The fruits of franchising

The fruits of franchising
Tags: Operations Management
October 10, 2007

* This is an excerpt from the Pizza Marketplace guide, Selecting a Pizza Franchise. Click here to download this report.

Compared to its closest foodservice competitors, the pizza business is unique in several ways. Consider the fact that 26,000 of the estimated 64,000 pizzerias in the U.S. are owned by independent operators — and then think of the last time you saw an independent hamburger, chicken or fish brand. Research shows that about 4,000 U.S. pizzerias open and close annually, and a good share of those shuttered are independent operations. When Ryan Reese, owner of a Garlic Jim's unit in West Seattle, was considering opening a pizzeria, he knew the numbers were on the side of franchises. "I know statistically franchises have a better success rate than independent, mom-and-pop-type start-ups," he said. Particularly important for Reese was having the support of experience, a tried-and-true method that had worked for those before him that he could put into action, as well. "I had no food experience going into this, zero. I never made a pizza other than a Tony's pizza you put in the oven." When Michelle D'Andilly was shopping for a pizza franchise, the former McDonald's manager specifically sought a concept with an established operational scheme that she didn't have to develop on her own. "I wanted to know that it worked, that the people who had developed this had made all the mistakes I didn't want to make again," said D'Andilly, owner of two Eagle Boys Pizza units in the Australian state of New South Wales. "When you've got something like that to work with, you can concentrate on growing your business instead of correcting it and putting out fires all the time." Since product development research is done and the guesswork is removed, franchise operators can focus on duplication rather than invention, and franchisees are basically buying the company's proven model for success, Gollersrud said. The Garlic Jim's model begins with standardized recipes, vendors and a distribution channel all incorporated in a cost-effective manner. "We have the buying power of our whole system behind us, which we leverage directly on our vendors to work to gain the best food costs possible for our franchisees," Gollersrud said. "Our food distribution system literally delivers everything they need to operate their stores, so they're not dealing with the food vendors directly; they're dealing with us and essentially one-stop shopping." The proven model expands to include a Web site that receives thousands of hits daily and other tools to market the brand. "There's a big cost to develop all the print ads, menus, menu boards, television commercials, radio commercials," Gollersrud said. "Things like that that are all a benefit to our franchisees." Brand recognition By looking at the top three pizza chains — Pizza Hut, Domino's and Papa John's — and the millions those companies pay for Super Bowl ads and the like, Dwayne Northrop said it's easy to see the importance of brand recognition. But the president and CEO of Garlic Jim's also said local store marketing can overcome a lack of brand recognition. "You have your delivery area," he said. "So, to some extent, the local franchisee doesn't really care if the guy on the south side of 200th Street knows who he is, because he doesn't deliver to that guy, as long as the guy on the north side of 200th Street knows who he is." Even at larger chains, Northrop said, the operators with the highest volumes are the ones who go out into local communities and conduct their own marketing, such as door-hanging and school and business visits. "They're doing the grass-roots marketing, not just relying on the big TV ads," he said. "The guys who sit there and wait for the phone to ring, they're not doing as good."

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When Scott Anthony bought an existing Fox's Pizza Den franchise 10 years ago, he not only knew about the company and its products, he knew everyone in the tiny town of Punxsutawney, Pa., was familiar with it, too. The 250-unit chain's outlets are scattered up and down the eastern one-fourth of the U.S., but that its core presence lies in Pennsylvania, where it's headquartered, was a strong selling point to him. "I knew I wanted a company that already had name recognition," he said. "I also wanted a franchise that had a good image in its core market because you get almost-instant loyalty." You're not alone A good franchisor, and especially one experienced at growing a pizza concept, has an experienced team in place to provide new operators training and advice on starting and running the business. Some franchisors may have corporate training facilities at which a basic pizzeria education is taught, followed by time in an existing store. In the case of Garlic Jim's, each new franchisee receives a total of four weeks of training before the new store opens. Gollersrud said the training is comprehensive and starts at square one. "It's literally A to Z," he said, "starting out as if you were a new hire learning how to answer the phone and make pizzas, learning how to write schedules and do food orders, learning how to market your business to schools and businesses and to the neighborhoods in which we're doing business all the way through PNL analysis and management and insurance issues." The hands-on training for all aspects of the job was critical for Reese. "It's a lot easier for me to learn by actually doing it rather than reading out of a book or something else," he said. D'Andilly sought that kind of experience in the management and training corps of Eagle Boys, which is based in Brisbane, Australia. When she read the bios of the company's leaders, she wanted to see not just broad business experience, but people with foodservice and pizza knowledge. "I wanted to know there was someone who had experience in the field in training and marketing, someone who could answer the questions I know I'd have," she said. "Having worked for a large franchisor before, I know that the people working in the organization to support (the franchisees) are the most important part."