Jun 5, 2011

10 Steps to Growing a Food Franchise

At one point, McDonald’s, Taco Bell and Pizza Hut all started out as single stores. Their brands were unfamiliar, their food offerings new. Now, they’ve become household names, tantalizing taste buds nationally and even internationally. But how exactly do you nurture and grow a food franchise to such heights?
We went searching for information and checked in with Douglas P. Fisher, president of FHG International Inc., a food-service and franchise consulting firm, and John Scardapane, founder and CEO of Saladworks, a fresh-tossed salad franchise concept that’s currently operating over 100 franchise locations across 11 states. Here are their top pointers:
1. Do an honest evaluation of your own experience: The only way your franchise can enjoy success is if you have the proper experience to take it to the next level. So be fair to yourself and your future franchisees and evaluate whether you’re truly capable of launching a successful food franchise. Says Fisher, “Each concept is different, and experience is what the franchisee is purchasing along with the brand.”
2. Make sure your concept is franchise-worthy: What could be a delicious success in one market might be a major flop in another. It’s important to take the time and do the research to see if your food concept is, indeed, franchise material. “All too often people open one restaurant and, whether successful or not, try to franchise it,” says Fisher. Instead, before you even think about franchising, Fisher recommends opening locations in at least two additional markets to ensure that the concept is profitable and has legs.
3. Make sure your business model is unique: To go far with your concept, you need a business model that can take you there, so make sure what you’re offering is unique. “You need a value differentiator from your competitors,” says Scardapane. “It should be clear to your customers what value you offer to them by coming to your store. You need to identify this model and be the best at it.” For example, Saladworks focuses on serving fresh and nutritious food in an upscale environment. The produce is chopped, grated, and sliced on location.
4. Build a healthy infrastructure before launching a franchise – even if it means making a major investment upfront: Even though the costs are always greater than the return in the short run, Fisher stresses the importance of manuals, standardized recipes, local store marketing, and operations expertise to the success of a franchise. Scardapane agrees that a strong infrastructure needs to be in place, and advises a food franchisor to be sufficiently capitalized to be able to hire employees for the home office six months before those positions are even needed. “Regardless of the experience a person has, it takes at least that amount of time for them to understand the true culture of your system,” he says. “Then they are ready to teach others your culture.”
5. Be ready for the challenges of expanding nationally: There are many factors that face a national brand that don’t affect a local one. For example, one of the challenges Scardapane faced was setting consistent pricing for his franchisees despite varying shipping charges. “You need to figure out a system for consistent pricing to all franchisees,” he says. “It takes some time, but it can be done.”
6. Have a spontaneous crisis management system in place 24/7: When operating a food franchise, major food issues can immediately and directly impact your business, so be prepared to go into action when necessary. The spinach scare in 2006 could have greatly handicapped Saladworks. However, because the company was prepared to deal with such emergencies, they had already pulled all the spinach from their shelves as a precautionary measure before the media even announced the scare. Says Scardapane, “[Your spontaneous crisis management system] needs to be designed to handle many crises--in particular, potential food-borne illness.”
7. Be ready to deal with growing pains: Growing is good, but it can be awkward at times. Working efficiently with a manufacturer is one issue that Saladworks had to deal with. “As you continue to grow, you outgrow your manufacturer’s capabilities, and you’ll have to identify national manufacturers,” warns Scardapane. “Often, they’re not able to handle the unique recipes that are required for some menu items. You’ll have to go through the process of teaching the manufacturer how to make your products with their machinery.”
8. Capitalize on the rewards of being a big brand: Survive the growing pains and you’ll ultimately reap rewards. In the beginning, Saladworks had to cope with the challenge of working with wholesale distributors whose price and quality wasn’t always consistent. However, with expansion came the ability to buy directly from growers who could ensure the best price and quality. “All of our produce is bought on yearly contracts, setting the per-unit price at the lowest constant number for the entire year,” explains Scardapane. “Market conditions do not affect our cost or, ultimately, our food costs.”
9. Keep your sight on the horizon: Every year, advises Scardapane, take the time to create a strong strategic plan that identifies your strengths, weaknesses, opportunities, and threats, along with a five-year projection. “Every year, identify seven or eight initiatives that you want to accomplish,” he says. “This will help you focus and be proactive instead of trying to put out fires.”
10. Exceed customer expectations: “Provide the best customer experience above and beyond all competitors,” says Scardapane. “If you exceed these expectations, your customers will become fans of your brand, not only increasing retail sales, but also building your brand nationally.” 

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