Romeo’s Pizza (romeospizza.com) started franchising about 10 years ago and currently has 35 stores. There have been many ups and downs over the past decade. As with anything, the grass is always greener on the other side. Some days I’ve wished that all of the stores were franchised, and some days I’ve wished that none of them were!
Many restaurateurs see franchising as the ultimate prize. In some cases, they may be right. With franchising, you can grow quickly for less money—and with less responsibility—than you can by opening restaurants yourself. But you will have to maneuver around many obstacles before you achieve success. In this article, we’ll look at five key questions you’ll need to ask yourself in order to make a better informed decision about franchising your pizzeria concept.
What Is Franchising?
Before you adopt the franchise model, you’ll need to understand what franchising really is. First, it is a financing model. It’s a way to use other people’s money to grow your brand and income. After all, if you had all of the money in the world and every store was generating cash flow, why would you even consider franchising? But most restaurateurs do not have that kind of money. So, to gain momentum quickly, they sell franchises.
Which leads me to the second point: Franchising is selling. Selling is a totally different skill set from running a restaurant. Professional salespeople spend a lot of time cultivating leads, making calls, doing follow-ups and closing the sale. Selling franchises requires all of those skills. Do you have those skills, or will you need to hire someone and bring them into your company?
Since franchising is selling, you will need a sales system. How will you cultivate leads? Will you use a lead source, such as Franchise Marketing Systems? How much will you charge for the franchise, and how much in royalties will you need to take to maintain a supportive environment? These are all questions related to franchise sales. Without a system in place, you will waste a lot of time and end up frustrated.
Is Your Brand Marketable?
Assuming your restaurant concept is a brand, you have to ask yourself: Is the brand marketable? So many great restaurants have that special something that makes them work. I call it “the magic.” In many cases, “the magic” is the owner, the manager and/or the employees. Alternatively, it may be the location, the competitive environment or even the product. Unfortunately, all of those things are completely unmarketable when it comes to franchising. The only thing that is marketable—the only true “magic”—is the power of your brand. Your brand is everything that your company stands for and projects to the outside world. It’s the logo, the uniforms, the way you greet customers, the food quality, the speed of service, or anything else that is unique to you. It is the how, why and when of your company. It is bigger than the owner and is truly “the magic.”
Your brand represents the real “product” you will be selling through franchising. The systems and processes that work behind the scenes also make your brand. In my last article for PMQ (March 2015), I talked about these systems and processes that must be in place before you even consider opening a second unit, let alone franchising your concept. You’ll need an operations manual, a food prep manual and an employee handbook. Your operations manual needs to address customer relations, inventory and ordering systems. You must have a system for labor scheduling and optimization. And you need a financial system to track the success of the restaurant. These systems are the most important “products” you’re selling when you sell a franchise.
I also believe you must have at least three highly successful locations before you can franchise your concept. Otherwise, few potential franchisees will want to invest in your brand. Why? Because you haven’t proven that “the magic” is the brand and the system. With just one or two locations, you may still be “the magic,” or maybe it’s the town you’re in or some other factor that cannot be duplicated.
In addition, those three stores should run as close to perfectly as possible. Sales and profits need to be high. The stores need to show sales growth year over year. You need to have employees in place who genuinely care and make the restaurant hum. Remember: Once you build your system, you must train your employees to operate that system. Then it’s your job to look for areas where the system is breaking down and opportunities for improvement. The system is what you are selling, so make sure it’s perfect!
Employee Kerry Maher gets ready to make a delivery run for a Romeo’s Pizza shop in Pickerington, Ohio. Photo by Daniel Perea
How Crucial Is Image?
Your restaurant’s image plays a crucial role in franchising success. Try to think like an outside investor. As you step into your restaurant, ask yourself some probing questions. Is it clean, neat and well-organized? Are the employees behaving like professionals and treating customers correctly? Does the decor truly reflect what you want the next 50 stores to look like? Would you invest in this company?
Decor is a very important piece of the puzzle. The overall appearance and ambience generated by your decor will make or break a lot of franchise sales. If your pizzeria looks too “mom and pop,” you will have a difficult time selling franchises. It needs to look and feel new, sleek and marketable, with digital elements or signage that project a modern, appealing image. Hiring interior designers to achieve the right look can be expensive, but creating an image that sells is mandatory for your success.
Branding is essential to any pizzeria franchise. Branding is the true “product” that franchisors are selling, says Romeo’s Pizza founder Sean Brauser. Photo by Daniel Perea
What Kind of Expenses Will I Face?
No doubt about it, franchising is expensive. To sell a franchise, you must have a Franchise Disclosure Document (FDD) and a Franchise Agreement. Together, these documents can run up to 200 pages. Whenever you speak to a potential franchisee about franchising, you must give him a copy of these documents and have him sign off on them. Creating these documents can cost a lot of money. When I first started, I found a company called FranDocs that sells boilerplate franchised documents for significantly less than a lawyer would charge. I took the documents and spent about three months completing the agreements with Romeo’s Pizza specifics. I then took the document to an attorney for a legal review. One thing I have learned is that it’s a lot cheaper to have an attorney review something than it is to pay him to create it for you.
Franchisees also expect—and deserve—a support team paid for by you, the franchisor. In the beginning, the Romeo’s Pizza team consisted of myself, my partner and one other person. Unfortunately, providing franchisee support took all of us away from our regular full-time responsibilities to the company. We had to hire additional personnel to fill the gaps. We now have a staff of about 12 people providing support to our current franchisees and recruiting new franchisees. We have teams in place for training, marketing, operations and brand protection. Our goal is to give our franchisees unparalleled support so they can run their businesses efficiently and profitably.
Royalties sound nice and easy, but until you’ve got multiple locations up and running, most of that revenue —and then some—will go toward providing support for your franchisees and developing your brand.
One more thing: It’s crucial to work with an experienced attorney who can guide you through the many legal issues pertaining to franchising. You can do your own research—there are a number of books about the legal mechanics of franchising—but always have a lawyer review everything you’re doing to avoid costly lawsuits.
Who’s the Ideal Franchisee?
Finally, one of the biggest challenges you’ll face is finding the right franchisee. At Romeo’s Pizza, our most successful franchisees have certain qualities in common. First and foremost, they all have entrepreneurial mindsets. They want to have their own business and make their own way in life. But they also want a system that they can follow and learn from. The smartest people are those who admit they don’t know it all. Beware of the potential franchisee that thinks he already knows it all!
Achieving success in franchising is quite a challenge. Remember that what you are selling is a system to make money. Your product just happens to be pizza. You are a marketing company and a sales organization. You need to constantly improve and grow your system—it is never done! You need to be prepared to support your franchisees on a daily basis, especially if your system is complicated. You can be successful in franchising, but understanding what success looks like first will help you decide if that’s really what you want. Good luck!