Birth of a franchise: The first franchised location

Birth of a franchise: The first franchised location
Tags: Franchising & Growth, Operations Management
June 23, 2009 - Valerie Killifer

* This is the second story in the Birth of a Franchise series following Sofi's Crepes founder Ann Costlow as she goes from independent operator to franchise owner. The first story, Birth of a Franchise: Sofi's Crepes, appeared on Fastcasual.com on May 19.

Ann Costlow was all set to open her first Sofi's Crepes franchised location in Annapolis, Md., when she heard from an inspector a building permit was required despite her being told otherwise. Then, an addendum was found in the lease that said there could be no cooking in the building even though her franchised Sofi's location was previously a restaurant.

"It was unbelievable. It was a nightmare," Costlow said. "We were never told there was anything in the lease. We have been knocking on every politician's door to get help. No one can explain why this addendum was filed."

Costlow had to endure two public hearings, the first on May 21 and a second June 2, before she received the unanimous go-ahead to open Sofi's. So after the location's final inspection June 8, Costlow signed the occupancy permit and turned around the sign on the door.

Even though it was going to take an hour to prepare crepe batter and further prepare the restaurant, Costlow said her main goal was to get the location open.

"Within five minutes we had guests," she said. "We just got it all together and had a great first weekend, actually."

Turning obstacles into opportunities

Costlow's postponed opening did little to thwart community interest, and if anything, only increased the amount of buzz that surrounded Sofi's opening day.

"I'm trying to look at the positives of everything," Costlow said. "Having not been open was a little bit of a public relations thing for us in a way. It was sort of known around town we were dealing with a zoning issue and it's known around town that happens a lot. It also brought us to the attention of all the people we were contacting at City Hall."

Costlow is based out of Baltimore, where she opened the original Sofi's Crepes in 2004, and she became a legal franchisor in Maryland in February.

A former manager is her first franchisee and Costlow plans to travel to Annapolis at least once a week during its first month of operation to help run the shop.

"I don't feel like I have to work with Stephanie a whole lot because she was a manager for two-plus years," Costlow said. "She didn't need the on-site training as much."

The Annapolis location has no indoor seating, but there are tables outside. The limited seating capacity and menu will help Costlow's franchisees keep overhead low — cost of goods sold are about 18 percent of Sofi's net sales and only four employees are needed during busy shifts.

The Sofi's Crepes franchise fee is $30,000 and the total amount needed, including the fee and three months worth of working capital, is anywhere from $100,000 to $250,000.

Costlow said she is trying to work with a younger audience as potential franchisees and is in talks to open locations in Boston and other markets.

"I want somebody that really is interested in putting their heart and soul into it and creating a business for themselves," she said.