For Le Duff, Growth is All the Rage

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Only a little more than a month into 2013, Le Duff America—the world’s second-largest restaurant company in the bakery café segment, with brands like Bruegger’s Bagels and la Madeleine Country French Café in its portfolio—can already tell it’s going to be a big year.

For starters, it recently purchased casual-dining chain Mimi’s Cafe from Bob Evans for $50 million. It also plans to begin franchising the growing la Madeleine brand, and is expanding Bruegger’s presence with both traditional and nontraditional unit openings.

The latter predicts a six percent increase in new bakery openings in 2013—nine franchise locations and 10 corporate units, for 19 in total—and hopes to launch more than 100 new bakeries over the next five years.

Targeted growth markets include Atlanta; Austin, Texas; Phoenix; and Virginia Beach, Virginia. Bruegger’s—which recently opened a unit on the campus of Virginia Tech—is also offering franchisees the opportunity to take over company-owned stores in three markets: Nashville, Tennessee; Tallahassee, Florida; and Huntsville, Alabama.

Paul Carolan, chief development officer for Le Duff America, says the brand has experienced five years of comparable sales growth, and has an AUV of more than $700,000 and build-out costs of $400,000–$500,000.

“The timing for [expanding] Bruegger’s couldn’t be better,” he says.

And the time is also ripe for franchising another brand in its portfolio: la Madeleine Country French Café.

The 60-plus-unit chain has been making a name for itself in markets like Texas and Louisiana since 1983, but it wasn’t until recently that Le Duff was ready to take the brand out of company hands—and for good reason, Carolan says.

“There’s a gap between when you’re ready to franchise and when people want to franchise,” he says. “People want to franchise a lot, and they usually want to franchise for all the wrong reasons.

“They think, ‘We can probably get more points of distribution, we can grow our business, we can get more royalty streams,’” he continues. “Yet, they have a brand that’s not very franchise-able. It doesn’t have the right customer demand, and they don’t have a good economic model.”

But la Madeleine, Carolan says, doesn’t fit this description. After conducting several focus groups over the last few months, the brand discovered that guests had two primary complaints. First, locations weren’t convenient to them, due to the fact that there simply weren’t enough units. Second, guests said restaurants were just too busy.

“That’s a good problem to have,” Carolan says.

With an AUV of $2.1 million and an EBITDA approaching 18 percent, he says the brand is a great sales-to-investment ratio for potential franchisees.

La Madeleine’s first franchisee, Buddy Beach—also a Red Mango franchisee—signed an agreement at the end of 2012 to open three units in Western Texas, located in Lubbock, Midland, and Amarillo.

Carolan says the company is being very selective when vetting potential operators. “They have to have plenty of capital,” he says. “To build out one of our stores, [you need] $1.2 million.” He adds that franchisees must also have excellent restaurant operating skills.

Company projections call for more than a 15 percent increase in new la Madeleine units in 2013: Seven company-owned units will open their doors, and three restaurants will debut in airports with help from partner HMSHost.

The brand plans to grow in concentric circles from established markets—like New Orleans, Atlanta, and Washington, D.C.—and would like to see expansion in areas such as northern Virginia, Maryland, northern Florida, Oklahoma, and New Mexico.

“We’d like to sign five to six deals this year, and usually our goal is to have a five-unit deal in each one,” Carolan says.

However, the company wants to keep growth under control. “In franchising, I think the piece that you always have to guard against is not letting … your head get beyond your heart or what you’re capable of managing,” Carolan says.

“A lot of times, people love their brand, but then they get so many people excited about them and with that press and all that excitement, they let go of their heart and they starting thinking with their financial mind,” he continues. “All of a sudden, you’ve got too many franchisees opening, they’re not getting support, and then you’ve got franchisees closing.”

Carolan says the brand’s goal is to manage growth and continue providing support to its future franchisees. He says Le Duff as a whole also has a long-term strategy to focus on food, customer experience, and service.

“I think that’s a lot from our heritage from France and Europe,” he says, adding that the brands want to “treat customers truly as guests in our home and serve up some great food that’s served freshly for them.”

By Mary Avant