GOOD BUSINESS is franchising right for you?
is franchising right for you? It can be a boon to your business if done right. By Suzanne Hall
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f your restaurant has salability, stability and can be cloned, there might be a franchising opportunity in your future. Franchising is not necessarily easy or inexpensive, but it does allow you to expand your brand without the hassle and expense of opening a new restaurant. Going that route not only takes time, but also money you don’t have or want to spend right now. Less risk is another good reason to franchise. Generally, franchisors are paid on gross sales, not profitability. Also, there’s less hassle. You don’t have to find a location and build it out. You don’t need to search for qualified managers and other staff. That doesn’t mean that all franchisors have to do is sit back and collect royalties. To be successful, the franchisee has to be successful, and franchisors provide the tools for that success. These include offering a workable and potentially profitable unit, creating effective operating and training manuals and workable recipes, starting a commissary or establishing a supplier list, and creating a team to provide field checks and support. overseas? or close to home?
Opposite, clockwise from top: 1) Fillet sliders at Tap House Grill, where franchisees must have a passion for the brand. 2) Some the of 450 cupcakes in the Yummy Cupcakes repertoire. 3) A HoneyBaked Ham bone-in half ham. The company hopes to add 15 to 20 new franchises in the coming year.
Getting started as a franchisor is not as simple as having someone say that he or she wants to put a restaurant like yours in Tucson or Tel Aviv. But, sometimes, it does happen that way. Tiffini Soforenko, executive chef/founder of Yummy Cupcakes based in Burbank, California, started her business with her husband and mother as business partners in 2005. Soon, they were looking to expand and possibly take the concept nationwide. “We had no investors, and couldn’t afford that kind of expansion, so we ran an ad for franchisees on the Internet,” Soforenko says. The first taker, and Yummy Cupcakes’ first franchise, was in Istanbul, Turkey. Soforenko provided training in her shop and then went to Turkey to help open the venue. Within a year, another franchisee, closer to home, was signed up. Although her mother had some franchising experience, Soforenko decided they had neither the time nor the expertise to continue on their own. So, they hired a franchise broker. Today, Yummy Cupcakes has five franchise locations—the one in Turkey, two in California, one in
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GOOD BUSINESS is franchising right for you?
Indiana and one in Michigan. Soforenko currently is helping the Indiana franchise open a satellite shop. “They’ll have one bakery and two retail outlets,” she says. Soforenko remains active in the company. She continues to create new cupcakes, and there are now some 450 in the Yummy Cupcakes repertoire. She also regularly stays in touch with and visits her domestic franchises.
help is available There are a number of firms around the country that help potential franchisors get started. One of them, iFranchise Group, with corporate headquarters in Homewood, Illinois, has worked with 98 of the nation’s top 200 franchisors. Mark Siebert, CEO, says the firm talks with 300 to 500 businesses a month (not all are restaurants), and selects only about three to work with. “Not everyone should franchise or is ready to franchise,” he says. Franchising is a strategic decision. It is not a way to solve a problem but a way to expand an existing business using someone else’s money. To determine if a business is a good franchise candidate, iFranchise counselors use a number of criteria. If a business meets those criteria, it signs on with iFranchise and is helped with each phase of the franchising process: developing a sound business plan for five years of growth; creating operating and training manuals; securing the proper legal documents and assistance, including registration to franchise, as needed; training a franchise sales staff; and developing and putting into action a marketing plan. For that marketing plan, iFranchise recommends its affiliate, TopFire Media, also located in Homewood. Matthew Jonas, president, says, “About 50% of our business is with restaurants, and in the past 18 to 22 months, we’re seeing franchise interest from more chef/owners.”
Top: Tap House Grill’s BLT. Bottom: A HoneyBaked Ham boxed lunch.
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TopFire’s job is to get the potential franchisor’s message out in a variety of ways, using techniques most chefs have little knowledge of. The first and key ingredient in the marketing plan is a recruiting website. Other marketing techniques used include search engine optimization, public relations, social media marketing, pay per click advertising, website development and services to get franchise information out to as wide an audience as possible. In addition, TopFire helps franchisors evaluate their marketing plans, identify the best sources for leads and determine a budget. That budget is often a large one, ranging from $70,000 to $100,000. Jonas notes it’s an amount that credible franchisors with feasible franchise offers often can borrow.
bring in the experts Scott Ward and Mark Zych own and operate nine Tap House Grill venues in the Chicago area. When they decided to franchise their brand, they turned to iFranchise Group, TopFire Media and Franchise Dynamics, Homewood, the group franchise sales affiliate. “I’d witnessed a poor franchising experience and wanted to do it the right way,” Ward says. So far, they’ve invested about $175,000 in the enterprise, and are working on establishing their first franchise. The first step in the process was to have iFranchise determine that they were capable of growing outside the Chicago area. They were, and Tap House Grill is now registered to franchise in four states—Illinois, Indiana, Michigan and Wisconsin. The plan is to move slowly and deliberately to sell two to three units before the end of 2015 for a 2016 opening, and to sell another four to six units after that. Ward and Zych are starting close to home, to keep the driving distance to franchisees under 500 miles. They hope to eventually go nationwide. Ward’s advice to potential restaurant franchisors is to practice due diligence. “We have a personality profile for our franchisees,”
he explains. “They have to have a passion for the industry and for our brand.” He also suggests looking close to home. For example, there is a manager in one of his company stores that he hopes will buy a franchise. Finally, he says, “Don’t just jump on the franchise fee. Make sure you’ve vetted the buyer.”
plans to expand iFranchise Group and TopFire Media do not work only with those just getting into franchising. Their clients include existing franchisors who wish to expand or improve their franchising operations. Atlanta-based The HoneyBaked Ham Co. and Cafe is one of those clients, and recently announced a plan to add 15 to 20 new franchises in the coming year. Of its existing 400 units, about half are corporate stores and half are franchises, according to Mark Demis, director of development and real estate for the family owned company founded in 1957. “Franchises allow us to get into more markets. Our biggest growth since 1998 has been in franchising,” he says, noting that the company seeks franchisees, and some find the company. A primary goal is to make sure the franchisee will be successful, and a three-part program includes in-store, online and opening training. Helping franchisees select an appropriate location is part of Demis’s job. To help ensure success, HoneyBaked Ham looks for a potential franchisee who is entrepreneurial and willing to be involved in the community. That person also needs to be willing to promote the brand. “Our biggest business is seasonal,” Demis says. “We do 70% of our business at Christmas, Thanksgiving and Easter. Franchisees need to promote throughout the year and acquaint customers with our other products, including sandwiches, soups and desserts.” As a franchisor, HoneyBaked Ham has the responsibility to protect its brand by selecting appropriate suppliers and keeping in place a team to ensure that franchisees follow its standards for consistency and customer service. If the ins and outs of franchising don’t sound too intimidating, and you are thinking of becoming a franchisor, this might be the time to do it. Restaurants that can be duplicated or cloned have been— and still are—the most popular businesses to franchise. “They represent 40% of franchises. They are the single biggest category,” says Siebert. Because pizzerias, sandwich shops, bakery/cafes and some casual restaurants are generally the best options for franchising, don’t look to chefs when seeking franchisees. Restaurant franchises come with rules about menus and recipes, service and decor. Chefs like to do their own thing, and most won’t be willing to follow your lead. There are plenty of others who will, though. Today’s millennials—and there are a lot of them—love restaurants, especially casual ones. They grew up in them. They’re educated and ambitious, and the older ones have money. They’re prime candidates to become franchisees, if you’ve got the right restaurant. Suzanne Hall has been writing about chefs, restaurants, food and wine from her home in Soddy-Daisy, Tennessee, for more than 25 years.
Is your business a candidate? To determine if a business is a good franchise candidate, counselors at iFranchise Group, Homewood, Illinois, use a number of criteria. Among the key ones are: • Credibility—determined by such things as size, years in business and consumer awareness of the brand • Differentiation—is it adequately different from the competition • Transferability of knowledge—can the system be taught to prospective franchisees in a relatively short period of time • Adaptability—can the concept be adapted to other markets • Capital—does the franchisor have the necessary funds, which can be as low $15,000 for the legal fees to establish one or two franchises, or $100,000 or more for a more ambitious franchising plan
Top: A HoneyBaked Ham neighborhood store; and a Tap House Grill venue. Left: A Yummy Cupcakes’ selection.
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