Franchising | July 2012 | By Daniel P. Smith
2012’s Best Franchise Deals
Total U.S. Unit Count: 152 / 83 franchised
Franchise Fee: $40,000
Total Start-up Costs: $500,000 approx.
Royalty: 5–6% of net sales
Renewal Fee: None
Marketing Fee: 2% of net sales
In the dynamic better-burger segment, Denver-based Smashburger has earned a cult following for its highly customized, regionally adapted menu and smashed, 100 percent Angus beef burgers.
With systemwide sales approaching $116 million in 2011, Smashburger’s AUV now tops $1 million, a sign of the robust momentum it offers its multiunit franchisees.
Smashburger chairman and CEO Dave Prokupek says his company provides its franchisees a number of distinguishing characteristics, including: six weeks of training at corporate headquarters and at the franchisee’s location; ongoing support in the form of a franchisee newsletter, field evaluations, purchasing cooperatives, and security procedures; and marketing support from co-op advertising and national and regional spots.
“We offer a progressive approach to partnering with our franchisees, treating them as co-investors and co-developers,” Prokupek says.
An Outside View: Jameson says “unique and signature differentiation” separates Smashburger from the crowded fast-casual burger category.
“With their Smash Fries, chicken sandwiches, salads, and three buns, Smashburger provides options that consumers seem to crave,” he says, adding that the company’s philosophy of treating franchisees as partners “drives a business model that can yield solid performance.”
Total U.S. Unit Count: 24,722 / all franchised
Franchise Fee: $15,000
Total Start-up Costs: $84,800–$258,300
Royalty: 8% of gross sales
Renewal Fee: None
Marketing Fee: 4.5% of gross sales
Powered by flexible unit formats, a health halo around its made-to-order products, and value-driven marketing that produces results, the world’s largest restaurant chain makes its third consecutive appearance on this list.
“Subway is known for its healthier alternatives to traditionally fatty fast foods, offers low start-up costs, and requires minimal experience, equipment, and space,” Subway spokesman Les Winograd says when defining the brand’s most deal-worthy traits.
Though concerns linger about cannibalization in the 100 percent franchised system, Subway’s robust results (system-wide sales in 2011 topped $16 billion) are difficult to discount and continue pushing entrepreneurs into the Connecticut-based sandwich giant’s franchising ranks.
An Outside View: Jameson says Subway franchisees benefit from a strong value equation, reasonable start-up costs, versatile store models, and strong area developers that manage and support new and existing franchisees.
“More on-the-ground support helps in a huge system, especially if you are bringing new franchisees in without any restaurant experience,” Jameson says. Still, he cautions franchisees to be clear about development agreements, territory, and defined market area.
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