Franchise or company owned stores? Successful followers of both models offer insight
Photo courtesy of iStock.
Is franchising the best way to grow the business? The question dates back to the Middle Ages, when landowners allowed tax collectors to retain a percentage of the funds they collected and returned the rest.
Today, the question weighs heavily on the minds of foodservice establishments that need to consider the benefits and challenges of offering a turnkey program to entrepreneurs versus having more control (and attendant headaches) via expanding with company-owned stores.
A session last month during the Fast Casual Executive Summit at the Nashville Omni gave attendees a chance to hear from two successful pizza entrepreneurs who pursued different paths to growth — franchisees and company-owned restaurants.
Two different approaches
Jim Mizes, CEO and president of Blaze Pizza LLC, grew his company mostly through franchising, operating 215 franchises and five company-owned stores. The company-owned restaurants were developed to create operating systems for the franchisees.
Michael Lastoria, co-founder, CEO and creative director of &pizza, a 23-pizza-restaurants chain, chose the company-owned route. The company's concept is to reflect the culture and people of the neighborhood in which each restaurant is located.
Mizes said the decision to franchise depends on the company's goals. In his case, he wanted to expand as fast as possible when he decided to get into the fast casual pizza business in 2012.
"We saw that getting on the field fast was important," Mizes said.
For Lastoria, the goal was to embellish the uniqueness of each restaurant. Each &pizza has its own story that Lastoria works to incorporate into the store's design.
"This is about building something meaningful, special and will be around for decades to come," Lastoria said. People increasingly are choosing to visit businesses that reflect their own values.
Jim Mizes of Blaze Pizza proves to Mike Lastoria of &pizza that his franchisees are encouraged to be unique by showing his new tattoos. The tattoos were not real, however. Photo by Matt Tilbury.
Asked what the drawbacks are of company-owned stores, Lastoria said learning to operate a restaurant is difficult, and as an independent owner, he had to learn things like how to hire good operators and how to negotiate real estate transactions.
Lastoria acknowledged that franchising provides a way to teach operators these operational tasks.
Asked how he controls franchisees as they grow, Mizes said every franchisee has a voice in the organization's decision. There are monthly meetings and an annual meeting. There is no franchisee council that makes the decisions. Every franchisee has a voice.
Mizes disputed the idea that franchising doesn't allow for store originality. He said he liked Lastoria's idea of having a story for each restaurant and has incorporated this concept into his franchisees' restaurants.
Mizes also said he believes he communicates with his franchisees as often as Lastoria communicates with his employees.
Can you have it both ways?
Asked if it would be possible to have both franchises and company-owned stores, both Lastoria and Mizes said it would be difficult.
"I think it would be very, very hard to do both well," Lastoria said. But it could be done."
The session demonstrated that both business models can be successful with the right execution.
Elliot Maras Elliot Maras is the editor of KioskMarketplace.com and FoodTruckOperator.com.