Special Report | July 2015 | By Daniel P. Smith

2015 Best Franchise Deals

Page 3
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

Powerbroker

Tropical Smoothie Café

TOTAL U.S. UNIT COUNT: 411 (410 franchised)

FRANCHISE FEE: $25,000 (first unit), $15,000 (additional units)

TOTAL START-UP COSTS: $165,940–$414,685

ROYALTY: 6% gross sales

RENEWAL FEE: $0

MARKETING FEE: 2%

Crossing the 400-store plateau in 2014, Tropical Smoothie Café has emerged as a major player on the national scene with units now peppered across 38 states. The majority of the chain’s growth is being driven by existing franchisees, which, CEO Mike Rotondo says, “shows we are on the right track.” The brand expects to open its 500th store later this year.

With a balanced business model that represents a 50/50 split between sales of food such as tacos and flatbreads and high-margin smoothies, Tropical Smoothie saw comp sales growth of 11 percent last year and AUV topped $526,000, the highest in the company’s 17-year history.

McAlister’s Deli

TOTAL U.S. UNIT COUNT: 337 (293 franchised)

FRANCHISE FEE: $35,000

TOTAL START-UP COSTS: $579,000–$1,475,500

ROYALTY: 5% net sales

RENEWAL FEE: 10% of then-current franchise fee

MARKETING FEE: Up to 3% net sales

The recipe for success at McAlister’s Deli is a simple one: Combine Southern hospitality with generous portions of sandwiches, soups, spuds, and sweet tea.

McAlister’s president Carin Stutz identifies three key points of differentiation for the Georgia-based brand: service and hospitality that is high-tech and high-touch; a diverse, high-quality menu that helps the chain overcome veto votes; and its famous sweet tea, an in-demand product with a fanatical following.

“I love what we can offer our franchisees,” says Stutz, a quick-service industry veteran who came to McAlister’s in 2014 after executive stints with Cosi, Brinker International, Applebee’s, and Wendy’s.

Despite serving a broad and diverse menu, Stutz says, McAlister’s franchisees enjoy operational simplicity, as the chain eschews fryers and grills and forgoes breakfast and late-night hours. But don’t mistake simple operations for simple returns. AUV in the 337-unit system sits at $1.5 million, while the chain’s top 25 percent of restaurants report AUV near $2.4 million. Meanwhile, by the close of 2014, McAlister’s had rattled off 13 consecutive quarters of same-store sales growth, a trend that continued into the opening quarter of 2015 as well.

Stutz says McAlister’s “owns the lunch daypart,” while the dinner daypart, which today represents about 30 percent of sales, continues to escalate.

“We see the opportunity to grow our dinner business even more, while we believe catering can also be an additional growth driver, as well,” Stutz says.

Now under Focus Brands’ umbrella, McAlister’s has the resources—principally the ramped-up buying power and supply chain leverage of the Focus family—to propel its national expansion, she says. Up first: heightened development in adjacent markets throughout the Midwest and West.

“We’re a chain that’s been a Southern favorite for a long time, and we’re taking something well done in the South and Southeast and bringing it to the next level,” Stutz says.

Though McAlister’s just finished its 25th year, Stutz says the concept still feels young and fresh, debuting new products and routinely investing in a rich dining room experience and the generous portions that curry favor with diners.

“Our franchisees feel great security in knowing this brand has a track record, but continues to innovate to ensure relevancy with today’s guests,” she says. “We’re ready for this and excited about what the future holds.”

Charleys Philly Steaks

TOTAL U.S. UNIT COUNT: 447 (403 franchised)

FRANCHISE FEE: $24,500

TOTAL START-UP COSTS: $153,000–$450,000

ROYALTY: 6% net sales

RENEWAL FEE: $10,000

MARKETING FEE: 0.25%

Charleys, which rebranded from Charley’s Grilled Subs to the Charleys Philly Steaks moniker in 2012 to spotlight its core menu offering, has been growing its domestic unit count at a 10 percent annual clip over the last decade. The Ohio-based chain, which can also be found in 20 countries around the globe, now claims 447 U.S. restaurants.

Peddling fresh-grilled Philly cheesesteaks alongside gourmet fries and real fruit lemonade, the concept’s menu is streamlined to focus on what it does well, Charleys vice president of marketing Kris Miotke says. “We aren’t trying to be something we are not,” Miotke says.

That self-awareness sparked double-digit same-store sales growth in 2014 and AUV of $606,000.

Dickey’s Barbecue Pit

TOTAL U.S. UNIT COUNT: 511 (502 franchised)

FRANCHISE FEE: $15,000

TOTAL START-UP COSTS: $121,722–$498,091

ROYALTY: 5% net sales

RENEWAL FEE: $10,000

MARKETING FEE: 4%

Capitalizing on the growing interest in Southern comfort foods, Dickey’s closed 2014 with 470 stores and AUV of nearly $766,000. The Dallas-based concept has added about 100 new locations each year since 2011 as part of a deliberate growth strategy focused on driving quality.

“We build new locations, wow new guests, and find efficiencies that make our expansion authentic,” says Trinity Hall, Dickey’s senior vice president of development.

Dickey’s offers its franchisees five revenue streams—dine-in, catering, retail items, holiday meals, and carryout—and extensive corporate support highlighted by a four-week Barbecue University training program that prepares its partners to operate a successful Dickey’s eatery.

The Hall of Fame

The Best Franchise Deals Hall of Fame includes brands worthy of this year's list that have already made an appearance at least two times.

• Subway

• Popeyes

• Bojangles’

• Saladworks

• Wingstop

• Barberitos

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