June 18, 2013

Franchising | July 2012 | By Daniel P. Smith

2012’s Best Franchise Deals

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Dickey’s Barbecue

Total U.S. Unit Count: 218 / 203 franchised

Franchise Fee: $15,000

Total Start-Up Costs: $63,000–$395,000

Royalty: 5% of net sales

Renewal Fee: $10,000

Marketing Fee: 4% of net sales

Dallas-based Dickey’s, which had its AUV surpass the $800,000 mark in 2011, remains among the nation’s fastest-growing barbecue chains.

Richard Phillips, Dickey’s vice president of development, says the family-run, third-generation business offers more than 70 years of proven restaurant expertise and high growth potential courtesy of an extensive training program at Dickey’s Barbecue University. It also features ongoing operations support and an energized marketing program that supports franchisee profitability, he says.

Phillips adds that the fast-casual barbecue brand offers myriad real estate options, ranging from traditional free-standing restaurants to shopping-center end caps and nontraditional units, including airports, theme parks, and convenience stores. Such flexibility allows prospective franchisees an opportunity to capitalize on favorable commercial real estate costs present throughout many U.S. markets.

An Outside View: Though the barbecue segment can be challenging with regional competitiveness, Jon Jameson, a former Panera Bread executive who is now a principal with the Bellwether Food Group, calls Dickey’s “the value leader in the chain barbecue category.” He says the concept is positioned to compete with its “good smoked meats and tasty sides at prices that are surprisingly reasonable.”

Freddy’s Frozen Custard & Steakburgers

Total U.S. Unit Count: 58 / 49 franchised

Franchise Fee: $25,000

Total Start-up Costs: $395,000–$835,000

Royalty: 4.5% of gross sales

Renewal Fee: 1⁄3 of then-current license fee

Marketing Fee: .25% of gross sales

Despite a presence in only 20 states, Wichita, Kansas–based Freddy’s Frozen Custard & Steakburgers is quickly gaining a national following. In 2011, systemwide sales climbed to more than $70 million as AUV topped $1.3 million, largely on the back of Freddy’s cooked-to-order premium steakburgers, Freddy’s Fries, and fresh-made custard.

A formal “Freducation” training program and infrastructure for franchisee coaching help ensure consistency throughout the system, while the corporate office embraces low fees and transparency, highlighted by a longstanding practice of returning all incentives and rebates to franchisees.

“Freddy’s fun and friendly culture is … a direct result of the autonomy granted to entrepreneurs to succeed with a cost-effective means of growth and the ability to build a winning brand while remaining independent,” Freddy’s COO Scott Redler says.

An Outside View: “[Freddy’s] low fees and above-average AUV are no longer a secret, and I think we’ll see them have a true national footprint in the coming years,” Omholt says. He adds that Freddy’s inviting, nostalgic décor and high-quality burgers have allowed the brand to hold its own in head-to-head marketplace battles against the likes of Steak ‘n Shake and In-N-Out Burger.

Next: Moe’s Southwest Grill