Franchising | May 2010 | By Jordan Melnick

Grow Town

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Detroit might be a reasonable location for quick serves to open up.
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So, despite the naysayers, Ansley says he is planning “to pull the trigger on a couple of more” locations in the Detroit market.

“It’s kind of a contrarian view point,” he says, “but it’s like Warren Buffett says: Be greedy when everyone else is fearful and fearful when everybody else is greedy.”

Ansley isn’t the only one planning to bring the Sage of Omaha’s famous principle to bear in the market. Craig LeMieux, the Detroit-area developer for Tropical Smoothie Café, whose closest location to the city is 16 miles away in Livonia, Michigan, says he is “currently looking for prospective franchisees” and “absolutely” committed to moving into the Motor City.

“Five Guys is building stores in Detroit like it’s going out of style. The Panera Breads, the Chipotles—those places seem to be doing well.”

“There’s one thing about a down economy, it creates opportunity,” LeMieux says. “We’ve never seen the opportunities that are available right now in real estate and the cost of lease space and the negotiations that landlords are doing right now to get tenants in there. So, it’s absolutely the right time now to be doing business.”

And then, like Ansley, he paraphrases Buffett: “I think the greatest success stories often come from times of bad economic conditions because people act at the right time. This is when opportunities are made.”

While Tropical Smoothie Café is hell-bent on opening in Detroit, it doesn’t even have one Detroit store opening in the works. And that’s the irony in the Buffett principle, particularly as it pertains to a franchise chain. A franchisor can embrace greed in scary times and not find any franchisees willing to join in throwing caution to the wind.

“The economy has scared a lot of people into holding their money, and I think they need to start seeing some changes in the economy for them to make that leap,” LeMieux says.

But after seeing his franchise leads triple year over year in January, LeMieux senses that, slowly but surely, more people are getting ready to jump.

“We’re on the crest of being able to pull out of the recession and grow quite a bit in the very near future,” he says.

And like many other players that have weathered the economic storm in Michigan—which most Detroiters will tell you first descended on the city about eight years ago—LeMieux puts much stock in a motto Buffett did not coin: Whatever doesn’t kill you makes you stronger.

“I’ve seen other concepts closing up during these times,” he says. “Concepts that were on the edge didn’t make it. It’s kind of a cleansing of the system. The strong concepts come out of this even stronger, and the weaker ones kind of fall away.”

Still, even for those who have survived the recession, the battle is only beginning. For one thing, there is still Detroit’s emigration problem, which John Brodersen, a Popeyes Louisiana Kitchen franchisee with 11 stores in the city, calls more “dramatic than in any city in the U.S.”

“The problem in Detroit is that even if you’re growing 2–3 percent per year, the population is losing 2–3 percent, and you’re not going to show sales growth,” he says. “In other words, you’re flat in sales even if you’re doing well.”

So even as the recession cleansed the market and ostensibly gave surviving restaurants more breathing room, emigration forces restaurant operators to do whatever it takes to attract a shrinking customer base.

“It’s kind of a scary thing for a lot of operators used to doing business in the suburbs where they don’t have to meet any growth demands—they just wait for the population to move into their towns,” Brodersen says. “They don’t have to steal customers from their competitors … to get growth.”

Despite all of the obstacles, Brodersen is also talking opportunity. He estimates that the costs of opening and operating a restaurant in Detroit are down 40 percent and is eager to take advantage of the cut rates.

“Three years from now you’ll look back and say ‘I’m glad I bought,’” he says. “In our lifetime this will be the cheapest asset.”

He, too, channels his inner Buffett: “It’s the guys with the guts and the gumption that do it now that will be making money later.”

Of course, not all of the guys with the guts and gumption to venture into the Detroit restaurant market are chain operators—or guys.

Torya Blanchard is the owner of Good Girls Go To Paris, a crêperie in Midtown that opened in July 2008. A Detroit native, she’s defensive when it comes to her hometown’s beleaguered reputation.

“When we read negative stories about Detroit we say, ‘OK, whatever,’ and we keep going on,” Blanchard says, speaking on behalf of her fellow residents. “Yes, there’s a lot of unemployment and, okay, we’ve been battered this year—but we’re not going to just give up and move out.”

Blanchard says business is good—she recently relocated to a bigger location—and that, while much of Detroit lies vacant and desolate, Midtown is thriving, helped by loyal customers and several large cultural institutions nearby.

A couple of miles away, in the Eastern Market, is Supino Pizzeria, which opened in June of 2008, just before the world economy lost the wind in its sails.

“It was unbelievable, like boom, things just started to go downhill on a daily basis,” says owner David Mancini, a self-described Detroit loyalist.

Nonetheless, Supino Pizzeria is also doing well as it benefits from customers trading down and a best-pizza nod from the Detroit Free Press last August, which Mancini says increased his business “exponentially.”

As young, homegrown entrepreneurs, Blanchard and Mancini represent yet another side of the Detroit story. They don’t just plan to stick it out in the Motor City—there’s nowhere else they’d rather be.

“The thing about Detroit is we don’t care what outsiders think,” Blanchard says. “We go on with our lives and we create. We’re resourceful and very resilient. In the end, we just keeping it moving.”

And Detroit is now moving, however slowly, in the right direction, Mancini says.

“As dire a situation as it was, I think it’s getting better,” he says. “Specifically in the city of Detroit itself, you see a lot of loyalty. It’s kind of a big city with a small-town mentality. That’s going to help.”

And with that, Mancini uses another O-word that many wouldn’t think to associate with Detroit.

“I’m optimistic,” he says.

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