Texas-based Pepperoni’s franchising as a 30-year overnight success!

After many years of building a successful brand, Pepperoni’s Founder & serial restaurateur, Ray Salti developed a more efficient scaled down business model that addressed many of the issues facing restaurant operators today – high real estate costs, escalating labor costs, diminishing workforce pool, quality control and increased demand for take-out & delivery.

Proving the new model for over five years with increasing revenue and profitability, Ray decided to launch the new Pepperoni’s into franchising in mid-2019. To ensure success as a franchise system, significant financial resources were committed to technology integration, modern unit layout & design, operations support & training and a call center.

In addition, construction on a modern corporate office was completed in early-2020. The goal is to have a state-of-the-art facility for the growing Pepperoni’s team with plans to include a test kitchen, training areas and a commissary. Combined with delivery of exceptional New York style pizza, positively memorable customer experiences and excellent unit-economics, Pepperoni’s is well-positioned for franchise success.

Single and Multi-unit Franchise opportunities are available along with Area Development opportunities such as those that recently resulted in several multi-unit development agreements in Greater Houston Area. Short-term growth plans include all major and secondary markets throughout Texas followed by expansion across Southeast U.S. Investment level starting at $153,000.

Interested in owning a Pepperoni’s? Learn more HERE.

#pizza #franchise #lowinvestment #QSR

QSR & Pizza Fueling Franchise Growth

Fast-Food-2Each year the International Franchise Association commissions a study from PwC (PricewaterhouseCoopers) on the economic impact of franchising in the U.S. Highlights from that study include the following:

  • Taking into account the indirect impact of franchised businesses, business format franchises support more than 13.2 million jobs, $1.6 trillion in economic output for the U.S. economy, and 5.8 percent of the country’s GDP.
  • Franchise businesses provided more jobs in 2016 than wholesale trade, transportation and warehousing, nondurable goods manufacturing, and information (including software and print publishing, motion pictures and videos, radio and television broadcasting, and telecommunications carriers and resellers).
  • Quick service restaurants (QSR) is the largest category, representing 25 percent of all franchise establishments and 45.5 percent of all franchise jobs.
  • Jobs supported because of franchise businesses were at least 10 percent of the private sector nonfarm workforce in 33 states, and at least 6 percent in every state.
  • The number of people employed by franchises is greatest in California, Texas, Florida, Illinois, and Ohio.
  • Franchisees own and operate 88 percent of all business format franchise establishments and franchisors own and operate 12 percent.

Read more…

Quick Serve Franchise Sector Continues to Blaze a Trail for Franchising

There is little doubt that the franchise industry is undergoing significant changes fueled in great part by the success of various PE firms that began in the QSR sector. As other franchise sectors are targeted by PE investors, the competitive environment in those sectors will become more challenging. In order to prepare for these challenges, small to medium sized franchises will need to become successful franchise systems that produces sustained system growth, successful franchisees and an efficient operating system.

Multi-unit franchisee ownership that originated in the QSR sector continues to increase as franchisors seek large multi-unit franchisees that can own and operate more franchise units.This ownership model provides organizational stability, ample financial resources, sustained growth and economies of scale to the franchisee operation.

Read more…

Who’s Winning the Pizza Wars?

Welcome to the pizza wars, where brands big and small, quick-service and fast-casual alike face two choices: pick up the pace and earn relevancy through definitive, clear marketplace differentiation or step aside.

Read more…

 

 

Facts & Perspective on the Future of Franchising

franchise imageTwo out of three isn’t bad. In fact, in baseball that would be a phenomenal batting average never even remotely approached. A winning season percentage? Well, it has been done in several professional sports. However, what I’m referring to are leading stories last week (see below) about franchising. Two of three were positive with growth statistics for franchising shared and the power of the franchise model defined. The other presented as somewhat of a negative perspective on family-owned franchises as being less productive than non family-owned businesses.

In any event, I’d love to see more study done on family-owned franchises and how the notion of underperformance may vary from one industry segment to another. My thought on this focuses on the potential differences between multiple generations of families that own Dunkin’ Donuts franchises as opposed to families that may own a non-food brand that may be more inclined to rely on the performance of one, two or several key staff members. I’d also like to explore the difference between single-unit and multi-unit ownership by families. Any takers to start the discussion?

“Regulations have been trimmed, taxes have been cut, and, as a result, the franchise community has continued its economic momentum. As we move into 2018, we expect lawmakers will remain steadfast in their support for a strong business environment,” said Robert Cresanti, IFA President and CEO in a statement.

The franchise industry is set for another year of major growth!

Franchise establishments are set to grow by 1.9 percent to 759,000 locations after increasing 1.6 percent in 2017, while employment will increase 3.7 percent to 8.1 million workers after growing 3.1 percent in 2017. The gross domestic product of the sector is forecast to increase by 6.1 percent to $451 billion, and will contribute approximately 3 percent of U.S. GDP in nominal dollars, according to the report. Franchise business output will also increase 6.2 percent to $757 billion. The forecast follows a year of slower growth in 2017, mirroring trends seen the year prior in terms of employment and output. Read more.

Family-owned franchises underperform, study finds.

A new study that involved a Ball State University researcher found family-owned franchisees post 6.7 percent lower sales per employee than other franchise owners of restaurants and other chain businesses. “It boils down to the fact that often, family-owned franchises have different objectives as compared to their counterparts,” said Srikant Devaraj, a researcher with Ball State’s Center for Business and Economic Research. Read more.

Will franchise leaders embrace a new future state of franchising?

A relatively misunderstood business model, with a paucity of academic support, franchising is on the precipice of history.  Defined by the Federal Trade Commission as an ongoing commercial relationship that includes a license to a brand, payment of a modest fee and the existence of significant control or support, the average consumer knows it as Subway, McDonald’s or Anytime Fitness.  In layman terms, a chain of businesses that share a common brand and a consistent customer experience owned by a local consumer.  But the traditional methodology of franchising has been supplanted by an ever-growing array of hybrid formulations that increasingly are revealing the real power of this enigmatic model. Read more.

Is Franchising the Right Way to Grow Your Restaurant Business… or Any Business, for That Matter?

This past January I presented a webinar for RestaurantOwner.com about the ins and outs of franchising a restaurant business. Special attention was also placed on preparing to franchise and how doing so could significantly improve the business itself and provide a road map for multi-unit operations – even without actually proceeding into franchising.

Well, the response after the event was quite robust and led to us performing a number of franchise feasibility studies for independent restaurant owners in various markets across the country. Our recommendations were split on whether to franchise or stay the course as an independent operation. In the coming months, we’ll be able to see how our recommendations play out. In the meantime, interest remains high, not only for restaurants but also non-foodservice operations across a multitude of industries and industry segments exploring franchising as an expansion or growth strategy.

RSG_Logo_Rev3.pngLast month, in Restaurant Startup & Growth magazine, a RestaurantOwner.com publication, appeared an article by the RS&G staff, taking a deep dive into my webinar and philosophy about franchising a business. The article started out…

Some of the most successful brands – in any sector – are franchises. In the restaurant business, they are household names. For many independent operators, franchising their concept is the so-called “Big Hairy Audacious Goal”. Before you take that leap, there are a lot of small and critical steps to consider.

The rest of the article, Baby Steps – Is Franchising the Right Way to Grow Your Restaurant Business? may be read on pages 42-47 by clicking HERE.

Franchising: Yesterday, Today & Tomorrow

World of FranchisingAs I often do on the weekends, I was searching through my personal library seeking out a book or two that might provide me some inspiration for an article or report, and this weekend, I came across a business book that was published back in 1979. The book, “Free Yourself in a Business of Your Own” by Byron Lane, caught my eye for reasons I cannot really explain. Obviously, I’ve had it in my possession for many years, yet, never opened it again since I purchased it for $1.29 at Target. It must have been a clearance book as the cover price was $5.95. Anyway, I can’t even recall seeing it when I routinely search through my library. It’s like it suddenly jumped out front and center and said, “Hey, look here!”

Well, I decided to look through the book because the back cover stated, “This book is about freedom. Freedom from an 8 to 5 regimen. Freedom from dehumanizing democracies. Freedom from job boredom. Freedom from the lock-step culture. Freedom to do your work your way.” Hmmm… not much seems to have changed although lock-step culture is not one I’ve heard of before.

Right away, my thoughts turned to franchising and I began to think about what franchising was like back in 1979. Fortunately, I didn’t have to think very hard, as to my surprise, was a chapter on franchising! It’s placement was to present franchising strictly as an alternative to other forms of business ownership, and in a book with 174 pages, the franchising chapter comprised all of 3 pages. Yes, 3 pages!

Within these pages were a series of bullet points that I found very interesting and it made me wonder how much franchising had actually changed since 1979, and if the changes have improved franchising today. Read the bullet points below and you be the judge.

– While there are no federal laws governing franchising, most states have franchise laws. Get a copy of the law in your state and read it for degree of stringency and coverage. If it is a tough law and a franchising company qualifies to do business in your state, you have one measure of security.

– Don’t believe that acceptance of you by a franchiser means they have evaluated your ability to get the job done. Some franchisers would select a corpse if rigor mortis had not set in and if it clutched in its hand a certified check for the amount of the franchise fee. Do your own introspection and decide if you can handle the franchise.

– Do not deal with profit projections or average profits. Insist on actual financial statements from a cross-section of franchisees. Then, evaluate your expected return on investment.

– Get the financial statement of the parent company and evaluate its ability to provide the services it promises.

– Read the franchise contract. It should be simple, frank, and fair, with complete disclosure, not an instrument of repression. After you think it through with your head, listen to your gut and determine if the contract fits you

– Finally, and perhaps most important of all, is evaluation of the franchiser’s management team. You should do this from two aspects – their management ability and their humanness. If the management does not measure up to good corporate standards, you will not get the profits you seek. You may turn out okay, but they can bring you down.

 

Controlled Growth Key to Success for New Franchise Concepts!

Working with entrepreneurs exploring franchising as a business expansion strategy, I’m often asked the question, “How does a new franchise company sell franchises without brand recognition?” Here are my thoughts…

Initially, the founder is the brand. It’s his or her passion for the business. It’s how he or she treats customers and employees alike. It’s how the business is promoted within the local market. Not just through typical advertising efforts, but through solid grassroots, organic efforts.

The initial franchise candidates are actually the “low hanging fruit” of the original business. These are the customers that inquire whether or not the business is a franchise and how they can learn more about owning their own. Most are interested because the business appears to be thriving and they’ve seen the owner (founder) time and again, always smiling and shaking hands. Public Relations efforts should ensure this occurs.

They admire the owner a great deal and will base their decision to open a franchise location, on the potential of establishing a relationship with the owner. They’ll compare the opportunity to other franchises and justify to themselves that they’re in on a ground floor opportunity with a direct line to the founder. As such, they feel their probability of success is greater because their location will be in the home office city and if they need help, they could easily approach the founder and the home office because of the proximity to their franchise location.

Ideally, the next few franchisees will also be in the same market as the original business and the first franchise location. It’s prudent to only expand locally until critical mass is established in the market, ad cooperative is developed and support systems are perfected. Now the concept is ready to expand outside the initial market.

However, it is often financial suicide to entertain requests from candidates all over the country. Instead, development efforts should be concentrated on one or two cities relatively close to home office city. For instance, if original business and home office is in Houston, the natural progression would be to promote the opportunity next in San Antonio/Austin and Dallas/Fort Worth areas.

As these markets start to become established with franchise locations, it’s advisable to promote the concept in another two or three areas. Maybe, explore another “hub” and “spoke” scenario. Let’s say, Atlanta as the next hub.

Expansion efforts should be the same as they were in Houston and expansion out of that market shouldn’t occur until Atlanta has a critical mass. Then, when that occurs, the opportunity could be promoted close by in Nashville and Charlotte. Now, you see the spokes of national expansion beginning to form.

While this is going on, maybe inquiries start coming in from the San Francisco area. So, the next phase of expansion might be in the Bay Area. The Bay Area becomes another hub, and once developed, the franchise opportunity could be promoted up the road in Portland and to the East in Sacramento and the process continues.

It’s all about controlled growth and the founder exhibiting tremendous restraint in expanding too fast and in areas far away from his core group and subsequent hubs to be able to provide ample support, create ad cooperatives and build the brand geographically. Chances of franchise success are far greater at all levels of the franchise organization within the parameters of a controlled plan of development.

So, to answer the often-asked question directly, I suggest everyone in the system having a clear understanding of the founder’s vision and if it includes anything but a controlled development plan with his or her firm commitment to actively participate in the franchise sales process, the chances of selling the first ten to twenty franchises will be a frustrating, monumental task that most likely will fail miserably.

Franchise Sales: A Tale of Two Theories

franchise_salesA couple of years ago, there was a discussion in the Franchise Executives group on LinkedIn with the posted question, “Who is using outside franchise sales groups [brokers]?”

Below are some interesting responses from group members that are not franchise consultants or brokers:

An experienced franchise executive stated:
“Why wouldn’t you develop your own small sales group? Using a service that sells multiple franchises diminishes your quality control to some degree. I have been a part of 2 franchisors for 25 years and neither has ever used any of these groups and we have had lots of success. What are you trying to achieve by using these”groups”? Lower cost of acquisition, less hassle, expecting more leads, more foot soliders?”

The president of a national franchise concept wrote:
“We do not work with an outside group. In talking with our prospects it seems important to them to know that our development staff are part of the company and experts on the concept they are selling. We even have a dedicated sales team for each concept. My advice is to talk with some of your new franchisees to see if it would have made a difference in their decision making process.”

A franchise attorney posted his response:
“…if you use an outside broker in the true “sales” role, they can lose credibility if they appear detached and not knowledgeable about what they’re selling (often happens when your brand is only one of many in the broker’s portfolio). That should factor into your due diligence process when you’re looking at outside brokers. But when the relationship stays between the franchisee and the sales person, the prospect’s going to be let down when that sale is done and the sales person is on to the next prospect. Besides, I always wanted my sales person’s relationship with the prospect to taper off once the sale was done – the franchisee’s relationship should be with someone on the development then someone on the operations team. Two points – first, I always caution my clients to use brokers more as “matchmakers” rather than “salesmen.” What should really “sell” the franchise is not the sales person (internal or external) or the broker, but the confidence that the prospect has in the brand and in the ability of the management team; and, second, if my clients use outside sales people, I always make sure the outside sales team attend the same training I give my client’s internal team and do so at the same time. That way the outside sales folks get entrenched into the company’s culture, they know what to expect from management, they see how to use management to “sell” the franchise, and they know what management expects of them.”

A Vice President of a national franchise concept went on to write:
“For a variety of reasons I’m personally a big believer in building sales teams from within the company. But then again I’ve had the luxury of working for established franchisors and had resources to either develop salespeople from within the company, or rely on referrals to hire from outside and train them to become franchise salespeople. Both methods take time – generally about 12 months for a franchise salesperson to really “hit their stride”. Many franchisors don’t want to wait that long, or can’t wait that long, or don’t know how to train franchise salespeople. In those situations it may make sense to bring on outside franchise sales groups.”

So, that’s what franchise professionals were saying a couple of years ago… but what about today? Please, let us know your thoughts!

Franchise Candidates: A Changed Mindset

This article was originally posted on August 13, 2009 as Franchise Candidates: A Changing Mindset. Well, I guess we can revise the title slightly to reflect candidates’ current views – A Changed Mindset. Nevertheless, the article may be even more relevant today as franchising attempts to rebound from the economic downturn and continues to explore more viable lead generation strategies that will attract today’s franchise candidate. Many continue to explore social media and have realized its position as an integral and effective component of these strategies… of course, when utilized according to a plan.

caution-01A look at today’s franchise candidates will reveal they are more sophisticated, better educated, and more technologically advanced than ever before. In addition, and even more so because of the economic downturn, they are extremely cautious.

Today’s candidates are spending more time researching opportunities, and doing so at a much slower pace. In order to be diligent in the process, more time is spent online pouring through page after page of information, constantly bookmarking, and moving back and forth from new information to saved information. They’re comparing notes with other franchise candidates on social networking sites. As well, they’re gaining invaluable insight monitoring online discussion groups and forums.

Ultimately, today’s franchise candidate desires and needs to be certain the franchise opportunity is as close to perfect for his or her situation, as humanly possible. In the past, and especially after previous recessions, franchise candidates took their capital gains and invested in a franchise opportunity. Many times leaving the principal investment untouched. There was a sense of throwing caution to the wind because they were investing profits. Many times ungodly profits, at least by today’s standards. Does anyone remember when money markets kicked out 17% profit margins?

Unfortunately, many individuals looking at franchise opportunities today are looking at things differently. They have to. Many are transitioning corporate executives staring at the back end of illustrious careers trying to squeak out just ten more years before retirement. Facing the challenge of younger talent, new technology, and a rapidly changing business environment, many opt to “buy” a job and explore franchising and small business ownership.

What Changed?

Here’s the difference between today’s recession, and of those in the past. As huge fortunes have been lost, and large gains have not been realized in current financial markets, today’s candidates are forced to invest all or part of their remaining nest egg in order to enter the world of business ownership. Of course, everyone knows and fully understand the risks involved in owning a business. But in yesterday’s business environment, many franchisees and business owners were “gambling” with profits.

Certainly, no one wanted to lose money in a business venture. But, many had fallback positions with funds still in retirement accounts and of course, if they had to, employment. For many of today’s candidates, failure is not an option because fallback opportunities are fast becoming non-existent. Actually, I believe many of today’s candidates might not have even considered franchise or small business ownership in the past.

So, as many individuals explore their options, they will focus more and more of their efforts online. Franchisors must embrace this fact, and dedicate more resources to the internet and look to social media to complement, not replace, their traditional franchise marketing strategies. By doing so, they’ll realize multiple benefits for their entire system including:

– Creating or further developing brand awareness with franchise candidates and consumers alike
– Generating franchise leads that are genuinely interested in exploring what franchising and small business ownership has to offer, and how a particular concept may be the vehicle to achieve their goals and objectives
– Establishing an interactive environment of communications and information sharing that will become the backbone of future franchise relationships throughout franchise systems

Last, many franchise candidates previously viewed franchising and small business ownership as a way of achieving their wishes, hopes and dreams, regardless of what those may have been. Today, it’s more about goals and objectives, and necessities. We, as an industry need to fully realize this, and understand the mindset of today’s franchise candidate.

Franchise Sales Process: Consistent or Flavor-of-the-Month?

Occasionally, I take a look at some of my posts from a few years back just to compare my thoughts and perspective from then to now. I always ask myself if I’m consistent so as not to confuse anyone. But more importantly, am I focused for the long-term or for just the here-and-now. Well, below is a post from June 2009. I’m sure you’ll agree that I have been consistent and have not jumped on any flavor-of-the-day bandwagon… It really is about fundamentals and best-practices!

Franchise Sales During the Recession

WSJRecently, in one of the franchise groups on LinkedIn, there was some discussion about the Wall Street Journal article, “Franchise Sales Pull Back During the Recession.” Several franchise professionals posted their comments and, of course, I added my “two cents” as well. Okay, I was definitely long-winded compared to the others, but as most of you who read my articles are well aware, I have a passion for franchising and franchise success and tend to go on and on to share the same with all who will “listen.”

“I too, believe there are many well-qualified candidates exploring franchising. Some as a career alternative, and also, in the case of already being a small business owner, as a business expansion strategy and/or an income diversification plan.

No doubt, the number of overall franchise leads has diminished quite a bit. But I believe many of the “tire kickers” have gone by the wayside while the more qualified candidates continue to search, inquire and ultimately decide franchising is right for them to achieve their goals and objectives. However, in order to fully realize this trend, one must realize that the candidates’ approach has evolved.

Today’s qualified franchise candidate is more sophisticated, educated and technologically advanced than we have ever seen before. Add to the mix, a sense of extreme caution, and their process in exploring franchising and specific franchise opportunities has become more of a detailed, well-thought out strategy.

Always understanding that there is risk in any entrepreneurial endeavor, today’s candidates explore franchising because it may provide even the slightest edge against failure. Their mantra has become, “failure is not an option” and they now live it by doing everything humanly possible to dot every “i” and cross every “t” and then rechecking only to do it over and over again until they have full, complete confidence in their decision.

To that end, the overall process from initial inquiry to franchise award is much longer than in years’ past and that is something franchisors must be prepared to effectively handle. It’s a primary reason I believe social media works so well in the new era of franchise sales as it creates an environment for today’s candidates to research organizations, share information, communicate with individuals at all levels of the franchise organization from franchisees to corporate executives, view photos, audio and video, etc. And, they can do so at their own pace and to their full understanding. That is the key.

Understanding and adapting to today’s qualified franchise candidate will help franchisors ride out this current economic downturn. Putting their heads in the sand and just complaining about the poor economy and the franchise candidate pool drying up will only incorrectly prove true that their negative thoughts are correct.

All that being said, certainly there are challenges in securing financing and other variables that must be contended with and addressed accordingly. But as the franchise candidate pool diminishes and many of the tire kickers aren’t around to waste our time, we should now have more time to explore all options, use our creativity and innovation, network beyond our comfort zones and seek out alternative solutions. I believe those solutions are out there and many are capitalizing on them as we speak. They will not only survive, they will thrive as others have done in other recessionary periods.”

“Localization and Social Media” – from Retail Franchise Industry Report 2012

The following is from the Localization and Social Media section of the recently released Retail Franchise Industry Report 2012 as shared by Franchise Direct. We’re excited to see franchisEssentials President & CEO, Paul Segreto, quoted in this section of the report…

Localization and Social Media

“People want to do business with people. They buy from people. Sure, the brand may get them in the door, but it’s the person representing the brand that they want to do business with,” says franchising expert Paul Segreto. “So, as consumers technologically advance it’s not uncommon for them to check out the local franchisee’s Facebook page or LinkedIn profile, perform a Google search of the franchisee, etc.”

Retail Franchise Industry Report-1In fact, findings from the 2012 Customer Insights Survey showed roughly three of every four consumers use Facebook to make retail (or restaurant) decisions. With more choices in the marketplace than ever before, it’s important for franchises to go beyond the price and quality of the products being sold and reach out to consumers where they are. Because of this, franchises are well served by letting franchisees foster relationships within their local communities that could lead to brand loyalty. Increasingly, this is being done through social media.

Whether is with Facebook, Twitter, Pinterest, Yelp or any other site, engaging customers and informing them about the choices they have in their backyard is always a good move. Relating the flow of money to the human body, David Boyle, researcher at The New Economics Foundation said in a Time Magazine interview, “Money is like blood. It needs to keep moving around to keep the economy going. [When spent in non-locally owned entities] it flows out, like a wound.”7

A franchise with a good advertising and marketing strategy that includes attention to local initiatives is very valuable to franchisees because no two markets are alike. As such, the advertising and marketing for different markets should be similar for brand continuity, but not exactly the same. Furthermore, many consumers find products and services by performing local searches, not searching out the corporate website first. Cultivating local media with tailored messages for specific areas is important to make a franchisee’s services relevant to that area’s consumers.

According to Segreto, “franchisors should not take a rigid approach with respect to messaging and social involvement. New media is all about interaction and engagement, and as such, requires a ‘personal’ touch at the local level.” One franchise system that has adopted the personal, localized social media and website concept is Apricot Lane Boutique. Each Apricot Lane franchisee is provided social networking set-up programs (including support and content for a Facebook page for their store, as well as Twitter and Pinterest). Franchisees also have their own customized website for their store.

Localized social media efforts can translate from friend to friend resulting in the word-of-mouth recommendations businesses of all types crave. One emerging way of rewarding local patrons through social media is offered by Foursquare. Foursquare recently launched a “local updates” tool geared towards letting businesses send messages about specials and events to customers wherever they happen to be at the time. The specials and events aim to capitalize on word-of-mouth advertising from those who buy from their store and take actions that advertise that store to their circle of contacts.

Read the complete Retail Franchise Industry Report 2012


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