Special Report | July 2015 | By Daniel P. Smith

2015 Best Franchise Deals

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QSR executives push brand efficiency and prosperity to benefit franchise community.
McAlister’s president Carin Stutz says the brand has three key differentiators: a diverse menu, high-quality service, and, of course, sweet tea. Patrick Heagney Photography

Rising Star

Great Wraps Grill

TOTAL U.S. UNIT COUNT: 65 (64 franchised)

FRANCHISE FEE: $22,500

TOTAL START-UP COSTS: $159,500–$458,500

ROYALTY: 5.5% net sales

RENEWAL FEE: 50% of then-current franchise fee

MARKETING FEE: 0.5% gross revenues

Featuring chef-created, made-to-order hot wraps, grilled cheesesteaks, healthy bowls, and a full, scratch-made breakfast menu, Great Wraps Grill is “uniquely positioned at the intersection of health and flavor,” says Spencer Reid, vice president of sales and development for the 65-unit chain.

Reid adds that the Atlanta-based enterprise, which had an AUV of $531,000 last year, has more than 20 years of proven success, operational simplicity, no direct segment competitor, and franchise support that has been lauded by the Franchise Business Review, an industry market research firm. Even more, the chain recently launched a new restaurant prototype to capitalize on nontraditional opportunities, such as airports, malls, and hospitals.

Donatos Pizza

TOTAL U.S. UNIT COUNT: 152 (100 franchised)

FRANCHISE FEE: $30,000

TOTAL START-UP COSTS: $461,000–$667,000

ROYALTY: 5% net sales

RENEWAL FEE: $0

MARKETING FEE: 1% gross revenues

Though fast-casual pizza chains have become an undeniably competitive part of the quick-service landscape, Donatos Pizza looms as the category’s hip forefather. For decades, the Columbus, Ohio–based concept has been dishing up customized pizzas in as little as seven minutes.

Donatos’ thin-crust pizzas feature the chain’s own special sauce, smoked Provolone, and fresh vegetables placed on top of the cheese for an intense roasting flavor.

“We’ve got a credible product, which is the most important starting point,” says Tom Pendrey, Donatos’ chief operating officer.

Of course, an AUV of just over $1 million, a number that rivals many of its pizza-peddling peers, doesn’t hurt, nor does the 152-unit chain’s buttoned-up operations perfected over 50 years. Donatos’ proprietary “Ready for Revenue” system, for instance, delivers comprehensive forecasts that help operators eliminate bottlenecks in production and improve kitchen efficiencies, speed of service, labor deployment, and, ultimately, profitability. The chain also has self-developed accuracy systems that boast 95 percent accuracy on orders.

“Our franchise partners are buying a system that works,” Pendrey says.

It’s that proven system, Pendrey adds, that caught McDonald’s eye in 1999. After four years under the Golden Arches’ ownership, however, Donatos founder Jim Grote repurchased the company in 2003.

“[McDonald’s] saw in us then what so many see in us today: a differentiated restaurant concept that performs day in and day out at an optimal level,” Pendrey says.

While Donatos began franchising in the 1990s, company leadership has only recently begun championing its marketplace niche and franchising potential. For the initial franchise free of $30,000, Donatos provides a 20-year agreement with no renewal fee, while its marketing fee sits at 1 percent and the corporate office also provides each franchisee free access to marketing software and the company’s digital ordering system.

“We’re a quiet and humble company, but more and more of late, we’re talking about what makes Donatos different,” Pendrey says. “As a result, we’re seeing a lift in our business and rising above the rest of the industry.”

Today, he adds, Donatos is committed to growth, eager to enter markets throughout the country, and energized by the possibilities.

“There’s a lot of people who still don’t know about Donatos, so there’s a lot of great, new experiences we can give to further build our fan base,” Pendrey says.

Newk’s Eatery

TOTAL U.S. UNIT COUNT: 81 (69 franchised)

FRANCHISE FEE: $40,000

TOTAL START-UP COSTS: $795,000–$1,130,000

ROYALTY: 5% net sales

RENEWAL FEE: $5,000

MARKETING FEE: 1% gross revenues

Culinary-driven Newk’s features scratch-made lunch and dinner dishes—sandwiches, salads, pizza, soup, and mac and cheese among them—crafted in an open kitchen.

While Newk’s corporate office owns and operates about 15 percent of Newk’s existing restaurant count, Chris Cheek, chief development officer for the Mississippi-based concept, says that number will approach 20 percent by the end of this year. It’s a sign of the confidence Newk’s leadership holds in the 81-unit chain, which recorded AUV of $2.4 million in 2014 and boasts a sales-to-investment ratio above the two-to-one threshold.

“We believe there is no better place to invest than in building more Newk’s,” Cheek says.

Fuzzy’s Taco Shop

TOTAL U.S. UNIT COUNT: 79 (72 franchised)

FRANCHISE FEE: $35,000

TOTAL START-UP COSTS: $330,000–$1,068,210

ROYALTY: 5% net sales

RENEWAL FEE: $2,500

MARKETING FEE: $0

In the last six years, Fuzzy’s Taco Shop has grown from a single franchised unit in Arlington, Texas, into an enterprise with 79 stores spread across 10 states. With systemwide sales accelerating toward $100 million, the chain recorded AUV of $1.24 million in 2014.

While Fuzzy’s senior vice president of franchise Paul Rickels says the Texas-based brand is passionate about consistent presentation before the guest, it affords franchisees freedom in site selection and significant front-of-the-house flexibility. Some units, for instance, serve margaritas and beer, while others have a full bar to boost overall revenue.

“We want each [Fuzzy’s] location to be unique to that guest base,” Rickels says.

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