Independent Operators

Multi-unit franchisors talk expansion plans, issues plaguing growth

Franchising can be difficult in the best of times, but add in supply chain issues, labor shortages and a pandemic and it can be downright impossible. A panel of expert franchisors discussed modern multi-unit franchising in a panel discussion at the Restaurant Franchising and Innovation Summit held in Atlanta, Georgia.

Photo by Networld Media Group

September 24, 2021 by Mandy Wolf Detwiler — Editor, Networld Media Group

Mastering franchising is difficult in the best of times, but COVID-19, supply chain issues and labor shortages have forced brands to be at the top of their game. Mastering the multi-unit franchise was the focus of a panel discussion at the Restaurant Franchising and Innovation Summit hosted by Networld Media Group and held in Atlanta, Georgia.

The event is one of several restaurant industry summits run by Networld Media Group. The media company's Fast Casual Executive Summit will take place Oct. 3-5 in Charlotte, North Carolina, and a virtual event #QSRNext, will take place Nov. 9. Now in its 16th year, the Fast Casual Executive Summit brings together the best brands in the world for three days of interactive sessions that delve deep into topics that are on the minds of restaurant leaders today.

Michael Manlapas, vice president of partnerships for Revel Systems, led a panel discussion about franchising with: Nicole Di Pietro, vice president of Jeremiah's Italian Ice; Rafik Farouk, senior director of global business development for P.F. Chang's; Mahesh Sadarangani, COO of Wingstop and Steve Schulze, co-founder and CEO of Nékter Juice Bar.

Jeremiah's Italian Ice is growing conservatively, Di Pietro said, adding that the company chooses its franchisees selectively because integrity and brand culture are paramount. "We are a people-first company," she said. "I think now more than ever that's extremely important even with technological advances. There needs to be a focus on that connection point."

The company is 65% multi-unit ownership with some single-shop owners and an area representative program that helps them to expand the footprint quicker. The area representative agreement allows the company to have a presence that's farther away from its home office in Orlando, Florida. It acts as a mini-franchisor in that the company shares royalties on a 40/60 split. It's proven to be successful, but Jeremiah's is only a year into it.

P.F. Chang's is a complex brand to operate, said Farouk. The company only works with multi-unit franchisees. "We don't do single unit, we don't do single country," he said. "We try to have a big operator that can sustain financially and operationally the development schedule that we put in place."

The company is looking to expand in current markets, including the Middle East, in places like Kuwait, Dubai and Saudi Arabia, and with franchisees willing to move with "sophisticated" franchisees with multiple units and multiple countries.

Sadarangani said Wingstop has 260 different franchises around the world, and "long term we want to get that to about 150 franchisees," he said. "Most of our growth throughout the world today … 94%, came from existing franchisees."

Wingstop looks for "brand partners" who embody the company's core values of being service minded, authentic, fun and entrepreneurial. The average Wingstop franchisee owns about five units, and the company wants to slowly grow that.

Schulze said Nékter Juice Bar has grown with patience and structure in its first five years. While they could have sold a lot of franchises in their early years of franchising, the company would probably be bankrupt by opening too many stores too quickly. He believes it's important to grow centrically.

"Far too often I've seen brands that don't have enough corporate skin in the game," Schulze said. "And the second aspect is I see a shotgun approach" with franchise inquiries far outside a brand's recognition and reach.

Now that the company is in 17 states, they're more apt to explore those one-off markets, "but we have the depth of experience to handle it," he said.

Issues plaguing today's franchisees

Supply chain issues, labor shortages and COVID-19 closings have all affected companies' ability to grow in the past year and a half.

"Supply chain issues have been even more detrimental to us than the labor issue because we only serve two products," Di Pietro said. "When we get a call from our distributor that there's a national plastic shortage, and we don't have any cups for you and I have franchisees that are not only currently operational but I also have 25 more to open the rest of this year, you have to pivot quickly. You have to start sourcing things everywhere and anywhere that you can."

Farouk said multi-unit franchisees have the opportunity to recover faster when there are issues. His company built more Outback Steakhouses because they could take the menu from 74 items to a third of the menu and his company focused on 36 ghost kitchens during the pandemic.

"It's much easier to have multi-unit franchisees that can mobilize their experience in the market specifically internationally than a smaller franchisee," Farouk added.

Sadarangani said using cross-functional ingredients help supply chain issues, and Wingstop was able to reduce cost of goods by 4.5%. "I think allowing the franchisees to reduce the number of SKUs, maintaining the integrity of the products, maintaining the ingredients and working with partners" are important aspects of acting as a franchisor."

About Mandy Wolf Detwiler

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Mandy Wolf Detwiler is the managing editor at Networld Media Group and the site editor for PizzaMarketplace.com and QSRweb.com. She has more than 20 years’ experience covering food, people and places.
 
An award-winning print journalist, Mandy brings more than 20 years’ experience to Networld Media Group. She has spent nearly two decades covering the pizza industry, from independent pizzerias to multi-unit chains and every size business in between. Mandy has been featured on the Food Network and has won numerous awards for her coverage of the restaurant industry. She has an insatiable appetite for learning, and can tell you where to find the best slices in the country after spending 15 years traveling and eating pizza for a living. 

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