In the late 1990s, Jeff Reetz was a head coach at Pizza Hut, helping to inspire a group of regional coaches to winning records at dozens of restaurants in eight Southwestern markets. "I helped them make their operations as successful as possible," recalls Reetz. However, like many working in a corporate environment, he dreamed of the day when he could manage his own business.
Thomas "Tab" Broome got an early start in the franchise business, going to work for a restaurant group in Raleigh, N.C., about 30 years ago. At the time, the company ran a string of Darryl's restaurants (which looked a lot like Applebee's, only with a little more variety and flair), a group of 11 Pizza Inns, and The Angus Barn steakhouses. General Mills swooped in and bought the pizza places and family restaurant business, and Broome got a chance to work for a large restaurant corporation.
Craig Horn is such a perfectionist that he'll probably never give himself a grade of "A" for performance as president and CFO of Fresno, Calif.-based JEM Management Corp. After almost a year-and-a-half at the helm of JEM, which owns 22 Wendy's and 15 KFCs, he gives himself a "B."
Tony Lutfi came to California when he was 16, a Palestinian-Jordanian immigrant looking for a better life. He dreamed of growing up, getting an education, and becoming a doctor. To earn some money, he took a job working the graveyard shift at a Jack in the Box. Then fate stepped in. "The manager had a heart attack, and they promoted me. I helped the management team in the summer after I graduated from high school," says Lutfi. "It became my passion. I never went back to school, and I was promoted at Jack in the Box."
What if there were a web-based tool that could help you create and organize your restaurants' menu quickly and accurately--while also collecting important data and ensuring consistent brand delivery? There is, and companies including Applebee's, California Pizza Kitchen, O'Charley's, Max & Erma's, and Papa Murphy's are now using the technology to create, design and order printed copies of their menus. The tool, MenuNet, is from Trabon Companies, which provides web-to-print restaurant technology and printing solutions.
I know few people who had money-making investments in 2008. On the flip side, I know many whose portfolios technically beat their respective benchmarks. In a rising market (like that experienced in 1999), beating the benchmark would have been considered a badge of honor--providing ample bragging rights on the golf course and around the dinner table. However, having relatively "less loss" in a down market isn't exactly considered a wonderful experience for most of today's investors.
The historical consolidation of franchise finance sources (local and regional banks, and other institutions) has led to only a handful of major players financing franchised companies over the last several years. These institutions, all well-known household names, have dramatically decreased leverage multiples while increasing interest rates and, most importantly, are tightly preserving capital until general economic conditions show signs of stability. As these lenders limit the flow of debt capital to franchising (or shut off lending completely), there are some trends all franchise owners should consider to ensure their financing needs are met during this recession.
I just returned from the Multi-Unit Franchising Conference in Las Vegas and, compared with the other industry conferences I've addressed so far this year, it was a welcome breath of fresh air. At other industry group presentations this year, attendance numbers were off (one conference was even cancelled at a tremendous cost to the organizer) and the prevailing mood at all of them could best be characterized as an oppressive atmosphere of economic uncertainty and pessimistic forecasts. Not so with the Multi-Unit Franchising Conference group of movers and shakers.
Back in 1989, I had an experience that remains vividly clear even now. I was driving through the small town of Monroe, La. Even though my windows were rolled up, there was an awful stench seeping into my rental car.
It seems there really is a silver lining in every cloud. And the recent economic downturn has deposited a little of that silver at the feet of some multi-unit franchisees who can tolerate risk and don't mind a little "remodeling" work. Today, opportunities abound to buy distressed franchise units from other troubled or bankrupt franchisees--often for pennies on the dollar. If they have the stomach, these "rescuers" can snatch up these units, turn them around, and watch the dollars flow in.
The big multi-unit rollers who convened in Vegas this April represented more than $1.6 billion in annual revenues, and they were playing to win. It was all part of the 2009 Multi-Unit Franchising conference, sponsored by Franchise Update Media Group this past April 15-17 at the Bellagio hotel. The annual event, which attracted a record 500-plus multi-unit franchisees, franchisors, and vendors from across the country, was a sure bet for attendees.
Kerry Pipes and Eddy Goldberg
The economy hasn't been the only problem wreaking havoc across the nation. Most cities are also reporting a disturbing trend of crime increases that experts tie to rising unemployment and a pattern of thefts called organized retail crime (a.k.a. organized retail theft). Beyond the convenience store "beer runs" and juvenile candy grabs, prosecutors and retailers alike are feeling the impact of retail theft groups targeting specific merchandise--not for personal use, but for resale through household sales, community swap meets, flea markets, or most commonly, over the Internet through one of the large online auction sites or community resale forums.
Rollie Trayte and Gary Widman
Why did lenders go from using fog-the-mirror underwriting to 100 percent cash collateral requirements in less than a 36-month period? Why did the banking watchdogs not bark? From a franchise growth perspective, the answer is simple: It doesn't matter. What does matter is confronting the new lending reality.
You've worked hard to build your multi-unit franchise business, and now it's time to step back--not only from the day-to-day operations, but perhaps from the business itself. Is it time to let go? Can you? Will the business continue without you?