Restaurant Franchises Growing, Serving Up Opportunity

By Gregg Montgomery
The Indianapolis Star.

Chris Frank’s dream is open for business.

“I wanted to have a restaurant of my own for a long, long time,” he said.

A convergence of opportunities brought Frank, 40, to this point. He got his MBA at Indiana University in 2011. He’d saved up cash, but an inheritance from his father helped the dream come true. In addition, he found a bank willing to bet on his plans because of his restaurant work experience, which began when he was in high school.

He’s part of a trend of an increasing number of franchise restaurants, with sales and job opportunities rising quickly.

The franchise model offers an “obvious alternative to starting your own business,” said Mark S. Long, an entrepreneurship senior lecturer at IU’s Bloomington campus.

People often find resources to start franchises through the 3Fs: family, friends and fools.

“They like me, love me or are dumb enough to believe in me,” Long said.

The “franchise fee” can range from $15,000 to $50,000, but startup costs also include construction, equipment, legal fees, supplies and labor.

“The average for a quality franchise is somewhere between $250,000 and $555,000, and the franchisee typically must have a net worth of at least $1 million,” Long said.

Women are increasingly getting involved in quick-service restaurant franchises. A recent study by the National Restaurant Association showed the percentage of quick-service franchises owned by women has reached 50 percent, Long said.

The sprouting of new franchise restaurants also is creating jobs.

In the past year, more than 157,400 quick-service restaurants provided more than 3.34 million jobs and brought in over $233 billion in the U.S., according to estimates by IHS Economics, a business analytics provider based in Englewood, Colo., and shared by the International Franchise Association. Year-over-year sales growth is expected to near 6 percent in 2015. Since 2010, the growth in annual sales is 67 percent.

The total of quick-service restaurant franchises grew by a modest 1.5 percent from June 2013 to June 2014, and the same growth was projected for the following 12 months.

The latest census information for Indiana, from 2007, showed that 18,350 franchised businesses — restaurants, service providers and others — were responsible for 608,700 jobs and more than $18 million in payroll. Updated figures are due out in February.
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Across the nation, quick-service restaurants “will remain among the leaders of the franchise sector in employment growth in 2015, with a 3.2 percent gain,” IHS reported to the franchise association. “Improving employment and wage growth in the overall economy is particularly good for the (quick-service restaurant) industry, as time for meals becomes crunched with more people working and spending time commuting.”

Frank researched possible franchise restaurants while he was marketing manager for dining at IU’s The Restaurants at Woodland. (The modern setting of multiple food retailers — you can order a quick coffee or a full steak or fish meal — opened in 2013 at the Forest Residence Center.)

He expanded on that initial research, studying 200 restaurant possibilities, before he chose Mooyah for a restaurant of his own. The Plano, Texas-based chain touts family-friendly environs, crispy-edged hamburgers and milkshakes. (Be sure to try the turkey burger.) He opened Mooyah’s first Indiana franchise Aug. 31 in Noblesville off Ind. 37 near Pleasant Street.

One big challenge during startup was finding employees in Hamilton County, where many restaurants sport “Now Hiring” signs. He found a solution by hiring people from other restaurants and using their contacts at those establishments to attract more employees.

Before he decided on Mooyah, he’d listed pros and cons of the 200 possibilities in a spreadsheet. He sought a franchise with a culture that welcomed families and treated employees like a family. Frank also wanted a franchiser that helped new owners upfront and allowed them to make changes to the local restaurant to fit the community. He made his choice after a trip to see about a half-dozen of the Mooyah restaurants in Dallas.

“It’s a small, new franchise, and it’s more flexible and able to let’s say tweak the formula of what’s on and off the menu, the seating arrangement, and the amount of TVs you have in the dining area and stuff like that.”

Jerry Ayers, 30, wanted a restaurant, too. But he was looking for a franchise with an established name and strong brand.
Ayers’ father wanted to help out his son and invest money from a former ready-mix concrete business. But Ayers and his father didn’t look only at restaurant chains. They also checked out concrete, oil-changing and tire-changing franchises. They looked at about 50.

But Ayers wanted to try a restaurant.

Ayers now owns three Zaxby’s chicken and milkshake restaurants — on Indianapolis’ Northwestside, in New Albany and near his home in Jeffersonville. A friend turned Ayers and his dad on to Zaxby’s. They contacted the chain based in Athens, Ga., and organized a trip to a Florida restaurant to see how it operated.

“It was the best chicken product I’d ever eaten, and I fell in love with it off the bat, and my dad felt the same way,” Ayers said.

Since he opened his restaurants, he’s been impressed that the corporate office and fellow Zaxby’s operators have been willing to help, with everything from the look of the restaurant, to training employees and operating efficiently.

“From small questions to big questions, they’re always there to help,” he said. “I have a list of 20 to 30 franchisees I can call on anytime to help.”

Indiana has five Zaxby’s locations, including ones in Fishers and the newest one in Greenwood. Plans are in the works for as many as 18 more within a year or two.

Zaxby’s had about 2,500 inquiries last year — most from people ages 20 to 45 — and granted franchise licenses to only six groups in the U.S., said Tray Doster, the company’s senior manager of franchise development.

Why so few? Zaxby’s wants community-minded people who will be active owner-operators. “Not a dad trying to buy junior a job, but that they will create a great culture in that store, because they are going to be training and mentoring young people” they employ, Doster said.

Carl Dissette knows something about mentoring young employees. The 52-year-old and his son on Aug. 3 opened Indiana’s first Pie Five Pizza Co., Downtown at Washington and Pennsylvania streets. It creates, bakes and serves 10-inch pizzas in about 5 minutes.

Dissette began in the food service business after graduating in 1985 from the University of Iowa, working with Continental Coffee and the Marriott Corp. Later, he opened two IHOP restaurants in the Chicago area. In 1996, he became a franchiser for Jimmy John’s Gourmet Sandwiches, eventually building up to 12 locations in the Chicago area. He recently moved to Zionsville, where he’s setting up a second Pie Five Pizza.

Plus, he’s not only bringing his son Chris, 26, into Downtown’s Pie Five Pizza as the operator, but he also has set up his other son, Collin, 21, in running Jimmy John’s locations near the University of Iowa, where he’s a junior.

But it’s not only about his sons. He’s proud that he’s creating jobs.

“Did you know we’re bringing 500 jobs to Indiana?” Carl Dissette said. “We have five salaried managers (in the Downtown Pie Five Pizza). They were severely underemployed. Now they have good salaries, 401(k)s. They have the ability at 23-24 years old to make a name for themselves.”

Giving employees a way to lift themselves up, as well as offering customers a good experience, is important to Dissette. “When your own money is at risk, it makes it more important to you,” he said.

Dissette has built up a name for himself along with some wealth in his years, allowing him to expand his franchise empire.

“I could’ve personally retired. … It’s not always about the money,” he said. “Entrepreneurs will have times in their lives when they’re very successful, and some entrepreneurs will have failures. I have failures I can talk about in business. In one, I lost $2.5 million.

“I paid everybody back, and I just tried harder.”

Key points about franchising

From Mark S. Long, entrepreneurship senior lecturer, Indiana University:

–Explore the types of franchises available, study them carefully, consider one that offers great support and one that is popular and well-known. “Look before you leap!”

–Get a Franchise Disclosure Document from the franchise and go over it with an accountant and an attorney. Look at fees, costs, royalties and other potential expenditures.

–Find out what type of training the franchiser provides the operator and the employees. Know what type of advisers they have available for startup and for operation once underway.

–Location is key, so learn information on traffic/head counts, surveys and land/site selection. Find out whether the franchise assists in choosing a location or relies on the operator to decide.

–An operator should get in writing that he or she has an exclusive territory and that similar businesses cannot be built in the same site. An operator also should get assurances from the franchise that he or she isn’t prevented from starting another business after leaving the franchise. Many franchise agreements have stringent “noncompete” language.

–Know that hard work is ahead; don’t plan on opening the doors and being an absentee operator. Operators may be bosses on the site but answer to the franchise. Deviation from the franchise plan may be encouraged or discouraged, so find out upfront what rules to follow.

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