Web Exclusive | November 2016 | By Danny Klein

When Franchising Just Doesn’t Work

Six years after announcing it would start franchising, fast casual Taqueria del Sol is taking control of its own future.
Menu items, like this Fried Chicken Taco, have made Taqueria del Sol an Atlanta fast casual destination. Taqueria del Sol

Back in 2010, Taqueria del Sol unveiled its plans for the future. The Atlanta-based fast casual, through a wholly owned subsidiary, was entering the franchise game—a rather intriguing prospect considering the brand’s resume. Three years earlier, the 10-year-old Mexican- and Southern-inspired concept, which began as a converted café in 2000, was named a “Top American Restaurant” by Bon Appétit. Following that, owners Mike Klank and Eddie Hernandez collected consecutive James Beard nominations for Outstanding Restaurateur, as well as stacks of regional and local awards.

Franchising, it seemed, was the next logical step toward building a successful brand.

Today, however, the brand's outlook is a much different story. With the exception of one location, Taqueria del Sol will now keep the restaurant strictly in-house.

“We won’t partner with anybody else, except the [franchisee] from Nashville,” Klank says. “We’ll do it ourselves.”

The Nashville unit, located at 12th Avenue South in the Music City, is the lone franchised restaurant still standing. The company will likely partner with that franchise group for additional locations in the future, but those will be the only franchised units, Klank says. Franchised stores in Cary, North Carolina; Orlando, Florida; and Richmond, Virginia, were closed.

Why didn't the franchise experiment work? Klank says it came down to commitment. “The main thing for us is that the hardest working people in our restaurants are the owners and the GM. And the franchisee didn’t buy into that,” he says.

There are four company-owned stores, all in Georgia, and those restaurants remain rooted in local dining lure. Written up in national publications like USA Today, the counter-service eatery often sees a 20–30-minute wait and lines that snake out the door. It serves reasonably priced, from-scratch food, such as fried chicken tacos, and a full bar with an array of specialty margaritas, beer, and wine. “I feel like our food is priced as fast casual but with the quality of ingredients above fast casual,” Klank says.

And for the first time in several years, the growth conversation is back on the table. This time, the expansion model will be very straightforward: All future Taqueria del Sol locations outside Nashville will be run by the same people who invented the original.

Klank says the company plans to open two units in Atlanta next year. Another location for the Nashville group is also in the works. Otherwise, the restaurant won’t commit to any tangible growth target moving forward. This way, “you’re not disappointed,” Klank says.

“We found two locations we liked and it just turned out that they’re both going to open next year. We’re going to get those running, and when they’re established and profitable, we’ll go look for another place,” he says.

Klank says the experience with franchising taught the company to forget about pace. Instead, the future will focus strictly on quality. “We’re not really worried about an ego trip or worried about this or that, or being this big or that small at this point in our lives,” he says, noting that he is 67 years old and Hernandez is 62. “We want to do what we do and have a good quality of life, and enjoy doing it. This way, work doesn’t become work.”

Their business relationship stretches back even further than many people know. The restaurant group started, in earnest, back in 1987. Klank and Hernandez united at Azteca Grill before the pair opened Sundown Café in 1991. Taqueria del Sol was born out of requests from guests at the full-service diner, who wanted the restaurant to start offering lunch service. In 1993 they acquiesced, and soon the dinner menu was gone.

“It would have been really hard to do what we did at lunch,” Klank says. “My partner Eddie ... is from Monterrey, Mexico, and I’m from the South, but I also used to live in New Mexico. And we have always liked street food from wheel wagons and carts. So when we started doing lunch there, we started doing fast casual with a very limited taco menu and one blue plate at lunch. It went over great.”

Some of the full-service details have remained part of Taqueria del Sol’s fabric. Guests can sit at the counter (if they can find the space) and be waited on. Even if they don’t, the food is run out to their table. With the bar and quality of product in mind, Klank says, the overall vibe eclipses the typical fast-food experience. It's also easier to grow and maintain. “In this day and time, to run a fast casual, you need less people than you do to run a full-service restaurant,” he says. “It’s easier to staff a fast casual. You don’t need waiters and waitresses. We just have people who run food.

“When fast casual first started, it was met with a lot of hesitance from the dining public,” he adds. “They said things like, ‘Oh, this isn’t going to work. No one’s going to want to wait in line.’ But then when people figure out they can get in and out faster, even when they wait 30 minutes in line, it’s paid for, they don’t have to worry about getting a check. I just think a lot of people found it attractive.”

Forging ahead, Klank, a “hands-on restaurateur” who still picks up shifts (including a backup bartending gig at one of his units recently) says he will trust his instincts when charting the future. “As long as we have a good feeling about it, then that’s where we’ll go,” he says. “It seems like every time I look at demographics real close, something goes wrong. Sometimes it just seems like a gut feeling works better than numbers.”

Comments

The skill sets of a successful franchisor are quite different than those of a succesful restauanteur. The fact that many succeed is no indication that Klank should even attempt to franchise. I suggest a man who still 'picks up shifts' clearly shouldn't franchise.

The song says: "There are 50 ways to leave your lover". There may not be 50 ways to screw up franchising your company, but there are several key issues that are critical. The transition from running a successful restaurant or two to running a franchising company requires a different set of skill sets. Klank's 'hands-on' management style may work for a few units, but that management style works against you when you attempt to expand aggressively in numbers or out of your immediate area, whether it be franchised or company-owned units. This creates a 'Hub and Spokes' structure in which everyone reports to one person. At some point it gets overloaded and breaks down and creates too many loose ends. You need a different structure, a well-defined plan, a staff that understands and is experienced in rapid expansion an organization chart that has accountability and delegation of authority and responsibility. The success of franchising over the last 100 years bears strong testimony that it works, but the key ingredients include : A strong and profitable concept, a well-defined operational format, meticulous screening for qualified franchisees, intensive training, meaningful startup assistance and strong ongoing support. Further, the management style of the CEO and staff must be inspirational, have strong teaching skills, set and enforce the standards and be visionary in continuing to evaluate the concept, the market, the completion, new technology, upgrades in products, service, staff, strategy and franchise -related issues. Not adhering to these requirements will bring down even an iconic brand. I have addressed these issues in the three books that I have written. For a free copy of "Franchising Your Business", go to WWW.francorp.com .

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