companies that have come and gone over the length of Roger’s investment career. This platform is his way of maintaining a dialogue with other professionals in the field, improving his own investment results, and remaining well informed on industry issues.
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FRANCHISE YOUR RESTAURANT – CLICK HERE: http://WWW.FRANCHISEGROWTHSOLUTIONS.COM