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

The 10 Best Franchise Deals

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Subway

Subway holds more worldwide locations than McDonald’s, a spot the company has attained with low start-up costs and a flexible franchising model that places its outlets in distinct environments, such as parks, airports, hospitals, and gas stations.

 

U.S. Unit Count:

24,033 (all franchised)

Franchise Fee:

$15,000

Total Start-Up Costs:

$84,300–$258,300

Royalty:

8% of sales

Renewal Fee:

None

Marketing Fee:

None*

The sandwich company blends its recognizable name with an efficient and well-structured franchising program that provides training and guidance in all operational areas, highlighted by a development office in every state.

 

“These are our people on the ground, many from our franchising ranks, who can act as mentors to our franchisees and give them the support they need,” Subway spokesman Les Winograd says.

 

An Outside View: “The maturity of Subway will continue to enhance their development, and this is displayed by their opening support offices in each state,” Spencer says. “They also have the ability, even for a large company, to stay nimble in developing new menu items to meet ongoing consumer tastes and help their franchisees’ top-line revenue improve.”

 

*The Subway Franchise Advertising Fund oversees marketing and advertising on behalf of U.S. franchisees, and funds come from a royalty of 4.5 percent from each store’s weekly sales.

Which Wich

U.S. Unit Count:

130 (129 franchised)

Franchise Fee:

$30,000

Total Start-Up Costs:

$184,875–$422,250

Royalty:

6% of gross sales

Renewal Fee:

$15,000

Marketing Fee:

3%–4% of gross sales

With a hip spirit and creative ingenuity, Which Wich continues its surging momentum. The youthful Dallas-based brand features more than 50 customizable sandwiches. And customers enjoy an interactive ordering process that features a paper bag and a Sharpie—an engaging format that draws the coveted 18- to 35-year-old age group and white-collar professionals that define the restaurant’s core clientele.

 

Franchisees benefit from the Which Wich Support Center headed by company founder Jeff Sinelli, an efficient supply chain, a distinctive store look, and AUV near $650,000.

 

“We understand where we need to be positioned in the market and are working constantly with our franchisees to assemble programs that will resonate with our customers from city to city,” says Connie Alires, Which Wich’s director of franchise development.

 

An Outside View: “Which Wich shows competitive advantages for the future based on the ability to converge into the new sandwich, fast-casual category with great menu items and offers the next generation of franchise owners other [development] options,” Spencer says.

Shane’s Rib Shack

U.S. Unit Count:

66 (64 franchised)

Franchise Fee:

$30,000

Total Start-Up Costs:

$403,100–$690,500

Royalty:

5% of net sales

Renewal Fee:

$30,000

Marketing Fee:

2% of net sales

Inspired by the secret recipes of founder Shane Thompson’s grandfather, Shane’s features a menu of slow-smoked ribs, hand-chopped pork, hand-breaded chicken tenders, and nine signature sauces. In 2010, AUV topped $832,000.

 

Although little known west of the Mississippi, Shane’s began franchising its fast-casual concept in 2004, just two years after the original Shack in rural McDonough, Georgia, created a stir for its hearty offerings. The brand’s youth, however, has done little to stem its growth and following across 14 states.

 

“We’re always asking: What’s the best way for our operators to get in a restaurant and maximize ROI?” says Thompson, who has found recent success in conversions. “I understand our franchisees because I’ve been in their position.”

 

An Outside View: Although a small company compared to others, Kincheloe calls Shane’s “a unique concept in the quick-serve arena” and one that can “allow for a personal relationship and hands-on experience with the founder.”

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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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