What is in this article?:
- New franchise leaders talk growth plans, challenges
- Opportunities, challenges ahead
- Dealing with a volatile industry
Insights from recently appointed franchise development executives at Captain D’s Seafood Kitchen, Toppers Pizza, Trufoods, and HoneyBaked Ham
Opportunities, challenges ahead
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Where are the best opportunities for your brand?
Arrowsmith, : We’re underpenetrated in every market we’re in. Development 101 is if you can grow in areas where you already are and have marketing density and operations support, it’s better to go there than somewhere where nobody’s heard of your brand. We’re going to go deeper into our markets and expand from there. You’ve also got oversaturation of burger and sandwich shops, and those are fine operators, but their franchisees sometimes look for alternatives.
Cheek, Toppers: We’re in a category that, in my opinion, is right down the middle of the plate. It’s not going away. From that aspect, we have a lot of markets we can grow into around the country. We could go to the far West, like Arizona or Colorado, though it could require a larger commitment from a new franchisee, or build out an existing market, like Chicago or Minneapolis.
Leone, Trufoods: Making these concepts more relevant in the marketplace is our opportunity. We’re rebranding Ritter’s and Pudgie’s, have built prototype locations, and we’ll sell franchises from there. That’s exciting. We’re in Houston and the Midwest for Ritter’s, Pudgie’s is in the Northeast, Arthur Treacher’s is in the Midwest, and Wall St. Deli is in Pennsylvania and the South.
McFarlin, HoneyBaked Ham: We consider ourselves more retail than restaurant, but the café side of the business also leads into catering. We have this hub-and-spoke model, where the hub store has the production area where we hand-glaze our turkeys and hams, but your spokes could be holiday pop-up locations, or a partnership you set up with a grocery store, mall or military base. We’re starting to test out a similar “lunch express concept.” A franchisee of ours has a mobile trailer he takes to speedways and race tracks to sell sandwiches.
What are the biggest challenges remaining for franchisors and franchisees?
Arrowsmith, Captain D’s: The big hurdle, although it’s getting better, is financing. It’s not where it has been or where it needs to be. There’s a disconnect between what you’re hearing politically and what’s translating to the banks, which are still very conservative, particularly with guys who aren’t in our industry yet. The newer franchisee coming in maybe doesn’t have foodservice experience yet could be a great franchisee, but getting him capital is going to be the biggest challenge.
Cheek, Toppers: The toughest part is finding the right franchisees, not the right markets. Yes, we want to continue to grow in penetrated markets, but we also know that where we can find really good franchisees, we can grow. Access to capital has gotten a lot better, but it still isn’t back to where it was before the crash. I don’t think that’s a problem necessarily, because we have three or four approved lenders we work with, and our investment is on the lower side of the restaurant industry average.
Leone, Trufoods: We’re looking to cluster stores in different markets to get economies of scale to support franchisees and leverage our pricing. The biggest challenge for me right now is learning all the brands, but for the company, purchasing and distribution is a big one. We’re spread out right now, so managing our freight lines and getting them into the whole system is difficult.
McFarlin, HoneyBaked Ham: There are some glaring boulders in the way of other concepts where I’ve worked, but here I haven’t seen any that stand out. Real estate is starting to increase a bit — for a while, rental rates were the lowest we’d seen for a while — which is good, because sites aren’t sitting vacant. Lending has come back, but banks still want to lend to the right people going into the right system. People are a lot more cautious and doing more due diligence, which I’m happy about.