Denise Lee Yohn: QSR's Marketing Guru | June 2011 | By Daniel P. Smith

The 10 Best Franchise Deals

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Popeyes Louisiana Kitchen

Popeyes Louisiana Kitchen’s culinary roots in the Cajun and Creole regions of Louisiana distinguish it from its chicken rivals and inspire revenue. Among freestanding Popeyes restaurants that opened in 2009, AUV during the first 52 weeks of operation approached $1.5 million.

 

U.S. Unit Count:

1,610 (1,573 franchised)

Franchise Fee:

$30,000

Total Start-Up Costs:

$292,300–$422,100

Royalty:

5% of gross sales

Renewal Fee:

$15,000

Marketing Fee:

4% of gross sales

According to vice president of development Greg Vojnovic, Popeyes is not a fee-driven concept, which creates a collaborative franchise relationship. Popeyes headquarters offers support and expertise in menu, operations, marketing, development, and profitability.

 

“The best way for our company to be successful is to ensure our franchisees’ success and loyalty,” Vojnovic says, adding that multiple lending relationships and incentive programs for both new franchisees and veterans have accelerated Popeyes’ domestic and international growth.

 

An Outside View: “Popeyes is a very solid and well-established opportunity in a very crowded market,” Kincheloe says. “The company is well established and can offer great support to a franchisee who has little experience and would like to get into the restaurant industry.”

Carl’s Jr.

U.S. Unit Count:

1,097 (674 franchised)

Franchise Fee:

$35,000 for up to 2 units
$30,000 for 3–4 units
$25,000 for 5+ units

Total Start-Up Costs:

$1.2 million–$1.4 million

Royalty:

4% of gross sales

Renewal Fee:

$5,000 for less than 5 years;
$10,000 for 5–10 years

Marketing Fee:

5.5% of gross sales

A consistent management team has maintained Carl’s Jr.’s focus on brand positioning, sparking same-store sales increases in nine of the last 11 years. Rather than playing in the discounting space with its rivals, Carl’s Jr. achieved value in customer satisfaction and high-quality menu items, such as Black Angus burgers and hand-scooped milkshakes. CKE Restaurants vice president Ned Lyerly calls the Carl’s Jr. strategy “good for margins and our franchisees.”

 

CKE corporate assists franchisees with site selection, restaurant design in flexible sizes, construction, and training. CKE sister brand Hardee’s boasts similar elements in the Midwest and East Coast marketplaces.

 

An Outside View: “Carl’s Jr. does a great job with rolling out and promoting new products, [though] the franchisee pays for this through slightly higher marketing fees than other similar franchises,” Kincheloe says.

Saladworks

U.S. Unit Count:

93 (93 franchised)

Franchise Fee:

$35,000

Total Start-Up Costs:

$343,802–$494,027

Royalty:

5% of net sales

Renewal Fee:

$17,500

Marketing Fee:

3% of net sales for
non-foodcourt units;
1.5% for foodcourt units

Positioned as a healthy concept in an increasingly health-conscious nation bolsters Saladworks’ appeal and marketplace positioning, while the company’s AUV of $820,000 represents a nearly 2:1 sales-to-investment ratio.

 

From the company’s Pennsylvania headquarters, corporate staffers provide franchisees (at a 1:3 staff-to-franchisee ratio) guidance on everything from marketing to operational best practices. Last year, an affiliated organization, Saladworks Leasing, began offering qualified new and multiunit franchisees “who best display the company’s core values” the opportunity to own a Saladworks unit for $75,000, a move that is helping Saladworks expand from its mid-Atlantic base.

 

“We’re about helping our franchisees succeed in whatever ways possible,” Saladworks president Paul Steck says.

 

An Outside View: “Saladworks is one of many concepts attacking the health trend,” Kincheloe says, “and is best positioned to succeed when placed in the right market and demographic for its menu offerings.”

Bojangles’ Famous Chicken ’N Biscuits

U.S. Unit Count:

491 (302 franchised)

Franchise Fee:

$25,000

Total Start-Up Costs:

$357,000–$771,000

Royalty:

4% total sales

Renewal Fee:

$12,500

Marketing Fee:

1% of total sales

Bojangles’ Famous Chicken ’N Biscuits’ executive vice president Eric Newman calls his brand a barrier-crossing restaurant. With 40 percent of its business in breakfast, plus fresh-made biscuits and a flavor profile characterized by hand-breaded chicken and high-quality side items, Charlotte, North Carolina–based Bojangles’ has become one of the nation’s fastest growing quick serves.

 

“We’re bringing full-service dining components into quick service and customers have responded,” Newman says. “We’ve got the breakfast and dinner pieces going on alongside a lunch lineup to compete with anyone.”

 

Throughout the recession, Bojangles’ attained same-store sales growth along with historically high unit growth. The company’s AUV of nearly $1.6 million for its traditional full-sized outlets, meanwhile, lifts it into the upper tier of all quick-service concepts.

 

An Outside View: “Bojangles’ continues to be strong in their maturity as a franchise company and chicken brand,” Spencer says. “Their base of strong multiunit franchise owners will help them to not only continue to develop, but will assist in appealing to new franchisees.”

These fast food franchises offer best franchise deals for investors.

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Comments

I have worked with several franchises and I think you missed one of the best. Jimmy John's has a low cost of entry and higher sales than most sandwich shops.It is a well run company whose standards are exceptional. That bodes well for the customers and the franchisees.

I own five Jimmy John's, and keys to our success are quality and consistency of product, fast delivery in addition to quick throughput in the store, and a culture that is fun, hip and genuine. We don't try to BS our customers about what it is we sell or do. Those core competencies are what make us great and what separates us from the 'sandwich pack".

I really feel that Genghis Grill should be on this list as it has a rather low start up cost and is expanding at an exceptional rate. It has a niche market where it is the leader in sales, service, and great tasting final product!

Family passion and controlled, successful expansion make Culver's the choice of discerning operators.

This basic information is helpful; however, it really is all about Unit Level Economics. What are food and labor costs running? Are sites available and if so at what kind of a rent factor? Finally, what are the numbers that make up the AUV? If you have 7 stores running $400K/yr and 3 stores running $1.2 mil/yr, the AUV is $640K. But guess what, 70% of the stores open are losing money. These are all extremely important factors when considering what makes a top franchise.

Paul,Not to say you're wrong, but.....The initial start-up cost is not the same as operational cost. As long as the operational cost is maintained below the gross profit, then your net will be positive. So if you make only 400k the first year, but your expenses were only $225k, then you have a net profit of $175k. This would mean that for an initial investment of $600k, your return on investment (ROI) would be 77%. That is a really good ROI.

That number would assume that you paid cash for the initial start up. If you actually only paid a down payment in order to secure a loan, then your ROI would be much, much, much higher!

No that would be return on assets your talking about. The correct number to use to calculate ROI includes borrowed and invested capital.

Not exactly. How do you get a 77% return on a 650,000 investment if you only made a profit of 175k. It's more like a 27% return.

planing to start a multi unit Indian QSR very shortly.

All of these companies are using QSR Magazine to make earnings claims that they don't make in their Franchise Disclosure Document. The companies are knowingly making this information avaiable by distributing links to these articles containing these claims on their websites and through Twitter and Facbook.

Give Me STEVI B'S Business Plan

What's AUV? How much would you have to come up with in cash and how much will the franchise finance?

I do personally believethat the best internet and IT industry franchise is offered by CenterServ.  As stated on www.centerserv.com/franchise CenterServis pioneering the internet franchise industry by offering an IT franchise and aWeb agency franchise.  They state to besocially responsible and use the franchise model for an expansionary incentiveto upgrade the quality level of cloud computing services.

I have seen the opportunity for real franchise growth in the ethnic food markets using a QSR model.  Great opportunities in franchising when a brand captures a specific, unique segment and builds a brand around good food from that culture in a QSR structure. 

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