Franchising | July 2013 | By Daniel P. Smith

2013 Best Franchise Deals

Looking to add a brand to your portfolio? These are the limited-service industry’s best bets.

Papa John's offers potential franchisees strong AUV and national brand exposure.
Papa John's lands on the Best Franchise Deals list by offering franchisees operational simplicity and name recognition. papa john's
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It’s back and bigger than ever. Now in its fourth year, our “Best Franchise Deals” report has become the can’t-miss list of top quick-service and fast-casual franchises, assessing factors such as investment-to-sales ratio, marketplace differentiation, corporate support to franchisees, and positive brand momentum.

While the previous reports whittled the best-franchise list down to 10, this year we’re homing in on 12 different brands in three size categories: The Hungry Upstarts, which focuses on smaller, emerging concepts; The Rising Stars, spotlighting more established brands seeking national penetration; and The Powerbrokers, well-established concepts with more than 300 units.

 

The Hungry Upstarts

Emerging concepts laying the groundwork for growth.

Tin Drum AsiaCafé

Total U.S. Unit Count: 11 (9 franchised)

Franchise Fee: $35,000

Total Start-Up Costs: $299,000–$477,000

Royalty: 5% of net sales

Renewal Fee: 50% of then-current franchise fee

Marketing Fee: 4.5% of net sales

With its street-inspired Pan Asian cuisine, energetic atmosphere, and self-ordering kiosks, Tin Drum is ahead of the fast-casual curve, throwing in bold flavor profiles, high-quality food, customization options, and convenience, to boot. An AUV topping $1 million, meanwhile, signals its appeal to a widening consumer base.

The Atlanta-based concept’s menu combines 15 signature sauces with more than 35 made-to-order items carrying Thai, Japanese, Chinese, Vietnamese, and Indian influences. The result, Tin Drum founder Steven Chan says, is dynamic flavor profiles that satisfy guests’ desire for more exotic food and promote repeat visits.

Tin Drum has menu items approved by HealthyDiningFinder.com—an alluring feature to health-conscious guests—as well as state-of-the-art, self-ordering kiosks equipped with health-based software that lets patrons order based on dietary goals, including gluten-free and vegetarian options.

For the franchisee, Tin Drum’s compact design reduces construction and operating costs, while the chain’s debt-free business strategy signals its ongoing effort to pursue strategic growth with the necessary infrastructure to help its franchise partners flourish.

An Outside Perspective: “What makes Tin Drum a win for a franchisee is not only the attractiveness to consumers, but the value-engineered cost of entry and strong AUV,” says Lynette McKee, CEO of McKeeCo Services, a franchising and development strategic advisory firm. “It could be a nice target for a multibrand franchisee looking for a second or third diversification opportunity.”

BurgerFi

Total U.S. Unit Count: 12 (10 franchised)

Franchise Fee: $40,000

Total Start-Up Costs: $313,750­–$627,083

Royalty: 5.5% of gross sales

Renewal Fee: % of then-current franchise fee

Marketing Fee: 3.5% of gross sales

Count eco-friendly BurgerFi among the latest entries into the burgeoning better-burger category.

Though BurgerFi’s menu is highlighted by all-natural, grass-fed burgers, the Florida-based fast casual also serves up numerous specialty items, including Kobe beef hot dogs, quinoa burgers, hand-cut fries, and frozen custard. Craft beer and wine service further boosts sales potential and differentiates the concept from a swelling list of competitors.

BurgerFi’s corporate office places a premium on providing consistent support to its franchise partners. In addition to providing assistance in such areas as field operations and lease negotiations, the company assigns each franchisee a personal business adviser to work with the operator on an ongoing basis.

The three-year-old chain, which has an AUV of $2 million, will soon debut stores in New York, Michigan, Washington, California, and Texas.

An Outside Perspective: Eric Simon, head of the business intelligence services team at Virginia-based FRANdata, says BurgerFi hits on an important trifecta with its variety, humanely raised meat, and environmentally conscious positioning.

“Nowadays, the public expects more than just another burger joint,” Simon says.

Fresh To Order

Total U.S. Unit Count: 7 (3 franchised)

Franchise Fee: $35,000

Total Start-Up Costs: $550,000–$720,000

Royalty: 5% of net sales

Renewal Fee: 10% of then-current franchisee fee

Marketing Fee: 4% of net sales

A pioneer of “fast-fine” dining—a restaurant blending upscale dining’s quality with the operational platform and price points of fast casual—Fresh To Order (F2O) features a chef-inspired, line
cook–executed menu of freshly prepared entrées, panini sandwiches, soups, and salads, all ready in less than 10 minutes for about $10.

Forty percent of the seven-year-old, Georgia-based concept’s daily business stems from dinner sales, a number that underscores f2o’s ability to please guests and provide strong ROI to franchisees. Within the next five years, f2o plans to expand beyond its Southern base by opening 50 new stores and adding 50 more to its development pipeline, including in nontraditional venues.

“With average unit volumes of $1.7 million and year-over-year comparable sales growth of 10 percent, our financial foundation is formidable,” says f2o chief development officer Jocelyn Blain.

An Outside Perspective: Simon likes f2o’s ability to attract business during different dayparts, its strict franchise requirements, and its development that features both franchised and corporate-owned locations. He says corporate stores show that the brand is committed to growing alongside its franchisees and to understanding “the reality of what is happening on the street level of its business.”

Taquerias Arandas

Total U.S. Unit Count: 27 (all franchised)

Franchise Fee: $45,000

Total Start-Up Costs: $98,000–$649,000

Royalty: 6% of net sales

Renewal Fee: $20,000

Marketing Fee: 1% of net sales

Since the original Taquerias Arandas opened in 1981, this Houston-based concept has dazzled patrons with its authentic, street-inspired Mexican cuisine.

Taquerias Arandas president Judy Camarena says the concept emphasizes a sense of community among its franchisees, one rooted in trust and systemwide success.

Years of steady growth throughout Texas and double-digit sales and traffic increases at stores across the system have readied Taquerias Arandas to take its name and its $1.3 million AUV beyond the Lone Star State. Camarena says the timing is right now given the company’s comfort with opening new stores and its role as franchisor. The growing taco trend, rising interest in the brand outside of Texas, and limited presence of national chains serving authentic Mexican cuisine have also encouraged its growth.

An Outside Perspective: McKee credits Taquerias Arandas for establishing trust with its franchisees and building a solid regional base before taking the brand to new markets outside Texas.

“What is also equally important is that the ROI for [the brand’s] franchisees is very healthy, and sales continue to climb with a nice—and low—price point and a truly authentic, real-Mex menu,” she says.

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