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8 franchisors waiving royalty fees
Freddy's Frozen Custard & Steakburger, Barberitos, Dickey's Barbecue Pit, Firehouse Subs, Gyroville, Muscle Maker Grill, Qdoba and Schlotzsky's are cutting royalties in hopes of keeping their franchisees in business.
March 30, 2020 by Cherryh Cansler — Editor, FastCasual.com
Although the majority of Freddy's Frozen Custard & Steakburger 52 franchisees were enjoying a successful start to 2020, most have been hit hard by the COVID-19 pandemic. Co-founder and COO Scott Redler knew he had to act fast to help them stay open.
"As we watched the crisis unfold throughout the country, we wanted to find the best way to assist our franchisees and their teams, so we focused on the financial impact," he said during an interview with FastCasual.
That action was implementing a 1.5% royalty abatement through April 15, as well as directing 0.5% directly toward a national digital marketing effort at such time as operations return to normal.
"While it is impossible to predict the coming weeks, we share everyone's concerns about a short-term reduction in sales, and potentially longer impact, as our country fights the COVID-19 pandemic," he said. "The royalty abatement and marketing support are a couple of the many ways we are working to support our franchisees. Our team is meeting daily to reassess and offer recommendations to franchisees as we navigate this difficult time."
Fortunately, the economical impact to Freddy's 370 locations has been lessened by the fact that it's set up for drive-thru, carryout and delivery.
"While our dining rooms are closed, we've been able to allocate the hours available where we can," Redler said. "Regardless, a few of our franchisees were unable to avoid it and have had to lay-off or furlough team members. Everyone, including the hospitality industry, has been hit hard, but we look forward to the day when we can get all of our team members back to work."
Barberitos, Dickey's Barbecue Pit, Firehouse Subs, Gyroville, Muscle Maker Grill, Qdoba and Schlotzsky's have made similar decisions. See below.
Barberitos
Barberitos, which spans 50 locations across the Southeast, has launched several initiatives to provide financial relief to its franchisees.
"The Barberitos franchisees are my extended family, and we are in this together," Downing Barber, Barberitos founder and CEO said in a release. "I have spent most of my life serving food and am committed to continuing to do so in the safest manner possible."
The chain has:
- Removed royalty fees.
- Removed marketing fund contribution fees.
- Extended terms on national deals for immediate relief and is providing recommendations on how to negotiate rent and other expenses.
- Working with franchisees to ensure they take advantage of government support opportunities.
- Offering a sounding board for best practices, as well as the development and promotion of new menu items, hours, delivery, etc.
Dickey's Barbecue Pit
Dallas-based Dickey's Barbecue Pit announced last week that it was reducing royalties by 50% for its franchisees and is requiring corporate employees to be online and available where comfortable seven days a week to help operators maximize their digital and off-premise sales channels.
"Our guests, our owner/operators and our company employees all makeup the Dickey's family, and I'm proud of how we're able to support each other during this ambiguous time," CEO Laura Rea Dickey said in a company press release.
Firehouse Subs
Over the past couple weeks, Firehouse Subs sales have declined about 40-45% throughout the chain's 1,000 units, but CEO Don Fox is trying to ease the fallout for franchisees by deferring royalties and suspending ad fund contributions.
"We intend to sustain those initiatives until we have a better sense of where this settle out in terms of sales and traffic," he said. "Our top priority is helping our franchisees sustain their operations."
Gyroville
Gyroville, a 10-unit Mediterranean fast casual concept, stopped collecting royalty payments March 16.
"With the rapid increase in Covid-19 cases around the country, and especially in our largest market, South Florida, we quickly noticed that our franchisees were having difficulty maintaining sales," founder and CEO Lambros Kokkinelis, said in a press release. "The time for us to act is now."
Muscle Maker Grill
Muscle Maker Grill has set up a royalty deferment program, meaning franchisees are eligible to receive a 50% deferment on royalties and a reduction in their marketing/advertising contribution, according to a company press release.
Qdoba Mexican Eats
Qdoba Mexican Eats, which has more than 730 locations in the U.S. and Canada, announced March 20 that it was offering a royalty deferral program for eight weeks.
The move will help franchisees protect cash flow as they adhere to the CDC guidelines for social distancing and the U.S. government's mandate for dining room closures, CEO Keith Guilbault said.
"Qdoba understands the plight of our franchisees during these unprecedented times, and we are committed to supporting our local business owners in any way we can," he said. "Our focus with every decision is to be in the best position possible to address this downturn and continue to be a dependable choice for our guests."
Qdoba is hosting daily webinars with its franchisees to keep lines of communication open. It's also moved to limited-contact ordering, including digital ordering through Qdoba.com or the Qdoba app, in-restaurant to-go ordering, and delivery via its third-party providers.
Schlotzsky's
Schlotzsky's President Beto Guajardo told FastCasual that in order to help franchisees remain cash-flow positive, the Atlanta-based chain has deferred royalty payments and advertising contributions through the end of April.
"In partnership with many of our vendors and suppliers, we have been identifying opportunities to reduce monthly charges where we can, or canceling nonessential services altogether," he said.
About Cherryh Cansler
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