Multi-Unit Franchisee Magazine - Issue I, 2019 by Franchise Update Media

Q1 | 2019

MICHAEL G. KULP, President & CEO

MEGA 99

SITE SELECTION

Tips from the pros to secure the best locations pg. 60

MICHAEL KULP GROWS FROM 64 TO 777 UNITS IN JUST 9 YEARS

pg. 14

FRANCHISE FINANCE Find the funding you need, when you need it pg. 66

UPCOMING EVENT

Multi-Unit Franchising Conference pg. 78

YOUR BIG BREAK Avg. Second Year Total Revenue for Top Quartile

$656K

Avg. Second Year Net Income for Top Quartile

$108K

Contact Brynson Smith

877-224-4349 Franchising@uBreakiFix.com *As published in Item 19 of our FDD dated May 16, 2018, these figures represent the average total revenue and net income (total revenue, minus cost of goods sold and minus expenses excluding interest, income taxes, depreciation and amortization) for the top quartile of 134 out of 326 franchise-operated UBREAKIFIX stores that submitted unaudited profit and loss statements. Median second year total revenue for top quartile of stores was $654,665. Median second year net income for top quartile of stores was $90,493. The data presented is from Jan. 2014 through Dec. 2017. Of the stores included in the top quartile for the second year, 15 (or 50%) attained or exceeded the average total revenue and 9 (or 30%) attained or exceeded the average net income. The bottom quartile year-2 average total revenue was $320,602 (median $349,890), and average net income was ($437) (median $15,545), with 20 stores or 63% of those in the quartile exceeding both averages. You should review our FDD for details about these numbers. Your results may differ and there are no assurances you will do as well and must accept that risk. **This information is not intended as an offer to sell, or the solicitation of an offer to buy a franchise. If you are a resident of or want to locate a franchise in a state that regulates the offer and sale of franchises, we will not offer you a franchise unless we have complied with that applicable pre-sale registration and disclosure requirement in your state. This advertisement is not an offering. An offering can only be made by a franchise disclosure document filed with the Department of Law of the State of New York. Such filing does not constitute approval by the Department of Law of the State of New York. These franchises have been registered under the franchise investment law of the State of California. Such registration does not constitute approval, recommendation or endorsement by the Commissioner of Business Oversight nor a finding by the commissioner that the information provided herein is true, complete and not misleading. Minnesota Department of Commerce File No. F-7063.

Franchise Opportunities www.uBreakiFix.com/Franchising

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CONTENTS Multi-Unit Franchisee | Q1, 2019

DEPARTMENTS

CHAIRMAN’S NOTE

2019 MUFC: Best. Conference. Ever.

ONLINE

LISTS

What’s online @ mufranchisee.com

MEGA 99 RANKINGS

The top U.S. franchisees by total number of units

MICHAEL G. KULP KBP Foods

60 12

SUCCESS WITHIN SITE

COVER STORY

Expert tips on finding the best locations

IT’S MEGA TIME! Six multi-unit franchisees • • • • • •

Michael Kulp Brent Veach JD Busch Shirin Kanji Jason Avant Tommy Hoopsick

Multi-Unit Franchisee

FRANCHISE FINANCE

CUSTOMER SERVICE

Franchisees and funders on getting it right; plus a case study of KBP Foods

WHOSE JOB IS IT?

open up about their unique routes to success.

FEATURES

Training for front-line excellence

ISSUE 1, 2019

CHAIRMAN

Gary Gardner

CEO

Therese Thilgen

EXECUTIVE VP OPERATIONS Sue Logan

CHIEF CONTENT OFFICER Diane Phibbs

VP BUSINESS DEVELOPMENT Barbara Yelmene

BUSINESS DEVELOPMENT EXECUTIVES Krystal Acre Jeff Katis Judy Reichman

EXECUTIVE EDITOR Kerry Pipes

MANAGING EDITOR Eddy Goldberg

PEOPLE

CREATIVE MANAGER Kevin Waterman

HIRING IN 2019

GRAPHIC/MAGAZINE DESIGNER

Gen Z and hourly employment trends

Cindy Cruz

DIRECTOR OF TECHNOLOGY Benjamin Foley

WEB DEVELOPER Don Rush

SOCIAL MEDIA

WEB PRODUCTION ASSISTANTS

IN THE MOMENT

Real-time tips to engage consumers

Esther Foley

Juliana Foley

DIRECTOR OF EVENT OPERATIONS Christa Pulling

SENIOR MANAGER, EVENTS & PRODUCTION Katy Geller

SENIOR SUPPORT MANAGER

INVESTMENT INSIGHTS

Sharon Wilkinson

HARDWIRED TO FAIL? Why we need to “think about thinking”

PROJECT COORDINATOR Joanne Peralta

SUPPORT COORDINATOR Leticia Pascal

FRANCHISEE LIAISON SUPPORT Greg DelBene

FINANCE

ROLLOVER FUNDING

Have you considered your 401(k) lately?

Helen Bond

Sara Wykes

Franchise Update Media 6489 Camden Avenue, Suite 204 San Jose, CA 95120 Telephone: 408-402-5681 Fax: 408-402-5738

EXIT STRATEGIES

SEND ARTICLE INQUIRIES TO: editorial@franchiseupdate.com

Why deals are taking longer FRANCHISE MARKET UPDATE

DOWNTURN AHEAD?

Two sets of insights for franchisees

CONTRIBUTING EDITORS ADVERTISING & EDITORIAL OFFICES

KEEP CALM 88

CONTRIBUTING EDITORS Rod Bristol Carty Davis John DiJulius Darrell Johnson Ashley Parks Fabio Rosati Carol Schleif

Multi-Unit Franchisee

ISSUE 1, 2019

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FRANCHISE OPPORTUNITIES IN

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Chairman’s Note

MUFC: Coming Right Up! As a 40-year veteran in the restaurant business, I often get called on to consult for people younger or newer to the franchise and restaurant business. Unfortunately, most people seeking my help are in trouble for a number of reasons and want my advice on how to fi x their particular situation. More often than not, had they asked for my advice or another professional’s advice before they pursued their venture, most of their mistakes could have been avoided, and I find myself in the unenviable position of trying to get them out of their current unfortunate position. Trust me, I have made more than my share of mistakes in my years. And even though I learned more from my mistakes than from my successes, I would be much better off today if I could have avoided them. Take lease terms, for example. Many beginners only think about their cost to open and overlook the large liability that comes with a lease. I have lost more money buying out of bad leases than I ever lost in the business itself. That’s just one of the reasons I often use the quote, “Know where the back door is before you enter the front door.” Other common areas newer franchisees should ask about include: franchise agreement negotiations; purchasing or leasing a property; whether the franchisor owns and operates stores or just sells franchises; how many stores the brand has opened and for how long; development/market rights; royalties; ad funds; and ongoing support. The most valuable insights will come from speaking with current franchisees.

That’s why, even after 40 years in the business, I continue— along with many other seasoned veterans—to make it a point to attend the Multi-Unit Franchising Conference every year. Yes, every year. If you are new to the franchise business or thinking about getting into it, this conference is a mustattend event. The depth of knowledge and experience you can gain in 3 short days will make it very worthwhile of your valuable time. This year’s conference takes place March 24–27 at Caesars Palace in Las Vegas. (Sunday the 24th is the event’s charity golf tournament.) From small beginnings nearly 20 years ago, the conference has grown to more than 1,600 attendees, with 2019 on pace to be the biggest yet! In addition to meeting many successful operators from a vast arena of franchise businesses, you will have a chance to see and learn about many new, established, and leading-edge franchise opportunities from the panelists, exhibitors, and keynote speakers. If you are a franchisor or a company that offers services to the franchise industry, I am sorry as booth space sells out usually a year in advance. However, it’s still worth your time to attend the conference to meet the many franchise operators looking to improve or expand their business. In summary, my advice is: Register to attend today! Look forward to seeing you there!

Greg S. Cutchall 2019 Conference Chair

Multi-Unit Franchisee

ISSUE 1, 2019

The 2019 MUFC Has Arrived (Almost)! The 2019 Multi-Unit Franchising Conference (MUFC) is on the agenda for the nation’s multi-unit operators this March 24–27 at Caesars Palace in Las Vegas. Attendees of the 2018 conference enthusiastically told us it was the event of the year for them to gather tips and tactics to take home for immediate implementation, and planned to return this year—with friends. Rodney Shaver, a multi-brand franchisee of La Madeleine French Bakery and Buddy’s Home Furnishings, said, “I have been to this conference for the last 5 years and I find the content relevant, useful, and timely. The breakout sessions allow you to pick the topics that best support the needs you have at a particular time.” This annual gathering is a unique, must-attend opportunity for multi-unit and multi-brand franchisees to meet and learn from the best in the business, explore new brands, and soak up invaluable expertise at the panels and sessions—not to mention the plentiful networking opportunities and more than 200 exhibitors with the latest solutions to current challenges. Keep current at www.multiunitfranchisingconference.com

ONLINE Multi-Unit Community Grows

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

FRANCHISE OPPORTUNITIES

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

RANKINGS

This issue contains our annual Mega 99 list, ranking the largest franchisees by total number of units and the brands they operate. For our MultiBrand 50 rankings of brands with the most multi-unit franchisees, go to www.franchising.com/topics/rankings/multibrand_50/

PUBLICATIONS

“Don’t just survive, thrive!” Franchise Update Media’s 2019 Annual Franchise Development Report and the best-selling book Grow to Greatness by leading franchise consultant Steve Olson, offer invaluable tips for franchise sales success and unit growth. To order, visit afdr.franchiseupdate.com and www.franchising.com/franchisors/growtogreatness.html

QUICKLINK

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

ISSUE 1, 2019

It’s Mega-nanimous! Six inspiring stories to start the year WRITTEN BY Eddy Goldberg

We’re starting the year in our usual way: with our “Mega 99” list of the largest U.S. franchisees, ranked by total number of units. We also feature profi les of six successful multi-unit operators—including a Reconnect with Shirin Kanji; a profile of a former NFL player turned franchisee Jason Avant; and an Under 30 profile with Tommy Hoopsick, who became a franchisee at 19—along with 3 more profiles (see below). Together they provide a broad spectrum of size, industries, and scope of operations. Perhaps more important, each has been successful in their own way and has a unique story to tell—and learn from. Successful franchisees, from mega to micro, must learn to become leaders, CEOs of their own organizations who know how to make deals happen, hire the right people, and create a dedicated, hard-working team, both internally and on the front lines. With the right combination of skill, brains, heart, and soul, they’re able to create, build, and sustain franchisee organizations that provide high-quality products and services, top-notch customer service, a wide range of job opportunities and training in their communities, and build revenue and royalty streams for their brands. Once again we are privileged to have been granted a look into the lives of six franchisees who have carved their own pathway to success. These are highly personal stories of how they’ve overcome obstacles and grown not only their organizations, but also their employees and themselves in the process. It’s rewarding and inspiring for us—and we hope for you—to read their stories, now in progress at hundreds of locations near you. • Michael Kulp (cover) has built a 64-unit, $70 million franchise organization into a 777-unit (691 KFCs and 86 Taco Bells), $780 million behemoth employing 14,000 people—and is far from done. He’s shooting to hit $900 million in annual revenues this year, and plans to stick around for the foreseeable future. Asked about his exit strategy, he quipped, “What would I do all day long?” • Brent Veach is Del Taco’s largest franchisee, with 29 in Arizona and 21 in Colorado. The CPA left the corporate world for franchising in 1999, investing in three Del Taco locations in Phoenix. “I loved the product and thought the company was large

Multi-Unit Franchisee

ISSUE 1, 2019

enough to be a strong regional player and small enough for me to come in and make a meaningful impact. I thought if I could get to three to five stores it would make a nice little business.” • JD Busch, with 90 units (60 Amazing Lash Studio and 30 Massage Heights), plans to add 40 more Amazing Lash locations this year alone. Since 1995, he’s had a knack for spotting brands on the rise and getting in early. Today he’s most excited about his own new venture: Manage 2 Profit, a franchisee management software package he’s created based on his own desire to track the KPIs of his multiple units through a single dashboard. • Shirin Kanji (Reconnect), whose family business operated 6 franchised hotels when we profiled him 3 years ago, has since diversified, adding 36 Rent-A-Centers (to the 40 they’d just acquired), 2 Carstar shops, a BurgerFi, and even a Starbucks. That expansion has boosted Impact’s annual revenues from $60 million to more than $85 million. Best advice he ever got? “Focus on the things you can control.” • Jason Avant (Athlete) grew up on Chicago’s South Side where gangs, drugs, and violence are all too common. Abandoned by his mother and raised by his grandmother, he was able to escape the dead-end path he was heading down. “My grandmother and aunt encouraged me to go to church and stay in school,” he says. It worked: after a decade-long NFL career, he now operates 3 Launch Trampoline Parks, and says he’s now had 2 winning careers. • Tommy Hoopsick (Under 30) became a Ductz franchisee at 19, thanks to his terrific work ethic, a little help from the seller (his friend’s father), and a fanatical dedication to making his new business a success. Asked how he balances life and work, the 25-year-old replied, “I don’t. I am completely dedicated to my businesses.” Mega 99. Be sure to check out our annual ranking of the country’s largest multi-unit franchisee organizations, ranked by number of units, following the profiles.

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Meteoric Growth Doing the simple things well WRITTEN BY Helen Bond

ith more than 700 KFC and Taco Bell restaurants spread across 20-plus states, Michael Kulp, president and CEO of KBP Foods in Overland Park, Kansas, oversees one of the country’s fastest-growing restaurant companies. Under his leadership, KBP’s annual revenues have grown from $70 million to $780 million, with projections of $900 million in 2019. Kulp credits his success to understanding the power that comes with doing the simple things well. “What keeps the business safe, performing, and healthy is when we run really good restaurants inside our four walls,” says Kulp. “I know that keeps our relationship with our investors, bankers, and franchise owners very healthy. My bias is to always start and stop there, and build an infrastructure around each set of restaurants, as though that business were no larger than that set of restaurants.”

Michael G. Kulp

Kulp grew up in the restaurant business. He got his first restaurant job the day after he turned 14, at a hometown burger joint in Lamar, a small town (pop. 7,601 in 2017) in southeastern Colorado. He never left the business, and would learn early how to spot an opportunity.

Company: KBP Investments

In 2001, Kulp was hired away from an Applebee’s in Grand Junction, Colorado, where he’d worked throughout college, by restaurant franchise veteran Gary Zancanelli and his son, Gary Jr. Both had previously been with Harman Management, a large KFC franchisee. The elder Zancanelli had learned the QSR business from KFC’s first franchisee, Pete Harman, the innovative Utah businessman who helped Harland Sanders build his secret recipe for chicken into a brand. The Zancanellis

President & CEO

Noumber of units: 691 KFCs and 86 Taco Bells Family: Wife Stephanie and 3 kids, Eric, Mikey, and Grace Years in franchising: 18 Years in current position: 7

Multi-Unit Franchisee

ISSUE 1, 2019

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Copyright 2019 © Phenix Salon Suites. All Rights Reserved This information is not intended as an offer to sell, or the solicitation of an offer to buy, a franchise. It is for information purposes only. An offer is made only by a Franchise Disclosure Document (FDD) in those jurisdictions that require it. Currently, the following states regulate the offer and sale of franchises: California, Hawaii, Illinois, Indiana, Maryland, Michigan, Minnesota, New York, North Dakota, Oregon, Rhode Island, South Dakota, Virginia, Washington, and Wisconsin. If you are a resident of or want to locate a franchise in one of these states, we will not offer you a franchise unless and until we have complied with applicable pre-sale registration and disclosure requirements in your jurisdiction. The information contained in this website is not inconsistent with our FDD. This advertisement is not an offering. An offering can only be made by a prospectus filed first with the appropriate state regulatory agencies. Such filing does not constitute approval by those states.

Cover: Michael Kulp had launched their own venture with a sports bar concept and the purchase of a group of five KFCs in Grand Junction in 1999. Kulp would immerse himself in the school of restaurant operations and, at 21, took advantage of his first opportunity to buy into a business. “They had quite a history in both franchising and the QSR industry and were operational experts,” says Kulp, who in 2001 became Zancanelli Management’s COO. “The first restaurants that we worked together were not that dissimilar to the restaurants we look to acquire today,” he says. “They were kind of underperformers. We significantly improved them, investing in the assets, and saw both top-line and bottom-line improvement.” Over the next decade, Zancanelli Management would expand from those five KFCs to 64 restaurants, when father and son decided to cash out. With some investor support, Kulp purchased the founders’ shares and became CEO of the 64-unit venture. In 2011, he renamed the company KBP Foods, embarking on a course of meteoric growth and record-breaking revenue as one of the largest franchisees of Yum Brands. “One of the things we have probably done best is to not change a lot, which is one of the mistakes I feel like I have watched a lot of people make,” says Kulp. “We have not changed our approach to the way we have looked at our infrastructure, and have not tried to dramatically leverage our infrastructure as we have grown.” While KBP has seriously considered diversification,

and has operated other brands over the years, the opportunities with Yum have been significant, says Kulp. The company’s growth-through-acquisition strategy has come largely through big deals— most recent ly a 91-u n it purchase in 2016, and the 2017 addition of 78 KFC locations in three states. In 2018, KBP took a different tack, adding 125 restaurants t hrough 20 independent deals—averaging five to seven units each—and roughly 20 new restaurants, built from the ground up. Throw out the holidays and traditional business downtime that typically occurs over a year, and Kulp estimates that KBP closed a sale and opened a new store every other week. Kulp, who targets 75 to 125 units of growth each year, has said no to deals far more often than yes. Acquisitions must have scale or geographic contingency to existing markets, where there are three levels of operational infrastructure in place. This approach has allowed KBP to expand at a rapid pace, without leadership feeling “as if they have their hands in seven different places at one time with multiple focuses,” says Kulp. Unlike many enterprises of KBP’s size, where one VP might oversee 400 restaurants, the company is flat by design. KBP has 22 third-level leaders, eight VPs, two SVPs, and invests “$7 million to $8 million more than you would ever see elsewhere at just that level alone,” says Kulp. “What that translates to, is that someone in Chicago has 60 restaurants. They are a third-level leader, an equity holder, and the only thing

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they oversee is Chicago,” says Kulp, explaining his threelevel management structure. “So what you have is someone whose family’s future is invested in this business overseeing six reports in Chicago, and they are one level away from the restaurant. That is how we are able to really affect the quality of people, the message being delivered, and keep those messages consistent. For these people, those individual restaurants are what they do— all day long, every day.”

KBP CARES Kulp also takes a thoughtful approach to his investment in people. He calls his decision seven years ago to add equity partners “life-changing” for both the internal managers— now numbering 40—and his own motivation as a leader. He is proud of the broad mix of financial, developmental, and incentive-based strategies and programs KBP has in place as part of his continual focus on building a strong corporate culture. He also believes in giving back. Kulp and his wife Stephanie Kulp formed KBP Cares in 2015 after years of trying to cut through the red tape to help their employees. She serves as president of the nonprofit that provides financial grants to employees in times of critical hardship. KBP also donated almost $2.5 million and 40,000 volunteer hours to local charities over the past year. “What we have worked really hard to try to do as we have grown is to act, behave, and communicate in the same ways as we did when we were a much smaller business—which is much easier said than done,” says Kulp. “We have tried

not to become the big behemoth and behave differently, whether to franchisees around us or inside our business.” Kulp is a strong believer in franchising, but says that with the current labor environment and tax challenges, any blips in the macroeconomic climate could lead to an interesting time for franchising in the coming years. Nevertheless, he remains focused on growth. What that growth will look like—domestic, international, more KFCs and Taco Bells, or the addition of another major brand—depends upon the opportunity. “We will continue to be opportunistic and make sure it fits a model that makes good sense for us,” Kulp says.

PERSONAL First job: Local hamburger restaurant as a cook at 14. Key accomplishments: 1) The continued grow th of KBP Foods, which has been fueled through the successful integration of more than 30 acquisitions across 24 states, onboarding more than 14,000 employees. 2) The formation of KBP Cares, a 501(c)(3) nonprofit organization/employee assistance program affiliated with and supported by KBP Foods and its employees. At KBP, we believe that no employee should have to face a critical hardship on their own. Several years ago, we created KBP Cares as an innovative way to scale the company’s ability to provide assistance for employees facing critical hardships. For those who have nowhere else to turn, KBP Cares is a lifeline. With support from employees from across the company, we provide hope, support, and relief for KBP employees and their families during challenging

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WRITTEN BY Kerry Pipes

The fitness industry is a $28 billion segment that is projected to continue expanding. The boutique fitness studio model has seen 70 percent growth in recent years and is predicted to grow another 8 percent in the next 5 years. That’s why Eat The Frog Fitness’ unique model is a great opportunity.

Eat The Frog Fitness Offers 3 Keys to Franchise Success

Bryan Clay was one of those kids who was lucky enough to have a mentor when he was growing up. The relationship taught him about thinking big, earning rewards, and having a disciplined work ethic. It was a recipe for success. Following years of hard work and training, Clay won the Olympic Silver Medal for the Men’s Decathlon in 2004 and the Gold Medal in the 2008 Olympic Games. Today, Clay is the co-founder of Eat The Frog Fitness and the company’s chief brand officer. Clay knew that to win with their company’s franchise model, they needed to create a unique experience that keeps their customers interested and engaged for the long-term. That’s exactly what the upstart boutique-style fitness brand has done and continues to refine at its first fully developed franchise studio in Phoenix.

Eat The Frog Fitness is on the grow. By late 2019 Eat The Frog Fitness plans to have 40 studios open. Hundreds more are expected to open through 2021 and beyond. Interested entrepreneurs should jump on the opportunity now. The brand has just closed a deal for the Ontario Canada territory and will be opening in Cummings Georgia, Indiana, and Illinois by the end of this year. 1 To find out how you can become a part of the rapidly expanding Eat The Frog Fitness brand, visit frogfranchise.com

“Our Phoenix studio has been one of the places where we test and experiment with our operation. It’s kind of like an incubator for our brand,” says Clay. 3 Keys to Eat The Frog Fitness’ Success Eat The Frog Fitness separates itself from the competition in three ways - by its unique culture, innovative studios, and ‘tribe mentality.’ “Eat The Frog Fitness is a science-based fitness approach that offers personalized small group training utilizing state-of-theart technology with live and virtual 24-hour access,” says Jesse Curry, the brand’s vice president of franchise development. But Curry says Eat The Frog Fitness goes beyond just equipment and workouts. The culture at Eat The Frog Fitness is more inclusive and free of the intimidation often found at other fitness clubs. But make no mistake, customers work hard and get results. Eat The Frog Fitness studios utilize technology in an unparalleled way. Personalized evaluation, training plans, and settings along with individualized attention from experts offers members proven ways to get results.

For Franchise Opportunities available Call 800-841-8363 or visit frogfranchise.com

Multi-Unit Franchisee

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Cover: Michael Kulp times. KBP Cares is truly a passion project for my wife, Stephanie Kulp, who serves as president and played an instrumental role in getting the program up and running. 3) The opportunity to help nearly 40 key members of management to meaningful equity positions within KBP, allowing them to reap the financial rewards of their hardearned efforts. Biggest current challenge: As our business has grown larger, it has become easier to be mediocre with every turn. Finding creative and unique ways to think, communicate, and behave with the passion, pace, and intimacy of a smaller organization challenges us every day. Next big goal: Finding new ways to grow and evolve our business, while continuing to provide rewarding career opportunities for our team and deliver value to our equity partners (both internal and external). First turning point in your career: Partnering with the Zancanelli family, whose generosity and belief in me sparked my passion for this business and my career. Best business decision: Building a capital structure that brought key members of our management team into equity positions. This opportunity helps us to attract and retain the best of the best, and has a significant impact on the way these key leaders behave across our organization. Hardest lesson learned: I lost my father when I was quite young. I learned that you should never wait to say the things you want to say, do things you want to do, or prioritize as you see fit. Life is short.

Best advice you ever got: To find the smartest, best mentors who you’d never think would take time out of their day to talk with you. They just might. In fact, I’ve yet to have one tell me no, and I have asked some pretty accomplished leaders for their time. What’s your passion in business? Providing a path for our people to achieve more—personally, professionally, and financially—than they ever thought possible. I love to listen to these dreams and go to work helping people achieve them. How do you balance life and work? It’s a constant balancing act, which I am better at some times than others. I have an amazing wife who takes care of so many things for our family and me, which allows my time to be better spent when away from work. I have gotten better over the years saying, “No,” and I don’t waste time on meaningless tasks. A mentor once taught me that “Your calendar never lies.” Guilty pleasure: A great bourbon and cigar, a terribly overpriced pair of shoes, and, of course, KFC’s Original Recipe. Favorite book: About a year ago, our management shareholders gave me a book. Each of them had taken a page and written a note to me. This is my new favorite book. Favorite movie: “It’s a Wonderful Life.”

Last vacation: Laguna Beach. Person I’d most like to have lunch with: My father.

MANAGEMENT Business philosophy: Be the best at what you do; do something that you can be the best at. Management method or style: Surround yourself with a team of smart, talented people who you can trust and have fun being with. Don’t confuse being soft with seeing others’ point of view, and do whatever it takes to help others win! Greatest challenge: See “Biggest current challenge” above. How do others describe you? That I prefer everything in moderation—especially moderation!

Pet peeve: Disorganization.

One thing I’m looking to do better: There is no one thing I am looking to be better at doing. There is nothing that I do that I could not do better. Every day I look to be better, and I have a long way to go.

What did you want to be when you grew up? A lawyer (thank God that didn’t work out).

How I give my team room to innovate and experiment: I believe in taking calculated

What do most people not know about you? Two things I still want to learn: 1) to speak Spanish fluently, and 2) to play the piano.

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risks. At KBP, we emphasize the importance of using data to guide decisions. If the data supports going in a new direction, I’m on board. Our leaders challenge the status quo regularly and know that we value the courage to do so. How close are you to opera t io n s? We h a ve g re at operational leadership. I stay very close to their key initiatives and the results achieved through our operations. The team does a great job keeping me in the loop. Additionally, we work to m a i nt a i n a regular cadence of visits in our restaurants throughout the country. W hat are the two most important things you rely on from your franchisor? 1) Innovation, running the gamut from product to facilities and technology. Innovation is critical to our success. 2) Product quality and safety standards leadership. What I need from vendors: True partners who seek to understand our business and deliver products and solutions

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Cover: Michael Kulp that exceed our expectations and remove barriers. We view our vendor partners as an extension of our company and hope that they view us the same. Have you changed your marketing strategy in response to the economy? How? Our marketing strateg ies are ever-evolving. They are often very different by market and even by trade area. We believe this is critical to compete at the highest level. How is social media affecting your business? Social media has changed the landscape of our business in many ways. It has allowed us to reach consumers in a variety of new ways, and it has allowed us to engage our employee base more efficiently and more frequently. However, it has also created the need to be much more aware of the ability for any information, irrelevant of its validity, to travel very quickly. How do you hire and fire? We have a very systematic process that we use for hiring and terminating employees—the collective goal of these tools being that we do less of both! How do you deal with problem employees? A problem on a team can never be underestimated. Fortunately, the strength of our team today has grown to a place where the wrong players often weed themselves out. If not, we have never been hesitant to act on a problem. Fastest way into my doghouse: If someone is focusing on what is best for themselves, before what is best for those they are responsible for.

BOTTOM LINE Annual revenue: $780 million at 2018 fiscal year-end.

2019 goals: $900 million. Growth meter: How do you measure your growth? The quality of our growth has always been our barometer. We have never set out to achieve a revenue number or a specific unit count. We want to create value for our shareholders, and help our teams to find professional and financial success. Vision meter: Where do you want to be in 5 years? 10 years? I’m hopeful that 5 to 10 years from now we will have invited a significantly higher number of management team members into our equity partnership, created life-changing outcomes for dozens more, and that our continued growth will still be providing professional and financial upside for people at rates they cannot find anywhere else. How is the economy in your regions affecting you, your employees, your customers? The current macroeconomic situation has brought with it one of the most challenging hiring environments we have experienced. To continue to lead in this environment, we are having to be sharper with retention tactics, more competitive with pay, and are amending policies and programs we have had in place for a significant time. Are you experiencing econom ic g row t h i n you r markets? We have restaurants in nearly 70 DMAs across the countr y. The threads running through these markets are low unemployment, increasing wages, old restaurants being remodeled, and new restaurants being built. Generally, ticket average has been growing, traffic has been challenging, and we are seeing modest growth.

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How do you forecast for your business? We use a regression-based model with coefficients calculated for multiple variables to forecast sales, project costs as accurately as possible, and project growth to the best of our ability. In a growing business, this is not simple. What are the best sources for capital expansion? We have been fortunate over the years to have partnered with great capital partners and lenders. I don’t believe there is a one-size-fits-all answer to this question, but rather a very different answer for each franchisee based on the makeup and needs of their business. What are you doing to take care of your employees? Our intentional growth is driven by the desire to provide personal, professional, and financial opportunities for employees at all levels throughout the organization. To highlight a few, this includes the ability to apply for college scholarships, participate in six-month professional development programs, an avenue to apply for financial assistance in times of hardship (through KBP Cares), celebrate with your loved ones at a 5-star resort in Mexico, and more. In our industry, it doesn’t matter where you’ve come f rom— a nyone ca n become very successful if you have a passion for people and work hard. We expect a lot and, in turn, try to do a lot to go above and beyond to celebrate differently, to recognize performance differently. How are you handling rising employee costs (payroll, minimum wage, healthcare, etc.)? There is a lot of hard work going into pricing and optimization efforts to try to combat raising wages.

However, in many instances, we simply are not able to offset all of these increases. We are hopeful that inflation will catch up with these increases in the near term, as the current environment is a very challenging one. How do you reward/recog n iz e top -per for m in g employees? We have built a culture of recognition. Our “Shout Out” program is designed to celebrate excellence in our restaurants every day through posts on social media. We also have an annual contest that recognizes managing partners and area coaches from across our business. They are measured on key performance metrics throughout the year and the winners enjoy a trip, with their spouse, to an exotic resort destination for four days of food, fun, exclusive experiences, and an awards banquet recognizing them. We also have Circle of Excellence (COE), which is our president’s award. COE recognizes individuals who perform at a consistently high level, both inside the company, as well as out. Recipients have demonstrated an incredible level of integrity in their work and personal lives. Each COE name is etched on the Wall of Excellence at the Corporate Support Center, signifying the place that person holds in the history of the company, and distinguishing their mark on KBP Foods. We also have numerous professional development programs for high-potential employees and unique, competitive compensation programs for top performers. What kind of exit strategy do you have in place? What would I do all day long? 1

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ONE BRAND MAN Del Taco’s largest operator continues to grow

WRITTEN BY Helen Bond

hen long-time Del Taco franchisee Brent Veach was ready to roll out an official corporate vision, crafted in response to growth, he took his team go-kart racing to illustrate the new direction. After everyone took to the track for three heats, Veach declared the winner was not the driver who posted the fastest time, but rather the person whose time improved the most. “That is what we are about: continuous improvement,” he says.

His relentless focus on achieving results, coupled with a servant leader approach, has made Veach the largest Del Taco franchisee. He operates 50 quick-serve restaurants, 21 in Colorado and 29 in Arizona. A CPA, Veach left the corporate world for franchising in 1999, initially investing in three Del Taco locations in Phoenix.

Brent Veach, 53

“I loved the product and, at the time, thought the company was large enough to be a strong regional player and small enough for me to come in and make a meaningful impact,” he says. “I thought if I could get to three to five stores it would make a nice little business.”

Del Taco franchisee Company: Desert Taco, LLC; Colorado Del, LLC

Veach has been making a meaningful impact in franchising ever since. After 20 years, he remains a steadfast champion of the brand and its leadership, serving as president of Del Taco’s Franchise Marketing Advisory Team for so long he can’t keep track. “I keep telling people it’s been 10 years,” says Veach, good-naturedly. “But it has probably been about 13 or 14 years I’ve been president.”

No. of units: 50 Del Taco Family: Wife Maria; 3 children, Craig (23), Megan (22), Jacob (19); and 2 Malshi dogs, Oreo and Chewy Years in franchising: 20 Years in current position: 20

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R U O Y

O T E C N A CH

C A E R

K A E P E H T H AUVS

$4,078,405 *

AVERAGE COST OF GOODS SOLD 27.1%

2017 FRANCHISE SAME STORE SALES +5.1%***

AVERAGE LABOR COSTS 29.9%*

PEAK PERFORMANCE #1 IN KNAPP-TRACK FOR COMP SALES FOR FULL YEAR OF 2017 RANKED #4 IN CASUAL-DINING CHAINS BY SALES GROWTH IN NRN

83 LOCATIONS “GETTING INVOLVED WITH THE TWIN PEAKS BRAND IS THE BEST DECISION I’VE MADE AS A MULTI-UNIT FRANCHISEE. THEY ARE BY FAR BEST-INCLASS IN THE SPORTS BAR SEGMENT.”

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*The franchise average unit volume of $3,879,134 is the actual average of 40 franchised Twin Peaks Restaurants open and operating for a full 52 weeks during fiscal 2016. **The Prime Costs of 56.6% is the average combined Total Cost of Sales and Total Labor Cost is derived from the 28 company-owned Twin Peaks Restaurants that operated during the full fiscal year ended December 25, 2016. See item 19 of our FDD for complete details. This advertisement is not an offering to sell a franchise. An offering can be made only by Franchise Disclosure Document that has been registered with and approved by the appropriate agency in your state if your state requires such registration. Individual financial performance will vary.

Brent Veach As he grew, Veach’s handson approach to managing operations had to evolve with each acquisition. When his restaurant count jumped from 14 to 20 in 2012, he knew he needed to find another way to touch each store, every day. “I realized at that point, if my desire was that these stores would be a representation of me, I needed to work on the culture. Culture is so critically important,” he says. So is explaining the organization’s core values “and putting them right in front of people,” he adds. Veach’s business philosophy, shared that day at the go-kart track, has also transformed over the years. The company recently introduced the acronym SERVE (Strive for excellence, Elevate others, Relentless focus on achieving results through continuous improvement, Visionary leadership, Every guest matters) and the motto “SERVE with Pride,” as constant reminders of these core values. No matter how you say it, Veach continually strives to create a culture of people, operations, and profits—in that order. “If you nail the people side and nail the operations, the profits side is much easier,” he says. “And that is hard for a CPA to say.” His decision to invest in his leaders with a profit-sharing plan has also paid off, resulting in the payout of what he described as “some pretty big checks,” and three consecutive years of 5 percent or greater sales, driven by transactions, with many of his stores achieving record numbers. While he won’t rule out ever investing in another franchise, Veach remains bullish on Del Taco and his future with the brand.

“My philosophy is that healthy businesses will continue to grow,” he says. “I want to continue to grow. I think that is a real positive sign, a sign of strength internally and externally. I’m positioning us for that, and I would like it to be with Del Taco.”

PERSONAL First job: My first summer job was in Minnesota working as a semi-truck tire repairman at my Dad’s trucking company. After moving to Arizona, I had a second summer job as a cantaloupe packer in a warehouse. I was paid by the box of fruit packed. This taught me a lot about how time and motion can have an impact on profitability, namely my paycheck. Formative influences/events: I would give credit to two major things: 1) my upbringing of faith and strong family values instilled and modeled for me by my parents, and 2) attending college at Baylor University, which was 1,000 miles away from my home where I knew only one person. This forced me to grow up quickly. K e y a c c om pl i s h m e nt s : Graduating from Baylor, earning my CPA certificate, and having a great relationship with my wife and three outstanding kids. Biggest current challenge: My wife and I are adjusting to life as empty nesters or “free birds.” Next big goal: To read one book per month each year. First turning point in your career: Thirty minutes into my first real job as an entrylevel auditor at a Big Eight public accounting firm in Dallas, I realized I didn’t care for accounting work, but I continued for three years

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before moving to Arizona and working for Motorola in its semiconductor operations. This is where I developed a passion for operations and continuous improvement. Best business decision: Leaving my corporate America job a nd becoming a Del Taco franchisee. Hardest lesson learned: Two hard lessons come to mind: 1) trust people but verify results, and 2) there is no substitute for me reading and understanding the details of contracts and agreements. Work week: It depends on the needs of the business. I can typically be found in the restaurants Monday through Friday in meetings. I usually will spend half of Saturday completing administrative work. Exercise/workout: I try to work out three to four times a week, which involves light weight lifting and cardio, typically jogging on a treadmill. Best advice you ever got: Relationships are the most important thing in life, personally and professionally. W hat’s your passion in business? Operations and achieving positive results or, in other words, continuously improv ing ou r people and business. How do you balance life and work? I try to align my time with my life priorities: faith, family, and work. While I invest a lot of time into work, I prioritize faith and family events above work when possible. I found that scheduling personal events and activities in my calendar, such as charity events, date nights, or workouts, provides a much greater chance of completing them. I also schedule travel around family time when possible. For

example, I’ll take the first flight out in the morning so I don’t miss out on evening time with my family. This often requires waking up at about 4 a.m. Guilty pleasure: Chocolate milkshakes with hand-dipped vanilla ice cream and chocolate syrup and chocolate donuts. This is why I have to work out three to four times a week. Favorite books: I have several favorite books that have affected different areas of my life. Making Life Work by Bill Hybels provides insights on how to live a quality, meaningful life and helps me in my personal life. Good to Great by Jim Collins provides great insight into how sustainable, successful companies operate. Execution by Larry Bossidy and Ram Charan provides great insights into “the discipline of getting things done.” Favorite movie: “Braveheart” (Mel Gibson’s “Freedom” quote). What do most people not know about you? I have an identical twin brother whose name is Brett. Also, I’m a movie star. I was on the Andy Griffith show as a six-monthold baby. Pet peeve: Being consistently late to meetings, not being attentive during meetings, and/or consistently not completing a g reed-upon assignments on time. What did you want to be when you grew up? I always wanted to own my own company and lead a business. Last vacation: Our family takes two vacations each year: skiing at Christmas and a San Diego beach vacation in July. We typically vacation with my parents, my brother and his family, and our three kids with their families and/or friends.

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Brent Veach Person I’d most like to have lunch with: George W. Bush. I admire how he handled adversity while president.

How do others describe you? I believe others would describe me as professional, passionate, and positive.

MANAGEMENT

One thing I’m looking to do better: I am working to develop my business and team in two areas: 1) to become more scalable, which will allow us to grow, and 2) to improve our ability to execute and consistently deliver positive results in spite of challenges.

Business philosophy: The vision I have for my business is: “To positively impact the lives of other people.” We operate our business based upon our core values represented by the acronym SERVE: Strive for Excellence, Elevate Others, Relentless Focus on Achieving Results through Continuous Improvement, V isiona r y Leadership, Ever y Guest Matters. We use the motto “SERVE with Pride” as a constant reminder of these values.

The most effective way to overcome higher labor costs is to grow our sales. Management method or style: I believe my job includes providing the vision, core values, and key initiatives to direct the business. I then work with our ASLs (above store leaders) to develop goals and plans that align with success in each key initiative. My job then becomes one of follow-up to ensure the team has the tools required and that we are achieving our goals on time. Greatest challenge: Hiring caring and motivated team members who align with our company’s core values. Also, leg islat ive requ irements are becoming increasingly more ch a l len g i n g. T h is includes annual minimum wage increases a nd cit y building requirements.

How I give my team room to innovate and experiment: I empower the ASLs to run their businesses in a way that delivers the desired results. I’m open to new ideas and encourage the team to try different methods to find a process that works best for them. How close are you to operations? I’m very close to the operations with weekly business updates and in-store operation reviews every 28 days with my ASLs and GMs. I joke that I have more offices than most people—my stores, my home, and my truck. W hat are the t wo most important things you rely on from your franchisor? Some of the most important things are maintaining the brand image, industry leadership, marketing support, and new product development. We are very fortunate to have excellent leadership within the Del Taco brand. The executive- and senior-level leaders listen to franchisees’ input and work collaboratively with us to improve the overall brand. This approach helps inspire the entire team to innovate and strive to improve. What I need from vendors: A willingness to partner with our business to continually improve the product/service and price.

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Have you changed your marketing strategy in response to the economy? How? We really focus on four-wall marketing by improving the guest experience when they come into the restaurant or go through the drive-thru. We want every person who comes to the restaurants to leave thinking, “Wow, that was great!” or “Wow, that was fast!” I believe increased frequency of visits by existing guests is the most affordable marketing we can buy. How is social media affecting your business? Social media has a big influence on business. When something positive happens it can give the stores a big push. How do you hire and fire? I’m personally involved in the hiring process of all the ASLs and very close to the general manager hiring process. It doesn’t take 25 great people to run a great restaurant—it takes one exceptional leader. I want to make sure we get the right leaders in the restaurants. When it comes to firing, I might be too slow. I give people a lot of opportunities and I want them to be successful. In my 20 years of owning restaurants, I’ve only fired two people. We have a culture of performance, and people who don’t fit in tend to leave on their own. About half of my GMs have worked with me for over 10 years. How do you train and retain? We try to be very deliberate with training and retaining. We begin each of our operation review meetings with the topic of “People.” My ASLs and I discuss the People Development Plan for each store every 28 days, including identifying candidates for additional training and promotions. We

also address our holistic people needs: where are we today and our anticipated needs in the next 30, 60, and 90 days. I have always had a mentor to lean on, learn from, and be encouraged by. I encourage my leadership team to develop a mentoring relationship with a successful professional they admire. I believe this is a highly successful way to train and develop your own leadership skills. Watch and learn from great leaders. How do you deal with problem employees? We don’t tend to deal with problem employees for long. They usually realize they don’t fit into our culture and will weed themselves out pretty quickly. Fastest way into my doghouse: Repeatedly not executing on agreed-upon commitments and not asking for help.

BOTTOM LINE Annual revenue: NA. 2019 goals: 5 percent sales growth driven by positive transactions. Growth meter: How do you measure your growth? Both organically in transactions, sales, and check average, and also in the number of units we own and operate. Vision meter: W here do you want to be in 5 years? 10 years? I don’t have a specific number of stores I want to grow to or sales volume to achieve. Instead, our goal has always been to “grow profitably.” I was once asked, “How much is enough?” After some consideration, I realized that I didn’t have an answer for that question because it was the wrong question for me. As long as we can grow the business profitably and I can achieve my

Brent Veach personal goals in life, the question for me is, “Why wouldn’t we continue to grow?” How is the economy in your regions affecting you, your employees, your customers? One of the biggest challenges is finding qualified employees in a strong economy. For example, the Denver market is operating at an approximate 2.5 percent unemployment rate as a result of a strong economy, which makes it challenging to find qualified employees regardless of the pay rate. Are you experiencing econom ic g row t h i n you r market? Yes, we’ve experienced positive same store sales growth for the past several years in each of our markets. How do changes in the economy affect the way you do business? Changes in the economy can affect my business in several ways. Challenging times can provide opportunity to purchase other restaurants or refinance debt at lower interest rates, while stronger economic times can provide additional cash to continue expanding. The economy also affects the operations of our business. During weak economic times we learn to operate leaner, while continuing to prioritize guest service. During stronger economic times we invest in our operations to improve the guest experience. What are the best sources for capital expansion? There are a lot of good options for capital. We’ve been fortunate to have people at local banks believe in us and our business model enough to continue to invest in us. We began by using local/regional banks then evolved to GE Capital Franchise Finance until they

were sold. We then moved to a large national bank. One of the keys I’ve found that helps us in this area is working with lenders I can trust and who understand my business. I’m very open and transparent with my lenders and see them as a partner within the business. I’ve been fortunate to have worked with great people in lending banks. We’ve always trusted each other and worked together to make both organizations successful. Experience with private equity, local banks, national banks, other institutions? Why/why not? I will always appreciate and be grateful to the local banks that believed in us when we started the business and had very little collateral and small cash flow. I’ve found that the larger my business becomes, the more important it is to have a lender that can grow with me. It is also beneficial to have a lender that understands the industry and the QSR segment so they can relate to the highs and lows we experience. What are you doing to take care of your employees? We offer a variety of incentives to help make our top-performing employees more successful. Some of the incentives include a 401(k) plan with up to a 3 percent contribution matching. We offer a quarterly profit-sharing plan where GMs and above can earn up to 20 percent of the improved profitability of their business. We also offer a family scholarship plan of up to $8,000 for the GMs and higher and direct members of their families who attend a qualifying college. How are you handling rising employee costs (payroll, minimum wage, healthcare, etc.)? I believe we have to grow

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our business to success—we can’t cut our way to success. The most effective way to overcome higher labor costs is to grow our sales. We have also revisited our staffing and scheduling needs down to every 15-minute increment throughout the day. This is having a significant benefit to our business. The end result is a better distribution of employee hours based on the business demand, resulting in better guest service and lower labor costs. How do you reward/recog n iz e top -per for m ing employees? The quarterly profit-sharing plan is a big incentive for GMs and higher. We encourage our leaders to run their business as if they were the owners, because

they really are the owners of a portion of the improved profitability. It’s a win-win for the leaders and the business. What kind of exit strategy do you have in place? After 20 years of franchising with Del Taco restaurants, I am still excited and energized by my work. I enjoy the people I work with, what I do, and I look forward to continuing to grow and expand the business. I’m not ready to exit, so this is a challenging question for me to answer. I have three kids I would enjoy working with if they have a passion for this business. When the day does come that I exit this business, I want to ensure that my successor shares my passion for the success of our team members and our guests. 1

LEAVE YOUR MARK

Two brands, 90 units, 40 to come WRITTEN BY Helen Bond

“Everybody has problems and issues,” says Busch, chief energy officer of Houston-based Busch Global. “It is about how people have succeeded and grown effectively. I’m not afraid to ask people to learn from their mistakes and to learn from people who are doing things right.”

Leave Your Mark Two brands, 90 units, 40 to come

These days, Busch is doling out as much advice as he looks for. He has built a successful business by aligning himself with emerging brands that, he says, “really need someone like me to help develop nationwide.”

By Helen Bond

JD Busch, 45 Chief Energy Officer

Company: Busch Global LLC No. of units: 60 Amazing Lash Studio, 30 Massage Heights Family: Wife Tammy, and 2 children, Jossilyn 9, Kensington 6 Years in franchising: 23 Years in current position: 12

D Busch’s path to franchise success is paved with what he calls “little nuggets” of learning.

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His current portfolio of 60 Amazing Lash Studios and 30 Massage Heights retreats is no exception. The first franchisee of the Amazing Lash concept, Busch is its largest developer, and is gearing up to open 40 more this year in Texas, Florida, and Georgia. And, as a regional developer for Massage Heights, Busch operates more than 30 percent of the franchised locations, accounting, he says, for 40 percent of the brand’s revenues. Busch has been a disrupter in franchising from the start. In 1995, the former college cheerleader put three different franchises—an NCA Super Center, Kid Fit Sports Day Care, and United Taekwondo—under one roof, long before brand synergy was common practice.

JD Busch “I’ve never run just a single business in my life,” says Busch. “I have always had multiple units of multiple brands since the day I turned 21.” A serial entrepreneur, Busch loves to develop. He has evolved over the years from being a self-described “nobody can do it better than me” micro-manager to a leader who thrives on finding the right team. Busch says he will never turn down a great hire if it fits the company culture and his own long-term growth plan. “When I learned to give up the ego and hire people who are smarter than me and able to do things better is when my whole life changed,” he says. “I’m always looking for great people, anywhere and everywhere.” Busch is now setting his sights on disrupting the business intelligence field with his newest entrepreneurial journey, Manage 2 Profit. The adaptable technology platform, developed and based on Busch’s own data and systems, connects to QuickBooks and POS software to allow users to track the KPIs of multiple locations through a single dashboard. Busch believes Manage 2 Profit will be his biggest venture yet. “One thing I love about software is that it is never done,” he says. “Like many serial franchise people, I want to keep growing and adding and learning new things. For me, every franchise I have ever been involved with has been my master’s and doctorate in how to operate and run other businesses. That has been key to the excitement for me.”

PERSONAL First job: My stepfather’s constr uction company. I started working summers when I was 12.

Fo r m a t i v e i n f lu e n c e s/ events: My involvement in EO (Entrepreneu rs’ O r g a n i z at ion), t he I FA , and attending Multi-Unit Franchising Conferences. K e y a c c o m pl i s h m e nt s : Featured two consecutive years in the Inc. 5000 annual list of America’s fastest-growing private companies; 2015 IFA Franchisee of the Year, recog n izing outsta nd ing contributions to franchising; University of Houston Cougar 100 list of fastest-growing businesses owned or led by alumni, 2014–2018; Massage Heights Regional Developer of the Year, 2009–2012; multiple awards from Amazing Lash Studio including the 2017 Regional Developer Top Sales Award, 2017 and 2018 Multiple Leadership Award, 2017 Highest Per forming Studio Award, and 2017 The Trailblazer Award. Biggest current challenge: To sustain growth, you have to have the right people on your team, which can be hard when you’re up against a lot of competition. Pay is an important factor, but so is culture. I’m always thinking of ways we can attract and keep the right people, while making sure our values are being rolled down to all of our locations. Next big goal: Our goal is to be a disrupter in the business intelligence field with our newest venture: a tech company called Manage 2 Profit. There is a need within the entrepreneur community for tools that allow business owners to better manage their operations. Beyond quickly getting data, business owners need tools that help them use that data to drive profits and success. The tools that currently exist for the entrepreneur are not geared toward

easy implementation—and they don’t show users what they should do with the data. Manage 2 Profit is a core group of people with over 50 years of combined entrepreneurial experience. We know how to run a successful business. We know how to help someone run a successful business. We know the tools necessary to be successful. We know Manage 2 Profit works because we were the first customers. First turning point in your career: Reaching a point where I couldn’t handle every detail. Growth is great, but it created a scenario I was unaccustomed to where I had to lean on and trust others with my business. I was forced to find great people, and it was one of the best things that has happened. Best business decision: Deciding to commit continuing resources to building an unbelievably awesome team. It started with hiring a core group and letting them build out their teams in the same way. They bring real-world experience, knowledge, incredible support, passion, and dedication—each and every day. Hardest lesson learned: Learning that closing a business is only a failure when you don’t handle it the right way and when you don’t learn from those mistakes. I spent years throwing good money after bad to prop up businesses that would have served everyone involved better if I had closed sooner than later. Those mistakes can drag an enterprise down. Don’t get comfortable where you are today, be a disrupter. Your company needs to evolve as consumer purchasing habits change. Just look at big box stores, which are suffering because they didn’t plan for consumers being more digital-savvy. To evolve Multi-Unit Franchisee

as a company, you need smart people. I think success comes with being comfortable surrounding yourself with people who are smarter than you. We focus on putting a plan together and then making sure it gets executed. Work week: Always working. Exercise/workout: Tennis, g ol f , a n d s k i i n g — s n o w and water. Best advice you ever got: Hire the best people, treat them well, and make sure you keep them. What’s your passion in business? “Leave Your Mark” is a saying I adopted early in my career. It not only spoke to my passion to continually evolve, but to also inspire others to achieve their path to success. Over the years, I learned that the power of controlling one’s attitude toward life is truly the most significant and effective way to reach one’s goals. How do you balance life and work? Working on that every day. Guilty pleasure: Boating. Favorite book: The Four Obsessions of an Extraordinary Executive by Patrick Lencioni. Favorite movie: “Top Gun.” What do most people not know about you? I was a college cheerleader at the University of Houston. Pet peeve: Laziness and an “I can’t do it” attitude. What did you want to be when you grew up? Be creative, but a role model. Last vacation: Beaches in Turks & Caicos with the family. Person I’d most like to have lunch with: Will Smith. I have used a motivational video of his called “Wisdom” to inspire all our new team members. ISSUE 1, 2019

JD Busch MANAGEMENT Business philosophy: I take great pride in the people I’ve surrounded myself with. My vision has always been about leaving my mark. What better way to leave your mark than to have an organization that creates opportunities for our team members, our partners, our franchisees, and their team members to grow and succeed. I couldn’t be more proud of what Busch Global has laid as a framework for sustainable future growth. Management method or style: I am an extreme visionary. I look down the road and see potential two to three times what the team believes is possible. To put it another way, I know my team is capable of what they believe is impossible. I push our team members to see the vision and get there, even when they don’t believe they can. Greatest challenge: Knowing what to prioritize and when. There are details that need my attention and there are details that are best left to the experts on my team. Knowing what needs my attention is key to a successful venture or project. How do others describe you? There is no slowing down for JD, you can see and feel his passion every day for his brands. He focuses on delivering the highest level of performance and profitability. There is no denying the pride he shows for his team and franchisees in his region. One thing I’m looking to do better: Grow all around me. How I give my team room to innovate and experiment: We have no sacred cows. I’m willing to be convinced to try new things.

How close are you to operations? It’s funny, but I think I’m both too close and too far. There are times when I can get lost chasing details and miss pointing the team at the bigger picture. In the same vein, there are details that slip by I wish I would have paid more attention to months before. W hat are the t wo most important things you rely on from your franchisor? Maintaining the consistency of the brand in regions and territories outside my own, and growing the brand nationwide. What I need from vendors: Accountability. They need to deliver on the commitments they make, and when they miss that mark they need to own it and make it right. Have you changed your marketing strategy in response to the economy? How? Yes, we are constantly looking at ways of evolving. Many businesses make the mistake of just focusing on one tier and not understanding the customer journey. It takes 10 touch points before the consumer even starts to acknowledge you. Digital seems easy when you don’t have lots of dollars to spend and it’s trackable, but if you’re not cultivating local relationships with grassroots and B2B efforts then you’re missing those personal connections. In several of our markets we’ve started to include TV segments to help tell our story, and some sponsored content with local magazines that target our demographic. It’s easy to want to cut back but you have to fight that gut reaction. You want to do what it takes to keep yourself interacting with your customers within the budget you have.

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How is social media affecting your business? In every way. It changes how we interact and communicate with our vendors, our customers, and our own team members. It’s changing how we attract new customers. The bigger challenge is trying to get ahead and understand what additional components of the business it will change in the very near future. How do you hire and fire? The workplace is ever-evolving, but it seems to be accelerating in change as Millennials make their way in. The way business owners approached employment can be seen as “old-fashioned” thinking as potential employees are looking for more perks, flexible work environments, and benefits. So how do we adapt? We just underwent this exercise with our team, as we know we need to continually evolve. We have rolled out some changes and are researching others to find the best way to balance running our business and providing the elements employees are seeking. We have been using a recruiter for our local stores for the past year. She definitely does more hunting than waiting for ads to produce candidates. We are also researching to better understand if we are looking for staff in the right places. Most owners get in a trap of advertising in the same places as everyone else, so the pool doesn’t seem as full, or limited on talent. We look at other places we can hunt for employees to fit the culture we’re trying to create. Ideas include revamping the referral program we currently have in place to leverage our best employees to help us attract more employees just like them.

How do you train and retain? Retention will always be a struggle for a retail business. However, we’re trying to minimize it by offering awards for annual service, monthly shout-outs, awards for tenure, and as we mentioned earlier, looking for creative ways to compensate them for their achievements. Some owners make their employees forprofit partners to make them feel like they have a say in the business. We have been trying different tactics with culture. For example, we rolled out a series based on the book The Energy Bus to help promote a fun work environment. We’re focused on creating a more customer-centric culture. How do you dea l w it h problem employees? Check yourself and your process first. Is the person in the right seat on the bus? Do they belong on the bus? People should be treated as the individuals they are, recognizing there is no one-size-fits-all solution. If you believe they should be on your bus, then you work with them to find the right seat. If they don’t belong, then you find a way to help them off your bus and find the path where they can be successful. Fastest way into my doghouse: Fa i l to respond . Everyone is busy, and I know that, so when I reach out, it is because I really do need your input.

BOTTOM LINE Annual revenue: $63 million. 2019 goals: Add 40 more locations and have revenue of $79 million. Grow th meter: How do you measure your growth? We track open locations and generated gross revenue by location, region, and brand.

GET ON OUR LEVEL:

The Premium QSR The Quick-Service Restaurant industry is overwhelmed with the same choices: burgers, chicken and tacos. Why not try something different? Franchise with the leading Italian QSR. That’s right, we said Italian, one of America’s most beloved foods. From the ingredients we use and the way we treat our guests to our operational processes and brand culture - at Fazoli’s - we go above and beyond in everything we do. It’s what we call the premium QSR experience and why we’ve been named the #1 Italian QSR concept. Life is Better with Breadsticks® The secret to our success is more than what’s in the sauce. The real secret is that we treat our franchisees like family. Don’t believe us? Numbers don’t lie.

Italian QSR Franchise Business Review Top 200 Franchises, 2018

$1,567,893

Average Net Revenue Top 3rd of Franchised Restaurants*

95%

Franchises say they...** RESPECT the Leadership TRUST the Brand Vision FEEL VALUED as a Franchisee ENJOY Operating the Business

JOIN THE FAMILY We’re looking for experienced multi-unit operators like you to acquire and develop existing locations in key markets and regions across the country. We can’t wait to tell you more about why you’ll love Fazoli’s. Find our contact information below so you can become part of the family.

OWNAFAZOLIS.COM

Steve Bailey, East steve.bailey@fazolis.com Kathy Davidson, West kathy.davidson@fazolis.com OWNAFAZOLIS.COM • 859-825-6212

*As shown in Item 19 of the current Franchise Disclosure Document of Fazoli’s Franchising Systems, LLC, for the 12 months ending March 28, 2018. There is no assurance that a franchisee of Fazoli’s will sell or earn as much. **FBR Fazoli’s Franchisee Satisfaction Report, 2017. Fazoli’s and logo are federally registered trademarks of Fazoli’s System Management, LLC.

JD Busch

Vision meter: W here do you want to be in 5 years? 10 years? In 5 years, we will have a software company that has become a true disrupter in the marketplace, generating substantial sales. In 10 years, we will have invested in new software and franchise opportunities as our current agreements begin to reach their end. How is the economy in your regions affecting you, your employees, your customers? The hardest impact, I believe, has been to staffing. The low unemployment numbers make it difficult to fill, find, and keep great staff. There are so many opportunities for intelligent individuals with drive. Even with good pay and great culture, we face stiff competition from other companies with the same benefits.

Are you experiencing econom ic g row t h i n you r markets? We see new shopping centers and general positive economic growth in most of the markets we are in. How do changes in the economy affect the way you do business? They affect how you market—not just in spend, but also in your messaging and delivery. They also affect how you recruit for talent. Regardless of the economy, we watch our margins. How do you forecast for your business? We try to take in multiple factors, including economic predictors, past performance, upcoming changes in the brand, and national brand trend data. What are the best sources for c apit a l e x p a n sion? Private equity.

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Experience with private equity, local banks, national banks, other institutions? W hy/ why not? We have experience with all those i nst it ut ions. Rea l ly, t he “best” solution is dependent on the particulars to each individual request for capital. It’s important to explore every option to really understand the potential variables.

transaction, as well as create efficiencies in the operations. Beyond that, we evaluate our payroll providers regularly to look for options.

What are you doing to take care of your employees? We constantly discuss and review all aspects of compensation, including salar y, benefits, educational opportunities, and culture.

What kind of exit strategy do you have in place? Every good business plan has an exit strategy. We have plans on exits that involve performance and targeted goals. We review those plans as an executive team to ensure everyone is comfortable with the plan and on the same page as much as possible. 1

How are you handling rising employee costs (payroll, minimum wage, healthcare, etc.)? We keep close tabs on our margins. We look for opportunities to improve t he aver a ge i ncome per

How do you reward/recog n iz e top -per for m i n g employees? Publicly praise, compensate fairly, and make sure they know the path they have available to them within the organization.

IRRESISTIBLE FOOD & SMOOTHIES HAVE US GROWING — AND GOING— FAST. JOIN THE FRANCHISE THAT PLAYS TO WIN! TropicalSmoothieFranchise.com or call 770-209-2667

720+ CAFES FROM COAST-TO-COAST WITH 110 OPENED IN 2018

$1,018,851 AVERAGE NET REVENUES FOR THE TOP 25% OF CAFES** **Top 25% of Cafes. Based on calendar year 2017, 48 of 243, or 20%, of the Cafes gained or surpassed this sales level. This information appears in Item 19 of our Franchise Disclosure Document. Your results may differ. There is no assurance that you will do as well. This information is not intended as an offer to sell or the solicitation of an offer to buy a franchise. It is for information purposes only. The offering is by prospectus only. Currently, the following states regulate the offer and sale of franchises: California, Hawaii, Illinois, Indiana, Maryland, Michigan, Minnesota (File No. F-4953), New York, North Dakota, Oregon, Rhode Island, South Dakota, Virginia, Washington and Wisconsin. If you are a resident of or want to locate a franchise in one of these states, we will not offer you a franchise unless and until we have complied with applicable pre-sale registration and disclosure requirements in your state. New York State Disclaimer: This advertisement is not an offering. An offering can only be made by prospectus filed first with the Department of Law of the State of New York. Such filing does not constitute approval by the Department of Law.

CALIFORNIA DISCLAIMER: THESE FRANCHISES HAVE BEEN REGISTERED UNDER THE FRANCHISE INVESTMENT LAW OF THE STATE OF CALIFORNIA. SUCH REGISTRATION DOES NOT CONSTITUTE APPROVAL, RECOMMENDATION OR ENDORSEMENT BY THE COMMISSIONER OF CORPORATIONS NOR A FINDING BY THE COMMISSIONER THAT THE INFORMATION PROVIDED HEREIN IS TRUE, COMPLETE AND NOT MISLEADING. ©2019 Tropical Smoothie Cafe, LLC. Tropical Smoothie Cafe, LLC 1117 Perimeter Center West, Suite W200 Atlanta GA 30338.

120 OUT OF 191 NEW AGREEMENTS SIGNED BY EXISTING FRANCHISE OWNERS IN 2018

Multi-Brand Machine

Family business accelerates growth WRITTEN BY Kerry Pipes

hen we last spoke with Shirin Kanji in early 2016 (see MUF, Q1), his company, Impact RTO Holdings, had just closed a 40-unit deal with Rent-A-Center. It was a pretty big move for the family business, which until that point had primarily been in the hotel space. Three years later, we wanted to know how Kanji had transitioned into operating the Rent-A-Centers.

Shirin Kanji, 38

“So well that we’ve added 36 more Rent-A-Center locations in Florida and Georgia,” he says. “We also entered the Carstar brand by acquiring two existing collision repair shops and converting them to Carstar shops.” And of course, there are plans to open more.

SVP/Chief Investment Officer, Impact Properties; President, Impact RTO Holdings

Don’t think the hotel side of the business languished while all this diversification was going on. Since early 2016, Kanji says, the company has built three more hotels in Florida: a Hyatt property in Tampa, a Hilton property in Gainesville, and a Marriott property in Jacksonville. The company also opened BurgerFi restaurants in Sarasota and Seminole.

Company: Impact Properties, Impact RTO Holdings Number of units: 76 Rent-A-Centers, 6 hotels (Marriott/Starwood, Hilton, Hyatt), 3 BurgerFi, 2 Carstar, 1 Starbucks outlet

That’s a lot of moves in just three years. Kanji says it’s all part of the plan to diversify the company’s holdings and allow them to leverage their infrastructure and experience. And it’s meant a lot of hiring. Impact has added employees to its web sales, HR, marketing, and other departments. “In early 2016, we had roughly 165 or 170 employees,” says Kanji. “Today, the organization has nearly 400.”

Family: Wife Swathi, daughter Serena Years in franchising: 9-plus Years in current position: 9-plus

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It’s a 40-year proven business model with three strong dayparts, a high AUV, and first-in-class support.” JEFF RIGSBY FRANCHISE OWNER WITH 65 LOCATIONS

760+ locations to serve our passionate BoFanatics who love our famous chicken ‘n biscuits

A menu that includes breakfast all day, every day since 1977

Three strong dayparts that fuel a best-in-class AUV

501.510.1156 BOJANGLES.COM/FRANCHISE

© 2019 Bojangles’ International, LLC. This franchise sales information does not constitute an offer to sell a franchise. The offer of a franchise can only be made through the delivery of a Franchise Disclosure Document (FDD). Currently, the following states regulate the offer and sale of franchises: California, Hawaii, Illinois, Indiana, Maryland, Michigan, Minnesota, New York, North Dakota, Oregon, Rhode Island, South Dakota, Virginia, Washington, and Wisconsin. If you are a resident of one of these states, we will not offer you a franchise unless and until we have registered the franchise (or obtained an applicable exemption from registration) and complied with the pre-sale disclosure requirements that apply in your jurisdiction.

Reconnect: Shirin Kanji All this growth has produced significant gains in annual revenue: at the beginning of 2016, Impact was a $60 million company. Today, that’s grown to more than $85 million. And, despite all the changes in the retail space, Kanji says the company has been able to maintain positive sales growth. There are some emerging web-based retailers in their space, so Kanji and his team are keenly aware and track the impact this has on customer expectations about speed of delivery and cost. With all the new pieces in place, Kanji says the company’s goal for the next three years is to drive same store sales growth by focusing on service and creating a positive experience for customers. “We aim to maintain our margins and focus on the P&L, while looking at trends in labor costs, health insurance costs, commodities costs, and managing all of those costs as we grow same store sales.”

PERSONAL First job: Working for my father during the summer breaks in high school in Tampa at one of our hotels. I spent time providing support in all areas of the business, spending time working in housekeeping, maintenance, administrative, and the office. I was able to bounce around and get valuable experience in all of those departments. Formative influences/events: Watching my father and uncles grow our small, independent motel business in a college town back in the 1980s into the multi-brand and asset company that it is today, developing lifelong relationships with all of our franchisors and partners along the way.

K e y a c c o m pl i s h m e nt s : I’m always focused on the future and upcoming accomplishments. There is a lot of potential for growth and opportunity in both business and life. I like to keep my sights on the next goals. Biggest current challenge: People—recruiting, training, a nd reta in ing tea m members at all levels of our company who can fit our culture and ambitions. Next big goal: To be the franchisee and employer of choice. We want franchisors to think of us first when opportunities arise because of the reputation we have established as both a successful operator and a quality employer. First turning point in your career: Getting to work for a large private equity firm before I rejoined the family business. It really tested me as an individual and highlighted what I was good at and what still needed improvement in my skill set. Without this ex perience, I would not be in the position I am today professionally. Best business decision: The best business decision for me is always to try something new, whether that’s a new business model, brand, or procedure. It’s hard to innovate and grow unless you are willing to try new things. Hardest lesson learned: Being smart is not enough to succeed in business. Work week: In a family business you are always on the proverbial clock in order to keep all of your businesses running well! Exercise/workout: Usually in the mornings before work, 3 to 4 times a week.

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Best advice you ever got: Focus on the things you can control. What’s your passion in business? Watching ever yone within our company succeed as we grow our business together. How do you balance life and work? If you love what you do and who you are with at work and at home, life is in balance. Guilty pleasure: I have a sweet tooth. Favorite book: It’s hard to pick just one, but a few of the recent books I’ve read that I really enjoyed include: The ONE Thing by Gary Keller and Shoe Dog by Phil Knight. Favorite movie: Again, it’s hard to just pick one. “Saving Private Ryan,” “Coming to America,” and “Braveheart.” What do most people not know about you? I’m a history buff and love learning more about the past from documentaries, books, and indulging in history of any type. Pet peeve: Drama. What did you want to be when you grew up? A businessman like my father. Last vacation: Charleston, Palmetto Bluff. Person I’d most like to have lunch with: Naval Ravikant (living) and Marcus Aurelius.

MANAGEMENT Business philosophy: Efficiency is doing things right. Effectiveness is doing the right things right. Management method or st yle: Our st yle has not changed through the years. We strongly believe in giving our people the resources and tools they need to succeed. Attention to people and process, not ideology.

Greatest challenge: Keeping the first things first. In the age of distraction and short attention spans, it is important to keep extreme focus on the key priorities day in and day out. How do others describe you? Hardworking, honest, loyal, knowledgeable, no-nonsense. One thing I’m looking to do better: Slowing down. When I get going, I go pretty aggressive and fast. Taking life at a slower pace is an area I believe I can improve.

We want franchisors to think of us first when opportunities arise because of the reputation we have established as both a successful operator and a quality employer. How I give my team room to innovate and experiment: Empowering them to come up with ideas and solutions to our everyday business challenges. It’s okay to try something new and different as long as we can learn from the experience and get better while moving toward the ultimate solution. How close are you to operations? From an ownership perspective, we are hands-on across all of our businesses. But ultimately, our goal is to let our people do what they do best and provide the support they need on a daily basis, leveraging our vast experience across disciplines to drive the business forward. W hat are the t wo most important things you rely

Reconnect: Shirin Kanji on from your franchisor? Maintaining a strong relationship and relevance with the brand’s core customer and innovating in all areas of the business model to improve unit economics for the franchisees. What I need from vendors: Reliability and responsiveness. Have you changed your marketing strategy in response to the economy? How? While it seems that consumer preferences seem to change quite often these days, in this economy your product or service has to be of value and relevance to your core customer. As such, the marketing strategy needs to be highly dynamic in terms of which channels you are speaking to your customers in, and how you use their feedback to constantly iterate your offering to meet more of their needs, when they have them, and as conveniently as possible. How is social media affecting your business? Social media continues to drive higher levels of consumer awareness around products, services, and price discovery. It also provides real-time customer service feedback on how you are doing. Sometimes it’s good reading and other times it is quite sobering. It keeps us on our toes at all times! How do you hire and fire? Take time to find the right fit for our culture. When it is not working out, we move on and have a suitable replacement ready to go. How do you train and retain? In today’s tight labor market, retention is critical to being able to maintain and grow your infrastructure as the business scales up. We try to align incentives at all levels of the company to the unit-level economics and give a meaningful

stake in the outcome. When the business grows, we all grow together. How do you deal with problem employees? Quickly! Fastest way into my doghouse: Not taking care of our customers.

BOTTOM LINE Annual revenue: $85 million-plus.

2019 goal: Our focus is on double - d ig it org a n ic revenue growth. Growth meter: How do you measure your growth? Total sales, EBITDA, and net profit. Vision meter: W here do you want to be in 5 years? 10 years? We are well ahead of schedule of the goal we set in 2016, which was growing Impact to 100 units and $100 million in total revenue across all business lines. How is the economy in you r reg ions a f fec t in g you, your employees, your customers? Our businesses are concentrated within eight states in the southeastern U.S. These areas have experienced steady growth over the past few years and show no signs of slowing down.

What are the best sources for capital expansion? The capital markets remain robust right now with all forms of capital available at attractive terms. Experience with private equity, local banks, national banks, other institutions? W hy/ why not? We have worked with each before and have found all of them to be valuable sources depending on our business needs. They each have an important role to play in the markets. As an owner, you have to be honest about what’s best for your business and the right place to get it. What are you doing to take care of your employees? Offering the best compensation, benefits, incentives, and training we can. How are you handling rising employee costs (payroll, minimum wage, healthcare, etc.)? The value of people to our businesses cannot be overstated. In some areas, such as

wages, we are able to generate higher returns by getting the right fit for our businesses. In other areas, such as benefits, we get creative to offer more value to our team, while also being able to reduce the costs of delivering these benefits to them. How do you reward/recog n iz e top -per for m i n g employees? Improved compensation, benef its, a nd opportunities for advancement within the company. We also use a great tool internally (YouEarnedIt) that enables us to provide daily recognition through a company stream similar to what you see on social media platforms. The team loves it. What kind of exit strategy do you have in place? I am very fortunate to be part of a family business. We are long-term owners and operators and get to underwrite our growth and future with that perspective. 1

Are you experiencing econom ic g row t h i n you r markets? Most definitely! How do changes in the economy affect the way you do business? We’ve been fortunate to have experienced a long expansion cycle in the economy, and it has provided ample opportunities for us to grow our sales and expand our offerings to our various customer bases. How do you forecast for your business? Staying in tune with the local economies where our units are located.

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Sports & God

Escaping street life for success on and off the field WRITTEN BY Kerry Pipes

ason Avant grew up on Chicago’s notorious South Side where gangs, drugs, and violence are the norm. Abandoned by his mother and raised by his grandmother, he was eventually able to pull himself away from the oncoming dead-end path he was heading down. He credits “sports and God” for saving him.

“My grandmother and aunt both encouraged me to go to church and stay in school,” recalls the 35-year-old. He did, and in high school got his first taste of organized sports on the basketball team. He was good. It turned out that his coach also led the football team, so Avant gave that a try. He spent his first year at fullback before finding his groove as a wide receiver. He quickly became one of the top players in Illinois and then in the country. The scholarship offers poured in and he chose the University of Michigan. During college, Avant was a

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Athlete: Jason Avant

Jason Avant, 35 Franchisee

Number of units: 3 Launch Trampoline Park Family: 3 children

Years in franchising: 3 Years in current position: 3

Fred Biletnikoff Award can- “When I backed off it allowed didate (given to the nation’s their talent to show itself.” top receiver), an honorable Avant is happy with his mention All-American, and post-football life. Combining received the Bo Schembechler his passion, work ethic, and a Award as Michigan’s most great product, he says he’s now valuable football player. had two winning careers. Avant was drafted by the PERSONAL Philadelphia Eagles in the fourth round of the 2006 NFL First job: Summer camp counselor. Draft. He spent 8 seasons with the Eagles before closing out Formative influences/events: his career with the Carolina Attending the University of Panthers and the Kansas City Michigan opened my mind to Chiefs. His NFL career lasted different cultures and philosa decade, during which he had ophies. My grandmother and 346 receptions for 4,118 yards. church instilled in me my valToward the end of his football career, Avant spent a summer working at a Launch Trampoline Park. “I fell in love with the business model and its potential,” he says. The brand, co-founded by fellow University of Michigan football and NFL player Ty Law, turned out to be just the right post-football move. In 2015, Avant opened his own Launch Trampoline Park and has followed that up with two more. One challenge Avant faced as he transitioned into the business owner world was micromanaging. “That stunts people’s growth,” he says today.

ues and morality, which are the foundation for all that I do. My coaches and sports taught me discipline, hard work, and how to admit my mistakes. It also taught me to think of myself less. K e y a c c om pl i s h m e nt s : Having happy, thoughtful, and respectful children. Realizing that I need God! Academic All-American (high school and college), Ed Block Courage Award Winner, Michigan Man Award, and Franchisee of the Year. Biggest current challenge: Balancing life. Business is about making money, but life is

about your relationships with people. Making sure I don’t allow business to steal what life really is about. Next big goal: I only have one goal and it never changes! Be the best person, business owner, dad, etc. that I possibly can be! That focus makes me hungr y to learn more, examine myself daily, and eliminate distractions. First turning point in your career: Realizing that I micromanaged and by doing so stunted everyone’s growth. Backing off allowed the talent to show itself. Best business decision: Opening a business in the city where I played professionally, and confining myself to a predetermined geographical area near my residence. My name recognition locally can get a customer into our store once. That’s all we need because the product is so good! Staying near my businesses helps me to be in the parks every day. I have earned every dollar I’ve made. I can’t expect employees to understand that, but I can show them because I’m around. Hardest lesson learned: Hiring for need and not for Multi-Unit Franchisee

want. The right chemistry, service, and work ethic can be destroyed with a bad employee. Work week: Approximately 50 to 65 hours. Good thing I own a family entertainment business and my kids love coming to work with me! Exercise/workout: 3 to 4 times a week. Vital to health, confidence, and family. Best advice you ever got: Hard work and preparation just needs an opportunity. Fear nothing, attack everything. W hat’s your passion in business? The customer service aspect. It allows me a moment to not focus on numbers and contracts. It allows me to be a person, and the customers appreciate you being one of them. Figuring out how to cut expenses, but keep quality service is incredibly exciting as well. How do you balance life and work? My kids are my life. I work hard for them and better myself for them, so I bought a business that allows them to be with me at work. Guilty pleasure: Probably fruit snacks. I can go through 5 or 6 family-size bags in an hour! ISSUE 1, 2019

Athlete: Jason Avant

Favorite book: The Bible. Favorite movie: “The Dark Knight.” What do most people not know about you? I’m very good at Scrabble, play the piano, and was a Division 1 basketball recruit. Pet peeve: None. What did you want to be when you grew up? A social worker and basketball coach. Last vacation: Two days to Punta Cana. It was a disaster when I got back, so I’ll never vacation again! Lol. Person I’d most like to have lunch with: Joel Osteen or Barack Obama.

MANAGEMENT Business philosophy: Care about your staff, care about your customers, and have the best product. Management method or st yle: Don’t ever expect. Explain everything three times

or more. Allow employees to be themselves. I’m naturally a micromanager but I’m learning to give them space. Greatest challenge: Relinqu ish i n g cont rol to my managers, who are more than qualified. How do others describe you? Most people describe me as humble and approachable. One thing I’m looking to do better: Bridge the gap more quickly between the office staff, bookkeeper, and accountant for my new parks. My first park took a while. How I give my team room to innovate and experiment: Sometimes I delegate the responsibilities and allow most to cross-train in other areas. How close are you to operations? Fortunately, I’m very close and make the operational decisions. Understanding what employees go through and the customer’s experience is paramount.

Multi-Unit Franchisee

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What are the most important things you rely on from your f ranchisor? Bra nd awareness, reduced prices from vendors, marketing, and experience in our industry! What I need from vendors: Proximity, low prices, and excellent service. Have you changed your marketing strategy in response to the economy? How? No. It has stayed the same, but the budget is seasonal. Our business has peaks and valleys. How is social media affecting your business? It’s the most effective marketing strateg y for our business! Skipping other businesses to access the consumer yourself is what social media does. It helps you to save money and acquire new customers at the same time. How do you hire and fire? Our company does group auditions. We are in the entertainment business, so

standard interviews aren’t compatible. We create games, trivia, and team-building activities to reveal the qualities in employees we like or dislike. We don’t fire anyone, they fire themselves! How do you train and retain? We have a team of trainers doing all the training. I work with them directly and train them by example. We work together to create best practices and call entire staff meetings when things change. How do you dea l w it h problem employees? Every situation is different. We like to have open dialogue with employees, asking questions and not just telling them what to do. This should show you if they will change or not. Certain problems are zero tolerance. We give multiple opportunities before we move on. Fastest way into my doghouse: Bullying.

Athlete: Jason Avant SPORTS & BUSINESS What skills/experience from sports have carried over to operating a business? Work ethic, fan interaction at all times, and not accepting failure. In the NFL we work until a task is complete, which includes holidays and weekends. When I moved over to the business, I realized quickly that most people don’t like to work on Friday and toward the end of the day. Work ethic is the key to success, so I try not to restrict myself by being time-conscious. Which do you find more competitive, sports or business? The NFL! The number of jobs and the amount of talent jockeying for them is unreal. Plus, professional athletes are expected to be perfect. Business is competitive, but not the same level. Why did you choose franchising as an investment option? Football for me was structure, a proven system, and that translates well to franchising. How did you transition from sports to franchising? A Launch Trampoline Park franchisee allowed me to work in their park in the summer while I still played football. Truly, I fell in love with the business model and its potential. W hat was your greatest achievement in sports, and what has been your biggest accomplishment as a franchisee? My greatest achievement in sports was making it to the NFL and playing 10 years! As a franchisee, I won Launch’s Franchisee of the Year award for 2017.

BOTTOM LINE

Annual revenue: $5 million-plus.

2018 goals: 7 percent growth.

Grow th meter: How do you measure your growth? Through service software that allows us to see where our customers are coming from. It shows us the untapped areas in our local community. We also measure growth by our staff evaluations. Vision meter: Where do you want to be in 5 years? 10 years? That’s too far in advance for me! How is the economy in your regions affecting you, your employees, your customers? We are on the East Coast. The economy is doing well. People have d isposable income and that’s the dollar we are competing for! Are you experiencing econom ic g row t h i n you r market? Growth in our market is definitely happening because people need to be

Multi-Unit Franchisee

ISSUE 1, 2019

entertained. With Amazon putting traditional retailers out of business, it helped grow the entertainment business across the country.

banks, other institutions? Why/why not? My experience with banks is good because they aren’t intrusive and care more about the note payment.

How do changes in the economy affect the way you do business? We may have to change our prices or cut back staff.

What are you doing to take care of your employees? Catered staff competitions every three months, yearly trip, and Christmas party with awards.

How do you forecast for your business? The number of parks in our area, what’s happening on Wall Street and in the Oval Office, weather, and school schedules. What are the best sources for capital expansion? This depends on your business. Banks and equity partners want to see cash flow. I like banks because I don’t want to give up percentages of the business. Experience with private equity, local banks, national

How are you handling rising employee costs (payroll, minimum wage, healthcare, etc.)? Self-ser v ice kiosk, fewer employees, and raising our prices. How do you reward/recog n iz e top -per for m ing employees? Awards, gifts, vacation, and bonuses! 1

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Tommy Hoopsick, 25 Owner

CLEANING UP

Hardworking youth rises to the challenge WRITTEN BY Kerry Pipes

ommy Hoopsick loves two things: operating a business and providing excellent customer service. He’s doing both as a multi-unit franchisee with Ductz, a brand he joined when he was just 19. That made him the youngest franchisee ever in the Belfor Franchise Group, which includes Ductz, Hoodz, and 1-800 Water Damage. The hardworking, home-schooled Hoopsick grew up in the Richmond, Va., area. He learned early about labor-intensive businesses, first working in the family’s asphalt company, then at a grocery distribution center after high school. While working night shifts at the warehouse, he took on a side job with the local Ductz franchisee, Russell Dixon, father of one of Hoopsick’s high school basketball teammates. Dixon noticed the youngster’s work ethic and determination right away, and before long had begun planning to sell the franchise to him. The 19-year-old cleaned out his bank account and in 2012, with a little help from Dixon, financed the deal and took over the Ductz franchise. He took the challenge on with gusto, learning the ins and outs of running his own business and providing excellent customer service.

Multi-Unit Franchisee

ISSUE 1, 2019

Company: Ductz of Richmond Southside, Ductz of DelChester Number of units: 2 Ductz Family: Dad, mom, and older brother Years in franchising: 6 Years in current position: 6

By 2016, Hoopsick had his business humming and was looking to expand. “I met with the current owner of a Ductz location in the Philadelphia area and began the process of buying that location,” he says. The deal was finalized in late 2016, and today Hoopsick and his team are busy growing both territories and dedicated to “giving the customers the best experience possible,” he says. Opening the second location, says Hoopsick, was the best business decision he has made so far. “It pushed my team and me way beyond our comfort zone, but it’s paid off tremendously.” Today, the 25-year-old looks into the future, sees more locations, and says he will remain dedicated to making all his locations the best they can be. And, he adds, he’ll do it by relying on his philosophy of over-delivering to his customers.

PERSONAL

First job: Working in a grocery warehouse loading trucks. Formative influences/events: Any type of business or leadership books. I have also had the opportunity to spend time with many other business owners and learn from them regardless of their industry.

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Under 30: Tommy Hoopsick Key accomplishments: We just did our largest project ever ($230,000) and it was the longest three weeks of my life. It was a huge challenge, but somehow we accomplished the task—and we did it on time.

Guilty pleasure: Sleeping in on a day with bad weather. Favorite book: Leadership by John Wooden. Favorite movie: “Star Wars.”

Biggest current challenge: Self-discipline will always be the biggest challenge I face.

What do most people not know about you? Most people don’t understand my level of dedication to my businesses.

Next big goal: Remodel my 98-year-old home and turn it into a smart house.

Pet peeve: When people compromise too easily or settle for less when they deserve better.

First turning point in your career: Working with other franchises on a large project. It was really an eye-opener because I was able to see areas where we could be better and learn from those owners.

What did you want to be when you grew up? NASCAR driver.

Best business decision: Starting the second location and pushing my team and myself way beyond our comfort zone. It hasn’t always been fun, but it’s paid off tremendously.

MANAGEMENT

Hardest lesson learned: In life you don’t get what you want, you get what you deserve. It took me a few years to understand how hard you actually have to work if you want to accomplish something extraordinary. I’m still learning this lesson. Work week: I try to work 7 a.m. to 7 p.m., 7 days a week. Exercise/workout: Leave for the gym at 4:55 a.m. to be there when the doors open at 5:00, then work out from 5:00 to 5:50. Best advice you ever got: Remember the small details because all the small pieces make up one big piece. What’s your passion in business? Always improving at everything, every day, to make sure we over-deliver for our customers and clients. How do you balance life and work? I don’t. I am completely dedicated to my businesses.

Last vacation: San Diego. Person I’d most like to have lunch with: Donald Trump. Business philosophy: Selfdevelopment. I have to set the right example for our employees. Then we have to over-train and provide them with the best resources possible to help them succeed on the job and outside of work as well. I want our employees to become better people using what they learn from their time with Ductz. If we create the best people, then we will have the best company. Management method or style: Lead by example, then make sure you adjust to each individual situation. There are always so many variables. I don’t think it’s smart to have a lot of set rules that never change. Greatest challenge: Getting everyone on the same page at the same time. How do others describe you? Hopefully, as someone who is dedicated and does things the right way. One thing I’m looking to do better: Have more procedures in place so it’s easier for our team to complete tasks and not

Multi-Unit Franchisee

ISSUE 1, 2019

miss any steps. This will also help when we onboard a new hire and to keep things uniform from location to location. How I give my team room to innovate and experiment: We have an open dialogue both ways. Everyone knows that if they have a good idea or think we need to change something, I want to hear about it and do a test run. We are always looking for more efficient ways to do things that will make our work easier, and everyone on our teams shares that feeling. How close are you to operations? Very. I manage most of our large projects, but if the jobs are smaller or less complicated I stay in the office and work on the business. W hat are the t wo most important things you rely on from your franchisor? Our website and our brand recognition. What I need from vendors: Fast response and over-communication. Have you changed your marketing strategy in response to the economy? How? Not really, most of our work comes from business-to-business relationships. How is social media affecting your business? I think social media in our industry is just getting started. We are working on a plan to become much more involved on our social media pages and put out content that educates our customers about how we do the work, the tools and equipment we use, and why we do the work the way we do. I see a lot of companies just posting a random fact here or there, and I don’t really see the value in that for the customer. How do you hire and fire? We try to find good family trees to

pick people from. Once we find a candidate, we start them on a temporary basis so neither party is locked into anything. If it’s not working out with someone, I sit down and try to understand what’s going on and if it can be fi xed. Once I have that conversation I can decide which way to go. In the case that someone needs to be fired, I try to be as fair, ethical, and professional as possible. How do you train and retain? We put our new people with the veterans. It’s basically a mentorship. It takes about six months for us to really get a tech up to speed and to the point where they are comfortable with all aspects of the job. I think we retain pretty well considering the way our industry works. Because we invest more into our employees and care about them more, I think that attitude flows back from the employees to the managers and the company. How do you deal with problem employees? I start by trying to step into their shoes and understand both sides of the event. I then try to make sure I am treating them uniquely since everyone and every situation is different. I think it’s unfair to treat all employees the same. I work on the issues with them, and normally we are able to make things better. Fastest way into my doghouse: Not going the extra mile requires attention from management.

UNDER 30

How did you get into franchising at such a young age? I bought an existing franchise from a high school basketball teammate’s dad. I started working on jobs with them and eventually it turned into me buying their location.

Under 30: Tommy Hoopsick Was becoming a franchisee something you’d planned on? I planned on owning businesses but I didn’t know I’d start with a franchise. Looking back, I was very fortunate that I did start with a franchise. It helped speed up the learning curve of owning and running a business. Did you have a mentor or inspiration for getting into franchising? Russell Dixon, who I bought my location from, was the inspiration for franchising.

I feel like the difference between a 25-year-old and an 18-year-old today is bigger than it’s ever been. I think my age group has a chip on their shoulder because they get misjudged. What jobs, skills, and experience have helped you operate a franchise business? Ductz is difficult work, so my previous experience of manual labor at the warehouse was beneficial. I also grew up using all kinds of power tools and equipment, so when I started working with Ductz I didn’t have a long adjustment period. What kinds of obstacles did you face in franchising at such a young age? Money was a big obstacle. I completely emptied my savings to buy the franchise and Russell self-financed the rest. Once I finally took over and opened for business, the bank account was barely positive for the first few months. My parents weren’t able to help me with money, but they did everything else

they could. I would have never made it without my family, so they deserve a lot of the credit as well. How would you describe your generation? I still remember playing games on Windows 95 with my older brother, and he remembers when our parents didn’t even have a computer. My age group is the last generation that grew up without a cell phone and iPad, so I feel like the difference between a 25-year-old and an 18-year-old today is bigger than it’s ever been. I think my age group has a chip on their shoulder because they get misjudged. People group us with others who are a few years younger, and it’s a totally different generation. Do you see franchising as a stepping-stone or a career? Franchising for me was a great starting opportunity. Although one day I plan on doing other things, I believe I will always keep my Ductz locations.

BOTTOM LINE Annual revenue: $1.25 million.

2019 goals: Finish 2018 strong. Then implement new operational procedures so we are more organized and so that, eventually, when we open our next office, the start-up is smooth. Growth meter: How do you measure your growth? The growth I worry about is our people growing. If they grow, the rest of the business will take care of itself. But we also watch the numbers. I am beginning to notice recognition in our market going up, so people are beginning to notice us. Vision meter: W here do you want to be in 5 years? 10 years? Over the next 5

Multi-Unit Franchisee

ISSUE 1, 2019

to 10 years I’m not planning any dramatic changes. Just a couple more locations and continuing to build our current locations. How is the economy in your regions affecting you, your employees, your customers? Lately, I’d say the economy is good and that we are affected by it positively. We were very busy in 2018, and I think people are spending money more easily than in the past couple of years, so that’s good for everyone. Are you experiencing econom ic g row t h i n you r markets? Yes, in both markets we are having record years. How do changes in the economy affect the way you do business? We try to not let anything dictate what we do, but when the economy isn’t good we have to work even harder on the sales side. How do you forecast for your business? It’s sporadic so that’s hard to do. We look at the previous year to see the comparisons, and we talk with other owners and get their opinions and information. That’s one of the advantages of having a group of other owners to rely on. What are the best sources for capital expansion? I have never had to do it, but I think a great way is passive investors you can partner with. Crowdfunding is also a big thing now and can be a great way to expand. Experience with private equity, local banks, national banks, other institutions? Why/why not? I like our local bank in Virginia. It’s nice to work with the people you know and who live in your community. It helps being able to walk in, call, or text. We also work with a regional bank, but it’s

not the same when you don’t know the employees’ names and they don’t know you. What are you doing to take care of your employees? Because of the nature of our industry we ask a lot from our employees. We pay very well in comparison to our local competition, and we always buy our crews lunch every day. Having worked on thousands of jobs myself I know what the techs deal with daily, and I promised from day one that we wouldn’t spare any expense to get our crews the best tools, equipment, and supplies to make their job go as smoothly as possible. If there’s something our crews need and we don’t have it, we get it right away. There’s not an expense request that has to wait to go for approval, etc. We make sure they are better equipped and better trained for their job than anyone else. How are you handling rising employee costs (payroll, minimum wage, healthcare, etc.)? We have increased our price, but I think the biggest thing we have done is estimated with more detail. How do you reward/recog n iz e top -per for m i n g employees? Because of the crazy hours we work and how much we travel for jobs, the number-one incentive we have to give our employees is not money or a gift—it’s a day off. We do give our employees bonuses and things like that, but when we really want to make them feel appreciated, we give them a break. What kind of exit strategy do you have in place? I do not have an exit strategy. I plan on being involved for a long time. 1

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2019 MEGA 99 RANKINGS Each year we work with FRANdata to compile a list of the country’s largest multi-unit franchisee organizations. Based on total unit count, the rankings show not only the number of units these “mega” franchisees operate, but also their brands. While the list is dominated by food brands, it also includes non-food concepts such as business services

NAME

UNITS

(tax preparation), consumer services (automotive), and lodging. Building a multi-unit empire is a matter of taste, opportunity, passion, and comfort level. If you’re looking to expand and diversify your own franchise empire, study what the “big guys” are buying—it just might help you with your own growth choices in 2019.

BRANDS

NPC INTERNATIONAL

1,599

PIZZA HUT, WENDY’S

FLYNN RESTAURANT GROUP

1,246

APPLEBEE’S, ARBY’S, TACO BELL, PANERA BREAD

TARGET

1,066

PIZZA HUT

SUN HOLDINGS

995

BURGER KING, POPEYES LOUISIANA KITCHEN, T-MOBILE, TACO BUENO, ARBY’S, GNC, CICIS, GOLDEN CORRAL, KRISPY KREME

CARROLS GROUP

849

BURGER KING

DHANANI GROUP

811

BURGER KING, POPEYES LOUISIANA KITCHEN, LA MADELEINE

KBP FOODS

777

KFC, TACO BELL

MUY BRANDS

762

PIZZA HUT, WENDY’S, TACO BELL

601

CHICK-FIL-A, EINSTEIN BROS. BAGELS, SUBWAY, PANDA EXPRESS, PAPA JOHN’S, PIZZA HUT, WHICH WICH, MOE’S SOUTHWEST GRILL, JAMBA JUICE, FRESHII, TACO BELL, STEAK ‘N SHAKE, QDOBA MEXICAN EATS, QUIZNOS, TIM HORTONS, CHILI’S, MOOYAH, ERBERT AND GERBERT’S SANDWICH SHOP, MCALISTER’S DELI, QUAKER STEAK & LUBE, WAHOO’S FISH TACO, WENDY’S, DENNY’S, KFC, THE EXTREME PITA, AU BON PAIN, BURGERFI, CARIBOU COFFEE, IHOP, PINKBERRY, PJ’S COFFEE OF NEW ORLEANS, WINGSTOP, THE COFFEE BEAN & TEA LEAF, DUNKIN’ DONUTS, NATHAN’S FAMOUS, LA MADELEINE

591

SUBWAY, CINNABON, WENDY’S, ARBY’S, DUNKIN’ DONUTS, DQ TREAT, TACO BELL, MOE’S SOUTHWEST GRILL, PIZZA HUT, HOT STUFF PIZZA, KFC, CARVEL, CHESTER’S, IHOP

11 SERVICES (AFEES)

493

SUBWAY, BURGER KING, CHARLEYS PHILLY STEAKS, POPEYES LOUISIANA KITCHEN, TACO BELL, ARBY’S, EINSTEIN BROS. BAGELS, WING ZONE, PIZZA HUT, BLIMPIE, TACO JOHN’S, CHURCH’S CHICKEN, DOMINO’S PIZZA

12 JAMES HUMPHREY

469

DUNKIN’ DONUTS

LOVE’S TRAVEL STOPS & 13 COUNTRY STORES

428

SUBWAY, CHESTER’S, GODFATHER’S PIZZA, HARDEE’S, IHOP, ARBY’S, TACO JOHN’S, DQ TREAT

14 GPS HOSPITALITY

408

BURGER KING, POPEYES LOUISIANA KITCHEN

15 HARMAN MANAGEMENT

397

KFC, A&W, LONG JOHN SILVER’S, PIZZA HUT

16 ROTTINGHAUS

393

SUBWAY

17 AMPEX BRANDS

391

KFC, PIZZA HUT, LONG JOHN SILVER’S, TIM HORTONS, TACO BELL

18 SUMMIT RESTAURANT GROUP

388

IHOP, APPLEBEE’S

19 SERVICE

377

JIFFY LUBE

20 JIB MANAGEMENT

358

JACK IN THE BOX, DENNY’S, TGI FRIDAYS, SIZZLER

21 TACALA

352

TACO BELL, SONIC

347

EINSTEIN BROS. BAGELS, CHICK-FIL-A, WOW CAFE & WINGERY, SUBWAY, PIZZA HUT, UFOOD GRILL, JAMBA JUICE, TACO BELL, PAPA JOHN’S, BAJA FRESH, ERBERT AND GERBERT’S SANDWICH SHOP, BURGER KING, MOE’S SOUTHWEST GRILL, QDOBA MEXICAN EATS, QUIZNOS, STEAK ‘N SHAKE, TIM HORTONS, AU BON PAIN, DENNY’S, GARBANZO MEDITERRANEAN FRESH, HOT STUFF PIZZA, MCALISTER’S DELI, CHESTER’S, GODFATHER’S PIZZA, NRGIZE LIFESTYLE CAFE, SBARRO, THE COFFEE BEAN & TEA LEAF, FRESHII, MOOYAH

ARAMARK

10 PILOT TRAVEL CENTERS ARMY & AIR FORCE EXCHANGE

HEARTLAND AUTOMOTIVE

22 SODEXO

Multi-Unit Franchisee

ISSUE 1, 2019

35 QUARTERS

OF CONSECUTIVE SAME STORE SALES GROWTH*

Unavailable

Multi-unit Areas Available

SINCE 1973 564 STORES IN 21 STATES†

Existing Locations Areas Available

INNOVATORS OF FLAVORED CRUST® PIZZA

Carryout and Delivery Concept

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248.414.3300 *Results measure company-wide same store sales figures for each calendar year over the previous calendar year. The measuring period is January 1, 2010 through December 31, 2018. Excludes store sales from the State of Florida, units which are not obligated to and do not report sales to Hungry Howie’s, and units which opened and/or closed during the measuring period. Not all individual stores experienced the same results. New franchisees may have results that differ. This advertisement is not an offer of a franchise. Franchises are offered and sold only through a Franchise Disclosure Document. STATE OF CALIFORNIA: THESE FRANCHISES HAVE BEEN REGISTERED UNDER THE FRANCHISE INVESTMENT LAW OF THE STATE OF CALIFORNIA. SUCH REGISTRATION DOES NOT CONSTITUTE APPROVAL, RECOMMENDATION, OR ENDORSEMENT BY THE COMMISSIONER OF CORPORATIONS NOR A FINDING BY THE COMMISSIONER THAT THE INFORMATION PROVIDED HEREIN IS TRUE, COMPLETE, AND NOT MISLEADING. STATE OF NEW YORK: THIS ADVERTISEMENT IS NOT AN OFFERING. AN OFFERING CAN ONLY BE MADE BY A FRANCHISE DISCLOSURE DOCUMENT FILED WITH THE DEPARTMENT OF LAW OF THE STATE OF NEW YORK. SUCH FILING DOES NOT CONSTITUTE APPROVAL BY THE DEPARTMENT OF LAW OF THE STATE OF NEW YORK. MINNESOTA STATE REGISTRATION NUMBER F-2873. †545 open stores in 21 states with an additional 19 agreements signed as of 12/18/2018.

2019 MEGA 99 RANKINGS NAME

UNITS

BRANDS

23 BODDIE-NOELL ENTERPRISES

345

HARDEE’S

23 SIZZLING PLATTER

345

LITTLE CAESARS, WINGSTOP, DUNKIN’ DONUTS, SIZZLER

MASON-HARRISON-RATLIFF 25 ENTERPRISES

335

SONIC

26 MERITAGE HOSPITALITY

310

WENDY’S

301

PANERA BREAD, CHARLEYS, DQ GRILL & CHILL, DQ TREAT

28 COMPANY

300

PIZZA HUT

29 K-MAC ENTERPRISES

298

TACO BELL, KFC

30 RPM PIZZA

283

DOMINO’S PIZZA

31 PACIFIC BELLS

281

TACO BELL, BUFFALO WILD WINGS

32 ADF COMPANIES

276

PIZZA HUT, PANERA BREAD

271

BURGER KING, SBARRO, CINNABON, QUIZNOS, CHILI’S, ROY ROGERS, PIZZA HUT, POPEYES LOUISIANA KITCHEN, NATHAN’S FAMOUS, CHICK-FIL-A, FAMOUS FAMIGLIA PIZZERIA, SMASHBURGER, SHULA BURGER, JOHNNY ROCKETS, KFC, PINKBERRY, EINSTEIN BROS. BAGELS, STEAK ‘N SHAKE, LA MADELEINE FRENCH BAKERY & CAFE, FIREHOUSE SUBS, GODFATHER’S PIZZA, GREAT STEAK, KELLY’S CAJUN GRILL, MOE’S SOUTHWEST GRILL, SALSARITA’S FRESH MEXICAN GRILL, THE COUNTER, YEUNG’S LOTUS EXPRESS, PANDA EXPRESS, PIZZA STUDIO, PIZZA BELL HOP, THE COFFEE BEAN & TEA LEAF, BLIMPIE, BURGERFI, CARL’S JR., BLAZE PIZZA

34 COMPASS GROUP USA

259

PAPA JOHN’S, EINSTEIN BROS. BAGELS, SUBWAY, AU BON PAIN, MOE’S SOUTHWEST GRILL, PIZZA HUT, DENNY’S, JAMBA JUICE, QUIZNOS, SMASHBURGER, BLIMPIE, CARIBOU COFFEE, PJ’S COFFEE OF NEW ORLEANS, SALSARITA’S FRESH MEXICAN GRILL, TACO BELL, WENDY’S, TIM HORTONS, WHICH WICH, BOJANGLES’, BURGER KING, CHILI’S, ERBERT AND GERBERT’S SANDWICH SHOP, FRESHII, MARCO’S PIZZA, SBARRO, STEAK ‘N SHAKE, TOSSED, CALIFORNIA TORTILLA, ILLY, IHOP, JOHNNY ROCKETS, KFC, NATHAN’S FAMOUS, PITA PIT, SLIM CHICKENS

35 G&M OIL COMPANY

253

CHEVRON (BRANDED), EXTRAMILE

36 TA OPERATING

251

POPEYES LOUISIANA KITCHEN, SUBWAY, BURGER KING, TACO BELL, PIZZA HUT, DUNKIN’ DONUTS, STARBUCKS, TACO BELL/PIZZA HUT, ARBY’S, FAZOLI’S, SBARRO, A&W, CHARLEYS PHILLY STEAKS, WENDY’S, TIM HORTONS, TACO TIME, CARL’S JR., CHESTER’S, DQ GRILL & CHILL, BOSTON MARKET, BASKIN-ROBBINS, QUAKER STEAK & LUBE EXPRESS

37 MITRA QSR

250

KFC, TACO BELL

38 CAFUA MANAGEMENT

247

DUNKIN’ DONUTS, BASKIN-ROBBINS

39 FUGATE ENTERPRISES

244

PIZZA HUT, TACO BELL

40 APPLE HOSPITALITY REIT

241

HILTON GARDEN INN, COURTYARD BY MARRIOTT, HAMPTON INN BY HILTON, HOMEWOOD SUITES BY HILTON, RESIDENCE INN BY MARRIOTT, SPRINGHILL SUITES BY MARRIOTT, TOWNEPLACE SUITES BY MARRIOTT, FAIRFIELD INN BY MARRIOTT, HOME2 SUITES BY HILTON, EMBASSY SUITES BY HILTON, MARRIOTT HOTELS, RENAISSANCE HOTELS

41 DESERT DE ORO FOODS

236

TACO BELL, PIZZA HUT

THE COVELLI FAMILY LIMITED

27 PARTNERSHIP

AMERICAN WEST RESTAURANT

33 HMS HOST

Multi-Unit Franchisee

ISSUE 1, 2019

2019 MEGA 99 RANKINGS NAME

UNITS

BRANDS

42 D. L. ROGERS

230

SONIC

43 B & B CONSULTANTS

229

SONIC

44 CIRCLE K STORES

220

SUBWAY, HOT STUFF PIZZA, BLIMPIE, CHURCH’S CHICKEN, HARDEE’S, DQ TREAT, DQ GRILL & CHILL, NOBLE ROMAN’S, HUDDLE HOUSE

45 EYM GROUP

216

BURGER KING, PIZZA HUT, DENNY’S

46 CHARTER FOODS

215

TACO BELL, LONG JOHN SILVER’S, A&W, KFC

47 JAE RESTAURANT GROUP

213

WENDY’S

48 FOURTEEN FOODS

210

DQ GRILL & CHILL, DQ TREAT

49 QUALITY DINING

209

BURGER KING, CHILI’S

50 DEKK GROUP

202

DUNKIN’ DONUTS, BASKIN-ROBBINS

51 FALCON HOLDINGS

195

LONG JOHN SILVER’S, CHURCH’S CHICKEN

52 GROUP

193

WENDY’S

53 COTTI FOODS

192

WENDY’S, TACO BELL, PIEOLOGY

SEAWEND LTD/CEDAR 54 ENTERPRISES

187

WENDY’S

54 BORDER FOODS

187

TACO BELL

56 THE BRIAD GROUP

183

WENDY’S, TGI FRIDAYS, ZINBURGER, MARRIOTT COURTYARD, RESIDENCE INN, HILTON GARDEN INN, HILTON HOMEWOOD SUITES, TOWNEPLACE SUITES, AC HOTELS BY MARRIOTT

57 STARBOARD GROUP

180

WENDY’S

58 MARWAHA GROUP

176

SUBWAY, YOGURTLAND

58 APPLE INVESTORS GROUP

176

BURGER KING, APPLEBEE’S, PIZZA HUT, IHOP, STEVI B’S

60 PALO ALTO

175

TACO BELL, PIZZA HUT

61 RMH FRANCHISE

167

APPLEBEE’S

61 GROUP/CFL PIZZA/BRAVO

167

PIZZA HUT, TACO BELL, KFC

63 HAZA FOODS

166

WENDY’S

63 SUNDANCE

166

TACO BELL, KFC, PIZZA HUT

65 DEVELOPMENT

163

SUBWAY

65 PJ UNITED

163

PAPA JOHN’S

67 PAC PARTNERS

156

PIZZA HUT

67 WENDY OF COLORADO SPRINGS

156

WENDY’S, GOLDEN CORRAL

69 JRN

155

KFC, PIZZA HUT

155

POPEYES LOUISIANA KITCHEN, BURGER KING

WENDPARTNERS FRANCHISE

CELEBRATION RESTAURANT FOODS

MIDWEST SUBWAY

INTERFOODS OF AMERICA

69 (SAILORMEN)

Multi-Unit Franchisee

ISSUE 1, 2019

SPONSORED

APPLEPIE CAPITAL

The Right Choice to Meet Your Multi-Unit Growth Goals WRITTEN BY Helen Bond

When it comes to multi-unit expansion, access to the right capital, at the right time, with the right financial partner can be a game-changer in ensuring success. With a fresh approach to franchise financing—and the only lender dedicated to the industry—ApplePie Capital knows franchising and understands the unique needs of franchisees at every stage of growth.

product, ApplePie Core, is designed specifically to accelerate multi-unit franchise growth at earlier stages than traditional franchise lenders will allow.

“When someone comes to us, the first thing we want to know No matter your strategy, Feldman urges franchisees to avoid is what their plans are for growth, and for succession or exit,” getting hung up on interest rates. The interest rate you pay is says Ron Feldman, ApplePie’s Chief Development Officer. “Your a lot less important than your monthly payment and the term exit plan—how long you want to run these units—can affect of the loan. what kind of loan you get.” “The cheapest capital is generally not always the best capital,” emphasizes Feldman. “You want the most flexible capital ApplePie’s teams are brand specialists. Armed with well-defined goals and a snapshot of your financial picture and operations, while you are growing; once you’ve grown then you look at the ApplePie takes a consultative approach to create and execute a cheapest capital options.” custom multi-unit financing strategy that ensures development What should a capital markets partner do for you? Similar to a stays on track. CPA or attorney, a capital markets partner should be a trusted The key to smart multi-unit expansion is to match growth plans with the right capital solutions. Generally, Feldman says, the rule of thumb is to preserve as much cash as possible to maintain a rainy day fund and the resources to open or acquire new units when opportunities arise versus “a one unit at a time” mentality. “The biggest problem we see with franchisees in the early stages is not using the proper balance of equity and debt to efficiently meet their capital and operational abilities,” notes Feldman. “Often, a franchisee will use too much cash or too little cash to fund expansion. They borrow too much or they don’t borrow enough.” ApplePie offers a dedicated, captive lending product, as well as a full host of SBA, conventional, and equipment loan options from its diverse lender network. Their simplified, fully online application process enables borrowers to access multiple loan options and fast and efficient funding with just a single application —whether you’re a first-time franchisee, growing multi-unit operator, or farming your franchise wealth. The path to finance multi-unit development typically varies based on the size of a portfolio. SBA loans are the most common way to fund initial growth, while conventional lending opportunities generally become more readily available for franchisees with five or more units. ApplePie’s signature loan

advisor that: • Knows your brand and specializes in the industry. • Provides customized financing options that meet our specific needs. • Focuses on your long-term goals and ensures you have the capital available when you need it most. “We want to take you from the first unit to your end place – whether that is 10, 20 or 50 units,” says Feldman. “Whatever that number is, we will hold your hand along the way to make sure you are optimizing the capital to meet your personal objectives. It goes back to being a trusted advisor. We know the ropes and will help you focus on the long-term, to get capital when you need it most.” 1

Submit your inquir y online today at applepiecapital.com/grow or contact us at 1 (844) 734-GROW to schedule a free consultation to discuss your franchise growth plans. Together, we’ll plant the seeds for your success. Easy as ApplePie.

applepiecapital.com/grow | (844)-734-GROW | grow@applepiecapital.com

Multi-Unit Franchisee

ISSUE 1, 2019

2019 MEGA 99 RANKINGS NAME

UNITS

BRANDS

69 HAMRA ENTERPRISES

155

WENDY’S, PANERA BREAD, NOODLES & COMPANY

72 GHAI MANAGEMENT

154

BURGER KING, TACO BELL

73 WKS RESTAURANT GROUP

151

WENDY’S, DENNY’S, KRISPY KREME DOUGHNUTS

73 RLJ LODGING TRUST

151

RESIDENCE INN BY MARRIOTT, COURTYARD BY MARRIOTT, EMBASSY SUITES, HYATT HOUSE, HILTON GARDEN INN, WYNDHAM, FAIRFIELD INN & SUITES, SPRINGHILL SUITES, MARRIOTT, HAMPTON INN, DOUBLETREE BY HILTON, HYATT PLACE, HOMEWOOD SUITES, HAMPTON INN & SUITES, HILTON, RENAISSANCE, SLEEP INN, HOTEL INDIGO, THE LEADING HOTELS OF THE WORLD, HYATT, HYATT CENTRIC, HOLIDAY INN EXPRESS, RESIDENCE INN, RENAISSANCE HOTELS & RESORTS, IHG, SPRINGHILL SUITES BY MARRIOTT

75 CARLSIE

150

WENDY’S

75 HOOGLAND FOODS

150

MARCO’S PIZZA

77 DAVCO RESTAURANTS

145

WENDY’S

77 ALVARADO CONCEPTS

145

TACO BELL, KFC

77 DOHERTY ENTERPRISES

145

APPLEBEE’S, PANERA BREAD, QUAKER STEAK, NOODLES & COMPANY

80 MANAGEMENT

144

BURGER KING

81 WING FINANCIAL SERVICES

141

JACKSON HEWITT TAX SERVICE

81 SUMMIT RESTAURANT GROUP

141

PIZZA HUT, LONG JOHN SILVER’S

81 NORTHWEST RESTAURANTS

141

TACO BELL, KFC, A&W, PIZZA HUT, LONG JOHN SILVER’S

84 EAST TENNESSEE SUBWAY

140

SUBWAY

85 SIDAL

138

LONG JOHN SILVER’S, WENDY’S, DENNY’S, GRANDY’S, MCALISTER’S DELI

86 AMERICAN PIZZA PARTNERS LP

133

PIZZA HUT

87 HALLRICH (THE INNER CRUST)

132

PIZZA HUT

87 VALENTI MANAGEMENT

132

WENDY’S, CHILI’S

89 HENLEY ENTERPRISES

131

VALVOLINE INSTANT OIL CHANGE

89 DMSD FOODS

131

JACK IN THE BOX

91 TOMS KING

130

BURGER KING

92 PREMIER KINGS

129

BURGER KING

CAMBRIDGE FRANCHISE 93 HOLDINGS

128

BURGER KING

94 AMERICA’S PIZZA COMPANY

125

PIZZA HUT

94 BURGERBUSTERS

125

TACO BELL

94 LUIHN FOOD SYSTEM

125

TACO BELL, KFC, PIZZA HUT

94 BURGERBUSTERS

125

TACO BELL, KFC, PIZZA HUT

98 STARCORP

124

HARDEE’S, CARL’S JR.

99 BLD BRANDS (SERAZEN)

123

PAPA JOHN’S, HARDEE’S

CALIFORNIA FOOD

SERVUS! (BR ASSOCIATES)/

SOURCE: FRANdata and Franchise Update Media

Multi-Unit Franchisee

ISSUE 1, 2019

2019 MULTI-UNIT FRANCHISING CONFERENCE BOOTH #403

BE AMAZING!

Franchise with Scooter’s Coffee Amazingly Simple Business ∙ Choose drive-thru kiosk or coffeehouse ∙ Small workforce ∙ No stoves, fryers or ventilation DRIVE-THRU KIOSK: 450-550 SQ FT

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Amazing Industry ∙ 66% of Americans purchase coffee prepared outside of the home ∙ Nearly half of coffee drinkers order at a drive-thru

Call 877.494.7004 or visit OwnAScooters.com/MultiUnitMag

SUCCESS WITHIN SITE Expert tips on finding the best location WRITTEN BY Sara Wykes

y the time he co-founded The Sunray Companies in 1996, Ray Harrigill already had experience with real estate, managing 26 restaurants in three states. An MBA, law degree, and a contractor’s license expanded his knowledge and contributed to the growth of Sunray into 30 properties in Mississippi and Louisiana that include Massage Envy, Hampton Inn & Suites, Holiday Inn Express, Bumpers Drive-In restaurants, and Palm Beach Tan salons. His years in franchising have given Harrigill plenty to say on the subject of real estate. For instance, “The best location and a vibrant business trumps owning the real estate. However, if you can own the real estate, it is a wealth builder over time.”

Also, “Getting a deal done is the goal,” he says, “but know the difference between deal-breaking points and your wants.” (See sidebar for more from Harrigill.) As ever, it all begins—and ends—with location. “There is a saying in America: location, location, location,” says Philip Schram, chief development officer at Buffalo Wings & Rings, a franchise with more than 70 locations worldwide.

Multi-Unit Franchisee

ISSUE 1, 2019

“A good location will make the business flourish; a bad location will kill the business,” says Schram. Typically, he says, two of the biggest variables in the franchise system are the location and the quality of the operator. A good operator cannot overcome a bad location—nor can a good location overcome a bad operator. Franchise real estate is a process, says Spencer Smith, closing in on nearly two decades as a franchisee. His holdings now include 44 Aaron’s stores, making him the brand’s third-largest franchisee. Building that array of locations has taught Smith that even with careful preparation, there are times “when you don’t know what you don’t know until you get started,” he says. Without question, however, “Location is key. You can never afford to advertise enough to overcome a bad location. The math never works out to take a B or C location and say, ‘I can turn this into an A-minus.’” NEED MORE DATA Finding the right location is also about gathering the most valuable, relevant, and specific information, says Schram. Technology that tracks consumer choices

Real Estate Feature

makes that easier than ever, and that information can be mapped by demographics and behaviors to pinpoint where success will most likely be found.

Accordingly, he cautions against getting into a franchise model at the peak of the model. “All brands have a life cycle—they hit a saturation point or their business model loses touch with what consumers want. I’ve been involved in a couple of brands that have grown to 1,000 locations, then pruned to 400. Brands have to go through a pruning process and it can take a while before that bears fruit. If you get in at the right point, life is great.”

While considering the data, Schram also understands another aspect of location selection: name recognition. As Buffalo Wings & Rings is not a nationally recognized name, Schram has found that success is most likely in towns that are county seats. Those towns are typically rural, but are distinguished by a population that’s bolstered, sometimes doubled, by government employees. The same phenomenon also will be found in towns with large manufacturing plants, he says, but those plants often have an in-house cafe that will compete for lunchtime customers. Nonetheless, in a small community, a newer brand will be noticed—in contrast to opening in a big city, where there is so much competition that “unless you have 10 locations of the same brand close to each other, nobody’s going to notice you,” says Schram.

Prospective franchise buyers should also consider the source of information they use to make real estate decisions, Smith says. Franchisors will share information with prospective franchisees at a variety of levels. National real estate brokers will also identify prospective locations with their own formalized process. Smith appreciates the guidance of others, but ultimately believes in the value of visiting a site multiple times and of understanding traffic patterns and regional markets. Doing that takes time, Smith says, but verifying data makes good business sense.

Some locations that might appear desirable in one way can actually be less so when their particulars are examined. “In airports, security is an issue,” Schram says. “You have to move food to the restaurant, and that makes the operational side challenging. Also, people are busy and always in a hurry. You need to be a major brand and not have an expectation of making money. You’ll be using your location more as advertising, even though you may not make money.” Buffalo Wings & Rings, for example, has a location in Paul Brown Stadium, home of the NFL’s Cincinnati Bengals, even though it’s not open year-round “because it makes a statement,” Schram says.

Schram follows a protocol aimed at evaluations conducted with the highest level of input. “When a franchise wants a location, they submit it to us. We do a lot of homework and then present it to the executive team. I am not allowed, on my own, to approve new franchisees, even though that falls under my responsibilities, and I cannot approve, on my own, site locations. Discussions about site location, in particular, are challenging and deep dives. We prepare a lot for those discussions. The executive team includes the CEO, the heads of operations, marketing, HR, and finance. Operations and marketing are the most important because they’ll be the ones living with the franchisee and the locations.”

Timing also matters—not only with the real estate, but also with the brand itself. In his years as a franchisee, Smith has observed that a brand’s life cycle influences real estate decisions. “There are rules of the road that never change, like location, but negotiating lease terms—those deal points ebb and flow,” he says.

Jason Glasrud, development manager at CBC Real Estate Group, spells out some additional reasons for involving many perspectives in the real estate and site selection process. “A collaborative team approach can help ensure that a location is appropriate, that the cost of doing business in a particular Multi-Unit Franchisee

ISSUE 1, 2019

Real Estate Feature which has offices in several U.S. cities. A commercial real estate brokerage firm that specializes in buying and selling net lease properties for private investors and institutions across the U.S., SIG has handled 1,500 transactions in 48 states worth more than $3 billion. Naylon keeps a close watch on tactics that help franchisees navigate a market that doesn’t make success simple for the uninitiated. Naylon says many operators have been able to successfully expand their operations with new store development by not rushing into new deals, by staying disciplined, and by focusing on real estate fundamentals. Doing those things ensures that franchisees stay fully informed with all germane information to help them stick with a strategy that best fits their long-term goals. The net leased real estate market has come front and center in the commercial real estate investment world, he says. Restaurants have continued to be one of the most sought-after product types and have been a major contributor to overall growth and expansion within the space. Operators, Naylon says, have used various expansion strategies, including acquisitions of existing businesses, sale leasebacks of owned real estate, and build to suit with third-party developers. Each of these strategies has its advantages and tradeoffs. Operators who are more aggressively expanding and looking to add a large number of new stores in a relatively short time are less likely to leave their capital tied up in real estate, and instead will look to deploy that capital into new acquisitions and buildouts using sale leasebacks and third-party developers. community is justified in the pro forma, and that the time to obtain approvals from the municipality conform with the desired schedule, working backwards from the day you expect to receive a certificate of occupancy and open for business.” That team, he adds, ought to include an architect or civil engineer who can evaluate a site according to a franchisee’s needs, and who understands the varying timetables for approvals and permits from building and zoning officials, in addition to impact fees that might apply. Smith, whose Aaron’s expansion is geographically dispersed, advises franchisees to allow their expansions to be dictated by available markets and the right real estate. “While we all would like to open in our back yard, there might be something 100 miles away that’s worth the extra effort to reach rather than opt for convenience.” He also suggests that franchisees reach out to existing franchisees to ask about their best locations. Then, just as important, “Go out and visit the actual locations,” he says. “No matter what a franchisor’s sales department says, you can always learn something different when you actually go out to a location.” COMPLEX ENVIRONMENT Successful growth for restaurant operators in today’s market environment has been made more difficult by increased land and construction costs, increased borrowing costs, inconsistent sales, traffic trends, and overall higher rents, says Chris Naylon, net lease advisor for the Sands Investment Group (SIG),

Multi-Unit Franchisee

ISSUE 1, 2019

Naylon believes that the low cap rate environment of recent years has enabled operators to take advantage of sale leasebacks. Some motivating factors for this strategy include paying off shortterm debt used to finance a new build or renovation, moving the equity into the next soon-to-be location, and taking advantage of a market where the real estate is more valuable because there is a nationally recognized name brand occupying the space. One of the greatest advantages to a sale leaseback, says Naylon, is that it allows the owner more control over setting a lower occupancy cost when looking to pull out equity. Determining the base rent is one of the most important factors, because that rent will drive both the final valuation and overall marketability of the property. Working with an experienced market consultant to help determine how the rent and basic lease terms will affect the final sale price can be valuable. Operators looking to use this strategy should be focused on maximizing the value of the business and keeping the rent as low as possible, while pulling out only the equity they need. In some cases owners have approached the sale leaseback strategy as an opportunity to artificially inflate their rent to unhealthy levels in an effort to achieve a higher sale price. This strategy is counterproductive and can have severe negative long-term implications on a business and could end up costing the business owner more in the future. Working with third-party developers to complete a custom build-to-suit restaurant is another widely used strategy, Naylon says. This allows the operator to avoid any out-of-pocket

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Real Estate Feature expenses up front or capital risk on the acquisition of the land and construction. It also means operators are able to continue to do what they know best—running their business without being distracted by also having to manage finding a new site and constructing a new building. Developers can employ their market knowledge, network of contacts, and expertise to source a new site for approval, fund the acquisition, build out 100 percent, and provide a turnkey store to the operator, ready for FF&E. The lease between the restaurant operator and developer is agreed to ahead of time. The rent factor would be calculated based on the developer’s overall cost to acquire the land and construct the building. It would also include a profit margin based on the expected valuation derived from the negotiated lease. Naylon recommends the importance of ensuring that the developer is working with a qualified and experienced net lease market consultant during this process—a step often overlooked by both parties, he says. “Our team has been able to successfully match a large number of operators and franchisees with one of our preferred development partners based on geographic locations and overall needs. Those developers who are partnering with us take advantage of our market expertise on final valuations,” he says. This helps mitigate market risk and helps the tenant keep their rent as low as possible, creating an economical win-win strategy for both the restaurant owner and the developer, says Naylon. “Searching for and interviewing for a developer partner can be a difficult task for restaurant owners, especially smaller franchisees with less experience. The importance of selecting the right group when using a build-to-suit strategy could be the difference between long-term success and immediate failure,” he says. Also, says Naylon, when choosing either a build-to-suit or a sale leaseback strategy, operators will need to be prepared to negotiate a long-term lease. Common lease terms operators should be prepared to discuss—because they drive the final value of the property—include the overall length of the base term, the base rent, scheduled rent increases, options to extend the lease, the strength of the entity providing the guaranty (in many situations a personal guaranty), and assignment language among other lease characteristics. It is important to understand how each of these will affect the final value, and to come up with a solution that works for the operator while still maintaining market appeal and value. Working with consultants who understand market conditions and how each of these characteristics will affect the value can be most useful. One last caution about leasing from Smith. “Never do a sublease. I’ve seen friend after friend get caught down the road when demographics shift or the business model weakens, and they have no negotiating leverage. Landlords will never make any concessions because they know that the franchisor will pay.” Such situations are more likely to happen when you’re first getting in, he says. “You might think, ‘If the franchisor signed, it must be a great lease.’” Not necessarily.

Multi-Unit Franchisee

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6 MORE TIPS Ray Harrigill offers additional thoughts and advice on making the best real estate deals possible in the current environment. 1. The quality of the location and the co-tenants can dramatically affect your success. Like most things in life, you get what you pay for. A quality location is not cheap. 2. Remember, a lease obligation may exceed the amount you invest in your business or borrow from the bank. Make sure you understand the document you sign and the commitment you have agreed to. 3. There is little value to leasing extra space on the front end that you might need later. Lease the minimum space you need to start your business to meet the franchisor’s requirement. A 3,000-square-foot space at $22 ($66,000) is less annual rent than a 3,300-squarefoot space at $21 ($69,300). The savings may very well pay your light bill. 4. Generally, rental rate is the most important thing to a landlord because it caps the value of their real estate with a lender or if they need to sell. While you should push for low rent, you will probably find the landlord is more willing to give you a larger tenant improvement allowance or free rent before they give you a low rental rate. 5. Push for a stair-stepped rent structure to keep your rate low and give the landlord what they want. Require pre-negotiated renewal options with your original lease. 6. If your business does not take off as you planned, don’t be afraid to ask your landlord for help. The worst thing they can say is no.

Multi-Unit Franchisee

ISSUE 1, 2019

Finance Feature

GOT FUNDING? ApplePie and BoeFly make lending better WRITTEN BY Eddy Goldberg

Once upon a time (about 10 years ago), a franchisee in search of funding had few choices: their own savings and home, friends and family, an SBA loan, or a traditional loan. This usually meant traipsing from bank to bank, lender to lender, making the case that yes, they were a good credit risk. Today, thanks to technology and some innovative thinking, life for loan seekers has gotten easier— not easy to be sure except for larger franchisees, but quicker and less painful than it used to be. We spoke with two of the pioneers leading the charge to speed and simplify franchisee funding: BoeFly (2010) and ApplePie Capital (2014). BoeFly is an online loan marketplace that functions much like a broker, connecting borrowers with lenders through its online platform of more than 5,000 funding sources. ApplePie also connects borrowers with lenders, but in addition will provide its own funding. And while BoeFly has a heavy presence in franchise funding, it’s not exclusive to franchising, whereas ApplePie is. One size clearly doesn’t fit all, and executives at both companies say they will refer franchisees to one another, depending on the circumstances. But for franchisees seeking funding to start, build or acquire new units, remodel existing units, finance equipment, or refinance or recapitalize, the more potential funding solutions the better. At ApplePie, we spoke with CEO and co-founder Denise Thomas and Chief Development Officer Ron Feldman. See their story in the following pages. In BoeFly’s case, we’ve put together a case study of four players to show how the process can work. Let’s start by introducing the four players: The Franchisee, The Franchisor, The Banker, and The Broker (sorry, there’s no baker or candlestick maker in this tale).

THE FRANCHISEE Around 2009, after a career in commercial real estate lending, Ryan Debin was looking to shift into franchising. He knew plenty about commercial real estate, where he estimates that he’d closed about $2 billion in loans. But he had a lot to learn about franchising—and the SBA. “I had four kids. I loved kids and wanted to find a concept that interested me,” says Debin. All his children had been going to My Gym Children’s Fitness, a concept he knew and liked. My Gym started in 1983 and has more than 600 locations in 34 countries. So when the opportunity came up to buy one, he did. Then he bought two more, opened a fourth, and now is up to 8 locations in the Greater Boston area. He’s planning to grow to 10 to 15 or more.

“My dilemma has been how to fund acquisitions for a business like this. I had two options, SBA or traditional,” he says. “It’s been difficult, but I’m a dealmaker, I get deals done.” Today his company, Momentum Enterprises, is the largest single franchise owner of My Gym facilities in the U.S. After about 6 years of steady growth in the franchise business Debin began looking for a second brand. When he signed a 5-unit deal with Launch Trampoline Park, the franchisor directed him to BoeFly. “Anybody who wants to be a Launch franchisee has to go thru BoeFly,” he says, which acts as a pre-screener, a kind of outsourced pre-qualifier for the brand.

THE FRANCHISOR Launch Trampoline Park, founded in 2012, is a relative newcomer “Do what you love,” he says. “When it’s good, it’s great. But if with 21 locations open and more being built, says COO Brad you’re not doing something you love and go through a downturn Artery. He calls BoeFly the brand’s preferred lending partner. or have some issue and you’re not doing something you’re pas- “We point every franchisee to them, but they also have the right sionate about, the bad becomes very bad. Find something you to use their own lender. It’s the solution we put in front of the love.” And he did. franchisees, and they’re very pleased with it,” he says. Multi-Unit Franchisee

ISSUE 1, 2019

Finance Feature

“For the first 10, we looked to relatively small local banks for SBA loans. The process was slow and painful, but SBA generally is,” says Artery. “As we grew in 2016 and 2017 a couple of banks surprised us. They said, ‘We’ve reached our limit for Launch and won’t fund any more.’ But we need 15 or 20 of these loans every year.” That’s when Launch discovered BoeFly. “They’re not a lender, but they have a panel of lenders, and they present your lending criteria and facilitate a whole host of lenders for franchisees,” he says. BoeFly’s approach was appealing, he says, because it did not lead to one potential lender, but thousands. “Each franchisee is different in terms of experience and wealth.” In the beginning, says Artery, BoeFly didn’t simply ask him for information to enter into a database or spreadsheet. “They said, ‘Let us understand your concept, how it’s different, and are other parks profitable? It was more of an explanation of our concept and how we position ourselves in the market,” he says. And that impressed him. “It was a validation point for us—them looking at us the right way.” Finding the right fit for each individual or group of would-be borrowers is made much easier through BoeFly’s online platform. “Thousands of lenders can take a look at what we’re looking for,” Artery says. “We say its costs $2 million to $2.5 million to open one of our parks.” And, as noted, BoeFly also pre-qualifies each franchisee, saving the franchisor time better spent on growing the system. Artery says BoeFly looks at four critical criteria right away before moving ahead: liquidity, net worth, credit score, and a background check. Once that’s done to everyone’s approval, BoeFly and the franchisor agree to work together to connect the loan applicant with their pool of lenders. BoeFly sets things up on their platform, and interested lenders will respond, saying they’ll issue a term sheet and would like to extend the loan, says Artery.

THE BROKER BoeFly, founded in 2010, is an online matching platform that connects borrowers with lenders. The company was a pioneer in a technology application that has become so familiar today in many fields, from mortgages and insurance to dating. “It’s a more efficient path to find financing,” says Mike Rozman, BoeFly’s co-founder and CEO. “We have more than 5,000 participating banks and specialty finance companies on our platform, but our focus is finding the right lender for our borrower.” The company has helped franchisees from more than 600 different brands. To date, BoeFly has facilitated transactions upwards of $6.6 billion (not all with franchises), with franchise brands that include Checkers, Tropical Smoothie Cafe, Jamba Juice, Meineke, Maaco, Kiddie Academy, Burger21,BrightStar Care, Papa Murphy’s, Senior Helpers, and many, many more. BoeFly says lenders benefit by being presented with only those loan requests that fit their lending profile, significantly reducing their time and cost of origination. And franchisees benefit from the ease and speed of using BoeFly’s online form to see if they qualify for funding based on the franchisor’s criteria. With Launch, says Rozman, “All franchisees go through our workflow.” Next comes an early stage term sheet issued by a lender who’s looked at the new franchisee’s credit, liquidity, net worth, and, based on the brand, will issue a term sheet. “It’s not a commitment letter, but that’s okay. They know the money is there when they need it,” says Rozman. With Debin, who’s opening one new Launch and buying another, “Our role is to help him navigate the financing path as efficiently and painlessly as possible,” says Rozman. “It’s hard to get a loan; banks want a lot of information. Our role is to capture the information from the franchisee once, and take it to one of an array of lenders we work with.”

Says Rozman, “It’s important for the franchisor to recognize As part of the process, he says, potential lenders will often that their franchisee’s process of getting financing be as smooth want to get on the phone with Launch corporate, asking the same as possible”—and match the needs and criteria of both borrower kinds of questions as BoeFly did: what is the concept, how is it and lender. Some banks do not like franchise lending for various different, etc. And again, once that relationship and a level of reasons, he says, so it saves them time too. Meanwhile he adds, trust is established, the franchisor won’t have to explain the “Ryan is growing his business, negotiating leases, and making concept again when the next franchisee applies to that lender. more efficient use of his time.” It’s all documented and available in the BoeFly platform. Rozman says the BoeFly team does a lot of explaining in the They will, of course, have to do it again with a new bank. initial encounter with the franchisee. “For many franchisees, “Patriot Bank won’t require me to describe any more, but new their only experience with finance is maybe a mortgage. Our banks will check us out,” says Artery. He expects to do about 15 most important role is education,” he says. loans this year, several with Patriot, the rest with other banks. “We have lenders with their own credit underwriting model. We As for timing, Launch waits until discovery day to introduce BoeFly to candidates. “We found that if we start sooner than that, we’re wasting time,” says Artery. When the time does come, they have BoeFly dial in for about 30 minutes to explain the process. “The perception from the franchisees is that this is going to be really painful and long,” says Artery. “Here we have a partner that makes this as painless as possible.”

Multi-Unit Franchisee

ISSUE 1, 2019

ask the bank what’s important for them from a data standpoint so they can use their own credit underwriting model. We take a fairly agnostic point of view when it comes to credit. We don’t want to be paternalistic when it comes to financing products.” The goal, says Rozman, is to understand the needs of both borrower and lender and use the platform to find the best match.

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Finance Feature

Finally, and unlike ApplePie, “We don’t make the loan,” he says. “We matched Ryan with a national SBA lender who can access the information we have securely stored.”

must first pass the franchisor’s requirements. “We appreciate that at the bank because it provides us with more highly qualified applicants,” says Keady.

THE BANKER In Debin’s case, that banker was Mike Keady, SBA loan manager at Patriot Bank in Stamford, Conn. “We found Launch through BoeFly, the broker that represents them,” says Keady. “They have dozens of bank partners and know what each bank is looking for—and trying to avoid.”

Finally, says Keady, “We found the transaction interesting and put out a proposal to Launch, which was negotiated and agreed upon.”

Keady, with 30 years in banking and finance, has been working with SBA loans for the past 2 years at Patriot, following a career in commercial lending. “When we look at an applicant, whether individual or group, we review past and current credit performance, personal financial statements, and other individual measurements,” says Keady.

“We ask what is the franchisee trying to accomplish,” says Rozman. “My advice is to think about what the implications are for any given loan product, and what future needs you may have. After 3, 4, or 5, then what?” In Debin’s case, if approval wasn’t a slam dunk, it was pretty close. “He is an entrepreneurial professional who believes in his brands, his capabilities, and with 100 percent accuracy knows he will succeed,” says Keady, who also mentioned Debin’s “unwavering confidence.” Bottom line? “We believed it would cash flow and result in a performing loan.” Before saying yes, the bank also evaluated the children’s fitness sector. “From a high-level view, we thought that the business and industry were viable. Maybe we didn’t know Launch specifically, but we knew the industry and felt confident it would draw people from a wider area and be successful with proper management.” Another plus for Debin was that, in addition to a solid portfolio of other businesses through Momentum Enterprises, he came in with a strong track record in the children’s fitness sector. “His success was in a similar industry to Launch, so we felt confident he knew how to own and operate based on his current and previous experience,” Keady says. The franchisor also has metrics they use to determine if someone is an eligible franchisee candidate well in advance of this stage. To qualify for applying on BoeFly’s platform, an applicant

Multi-Unit Franchisee

ISSUE 1, 2019

SBA: NEEDS IMPROVEMENT! Even a former banker needed help negotiating the SBA approval process. “When I get a term sheet, my background helps. But if I didn’t have the background I do I’m confident that BoeFly would have held my hand in the process. I know deal terms, but I had to be educated in the SBA guidelines and rules,” says Debin. Getting an SBA loan, he says, is “an extraordinarily exhausting process for the small-business owner. There are banks who do smaller SBA quick and easy [Express] loans, but my case is not very simple.” Through his franchises and other business interests, Debin says he has more than 30 LLCs. Neither quick nor easy. With its volumes of required paperwork and the time it takes to get approved for an SBA loan, he says the process needs to be fixed. “There has to be a better way.” Another issue, he says, concerns funding for multi-unit deals and the SBA’s lending limits. “To open a Launch costs multiple millions of dollars. Even if you get a loan for $1.5 million, by the third unit you’re tapped out at $5 million. So what do you do next?” So where do the franchisees who need $5 million to $10 million go, he asks. Enter the ApplePies and the BoeFlys of the world. Looking back on the process, “I could have done it myself, but the smartest move I made was getting onto a relationship with BoeFly,” says Debin. “BoeFly knew exactly what lenders needed to know—I knew commercial real estate.” Instead of having to assemble a team or do it himself, he had BoeFly. “They took the time to understand my whole business at Momentum.” “We ask what is the franchisee trying to accomplish,” says Rozman. “My advice is to think about what the implications are for any given loan product, and what future needs you may have. After 3, 4, or 5, then what?” Rozman also factors in what stage a franchisee is in. For example, he says, a beginner would go with an SBA lender, but by their fifth unit they could use conventional lending with no lien on their home. Before settling on Patriot Bank, Debin had spoken with four different SBA lenders, all with different requirements. He’d worked with Patriot Bank before, and was also looking to refinance his 8 My Gyms. Keady didn’t handle that, but he did connect him with someone in his office who did. “Patriot Bank has been a big help with acquisitions, startup, and refinance,” says Debin. He’s also “extraordinarily grateful” to BoeFly. “Had I known about BoeFly four years ago, I might be twice as big.” Would he use them again? “Yup, I can’t wait.” 1

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Finance Feature

LOOKING FOR FUNDING? LOOK HERE! “Whether you’re looking to open your first unit or your 50th, we can quickly help provide the financing you need, with multi-unit commitment options.” Music to a franchisee’s ears, right? That’s the promise of ApplePie Capital, a promise it’s been keeping since it began franchise lending 4 years ago. “We started with the belief that there was a need for growth-oriented lending solutions in the franchise industry and that we could improve the borrowing experience for franchisees through specialization in franchise businesses, a consultative approach, and technology,” says Denise Thomas, co-founder and CEO of ApplePie. “The only thing we do is franchise lending,” says Chief Development Officer Ron Feldman. “We want to take you from the first unit to your end place—whether that is 10, 20, or 50 units. We have a solution from $10,000 to $20 million. That’s our sweet spot.” “We are 100 percent in service to this industry, discovering what people need and crafting loan products to meet those needs,” adds Thomas. A pioneer in online lending for franchising, ApplePie was founded in 2014 and began lending in January 2015. The company provides funding to the franchisees of the brands it works with for almost any purpose: building new units, acquiring additional ones, remodeling and refreshing units, recapitalization, debt refinancing, and equipment financing. “We consider ourselves a loan product innovator,” says Thomas. Beginning with a handful of selected franchisor partners, ApplePie now has done transactions with 80-plus brands, more than 40 of which are full partners. “When we engage with a brand, we provide a set of services to them, including prequalification of a franchisee and lending solutions on a programmatic basis for their franchisees,” says Thomas. “We integrate with our partners in a deep way through our technology, providing a full digital experience from applying to closing the loan.” Unlike fellow online lending pioneer Boefly—an online marketplace that, much like a broker, connects

Multi-Unit Franchisee

ISSUE 1, 2019

WRITTEN BY Eddy Goldberg

lenders and borrowers but does not provide funding— ApplePie offers a dedicated, captive lending product, as well as a full host of SBA, conventional, and equipment loan options from its established lender network and captive $500 million in capital commitments. “Our ApplePie Core loans are optimized for franchisees looking to accelerate their growth, and our lending network provides a full host of SBA and conventional loan options,” says Thomas. “Overall, our financing options are flexible and can be optimized for whichever factor is most critical, including speed to money, shortterm cash flows, or future growth.” For existing franchisees, says Feldman, “The biggest value-add is that we can leverage the existing equity in their operations to fund their growth earlier than traditional lenders,” with the goal of finding each franchisee the best options depending on their stage of growth. “Our value is understanding their end goal.” The key to smart multi-unit expansion, he says, is to match growth plans with the right capital solutions. The general rule of thumb is to preserve as much cash as possible to maintain a rainy-day fund and the resources to open or acquire new units when opportunities arise, versus a one-unit-at-a-time mentality. “The biggest problem we see with franchisees in the early stages is not using the proper balance of equity and debt to efficiently meet their capital and operational needs,” says Feldman. “Often, a franchisee will use too much cash or too little cash to fund expansion. They borrow too much or they don’t borrow enough.” Another valuable piece of advice from Feldman: the cheapest capital is generally not the best capital. “You want the most flexible capital while you are growing. Once you’ve grown you look at the cheapest capital options.” To sum up, “We unlock value for the franchise brand by providing not only access to capital for their franchisees, but also growth planning,” says Thomas. “We are 100 percent focused on nurturing the growth of franchisees and giving them a full range of loan options through a single source, reducing the headaches and inefficiency of working separately across individual lenders.” As we said, music to a franchisee’s ears. 1

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Customer Service

Whose Job Is It? Training for front-line excellence WRITTEN BY John DiJulius

It is not the employees’ responsibility to have high service aptitude; it is the company’s job to teach it to them. The most important thing a leader needs to know is that the vast majority of the workforce has extremely low service aptitude, especially when they are entering the workforce. And sadly, a high percentage of senior-level executives continue to have low service aptitude themselves. Your employees do not know what world class is. Front-line employees’ standard of living typically does not afford them the opportunity to fly first class, stay at fivestar resorts, drive a luxury automobile, or enjoy other higher-end experiences. Yet as managers, we expect those same employees to be able to deliver world-class service to clients, guests, patients, or whomever we call our customers, who may be accustomed to these types of experiences. It doesn’t make any sense. Your employees are not your customers. Customer-facing employees in the vast majority of businesses cannot relate to their customers. They are not the same age range, income level, or professional position. Many businesses have front-line employees in their 20s dealing with clients between the ages of 35 and 50, maids who clean homes worth more than $400,000, or account executives, accountants, lawyers, consultants, and other professional service providers who deal directly with CEOs and entrepreneurs. Your employees are not looking at it from the customer’s perspective. Worldclass service organizations teach their employees to view things from the customer’s perspective. Remember, many employees have never been their own customer, have never needed the services and products their company provides, and cannot comprehend what the customer’s mindset is. Therefore, they do not relate well and find it difficult to empathize, be

Multi-Unit Franchisee

compassionate, and anticipate customer needs. Businesses need to build their customer experience from the customer’s perspective instead of from the company’s viewpoint. They must understand their customer’s circumstances, their pain, and their needs. What is it like to be their customer for a day? What are their personal commitments to their families, or their professional commitments to their company and demands from their customers?

Your employees are not your customers. Customer-facing employees in the vast majority of businesses cannot relate to their customers. They are not the same age range, income level, or professional position. You compare yourself to the rest of your industry. Whether you are a law firm, insurance agent, jewelry store, salon, or accounting firm, the comparison of your competition to you is really pointless. After your customer receives a haircut, they don’t leave your salon, go visit another

ISSUE 1, 2019

one and say, “Wow, my salon is so much better.” Your firm’s client doesn’t hang up with you and call another accounting firm. After your customers deal with you, they then interact with other businesses. They finish their errands, go to the dry cleaner, go shopping, and make a few other calls to totally different businesses. As a result they are doing one of two things: either wishing the other businesses they are dealing with were as good as yours, or vice versa. Your employees become numb. All businesses battle with going on autopilot and, from time to time, becoming numb to their customers’ situations and expectations. While consulting with a large hospital, I found out that, too often, nurses and doctors would refer to patients as “201B.” Saying something like “201B needs their medicine.” They were saying room 201, bed B, instead of the patient’s name. To dominate in the relationship economy, organizations must intentionally train their employees to avoid misconceptions about their customers. The responsibility for your organization’s employees continuously demonstrating exceptional, world-class customer service is on you. 1 John R. DiJulius III, author of The Customer Service Revolution, is president of The DiJulius Group, a customer service consulting firm that works with companies including Starbucks, Chick-fil-A, Ritz-Carlton, Nestle, PwC, Lexus, and many more. Contact him at 216-839-1430 or info@thedijuliusgroup.com.

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People

Hiring in 2019 Gen Z and hourly employment trends WRITTEN BY Fabio Rosati

With unemployment at historically low levels, 2018 has been a challenging year for companies seeking to hire and retain good workers to fill hourly jobs and shifts, and 2019 is shaping up to deliver much of the same. The expanding gig economy will deliver benefits like work flexibility and additional income to mitigate underemployment, which remains an issue for many workers, as detailed in Snag’s 2018 State of the Hourly Worker Report, while the growth in “on-demand” goods and services will lead to more warehouse, fulfillment, and delivery positions. At the heart of the rapidly evolving hourly labor market will be the workers themselves. Millennials continue to dominate today’s workforce but will soon be overtaken by Generation Zs—those born in 1995 or later who make up the largest and most diverse generation in U.S. history. Many employers are struggling with how to successfully engage with Gen Zs, who

display different behaviors and expecta- and Lowe’s are setting wage thresholds tions from previous generations. Thanks above the national standard. Employers to a lifetime of toggling between apps, Gen and workers will increasingly adopt the Zs process information faster, which makes “surge pricing” mindset of the gig econthem better multitaskers, albeit with omy, leading to higher pay in times of shorter attention spans. The vast majority high demand. (92 percent) have a digital footprint and Improving the worker experience. spend time on a multitude of platforms. When The Gap implemented a system proExposed to high-powered brands and a viding workers with a more predictable and celebrity-driven culture since birth, they consistent schedule, it saw sales increase seek authenticity in all facets of their lives by 7 percent. A major grocery chain now and greatly value their autonomy, which allows customer-facing employees to seek makes them less likely to remain in a job permission from their manager to step off they perceive as negative or unfulfilling. the floor to take an important call or text, With the best Millennial and Gen Z while adopting a “respecting time off polworkers becoming increasingly selective icy” that trains teams not to communicate about jobs, leading employers in retail, with co-workers on non-emergency work matters during their days off. Such policies restaurant, and hospitality are taking a fresh look at their recruiting strategies for are increasing job satisfaction among both hourly workers, seeking creative new ways employees and managers. of differentiating themselves in a fiercely Leveraging new technology platcompetitive marketplace. One example is forms. Businesses will redesign processes Starbucks, which recently launched new and adopt on-demand platforms and initiatives to provide its hourly workers predictive analytics to accelerate the hirwith paid sick leave, stock grants, and ing of candidates who will be a good fit. subsidized backup childcare to increase Leading-edge companies like First Watch retention and minimize no-shows. Restaurants are already dramatically WHAT’S AHEAD? streamlining the application process in order to hire workers in near–real time. At Here are some of the trends and issues we expect to have an impact on hourly work the data level, companies will begin leverand workers in 2019. aging artificial intelligence and machine learning to achieve highly personalized Continued wage pressure. Although and real-time interactions between the federal minimum wage hasn’t budged employers and workers. in a decade, some 29 states have enacted legislation to increase wages, and major Jobs and shifts. More companies will employers including Amazon, Walmart, post both jobs and shifts as technology makes this economically viable and “timeto-fill” rates drop from days to hours, and even minutes. Cava, the Mediterranean restaurant brand, is using our Snag Work to fill same-day shifts caused by callouts or surges in demand, allowing them to keep their restaurants fully staffed. Changing expectations. Businesses will train their managers to better understand the expectations of the new workforce, with Gen Zs in particular seeking tools and training that will lead to long-term career success. When employers find new ways of differentiation that go beyond wages and benefits, the companies themselves also benefit, as higher levels of worker job satisfaction pay dividends in the form of higher sales and lower turnover. And those types of bottom-line results are good news for everyone. 1 Fabio Rosati is the CEO of Snag, the largest platform for hourly work.

Multi-Unit Franchisee

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PuroClean Qdoba Mexican Eats Quaker Steak & Lube Quiznos Subs Raw Fitness The Rawls Group – Business Succession Planners Rent-A-Center, Inc. Retail Data Systems Retail Solutions Retail Strategies R.F. Technologies, Inc. RNR Tire Express & Custom Wheels Romacorp, Inc., Franchisor of Tony Roma’s and TR Fire Grill Rubicon Global Rusty Taco Salsarita’s Fresh Mexican Grill Save-A-Lot-Food Stores Scissors & Scotch Scooter’s Coffee Shoney’s Restaurants Signal Health Silvercrest Advertising Sirius Day Spa SiriusXM - Music For Business Slim Chickens Smoothie King Sonic Drive-In Steak ‘n Shake Stoner’s Pizza Joint

Stratex StretchZone Sushi Sake Sydnee’s Pet Grooming talentReef TEMSCO Solutions TextRecruit Tijuana Flats Tin Drum Asian Kitchen Tommy’s Express LLC Tropical Smoothie Café True REST Float Spa Twin Peaks Restaurants TWO MEN AND A TRUCK® uBreakiFix United Franchise Group Urban Bricks Pizza U.S. Bank VeganBurg Walk-On’s Bistreaux & Bar Wayback Burgers Web.com for Enterprise Which Wich Superior Sandwiches Wienerschnitzel Wings Over WingStop Restaurants Wintrust Franchise Finance Wireless Zone Yooz Inc. Zaxby’s Zen Ecosystems ZIPS Dry Cleaners Zipwhip

Social Media

In the Moment

Real-time tips to engage consumers WRITTEN BY Ashley Parks

Nothing beats the feeling of a real-time moment. In 1996, I watched as St. Louis Cardinals shortstop Ozzie Smith took his final regular season backflip in the infield of Busch Memorial Stadium. Nearly 20 years later, backstage at Bridgestone Arena in Nashville, I watched in awe as Chris Stapleton sang with Justin Timberlake at the 49th Annual CMA Music Awards. And, I tweeted with immense passion as Big A was finally revealed on “Pretty Little Liars.” Many of today’s biggest moments are being covered in real time (think Twitter). This gives brands the opportunity to join the conversation through engaging, creative, and most important, relevant content. Additionally, responding in real time to events and news can help a brand feel fresh, relevant, and personal. Here are a few ways brands are doing exactly that Create your brand story. In 2011, Buffalo Wild Wings aired a campaign called “Hit the Button,” which playfully implied that BWW could change the course of a game with just a tap of some buttons. Fast forward to January 2018, when BWW took credit for a missed field goal with 3 seconds left in the college football national championship game. Since that first 2011 campaign, fans are still asking whether BWW “Hit the Button” during crazy sports moments such as an unexpected overtime, an unheard-of call (or a missed one), or an unbelievable play. By owning the conversation, BWW is able to play along with fans, driving brand awareness in a natural way during the sports world’s largest and smallest moments. Mix it up. Retailers know that Black Friday weekend is a key moment in their marketing strategies. For carry-out restaurants, dates like Halloween and the Super Bowl rank high on their priority list. For Arby’s social team, though, dates like Pokémon Day (February 27) and the release of Nintendo Switch’s first game (“The

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Legend of Zelda: Breath of the Wild”) are driving the most conversation. Arby’s has an engagement-first mindset on social, allowing them to focus on reaching their audience in creative ways. With the overlap of Arby’s devotees and gamers, Arby’s has been able to connect on a deeper level, driving affinity for the brand, and getting recognition from game makers as well. Try a partnership. In today’s crowded digital landscape, it’s easy to see everyone as your competitor. You aren’t just competing against the everyday competitor, you’re battling for space against publications, children, and celebrities. A great way to reach new audiences is by partnering with influencers and other brands. Seventy percent of Millennials are influenced by the recommendations of their peers in buying decisions. By connecting with partners whose audiences are similar to your own, you can expand your network even further. Dunkin’ and Dove Hair partnered for a social giveaway featuring two items their female Millennial audience used: coffee and dry shampoo. #DoveXDunkin drove 1,141 posts on Instagram and was used as an awareness campaign for both Dunkin’s new branding and Dove’s new product. Support a cause. Not every moment is fleeting. Just ask Disney, whose Share Your Ears campaign with the Make-A-Wish Foundation was able to capitalize on a yearlong celebration of Mickey Mouse’s 90th birthday. The campaign concept is simple enough: share a photo of yourself with Mickey Mouse ears and Disney donates $1 to the Make-A-Wish Foundation. Along with celebrity support on social, the campaign

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appeared on “Mickey’s 90th Spectacular” on ABC last November. All in all, Disney donated $3 million to the foundation, making Share Your Ears one of the most successful cause marketing campaigns of the season. Be prepared. Don’t just wait for a big moment. Get your best and brightest minds ready to roll when a brand-adjacent event is happening. Keep an up-to-date calendar of conversation starters (pop culture, foodie holidays, television, sports, industry conferences), and use it when building out your content calendar. For the key dates you want to participate in, have a team ready to engage when the moment strikes. Provide them with guidelines for engagement, along with a point of contact for quick approval. With a little preparation and a lot of creativity, brands can contribute to realtime conversation in a meaningful way. Responding to events in real time can not only help drive awareness to new customers, but also build affinity with existing ones. Creating content in real time allows a brand to take advantage of what consumers are already paying attention to—and allows even the oldest brands to remain relevant and fresh. By planning ahead for events, including preparing for the unexpected, any brand can use real-time content to elevate their social media efforts and supercharge their brand status. 1 Ashley Parks is a social media strategist at Santy, a full-service marketing and advertising firm known for unexpected thinking and delivering results-oriented campaigns. Learn more at www.santy.com.

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Investment Insights

Hardwired To Fail? Why we need to “think about thinking” WRITTEN BY Carol Schleif

“After a crisis we tell ourselves we understand why it happened and maintain the illusion that the world is understandable. In fact we should accept the world as incomprehensible much of the time.” —Daniel Kahneman After many years of relative calm, volatility returned to global markets in a noticeable way last fall. Pundits rushed to put context around the volatility—an arguably futile exercise if the above quote from one of the founding fathers of behavioral finance is to be believed. None of the woes blamed for the pummeling were new: trade wars, Iraq, Iran, Syria, rising interest rates, mid-term elections, strengthening inflation, Brexit, Italian bonds, and U.S. Federal Reserve policy, to name a few. While economic fundamentals in the U.S. remain strong, there seems to be a growing unease, both about how much better things can get and how much longer this strength can be maintained. While we would hardly call the market’s performance a “crisis,” it did bring into stark relief some of the psychological ways that investors can do themselves harm over the short run. To be wise stewards of long-term assets, we must think about our thinking, often overriding our instincts during stressful market times. COGNITIVE BIAS The word “bias” has been in the news a lot lately across a broad spectrum of human endeavor. It’s frequently been accorded a negative overtone, but all of us are born with cognitive (thinking) biases. It’s how our species has continued to thrive. To understand how our biases may be affecting our long-term well-being, the key is to identify the particular biases we lean on most. To choose a more helpful course when needed, we must “think about our thinking.” Wikipedia lists 21 pages of cognitive bias with more than 185 examples of how our biology tilts our behavior. We deploy biases so frequently that we often don’t recognize them. We suspect that increased volatility

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is here to stay, so the ability to recognize— and circumvent—our inherent biases may come in handy in the months and quarters ahead. Anchoring is the tendency to pin one’s decision-making on a single (often recent) point of reference. Remember the headlines about the Dow breaching 20,000? Anchoring to market levels, individual stock or bond price levels, interest rates, etc. can shift our focus from where it needs to be: the relationship between price and economic value. Recency bias is the propensity to give recent history or events too much weight in decision-making, thereby discounting the potential effects of other events. Faulty analysis presumes history repeats itself, particularly recent history. But thorough analysis incorporates changing demographics, personal finance, and political, environmental, and economic shifts that affect both near- and long-term events. Confirmation bias involves seeking evidence that supports one’s viewpoint, whether intentionally or unintentionally. Poking holes in one’s theories and asking, “What if X didn’t happen that way?” is a vital component of thorough due diligence. Probabilistic thinking and analysis also can help broaden horizons by facilitating analysis of a wide range of potential outcomes. Investing is seldom either/or (growth vs. value, active vs. passive) as much as it’s X and Y. Dynamic, diversified portfolios contain a mix of investments to cushion from and participate in a variety of potential outcomes. Availability heuristic or cascade. Basically, the more an item is repeated, the more it becomes believed. For example, the notion that a 20 percent decline means a bear market is just an oft-repeated headline, not a hard-and-fast rule. Overconfidence effect. Having one decision or bet “pay off,” especially in a big and/ or emotion-filled way, has been shown to release powerful endorphins. Our brains are naturally drawn to such powerful chemical rewards and prompt us to seek more of the same. Loss aversion and negativity bias is the tendency to be more pained by losses than excited by gains. Humans also have a greater propensity to recall negative events, particularly when they were laced with strong emotion, and to react with undue force to future situations that evoke those memories. ISSUE 1, 2019

Herding instinct. We have survived for millennia by being part of the pack. Even today, when we are excluded from a group our brains flood our bodies with negative chemicals that come from the same sites as those for physical pain. We are hardwired to want to be part of the “in” crowd. That knowledge is why going against the investment herd, trimming when markets are up and headlines positive, can seem so terrifying. Developing a plan to regularly rebalance based on basic valuations and ranges established during quieter market times can circumvent these powerful influences. The list of cognitive biases goes on, but the bottom line is similar: as part of our species’ long-run survival, our brains are wired to seek order, consistency, and routine. None of these is prevalent in day-to-day markets, no matter how much effort we expend trying to predict outcomes. As such, we need to set up systems (regular rebalancing, valuation and probability analysis, dollar-cost averaging in and out of assets) to circumvent some of our worst tendencies. And to take the time to pause, reflect, and think about our thinking—especially when volatility is rampant. 1 Carol Schleif, CFA, is deputy chief investment officer at Abbot Downing, which provides products and services through Wells Fargo Bank and its affiliates and subsidiaries. She welcomes questions and comments at carol.schleif@abbotdowning.com.

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Finance

Rollover Funding Have you considered ROBS? WRITTEN BY Rod Bristol

If you are planning to open new units in 2019 or expand into a new brand, you might consider Rollovers as Business Startups (ROBS) funding. As the name suggests, it is often thought of as funding available only for new businesses. However, the same principles for startups can also be applied to expanding your existing operation. This could be a possibility if you left your corporate job years ago and still have an IRA or 401(k) just sitting there, not growing at a level you would like. Instead, it could be used to fund your own growth. Because of the tax benefits, many Americans have a significant portion of their savings in retirement plans. Without the proper structure, using these funds can result in significant taxes and penalties. Using the ROBS structure can avoid these penalties and defer the taxes. Typically, ROBS funding is best used in conjunction with an SBA loan. This is not borrowing against your 401(k), and therefore not subject to the $50,000 maximum, and you can use up to 100 percent of your funds. Benetrends has been a multi-unit funding resource for more than 35 years and was the pioneer of the ROBS strategy. According to CEO Dallas Kerley, “It is critical to have a strategic funding plan in place to open multiple units. If you fund the first unit the wrong way, it makes opening subsequent units more difficult or impossible.” For example, if you are funding a 3-pack, pull out enough money for the cash injection on an SBA loan for the first unit and leave the remaining balance in the retirement plan. The bank cannot collateralize the funds in the retirement plan, so those funds will be available for the subsequent units. When it comes time to fund the second unit, take just enough cash out of the retirement plan to fund the second unit, either in its entirety or in conjunction with a second SBA loan. When it comes time for the third location, you can use the remaining funds from the retirement plan.

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If the first unit is cash-flow positive, try to get an expansion loan of the first SBA loan, thus requiring a smaller cash injection than the alternative of seeking a third loan. NOT FOR EVERYONE While ROBS is an attractive option for many business owners, you should verify whether or not it fits your circumstances and business needs. Here are a few signs that ROBS might not be the ideal fit for funding your business: • You have less than $40,000 in your IRA or 401(k) account, or you need less than $40,000 to expand your business. • Your retirement account is sponsored by a current employer, and you’re not expecting to leave that employment. • Your retirement funds are tied up in a non-tax-deferred retirement account such as a Roth IRA, a non-spousal inherited IRA, or annuities with surrender charges. • You plan to grow your business with a partner who is not willing or able to invest financially in the business. 4 STEPS TO ROBS 1. Set up a C corporation. The process begins with establishing a new corporation using the proper legal structure to support the establishment and operation of the company’s qualified retirement plan. 2. Design a new qualified retirement plan. To avoid early withdrawal penalties and preserve tax-deferred status, you’ll need a new retirement plan to move your funds into. You are probably not a retirement plan expert, and setting up a compliant plan takes expertise. Working with advisors who have extensive expertise in setting up retirement plans for all types of businesses can help ensure that you derive the most value for your plan. 3. Transfer your retirement funds into the new plan. After your corporate retirement plan has been designed, you’ll need to identify an appropriate plan custodian. This custodian creates the new corporate retirement plan account according to the design and specifications you’ve developed. Your plan custodian will work with you to fill out temporary IRA documents. If you’re rolling over funds from an IRA, your plan custodian initiates the movement of ISSUE 1, 2019

those funds; if you’re rolling over funds from a 401(k), you must initiate it. 4. Use the retirement plan’s funds to launch your business. Finally, rollover contributions can be invested in the stock of the new company that sponsors the retirement plan. If you or other plan participants direct an investment of your rollover contribution in company stock, the plan then purchases stock in the new company. The company stock purchased by the plan is credited to the individual accounts of plan participants based on their investment decision, and the plan can now invest in the newly formed C corporation. This means your new corporation now has the capital to start, purchase, or recapitalize a business or franchise. ROBS financing can be complicated. However, the benefits in reduced interest payments can significantly help cash flow as you expand your business. 1 Rod Bristol is the director of business development and a presenter at Profit Soup, a financial education organization specializing in franchised companies. He can be reached at rod.bristol@profitsoup.com or at 206-427-5333.

Exit Strategies

Keep Calm Why deals are taking longer WRITTEN BY Carty Davis

Over the past several years, there has been an extension of what once were normal timelines for most industry-related transactions. These include multi-unit franchisee approval, franchisee-to-franchisee transfers, private equity/ family office investments, refranchising, and recapitalizations with both regulated and non-regulated capital providers. Let’s face it, time kills deals. Longer deal cycles exacerbate execution risk by exposing transactions to franchisor approval sentiment, changes in lending conditions, and macro or geopolitical events. Although managing through the deal process has become increasingly difficult and time-consuming, approaching it with the right focus, time, and effort up front can make it easier—and allow you to return to your real job of growing your business. Quality of financial information. If your business is in growth mode, it’s time to transition away from basic accounting systems like QuickBooks, and retain an accounting firm with the industry and multi-unit franchise expertise to upgrade and implement the appropriate systems and controls. There is no onesize-fits-all approach. Some companies outsource everything; others bring most of the needed financial functions in-house; and many, if not most, develop a hybrid approach. Interview several firms and speak with peers in your industry and area who have gone through a similar growth phase. Ensure you have financial integrity and credibility early in the process. Tighten up your finances and associated controls, because once your deal gains traction, the quality (or lack thereof ) of your books and records will greatly affect asset valuation, transaction timing, retrading, and overall scrutiny of the deal. Legal representation. When selling an asset that most likely is a substantial portion of your net worth and life’s work, hire an experienced franchise and/or M&A attorney, especially if they already have an existing client base within your brand. Depending on the type of deal, you

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can expect your attorney to be involved with the purchase and sale agreement, franchisor negotiations around territory rights and development requirements, loan documents, leases, and landlord consents. You need a true expert to guide your transaction through a process filled with time-delaying pitfalls and drama. Most likely they will know the key deal points and decision-makers at the brand level. Moreover, they will have current data on which funding sources helped clients make it to the closing table—and which ones threw up roadblocks that either caused transactions to stall or ultimately die on the vine. Lenders and investors. The lending process has been evolving over the past several years and has become increasingly complicated. Unpredictable franchisor capital demands, new growth requirements, and the inability to have consistent accretive revenue growth as costs escalate has given lenders pause. Lenders are demanding more data on a borrower’s ability to manage labor and food costs, the amounts, timing, and return on capital expenditures, marketing plans, brand initiatives, etc. If a transaction is above a size threshold for investment, expect a quality of earnings (QE) report. QE reports are now standard on most transactions involving family offices, PE firms, mezzanine or unitranche lenders, and larger senior credit facilities. QE reports take time, cost money, and almost always question some aspect of the business’s financial performance or reporting, which may leave the buyer vulnerable to deal renegotiation. Make sure your capital provider is experienced in your brand or similar concepts. Vet the lender and their outside support team (QE, legal, etc.). If your firm is not well-versed in raising capital and how to

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properly arrange the capital stack, retain a professional firm to assist. Again, experience matters. While there is significant capital available, the process simply takes longer to complete. Franchisor. Many brands are now taking a deep dive into the details of a transaction and critically reviewing financial results, capital plans, minority or new partners, and even term sheets from lenders. In addition, Tier 1 franchised brands are often inserting mandated development requirements as a condition for their consent. This requirement is becoming more widespread and increases the risk of cannibalization on existing stores achieving ROI benchmarks. A solid relationship with the franchisor and transparency are absolutely necessary for growth. Based on the overall relationship with the franchisee, franchisors will show some flexibility in timelines and requirements. The most successful franchisees are those who spend time educating the franchisor on what they are doing in their markets while seeking macro guidance from the brand. Above all, when it’s your time to be involved in a deal, stay calm. No one group or factor is responsible for the realities of today’s elongated deal times. Rather, focus on what you can control. Tighten up your finances, spend the smart money early in the process to hire the right team, and get to work. And remember above all else, keep your eye on the prize. 1 Carty Davis is a partner with C Squared Advisors, a boutique investment bank that has completed hundreds of transactions in the multi-unit franchise and restaurant space. Since 2004 he’s been an area developer for Sport Clips in North Carolina with more than 70 units. Contact him at 910-528-1931 or carty@c2advisorygroup.com.

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Franchise Market Update

Downturn Ahead? Two sets of insights for franchisees WRITTEN BY Darrell Johnson

It is increasingly clear that we are near the end of the current economic expansion. While it hasn’t been a robust period, it has been a persistently improving one—and the second-longest growth period in modern U.S. history. What comes next? We have two sets of franchise-related insights into the economic period we’re likely heading into over the next few years. First, let’s describe what the next economic downturn will look like. Typically, economic expansions reverse based either on exogenous shocks (by their nature unpredictable and therefore hard to anticipate) or on asset bubbles (more observable and predictable because they’re mostly self-inflicted). We have a few potential bubbles: 1) household debt (significantly fueled by student loans, auto loans, and credit card debt); 2) unwinding the Fed’s unprecedented $4.5 trillion balance sheet; and 3) federal deficits. After declining for a few years after the 2008 recession, household debt started climbing and now is at an all-time high. The main implication is a drag on further capacity for growth in consumer spending—about 70 percent of GDP. Unwinding the Fed’s balance sheet is triggering higher interest yields (part of the Fed’s intent) and lower stock prices (not part of the Fed’s intent). Finally, by 2020 we will have a federal deficit that exceeds $1 trillion. These latter two problems are hitting at a time when global debt is soaring, putting further upward pressure on interest rates. Buyers of that debt will be much more selective going forward. The two main consequences if the above forecast is realized are a slowing economy and a rising interest rate environment. That risks stagflation, which would be especially pernicious. At the very least, it seems reasonable to assume we will continue to experience a slowing economy and at least generally rising interest rates. We

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haven’t had a similar combination in more than 40 years, so it’s hard to predict implications with some degree of certainty. However, we have had several recessions in the past 20 years, so perhaps we can better understand the implications for franchise opportunities through that lens. If we know which sectors grew the fastest going into a downturn and which performed well coming out of a recession, perhaps we have a road map for your next franchise opportunity.

Pay greater attention to the health of individual brands than you would during economic expansion periods. During good times, a rising tide will cover up some of the underlying health issues of particular brands—weaknesses that will be exposed and exaggerated during downturns. TWO INSIGHTS FOR FRANCHISEES The first franchise-related insight we have from past recessions is associated with why certain sectors grew the most going into and during those periods. During the 2003–2006 period, we had more than 300 brands per year starting to franchise. QSR, health/fitness, sit-down restaurants, maintenance services, business-related, and child-related were the most frequent new brands by sector, in that order. On a unit expansion level, a similar pattern evolved, with the child-related, general services, real estate-related, restaurant, business-related, maintenance, and education sectors having the greatest percentage expansion, in that order. Perhaps as a reflection of the growing bubble, many of these sectors were real estate-inf luenced. However, a deeper look suggests a set of demographic shifts: sub-sector specialization in food, a rising ISSUE 1, 2019

willingness for households to spend money on children, and a rise in personal services. The second franchise-related insight we have is which sectors are positioned to best withstand a downturn. For that we can take a credit perspective. FUND scores, like FICO scores, are a relative measure of credit strength. While FICO scores are focused on individuals, FUND scores evaluate the credit dynamics for franchise systems over a lending cycle, which are typically 8 years. The highest average FUND scores are in the beauty-related, lodging, and health/fitness sectors, with the food (all categories combined) and child-related sectors rounding out the top five. WHAT’S AHEAD What do these two sets of factors suggest for the next downturn? First, pay attention to the underlying demographic trends that affect longer-term sector dynamics. Brands in maturing sectors often face reinvention on a regular basis (think McDonald’s). However, at some point reinvention doesn’t work very well for several reasons, notably demographic and generational shifts. Chasing new demographic patterns from a branding position with strong historical perceptions becomes harder over time. Further, that chase risks alienating buyers who identified with the traditional brand view, essentially attacking the brand from both ends. Second, pay greater attention to the health of individual brands than you would during economic expansion periods. During good times, a rising tide will cover up some of the underlying health issues of particular brands—weaknesses that will be exposed and exaggerated during downturns. While FUND scores are designed for lenders, some of the categories that compose the aggregate score apply to prospective franchisees as well; and the overall score has implications for both lenders and prospective franchisees. For the best-performing sector (beauty-related), projected unit success is nearly 30 percent higher than the overall average across all industries, making this sector a more attractive bet. The highest-rated brand overall is in the child-related sector, which is ranked fifth. It does pay to do your homework, especially in this phase of the economic cycle. 1 Darrell Johnson is CEO of FRANdata, an independent research company supplying information and analysis for the franchising sector since 1989. He can be reached at 703-740-4700 or djohnson@frandata.com.

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