Forecasted Growth in Retail Franchise Stores May Fuel Demand

By Sasha M Pardy

February 3, 2010

 

Where will demand for retail real estate come from in 2010? One area increasingly viewed as a potential source is franchise operators. Pricewaterhouse Coopers forecasts that approximately 11,100 new franchised retail stores are expected to open across the country this year.

The International Council of Shopping Centers (ICSC) recently formed a new strategic partnership with the International Franchise Association (IFA) and urged ICSC members to cooperate and form relationships with franchisees and franchisors active in their respective markets.

Explaining why he believed such a partnership is essential to those working in the retail industry, IFA President and CEO Matthew Shay said, "Franchise businesses need retail space and retail centers need occupants, so helping our members connect with real estate experts will help more franchise businesses expand.” ICSC President and CEO Mike Kercheval said the partnership with IFA is not only very timely, but necessary given the increased amount of available space at shopping centers during the recession.

Kercheval said that both franchisees and retail real estate brokers could benefit from sharing their expertise and resources with each other. IFA past chairman, Lawrence Cohen, owner of more than 30 franchise units commented, "Having good information about the real estate industry and developing solid relationships in this sector is a critical component of any franchisee’s success.”

To help foster new relationships between franchisees and retail real estate execs, the two trade associations are planning to hold three educational sessions -- the first will be a real estate strategy session at the IFA's 50th Annual Convention in San Antonio; then the IFA will conduct franchise education sessions at ICSC's Executive Learning Series in New York in April, as well as during ReCon in May. The sessions are expected to encourage landlords and brokers to form relationship with multi-brand and multi-unit franchisees and franchisors, and franchise operators will give the retail real estate community pointers on what particlaur franchisees are looking for in terms of selecting retail locations.

John Bemis, Director of Leasing for Jones Lang LaSalle Retail, said, "While it won't be a spike, I definitely think we will see increased franchise activity this year, with even more growth following in 2011."

Bemis told CoStar that a program JLL launched in the middle of last year to work with certain franchisors in identifying and marketing pre-approved sites has worked well, accounting for at least 10 new store openings in its portfolio of retail space since, with more new units in the pipeline.

Giving an example, Bemis said that JLL works with Nexcen Brands (Maggie Moo's, Marble Slab Creamery, Pretzel Time, Great American Cookie, Athlete's Foot, and Shoebox) to pre-approve sites. For those selected spaces, JLL would put up a window sign on the store indicating the site is pre-approved for the specific franchise concept and providing contact info for the interested party to inquire. "It plants a seed for that person interested in owning a business and opening a store. It’s the power of suggestion," said Bemis, adding that this method also speeds up the store opening timeline for all parties involved.

In addition, JLL has held franchise shows at many of the malls it leases and manages. "Several of the malls held franchise shows where they invited local franchisors to set up in the mall to advertise and solicit business from the local community. To draw people to the shows, the franchisor(s) would advertise to the local community for people interested and they would come. Mall managers report good turnout and positive results," said Bemis.

He added that property owners and brokerage firms can be proactive with franchisors to get their sites considered by franchisors' corporate real estate and franchise development personnel. On a regular basis, JLL holds meetings in which a franchisor would present its various franchise brands and preferred markets / site criteria to JLL leasing agents across the country. Then, leasing agents would identify locations that are a match and present those sites to the franchisor's real estate department.

In any case, Bemis said that it is always in a retail leasing agent's best interest to stay in front of franchisors' corporate real estate personnel. "Franchisors will share their site selection criteria, target markets and other requirements with agents," said Bemis. He added that ICSC's annual convention in Las Vegas and other major regional shows present some of the best opportunities to meet franchisors and learn about their requirements.

While franchisees typically lack the A-quality credit that some national and regional chains can offer, Bemis explained why franchisees should be valued as potential tenants in shopping centers.

"Typically in the franchise world, the operations are owner-operated. They are often times among your best tenants in a shopping center. They are present, it is their livelihood, they are fully invested in the store and their center. That's vital. When you're invested, not only financially, but emotionally, you do everything necessary to make that entity run as great as it can," he said. Additionally, franchisees are typically the tenants that will make more effort to help the center succeed…cooperating with advertising and events, etc. "They have a very vested interest in what goes on. They're keenly aware," added Bemis.

Franchisors JLL is currently working with to find space across the country include Nexcen Brands, Yum! Brands (Pizza Hut, Long John Silver, KFC, A&W, Taco Bell), Cinnabon, Subway, Auntie Anne's, Blimpie, Flamers, Glamour Shots, Nathan's, Rocky Mountain Chocolate Factory, Quiznos, Chick-fil-a, Great Steak, Thirsty’s, Buffalo Wild Wings, and more.

Source: http://www.costar.com/News/Article.aspx?id=1726B177064F196D497179C4BE19131B

How to Choose the Best Franchise Ideas

Are you interested in starting your own company but are worried about an idea that will sell? If so, consider franchising since you have access to many established and successful franchise ideas to choose from. Without having to worry about something new and original that customers will switch their chosen brands for, you can take advantage of a known brand and business that is already generating profit and open up your own branch of it. It takes a lot of the stress out of marketing a new product and takes advantage of the pre-existing customer base. Unless you want to take a chance with something entirely new, use a franchise directory and start looking for existing franchises for sale and what market you’d like to work in.
You need money to start any new business, and even more so with a franchise since you need to be able to afford to pay for it upfront. The upside is that there is franchise financing which you should take advantage of to free up your saved money to pay for other expenses you will encounter when starting the business. Buying a franchise is also beneficial because you have little legwork to do in terms of marketing yourself or designing extensive advertising campaigns to gain clients. You will have customers right away due to the established brand you will be selling, so if you are weak in the selling department, this is the route for you. However, you will need to support and pay into any marketing strategy or campaign the franchise sets up, and you have little control over how to run your business, sales, design or inventory, since it is all a package deal. A franchise is really the best option only for someone who is looking more to manage their own business than create one, since little creativity is required. Examine your skill set to determine what area of expertise you have to contribute. Don’t choose a franchise in an industry you are interested in but have never worked in unless you are planning to hire a manager to run it for you. Know what you can offer and find a franchise list that supplies available stores in that industry in your area. When you have chosen what you want, create a business plan of your projected costs, profits, plans and changes to bring with you when you apply for franchise finance. This will help you secure your loan and have a plan for the future of your business. When the loan is secure, hire your staff, order your inventory, and put your plan into action.

Source: Franchising Nation, eNewsletter, Team India Managers Ltd

Pros and Cons of Buying a Franchisee today

The advantages offered by investing in a franchise have grown considerably. In this day and age entrepreneurs are looking for the best possible opportunities and fast. They want to jump in to the next bandwagon that's available. So why should you consider a franchise? That's simple.

Advantages of a franchise

• Owning your own business. Because when a person works for himself, the efforts are recompensed fast and at a high level.
• A franchise allows many business objectives.
• A franchise is a part of a business that has already been established and is profitable for the original owner and has a mature customer base, which will reduce the risk of starting a business alone.
• The franchise allows to obtain the key to operate the business, the "know - how", the success in the market.
• A fast and safe development, since it has been demonstrated that people who go with franchises reach the success point quicker, which is needed in order to achieve long-term stability.
• The business has a brand guaranteed by the previous marketing activities, a prestigious brand, accepted and recognized both nationally and internationally.
• The franchisee will benefit from new developments in its network and will be implemented and paid by the franchisor, thus satisfying the demands of the market.
• The franchise is continuously updated.
• The franchisees pay to the parent company to provide the ability to implement important improvements in the system that was subsequently implemented in the main business successfully.
• Buying groups are cheaper. While your firm belongs to a franchise, you get more favorable purchasing conditions, more favorable payment terms and the security to obtain the materials. In addition you will benefit from the updated and comprehensive information regarding the franchisor's knowledge of the market and the sector.
• Plans for initial and ongoing training to give you the opportunity to work at a level regardless of your previous experience and success/failures.
• The franchisee benefits from a brand known nationally and internationally and investing large amounts in advertising both in newspapers, radio and television.
• The franchisee benefits from a brand with financing facilities, training and permanent assistance.

All this plus other benefits are added to the advantage of a franchise, but we also must provide the disadvantages of acquiring a franchise.

Disadvantages of a franchise

• When opening a franchise we must contemplate and cover the high costs of entry, the royalty and advertising.
• Disagreement between franchisor and franchisees can arise in the processes and they can have different opinions about the business methods.
• The low efficiency and other outlets of the network can seriously affect the image and reputation of your establishment.
• The franchisees have no freedom to make the necessary decision to run their businesses, this is the franchisor exclusivity.

In addition

• Sometimes you will receive poor service, support and assistance from the franchisor, because their interest is to attract new franchisees and not to care for what they have already collected on.
• Resource constraints that affect service delivery.
• Signing with an unethical franchisor who wants nothing to do with the building of the franchise’s name, and only wants to earn from selling its brand.

As you can tell it is important to analyze as many factors and aspects before purchasing into a franchise.

Source: http://www.ozcarguide.com/business-money/start-ups/796-pros-cons-buying-franchise

Franchising in 2010

Following a tumultuous 2009, what is going to happen to franchising this year?

This is a question that tinkers in many enthusiast minds...

Each year, some companies prosper and others fail, but 2009 was definitely the year that tipped the scales in franchising—and not in a good way. We watched as more companies experienced their toughest times with lead generation for franchise sales, difficulties with franchisee relations, tougher supplier negotiations, and negative consumer sales. Franchise companies were hit from all sides, and no one was exempt.

That brings us to the biggest question about franchising: What is really going to happen in 2010?

For us to really understand or predict what is going to happen, we could poll many opinions. These thoughts could come from the banking and lending companies, the franchise companies, industry executives, brokers, or consultants in the industry. Yes, each may have valuable opinions and substantial data to make such comments. But I ask you, are they the real source to learn what will happen to franchising?
I encourage you to look at a different source for information this year. Why? Because we no longer have the luxury to sell franchises or support franchisees as we have in the past. 2009 proved above all that the old ways do not work anymore.
So who is it that can tell us what is going to happen, and provide guidance on how franchisors need to evolve and improve? How about the franchise owners? As last year unfolded, I felt that we had to hear from franchisees, who hold a direct lifeline to growth for all franchise systems.
Since I actually spent more time with franchisees in the early part of my career than I did my corporate partners, this past summer I went back to the land of the franchisees. Instead of attending some industry meetings or spending time speaking at conferences, we went to smaller meetings and locally organized meetings, traveled, and had fun with franchisees. We connected again with small, mom-and-pop owners and large, multi-unit developers. It was clear that to truly understand what was going to happen this year, the answers could no longer come from the sources that we had leaned on previously.

What did we hear? In 2010, franchisees are not going to do business as they have in the past, either.

Here are our top three thoughts about changes to franchising in 2010:

New franchisees will enter the market through transfers of ownership. The legacy and older franchisees with no generation behind them will split up their units (if they have a high multiple) and sell to newer franchisees. Traditionally, the focus has been “the new franchise sale”—new restaurant growth. This is always a good strategy. However, the resale was basically ignored for the most part. In many companies, the team handling transfers of ownership (selling a current restaurant) was not part of the franchise sales team and not trained extensively to handle these types of transactions. In order to sign the best franchisees, franchise companies must be not only ready for this, but proactive about it. An example: Burger King has put a key person in place to oversee these types of sales.

A higher level of education will be demanded (and needed for future success). It will not just be about what support the franchise offers. The franchisees that stay in the system are going to push companies to revamp their training and support. The new franchisees want this as well. Both types of franchisees are more technology savvy than ever before, and will be more abreast of the latest developments and how to e-communicate to other franchisees. They will demand more business training. An example: Our company had an increase in 2009 of over 150 percent in requests to conduct our Educational Programs to franchisors and franchisees as an outsource vendor versus conducting these in-house.

The marketing jobs will be back—in a new way. Companies will need to focus on increased marketing activities and new areas of marketing. More experience (and I mean real experience) in social media will be needed. An example: One vendor to the industry (not a marketing company) held free conferences in 2009 for their clients and non-clients about social media issues.

Actually, 2010 is shaping up to be a great year. We may truly be back to the focus being about operations in the restaurant industry, and not just selling franchises.

Source: http://www.qsrmagazine.com/articles/outside_insights/138/2010franchising-1.phtml

How much can you make by taking up a Franchisee???

By: James Walker - Staff Writer for Red Hot Franchises.com

How Much Money Can You Make as a Franchisee?

When investigating a franchise opportunity one of the most difficult pieces of information to get from the franchisor is how much money you might make. This may be frustrating because you are not going to invest in a business until you have a good idea of what you can earn. In most cases the franchisor is not being purposely difficult.

There are two reasons for the exclusion: first, there is no possible way to predict how well any one franchise can do over another, regardless of other franchise successes. A franchisee will likely take these facts to heart, pursue the opportunity, then begin to retaliate should these figures not come to fruition. Secondly, earnings claims will include financial gains and losses and people new to the business world have a difficult time understanding anything to do with “loss.”

Therefore, by keeping the earnings claim portion out, franchisors are less likely to lose a franchisee candidate during the early stages of the franchising process. But, that doesn’t mean they won’t show you some actual income statements from existing outlets. If you’re lucky to get some samplings, it will happen later in the process, at the point where the franchisor senses your willingness to move forward.

However, there are ways to get this essential information………..

The Back Door Approach to Getting the Numbers
If getting cold hard figures doesn’t seem possible, you will have to take another approach to determining if the franchise opportunity will make you money. Listed below are some good questions to ask.

1) How long have you been in business?
2) How long did it take you to get comfortable with your franchise?
3) Has your business been growing year by year?
4) How long before your business broke even each month?
5) Are you getting the support you were promised from the franchisor?
6) Do you see yourself in this business over the next 5 to 10 years? If no, why?
7) Is your annual salary after all these years where you’d expected it to be?

What’s a reasonable level of earnings for a franchise business?
Once you have earnings data, your next question will be whether the probable earnings represent a good return on your investment.

Remember that when you invest in a franchise, you are investing both your time/talent and your money. Therefore, you should reasonably expect a greater return than you would for a passive investment of money only.

If a good return for a passive investment is 15% to 20% per year, you will want to see a greater return in a franchise opportunity. After all, the time you put into your new business should yield you a return at least equal to the return on the money you invest, maybe not the first year but certainly down the road.

A second important point to consider is that a higher franchise investment does not necessarily mean a higher rate of return. While this seems contrary to common knowledge, there are plenty of low to mid-range investment franchises that provide great return on investments. Don’t limit yourself only to high-investment franchises when seeking that business with a high ROI.

How much money you will make as a franchisee depends on many factors - from the structure of the franchise (e.g. retail versus service), to how long your franchise has been operational, to how well you understand and embrace the system, to your enthusiasm for the business and how it will help you realize your dream. But, with a little research, you can get enough information to decide if this opportunity makes financial sense for you.

Source: http://www.redhotfranchises.com/articles/Franchise_Basics/How_Much_Can_I_Make?

Is franchising for you?

By Roberto Pace on Saturday, 2 January 2010

How does a franchiser pick a good franchisee and is franchising for you?

For anyone who has aspirations to run their own business, franchising has long been considered a low-risk stepping-stone from employee to boss. It’s also a leap of faith.

For the business owner, franchising means placing their good name in your hands. For the franchisee, it’s taking a chance on a new way of life.

With 74 franchisees across more than 125 properties in Australia, New Zealand and Fiji, Quest Serviced Apartments has built its business on the franchising model. Quest franchisees come from all walks of life and some have made huge career changes to take on running a serviced apartment business. Among Australia’s Quest franchisees are former accountants, a nurse, a teacher, a chef and even a priest.

General manager of franchising, Nick Suriano, said the company’s investment into finding the right franchisees has been key to the success and growth of the business. “That really makes a difference: passionate, motivated people, implementing the best system,” he says.

Why franchising works
The franchise model has been extremely successful for Quest since its inception more than 20 years ago. Initially, some of the company’s properties were corporately owned and some were franchises. But Quest opted for a 100 percent franchise strategy when it was shown that the franchise businesses were outperforming the corporate properties.

“The results were quite polarised. It was almost chalk and cheese,” Suriano says. “The franchised properties were able to deliver a better bottom line. They had a smaller infrastructure and were run by motivated operators who were enthusiastic about driving their business. In almost every case where a business was converted to a franchised model, the performance doubled. Since we focused on franchising, the company’s growth has been in excess of 20 percent every year.”

How do you pick a good franchisee?
Quest receives more than 500 applicants for a year for an average of 10 franchised properties so competition is stiff. New Quest properties are only offered to existing franchisees and the company has a strict set of criteria, such as a proven financial track record, a clear business plan and a succession plan, making sure if they take on a second business that their first one does not suffer.

When it comes to new franchisees, Quest is looking for a number of qualities: business acumen, personal organisation, demonstrated leadership skills, strong sales orientation, communication skills and family and social support.

Franchise manager of Quest Newcastle and Quest Singleton, Belinda Stevenson, said the most important prerequisite for a franchisee is people skills: “You have to have a passion for people and you need to be customer focused because it’s a service industry.”

Employee versus franchisee
Franchisees agree that the number one difference between being an employee and a franchisee is responsibility. “The buck stops with you,” says Stevenson. Quest Ballarat Mews franchise manager Andrew Hoffman, said his responsibility “increased tenfold overnight”.

But with more responsibility, comes more reward. “It’s very satisfying to work for yourself,” Stevenson says. “And you have the franchiser and many other franchisees around you for support, which is a huge bonus.”

Suriano says more than anything he sees franchisees grow into great business people in their own right. “There’s a philosophy here that Quest is about creating business people. The Quest system empowers them to develop and use their management skills. If you’re thinking you’re sick of working so you’re just going to become a franchisee and sit in a back office, you’ve got the wrong attitude and you’ll fail.”

Benefits of being a franchisee
Those looking to take the step into running their own business will weigh up the pros and cons of a regular small business versus a franchise. Suriano believes one of the biggest arguments in favour of a franchise is the reduced risk for those starting out.

“There’s significantly less risk when you’ve got systems and processes and a strong brand behind you,” he says. “We’ve never had a business fail in 22 years. It’s a proven business. We do a lot of research before we select our next franchise opportunity.”

Support from head office and other franchisees is another advantage. “You’ll get excellent training, ongoing support, a refined business model, access to a strong customer market, a niche product, sales and marketing assistance and franchise mentoring,” Suriano says.

And finally, there is the power of a network of like minded people. “People love belonging and it’s a socially-charged network. It’s not just head office expertise, it’s also about sharing hundreds of years’ of experience and similarly-minded people with a desire to share ideas and resources.”

So when do you take the plunge?
For Hoffman, the decision to take on a franchise came down to the support the company offered. “It was the upfront training. If we were just going to buy a motel, I’m pretty sure we’d be broke by now. With those businesses, as long as you’ve got a chequebook, you’re in. I came from a building background—I was a roof tiler—so it was a complete change of lifestyle overnight.”

The two-week intensive training course Hoffman and his partner Sandy Cook undertook was invaluable and took away much of the risk of embarking on a new business. While Quest’s training was the sealer of the deal for Hoffman, it was by no means an overnight decision.

“For us, it was three years in the planning,” Hoffman said. “We talked about it for a long time, but I’m so glad we went that way. We’ve been there four-and-a-half years next month and we’ve never regretted it. You learn every day.”

For Stevenson, the decision to take on her own franchise was inspired by her own experience working in sales and marketing at Quest. “I’d always had a desire to own my own business and we’d looked at many other options and this was the best for us.”

Suriano says there were two distinct groups of franchisees; around half are home grown (former company employees) and the other half are new franchisees. “In terms of most of our franchisees, they would be in their mid-forties, probably sitting in a middle or senior management level job, looking beyond their current role to 20 years down the track and not liking what they see,” he says. “They see the whole business opportunity and the chance for independence.”

Source: http://www.dynamicbusiness.com/articles/articles-franchising/is-franchising-for-you4939.html

Grabbing a bite, Indians are lovin’ it!

BANGALORE: Amit Burman, vice-chairman of Dabur India, never thought that a casual stroll down one of south Delhi’s upcoming localities would
provide an idea for a unique business opportunity.

In 2006, the US-returned Burman and his friend Rohit Aggarwal were in Saket, standing outside one of the outlets of the international chain, Subway. The place was crowded, with people, especially in the 18-35 age group, buzzing in and out constantly. Burman and Aggarwal paused their conversation and wondered if there was a business opportunity here.

“Franchising Subway began as a hobby,” Burman says laughing. In the initial months, the team had to work on creating the sandwich category and tailoring it to local tastes. The classic cold-cut turkey and tuna subs had to share space with chicken tikka and chicken seekh kabab fare. “People were very doubtful about the venture and would ask if I planned to make sandwiches all my life,” jokes Burman.

He needn’t have worried. In three years, Burman’s Lite Bite Foods has become Subway’s largest franchisee in India. The company operates 40 quick- service restaurant (QSR) outlets and has added other international brands apart from Subway to its menu. Street Foods of India serves roti-kababs and rajma-chawal though kiosks, bakery cafe Bakers Street at airports, Pino’s Pasta Pizza and Rapps. It will also franchise US-based fried chicken brand Pollo Campero in the next few months. “We intend to become a restaurant chain with 200 outlets, including 30 QSRs, in three years,” he added.

Consumers’ growing penchant for eating out and taking quick meals in between long working hours has spawned a boom in the Indian QSR industry. Across the country, businessmen are either venturing into QSR market on their own or through franchisee tie-ups with foreign chains such as Domino’s and Papa John. Unlike fine dining restaurants, QSRs largely operate through smaller self-service outlets that provide value-for-money food that can also be consumed while on the go. It is estimated to be worth about Rs 2,500 crore and is growing at 30-40% annually.

Bangalore, which is a favoured choice for many people to open restaurants, has also seen an explosion in the number of QSRs in the recent past. This includes Spencer’s Retail’s Au Bon Pain, Global Franchisee Architects’s Cream and Fudge Factory and Donut Baker as well as Italian coffee brand Caffe Pascucci. US chain Melting Pot is ready to invest $5-$7.5 million in the Indian market by 2010.

“Many international franchise food brands are successfully operating in the country and these success stories have sent positive signals to other US franchisors to actively look at India for expansion,” said US Consulate’s principal commercial officer, Aileen Crowe Nandi. The consulate recently held a programme to introduce Indian entrepreneurs to American fast-food outlets such as CKE Restaurants, Round Table Pizza, Tropical Sno, Melting Pot and Church’s Chicken.

QSR segment operates on a high volume-low margin business model. Not only does it focus on delivering products with speed within high footfall areas but its ability to push sales even in recent months by tapping into captive audiences at malls, educational institutions and airports through evolving formats such as kiosks, drive-ins or even take-away joints has been critical.

“India offers tremendous opportunity due to its sheer size which will see the Papa John’s outlets quadruple to 100 in four years,” said Tapan
Vaidya, general manager, restaurant division, of the Jawad Business Group—the franchisee for pizza take-away chain Papa John’s in India and Middle East.

International brands are not the only ones to cash in on this trend. Local entrepreneurs have jumped into the fray with different concepts and ideas. Sunil Cherian, who runs the Chennai-based Burgerman is one such. Burgerman’s core business proposition is to offer 25 burger variants within a 25 sq ft kiosk. With 50 outlets in Chennai and 30 in Bangalore by the month-end, the chain has tied up with retail chains to grab captive consumers at Big Bazaar, Foodworld, Nilgiris or even HPCL and BPCL.

BuddyChef, which comes from the stables of Pune’s organic farming firm Orgreen, aims to sell pre-cooked Indian and Chinese meals under $1 across every pin code. With seven outlets across Pune, it is selling 5,000 meals a day across the counter to working couples, students and small offices.

Franchising has been a catalyst in fuelling the QSR concept in India. Sanjesh Thakur, Ernst & Young’s associate director, retail & consumer products practice, says that around 17% of the F&B outlets within the organised sector are operated through franchisees and over 30% of the upcoming outlets are projected to be based on this model.

The QSR trend was kicked off by the likes of McDonald’s and Yum! Restaurant’s KFC, which began operations in the 1990s. “Since the market opened up in the ‘90s, consumer habits including eating-out behaviour has gradually undergone a change,” said KFC India’s marketing director Unnat Varma. KFC added 27 outlets last year taking its total count to 72.

All this growth needs money and investors have started opening their purses to the industry.

Bangalore-based East West Ethnic Foods, the holding company of wraps chain Kaati Zone which is adding 100 outlets by next fiscal across Maharashtra, is in talks with two-three private equity players to raise between Rs 12-15 crore.

It received its first round of funding from Accel Partners India, Draper Investment company and the founder of Helion Ventures, Ashish Gupta.

Source: http://economictimes.indiatimes.com/News/News-By-Industry/Services/Hotels-/-Restaurants/Grabbing-a-bite-Indians-are-lovin-it/articleshow/5393087.cms?curpg=1