When it comes to developing a quick-service concept, Wingstop CEO Charlie Morrison understands that the economic model remains a large piece of the puzzle. In creating a strong franchise deal that fosters company growth, however, Morrison and many other quick-service leaders know that many other tiles complete the mosaic, including corporate support, marketplace differentiation, and sales momentum.

“To be successful, you need a solid value proposition,” Morrison says, well aware that a sound value proposition attracts new franchise partners and drives engagement with existing franchisees.

With that spirit in tow, QSR unveils its fifth-annual Best Franchise Deals report, a collection of upstart brands building a foundation for robust growth, emerging concepts clamoring for a spot on the national stage, and well-known names seeking deeper inroads into the American consciousness.

 

The Hungry Upstarts

Emerging concepts laying the groundwork for growth

Inspired by the Carolinas’ roadside barbecue shacks, Old Carolina dishes up pulled pork alongside beef brisket, ribs, pulled chicken, and turkey smoked up to 14 hours over hickory wood.

The menu also features other Southern classics, such as hush puppies, banana pudding, and Cheerwine.

Last year, the Ohio-based company’s AUV topped $1.4 million, a tally propelled by delivery and full-service catering programs that produced an additional 40 percent of revenue at each 3,000-square-foot location.

Already in 2014, the company has opened units in Michigan, Ohio, and Kentucky. Old Carolina cofounder and CEO Brian Bailey expects to open an additional four to six units by year’s end, while it also invests in new technologies aimed to drive sales growth, operational efficiencies, and guest satisfaction. This summer, Old Carolina will launch a redesigned website, a mobile-based loyalty program, and an online ordering system.

An Outside Perspective: Don Boroian, chairman of Francorp, an Illinois-based franchise development and consulting firm, calls Old Carolina’s unit sales and product “impressive,” while also noting that barbecue is one of the few quick-service niches with growth potential.

“[Old Carolina] should have a great shot at the market and at selling franchises,” Boroian says.

Fast casual Burger 21’s chef-inspired burger creations, handcrafted milkshakes, and fresh salads sparked AUV of more than $1.75 million in 2013.

Dan Stone, vice president of franchise development for Front Burner Brands, Burger 21’s parent company and the management enterprise behind The Melting Pot restaurants, says the concept fills a void in a “beyond-the-better-burger” category by offering broad appeal that captures the “mom vote.”

“Twenty-five percent of burgers sold at Burger 21 are non-beef alternatives, and 56 percent of revenues come from non-beef items,” Stone says, adding that Front Burner holds a 30-plus-year track record of pushing franchisees’ success.

Since launching in 2011, Burger 21 has opened 12 locations in five eastern states. By the end of this year, Stone expects a total of 20 units serving customers, including an outlet in Scottsdale, Arizona, that will mark the concept’s first entry into the West.

An Outside Perspective: The better-burger space is a crowded, competitive field, says John Gordon, principal at Pacific Management Consulting Group. And while Burger 21 has compelling attributes, he says, the franchise strategy should be more geographically focused.

“It should be first developed in a lower number of markets to gain efficiencies and market knowledge,” Gordon says.

Landing on the Best Franchise Deals list for the second consecutive year, Tin Drum is riding high with street-inspired, Pan-Asian cuisine that is cooked fresh in a contemporary fast-casual setting.

The Atlanta-based concept’s diverse menu features more than 35 items made with Thai, Japanese, Chinese, Vietnamese, and Indian influences, thereby creating a dynamic and varied menu that addresses consumers’ growing interest in ethnic foods.

Long embracing a debt-free business strategy, Tin Drum has an upward trajectory that recently attracted a minority interest stake from BIP Opportunities Fund, a private-equity firm that will help Tin Drum founder and CEO Steven Chan advance the concept’s growth and infrastructure build-up, including the development of a new design prototype and simplified kitchen execution. The chain, which recorded an AUV of more than $1 million in 2013, will open three additional cafes in the Atlanta metro area this calendar year.

An Outside Perspective: Gordon says Tin Drum has some definite pluses, including its geographical location in the Southeast—away from upstart Pan-Asian rival Pick Up Stix—and the fact that its largest competitor, Pei Wei, does not franchise. But there’s still some foundation-building to be done at Tin Drum, Gordon says.

“Franchisees should look for that magic point of entry,” he says.

Teriyaki Madness continues making headway in its mission to become a national chain.

The emerging fast casual has recorded three consecutive years of double-digit, same-store sales increases, including a 14 percent gain in 2013.

After seven years of testing and developing the concept in Las Vegas, Teriyaki Madness began its national franchise campaign in late 2012. Chairman Michael Haith says the concept has attracted interest from franchisees across the country and now has more than 60 units in development, including soon-to-debut units in California, Texas, Virginia, Nevada, and Florida. The Denver-based chain expects to have 30 units open by this year’s conclusion, and 100 locations by the end of 2015.

Haith points to the brand’s AUV of more than $970,000 in 2013 and its $243,000 operating profit as proof of the concept’s potential. “It’s a wide-open playing field for Teriyaki Madness,” he says.

An Outside Perspective: While Boroian wishes Teriyaki Madness had a more contemporary Asian look as opposed to its current austere dining-room environment, he credits the concept for having “a great presentation of a unique menu.” He says Teriyaki Madness should attract multiunit buyers given its strong margins and low build-out costs.

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The Rising Stars

Established brands ready for the national spotlight

Fuzzy’s vice president of franchise Paul Rickels terms his fun-loving concept’s business approach a
“reverse mullet.”

“Our back-of-the-house systems are all business, designed to deliver consistently safe, fresh, and flavorful food to our guests,” Rickels says. “The front of the house is all about the party and takes on the personality of each community and franchisee.”

Amid the quirkiness, Rickels touts sound operations, including a strong internal infrastructure that features custom distribution, comprehensive training, and mystery shopping programs designed to ensure brand quality.

Fuzzy’s is expanding this year with additional units in Texas, Colorado, and Arizona, wooing many partners with AUV nearing $1.2 million and strategic franchisee incentives, including a multi-store franchise fee reduction of $5,000–$10,000 and a reduced royalty rate of 3.5 percent for a new store’s first 52 weeks.

An Outside Perspective: Outside of a “generic concept name that does not make a bold, positioning statement,” Gordon finds plenty appealing about Fuzzy’s: AUV of $1.2 million; a mix of company and franchise stores; Western market expansion; and early franchisee incentives.

“I am [also] pleased to see a more developed menu beyond tacos and burritos that other burrito-space operators don’t have, including industry leader Chipotle,” Gordon says.

Spurred by a 2013 AUV of $750,000 and same-store sales increases of more than 7 percent, Mexican cuisine–peddling Barberitos makes its second consecutive appearance on the Best Franchise Deals list.

Barberitos founder and CEO Downing Barber says his Athens, Georgia–based concept is committed to providing its franchisees low royalties and an affordable franchise fee alongside five-star support, including a full marketing program, field support, purchasing group and contract buying, and same-day response.

“Barberitos Franchising is relentlessly committed to making each unit successful and [seeing] continuous growth in sales,” says Barber, a Barberitos franchisee himself who takes pride in being connected to daily operations from inside the chain’s system.

The company is expanding up and down the Atlantic Coast, while Barber and his team are also readying the debut of a new restaurant prototype to follow recent menu introductions, such as fire-grilled salsa and slow-roasted pork.

An Outside Perspective: “I am glad to see the Southeastern development footprint, but think the concept needs further development to get the AUV closer to $1 million,” says Gordon, noting that escalating real estate costs demand stronger unit performance.

Dishing up Southern-inspired barbecue, Shane’s Rib Shack notched an AUV of $945,000 in 2013.

The family-oriented eatery, which made the Best Franchise Deals list in 2011, is bolstered by a proprietary smoking process and secret barbecue sauce recipe that allows the franchise to be portable, highly scalable, and adaptable to varied real estate, says cofounder Shane Thompson. He adds that Shane’s fosters strong AUVs and franchisee profitability with hands-on marketing support, corporate training, and in-house purchasing and distribution.

“Our company focus is not how many locations we have, but successful units franchised and corporate owned,” Thompson says.

That, of course, isn’t to suggest Shane’s is a static brand shunning growth. The Georgia-based concept is opening four additional corporate units in 2014, and Thompson foresees substantial runway for expansion and market development.

An Outside Perspective: Boroian expresses some concerns about Shane’s ability to play outside of its Southern base, as well as its unit economics and renewal fees. Still, he says, Shane’s has proved its concept and successfully made the transition from a family-owned business to a credible franchise organization.

“This is a major benefit in attracting and developing new franchises,” Boroian says.

In the admittedly crowded pizza segment, Toppers chief development officer Chris Cheek says his Wisconsin-based company distinguishes itself with a focus on product innovation.

Toppers features fresh, made-from-scratch dough, real Wisconsin cheese, and unique toppings, such as oven-roasted tomatoes, mac ‘n’ cheese, and tater tots. Paired with its playful personality, Toppers’ outside-the-box menu creations produced AUV of $889,000 in 2013.

And Cheek says Toppers is just getting started.

Last year, Toppers earnings claim showed company units averaging more than $143,000 in net income, a figure that continues attracting franchisees into the system at a record rate. Cheek projects the opening of 20 units across seven states by the end of 2014, a pace that positions Toppers to hit its goals of 100 units by the end of 2016 and 500 by the end of 2020.

“New store growth is one of the most important components to our success,” Cheek says.

An Outside Perspective: Boroian likes Toppers’ good-looking, differentiated product, as well as the impressive income it delivers to its franchisees. Above all, though, he appreciates how the concept has clustered units.

“This makes brand awareness and unit support effective,” Boroian says. “It also is a great model to show multiunit franchise developers.”

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The Powerbrokers

National brands with name recognition, profit potential.

Back in 2011, Wingstop appeared on the Best Franchise Deals list with just over
450 units and AUV approaching $750,000.

Three years later, Wingstop continues to ride a wave of momentum few in the quick-service field can match. The chain concluded 2013 with a record number of store openings and AUV of $972,000, a $71,000 jump from the previous year. With same-store sales gains of nearly 10 percent in 2013, meanwhile, Wingstop continued its decade-long run of same-store sales increases.

In the 2014 calendar year, the company’s 20th, Wingstop chief development officer Dave Vernon says his company expects to open as many as 90 new units and cross $1 million in AUV. That hearty ROI and Wingstop’s ease of operations continues to attract franchisees both on the domestic and international fronts, as Wingstop claims more than 500 stores in its development pipeline.

An Outside Perspective: Of Wingstop, Gordon says: “[They are] clearly the wing experts. It is not a Buffalo Wild Wings, but [also] doesn’t need a 7,000-square-foot box, either.” And though Wingstop is nearing 600 units, Gordon sees a lot of development opportunities remaining in the Midwest, Ohio River Valley, and the Northeast.

This Georgia-based fast casual, named the most kid-friendly fast casual in Technomic’s 2014 Chain Restaurant Consumers’ Choice Awards, offers an array of made-to-order sandwiches and fresh salads alongside its Famous Sweet Tea.

In 2013, McAlister’s saw its AUV climb over the $1.5 million plateau.

McAlister’s CEO Frank Paci says the chain’s operating platform fosters the delivery of quality food in an efficient operating environment sans fryers and grills or breakfast and late-night hours.

“As a result, McAlister’s offers exceptional unit sales volumes, an attractive sales-to-investment ratio, and strong and consistent same-store sales increases,” he says.

In 2014, the company’s 25th year, McAlister’s anticipates opening 25 new restaurants, including expansion into new markets, such as Orlando, Buffalo, and Salt Lake City.

An Outside Perspective: With a large concept like McAlister’s, Gordon wants to see a sales-to-investment ratio well above 1-to-1, as well as a strong identity platform cultivated from previous expansion. McAlister’s has that, Gordon says, as well as “a differentiator in that many small and regional delis have closed in the U.S., and that it almost solely occupies that segment.”

Which Wich makes its second appearance on the Best Franchise Deals list, having previously been recognized in 2011.

Which Wich senior vice president of development Jeff Vickers says the company continues to strive for and deliver superior metrics to its franchise partners, including a sales-to-investment ratio, sales-to-occupancy ratio, and a cash-to-investment ratio that is sustainable long-term. That, along with AUV of $686,127 in 2013, continues to attract franchisee interest.

Even more, the brand’s flexibility with drive-thru locations and interest in nontraditional venues, such as kiosks, college campuses, and airports, provides franchisees opportunity to capture customers by championing convenience. With the debut of more than 80 stores in 2014, Which Wich will claim a domestic unit count above 350 and cement its position among the nation’s largest sandwich chains.

“We have a concept that’s universal and well received,” Vickers says.

An Outside Perspective: Boroian calls Which Wich a franchisee-friendly concept with a rich story and impressive unit sales.

“They have become a significant player in a highly competitive market segment,” Boroian says. “They know what people will eat and what sells franchises and how to make them all happy.”

Serving made-to-order Southwestern fare in a fun-loving fast-casual environment, Moe’s notched systemwide sales just shy of $500 million in 2013, while its AUV topped $1.17 million.

Moe’s president Paul Damico says the company embraces the latest culinary trends, serving 100 percent sirloin, grass-fed steak and all-natural, cage-free chicken, while shunning trans fat and MSG.

With more than 500 stores already in operation, Moe’s looks to double its size over the next three to four years, particularly looking west to drive its development objectives. The Atlanta-based concept recently solidified plans to enter the California market with 18 stores slated for Sacramento and Santa Cruz, and looks to bring about 18 stores to the Dallas–Fort Worth area as well.

Damico adds that the company offers multiunit development opportunities, an efficient restaurant design adaptable to traditional and nontraditional venues, and world-class franchisee training and support.

An Outside Perspective: Boroian dubs Moe’s “an ideal franchise” led by a strong, experienced, and well-organized management that has positioned it for national expansion.

“Moe’s has a strong, complete, launching pad-to-orbit program for franchise development and support,” he says.