News

Summit seminar to tackle franchising pitfalls

September 6, 2007

Rich Hicks doesn't want to make the same mistakes others have made. The founder and president of Tin Star Southwest Grill hopes to learn from his peers' experiences with franchising — both positive and negative — when he attends the fourth collaborative seminar at the 2007 Fast Casual Executive Summit, "New frontiers in franchising and expanding your brand."

While he intends to hear about the pitfalls and headaches other franchisors have faced throughout the franchising process, he'll have his own tales to tell during the discussion, scheduled for 10:30 a.m. to noon Sept. 19.

"I'm sure that when we get talking, I'll have some horror stories," he said. "That's why we're doing this thing, (to learn from one another)."

Pattye Moore, co-founder of Instincts LLC, will lead the discussion, which is the last collaborative of the Summit, to be held Sept. 18 and 19 at the Hotel Palomar in Dallas.

Every restaurant company must examine how it will grow, Moore said, whether it be franchising, cultivating existing units or finding another way for brand expansion.

"I have a saying, 'Change is inevitable, but growth is optional,'" she said. "The reality is, if you're not growing, somebody else is."

According to results from the 2007 Fast Casual Industry Benchmarking Survey, about half of the representative fast-casual chains do not franchise. During the roundtable-type discussion, Moore intends to explore the reasoning behind that mentality.

"What are the barriers to franchising?" she asked. "Why have they chosen not to franchise? And what are the consequences, i.e., slower growth, as a result?"

One of the most pressing concerns among fast casuals is real-estate costs and availability, Moore said, and franchising could share that risk and alleviate some of the pressure.

But the decision to franchise must be weighed carefully, said Janelle Barlow, president of TMI US. The biggest challenge, she said, occurs when franchisors do not hold the reins of the franchises tightly enough.

"(In this case) the franchises end up delivering something other than what is delivered in the national advertising," she said. "So the customer comes in expecting something and then they walk into that local franchise and they don't get it. That begins to erode the trust that you need to have as a national brand."

When a brand is just starting to emerge, an operator may be tempted to cede more control to a local franchisee only to take away that freedom once the brand is established nationally, Barlow said. But the goals and structures should be clearly defined — up front — as the franchises are set up.

"They need to tell that local franchisee that that's what they're aiming for," she said, "and that the only way to do this is if everybody who operates one of these franchises works within a certain framework and that they need to design and manage and control that framework."

This front-end discussion and management can help grow a healthy brand.

"(Franchises) can become a part of capital generation," Barlow said. "But (operators) want to be careful that they don't let short term sales of those franchises get in the way of establishing a truly national brand."

Whether by franchising or through other means, Moore hopes the collaborative will spark a new attitude toward growth in participants.

"I hope that they will walk away with some concrete ways that they can approach growth, whether it's organic growth on their own or through franchising," she said. "That would be my hope, that they would get some of their questions answered and find new ways to think about growth."