Nontraditional Locations 101: A Crash Course In Getting One Open and Making It Profitable
By: Eddy Goldberg
Economic realities have been harsh, lenders stingy with money, and many suburban territories unavailable or overbuilt. These are just some of the reasons a few multi-unit franchisees are turning to opportunities in nontraditional locations. Many franchises have potential in places that have not historically been franchise hotbeds, like airports, hotels, colleges, senior centers, highway rest stops, hospitals, and military bases.
If you've ever considered - or never considered - nontraditional franchise locations, it can be a whole different ballgame. When done properly, it can be full of potential. For those who may be considering entry into nontraditional locations, here are a few tips from franchisees experienced in operating in these venues.
Pick the right franchisor. Flexibility on the franchisor's side is one of the most important factors in succeeding in a nontraditional environment. A franchisor's willingness to adapt to locations that have different sizes and shapes from the concept's standard footprint, to allow variations in the food or service, to conform to the requirements of the host venue, and to provide creative, innovative support is critical.
Go it alone or team up? Franchisee organizations experienced in nontraditional locations know the ropes, but for those new to the game, it's worth considering pairing up with one of the large concessionaires, such as an HMSHost, Sodexo, or Aramark. "There are developers airports contract with," says Samir Mashni, vice president business development at Midfield Concession Enterprise, which operates about 25 brands in airports from its base in Romulus, Mich., including sites in airports in Philadelphia and Dallas, with new locations in the works at airports in Newark, Cleveland, and Boston. "Talk to those developers, constantly share your brand portfolio with them. We're constantly educating developers and airports to our brand portfolio."
Is it right for you? Does your organization have the resources, time, expertise, and staff to branch out? Will nontraditional locations work within your current business model? Gina Puente, the CEO and co-founder of Dallas-based Puente Enterprises Inc., says franchisees should "fasten their financial seatbelt" and "make sure they have the appetite to work in an airport environment." And while profitability can be higher, she cautions, it's not easy. "Some feel they can go in with one location, hit a gold mine, and go on vacation in Tahiti every year. It's hard-core, extreme retail. The only way you can be successful is to be hands-on as an owner and get a great team behind you." It's not only a case of running the numbers for an enterprise to get in an airport, she says, "You also have to check if your lifestyle will work in these types of operations. In a heartbeat it can fall off-course."
Fundamentals still apply. Michael Ty's Hospitality Culinaire Inc., operates franchise locations inside Las Vegas' McCarran International Airport. He says, "If you know how to run an operation properly, there's good opportunity. Even with the scenario I have with the specific terminal, you learn how to adjust, and you have to learn how to save for the rainy days. You know when the down periods are, and adjust your labor accordingly. Labor is my highest commodity of every dollar I take in."
Be ready to compete. Not only for contracts, but with the other brands to win a bid at a nontraditional location. "It's very competitive, you need to know that," says Mashni. But the rewards are worth it. "If you understand the business and can find a very good location, your revenues are going to be much higher than on the street. If you don't get a good location, you'll be operating in a high-cost location without the revenues."
Leases: look before you leap. Rob Lewis was co-owner of a Best Western Hotel & Conference Center in Brandon, Fla., when the in-house restaurant closed. Nick Vojnovich, president of Family Sports Concept, franchisor of Beef'O'Brady's, stopped in to ask about locating a Beef'O'Brady's there. Lewis teamed up with Rob Wolfenden, an experienced restaurant operator, who assembled a management crew, and after some discussion with Vojnovich about adapting the concept to the space, they went ahead and opened in September 2008.
When negotiating the terms for a Beef'O'Brady's at a Holiday Inn he operates in Gainseville, Lewis and partner Wolfenden employed a real estate broker; Vojnovich also helped. "Absolutely engage the services of a professional real estate broker who knows how to assist in the acquisition and lease the property," says Lewis. "If they push back hard, blame it all on the broker. You're going to have an ongoing relationship with the landlord, don't sour it."
"There's really only one chance you have to set your rent. It's such an important part," says Wolfenden. "If you're going to sign a lease with the landlord, it's good to have a buffer to make sure the relationship remains warm and fuzzy."
Adds Lewis, "You can control food and labor, but not your fixed costs. If you're paying too much you rent can't survive. Look at the revenue you're likely to drive." For example, if the average ticket is $10 and you have a certain number of seats, do the math. "If you make a rent assumption higher than that, you're doomed to failure; you can't turn tables fast enough."
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