Food Franchise Magazine Summer 2015

Fast food Franchise

QSR Franchise

Coffee franchise

Sandwich franchise

Pub Franchise

Restaurant Franchise

SUMMER 2015

FoodFranchise Coffee Coffee franchising is big business and on the back of the Allegra UK Coffee Leaders’ Summit we highlight some of the latest developments in the industry

Accountancy

Franchisor Q&A

We get behind the numbers with a little help for McPhersons Chartered Accountants

We speak to the men and women at the helm of some of the UK’s largest franchise opportunities and find out more about the industry

Print edition £3.99

One to Watch

Legal

We find out what the rest of 2015 has in store for Healthy fast food chain, Update1

The franchise experts at Sherrards help us get to the bottom of franchise agreements

www.sherrards.com

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Contents summer

06 News round-up A look at some of the latest developments in the food franchise sector

16 Franchisor Q&A In this issue we speak to the men and women at the helm of some of the UK’s largest franchise opportunities and find out more about the industry

06

24 One to Watch Healthy fast food chain, Update1 are this issue’s One to Watch and we find out what the rest of 2015 has in store for them

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29 Security How safe is owning and running a food franchise – we look at the burning issues and provide some handy tips

34 Coffee Coffee franchising is big business and on the back of the Allegra UK Coffee Leaders’ Summit we highlight some of the latest developments in the industry

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38 Accountancy We get behind the numbers with a little help for McPhersons Charter Accountants

40 Finance Making a good return on investment is key and here we look at some of the ways you can be sure of hitting your targets

42 Be Inspired We talk to Esquires franchisee, Steven Prime about his life and awards

40 Market Watch

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We look at how some of the current food franchise opportunities are performing on the stock market

44 Legal The franchise experts at Sherrards help us get to the bottom of franchise agreements and point us in the right direction as to what they contain

49 Ian Dawes Guest columnist and Subway franchisee talks you through the highs and lows of owning multiple units 4 | Food Franchise Summer 2015

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Editor’s message Hello and welcome back to the Summer edition of Food Franchise Magazine.

Editor Scott Rumsey scottr@mvhmedia.co.uk Office: +44 (0) 333 003 0499

Editorial contributors Trevor Langley

Commercial Manager Lewis Wantling info@mvhmedia.co.uk Office: +44 (0) 333 003 0499

Advertising sales Sandra Bouillet sandrab@mvhmedia.co.uk Office: +44 (0) 333 003 0499

Finance Laura Williams finance@mvhmedia.co.uk Office: +44 (0) 333 003 0499

Design Simon Warbrook design@mvhmedia.co.uk

The franchise industry is strong and there have been so many shows and events to attend that you tend to lose track of time. That being said these events are vital for us to meet those working in the industry so that we can bring you the latest news, trends and opportunities.

This issue as always is packed with informative features, expert opinions and a roundup of what’s going on in this ever changing environment.

In this issue we run the second of our Q&A features and this time we meet the men and women at the helm of some of the UK’s largest franchise opportunities.

These individuals and their companies present some fantastic opportunities and have a great understanding of food franchising so it’s great to have them on board.

The One to Watch feature concentrates on Update1 a brand new health-food operator in the UK who plan to ride the wave of the healthy eating trend and expand rapidly towards the end of the year.

We also look at the security of franchising and give you some hints and tips to make sure that you understand the risks and rewards of choosing a food franchise as an investment opportunity.

Following on from a trip the UK Coffee Leader Summit we look at some of the coffee franchises and how they are performing in the industry, as well as giving you an insight into this exciting area of franchising.

As well as all this we have our regular columnists and expert advice relating to finance, accountancy and the legal side of franchising.

I hope you enjoy the read and we’ll be back in September with our Autumn issue.

Until then you can keep up to date with the latest news and trends on our website.

Happy reading.

Publisher MVH Media Ltd. Unit 9 Wilkinson Court, Clywedog Road South, Wrexham Industrial Estate, Wrexham LL13 9AE The publishers do not accept responsibility for advertisements appearing in this magazine.

The opinions expressed are not necessarily those of the editor or the publisher.

GET IN TOUCH www.foodfranchisemagazine.co.uk @franchise_food /foodfranchisemagazine1

Front cover image courtesy of Caffe Latte

Summer 2015 Food Franchise | 5

News

round-up Chopstix expanding quickly across the UK Chopstix noodle bar, the quick service Oriental fusion restaurant, launched its new site at Stratford shopping centre earlier this month taking their total number of stores in the UK & Ireland up to 45.

The noodle concept of food franchises is one of the fastest growing areas in the market and it is a testament to the Chopstix model that they have outgrown many others to become a leading brand.

Menashe Sadik, managing director at Chopstix, said: “Our location in the Stratford Centre means we are able to serve the community in a high footfall shopping centre, which gives us the opportunity to trade for longer hours.

“We pride ourselves on offering a quick and convenient dining experience for health conscious customers who want to take their food away or sit in and enjoy our tasty meals.”

The chain’s first major shopping centre branch opened at Bluewater in 2012 and has rapidly grown over the past four years, offering customers a fast-casual dining experience.

Barclaycard report boost food franchises as consumers spend more Food Franchising is in a healthy position and as is the rest of the food and drink industry according to the latest set of results from the Barclaycard Consumer spending Report.

According to the study, consumers are looking to eat out more as spending in restaurants has grown 17% in Q1 2015, with one quarter (24%) saying they plan to visit more restaurants in the next three months.

However, whilst consumers are preparing to spend more overall in restaurants, they aren’t becoming reckless in their eating habits with 36% saying they never go to fine dining restaurants, making a QSR the option of choice.

Commenting on the findings, Howard Archer of HIS Economics said: “When people feel better off, they are more prepared to go out to restaurants.

The fall in petrol prices and muted food prices will give them a bit more discretionary income.”

The data for Q1 refers to the period from December 28th, 2014 to March 28th, 2015 inclusive and compares it to the period from December 29th, 2013 to March 29th, 2014 inclusive.

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Marston’s acquire Thwaites’ in landmark deal Pub franchise, Marston’s PLC has announced expansion with the news that it has acquired the trading operations of Thwaites’ beer division in a deal worth £25.1 million.

The acquisition, in agreement with Daniel Thwaites plc, includes the Wainwright and Lancaster Bomber ales brands.

It is thought that these premium products joining the brand will further aid the cause of Marston’s who are continuing with their nationwide growth.

Marston’s has been brewing Thwaites’ beers since early 2014 and the deal is said to be good for all parties with both sets of operators set to gain.

As part of this acquisition, Marston’s have entered into a longterm,exclusive agreement to supply all beer, wine, spirits and minerals to Thwaites’ pub estate, a good result in the current marketplace.

This acquisition is consistent with Marston’s brewing strategy to focus on popular premium ales with local and regional appeal, and provides an opportunity to capitalise on the developing free trade market and wider consumer interest in the beer category.

Ralph Findlay, chief executive officer of Marston’s, said: “I am delighted to welcome our new colleagues to Marston’s. We are acquiring a very high quality business with good people and brands, and with growth potential.

“The acquisition is consistent with our beer business strategy to focus on local provenance and premium brands, and provides opportunity to capitalise on the developing free trade market and increasing consumer interest in the beer category.”

It has been reported that the deal will be earnings-enhancing for Marston’s in the first full year of ownership, with an estimated profit before taxation of around £1.5 million

Papa John’s franchisee expands thanks to new incentive A serial franchisee has opened a second Papa John’s branch in Swansea just six months after opening his first outlet for the leading pizza chain.

Umar Malik, who initially intended upon opening five stores in two years, now believes that he will achieve his expansion plans within 12 months.

Mr Malik is so confident in his plans that he has already employed 18 new staff members to cater to demand and who he can train up ready to cope with the expansion.

The pizza chain recently launched its new 2015 incentive scheme in order to facilitate new franchise openings, a scheme which has seen plenty of positive responses.

The concept allows a number of benefits in in different regions, such as discounted royalty fees, free equipment and marketing spend.

These factor will allow potential franchisees based in the Midlands, Scotland, Wales, the North East and North West to grow quickly and successfully.

Malik commented that whilst a successful market launch played a part in his estimated growth, the Papa John’s incentive scheme was also a huge benefit to his quick expansion: “The incentive scheme currently run by Papa John’s to help franchisees set up has been a great help. We received deals on equipment and franchise fees, which frees-up a little working capital to spend on other things like marketing.”

Papa John’s, is now operating in 36 international markets and currently has over 280 franchises in the UK.

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News

round-up Chipotle make a move in London Chipotle Mexican Grill, one of the most exiting new brands to the UK market is set to open its seventh restaurant in London.

The new restaurant will also be the first in the Square Mile, an area with many overseas visitors who know the brand well. The opening is expected in late June 2015 and will be a welcome addition to the area.

Chipotle, which was established in the US, opened its first restaurant outside North America, at Charing Cross Road, back in 2010, a move that has proved highly sucessful.

Jacob Sumner, UK managing director for Chipotle, said: “We are delighted to continue our growth in London. Our customers are responding very positively to Chipotle, and as we continue to develop our teams and provide an exceptional experience, we will look to grow sustainably and sensibly across London and into the UK.” Chipotle, which was founded by Steve Ells with a focus on burritos, tacos and salads, currently operates 1,800 restaurants in the USA. It is thought that the seven restaurants in London are just the beginning in this ambitious period of growth and we could see many more in the coming months.

Miliband to limit fast food outlets Labour leader, Ed Miliband has warned of the dangers of unhealthy fast foods and has stated that he has plans to cut the number of fast food outlets if given the opportunity.

Speaking to reporters, Miliband hinted that he and his wife Justine were conscience about the food their children ate and said: “We aim to help parents out by placing limits on the amount of sugar, fat and salt that is in food.

“We will also give local councils new powers to limit the number of fast food outlets.”

His quotes come fresh on the back of research by academics at the University of Cambridge,which found that the number of takeaway restaurants has risen by 45 per cent in the last 18 years, from 2.6 outlets per 10,000 people to 3.8.

The results also found that most of the openings were in the poorest parts of the country, prompting fears that easy access to fast food is contributing to high obesity rates.

Dr Pablo Monsivais, of Cambridge’s

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Centre for Diet and Activity Research (CEDAR), said: “The growing concentration of takeaway outlets in poorer areas might be reinforcing inequalities in diet and obesity.

“Our findings suggest that it might be time for local authorities to think hard about restrictions on the number and location of outlets in a given area, particularly deprived areas.”

A spokesman for the National Obesity Forum said that fast food takeaways would “continue to proliferate” until councils were empowered to stand up to big chain franchises, which he said sometimes threatened them with legal action if they threw out planning applications.

Fried chicken shops, fish and chip shops, pizza and kebab shops were all included in the survey, as were Indian and Chinese takeaways.

Pita Pit One of the UK’s, most interesting food concepts, the pitta bread sandwich chain, Pita Pit, has opened on the site of the former Pret A Manger in Croydon town centre.

Pita Pit, which has branches in a number of locations in Manchester and London, opened for business on Monday April 20th adding to the 500 branches that the chain operates across the world.

The global trend of healthy eating and consumers opting to change the way that they eat means the chain has done increasingly will over the last few years, with crowds flocking for the filled pittas.

Taking over the unit from another food-to-go unit is common practice and after selling the unit instead of renewing the lease, a Pret spokeswoman said: “We’re currently looking for great alternative spaces locally and are continuing to trade through our other stores as normal.”

Food franchisees listed for EWIF awards The NatWest EWIF Awards 2015 shortlist has been revealed and there are several contenders from the world of food in this years nominations.

The awards which celebrates Elite Women In Franchising are some of the most eagerly anticipated of the year and women from across the industry gather at the ceremony in London to reflect on a memorable year.

Sally Anne Butters, National Co-chair of EWIF said . “We’d like to offer a huge congratulations to all the finalists.

“The judges had a tough decision to make this year especially with a record number of entries! We’re looking forward to seeing all our finalists at the awards ceremony and celebrating the hard work and effort that they have put into both their businesses and encouraging women into franchising over the last year.”

The finalists who are competing on behalf of food franchises are: • New Woman Franchisee of the Year 2015 Jane Blackwell – McDonald’s • Woman Franchise Employee of the Year 2015 Jay Rosindale – Cafe2U • Woman Franchisee of the Year 2015 Kate Walker – McDonald’s These three individuals will be joined by women from other types of franchise and The winners of each category will be announced at our awards ceremony on Tuesday 12th May at RBS/NatWest Building.

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News

round-up Domino’s Share price surges Shares of Domino’s Pizza have shot to an all-time high in the last few weeks after the company reported better-than-expected earnings.

The company posted adjusted earnings per share of $0.81, beating the estimate of $0.797, according to market analysts Bloomberg.

Revenues came in at $502 million, higher than the $487million investors had forecast.

These results are huge positives for both the company and the investors and helps to cement the franchise as one of the leading pizza companies operating in the UK. In the earnings release, CEO of Domino’s Pizza, Patrick Doyle said: “We had an outstanding start to 2015. Strong global sales, store growth and technology advancements all demonstrated the fundamental strength of the Domino’s brand.”

The stock surged as high as $109.76 per share and is up about 15% year-to-date, and about 44% over the past 12 months.

Reports from the company also revealed that the domestic same store sales climbed 14.5% in the first quarter of the year compared to the previous period in 2014.

The company has also performed well internationally with same store sales rising 7.8%, excluding the foreign currency impact.”

Papa John’s launch Payshare system to help us split the bill Papa John’s the award winning pizza franchise have recently embraced technology and have introduced a digital solution that lets customers split their pizza bill on any mobile or online order.

Bob Kraut, Papa John’s chief marketing officer, said they expect their PayShare scheme to change the mindset of customers who would look beyond the value of the full order and instead would look just at what they would pay.

This concept is believed to give the customers the mindset of spending what they would at a burger franchise for a full meal as pizza is often the priciest of all food-to-go options.

PayShare, which is powered by Venmo, also allows groups to post its order on social media channels to let its community know what it ordered.

This option is something that is becoming increasingly popular and work for the brand as a free revenue stream.

Talking about the concept, Papa John, founder, president and CEO of Papa John’s said:”In today’s ‘sharing economy,’ consumers split fares for car services and share their homes on holiday rental sites, so why not share the pizza bill too?”

The pizza chain has given the industry many digital ‘firsts’ including the first commercial pizza chain to allow system wide online ordering. They were also the first pizza brand to account for 50 percent of all sales through digital and mobile channels.

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Wrap it Up! Heads North with ambitious growth plans One of the leading food-to-go chains Wrap It Up! have announced a string of ambitious growth plans that will not only see the brand leave London for the first time but that they will also alter their menus to cater to customers’ demands for more natural and nutritious foods.

Wrap It Up! who have thrived since an appearance on hit TV show Dragon’s Den have announced that they will be leaving the capital to open a new outlet in Manchester during May. Speaking about the venture, Tayub Mushtaq, Wrap It Up! Managing Director, said: “Manchester has the right demographics for our business – a sizeable professional working population, students, and with our city centre location, plenty of passing trade.

We have a great marketing team and we’ve already identified a core customer base with which to target. We hope that when the people of Deansgate taste our food and look at the variety on the menu that they will be coming back regularly.”

The new outlet will take the total number of units up to 12 as the company already has 11 outlets across London.

The launch is seen as step one for the company who specialise in wraps filled with food from around the globe and they have active aspirations to open 21 new outlets elsewhere in the UK over the next three years.

Wrap It Up! is part of a new wave of natural food concepts successfully responding to a shift in UK consumer tastes and they saw a 53% sales increase during the last financial year.

Being on trend and adapting to the ever changing food landscape

Tayub added “Customers are increasingly knowledgeable about the links between food and health. I am from up North and there’s this perception that all we eat is deep fried food. Those days are long gone!

“The company’s menus are driven in part by customer suggestions and emerging tastes and we find that they respond well to the transparency about the nutritional value of the food and the sources of ingredients.

“We’re confident that our combination of quality food, good variety and regular changes to the menu, which traditional fast food restaurants have historically found difficult to maintain, will be a hit with the people of Manchester.”

The company are currently running a crowdcube campaign to raise funds for a new central development unit that will cater for the stores.

Harry Ramsden’s ‘return home’ with Yorkshire store Harry Ramsden’s, one of the most famous names in the world of fish and chips have announced that, at last, the brand has returned home.

The franchised model has seen much Success over the last few years and by opening their doors in Wrose Road, Shipley on 2 April 2015 they ended a long absence from the county of Yorkshire.

The opening of the new outlet is the result of the partnership between Vikesh and Dimple Patel of JVP Ventures and the senior management team at Harry Ramsden’s. The new owners were joined by The Lord Mayor of Bradford, Cllr Mike Gibbons as well as Harry Ramsden’s Director, Frank Romano at the official opening and so far trading has been good.

Speaking about the opening, Joe Teixeira, CEO of Harry Ramsden’s said: “With this opening, we are pleased to fulfil a long held ambition to bring Harry’s home to Yorkshire.

“We are also delighted to unveil the new contemporary look and feel which has played its part in allowing the brand to reclaim its rightful place as one of the nation’s favourites, as was confirmed recently in an independent industry survey of 5000 UK consumers.

“Indeed, it also remains a fact that fish and chips is still one of the UK’s favourite takeaway meals, selling over 300 million portions annually and this gives us great confidence moving forward, as we seek to increase the brand’s presence both within the UK and internationally.”

Mr Gibbons added: “I’m delighted that Harry Ramsden’s has decided to come back to Yorkshire and especially that they have chosen to start this welcome return in the Bradford district.”

Since the opening it has been confirmed that this store is the first of many to come and that the new store design as well as that of the website will be the beginning of a prosperous new financial year.

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News

round-up Wrapchic boosted by growing market The food franchise market is currently riding on a wave of success and much of this growth is due to the rise in popularity of burrito outlets.

Chains in the Mexican style food are now the fastest growing type of eatery on the high street and there have been some noticeable success stories such as that of Wrapchic the Indian-style burrito chain..

In the last year alone, the number of Mexican inspired food units have risen by 71%, growth which has outstripped the upmarket burger phenomenon.

Birmingham-based Indian burrito chain Wrapchic, which combines influences from two of Brit’s best-loved ethnic foods, is the UK’s fastest growing restaurant chain in percentage terms, growing 900% from one to 10 outlets in the last three years according to research from Horizons.

Over the last five years burrito chains have opened an average 57% more outlets per year compared to a 16% annual rise in burger joints over the same period according to a report by property advisory firm CBRE. Speaking about the findings, and whether this type of food franchise would have an effect on the rest of the industry in years to come, Seb Howard at CBRE said: “There is still very much a place for the traditional fast-food outlets and the number of branches is still growing but many are now being influenced by the niche upmarket players and are upping their game in terms of quality and the variety they offer.

“It’s a threat but in practice there’s a question whether its grabbing business from more established operators or from independents.”

The results found that just over a third of Brits have now visited a Mexican or TexMex, making it the fourth most popular ethnic food, behind Indian, Chinese and Thai takeaways.

SOHO Coffee Company top ethical list UK Coffee franchises have performed well in an annual ethical food report scoring highly in all areas.

Top of the rankings were the SOHO Coffee company and Esquires, with SOHO the only coffee chain whose coffee, tea and hot chocolate was all Fairtrade.

Celebrating the achievement a spokesperson for SOHO coffee

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said: “We’re proud that not only is our coffee both Fairtrade and organic, but our environmental, supply chain and workers’ rights policies have been acknowledged as the best in the sector.

“Since we began, our coffee has always been made with 100% organic and fairly traded Arabica beans, traditionally drum-roasted in The Forest of Dean.

“As we grow, we remain a people-focused company, with a strong ethical commitment to our staff, our franchise partners and our supply chain; and we strive to continually improve upon our environmental impact.”

The last 15 years have seen a boom in the UK’s coffee shop market, with growth of more than 10% in 2014 alone. The main beneficiaries have been the big brands such as Costa, Starbucks and Caffè Nero, which together now own more than 3,000 shops.

Tim Hunt, co-editor of Ethical Consumer, who conducted the study said: “Consumers could go to one of our Best Buy chains – SOHO Coffee Company or Esquires Coffee Houses. Both of these appear to pay their taxes, sell Fairtrade coffee and have not been involved in any major scandals, plus SOHO use organic milk,”

FFS Brands to launch new franchise opportunity FFS Brands, who operate the global Southern Fried Chicken franchise, have announced a new style Quick Service Restaurant concept for both the UK and international market.

AJ’s Piri Piri, a concept that was first conceived 15 years ago is now ready to go to market having been put on hold whilst Southern Fried Chicken went through an expansion. This exciting opportunity is now ready to launch and will be a welcome addition to the growing food franchise industry.

Earlier this year, AJ’s Piri Piri underwent a rebrand which resulted in new contemporary graphics to match the fresh menu.

Today, a completely different style of franchise model is now available to independent takeaway owners and new site owners looking for a low cost investment and with the support of a franchise team boasting over 40 years’ experience, serving a tasty food has become an appetising business option.

With over 90% of the enquiries that FFS Brands receive coming from fast food operators looking for a new look but without the high capital investment that usually comes with a franchise brand, the executive team decided to offer owners a new way to join and benefit from systems that have worked for hundreds of franchisees all over the globe.

The new offering comes with the option to use existing equipment that might be in the unit to complement the core equipment that is really needed to deliver the quality food AJ’s offer their customers. With fixed ongoing franchise fees instead of percentage royalties, franchisees will not be penalised by their success and by introducing a low initial fee of £5,000 for training and the rights to a territory, this really is a tasty option.

Over the last two years the FFS group have strengthened their management team and invested heavily in increasing the franchise support team. This was all in readiness for the next phase of development for Southern Fried Chicken by securing Master

Franchise partners while preparing AJ’s for the UK market.

The initiative is headed up by Chris Gibson, President of the FFS Brands Group and a franchise veteran with nearly 20 years’ experience in in the US and UK markets.

Talking about AJ’s Piri Piri as a standalone franchise opportunity, Gibson said: “We know that the taste works because we already serve a mini menu in our Southern Fried Chicken restaurants which has contributed to a 20% increase in sales for many of them.

“With a dedicated brand targeted at traditional takeaway locations we are confident that the future will see an explosion of AJ’s sites in the UK.”

Jasper’s owners handed new product ranges.

Jasper’s Franchise Catering Directors, Nathan Siekierski and Paul McMahon have been working hard behind the scenes for more than a year to launch their revolutionary new catering concepts to sit alongside the well loved Jasper’s Buffet Catering range.

As of this week, the concepts have been launched and are already being enjoyed by thousands of existing and new customers.

The concepts have never been seen before in the food franchise industry, pushing Jasper’s to a whole new level above the competition. After a network meeting in January, the new range was unveiled to Jasper’s franchisees for the first time, to which one franchise owner responded: “If I were a competitor of Jasper’s and saw that, I would be terrified!”

The initial response from customers who have seen the future of catering has been genuine awe and excitement. The result is a whole franchise network buzzing with excitement at the real opportunity for limitless business growth.

Nathan Siekierski stated: “We have future proofed the business. Jasper’s franchise owners are being handed the ULTIMATE new food franchise model. This is what being a franchise network is all about – no independent could ever get near what we have achieved together. The future of catering is firmly in the hands of Jasper’s” Alongside the well known Jasper’s Buffet Catering range - which already includes more choice of breads and finger foods than that of any caterer - customers can now choose from the new Bamboo, Tapas and Picnic food ranges. These offer contemporary bowl food to share; hot and cold tapas served in traditional cazuelas; and buffet catering on the go packaged in attractive windowed Picnic boxes. As the ultimate catering solution, Jasper’s also provides boxed fruit and snack deliveries.

Summer 2015 Food Franchise | 13

INTERNATIONAL industry news

McDonalds to close 700 stores after poor results One of the most recognisable brands in food franchising, McDonald’s are to close 350 underperforming restaurants in the United States, Japan, and China, it has been revealed.

The news will be a bitter blow to the burger chain who have seen profits drop over the last few quarters after increased pressure from market rivals.

The number of stores reported, did not include an additional 350 other locations that are also targeted for closure this year, according to The Associated Press.

In the first financial quarter, the chain saw a 2.6 percent drop in domestic sales, while sales for Asia, the Middle East, and Africa saw an even more drastic drop of 8.3 percent.

The company, which has endured losses in customer traffic and sales all over the world, is reportedly planning to unveil a turnaround plan on May 4 and McDonald’s British born, CEO Steve Easterbrook has acknowledged the challenges in a statement saying: “We need to better address today’s consumer needs, expectations, and the competitive marketplace.”

McDonald’s started falling into a steep decline after customers began seeking healthier alternatives, and they reported 11% decrease in revenue and 30% drop in profit in the first quarter of this year.

Dunkin’ Donuts announce huge franchise agreement Dunkin’ Donuts one of the world’s leading coffee and baked goods chains, have recently announced that the group has signed a franchise agreement with SSP Group.

The SSP Group which is a leading operator of food and beverage brands in travel locations worldwide are seen as the ideal partners for the food franchise and initial plans for an international launch are in full swing.

The initial stage of the deal is to begin developing Dunkin’ Donuts restaurants in train stations across Denmark on an exclusive basis.

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The franchise agreement calls for the development of at least five Dunkin’ Donuts restaurants in train stations throughout the country over the next five years, with the first location planned to open at Copenhagen Central Station.

According to Paul Twohig, President, Dunkin’ Donuts U.S. and Canada, and Dunkin’ Donuts & Baskin-Robbins Europe and Latin America, the deal should be a success. He said:”Denmark consistently ranks among the top countries worldwide in terms of coffee consumption, so we are very excited to announce our entry into the country with Dunkin’ Donuts.

“SSP brings an incredible depth of expertise in operating restaurants at transit stations around the world, so we feel they will bring strong experience as we begin developing Dunkin’ Donuts in key train stations across Denmark.”

To celebrate the store opening, Dunkin’ Donuts and SSP will be rewarding the first 100 guests in line on opening day with free donuts for one year. The restaurant will feature Dunkin’ Donuts’ wide range of hot and iced coffees, lattes, espressos, cappuccinos, teas, Coolatta® frozen drinks, bagels, muffins, croissants, donuts and sandwiches, all served fast and at a great value.

Dunkin’ Donuts currently has more than 11,300 restaurants in 36 countries around the world, including 170 locations across Europe.

business profile

Investment in Papa John’s Pays Off Ahmed Eldessouki runs eight Papa John’s in the South East. From Bath to Burgess Hill to Brighton and a few in-between, Ahmed built his franchise portfolio of stores up from scratch and his story is an inspiration for any ambitious franchisee It was a chance recommendation from a friend that first led to Ahmed getting a job in the kitchens at his local Papa John’s store in Reigate. He says: “I always knew I wanted to run my own business but it was just a twist of fate that brought me into the food industry with that first job!

“I started in the kitchens, then became a driver. I made my way up to supervisor and then manager. I also spent some time at Papa John’s corporate before I got the opportunity to invest in my first franchised store. It is hard to imagine where I’d be today if it hadn’t been for my friend suggesting that very first role in food preparation!

“I remember my first day as a franchisee was Boxing Day in 2007!

Initially I bought the Maidenhead franchised store and built up the business and sold it on after a couple of years. This gave me the seed capital to start building my franchise portfolio. With some funding from the bank, support from Papa John’s, plus the Company’s special franchisee incentive offers, I now employ more than 100 staff across eight stores. I also have plans to open a further 12 outlets along the South Coast and in South London within the next five years.

“Buying into Papa John’s was a big investment but it has paid off!” continues Ahmed. “I had completed much of my training ‘on the job’ however, Papa John’s helped me train my staff in-store as well as providing head office courses and an online learning system for my employees.

“However, the investment in the franchise covers far more than just training. It offers the chance to run and grow a very successful business. Of course, there have been tough times, however Papa John’s staff have always been supportive and provided assurance that the Company’s tried and tested formula will work and it does!

“The greatest challenge is finding the right staff. If you just own one unit you do everything yourself. However, with multi-units you need to be able to delegate confidently and so a great team is essential.

Quite simply I couldn’t do it without them!

“I try to choose people who are ‘hungry for success’. It’s ok if staff are efficient and on-time but I need them to want to make their mark. I try to employ a manager who wants to become an area manager or

kitchen staff who want to become drivers and then give them the opportunities to succeed. If they want to grow they put the effort in.

“One key member of the team is my wife Kinga. When we started out I ran one store and she ran another. These days we have more of a managerial role. I spend most of my time visiting my various stores, looking at the numbers and reviewing the wider picture.

“Although the quality of the product speaks for itself - our Better Ingredients, Better Pizza concept is always popular - planning and marketing is also important,” continues Ahmed. “The recent corporate TV advertising has really helped improve sales, which is an exciting development. However, we also run our own offers to drive business too.

“The highlight for me so far is achieving record sales at the end of last year in one of our stores. We planned and executed a great, focused marketing campaign and recorded the highest ever sales in the UK for one week!”

Anthony Round, business development manager, Papa John’s comments: “We encourage applications from potential multioperation franchisees like Ahmed, keen to become part of Papa John’s success story. The combination of our popular pizza, excellent customer service, rapid delivery times, strong brand, comprehensive staff training plus hard hitting marketing support and the franchise serves-up a fantastic offer for those looking for a quality investment opportunity.”

Papa John’s is one of the largest pizza companies in the world. As a franchise, the Company supplies all the assistance needed to get your successful Papa John’s up and running including help with location selection and shop fit-out.

For further information please visit: www.papajohns.co.uk/franchise call: 0844 567 0937 or e-mail: enquiries@papajohns.co.uk FF

Summer 2015 Food Franchise | 15

industry voices

industry

voices Food franchising is big business and as the market grows the competition between franchisors grows too. Each wants to seek new investment and win business for their brand, knowing that the more units they have the more profitable the business can become.

The options in the UK market are astounding with over 200 possible food franchises with which to invest in. As always with food franchise magazine we look to bring you some of the most important opinions on this market and as such we bring you the second of our Q&A features.

In this issue we talk to some of the senior figures from franchising and hear about the market, their business opportunities and what the rest of 2015 will bring.

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We spoke to representatives from both Hotcha and Steak and Shake as well as: Nathan Siekierski – Jaspers Catering Anthony Round – Papa John’s Mahesh Raikar – Wrapchic Tom Acland – Café 2 U Frank Romano – Harry Ramsden’s

industry voices

Give a brief overview of your business, including where you see your business in the franchise market.

Jaspers: Jaspers is ‘THE’ food franchise; if you like food and the idea of building a business that allows you to create and provide solutions for people and businesses that need catering for events, meetings or celebrations, then Jasper’s is the franchise for you!

We operate in a very exciting market that is extremely resilient, but actually under the radar a bit unless you are in it. We are not a retail high street franchise with all the huge expenses that come with that and we don’t cross our fingers and rely on passing trade.

Papa John’s: John Schnatter, founder of Papa John’s has a story that is an inspiration to any franchisee! At high school, he worked as a dishwasher, later selling his prized car to fund used restaurant equipment to make and sell his own pizza in a converted broom closet in his father’s tavern. Papa John’s was founded in the USA in 1984. Today, there are now more than 280 stores across the UK and 4,600 stores in 36 international markets and territories.

Harry Ramsden’s: Harry Ramsden’s is the UK’s longest established restaurant chain, serving generations of families since 1928. Harry’s has been, and remains the brand most closely associated nationally and internationally, with fish and chips

which, with sales in excess of 350 million portions each year, is one of the country’s favourite takeaway meals!

Within the franchise arena, Harry’s is a relative newcomer, with the franchising model launched less than two years ago. However with its internationally renound brand name, reputation for service and quality as well as great value and product range, it is already making serious inroads within the franchising sector.

Steak ‘n Shake: Steak ‘n Shake is a classic American brand offering premium steak burgers and milkshakes. The hand-cut fries are thin, crisp, never frozen and made to order from only the freshest potatoes, and now, all this and our award-winning, hand-dipped milkshakes, is headed to the UK as part of our international expansion.

Cafe2U: Cafe2U is the UK’s largest mobile coffee franchise, selling barista made coffee, sweet treats and snacks to people in non-traditional locations i.e. business parks, industrial estates, events etc through our network of 60+ franchise partners.

Hotcha: Hotcha is on track to be the UK’s first national Chinese Takeaway franchise brand. We really wanted to give people a more modern, trendy experience with bright sleek interiors and a fresh twist to the classic dishes that everyone loves so much.

We are talking to highly experienced multi-unit developers who completely understand the potential, so I think we can confidently say 2015 is going to be a big year for Hotcha.

Summer 2015 Food Franchise | 17

industry voices

What are your plans for the remainder of 2015 and beyond?

Jaspers: We have just released three additional concepts and a new ordering platform which is very exciting, so firstly we are focusing on customers enjoying our new and exciting products. Alongside this, we are trying to find suitable people who are really passionate about success in food to help service the thousands of prospects who want to order Jasper’s but can’t because we aren’t open in that area…YET!

has resulted in the opening of almost 20 new outlets in locations all across the UK which has significantly increased our visibility and accessibility to its customer base. Internationally, the first Harry’s to open overseas will take place in Doha.

Steak ‘n Shake: Steak ‘n Shake are currently advertising for the UK market but we have no units in the UK as yet. We have over 530 restaurants and more than 20,000 employees in the USA, where Steak ‘n Shake is already a massive success; we fully intend to replicate this success in the UK and on the international stage.

Papa John’s: Papa John’s is expanding! We are looking for entrepreneurial, business-minded franchisees to open multi-unit sites across the UK. Papa John’s is offering franchisees discounted royalty fees, contribution towards marketing spend plus free equipment for new stores opening in the enterprise development zones of the Midlands, Wales, The North West, North East and Scotland in 2015.

Cafe2U: We plan to continue to serve great coffee, to delight our customers and to expand our network towards 90 outlets.

Harry Ramsden’s: A number of franchise agreements are already in place including Scotland, Yorkshire and South West Sussex and within the coming months, we anticipate further openings in each of these areas. Additionally, our partnership with Welcome Break

Hotcha: We haven’t put a number on the number of units we want this year because we are only interested in partnering with the right people, but it’s entirely likely we will have doubled in size by the end of the year.

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Wrapchic: We currently have 8 franchisees actively looking for properties in the UK as well as a franchise deal going ahead in Dubai. For 2015 we are looking to open 10 new outlets in the UK and explore more options for both home and globally.

industry voices

Is there a number of openings you plan to achieve?

Jaspers: We want to increase the network by 10 units this year, split between brand new start-ups and existing operators coming into the brand.

Papa John’s: From our perspective the pizza industry is expanding. We are experiencing unprecedented growth through new store openings and our product is ever growing in popularity.

Harry Ramsden’s: With the agreements which are already in place, over 100 new outlets are scheduled however, we aim to increase our presence further and it is our objective to achieve a 10% share of the fish and chip sector within the next 5 years.

Cafe2U: We would like to ensure that we have enough outlets to satisfy the demand for Cafe2U in nontraditional locations across the United Kingdom.

Wrapchic: Our vision does say “On the way to becoming the most loved burrito company in the world”. We are looking for 10 units in the UK in 2015 and want to double that number the year after. We are actively looking to expand abroad as well as locally. We want to keep expanding as long as there is a place in the market for us.

Hotcha: We are only talking to potential franchisees who can commit to opening at least 5-10 stores across their territories, so growth is likely to be fast, but we will make sure it’s done right with the right people.

What type of person/investor are you ideally looking to work with?

Steak ‘n Shake: We are actively seeking ambitious people to partner with the brand and help to develop the UK and European markets.

Jaspers: Confident, growth focused people with the right attitude.

Potential partners will need to be as passionate about our mission as we are: “To constantly serve our patrons the highest quality burgers and shakes along with extending them great service at the lowest possible prices.”

Papa John’s: To become a successful Papa John’s franchisee you need to be motivated, enthusiastic, hard-working and want to be part of a growing team. You’ll have to be dedicated and passionate enough to adapt to a proven way of working. And you’ll need the ability to roll your sleeves up and get stuck in, which means everything from making pizza through to managing staff. We are ideally looking for franchisees keen to expand and open multi-unit franchised stores.

Harry Ramsden’s: We prefer to deal with individuals, partnerships, couples and businesses of sound character who are customer focused, with experience in multi-unit operations. We would prefer that they already have an understanding and knowledge of the territory they are interested in, and have the liquidity to fund multiunit launches.

Cafe2U: At Cafe2U our recruitment team are looking for hardworking, motivated men and women with an entrepreneurial spirit; someone who wants to change their life-work balance for the better.

If they have the energy and the commitment, we have the product and the experience.

Wrapchic: We are looking for someone who is hands on and enjoys what they do and what they are selling. Experience in the industry is important but skill can be taught, passion on the other hand cannot.

Hotcha: They need to understand how to operate multiple units, oversee a large number of staff and have a huge amount of drive and ambition. Food experience isn’t essential because our training is so strong, but you will need to be able to demonstrate a good head for business.

Summer 2015 Food Franchise | 19

industry voices

What makes your brand different and why should a potential franchisee choose your brand?

Jaspers: You should choose our brand because we understand what brand means – it isn’t a logo, as a logo isn’t going to make you any money! A brand is a system that can differentiate itself in a market, things that make it distinctive – predominately our technology is the structure of our brand that allows customers to get the control over ordering food and the reliability to ensure time after time we nail it – there is no competition that thinks or does what we do.

Papa John’s: A top quality product is essential when running any successful business. The Papa John’s concept of only using the highest quality ingredients and 100% fresh dough to create a top quality pizza with a better natural flavour has proved popular around the world. Combine this with excellent customer service, rapid delivery times and a great brand and Papa John’s is an exciting place to be right now.

Harry Ramsden’s: We are one of the most iconic brands this country has ever produced, recognised and respected nationally and internationally which is an enormous and immediate plus We are the largest fish and chip operator in the UK – and offer the only fish and chip franchise in this country.

Unlike many others franchises, the most significant difference with Harry’s is that, because our model is relatively new, we have

20 | Food Franchise Summer 2015

territories available as our market has yet to reach saturation point Steak ‘n Shake: Steak ‘n Shake bridges the gap between fast cheap burger outlets and the high cost gourmet burger restaurants with our premium steakburgers at reasonable prices.

At Steak ‘n Shake our steakburgers are made from 100 % pure beef selected from the best producers. Our fresh-cut fries are made fresh and never frozen, and our award-winning, handdipped milkshakes are traditionally prepared by hand with real ice-cream. All are priced competitively.

Cafe2U: Cafe2U has a proven track record of success over 10 years, focusing on customer needs and wants, which has translated into success for our franchisees. We invest time and money in on-going brand and product development and we truly believe we have a unique and distinctive business, which reflects the high quality of the product we sell.

Wrapchic: Wrapchic is fresh, it is innovative and it is a great way to bring the nation’s love for Indian food into the lunchtime market. It is an easy and clear concept – what you see is what you get, and the food basically sells itself!

Hotcha: We are offering exactly the right style of food and our systems and procedures are second to none. It’s not a fluke – we’ve worked unbelievably hard to build Hotcha into the business it is today.

industry voices

What advice would you give to those considering franchising?

Jaspers: Jaspers: Focus on what you NEED to earn before anything else, no matter what you invest or how much cash you have, your starting point must be return. After that, attend discovery days and talk to as many franchisors as you can. Book a week off and go and meet with them; after seeing three or four franchisors you will soon get a good idea of what will and (more importantly) what won’t be right for you. If you are considering food franchises then definitely come and look at the offering we have – at the very least you will have something to go away with and compare to other franchises.

Papa John’s: Buying a franchise, like buying any business requires investment and therefore careful planning is required. Franchisees need to be able to fund the purchase of their franchise and so above all you need to make sure the figures stack-up. Some banks are able to offer finance deals and we are always willing to talk through the various options with enthusiastic franchisees.

When a new franchisee sets up, we provide full training and marketing support to ensure success and drive local brand awareness and customers.

We also provide support to enable franchisees to continue to market their franchise operations. Ongoing marketing is an important part of every-day business success.

Harry Ramsden’s: A franchise should offer high levels of brand recognition, as this offers an immediate competitive advantage. We would also suggest that thorough research is undertaken into the geographical territories available and if these can be supported by the size of the potential customer base.

Steak ‘n Shake: Choose a franchise you feel that you will enjoy being a part of, love what you do and do it with a passion.

It is vital that all prospective franchisees carry out their own due diligence on the franchises they are considering. In today’s technological age this information is far more readily available than previously so you can compare franchises side by side and research any reviews on the franchise from others.

Cafe2U: I would urge potential franchisees to be thorough with their research; understand that your decision is a long term one and take professional advice where necessary. Also, pick a brand that can demonstrate that they not only have a good idea but also that sufficient thought and experience has been invested in you, the product and the business before you sign on the dotted line.

Wrapchic: Our advice is to do your research, know your numbers, look for the right operator for you and most importantly find something that you are passionate about!

Hotcha: It’s a great way to get into business for yourself without the same level of sleepless nights you get when you start completely from scratch like we did! There is a proven business model and full training and support so it carries far less risk too. You still need to work round the clock on your own business to be guaranteed success though – the franchisor doesn’t do that bit for you.

How would you describe the food and drink franchise market in the UK and do you think this has changed in recent times?

Jaspers: TV has revolutionised it and made the consumer more aware of what good food is and has definitely raised expectations. Some fast food giants are seeing global sales and profits fall of a cliff, a big part of that is that traditional models and offerings don’t cut it in the new market. Our job is to stay right out in front of the market – if you visit www.jaspersonline.co.uk, you will get an idea of how we do that!

Harry Ramsden’s: From the high levels of enquiries we are receiving, the Food franchise market appears to be very buoyant at the moment and going from strength to strength. As we know, it is very a competitive sector, however we feel that there are perhaps greater levels of interest in our brand than others because Harry Ramsden’s offers a franchise opportunity that is genuinely unique.

Steak ‘n Shake: Europe is lacking a gourmet burger chain offering premium burgers at an excellent value. Currently there are either, fast food chains selling low quality burgers at low prices, or small independent restaurants selling high quality burgers at high prices. Our niche is to offer premium burgers at great prices.

High-quality hamburgers have come into fashion across Europe. People say it is a trend but we do not see it as a trend, we say that burgers aren’t new. They’re like high-top Converse sneakers: They never go out of fashion. What is NEW is high quality and great service at affordable prices.

Cafe2U: The food and drink franchise market in the UK is exciting and evolving rapidly in line with today’s customer’s appreciation of fine food and drink. The coffee market in particular has seen a definite improvement in quality over the last 10 years and is a constantly improving sector and an exciting one to be involved in.

Wrapchic: We believe that the franchise market within the food sector is in a very strong place at the moment.

Successful business people being secret foodies are finally taking the leap out of their comfort zone to enter food retail, and rightfully so. The market is booming!

Hotcha: There are some highly experienced franchisees out there who really understand the competitive advantage you can get with a great franchise model and a strong brand. As some of the best known food franchise brands reach near saturation, many of these people are now looking for the next big brand that they can get brand new territories with – those are the people that are talking to us!

Summer 2015 Food Franchise | 21

industry voices

How much would a potential franchisee expect to invest for a business and what sort of returns could they expect to achieve?

Jaspers: The total investment in the first year with cash flow will be around £120,000 which is far more competitive than other food franchises with similar returns. The return depends on your ability to manage your business but you can definitely be in the top 5% of UK earners within a couple of years.

Papa John’s: Investment is on average 185k plus vat for your first store. This includes franchise fee, training and marketing fee.

You will need a minimum of 70k unencumbered funds and high street banks can provide up to 70 % of the investment subject to status.

Ideally 30k of working capital is also available.

Harry Ramsden’s: Harry’s ‘traditional local’ provides an excellent value way to join the family, and the average required investment ranges from £150k - £250k with £70k liquid funds required.

Harry Ramsden’s Restaurants focus on full service dining, with many including a separate takeaway counter to maximize passing trade. The typical investment ranges from £300k - £500k, depending on a number of factors including size and location.

around £240,000 is required in order to qualify for a bank loan* that would cover the full investment. (*Subject to financial checks and status) Steak ‘n Shake Franchise owners will receive all the support and expertise you need for success including; 1.

Full Support & Training 2.

Proven Supply Chain 3.

Operational Support 4.

Flexibility in Design & Construction 5. A Set-Up Consultant 6.

Full Marketing Expertise Cafe2U: The current investment level needed for a Cafe2U franchise is approximately £30 000; the returns can vary according to a franchisee’s goals and level at what they operate their business.

Wrapchic: Wrapchic offers 3 business models to accommodate for different territories and unit sizes – Wrapchic Kiosk, Wrapchic Eat and Wrapchic Premier. The models vary on the number of seating, square feet and the possibility to add an evening time option with alcohol to the offer. The fees as advertised are 15-20k dependent on business models and 10k for marketing.

A future franchisee will be looking at returns of about 10-15 %

Regardless of the franchisees’ preferred model, we can demonstrate figures which confirm extremely healthy returns on investment for each.

Steak ‘n Shake: The investment required will vary depending on factors like size and location. (The total investment would be from £550,000 to £1,172,000). A personal investment starting from

22 | Food Franchise Summer 2015

Hotcha: The investment cost is £15,000 and with a strong franchisee driving the business, the average franchised Hotcha store should eventually be generating revenues of up to £500,000 per annum with a gross profit margin of 70-75%. But there are no guarantees, because success naturally affected by the strength of the franchise owner and the team they build around them.

industry voices

Success in business is not guaranteed but what security, advice and support do you offer?

is comprised of highly qualified individuals with extensive industry experience who provide full support and training to our franchisees.

Jaspers: You are absolutely right – all we can guarantee is the tools; we give you all the training your need, the technology and systems to do the job and most importantly, we will give you access to the market by guaranteeing £1,000,000 worth of first year appointments. Throw in £30,000 worth of free stock from our suppliers and you have everything you need to be a success – the rest is about you, your discipline and confidence.

Our franchisee’s success is our success! That is why we do everything we can to help their business succeed.

Papa John’s: Papa John’s is one of the most successful food franchises in the marketplace. Our franchisees and their staff are thoroughly trained and supported. The business model ensures a top quality product, great customer service backed by hardhitting marketing support. This approach always keeps customers coming back for more!

The franchisee is our partner; their success is our success.

Harry Ramsden’s: Because we work in true partnership with our franchisees, they immediately become part of the Harry’s family, with access to everything we offer. This includes advise on funding sources, mapping and site selection, recruitment and bespoke staff training, access to Harry Ramsden’s operations, brand and franchise manuals and systems, access to Harry Ramsden’s supplier base thus benefits from our buying power, as well as Ongoing Director Level Input from our Franchise Team and marketing, promotions, HR and IT Support.

Steak ‘n Shake: The path to owning a Steak ‘n Shake franchise is an exciting journey from the beginning, during the application phase, to the opening of a restaurant. Our leadership team

We have regular and ongoing contact with our franchisees and update our network with any new developments. We track business activities on a daily basis and investigate all local opportunities together with the franchisee.

Cafe2U: Firstly a franchisee will take part in our 4-week accelerated launch programme that sets them up for success; our experienced team of development managers will then continue to visit the franchisee in territory on a regular basis, to maintain that success. From head office we run regular ‘above the line’ marketing programmes for our franchisees and have a dedicated events coordinator to help them develop their business even further. Finally we’re selling a great product, great coffee served by great people, a recipe for success!

Wrapchic: We have a marketing plan for all new units and are more than happy to go above that to help the franchisee up their sales and make their outlet a success.

Hotcha: Our brand, products, service, systems and procedures are all fantastic and proven to work, so if the investor is prepared to follow the model and genuinely put in the work, then there is no reason not to be confident about getting a great return. FF

Summer 2015 Food Franchise | 23

one to watch

One to Watch Update 1 Where it comes to the world of food franchising there are many different options in which to invest and there is enough variety to accommodate very budget.

Here at Food Franchise magazine we spend a lot of time looking for new and exciting opportunities, that we think will turn into big success stories. In this issue we look at a brand that are really on trend and that have embraced the ever popular health food market. Update1

so extensive you could do your whole weekly shop here.

“We promote better living and our founders Norbi and Reka Rubint have brought the concept over from Hungary.

So Roman, tell us a little bit about Update 1.

“There is a public awareness about the harm refined carbohydrates and over consumption of sugar does to the body but until now there was no real alternative to live a low carb lifestyle without depriving yourself of foods like bread, pasta, chocolate, ice cream etc.

“Update1 is not just a food-store it is a way of life, you could say that we are an alternative supermarket or grocers selling a low-carb range of products

“Yes, you can find bits and pieces in other places but nothing like Update1 where you can do all your grocery shopping in

Talking about one of the latest franchise concepts to hit the UK market was Roman Bhatia, Director at Update1.

24 | Food Franchise Summer 2015

a low carb version. We have taken our concept one step further by introducing a Paleo range, over 60 products that are gluten-free, lactose free, no added sugar, low carb. It is the healthiest way of eating as our bodies are designed to eat a paleo diet (simply unprocessed). A diet like our ancestors, a time before obesity, heart disease, metabolic syndrome etc.”

When did the first store open in the UK?

“The first store opened on the 12th of October 2014 in Walthamstow and was a huge success from the start, this is an opportunity like no other and people have really warmed to us.”

one to watch

What has the public response been to the concept and the products?

“Like I said it has been great on the opening day we had over 500 people eagerly waiting outside the store.

“There is a huge demand for food and drink products that have a reduced carbohydrate content and no added sugar and surprisingly there aren’t enough (very small range) low-carbohydrate, no

added sugar products available in super markets or health food stores.

“We offer the public a real alternative with over 400 low carb products, an onsite bakery producing over 50 different fresh, low carb breads and pastries and a low carb bistro. It’s basically a low carb heaven.

Are there plans to roll out other stores?

“Our plan is to open 50 stores by 2019 and this is something that we are very passionate about, we believe in the product, in the business and in our targets.

“Government targets and changes to food production will mean that far more will be made of how and what we eat so we feel this market can only grow.”

If yes, where will the new stores be/ are there any in the pipeline?

“We have locations in the pipeline and we will announce these in time. Expansion is key and we are glad that we have brought

this to the UK market.”

Are you actively seeking franchisors at the moment or is it operated under a master franchise agreement?

“Yes we are actively seeking franchisors.

We have one pilot store in operation and a second pilot store in planning. This is the beginning of big things for Update1 as a brand and we have some big names helping us spread the word.”

Yes, talking of big names, we hear that Andre Agassi has been named as a brand ambassador – How active has he been in the promotion of the concept?

“Andre believes in Update1. He shares our view about healthy lifestyle, lowcarb foods, no added sugar and gluten-free nutrition.

“Update1 is a well-constructed system which has been operating in this market for almost 10 years. Andre Agassi helps to raise the popularity and reputation of this concept.

Summer 2015 Food Franchise | 25

one to watch

“The name Andre Agassi shows on our store-front’s and in our communications, we also plan to introduce a new sport product range with the slogan “recommended by Agassi”, these products would contain his portrait as well.

“We are also working on the concept of a flagship store in London, which we hope to open very soon and Andre Has agreed to participate at the opening ceremony.”

So who are your target audience?

“Update1 offers a complex lifestyle system for those who are not only health conscious but for those who need food specifically tailored to their diet.

“We have helped diabetics, and people who want to lose weight as well as those who generally want to live a healthier lifestyle.”

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Fitness and health are big trends at the moment, what makes you different from the competition?

“The primary key to our success is the development of a uniquely broad product list including hundreds of items which offers the basic elements of traditional nutrition (bread, bakery products, pasta, flour, snacks, cold-cuts, sweeteners, ketchup, ice-cream, soft drinks as well as prepared meals) all in a low carb form allowing healthy consumption promoting weight loss and a healthier lifestyle.”

“Therefore this diet is neither about suffering nor giving something up you love, but mainly about reducing the amount of carbohydrates and sugars you consume.” FF

business profile

Meet Sherrards Solicitors

We know the franchising sector inside out It’s no great surprise that the food sector continues to flourish – it’s an exciting place to be.

We all love tasty food and great dining experiences, and the globalisation of our lives is opening the door to new flavours and dining experiences every year.

To build a successful food business takes more than just energy and passion – it requires a good business head, exceptional leadership skills, the ability to communicate with people at all levels, the support of specialist professionals in law, property and accountancy, and of course a sprinkling of good luck!

The most recent NatWest/British Franchise Association survey shows that there was a six per cent increase in the number of hotel and catering franchises in the last year, with 8,300 franchise businesses now operating in this sector, making it one of the most popular categories.

The successful franchisors and franchisees we work with have all sought professional advice from the outset –robust legal foundations are essential and pay dividends as the business goes through its life cycle.

The prospective franchisor will need expert advice on whether their business model can be understood, mastered and therefore replicated by another business owner, whether here in the UK or overseas, and whether franchising offers the best route to growth. If the answer is ‘yes’, there will flow the need for a welldrafted master franchise agreement and possibly, regional and developer franchise agreements. Franchising your business in other locations requires you to be in full control of your assets and to have highly developed systems and processes.

As such, your legal contracts must be water tight and forward oriented. The importance of this cannot be emphasised strongly enough. As all franchise contracts for your network will be the same, it is important to get it right from the outset because one defective franchise agreement will mean all your franchise agreements will be defective, with the possible consequent loss of your whole network.

Some of the high street’s most recognised food brands work with our Franchising Team to expand their businesses here in the UK and overseas – names such as Dominos, Muffin Break, Southern Fried Chicken, Esquires Coffee Houses, Café Fratelli and multi-unit franchisees within the Harry Ramsdens network. We are proud that our client base has grown largely due to the recommendations of clients such as these.

Successful franchisees such as Mike Arbuckle, franchise MD of Muffin Break UK, who has worked with us to manage the constant changes to its property portfolio of over 50 outlets in retail shopping centres comments: “Sherrards were recommended to us because of their retail experience and because of the fact

they could provide City-level expertise at regional rates ... and deliver it with good old-fashioned service.”

Many food franchisees go on to operate multiple outlets and will need to employ further staff and lease property for their premises. A complex set-up requires solicitors who can negotiate on your behalf, offer high quality employment law support, and unfortunately on occasion, resolve disputes. As a law firm with a wide range of commercial services, we can take care of all of this for you and more.

And when it comes to export, experience of international development and master licence agreements, and how to organise and structure a franchise business internationally becomes hugely important.

Our membership of international alliance of law and accountancy firms Alliott Group ensures a safe pair of hands wherever in the world your business takes you.

We can help you get started in franchising or further develop your business – contact Sherrards Solicitors in St Albans (01727 832830) or London (020 7478 9010).

Alternatively, please email franchising@ sherrards.com or visit our website www.sherrards.com

It is important to get it right from the outset because one defective franchise agreement will mean that all of your franchise agreements will be defective.

Summer 2015 Food Franchise | 27

Franchise viewpoint

running multiple

franchises Taking on a franchise is an exciting and rewarding time for all those that make the leap of faith and get stuck in. But the big question to ask is “what’s your motivation for starting your own franchise”?

A Maybe you just want a small business to support you and your family, perhaps you already work in a franchised business and think you can do a better job than the boss?

My motivation, like many other owners is to slowly build up a small group of profitable stores in my region that I can one day pass on to my children. According to Subway®, over 70% of its existing franchisees take on a 2nd store if not more, we have 3 stores in total and have plans to take on many more in the future. If you’ve never run your own business before, owning one site can seem a very daunting idea, never mind the thought of two or more! This is why I believe franchising comes into its own. You run your own business, make profits but have the support of an already established brand and a team to help you run your business.

It takes time to build a great team but once you have them you need to put those people in the right places However help is always at hand, your franchisor is very likely to want you to grow and has the tools to support you every step of the way. Subway® has a name for franchisees with several stores called “Multi

28 | Food Franchise Summer 2015

Unit Owners” (MUO) and these people are supported all the way. Every year the company holds MUO meetings in the U.S. and U.K. to help these owners organise their business and realise their full potential. I find it quite daunting that I am at the point now where I have to leave the running of my stores to other people in the hope that they meet the high standards I have set them. The main key factors for me in making this work are structure, communication, training as well as a little bit of patience.

Structure It takes time to build a great team but once you have them you need to put those people in the right places. You will need a clear chain of command starting with a manager, assistants and supervisors who are all able to operate the smooth running of the store.

Creating these positions gives other staff the aspiration to improve and move up the ladder when opportunity arises thus building loyalty and trust.

Communication We often have new menu items, changes in company policy and legislation amendments that need to be conveyed to staff at multiple sites. You need to keep sharing this information so that staff can fully

understand what is being asked of them and carry out your requests. Hold regular staff meetings, management one to one’s and have staff appraisals on a regular basis so they can give you feedback as well.

Training If you ever expect to open more sites you will need skilled people to do the jobs you can’t, so you need to train them to the highest standards possible. Start with yourself, keep learning new ideas and skills then share them with your employees so they can develop too. Just because they’ve been told about something once doesn’t mean to say they understand it, keep showing them until they flourish in what they do.

Patience I’m often reminded that I can be impatient and that I expect too much, everyone has different levels of ability and desire which means they won’t always work to the same standards as me to begin with.

Give your employees the time to soak up the information and they will improve and become experts in what they do.

Finding time to run several businesses often has its difficulties but ultimately provides its rewards in the profits. Rome wasn’t built in a day. FF

Franchise Choices

The security of franchising As I write this there are still a couple of days until the General Election and the political landscape of the country is still unknown. Factors such as this have a huge impact on a number of things, especially business and finance.

When it comes to making an investment it is important that you look at several options and that you weigh up all of the factors that can turn a potentially dangerous business deal into a safe, secure business move.

More and more we find ourselves reading about investments that have gone wrong or of individuals that have put their hard earned money into something that ultimately fails. This sort of story can be

difficult to read about, but for all of these negatives, there are many tales of success.

When you look at franchising and especially food franchising opportunities, there is a fantastic selection available to invest in.

There are large, proven models, as well as smaller start ups. There are quintessential British brands and there are international franchise opportunities from the U.S and beyond, but just how safe are they?

Your Money The logical place to start is always with the money. As with all businesses there is a financial cost that is put in place before you can begin trading. In the franchise world this is the franchise fee. The fee may be large or small with prices in the UK currently ranging from as little as ÂŁ8000 and going as high as ÂŁ400,000 per unit. This disparity will be one of the first major filters in sorting out which franchise you are able to go for. There are other factors such as

Summer 2015 Food Franchise | 29

Franchise Choices

the type of food or drink that you want to serve and the geographical area in which you wish to operate. There may also be external factors such as preferred working hours that you might want to consider too, but money plays a huge part.

When you decide to make an investment you do so in the hope that it will be a secure one and that it will be profitable for the duration of the investment. One of the main dangers in entering into a franchise agreement in terms of making it as financially safe as possible, is that you fully understand the costs associated with the

investment and that you have the working capital to cover any stock that you may have to buy, or any staff that will need to be paid before you see a return on investment.

Financial constraints such as the amount you may have to borrow and the amount that you can borrow are also factors to consider. Getting into unnecessary debt or facing repayments that you can’t afford can be a risk. Fortunately this is where the franchisor has an almost unwritten duty of care. They will want you to invest and will do the due diligence on you before accepting whether to sell you a franchise

When you do decided to open a franchise, getting a good solicitor, familiar with franchising is vital. You should sit down with them and review the Franchise Disclosure Document.

30 | Food Franchise Summer 2015

model. As they are the ones that are selling a product (the franchise) they will be keen to discuss financial projections and numbers relating to the average store.

Using this is vital if you are to eliminate some risk.

When you do decided to open a franchise, getting a good solicitor, familiar with franchising is vital. You should sit down with them and review the Franchise Disclosure Document.

After reviewing the legal documents it is crucial to look at the profitability of each location, especially those that serve in markets similar to yours. Doing your due diligence can mean the difference between success and failure so make sure you speak with current and past franchisees. Ask them direct questions about their profitability and if talking to a past franchise owner, ask them why they

Franchise Choices

left the franchise. If you get any sense that the franchisees had trouble making a profit, then think very carefully before moving ahead.

go down the rungs of the franchising ladder to less well-known brands, new franchisors, and those with very low rates of entry, the risks typically grow.

Most importantly, insist that your prospective franchisor provide you with sufficient data to evaluate the profitability of the business. Limit your search to franchisors that make financial performance representations.

Brand Reputation

There are many franchise opportunities available that are able to authentically boast high rates of success and profitability.

These tend to be the top tier franchisors that require the highest investments and strictly limit their franchisee pool. As you

Brand reputation for a franchisor is everything and is one of the main tools that they use when they are trying to sell their franchise opportunities. For them the more people that can operate under their license the better. There is of course one proviso to this and that is that the person taking over is responsible. The risk for the franchisee is that is another franchisee does something which has a direct impact on the brand, for example a food scare, then it this

could have a detrimental effect on other franchisees. For this reason franchisors are very stringent on who they ask to take up a license and there is a large amount of protection in place to compensate for the failing of an individual. Due to this, you could argue that franchising is very safe as every check possible is made by the franchisor to ensure that policy is followed and that the right people and procedures are put in place.

One misconception in franchising does however relate to the brand. Those franchise models that have a huge global presence such as Subway and McDonalds are hugely successful but there is nothing to say that a small street food unit can’t be

Summer 2015 Food Franchise | 31

Franchise Choices

as successful. In truth it is all relative the amount of money that you put in relates to the average takings in your unit and the possible profit that you might make. It also relates to the amount of time you may have to put into the business and the hours that need to be worked. As a percentage most people looking at the franchise model rate the branded size and reputation very highly but more than 70% are looking at smaller operations. These smaller projects will allow them to get in early and therefore expand as the business grows.

One potential danger with a large franchise is that some of them do not offer geographical security and therefore somebody else might be able to open one or more stores close to your unit. This could have an effect on trade and therefore sales.

The People When it comes to the people who are looking at buying a franchise, they are often in a very similar position and from a similar

32 | Food Franchise Summer 2015

mind-set. The majority of franchisee have the money to make an investment, a work ethic to see a project through and a clear idea of what it takes to be a successful business person. In the realms of food franchising then the individuals who enter into franchising agreements also have passion for the industry. One of the most common views is that those operating in the food franchise industry (around 80%) have had previous industry experience. It is fair to say that there are not many who invest solely for business reasons and that this passion for food is again one of those factors for success.

Franchisors want the best for their brand, the sale of a unit or of multiple sites is important for their growth plans, but the people that run the stores are vital.

Due to the importance that they put on the people they choose they do ask for a lot in return. Aside from the money they ask that the franchisee commits to their training schedule and that they operate in much the same manner as other

franchisees.

For the franchisee to meet these commitments they may have to give up their paid job long before they open a store, this can have financial implications on a family or individual so that means there must be the finances in place to cover the period before they open.

Reflecting on the points raised there is a lot to consider and this is just the beginning. Without some degree of risk everybody would be investing in franchises. The risk adds to the sense of achievement when a project works and the rewards of franchising are plain to see. All in all you would have to say that you know with a franchise that you are buying a proven model from a national or internationally known business. The investment comes with support and marketing strategy and gives you the best possible chance of success. Some in the industry say that there has never been a better time to be part of a food franchise, and to be honest it’s hard to disagree. FF

infographic

year on year growth within the fast food market

Over half of all food franchise units turnover

Since 2008 there has been a net rise of

ÂŁ500k per year

in the number of franchise systems in the UK

UK franchise industry turns over

ÂŁ13.4bn

ÂŁ1321

Average annual spend per person on food-to-go

per year

of all food franchises profitable after 1 full year As the number of franchises in your business grows so to does the brand awareness making them more profitable year on year

78%

of franchises that close are down to personal reasons not financial or security reasons

Summer 2015 Food Franchise | 33

coffee summit

focus on coffee There are several questions that we get asked by prospective franchisees here at Food Franchise Magazine. Some relate the technical aspects of investing whether that be raising the finances or dealing with contracts, but some are more to do with the industry as a whole.

One particular area of interest is the coffee industry and there are many out there that think the high streets of the nation are ‘littered’ with coffee shops. Some are of the opinion that the big chains are driving out the smaller independents whilst others are sad to see streets evolving to house coffee shops, bookmakers and payday loan companies.

Many of these opinions can be attributed to the current economic climate and the ‘state of the nation’ but is this really fair?

We went the Allegra UK Coffee Summit to find out and in truth there has never been

34 | Food Franchise Summer 2015

a better time to own a coffee franchise, with the big brands working together to ‘transform the high street’.

Coffee is evolving – that is one of the messages that we are first greeted by, gone are the days where you can just pick up a ‘flat white’ on the way to work, or a drop of over-stewed black from something not out of place in a 1950’s American diner.

Instead we are now greeted with increased variety and a real feeling that the market is growing. Coffee shops are no longer a

calling point and are now destinations, they are the meeting place of choice for everybody. We use the spaces to arrange business meetings, meet friends and family or for some peace and quiet, such is their versatility.

The market Looking at the market there are several key factors that stand out, all of which give you an idea of how the industry is growing and why more and more investors are looking at starting a food franchise in this sector.

coffee summit

The current market is a healthy one which has seen growth of 10.7% in turnover to reach a total of £7.2billion last year.

Looking at some of the statistics that were presented on the day, it was surprising to see that 63% of customers were having a coffee to drink in, with 20% taking the product away and the remaining 17% not buying a hot drink. This also emphasises the importance for making a welcome environment for the customers if they are going to be spending plenty of time in your premises.

The most important factors that consumers consider when choosing where to buy their coffee from are as follows: • • • • • •

Coffee Quality 54% Convenient Location 35% Cleanliness 24% Affordability 20% Loyalty Scheme 19% Service 18%

There were also trends that highlighted the importance of offering a variety of products with 56% of all consumers buying at least three cups of coffee per week and nearly 70% of these choosing to change their coffees from time to time. It is also interesting that nearly one third of all consumers prefer a coffee shop that sells limited edition or seasonal flavours.

Coffee In the UK the Latte is still king with the vast majority of those aged between 18-45

The current market is a healthy one which has seen growth of 10.7% in turnover to reach a total of £7.2billion last year. choosing it as their coffee of choice. Those aged over 45 tend to go for a Cappuccino, preferring the stronger taste. There is also an idea that brand loyalty is very important. Nearly 60% of us have a chosen coffee shop and with so many units on our streets you can see how it would be hard to win customers. This is a problem that some of the independents face and is one of the main factors that food and drink franchises such as Starbucks, Enquires, Costa and Caffe Nero are popular for investors.

Conducting ceremonies at the Coffee Summit was Allegra Group Managing Director, Jeffery Young who told the 250+ delegates that the coffee industry was in good shape.

“The industry is looking strong, we have a record number of units opening in the UK and the demand for coffee and especially good coffee has never been bigger.

“It’s a testament to all of you that have attended today and for the work you do that we are such a strong position. There are many innovators in the room and the brands are offering a whole range of

products, we truly are transforming the high street.”

Service Service is a big part of the business and Managing Director of Starbucks, Mark Fox revealed that one of the reasons customers keep coming back and why they are more likely to sit in and spend a longer period of time in a coffee shop is that the service has changed. He told reporters: “The way we do our branding means that we have nicely designed and comfortable coffee shops and that the staff are picked and trained to our standards.

Training staff is vital and the coffee industry has changed rapidly over the years with barista’s becoming the next cocktail bartenders – They have a creative licences to make coffee fun and interesting and can create bespoke drinks. This level of service goes a long way to pleasing customers, adding to the theatre of the location and ensuring that they return.

Speaking of his own experience, he continued: “I walked into one of our central London units this morning and was greeted by a friendly and professional individual, it gave me the feeling that they really cared about what they were doing and that they believed in the brand and the ethos of what we are trying to achieve.

“The people that work hard for you and adopt this mentality are not just cogs in the wheel, they are the core of what we do, and without them we lose passion and that personal touch.”

Food The food offerings that are available at the moment are fantastic and more and more coffee shops are moving away from traditional sandwiches and they are

Summer 2015 Food Franchise | 35

coffee summit

experimenting with different types of bread and various fillings. There has also become something of a ‘basket building’ trend where it is possible to buy a range of individual food-to-go items and make a full meal. Cakes and traybakes have been popular as have snacks such as popcorn, crisps and cereal bars.

One person at the event who spoke on the subject of food was Sarah Doyle, Brand Director at EAT who have rebranded their company with a new focus towards high quality coffee with fresh food.

She said: “We are very conscious about the work we do and are always looking at new ways to expand of range, we are fortunate that we have a lot of people coming in for coffee but we mustn’t forget that we are a food retailer first and foremost.

“We work hard on moving those who are looking to take away their food through the store with people allowing them to pay on portable epos systems and through iPad’s etc, we take the card machine to them.

“We also allow people to pass us their food to heat whilst they queue to pay and that they can also have a hot drink to go.

“By doing these things we have more time and space to accommodate those who want to sit in, this adds a real personal touch and we are able to dedicate or time to regular and returning customers.”

Alcohol Alcohol sales are something that are being trailed by many coffee shops across the country and is seen as one of the key factors in making the units a day long experience. A large percentage of the trade that was done in the coffee sector was in the breakfast, brunch and lunch hours and increasingly trade started to die off around 3pm. Of course many of the big retail units and those situated at travel hubs were busy during the evening commute but high street units struggled.

Mark Fox spoke on the subject of alcohol and what Starbucks were planning to do

in a bid to increase their trading hours. He said: “Much has been made in the media recently about alcohol sales in cafes and coffee shops and we feel that here are Starbucks we are paving the way.

“We are incorporating alcohol at our stores in a bid to become the new local.

“When you pair this offering with food and great coffee you appeal to a wide range of people and we know that a glass of wine served with a meal will entice people in.

“Female groups in particular have taken to the idea, they come in groups and see it as a safe, clean, friendly alternative to the pub and that it is a great place to socialise, eat and drink.”

There is also a trend of serving beer and especially craft been in coffee shops, these type of place tend to be the independent or those that offer evening entertainment such as live music or comedy.

Mark also noted that the coffee scene needs to combine functional and emotional needs of its customers to grow and become more successful, and stressed the importance of coffee shops on local high streets arguing that they are integral, with research showing that 18% of people visit a coffee shop more than once a week.

FF

36 | Food Franchise Summer 2015

infographic

UK coffee industry is worth of UK consumers visit a coffee shop regularly

ÂŁ7.2bn

There are currently

5781 branded coffee outlets in the UK, these units have seen an

11.9% growth

18,832 outlets selling coffee in the UK

growth this year, and accounts for

ÂŁ2.9bn of the industry

biggest operators in the branded market Costa 1821 units Starbucks 824 Caffe Nero 590 Harris & Hoole 46 Coffee 1 46 Esquires 25

Industry is growing

10.7% per year and the number of outlets is growing by

7.8% Summer 2015 Food Franchise | 37

Accountancy

How to Retire

at 55

Have you ever thought “if only I could stop working”, but how could you afford it? The answer will be dependent on your pension and how well it has performed. Here, Peter Watters, FCA, looks at ways to get your pension into shape.

Use your share of the £35 billion the taxman gives pension savers When you put money in a personal pension the taxman also contributes.

Imagine you pay in £1,000. The taxman automatically adds another £250, so your pension pot receives £1,250. If you pay 40% or 45% rate tax, as a higher rate taxpayer you get even more. You can claim back money through your tax

38 | Food Franchise Summer 2015

return which means the £1,250 from the example above, could cost you as little as £687.50 or 55%. The amount you get from the taxman depends on your circumstances and tax rules can and do change. So take advantage whilst it is still on offer.

Start a pension It is thought that as many as four in ten British adults don’t have a pension,

including 1.4 million who are within 10 years of retiring. If you wish to retire at 65 on 65% of your salary, the rule of thumb is like this; so the calculation is like this, divide your age when you start your pension savings by two and contribute this as a percentage of your earnings.

For example, if you’re 25 you should aim to save 12.5% of earnings. Obviously to retire at 55 you’ll need to save more, but the sooner you start, the less it should cost you to build a substantial pension.

Accountancy

If your employer offers you a pension at work, take it!

Some companies, especially the large ones, usually offer workplace pensions.

In many cases, they pay money into your pension due to auto-enrolment which came into effect in 2012. Over the coming years all UK companies, will have to offer a pension to their employees. If you opt out, you could be missing out on ‘free money’ from your employer

Check where your pension is invested Half of the UK population have no idea where their pension fund is invested, but it is important to know because you could be missing good returns if you didn’t.

Not all investments are the same and the difference could have a significant impact on your pension. That said, all investments go up and down so you may end up with less than you invested, but keeping a keen eye on it lessens risks on returns.

Make small, regular increases Take a person aged 30 contributing £150 net to his pension every month. If every year that person increases that amount by 5% or £7.50 a month for the first year, at age 65 he could find himself with an extra £190,642 in his pension, assuming basic tax relief and that the fund grows 4% a year after charges. Never mind takeaways: this should pay for quite a few fine dining meals! Meaning a little increase can go a long way in the future.

However, this example is only based on today’s terms and doesn’t consider

inflation which would reduce real values over time.

Trace old pensions Most people have around 10 jobs during their working life and many forget or don’t keep track of all the pension schemes they have joined during their career. If you recall joining more than one pension but don’t have the details to hand, you can trace them for free with the Pension Tracing Service.

Approaching retirement?

Retirement rules are changing as of April 2015. If you are 55 or over, you will have a lot more freedom and flexibility on how you can draw your private pensions.

You can take lump sums (single or periodical), income (secure or flexible), or a combination, you can even take your whole pension fund as cash in one go.

However, remember the first 25% you withdraw is usually tax free, and the rest will be taxed as income. Choosing how to draw your pension is one of the most important financial decisions you will have to make. Remember you may need it for 20, 30 or even 40 years. So ensure you find out about the new rules and opportunities available.

Don’t delay on your pension It is thought that as many as 3.5 million people have no plans to stop working at all, many because they have no monetary support structure in place, but wishing they had. What you do today could make all the difference for your future and relaxing at 55 sounds better than working hard well into your later years! FF

Avoid becoming a 45% taxpayer overnight When taking benefits from a pension, 25% is usually tax-free and the rest is added to other income in that tax year and subject to income tax. For those planning to take large lump sums out, this could push income into a higher tax bracket. At the extreme, someone could instantly become a top rate taxpayer (45%). One option to reduce tax is to spread withdrawals over a number of years. Investors - perhaps basic or non-taxpayers, might even consider taking some this tax year. Although the new rules don’t take effect until 6 April, pensioners can already use income drawdown to take tax-free cash and some taxable withdrawals.

Until April most people are restricted on the amounts they take out. From April the limits are effectively removed.

Please remember, a pension is intended to provide income for a retirement potentially lasting 20 years or more.

Taking excessive withdrawals increases the risk of running out of money later and could have a significant impact on lifestyle. In income drawdown the pension fund remains invested so will rise and fall in value. It is a high risk option so will not be suitable for everyone and income is not secure.

Tax treatment and pension rules will change over time and will depend on individual circumstances.

The value of pension and the income they produce can fall as well as rise. You may get back less than you invested

Need more help?

This feature aims to give some informal hints and tips. McPhersons Chartered Accountants and McPhersons Financial Solutions are offering businesses free advice so get in touch now to arrange your meeting. Simply email Peter Watters p.watters@mcphersons.co.uk or call our Head Office on 01424 730000 for a free consultation at mcphersons’ London, Bexhill or Hastings offices. www.mcphersons.co.uk

Summer 2015 Food Franchise | 39

Franchise FINANCE

ROI Making a good

from food franchises

There are many people who make investments and who make them on a daily basis. These investments are solely with the purpose of further boosting the investor’s finances and as a way to increase the rateable value of a person or a company

40 | Food Franchise Summer 2015

Franchise FINANCE

It is often said that a wise investor, will put their money in the stock market or into the property market, others choose something different such as commodities or art. These are all solid options and the returns can be very good but in truth they are known as a passive investment. These investments require some work such as market research and can yield returns of up to 15% annually.

When you put this type of return into context, buying £200,000’s worth of shares or indeed a property of the same value, you would hope to see a return higher than bank rates and in truth well over 5% or £10,000. This is a nice sum of course, but food franchising can be a way to have an active involvement in in a profitable business.

Those investigating franchise opportunities should look carefully at the company’s potential ROI. It is also vital to remember that since a franchise purchase involves investments of both time and money, you should expect more than you would from a passive investment.

One assumption that people often make is that the less money you invest for a franchise the less money you will earn, and the higher your investment amount in a franchise opportunity the higher your return.

Actually, there is often little correlation between the total investment and the amount of money you can make in the business. Returns in franchising vary all over the board, depending on the

The additional factors such as the time that you put in are often the most vital thing to consider.

A critical step in your investigation of a franchise is to determine the average earnings of a typical unit during the first three years of operation. concept, the industry, the market and the operator.

In fact the additional factors such as the time that you put in are often the most vital thing to consider.

A person’s passion for the industry will weigh heavily on any leverage that they have and a common element for boosting ROI is to use leverage to increase the return.

A critical step in your investigation of a franchise is to determine the average earnings of a typical unit during the first three years of operation. You can sometimes find this information by reviewing the franchise company’s prospectus. Bear in mind that this is optional and not all franchisors list this information. If this information is available for those companies you are researching, you should be able to project the average three- to five-year returns on investment.

Typically, leverage relates to using financial capital to secure loans, to invest in more units. Providing that your debt service is less than the increase in income then you should be able to build a profitable business within a franchise model. One of the best ways to make the most from a franchise opportunity is to have the scope, scale and permission to look at owning a multisite operation.

Make sure that the franchisor is willing to allow you to expand and that you can borrow against the first business if needed.

Often the most accurate information about unit performance comes from franchisees actually operating locations similar to the one you are looking at for example in a train station or in the centre of a large city. Franchisors who feel that you are right for them and who are confident that you will pay for a franchise will be keen to give you these figures as it lends itself to you investing. This really is another vital source of financial information for which you can base ROI.

It is also important that you look at geographical restrictions and make sure that somebody else can’t buy a site in close proximity to you which could reduce your profitability.

Ultimately your due diligence and an understanding of how to best leverage your personal assets, with you financial investment, will allow you to find a franchise that meets your ROI requirements in a relatively short period of time. FF

Summer 2015 Food Franchise | 41

BE INSPIRED

Be Inspired Every issue we look at somebody who is making a difference in the world of franchising and this edition is no different. Here we speak to Steven Prime the award winning franchisee who currently runs an Esquires Coffee House in Coventry.

Hailing from Rugby, Steven, 29, has had something of a meteoric rise in the franchise world picking up awards and gaining plenty of exposure since he opened his first Esquires Coffee House back in December 2008. His knowledge of the market and the business is excellent and after graduating with a Business Degree from Sheffield University and undertaking a graduate scheme, Steven felt it was time to move on and open his own business.

decided that he wanted to follow in their footsteps and run a business of his own.

Bored with working nine-to-five and inspired by his father who managed a series of motorway service stations and his grandfather, who ran a solicitors, he

“I did look at other food franchise opportunities and coffee opportunities but Esquires were the ones for me. It had to be Coventry too, the place didn’t have

42 | Food Franchise Summer 2015

With a passion for coffee and a head for business, Esquires Coffee seemed the perfect choice to invest in.

Talking exclusively to Food Franchise he said: “Esquires were the natural choice, I believed in what they were doing and this came across when I went to meet them.

many coffee shops and I could see a real market – the team at Esquires were so positive and supportive and they continue to be so.”

Steven really took to franchising and use his business knowledge to great effect and with it the awards began to pour in. First he was named as the Regional Franchisee of the Year in 2012, a process in which he had to pitch against a series of equally hungry competitors before coming out on top. His most notable award came a year later when he was crowned BFA Young Franchisee of the Year, an award which Steven is understandably proud of.

BE INSPIRED

Talking about the awards he said: “It’s great, I was really surprised to win and it is a huge honour. The competition was very tough and I was very fortunate to get the prize.

“Things like this are a great way to show where I’ve come from and in reality they are for my team back at the shop. They all put plenty of work in and I couldn’t do it without them.”

Steven’s flagship store, which is based at the Coventry Transport Museum, has been hugely profitable over the last six years and it is a testament to the manner in which Steven has embraced the industry and the franchising model. Talking about his future plans, Steven said: “These last few years have been great in terms of business and I’m ready to press on.

“I have my second store opening in just a few weeks’ time, again in Coventry. The people here have really embraced the brand and by opening in the city’s largest shopping centre, the West Orchards Shopping Centre, the public can continue to enjoy great products.”

Away from franchising Steven has been praised for his community spirit winning the internal Esquires Community Service Award following a trip to America to raise money for the charity, Coffee Kids, who raise money for children in coffee growing communities across Central and South America. Steven set out on his bike with the aim of cycling 1400miles across the country in 19 days. In the process Steven was sadly knocked off his bike just 40 miles in and suffered horrific injuries.

Talking exclusively to Food Franchise he said: “Esquires were the natural choice, I believed in what they were doing and this came across when I went to meet them.

After the collision with a pick-up truck Steven was left with a shattered left wrist, broken bones in his back and six broken ribs – the injuries obviously put paid to the trip but the determined franchisee still managed to raise over £2500 for the charity.

Good things come from food franchising as I’m sure you see from this publication there are plenty of people doing well in this industry, Steven is certainly one of those. If you know somebody form with food franchising who has a good story and who you would like to put forward for the Be Inspired feature. Please get in touch: Editor@MVHMedia.co.uk e. FF

Summer 2015 Food Franchise | 43

legal

THE ESSENTIALS OF

A FRANCHISE AGREEMENT

Here at Food Franchise Magazine we are always aiming to bring you the answers to cutting edge questions and this month is no different. One of the areas that prospective franchisees always have queries about is the franchise agreement. In this issue we speak to Solicitor, Manzoor G. K. Ishani from Sherrards Solicitors.

44 | Food Franchise Summer 2015

Legal

A franchise agreement should achieve three fundamental objectives:

6.

FIRST

7.

I t should set out clearly what the franchisor has promised

Improve, enhance and develop the franchisor’s concept and system (including new menu items); and Provide ongoing support.

A franchisor will wish to:SECOND It should seek to protect for the benefit of both franchisor and franchisee, the franchisor’s know-how and the brand

1.

2.

THIRD

I t should clearly set out the rules the parties are expected to observe.

3.

Ensure the franchisee does not disclose confidential information (recipes, processes, etc) Protect its know-how, brand and network Control the use by the franchisee of the franchisor’s know-how and system; and Protect its network from unfair competition from former franchisees.

(a) The Terms

4.

Because there is no special law for franchising, the franchise agreement becomes important in determining the rights and obligations of the franchisor and the franchisee and their relationship.

(b) The Brand and Know-how

If difficulties should arise between the franchisor and the franchisee, they will need to turn to the contract to see what, if any, rights and obligations have been provided in the franchise agreement.

What then should a prospective franchisee look for in a franchise agreement?

The franchisee should expect his franchisor to: 1.

2.

3.

4.

5.

Train the franchisee and his/her staff Supply goods and/or services Be responsible for promoting the brand Assist the franchisee where appropriate, to locate and acquire premises and have them fitted out and converted into a franchised outlet. This is particularly important in a fast food franchise Assist the franchisee to set up business

Unless the franchise agreement contains sufficient safeguards to protect the franchisor’s know-how, brand, system and confidential information, the franchisor may find it is unable to prevent infringement of its rights by a third party or an ex-franchisee.

If the contract is weak, franchisees will not consider the franchise to be a sound investment because the franchisor will be limited in what it can do to prevent “copycat” operations springing up in direct unfair competition.

(c) The Rules

then it is important, from the franchisee’s point of view, that it is not only legally sound but also workable in terms of the rights and obligations of the parties.

The franchise agreement should therefore clearly: 1.

2.

3.

Specify the duties and obligations of the franchisor and franchisee Deal with the payment of franchise fees and the timing of those payments; and State the grounds on which the franchisor will seek to terminate the franchise agreement and what happens to the franchisee after termination.

For the franchisor, the franchise agreement is an income producing asset which will ultimately have a place in its balance sheet. If the franchise contract is defective, the cost to the franchisor can be the loss of its whole network.

For the franchisee, although he or she may be tempted to rely on goodwill of the person with whom he/she is dealing, ultimately only the contract matters.

Whatever the franchisor’s reputation, prospective franchisees will scrutinise the quality of the franchise agreement because they know that, in the future, there may be a change of ownership or policy of the franchisor.

All franchisees should be treated as a family and, as such, there should be no room for favourites. Franchise agreements are in a standard form and best practice requires that all prospective franchisees are offered the same terms with no special deals being done.

Once a franchise agreement has been signed, both parties are bound by it. It can be a double-edged sword and if either has got it wrong, they will have to pay the price. FF

A franchisee is therefore invited by the franchisor to “take it or leave it”. If a franchise agreement is not negotiable

Manzoor Ishani is a Senior Consultant Solicitor with Sherrards (Solicitors), a commercial practice advising franchisors and franchisees in the UK and internationally. He has specialised in franchising for over 30 years and is a former member of the Legal Committee of the BFA and is co-author of “Franchising in the UK”, “Franchising in Europe” and “Franchising in Canada”.

Once a franchise agreement has been signed, both parties are bound b y it. It can be a doubleedged sword and if either has got it wrong, they will have to pay the price!

Tel: 020 7563 9800 e-mail : mgi@sherrards.com

Summer 2015 Food Franchise | 45

Franchising your business

Franchising your business The premise of franchising is a simple one, yet there are so many people out there who have a business idea, yet don’t know the best way to get it to the mass market.

46 | Food Franchise Summer 2015

Franchising your business

Franchising your business can be a very lucrative move and the options and opportunities that are created through franchising could turn a single unit into a nationwide brand.

Franchising encompasses a multitude of business types and consumer markets and has well established itself as a respected and highly regarded business model.

There are however sceptics. Those individuals who think that it will be far more effort than it’s worth to try and sell the business opposed to operating it themselves.

Statistics relating to the food franchise industry show that the industry is growing year on year and that more investors than ever are looking to get into the market. This is great news for potential franchisors knowing that there are franchisees waiting. The lack of confident in the banks and low interest rates also means that franchising can be a far more profitable investment than savings or property.

In this feature we’ll look at some of key things you need to consider before franchising your business.

What is a franchise?

First of all it is important to understand exactly what a franchise is. In its essence it is the granting of a licence by a person or company (the franchisor) to another (the franchisee).

Profitability Looking at the figures it is fair to say that the contribution of franchising on the UK economy is a significant one. Since the start of the recession franchising

Franchising encompasses a multitude of business types and consumer markets and has well established itself as a respected and highly regarded business model.

This agreement entitles the franchisee to licenced trading, under the brand of the franchisor. This is often seen as a safe why to operate as the business belongs to the individual, yet they have an umbrella over them to aid promotion and support.

The proviso of course is that they must conform to the business model.

Is franchising successful?

Franchising is a model used to replicate a successful and proven business, using the investment and skills of new individual business owners, who will be trained and supported to run the business under the agreement, conditions and format, as proven and agreed.

has remained strong with an increase of 11% in the total number of franchising systems that are in place.

82% of these are UK owned whilst the other 18% are owned by an umbrella or parent company. 25% of all the UK owned franchise options have also seen a positive transfer abroad, showing that there is real scope for UK business owners.

In the catering sector of the market, there is research that suggests that neatly half of all franchising units turn over in excess of ÂŁ500,000 per year and that out of the total number 92% are profitable. With numbers like this it is clear to see why businesses are looking to franchise and

this is further boosted when you take into account the selling of stock to the franchisee and the ongoing marketing costs that are collected. The larger the business the more profitable for the franchisor.

One thing to note is that franchisee will early always do their own promotion as it is there business and the majority of them will open multiple sites or become brand ambassadors. As more people join and open units they benefit from the greater exposure.

Things to remember The first thing to understand is that franchising is not a quick fix to a bad business. The business will need to be proven and it is the duty of the franchisor to show potential franchisees that the business will work in a way that is profitable and allows for growth. Failure to show success and scope for growth will ultimately lead to a lack of investment.

To franchise a business is not something that can be done without thought.

There are a checklist of things before franchising. First the business needs to be to be transferable, so that it can be run in multiple locations.

It must be able to use the same system, brand and quality as the original model and not deviate from this so that all of the units in the brand are working together.

The franchise needs to be something that you can teach people to do. There is little point having a franchise that only one person would be capable of running.

You then need to make sure it is protected, by ensuring you have all the correct documents to secure your brand with any appropriate legal advice and that the franchisors also feel protected by their franchise agreement.

The final and perhaps most important factor to remember is that whilst franchising a business may strengthen buying power and grow the brand, the franchised units are not there to provide injections of income to the original store.

Summer 2015 Food Franchise | 47

market watch

Market Watch Of all the questions that we receive here at the Food Franchise office, a large proportion of them are to do with finance and the safety of investing in businesses in this sector. With that in mind we decided to start a new, informative feature, looking at the global financial markets and how the food franchises that are listed perform.

When it comes to food franchises, each franchisee has a responsibility not only for their part of the business but they also have an unwritten duty to the other franchisees too. If one part of the franchising mechanism goes wrong then it can have

48 | Food Franchise Summer 2015

detrimental effects on the rest of the group or brand. One way to monitor the way a franchise is performing is to look at the stock market. Many of the big brands will be represented here and as such the share price can be used as not only a comparative

tool but as a guide. The information that you can gather from the markets is vast, you can look into the share dealings of directors, the planned growth of a company, banking forecasts, predictions and a foresight for the future.

market WATCH

Dunkin Brands DNKN

+10.6% Yum Brands YUM

+10.4% Marstons MARS

+6.4%

Domino’s DOM

+1.2% McDonalds MCD

+0.3% Papa John’s PZZA

-0.5%

Krispy Kreme KKD

-6.3% Wendy’s WEN

-8.4% Sonic SONC

-12.5%

Hot/Not In order to give our readers the most accurate overview of the ever-changing markets, we look at how certain stocks have performed over a three month period and rate them accordingly on our Hot or Not chart.

Papa John’s International Inc (PZZA) – The pizza market within food franchising has been a growing market over the last few months and Papa John’s (PZZA) have maintained a strong position within the market. Awe we last looked at them their price was at $61.78 and as the time of writing we find them at $61.47. Staying virtually the same for the last three months and only dropping 0.5% is a positive and sets them up for a strong final half of the year.

Domino’s Pizza Group plc (DOM) – Like Papa John’s the team at Domino’s (DOM) have continued to be on trend with their offering. An ever expanding range of products and inventive menus have been vital. A large number of new stores opening has meant that Domino’s now find themselves at a historically high share price. At time of writing they were up to 784.50p from 774.50p an increase of 1.2% .

YUM Brands Inc (YUM) – It been an interesting year for YUM Brands, who look after the interests of franchise opportunities, Pizza Hut, KFC and Taco Bell. Following on from 6.8% growth in the last quarter we have seen them rise to the summit of our chart with an astounding 10.4% growth in the last few weeks. Their price is up from $77.84 to $85.97. All of the brands are performing strongly in the franchise world and long may that continue.

Marston’s plc (MARS) – Following a shake-up in licensing laws and scrutiny over whether or not the pub companies could tie their tenants down to buying from them, this area of the industry looked set for a lean period. Over the last three months however Marston’s have provided investors with some healthy results, investing in their range with a takeover of Thwaites they have risen 6.4% moving from 148.9p to 158.5.

McDonalds Corporation (MCD) – There has been a lot of negativity in the press about McDonalds and it looks a little unfair.

The brand are going through a period of transition and are making changes inhouse, the market is fierce and in the last three months they seem to have steadied the ship, there price change has been minimal moving from $96.26 to $96.58 a rise of 0.3%.

Dunkin Brands Group Inc (DNKN) – Our best performing stock of the last quarter has been DNKN – the Dunking Brands Group, a series of strong sales have seen the stock rise hugely. Moving from $47.10 to $52.12 in the last 12 weeks investors will be pleased with a 10.6% rise. Over a similar period a few months ago they only increased their worth by 0.7% so this is definitely a step in the right direction.

Krispy Kreme (KKD) – Krispy Kreme were always going to struggle in the early part of the year with so many new units and retail locations opening, the marketing campaign has seen steady growth and this is one share I fully expect to bounce back in the second half of the year. Recent figures show the group down 6.3% from $19.01 to $17.81.

Wendy’s (WEN) – Wendy’s were our top stock in the last issue and now they find themselves somewhere near the bottom, this is not a business fault but probably because the performed so well at the turn of the year. They seem to be settling down at the moment and finding their place in a competitive market. From their position of $11.05 they have dropped slightly to $10.12 which represents a loss of around 8.4%.

Sonic (SONC) – Much Like Wendy’s, in this issue Sonic find themselves at the other end of the chart and on the decline, not as a brand but as a stock. Across the water they are growing at a fast rate and maybe this investment has halted some of their trading options. They are currently down 12.5% with shares falling from $32.76 to $28.65.

All information correct as of 01/05/2015

Summer 2015 Food Franchise | 49

diary dates

Dates for your diary Find out what events are taking place in the world of franchising over the next few months Make a date for your diary with the Caffe Culture which returns to London’s Olympia on the 13th and 14th May.

caffè culture Olympia, London

The show remains the only event in the UK dedicated to the cafe industry which will introduce you to the suppliers of those all-important products to set you apart and drive customers through your doors.

13th-14th May 2015

Harrogate Speciality Food Show Yorkshire Event Centre 21st-22nd June 2015

The Harrogate Speciality Food Show, the north of England’s largest gathering of artisan and speciality food producers, is open to the trade only and attracts buyers from far and wide who come to meet and place orders with producers - many launching products for the first time at the show.

Also for the first time, there will be an opportunity to watch Great Taste judges, who will be blind-tasting food and drink entered into the world’s most respected food accreditation scheme.

John Farrand, organiser of the show and MD of the Guild of fine Food explains: “Great Taste is growing each year and the Harrogate Speciality Food Show provides an ideal location for our judges to gather.

lunch! is frequently cited by food-to-go retailers and buyers as their key annual event for discovering innovative new ideas and concepts and, as such, has enjoyed significant year-on-year increases in both attendees and exhibitors (37% and 42% respectively in 2013 alone).

lunch!

Business Design Centre, London 24nd-25th September 2015

Takeaway Expo Olympia, London 29th-30th September 2015

lunch! 2015 will feature around 300 exhibiting companies showcasing a wealth of new food and drink products, packaging, equipment and technologies. The 2015 exhibitor list is available to view and search at www. lunchshow.co.uk.

The event is designed to give you all the tools you need to grow and to develop your takeaway, whether that is franchising your restaurant, adding an automated online ordering system or re-branding yourself to move to the top of the food chain.

You’ll be able to talk shop with peers and suppliers, hone your business skills and take away a wealth of free expert advice on everything from Murgh Masala to e-marketing.

Learn how to improve your coffee making skills in our barista training demos and attend our free seminar sessions, including a panel discussion on how to successfully deliver a quality coffee and tea offering when it’s not your core business.

Secure your free ticket today by visiting www.caffecultureshow.com/book

“Visitors to the show will be able to see just how much work goes into judging Great Taste and how our judges work in teams to blind-taste each entry. We are also very pleased to be working with food group Deliciously Yorkshire which will be running ‘Meet the Buyer’ events alongside the main show area. This presents even more valuable business opportunities for exhibitors and buyers.”

Over 150 exhibitors will be at the show which last year attracted over 1,000 buyers ranging from delis to chefs, garden centres to farm shops, hamper companies to coffee shops, restaurateurs to publicans.

To keep updated, exhibitors and visitors planning to come along are advised to follow @guildoffinefood using the hashtag #hazzer. To register your interest, contact Sally Coley on 01747 825200 or email fairs@finefoodworld.co.uk.

Show features include the Working lunch! Keynote Theatre, Innovation Challenge Awards, Innovation Challenge Showcase, and the British Smoothie Championships. “lunch! just gets bigger and better each year,” says Andrew Rose, head of purchasing at Caffѐ Nero. “It has a great mix of suppliers covering a range of categories, enabling me to keep up with trends and innovation within the industry.”

To register for a free trade pass, visit www.eventdata.co.uk/ Visitor/Lunch.aspx?TrackingCode=PR

that cover new food technology, marketing, maximising your output, new food and menu ideas as well as the Keynote Theatre 120 Exhibitors The Show aims to bring you the widest range of products and services from leading lights in the catering and business world. With everything from shop front signage to online ordering systems, to food wholesalers; to help you find the perfect way to diversify your business.

Takeaway Innovation Expo 2015 will include the following: Workshops Their series of ‘How To...’ workshops aim to give you the inside track on how to grow your takeaway; find out from the experts exactly what will be involved and how to make it work for you.

85 Free seminars These seminars are run by some of the foremost experts in the food industry; they’ll be speaking from seven theatres

50 | Food Franchise Summer 2015

Keynote theatre Hear from some of the UK’s leading experts in business and catering as they impart their skills, knowledge and expertise on how you can improve your takeaway, as well as speakers from catering offering some fascinating insights into the food service industry.

Find out more and to order your free ticket, visit www.takeawayexpo.co.uk.

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