Getting New Franchisees Off to a Great Start

GETTING FRANCHISEES OFF TO A GREAT START…The likelihood of a franchise owner “going rogue” when a company is transparent in its expectations lessens. Franchisees know what is expected of them. 

 

Getting New Franchisees Off to a Great Start
Prepare them for business ownership through the onboarding and training process.

By Gary Occhiogrosso – Managing Partner of Franchise Growth Solutions, LLC.
Photo by Perry Grone on Unsplash

When training new franchisees, there is a term that is used regularly but has received a lot of criticism “Onboarding” Many Franchisors believe that the “onboarding process” begins once a candidate is awarded the franchise. I coach this process is a different way. At Franchise Growth Solutions we know that the onboarding process begins from the very first interaction the company has with the franchise prospect.

That said, let’s take a step back and first explore the goal of proper onboarding. In my opinion, the main focus is to create value for the brand in the minds eye of the candidate. Without value and respect for the brand, all the training in the world will not produce a franchisee capable of living up to his or her full potential as the operating franchisee.
Although franchisee training is often seen as a means to an end because of how quick paced it is and how much information is packed into training sessions, in and of itself training is certainly not the sole answer in producing quality franchisees. Through the years I’ve trained franchisors to understand that in order to successfully orientate a new franchisee; Mission, Culture and Core Values of the brand must be communicated to and embraced by the franchisee. Here again I cannot emphasize enough that franchisors must start building value and respect for the brand during the recruitment phase. It is during that time, potential franchisees and the franchisor should engage in meaningful, mindful conversation so that the franchise candidate understands what is expected of them and the Franchisor should understand what the franchisee expects in return. It’s a simple (but not easy) process that can lead to rejecting a candidate and losing the deal. However, trust me when I say, losing that candidate is a far better outcome than bringing the wrong franchisee into the system only to wreak havoc, compromise brand standards and lobby additional, otherwise satisfied franchisees into their negative mindset.
Successful onboarding and training requires transparency, consistency and follow up.

The likelihood of a franchise owner “going rogue” when a company is transparent in its expectations lessens. Franchisees know what is expected of them. In addition, the Franchisor’s support personnel should be out in the field in front of the franchise owner, coaching, counseling and working with the franchisee to achieve optimum results, financially as well as making sure the business is providing options consistent with the franchisees lifestyle goals. Supplying ongoing training that places resources within reach of the franchisee is not only vital at the onboarding phase but throughout the lifecycle of the business relationship.

This approach helps franchisees adapt as the brand grows and systems evolve. Preparing franchisees to deal with the issues that may come up along the way is key to building a successful franchise system. Ultimately solid onboarding and training should expose the franchisee to detailed information so the franchisee knows what the company expects and they can live up to the “Brand Mission”. Initial and ongoing training should support the idea that following the system is the most important aspect leading to the success of the business. This approach puts franchisees in a better position to make sound decisions concerning the business with little outside assistance and with little room to “reinvent the wheel”.

Franchisees need to be held accountable for holding the same high standards as the franchisor. In order to do this, your company culture, value proposition, training program, operations manuals, job aids and other franchisor supplied tools should be carefully develop, tested, reviewed and updated as necessary. The onboarding process and training program is never “done”. As the franchisor it is you job to insure that franchisees have access to the tools and support needed to grow and thrive.
Get new franchisees off to a great start through a sound onboarding process that starts at the first hello. Recruit and vet your candidates thoroughly, be certain they are a fit for you brand culture and buy into your mission statement. Provide them with the tools and support needed to navigate system changes as they occur. Give the franchisees the foundation they need to grow, develop, and succeed as business owners. An excellent franchise system, built this way from the start makes it easier for franchisees to overcome challenging situations as they occur, and they will occur.
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About the Author:
Gary Occhiogrosso is the Managing Partner of Franchise Growth Solutions, which is a co-operative based franchise development and sales firm. http://www.frangrow.com
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 100+ unit, 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 teaching Restaurant Concept & Business Development as well Entrepreneurship. He has published numerous articles on the topics of Franchising, Entrepreneurship, Sales and Marketing. He is also the host of the “Small Business & Franchise Show” broadcast in New York City and the founder of http://www.FranchiseMoneyMaker.com

PRESS RELEASE – Franchise Growth Solutions Exhibits Innovative Franchise Brands.

COME OUT TO THE INTERNATIONAL FRANCHISE SHOW…Franchise Growth Solutions Expands Internationally as Exhibitor and Speaker at The International Franchise Expo May 30 to June 01, 2019 at New York’s Javits Center

“We’ll be showcasing some of the most innovative and exciting franchise brands of the year.” Gary Occhiogrosso – Founder, Franchise Growth Solutions, LLC.
NEW YORK MAY 27, 2019

Franchise Growth Solutions LLC, the New York-based strategic planning, franchise development and sales organization, headed by franchise industry expert, Gary Occhiogrosso, will exhibit at the International Franchise Expo, May 30 – June 01, 2019, at the Jacob K. Javits Convention Center in New York City.

Mr. Occhiogrosso, a 30-year veteran of single and multi-unit franchise development and sales, was instrumental in the launch and growth of nationally recognized franchises including Ranch *1, Desert Moon Fresh Mexican Grille, and brands found under the 100+ unit multi-brand franchisor, TRUFOODS, LLC.

From booth #646, Franchise Growth Solutions will showcase some of 2019’s hottest franchise opportunities: Acai Express®, Riko’s® Thin Crust Pizza, Balloon Kings®, and MATTO Espresso® to an estimated 20,000 entrepreneurs and future business owners. Occhiogrosso revealed, “We’ll be showcasing some of the most innovative and exciting franchise brands of the year.”
With additional credentials as an in demand public speaker on franchise success, and as an adjunct instructor at NYU, and Contributor to Forbes.

Occhiogrosso will also moderate two panel discussions entitled. At the first discussion “ Private Equity and Franchising” scheduled for Thursday May 30th at 10am, Occhiogrosso will host a discussion between franchisors and private equity investment professionals on how to find capital, the best ways to position franchises for growth/investment, and a checklist of what is required for strategic partnership in the eyes of the investment community. “This is my favorite venue to present this panel, we bring together Emerging Brands and Private Equity Investors to discuss ways to capitalize on the fired-up equity markets in Franchising,” added Occhiogrosso. The second event titled “Using Your Digital to Sell Franchises” is scheduled for Thursday May 30th at 4pm and will cover how Franchisors can maximize their franchise solicitation by tapping into the vast array of tools now available in the digital world. Occhiogrosso said “This panel will feature experts in the Internet marketing industry who will share tips and best practices designed to create accelerated lead generation for their franchise sales effort.” The events are free as part of the attendance fee for the Franchise Expo.

The International Franchise Expo in New York City is the largest franchise show of its kind in the country. The three-day show traditionally attracts over 20,000 attendees and over 400 national and international franchise opportunities.
ABOUT FRANCHISE GROWTH SOLUTIONS, LLC

Franchise Growth Solutions, LLC is a strategic planning, franchise development and sales organization offering franchise sales, digital advertising, brand development, strategic planning, real estate selection, architectural development, vendor management, lead generation, and PR including social media. Franchise Growth Solutions’ proven “Coach, Mentor & Grow®” system puts both franchisors and potential franchisees on the fast track to growth. Membership in Franchise Growth Solutions’ client portfolio is by recommendation only.

For information on Franchise Growth Solutions or any of its franchise opportunities, please contact Gary Occhiogrosso at (917) 991-2465 OR email at [email protected]

Franchise Marketing – Do’s & Don’ts

FRANCHISE MARKETING – DO’S & DON’TS…Today’s featured post is courtesy of Harold Kestenbaum. Harold is one of the Top Franchise Attorneys in the country. He works exclusively with franchisors and has been involved in some of the most important franchises ever launched such as Sbarro, Ranch *1 and Five Guys. In this “double article” Harold shares his insights on franchise marketing and recruiting new franchisees.

The Dos and Don’ts of Franchise Marketing Materials
By Harold Kestenbaum

As an entrepreneur, it can often be worth your while to consider franchising your business. When you have a great product or service, franchising is an excellent way to create a new revenue stream, while increasing brand awareness. As with any new venture, the key to successfully franchising your business is laying the groundwork for a thriving enterprise. This begins with your franchise marketing materials.

Your franchise marketing materials are the key to attracting like-minded individuals to work with your business and grow your brand. It is important to remember though, that you must be careful with what you do and don’t say in these documents, as you want to remain legally compliant and truthful in your endeavor.

DO explain your brand, mission, and infrastructure. In your franchise marketing materials, it is vital to explain who you are as a company, how you operate, and why someone should want to work with you.

DON’T promise your franchisees any specific profits or financial gain. Since every market is different, it is important to refrain from making promises about a franchisee’s total profit or financial gain from buying into your business.

DO set the right restrictions. Your marketing materials should establish policies you have on hiring, training, proprietary processes, etc. but it should also allow the franchisees some freedom to make the business their own.

DON’T neglect to screen franchisees. Just as you would interview potential new hires for your location, you will want to screen franchisees once they have inquired about this opportunity. You want to build a network of people dedicated to your brand and mission.
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Franchise Marketing Materials 101: Establishing Your Recruitment Website
By Harold Kestenbaum

When you have made the decision to franchise your business, you will want to put a lot of time and money into your franchise marketing materials, especially at first. In order to grow your brand and find potential franchisees, these marketing materials must be appealing, straightforward, but also compliant with the law. As you begin working on your marketing materials and franchise recruitment website, it is important to work with a seasoned franchise attorney and remember these key tips.

Register your franchise: Before advertising your franchise to a particular state, it is important to know that many states require a franchise to be registered prior to the sale of any franchise location, but also any offer of franchise. This means you must take care of all necessary registration before launching your website in a given state or sending out marketing materials.

Understand the laws of advertising: Not only do you have to account for the franchise laws that apply to your business, but you also have to consider the other laws which affect advertising. These can include intellectual property laws, unfair competition laws, and deceptive trade practice laws. Your franchise attorney can review all marketing materials to ensure that you are not infringing on any other company’s rights and that you are in full legal compliance.

Provide clear, accurate information: To successfully gain leads from your website and marketing materials, it is critical for franchisors to provide clear, accurate information which provides potential buyers with enough evidence to make a purchase decision. This information should outline the requirements for buying into the franchise, as well as the type of support franchisees will receive once they are a part of the program. You will want to avoid words and phrases such as success and profit, so as not to mislead buyers about their expectations of buying into your franchise. You want to give franchisees truthful information, without making any specific claims about financial earnings, especially since every market is different.

Stay consistent: In all your marketing materials, you want to stay consistent in the way you represent your brand. You will want to avoid making promises that you cannot fulfill once a buyer signs a contract and purchases a franchise under your name. By staying consistent in all your content, you can avoid potential legal roadblocks down the road.
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About the Author
HAROLD L. KESTENBAUM is a franchise attorney who has specialized in franchise law and other matters relating to franchising since 1977. From May 1982 until September 1986, Harold served as franchise and general counsel to Sbarro, Inc., the national franchisor of more than 1,000 family-style Italian restaurants and, was a director from March 1985 to December 2006. From September 1983 to October 1989, he served as president and chairman of the board of FranchiseIt Corporation, the first publicly traded company specializing in providing business franchise marketing and consulting services and equity financing to emerging franchise companies, which he co-founded. Harold has authored the first book dedicated to the entrepreneur who wants to franchise his/her business, called So You Want To Franchise Your Business. It is a step-by-step guide to what a businessperson needs to know and do to properly roll out a franchise program. Harold’s book is available at major book stores and on Amazon.com or you can click here for more info on his book So You Want to Franchise Your Business.

Franchising Your Business? – NOW WHAT?

FRANCHISING YOUR BUSINESS? – NOW WHAT?… A well thought out plan that is forward-looking for the first 1- 3- 5 years. Have you also given thought to the logistics, how do you intend to respond to all the incoming and make outgoing calls quickly?

Franchising Your Business? – NOW WHAT?
By Gary Occhiogrosso – Managing Partner – Franchise Growth Solutions

So you’re ready to launch your newly franchised brand. You’ve set up your store; proved it out over time, have the UFDD and the Operations Manuals in order, so now what? What do you have to show for all the time and money spent up to this point? Where’s the ROI?

How to be a Growth Story
Well, for a franchise system to truly grow, you must sell/award franchises to qualified individuals. You’re not a “growth story” if you’re not selling new franchise units. Hell, you may not even be a franchise story if you’re not selling franchises!
New franchisors are usually so caught up in the idea of “process” or in other words the work of the business so to say that in fact, they overlook the time, cost and needed strategy to sell franchises. I’ll bet many are so sure their franchise will be a hit that they think you can sell it on your own or use “success fee” broker network as the entire development plan. There are no zero cost decisions, one way or the other. How to grow and at what cost is always the question.

Harsh Reality
It doesn’t take long for the smart franchisors to recognize reality and ask themselves a tough question; what do you I know about selling a franchise? Most don’t even have a written Strategic Development Plan? Yes, a development plan, a plan that outlines the markets, the trade areas, the type of ideal franchisees, where to find them, the cost per inquiry, and the conversion percentage, the budget, and the goals. A well thought out plan that is forward-looking for the first 1- 3- 5 years.
Have you also given thought to the logistics, how do you intend to respond to all the incoming and make outgoing calls quickly? Make the follow-up calls; conduct the discovery days, and all the prospects questions, his wife’s questions, his attorney’s questions. Consistent, timely sales efforts rule the day. If you’re lucky, you quickly realize you don’t have the time or the expertise to launch an effective selling system for your franchise.

Ignorance is NOT Bliss
The danger and destruction of ignoring that realization can be seen at all levels in the franchise industry from dead brands to bankrupt franchisees. When franchisors fail to recognize that they are now in a completely different business than the concept they started, several mistakes can happen whether it is selecting the wrong franchise candidate. Or thinking they can service an international franchisee. Alternatively, opening in a market where they have distribution challenges. Or opening in a market with zero name recognition, franchisors can sometimes be their own worst enemy to growing their brand in an aggressive but responsible way. The successful Franchisors all come to the realization that just because they know their business doesn’t mean the franchisor knows the franchise business. Certainly not anymore than a franchise strategist might know the trade secrets of operating your business successfully.

Answering the NOW WHAT Question
The road is littered with new franchisors that tried the “Do It Yourself” approach. Alternatively, perhaps paid a company that is really in the business of selling paperwork like the FDDs, Manuals, & Brochures, but not selling the franchises. Or thinking a broker network, which is designed to supplement your selling strategy, should be your sole selling strategy. So we get back to the question; now what? We can help you answer that question. Please feel free to contact us at [email protected]
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About the Author
Gary Occhiogrosso Managing Partner – Franchise Growth Solutions
Currently, is the Managing Partner of Franchise Growth Solutions, which is a national franchise development and sales firm. Their “Coach, Mentor & Grow Program” focuses on helping Franchisors with their franchise development, strategic planning, 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. He is the former President of TRUFOODS, LLC a 100 unit, multi-brand franchisor and former COO of Desert Moon Fresh Mexican Grille. Gary was selected as “Top 25 Fast Casual Restaurant Executive in the USA” by Fast Casual Magazine. In addition, is an adjunct instructor at NYU on the topics of Concept & Business Development as well as Franchising & Entrepreneurship. He is also the host of the “Small Business & Franchise Show” broadcast in New York City and is a contributing writer for www.Forbes.com on the topic of Franchising.

Lead Generation – Lifeblood of Franchise Sales

LEAD GENERATION – LIFEBLOOD OF FRANCHISE SALES…You’re damn right no one told you, or you may not have purchased the Op’s Manuals or had an FDD written. What you must consider is the total cost to launch a franchise company. Moreover, the most significant piece to that puzzle is the “Cost Per Acquisition” or Lead Generation.

By Gary Occhiogrosso – Founder Franchise Growth Solutions, LLC.
Photo by David Marcu on Unsplash

Despite what you’ve heard, start-up and emerging brand franchises do not sell themselves. Oh sure, we all want to believe that the brands we’ve created are so unique and special (like our children) that everyone will beat a path to our door just for the opportunity to invest a few hundreds thousand dollars in opening one of our franchises. Although I’m one of the most positive people you’ll ever meet when it comes to franchising, I’ve also been around long enough to know that a franchisor’s short view, lack of research and sometimes ego are responsible for one of the most the critical mistakes startup franchisors make. That is to underestimate the Cost Per Acquisition regarding Lead Generation.

Let’s go back to the beginning.
You have this idea to expand your business. You do a little research that leads you in the direction of franchising. So how does one do that? Well for many, after a quick google search, they come across listings for franchise attorneys that will write a Franchise Disclosure Document and a “Franchise Development” company that will take on the responsibly of writing a set of Franchise Operations Manuals. Many startup franchisors and emerging brands are led to believe that these two components on their own will make you a franchisor. While these items are necessary, this by itself happens not to be the whole truth.

My firm Franchise Growth Solutions specializes in start-up, emerging and turnaround franchise brands, I have witnessed the challenges facing these brands at their outset. As a result, I’m about to tell you the first thing you won’t want to hear – You need approximately $120,000 to $200,000 over the first 12-15 months of your startup to properly launch a franchise brand.

WOW – No One Told Me.
You’re damn right no one told you, or you may not have purchased the Op’s Manuals or had an FDD written. What you must consider is the total cost to launch a franchise company. Moreover, the most significant piece to that puzzle is the “Cost Per Acquisition” or Lead Generation. Here’s the second thing I’ll tell you that you won’t want to hear – Simply put, no leads, no franchise sales. Also, to be clear, we’re not talking about the enthusiastic customers that tell you they would love to open a franchise. Trust me, most of these evaporate as soon as they realize what it costs to open a business and that you don’t have a siphon hose that goes from your cash register directly into your pocket.

The data today regarding how much it costs to sell a franchise is overwhelming. It’s true every once in a while (like a total solar eclipse) we hear about the franchise brand that almost from its outset grabs the imagination of the general public and eventually investors, and before you know it, there are 150 operating units. There are three things to embrace with this scenario, one; it’s great to expect and even initially forecast that you fall into the solar eclipse category but bad if you build a long term financial business plan on it. Two, as I mentioned earlier, it is very very rare and three; many times (usually most, but I can’t quantify that) these rapid rising stars collapse under their weight due to lack of infrastructure, franchisor experience and lack of growth capital. Many of these franchisors believe they can support their growth by “selling franchises.” However, just like a hungry shark, the bigger it gets, the more bodies it needs to eat to stay alive – Ouch if you’re a franchisee that just got swallowed up so the franchisor could pay the electric bill at the office.

There is a “Light At The End Of The Tunnel.”
Some of the things we instill in our franchisor clients is the understanding that it takes time, patience and money. What’s daunting is; there are “unknowns” regarding how much time and money. We can point to statistics and make some forecasts, but forecast change and franchisors need to be able to move with those changing dynamics. If the Franchisor is unwilling or unable to modify and pivot their franchise sales program, they will eventually give up, fail or be sidetracked by some other interest, just like the dog that chases the ball no matter where you throw it, even in traffic.

The “light at the end of the tunnel” is the way the Cost per Acquisition will be reduced as you open units, garner more brand recognition, create successful franchisees and start to build up a digital footprint that will drive interested people to your franchise website. That said, it’s important to embrace three ideas; be properly capitalized as mentioned above, also slow and steady (within plan) wins the race. And lastly, solely chasing ROI is pointless. If you dismiss these three ideas, you run the risk of exhausting yourself and depleting your assets simply because you “need” to grow quickly. Notice I said “need” not “want.” We wouldn’t be prudent entrepreneurs if we didn’t want to grow our companies as quickly as possible. However, the frenetic, lizard-brained approach often misjudges,ignores the universe or doesn’t know that mistakes abound, egos mislead and eventually you have that sandwich chain that everyone was so high on in the early 2000s that has now all but vanished, seeing multiple bankruptcies and too many lawsuits to count.

The Full Picture
Getting all the facts on how to franchise your business is the most critical exercise you can perform. Launching your brand the right way may take a little more time and money, but a strong foundation, a good plan and great people will pay off in the long run.

For more information on this topic contact us at [email protected]

Millennials Drive Menus In Fast Casual Restaurants

MILLENNIALS DRIVE MENUS IN FAST CASUAL RESTAURANTS…. These Newer Concepts must not only live up to the marketing message but also ensure that their operations can provide consistent, quality products in every location…. Their business models must be replicable and easily managed.

By FranchiseMoneyMaker Contributor

As recently as 15 years ago the idea that you could grab a nutritious, healthy and still tasty meal from a drive-thru or fast food restaurant was unheard of. It wasn’t until the post Y2K era that fast food consumers became concerned with what they ate. As the Millennial generation started spending money on food outside the home the industry has been “forced” to move toward healthier, high-quality menu alternatives. Once begun this movement toward fresher, greener menus has continued to accelerate at an ever increased pace.

Does Better for You equal Better for Business

Consumer attitudes regarding the link between diet and health have shifted. Data shows that Millennials and aging baby boomers are taking a more proactive approach to healthy eating. Many have adjusted their dietary choices to promote better health. The demographic with higher levels of education and more disposable income is at the forefront of this trend. These health-conscious consumers take the time to research before they dine out. In addition, they seem more willing to pay higher prices to ensure that what goes into their bodies is nutritious.
With this new consumer focus on nutrition, sustainability and ‘clean food’ comes a revolution in the Quick Service Restaurant (QSR) industry. According to a recent article in Business Leader, 83% of Americans believe that fast food from traditional Quick Service franchises is not healthy. This has created the rise of the ‘better for you’ brands that now compete with fast food giants such as McDonald’s, Burger King, and KFC. For example, healthy quick service brands such as Dig Inn, By Chloe, and Sweetgreen are creating their own niche by specializing in organic, locally sourced meal options that contain more vegetables and fewer calories than traditional burgers and fries.

Quality comes with a Cost

As enticing as these food offerings may be to our palate Consumers may find themselves paying almost double what they would at a traditional fast food location. Locally sourced, organic and sustainable food suppliers still see this segment as small compared to conventionally processed ingredients, so access and availability remain a challenge. As a result, many healthier focused chains are developing altogether new selling propositions by positioning “value with reasons” as a way to compete with the traditional fast food chains of the industry. These “better for you” concepts post nutritional information, health benefits as well as the sourcing and methods used in their products. The emphasis is on local, clean, humanely raised and organic.

One such concept is Salad and Go. Branded as a healthy drive-thru option, Salad and Go offers large salads, smoothies, soup and breakfast with an “Always Organic” list of ingredients. In addition, the brand highlights their competitive prices. Salad and Go currently has in 10 locations in the U.S. with plans to nearly double that number by the end of 2018.
Another U.S. chain, LocoL, offers food made only from local ingredients. Founders & Chefs Roy Choi and Daniel Patterson claim “We at LocoL want to live in a world where eating healthy doesn’t take a lot of money or time.”
New quick service food concepts like these are branding their menu items as healthy, high quality alternatives to the sugar, fat, and salt-heavy meals provided by traditional fast food franchises. Recently developed QSR concepts give consumers a choice. Whether it’s organic, farm to table, all natural, gluten free, vegan or humanely raised, the race to innovate and meet this rising consumer trend has never been more of a priority in the Quick Service Restaurant segment than it is today.

Forcing Innovation in Traditional Brands

As new brands continue to make their mark in the minds of U.S. consumers, established brands are attempting to keep up with changing demands. Fast food chains such as Taco Bell have promised to use cage-free eggs and reduce artificial ingredients, and McDonald’s has started selling antibiotic free chicken, and now cooks many of its items to order and offers more salads. It is yet to be seen if that alone will be enough to keep the long-standing leaders in the QSR industry on top.

Serving up Quality, Quickly and Consistently

These QSR pioneers are faced with the challenge of living up to the expectations of an informed, proactive consumer. These newer concepts must not only live up to the marketing message but also ensure that their operations can provide consistent, quality products in every location. Their business models must be replicable and easily managed. This may also prove to be a challenge when food is being prepared to order using fresh locally sourced ingredients instead of processed or precooked menu items. If they can accomplish these tasks, the potential for growth is unlimited.

Regardless of the challenges facing these new “better for you brands”, the move away from traditional fast food to healthier quick service food options is unstoppable. As a means to address consumer concerns, in late 2017, the FDA announced new regulations requiring large restaurant chains to add calorie counts to their menus by 2018. This, combined with health-conscious consumers, will continue to push these new QSR chains to sharpen their competitive edge by offering a wider variety of great tasting, healthier options. As I see it, the success of the “better for you” fast casual concepts will depend on their adaptability to trends, consistency in product, as well as the price point and expense management.

How Successful Restaurant Franchisees Are Growing Their Brands

WHEN GROWTH IS THE GOAL, MULTI-UNIT, MULTI-BRAND IS HOW FRANCHISEES ARE FUELING THEIR GROWTH…

How Successful Restaurant Franchisees are Growing their Brands
By Gary Occhiogrosso

Restaurant franchising has undergone an evolution in the last 20 years. Today’s franchised restaurant business now attracts a variety of investors for a variety of different reasons. Beginning in the 1960s owning a single unit franchised restaurant was an entry point for everyday individuals to get into the restaurant business. This “First Wave” in restaurant franchising was the growth tool of choice for many entrepreneurs and first-time business owners.

With Success Comes Change
Successful individual franchisees seeking growth went on to open numerous locations under the same franchised brand name. Using their experience in real estate, restaurant operations and developing staff as well as their ability to leverage cash flow from their profitable businesses, many went on to open additional units in the ’80s and ’90s. Whether it’s a single individual owning three to five franchised restaurants or larger investors that opened scores of locations, multi-unit ownership proved to be a method for financial growth by giving franchisees and investors an established model with a predictable result. Using this Multi-Unit development method as a means to increase enterprise value for the business owner became what I call the “Second Wave” in franchising. Many of these now professionally managed “corporate” franchisees have taken numerous franchise systems to new heights by developing hundreds of units in their designated territories.

All Dressed Up And Nowhere To Grow
When growth is the goal multi unit multi brand is how franchisees are fueling their organizations.
So what happens when a growth-driven franchisee reaches a level of saturation for their brand in their market? How can they continue to expand? How do they optimize the business infrastructure they’ve already created in their organizations?
Today’s “Third Wave” of franchise development lies in the concept of not only owning multiple restaurants of the same brand but also owning multiple units of various brands. Multi-Brand restaurant franchising has exploded in recent years. Countless franchisees now operate two, three or more non-competing restaurant brands. These large franchisees can sometimes develop additional brands in their original territory while many others choose to run restaurants in several regions. These franchisees are driven by revenue growth, brand diversification, open territory, capitalizing on existing human resources, local real estate, consumer trends and demographics in a market. The concept of owning multiple units of one brand has been eclipsed by what is now known as Multi Brand ownership. That’s where a franchisee develops the business enterprise as a franchisee of various non competing restaurant brands.

Private Equity Investors Dig Deeper for Gold
Today, not only are the franchisor/parent companies the target of private equity investment and acquisition but so are large franchisee organizations. As franchisees, private equity firms are creating millions of dollars in profit by scaling the number of restaurants in their portfolios utilizing a proven system with a predictable result.

Phil Druce, Partner with Atlantic Street Capital says “We feel strongly about the sustainability of the franchising category as multi-unit franchisee investors into the future. While some equity investors might shy away from broadly defined retail thinking that the category over the medium to long-term will be compromised with the proliferation of technology or delivery-based solution, we continue to feel positive about the sector.

Druce continued; “Amazon risk” will continue to be a popular phrase used across the industry as an undefinable risk. We feel as though the best operators and investors will find ways to drive door swings, engage with the customer in a meaningful way, and deliver a customer experience that keeps people coming back. The most sustainable businesses will complement their core retail business with technology solutions of their own that enhance, without cannibalizing, their value proposition.”

The number of Multi Unit-Multi Brand franchisees has grown to the point that some franchisees operate more units in their collective Multi-Brands portfolios than some of the individual franchisors they represent. This month is the Multi Unit Franchise Conference in Las Vegas. I’ll be attending and I’ll have more to say on this topic in my next article. Whatever the ultimate future direction of this type of franchise growth happens to be, Multi Brand franchising is here to stay and will continue to create larger and larger franchisees.

A Roger Lipton Update – Chicken Salad Chix

A Roger Lipton Update – Roger is an investment professional with decades of experience specializing in chain restaurants and retailers, as well as macro-economic monetary developments. He turns his background, as restaurant operator and board member of growing brands, into strategic counsel for operators and perspective for investors.

By Roger Lipton -with Permission
An archive of his past articles can be found at RogerLipton.com.

Chicken Salad Chick, based in Auburn, Alabama, was formed in 2008, by Stacy Brown. Stacy was a stay-at-home mom and self-proclaimed connoisseur of chicken salad who began the business by selling chicken salad made from her home kitchen. She was eventually shuttered by the local health department for selling food from an un-approved facility. She then joined her future husband, Kevin, who left a career in software sales, to help build the foundation for multiple corporate locations and future franchise growth.

In terms of equity ownership, in early 2015, Eagle Merchant Partners (“EMP”), an Atlanta, GA based private equity firm, purchased the majority ownership of the company. Kevin Brown, tragically, succumbed to colon cancer in 2015 at the age of 40. Before his death however, Kevin was instrumental in negotiation of the PE transaction, and he also helped establish the Chicken Salad Chick Foundation, which raises funds for cancer research and feeding the hungry.

In conjunction with that transaction, Russ Umphenour and Scott Deviney become chairman and President/CEO, respectively. Both are highly respected industry veterans. Mr. Umphenour was the CEO of Focus Brands (parent of Moe’s, Auntie Anne’s Pretzels, and others), and before that ran RTM Restaurant Group, the Arby’s franchisee that he founded.

Mr. Deviney was CEO of SDZ (a multi-unit Wendy’s franchisee) and SVP with SunTrust Bank, specializing in the restaurant industry. Over the last several years, the management team has obviously been broadened further to support the ongoing rapid growth. Stacy Brown, the cultural creator of Chicken Salad Chick remains a prominent spokesperson and brand voice, as well as a shareholder.

Originally a drive-thru and takeout only operation, the menu was expanded and sit-down facilities were added as additional stores opened. With franchise operations beginning in 2012, 29 units were open by the end of 2014, with contracts for an additional 114 locations.

The comfortable family oriented decor is combined with a creative and modestly priced menu, featuring over a dozen varieties of made from scratch chicken salad plus pimento cheese and egg salad, as well as fresh sides, salads, soups and sandwiches.

The primary meal special called The Chick includes a scoop of sandwich of chicken salad with a choice of a fresh side, salad, soup or another scoop of chicken salad, egg salad or pimento cheese. All meals are accompanied by a pickle spear, wheat crackers, a selection of breads for sandwiches and a small cookie. The menu also offers chicken salad BLT and turkey club sandwiches, though over 85% of sales come from chicken salad, which is also sold in large and small grab’n go containers called Quick Chick. Upwards of 70 percent of guests are women and the chain prides itself on being “chick friendly.”

Chicken Salad Chick ended calendar 2018 with 104 locations operating—74 franchised and 30 company operated. There were 21 franchised locations and five company stores opened in 2018. When EMP purchased the business in May 201, there were 32 stores in the system, so growth has been dramatic over the last four years.

The 104 locations are now located within twelve states—ALA, GA, FLA, NC, SC, TN, MS, LA, TX, KY, AK, OK. It is expected that 45 locations will have opened in 2019, 13 of them being company operated. It has so far not been necessary to advertise for franchisees, as the curb appeal of the physical unit combined with the menu and employee culture, as well as attractive unit level economics have generated more than adequate franchise interest.

According to the most recen Franchise Disclosure Document: The stores are about 2750 square feet in size, generally located in strip malls, costing an average of about $450,000 in total to establish, including up front franchise fees.

Much of the franchise appeal is the operational simplicity, which in turn generates attractive unit level economics. The equipment package is basic, with a steamer to cook the chicken (everything is prepared daily in the restaurant), food processors, refrigerated sandwich tables, a walk-in cooler, reach-in freezer, water filtration system, toaster and Quick Chick refrigerated case.

The absence of fryers (which must be vented) reduces construction costs, creates site flexibility as well as relative desirability as a tenant. The entire package of furniture and fixtures cost around $120,000. The up front franchise fee is $50,000 per unit, the ongoing royalty is 5% of sales with an additional national advertising contribution of 1.5%.

Last twelve months’ AUV was $1.2M in 2018, growing by about 9% in 2016, 13% in 2017 and 11.2% in 2018. Same store sales were up 15% in 2016, 8% in 2017 and 4% in 2018. Traffic has also been up consistently, most recently up 2.9% in 2018. The sales improvement is especially impressive within a restaurant industry that has been challenged in this regard.

Cost of Goods Sold has averaged about 30.5% with fully loaded labor at roughly 25.0%. Stores are open from 10am to 6-8pm (depending on the market) and closed on Sundays, taking a page out of Chick fil-A’s playbook, and allowing operating management to “have a day for family life.”

It is noteworthy that only about 45% of sales are dine-in, the balance being takeout (25%) and catering. Dine-in and takeout sales combine to provide a ticket average of $14.82. Also important: Drive through locations generate 27% more sales than without. 31% of the current system has drive through windows, and 40% of the planned locations will have them.

While the company makes no unit level profitability claims, our analysis indicates that franchises are likely earning at least 15% EBITDA (after royalties) at the store level. With sales now running at about $1.2M per unit, that would generate a “cash on cash” return of $180,000, or 40% on the $450,000 investment including franchisee fee, among the best returns in the franchised food industry. We emphasize: this is our analysis, not their claim.

Chicken Salad Chick continues its smart and rapid growth with no obvious impediments. While still relatively small, with only 104 units system-wide, franchisees are “voting with their pocketbooks,” and opening stores at a rapid rate. The concept seems “defensible” in terms of product line differentiation, combined with an employee “culture” reflecting the “chick” founder, but an operational simplicity that allows for fairly rapid growth. We look forward to following this company’s future development.

Getting A Higher Price When Selling Your Restaurant In 2019

Getting A Higher Price When Selling Your Restaurant In 2019
Chris Viscup a prominent New York Business Broker with Transworld said “One of the other most important parts of selling your restaurant is to make sure your books are in order. It will be your job to prove out how much money trickles down to you through the company and what this can look like to potential buyers.

Getting A Higher Price When Selling Your Restaurant In 2019
by Gary Occhiogrosso Contributor
Photo by Rod Long on Unsplash

It’s 2019 and after years of hard work you’ve now decided to sell your restaurant, perhaps to open a different business, or retire or relocate. Whatever the reason, selling a restaurant requires a strong strategy, careful planning, and detailed preparation. In this article, we’ll explore some essential tips and steps needed to put you on a path for a quicker sale at the highest possible price along with a smooth transition.

Let’s Start With First Impressions.

The appearance of your restaurant not only matters to your customers, but it also matters to potential buyers. Bad “curb appeal” on the initial visit may be all it takes for a potential buyer to take a pass on a more in-depth look into the investment potential of your restaurant. Make sure everything inside and outside the restaurant is clean. If your establishment is a free-standing building, then the quality of care for the property will be an early indication of the level of care taken in building and growing the business over the years. Items like trimming the grass, keeping the parking lot and surrounding area clean and free of trash are crucial to curb appeal. Maintaining clean windows & glass doors, polishing handles, deep cleaning the grout in tile floors and shampooing carpeting are some simple things that will pay dividends to the buyers first impression. If the restaurant is a storefront location, then you’ll also need to make sure any cleaning and improvements that may be the responsibility of the landlord are taken care of before showing the business.

Nothing says “I don’t care” or “I’ve given up on this place” more than broken or missing equipment. If your kitchen equipment is not in 100% working order, it may set up doubt in your financial presentation regarding production capabilities. Also, nonfunctional equipment is detrimental to employee morale and productively. Ultimately that lack of productivity shows up on the Profit and Loss Statement (P&L) in the form of increased labor cost. Every part of the restaurant should present itself as credible to handle the current volume as well as to grow the business in the future. Make sure all of your equipment works. I can not emphasize enough to take the time in advance to replace or repair any broken equipment.

Remove personal items you do not intend to include as part of the sale. Doing this helps avoid any misunderstandings later between buyer and seller. For example, your personal laptop computer used for the business sitting on your desk may be mistaken as part of the assets for sale. Later in this article, we’ll cover making sure a complete equipment and asset list is written. However, the cleaner and less cluttered the visual aspect of the facility, the less chance for any misunderstanding when it comes time to negotiate.

And lastly regarding the facility, don’t be afraid to spend a little TLC money. Making a small investment, such as freshening up the paint, or replacing ceiling tiles, or reupholstering a ripped seat cover can go a long way to increase the visual appeal of your restaurant. These quick fixes will have a positive impact on your sale price and the time it takes to sell the business.

Put Your Financial House In Order Now

Presenting an honest, straightforward, financial picture of your restaurant is the most critical factor in determining accurate valuation and sale price. Professionally documented results regarding unit economics, profitability, and true owner benefit are what buyers, their accountant, and lawyer will be investigating in the due diligence phase of the process. Whether or not potential buyers purchase your restaurant depends on whether or not they think it will make money and provide a reasonable return on investment (ROI). Therefore, the financial information you provide to the buyer is the most significant factor in determining the success of the sale.

Ideally, you have practiced clear and organized bookkeeping since you started your business. If not, then arrange financial records going back at least one year before the time you list your restaurant for sale. That way potential buyers will have a trailing 12-month picture of the restaurant’s performance and trending. It is likely that buyers will ask to see a profit and loss statements and a balance sheet. If you are unable to create them yourself, have your accountant prepare them in advance so you do not feel rushed later in the sale process.

Make A To-Do List For Yourself

Financial statements aren’t the only aspect of getting organized. This step also includes creating a written list of all hard assets such as furniture, fixtures, small wares, and equipment. Also, a copy of your lease should be available for review in the due diligence phase of the transaction. Additionally, be prepared to document that all of the restaurant’s bills are up to date. Be ready to prove in writing that your sales and payroll taxes are current and paid in full. Employee payroll information needs to be in a presentable format and up to date. A to-do list will help you make sure everything gets done so that the sale goes as smoothly as possible.

The Hunt For Buyers

There are two ways to find potential buyers: find them yourself or hire a business broker. The process of valuation, listing, advertising, and vetting potential buyers is time-consuming and in my opinion, requires professional experience and know how. Although many sellers take this step on their own, a professional business broker can support the process by offering recommendations and presentations that save time and attract more potential buyers.

When you interview brokers, be sure to ask them how long they have been in the business of selling businesses, what their specialty is, how many listings they have now, and how many restaurants they have sold in the past year. Also, ask if they have prepared contracts for this type of transaction and how they plan to determine the value of your restaurant. Discuss their answers with your financial and legal advisors to determine if the broker has the right qualifications, experience, and track record.

One prominent New York Business Broker I spoke with said “One of the other most important parts of selling your restaurant is to make sure your books are in order. It will be your job to prove out how much money trickles down to you through the company and what this can look like to potential buyers. Without this component, you will either fall prey to lower offers than you would otherwise be getting, no offers, or end up with buyers wasting your time and never getting to the finish line. Not having good books leads ultimately to the two biggest deal killers – lack of trust and too much time for the transaction to close. With a good broker and good books, most of the heavy lifting is completed in the beginning, before putting the business on the market. Once you sign with a broker, there should be significant time dedicated to proving out the numbers – what they are, and what they could be. Every minute you spend in the beginning will save 5-7 minutes later.”

On the other hand, if you decide to go it alone and forgo hiring a business broker, then you’ll need to get some additional advice from your attorney and account. They can assist you with the proper valuation and selling price. Setting an unrealistic or emotional price on the business will slow the sales process or cause it to fail altogether. Actions to take also includes advertising and listing the restaurant on websites that post restaurants for sale. Keep in mind professional business brokers also use these websites, so competition exists. However, if you study these websites carefully, you should be able to get a good idea on how to word your ad for better results.

Always Be Ready

Whether you list your restaurant on your own or with a broker be prepared to show your restaurant to potential buyers at all times. Since you may have a buyer visit you unannounced, it means keeping the restaurant clean, fully staffed and well-managed no matter the day and time. You never know when a buyer might drop by to take a look. I also remind my clients that any customer in the restaurant may actually be a buyer doing some research before they contact you.

Once The Buyer Is found

At this point, if you’ve found a buyer and negotiations have been successful, then the final step is the paperwork necessary to complete the transaction. The paperwork usually starts with an “Asset Purchase Agreement.” Your attorney should prepare this document for you. The Asset Purchase Agreement details all the components of the sale. Items such as the sale price, the terms (if you are holding a note), a full and complete equipment list, the amount and value of the inventory you will have at the time of closing, the length of time (if any) that you are willing to train the new owner as well as any contingencies regarding the lease assignment from your landlord and of course a deadline date to close the transaction. Regardless of whether you’re working with a business broker or selling on your own, in all cases, I recommend you have your attorney involved to ensure the Asset Purchase Agreement covers all the various aspects of the transaction.

In addition, once you have a buyer engaged but before the final closing date, you should continue to operate your restaurant as if you are not selling it. Acquisitions sometimes fall through at the last minute, and you don’t want to create extra work for yourself in getting everything back up to par again if that happens.

Plan And Proceed

Smart and detailed planning will minimize glitches and deal-killing problems, throughout the transaction. Business Brokers warn: “The biggest disasters all come with one thing in common – wasted time. Without proper planning, not only may you decide to accept an offer lower than what you desire, but you will lose a good portion of your time getting there. As the saying goes – An ounce of prevention is worth a pound of cure! Make sure you front-load your business and get all the materials you need in order before you sell it.”

I recommend you spend the time upfront, planning the sale, organizing paperwork, investigating brokers and deciding the best time to execute your plan. Selling a restaurant can be a smooth, simple transaction if these tips along with the advice of your accountant and attorney are put into practice.

Six Ways to Finance a Restaurant Franchise

Six Ways to Finance a Restaurant Food Franchise…

Before seeking financing of any kind, make sure you’ve done your own due diligence. Prior to beginning your search, it’s important to know your own net worth, your credit rating, and to have a comprehensive business plan that includes pro forma documents, operations details and market comparison analysis.

Six Ways to Finance a Restaurant Food Franchise

If you are considering investing in a franchise opportunity, the very first question that may come to mind is whether you qualify financially. Most entrepreneurs, restaurant aficionados, or business executives exploring opportunities for a restaurant food franchise will seek outside sources of financing. The golden rule is to expect to contribute 15% to 30% of your own money to start with, and then go from there.

If 30% seems daunting, there’s good news. Often a franchise business opportunity is looked upon by financial institutions as less of a risk, compared to independent business start-ups. This can be further reinforced by the history and recognition of the brand name, the number of units in operation, and even the support provided to the franchisee by the franchisor.

Before seeking financing of any kind, make sure you’ve done your own due diligence. Prior to beginning your search, it’s important to know your own net worth, your credit rating, and to have a comprehensive business plan that includes pro forma documents, operations details and market comparison analysis.

Franchise financing can be complex, but it doesn’t have to feel impossible. Consider these six ways to finance a restaurant food franchise like Taboonette.

1. Friends and family, as well as experienced business owners,d business owners turn inwardly toward friends and relatives to help finance their franchise or start-up business. With this kind of financing, individuals and families get to create their own terms for repayment and enjoy the collaborative support from those closest to them.

2.SBA loans.
The Small Business Administration is a government agency that helps entrepreneurs plan, launch, manage and grow their businesses.1 They work with financial institutions to provide SBA-secured loans. A lender may be more likely to approve financing for individuals backed by an SBA loan because it is 90% secured. This means if the loan goes into default, the SBA guarantees repayment of 90% of the loan to the lending institution.

3.Bank and private loans.
Since the 2008 recession, it has been more difficult to secure bank loans or loans from venture capitalists or angel investors. A bank loan not secured by the SBA is perhaps the most challenging to obtain, but if you have a good relationship with a financial institution, a stellar credit rating and the required minimum liquid capital, it may be a good option.

4.Veterans loan.
The Department of Veterans Affairs, another government institution, offers qualified veterans financing opportunities for franchise and business loans. The program, called the Patriot Express because of its speedy process, makes loans up to $500,000 to active-duty military preparing to transition to civilian life, as well as to spouses and survivors of veterans. The loans come with the SBA’s lowest rates.2

5.Home equity.
A home equity line of credit or second mortgage is a way of obtaining financing but comes with a personal risk. Financing in this way uses your home as security. This means if you default on a business loan, you lose your home. But with sufficient equity in your home, it can be a relatively easy financing source to tap.

6.401(k), stocks and other personal accounts.
It is not unusual for people to tap into their retirement or savings accounts to help finance business ventures. In an interview with the Wall Street Journal, Bernie Siegel, founder of Siegel Capital LLC, discusses a rollover plan where the franchisee creates a C corporation that will own and operate the new franchise business. That corporation then creates its 401(k)-retirement plan. The C corporation’s 401(k) plan then purchases stock in the C corporation. The cash paid to the corporation is then used as the down payment, and the balance can then be financed through an SBA guaranteed loan.3

At Taboonette, we are excited to work with financially qualified individuals to help them reach their goal of owning a restaurant food franchise. Together we look forward to growing both our Taboonette franchisee and customer bases and bringing our delicious trademark Middleterranean® food and a unique dining experience to more hungry guests.

For franchise information contact [email protected] . “Offer by Prospectus only”

1.https://www.sba.gov/
2. http://guides.wsj.com/small-business/franchising/how-to-finance-a-franchise-purchase/
3.https://www.wsj.com/articles/SB120242422031851929