Turning Concepts Into Chains
Franchisors offer tips for success.

By Jamie Popp, Senior Editor

From concept ideation to the first customer walking through the door, opening a restaurant requires investments of time and resources. For those with big dreams, transforming the idea from a single unit to a chain requires the same careful planning—and a lot more work.

Beyond the initial costs of building or leasing a location, developing a menu, creating an image and hiring staff, restaurant owners who wish to expand have many variables to consider.

“Becoming a franchisor is not the hard part; becoming a good franchisor is. It doesn’t mean you just take somebody’s fees. It takes a lot of time, money and knowledge to become a good franchisor, one who people invest in,” says John DeVries, chief executive officer and president of Gimme Sum Worldwide Inc., operator of Las Vegas-based Gimme Sum Fresh Asian Grill, a fast-casual Asian concept with locations in Nevada, Missouri and Utah. “You’ve got to get one [restaurant] right and build that to a critical mass before you look at anything else.”

DeVries’ experience stems from nearly 20 years’ experience with Milford, Conn.-based Subway. Today, his attention is focused on the new venture, franchising the Gimme Sum concept of contemporary Asian-style food that he calls American Chinese.

“I knew it was going to be a franchise from day one. The first franchise restaurant is opening this month in St. George, Utah,” he says. “We have three more locations opening in the next 90 days, with 18 or 19 restaurant openings this year.” Only two will be corporate owned.

“Our systems are great. From our operating systems such as training and manuals, everything we have is a good system; it works. We’ve set up a company that’s not top heavy on the corporate side and we don’t need to be.”

Simple in its approach, Gimme Sum has established what it hopes is a ready-made recipe for franchise success. In addition to national distribution and negotiated deals from distributors, components such as mixes and marinades are made in a commissary for franchisees, DeVries says.

Concept Creativity
While focusing on restaurant operations is important in order to establish systems and service consistency across multiple units, branding is a key component of getting a chain off the ground.

“We’ve been blessed with a cult-like following that spreads by word of mouth. When you’re a small company you need that,” says Alan Hixon, president and chief operating officer of College Station, Texas-based Freebirds World Burrito, a chain of 11 fast-casual Tex-Mex restaurants in Texas. “We’ve grown to a point where our revenue stream allows us to become more aggressive. We’re using outdoor and radio this year and rolling out the first television campaign in all Texas markets.”

Freebirds serves burritos, salads, quesadillas, tacos and nachos. In addition to the food, Hixon says a comfortably offbeat ambience is a big part of the Freebirds experience. Some locations feature cloudscapes and 3-D motorcycles with the Statue of Liberty holding a burrito.

Whether it is cheap-eats fickleness or a demand for something different, college campuses are fertile ground for dining innovation. Another college-born restaurant concept is Chicago-based Cereality Cereal Bar & Cafe, a restaurant concept designed to expand cereal consumption to all dayparts. What started as a food-court kiosk in Arizona State University’s Memorial Union in Tempe, Cereality is morphing into cafe-style dining and targeting a very different crowd.

“Cereality’s ingenious use of branded cereals ‘beyond the bowl’—in our Slurreality smoothies made with cereal and addictive snack mixes and bars—is what helped put our concept on the map,” said Rick Bacher, Cereality co-founder and chief creative officer, in a recent statement.

Although Cereality was first introduced to college students, a cafe location in a 1,500 square-foot format, recently opened in Philadelphia. According to a company spokesperson, the Philadelphia unit is a draw for families on the weekends and has helped broaden the concept’s appeal beyond college students to children and their parents. Cereality also is opening a location in downtown Chicago to further distance itself from the college crowd. Additional Chicago locations are expected to open as well as a first unit in Southern California.

Managing Costs, Retaining Talent
With real estate at a premium and food and labor costs always on the rise, Cereality has put together a team of executives from both the operations and manufacturing sides to manage its concept growth. Like other fledgling chains, it also is focused on the need to create a shared spirit.

“Every member of the team at Cereality is driven to build a world-class company and brand, not just open stores or do product line extensions,” said David Roth, chief executive officer and co-founder, in a recent statement.

Attracting and keeping upper-management and hourly staff are important to a chain’s success. Hixon says Freebirds’ part-time staffers can receive tuition assistance and participate in its Free Books program, which pays enrolled students who work a designated number of hours and maintain a set grade point average.

Franchising is an opportunity for both the franchisor and franchisee to get involved in the growing foodservice arena. Restaurant owners best prepared for expansion often produce the best results.

Franchise Forecast
Franchising transformed the restaurant industry from a collection of standalone operations into a global network of multi-unit brands. Last year, the 100 largest U.S. independent restaurants had aggregate sales of $1.28 billion. The McDonald’s system eclipses that total in any 10-day period.

Despite the spread of franchised restaurants, saturation isn’t a concern. U.S. food franchise executives surveyed recently by Franchise Recruiters Ltd., an international executive search corporation in Crete, Ill., predict a 4% growth this year in net new-unit development.

“There’s a lot of activity in franchising right now, even more so than I saw in the 1990s,” says Jerry Wilkerson, Franchise Recruiters Ltd. founder and a former president of the Washington, D.C.-based International Franchise Association. Economic slowdowns or downturns don’t necessarily deter growth of franchised businesses. “Franchising doesn’t always follow the strict economic programming that we live by,” he says.

The restaurant industry is not immune to challenges, however. Wilkerson cautions that rising gasoline prices already are having an effect on Americans’ dining habits “because people can’t get out and they spend their money on something other than food.” He believes quick-service concepts, with its traditional appeal among lower-income consumers—the “flexible-wallet community” is Wilkerson’s term—is especially vulnerable to negative impact from diminished discretionary income.

Because restaurant franchises rely on commodities—including beef, cheese and dairy—with changeable pricing, prospective franchisees need to understand and anticipate the business’ cost structure. He advises franchisers and franchisees to continually monitor industry trends to ensure success.

“Operations has become more and more important because [franchise owners are] looking for ways to enhance the bottom-line and lower the cost of doing business,” he says. “Marketing is a part of that but staying current with what’s going on in the industry and where the marketplace is going is extremely important. Average operators can’t do that. They’ve got their nose to the grindstone and can’t keep up with what’s going on in the business. Franchisors have to provide that information to their franchisees.”

Given the growing number of chains that find their systems overextended, undercapitalized or mismanaged—recent high-profile examples include Schlotzsky’s Deli and Krispy Kreme Doughnuts—Wilkerson foresees more consolidation ahead, especially among mid-scale chains.

“There are going to be some fairly sizable companies for sale this year because management doesn’t know what to do with them right now. They’re going to have to be reengineered and rewired,” he says. “They’ve been around a long time and are not keeping up with where the marketplace is going. These aren’t necessarily national chains. Some are regional chains that don’t have the horsepower in their management team to take the next step.”