FOOD FRANCHISE

Fast food Franchise QSR Franchise Coffee franchise Food-to-go Franchise Pub Franchise Restaurant Franchise

HISE NC A R F Be Inspired

S WINTERWINTER EDITIONI E O I T Meet Richard and Rosie P N P O RT U McLucas and find out what it’s like to be a Franchisee

ONE TO WATCH Franchisee Q&A Welcome to BAP, a UK based sandwich Making the decisions to become a franchisee chain with plans to grow rapidly over the can be a difficult one. We speak to some next 3 years individuals who have taken the plunge and learn about how and why they got into the industry

Print edition £3.99 BUYING A Market Watch WINTER EDITION FRANCHISE A look at how some of the 10 things you must largest food franchises are consider before you performing on the stock become a franchisee markets

Editor’s message

s we enter 2016 there is plenty to get excited about in the world of franchising, especially in the food and drink sector. Over the last 18 months the market Ahas seen significant growth and the number of new investors looking to open a franchise is rapidly increasing.

Another area where we are noticing growth is in the number of small business owners who are looking to franchise their own businesses. Originally these developments came Editor about as a way of spreading the load and those that couldn’t manage another site offered Scott Rumsey someone else to operate under their brand and licence. Now the growth is down to [email protected] consumer demand. Coffee sales are rocketing and the big brands are offering a more Office: +44 (0) 333 003 0499 premium products. Factors such as speed, convenience and consistency are also high on the consumer agenda, meaning that franchises are turning over more each year. All things Commercial Manager being equal therefore 2016 could be the year for you whether you are a franchisor or a Lewis Wantling franchisee. Over the coming pages we will look at all of the latest news from the industry and hear from the experts to make sure you are best placed to grow as the market does. [email protected] Office: +44 (0) 333 003 0499 In a bumper edition which sees the magazine launch into retail we have included over 20 pages of news from around the industry and speak to some of the biggest brands who are Advertising sales currently offering fantastic franchise opportunities. Sandra Bouillet Avoiding risks when it comes to business can be hard but we look at the best ways to [email protected] avoid franchise risk in one feature, whilst another looks at the 10 things new franchisees Office: +44 (0) 333 003 0499 should consider before buying a franchise.

Finance Over the last few months we have met many interesting individuals from the industry Laura Williams including the guest in our Be Inspired feature. We speak to a couple who have taken on a Muffin Break franchise and visit BAP, one of the fastest growing sandwich franchises. [email protected] Office: +44 (0) 333 003 0499 In the finance section we look at the importance of working capital and the effects it can have on your business if you don’t allow for it. The market watch feature gives you a Design roundup of how some of the biggest brands in the industry are performing on the stock Timeem Taleifeh market. [email protected] Expert legal advice comes from the team at Sherrards and we speak to McPherson’s about all of your accountancy queries.

For those looking at getting into the industry, then why not visit a trade show. We preview the Franchise Show and speak to the organisers about what visitors can expect.

We hope that you find the new look issue full of helpful information and as always, happy reading.

Until next time,

Publisher MVH Media Ltd. Unit 9 Wilkinson Court, Clywedog Road South, Wrexham Industrial Estate, Wrexham LL13 9AE

The publishers do not accept GET IN TOUCH responsibility for advertisements appearing in this magazine. www.foodfranchisemagazine.co.uk Front cover The opinions expressed are not @franchise_food image courtesy necessarily those of the editor or the of Muffin Break publisher. /foodfranchisemagazine1 (Page 58)

WINTER 2016 FOOD FRANCHISE | 3 ContentsWINTER

06 Industry News We round up all of the latest news from across the industry over the last quarter

34 Franchisee Q&A We speak to some individuals who have taken the plunge and learn about how and why they got into the industry. 06 48 10 things to consider before buying a franchise franchisees must consider before they become a franchisee

58 Be Inspired We talk to Richard and Rosie McLucas from Glasgow about what it’s like to be a Muffin Break Franchisee 34 62 Avoiding franchise Risk We look at the best ways for you to protect your franchise and avoid risk with some handy tips and tricks

72 One to Watch In this issue we look at the exciting plans for BAP, a UK based sandwich chain with the potential to grow rapidly over the next 3 years

58 74

4 | FOOD FRANCHISE WINTER 2016 58

76 Show Preview We take a look ahead to the Franchise Show which takes place in 62 mid-February

79 Finance We look at working capital and why it is vital for the security of your business

84 Legal The experts at Sherrards Solicitors talk to us about the some of the key points in the industry

84 Accountancy The experts from McPhersons give us some handy tips for the start of 2016

90 Market Watch A look at how some of the largest food franchises are performing on the 88 stock markets

WINTER 2016 FOOD FRANCHISE | 5 News round-up

Hotcha franchise celebrates ten store deal The team at Chinese Takeaway franchise Hotcha, are in a celebratory mood after two highly experienced multi-unit franchise operators have signed a deal to open ten stores in the Liverpool and Cheshire area. Although Hotcha is only offering multi- a FTSE 250 pub company, where they store opportunities, this is the first deal of bonded over a desire to test their skills this size for Hotcha and everyone is excited and experience with a business venture of including boss, James Liang. their own. Conversation led to action and Businessmen, Chris Wright and Keith eventually Chris and Keith became franchise Janion, both from the North West, ticked owners themselves in the highly competitive every box on Hotcha’s wish list: multi-unit fuel and retail sector and built up a experience, food sector knowledge and a substantial portfolio of successful outlets. solid track record of building and managing Chris and Keith started to discuss how teams that could deliver fantastic results in a the real action was to be found getting in competitive environment. on the ground floor of a new and exciting Chris started his career with a large franchise operation. Many of the biggest supermarket group on the company’s ,and once upon a time most desirable brands, graduate trainee programme. He then were close to saturation point and they felt moved into regional management roles in investing would feel too much like buying force in their sector and go on to become the off trade before overseeing the food and a job. For a long time, Keith was quietly a household name alongside the burger, beverage operation of a large 5-star holiday exploring ways to independently compete chicken and giants that had gone company. in the coffee shop sector, but their eureka before them. Keith began his journey in the on trade, moment came when Chris discovered As Keith and Chris approach their first managing a network of pubs and restaurants Hotcha, and the two realised they found store opening they are already happy to before taking a senior management role with exactly what they had been looking for. speculate how ten stores may eventually one of the world’s largest franchises They wanted an ambitious franchisor who lead to more; this is very much a relationship that saw him dividing his time between the was at the beginning of a national expansion where ambition is matched by both UK and Canada. programme, yet had the credibility, business franchisor and franchisee. The two men met whilst working for model and brand to become the dominant

Wrapchic continue expansion with Merry Hill Fusion food chain Wrapchic’s expansion plans are on target for 2016, with Harris Lamb having overseen the acquisition of their latest site.

The business, which was founded by looking into launching abroad, and we’re from snack counters into fully-fledged Mahesh Raikar in 2012, has grown from committed to supporting its growth. atmospheric restaurants offering a bar one site in a central mall to Harris Lamb has worked closely with the service. having a presence in the Bullring, on key business to secure an excellent location in “The response to our launch in Bradford high streets, in hospital food courts and on the Merry Hill shopping centre, as well as was fantastic and we look forward to the university campuses. other sites which will be revealed over the Merry Hill launch. We anticipate further Wrapchic opened its Bradford outlet next few weeks. growth in 2016 and we’re glad to have earlier this month the Westfield shopping He said that Harris Lamb is continuing Harris Lamb as a partner to help us do centre. talks with key landlords and providers so. The retail team has committed time to Harris Lamb was retained at the across the country to negotiate a further understanding the business and its change beginning of the year to identify UK sites presence for the chain. of focus and has become a pioneer for our for Wrapchic, and David Walton, head of Mahesh said: “Wrapchic is going business, using that knowledge to find retail, said the business model was proving through an exciting transition at the complementary sites,” he said. a huge success on high streets across the moment, increasing its lunchtime grab- The business is currently expanding country and-go offering to options that are suited opportunities within Northampton, “Wrapchic has enjoyed incredible to all times or the day and evening, and Nottingham and Central , as well as growth across the UK and is already we’re looking at evolving the business , Bahrain and New York.

6 | FOOD FRANCHISE WINTER 2016 Marston’s to create 40 jobs with Costa confirm brand new site new openings Marston’s one of the UK’s largest pub operators is set to build has announced its newest venue in the North East and with it create around 40 it has opened two outlets in new jobs. South Wales

Marston’s Inn and Taverns, a trading application represented a “sustainable The coffee chain has agreed two 10 year division of brewing giant Marston’s, development” and that it “has been leases for 50/52 Albany Road in Cardiff and successfully submitted plans to demonstrated that there is a need for a 67 John Street in Porthcawl for £30,000 per Sunderland City Council, along with facility of this type in the Teal Farm area”. annum per store. Wildgoose Construction, to build a pub Existing Marston’s franchisee, Aaron Both stores will create a combined 28 with a restaurant facility at Teal Farm in Stewart, who has three other franchised jobs. Washington. pubs with the group, has been appointed The 2,000 sq. ft. unit located on Albany The pub which will be named after the to operate Teal Farm and the business Road opened in early August and will have area and called Teal Farm is located in will operate under the group’s Urban the capacity for 81 seats, whilst The 1,800 Washington, Tyne & Wear on Pattinson Format. There will be a strong focus on sq. ft. unit on John Street in Porthcawl Road and is Marston’s first new build food and drink and guest can expect a opened a week earlier and will have space community pub. According to the team vibrant atmosphere created by live sports for 87 seats. at Marston’s it will also be their first (Sky and BT), entertainment and events. Retail & Leisure property specialist EJ franchise new build too. The pub which is part of a wider new Hales acted jointly with Cooke & Arkwright The development covers an area build programme and development for private investors on the Cardiff unit. EJ of 100,000 sq ft. and the building plan, makes up one of the franchise’s Hales also acted for landlord Callowgate will be two storeys with the pub and 25 brand new pubs to open in the last Limited for the unit in Porthcawl. restaurant on the ground floor and staff financial year. It will create around 40 Philip Gwyther, partner at EJ Hales, said: accommodation on the upper level. The jobs and is expected to open in March “Both locations are in highly populated areas venue will cater for about 120 people 2016. Marston’s currently operates more for shoppers and residents which will, no internally and 75 externally. A 47-space than 1,000 pubs throughout the UK, doubt, mean Costa Coffee will perform well car park is also proposed. while Marston’s Inns and Taverns has a in both areas. In a report to the councillors, 41-strong operation. “It’s great to see national chains Marston’s stated that the initial continuing to invest in Wales and follows on from our letting to Costa for its first drive- thru in Wales in Swansea.” Rob Palmer, associate in the retail team at Savills, said: “Costa continues to go from strength to strength and we are pleased to be supporting the chain’s ongoing expansion. The new store on Albany Road is well placed to at the heart of this popular residential suburb.” The news comes as coffee shop rival could be developing a second drive-thru outlet in Swansea.

US sandwich franchise, Earl of Sandwich is to return to the UK after securing a site in Bluewater shopping centre. Owned by Earl Enterprises, the sandwich chain will open a 551 sq ft site in Bluewater’s Winter Garden, after closing its only UK site in the City last year.

Land Securities also confirmed that Shawa, Securities, co-owner and asset manager of opening because its sister brand, Comptoir the sister brand to Comptoir Libanais, the Bluewater, said: “Earl of Sandwich is another Libanais, has traded consistently well. Both Lebanese-inspired canteen-style restaurant, great addition to Bluewater’s line-up of have made their debuts outside London at will open a 472 sq ft site, its first out of leading UK and international brands. Their Bluewater, reinforcing our position as the first London. unique combination of heritage and high choice location for expanding brands.” Oh You Pretty Thing, a champagne bar, will quality grab-and-go food adds something The news coincides with a strong year for complete the trio of new brands opening in new to Bluewater, providing guests with even Bluewater’s dining brands, with catering sales Bluewater. greater choice. up 8% in the year to date. Russell Loveland, portfolio director at Land “Shawa is an equally exciting arrival, and is

WINTER 2016 FOOD FRANCHISE | 7 News round-up Study finds large disparity in food franchise coffee prices Annual coffee spend now £730m as sales continue to rise.

31 per cent to branded chains such as Starbucks and Costa Coffee. But what’s really interesting is the price discrepancy between the chains with customers spending anything from £1 to £3+. The Survey found that if you stopped for a coffee on the way to work, over the course of year you would spend the following:

Wetherspoons £252.45 Coffee is a big business in the UK with truth the consumers seem willing to pay for £405.45 consumers drinking 70 million cups a day - a convenience. £446.25 habit which adds up to a £730 million annual Sales are on the rise, with global McDonald’s £481.95. caffeine spend. It will be no surprise that consumption of coffee coming up to 400bn £548.25 many of the consumers in today’s market end cups per year as the proof of this trend. Pret £548.25 up buying their daily brew from a large chain The growth of the UK coffee industry Caffe Nero £599.35 or franchise. means that the number of coffee shops is set Costa £624.75 Expert behind the study have hinted that to rise from 10,000 this year to 21,000 by M&S £624.75 by simply switching from coffee shop drinks 2020. Starbucks £663 to homemade brews, you could make a Non-specialist coffee outlets currently saving of £1,873, so how do the franchises have the greatest market share in the UK Are you the owner of a coffee franchise combat this. with the Greggs taking the biggest slice with and what are your thoughts? Do UK With the power to bulk buy and with 37 per cent. businesses charge too much to the consumer large distribution networks you would think This is followed by independent outlets, and how hard is it for independents to keep that it is possible to reduce the costs but in which claim a 32 per cent share and finally their prices down. Let us know.

Domino’s invest and takeover Germany’s biggest pizza chain The companies that own Domino’s Pizza in the UK and have set up a joint venture to buy Germany’s biggest pizza chain.

The pizza giant will take over Joey’s can build from,” he said. Pizza who currently operate 212 stores The company’s Sydney-listed shares across Germany and boast annual sales of jumped more than 12% after the deal was €143m (£103.9m). announced. The stock has soared more The joint venture will be two-thirds than 125% in the past 12 months. owned by the Australian company, with The Australian company also raised its the remainder owned by the London-listed profit outlook for the year to June by 30% Domino’s Pizza Group, which already has - to A$166.1m net income before tax and operations in Germany. other items. Don Meij, chief executive of Domino’s The deal will increase the number of Pizza Enterprises, said that entering the stores owned by Sydney-listed Domino’s German market represented a long-term Pizza Enterprises to 1,870. Germany growth opportunity. is currently the world’s fourth-biggest “The acquisition of the market-leading pizza market and the deal is worth up to Joey’s Pizza business provides immediate A$120m. scale and marketing presence which we

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www.wokandgo.co.uk News round-up

Crêpeaffaire continue international growth with opening Crêpeaffaire, the UK’s leading branded crêperie group, is continuing its international expansion by opening its first store in Kuwait.

Following the launch of its initial unit received many requests to open there from in The earlier this year, part consumers and established local operators of an international development strategy, alike. Judging by our first store in Kuwait Crêpeaffaire is opening its first unit in City, developed in partnership with a strong Kuwait. local operator, we have definitely filled a gap Talking about the acquisition, Saoud Al- in the market.” Sabah of Dome National General Trading Crêpeaffaire are continuing to pursue their Co, which has acquired exclusive rights to development strategy by focusing on the UK, the brand for Kuwait, said: “It has been an the Middle East and mainland Europe, with exciting journey so far with Crêpeaffaire: another area development agreement signed from the start they supported us with earlier this year for the Netherlands and on- localising the recipes, training our staff to going expansion in its domestic market. their system and leading the store designs. Throughout 2015 the brand has grown its “We were assisted by qualified personnel presence significantly in the UK by opening prior to and after the opening of the first in high streets (London Islington, Bristol), store. We are delighted to say the store shopping schemes (Birmingham Grand “Crepeaffaire combines strong intrinsic is already trading above expectations and Central) and non-traditional locations (inside economics with sophisticated branding and a expect more will follow.” KidZania at Westfield London) demonstrating systematic operation, making it an excellent Founder and Managing Director, Daniel the flexibility of its model. business opportunity. We are highly selective Spinath also commented: “The appetite for Matteo Frigeri of Seeds Consulting, when it comes to our partnerships: they have sweet and savoury crêpes in the Middle East which assists Crêpeaffaire in its UK and to display operational, business and financial is immense and since our inception we have international development, revealed: acumen to qualify as a partner for the brand”.

Domino’s lose second CFO in 10 months Domino’s Pizza has announced its chief financial officer, Paul Doughty, has resigned after just five months with the company, meaning that the pizza giant have seen one of their most senior roles vacated twice in less than a year.

The company has announced that was a problem with the culture. “It’s not As a result of the news shares in the chief executive, David Wild will assume something that I think is an issue, the company dropped by 16p but trading has Doughty’s responsibilities, while the business is doing really well,” he said. “But remained strong, only last month Domino’s recruitment process gets underway. I wouldn’t I say it was a naturally easy reported a 14.9% increase in like-for-like Wild has now been forced to defend the environment. sales in Q3. This is largely attributed to corporate culture at the fast-food delivery “The franchisees in particular are very their growth, they opened 33 new stores business after the FTSE 250 company lost demanding entrepreneurs but that frankly this financial year and should be on course its second finance chief in the space of ten helps us in terms of moving the business to open a minimum of 50 by the year-end. months. to the next level which is what we’re Paul Doughty, who only joined Domino’s doing.” in June, will leave at the end of next Mr Wild also added that Mr Doughty, month. His departure comes after Sean who joined Domino’s after a decade as Wilkins, his predecessor, quit Domino’s finance chief of Moneysupermarket. with immediate effect in January after only com Group, had decided he did not like 14 months with the firm. the “fast-moving, entrepreneurial”, quick- Speaking in response to claims about service, franchise restaurant business. careless structuring from some financial “Credit to him, he made the decision analysts, Wild, said he did not think there quickly,” he added.

10 | FOOD FRANCHISE WINTER 2016 Esquires continue national rebrand and growth strategy Esquires Coffee has unveiled its 9th rebranded store at The Bridges shopping centre in Sunderland, and has also announced three more store openings as the popular coffee brand continues to grow.

The Sunderland site has been owned that they are to open another three and run by Hartlepool based couple stores in the first quarter of 2016. Dave and Doreen Parnaby since January The stores will be in Waterside 2008, and the pair are said to be very shopping centre in Lincoln, the new excited about the fresh new look for the Yate Riverside development in South store and are looking forward to getting Gloucestershire and in the new Xchange back out there to serve the best coffee development in Bradford City Centre. in Sunderland! The franchised chain has aggressive The new design for Esquires Coffee’s plans for growth and hopes to be stores is reflective of the brand’s move operating 200 stores in the UK by 2020. towards becoming a more artisanal Since June 2014 all of Esquires coffee coffee brand. has been certified as 100% Fairtrade and Esquires Coffee has also announced Organic.

KFC has revealed plans to expand to 1,000 stores in the UK and Ireland by 2020 in a bid to hit sales of £1.5bn. Bank helps fund franchisees The fast food giant, which hit sales of £1bn last year and currently dream as Wrapchic opens in has 880 UK sites, is growing its Bradford core business and expanding its food and beverage offer to hit the Indian and Mexican fast food franchise Wrapchic has ex- target. panded to West Yorkshire, thanks to franchisee Aravind Venkana rolling out the venture to the Westfield A push towards healthier meals, including rice boxes and burritos, is one of the ways the brand development in Bradford. is aiming to hit its £1.5bn target, as well as the New banking partner Royal Bank of “Thanks to the Royal Bank of introduction of breakfast and 24-hour trading. Scotland provided a loan to facilitate Scotland I have been able to set up Martin Shuker, CEO of KFC UK & Ireland, told the expansion, which brings twelve new the first Wrapchic franchise in West The Telegraph: “We need to prove and build a jobs to the area. Yorkshire and I look forward to building strong enough breakfast business in order to be Aravind has ten years’ experience this brand further across the area.“ able to facilitate [24-hour trading].” in the fast food sector and is looking Twelve new roles have been created, In his interview, the CEO also discussed forward to establishing Wrapchic as the including a full time manager and mitigating the impact of the National Living Wage only fast food outlet to serve Indian and a mixture of 11 full and part time without pushing up prices, which he believes will Mexican cuisine at Westfield. positions, to support this seven day a give KFC an edge over the likes of McDonald’s Aravind Venkana, Wrapchic week operation. Initially, Aravind will be and . franchisee, said: “I was looking for an hands on to train his staff and get the KFC is owned by YUM Brands and the UK & interesting blend of Indian and Mexican brand name established. Ireland branch employs around 25,000 people, flavours in the food to go sector and Simon Winterburn, Relationship with approximately 900 apprentices. Wrapchic certainly delivers on this. Manager at Royal Bank of Scotland, “I have spent several months added: “Aravind is no stranger to modifying the premises at Westfield this competitive industry. With his to provide a modern and welcoming background and appetite to succeed, environment for our customers to enjoy we have no doubt he will flourish in and I am pleased with the overall look bringing high quality fast food to the and feel. Bradford community.”

WINTER 2016 FOOD FRANCHISE | 11 News round-up

Food franchises surge ahead on McDonald’s social media launch new McDonald’s and Nando’s are amongst the brands with the largest packaging for social media followings, according to the latest Food and Beverage Social Media Benchmark from eDigitalResearch. 2016 The recent study saw Nando’s cement at eDigitalResearch, said: “A key social their place at the top of the Twitter league media trend in 2016 will be focusing on McDonald’s has unveiled table with over 1.5 million followers - half listening, not just engaging. We’ve seen how a fresh re-design of its a million more than second place Dominos. a creative and engaging strategy can spread takeaway packaging due to Coffee chains Starbucks (3rd, 637k) and brand messages and increase customer Costa (5th, 167k) also ranked highly. reach but it’s more important than ever to be rolled out to 36,000 of its Dominos has the biggest growth in listen to what these social customers are restaurants throughout 2016. followers, with almost 150,000 new saying. followers since the last benchmark. “Competition for consumers attention is The re-design features bright colours Starbucks added 43,000 and Costa added fiercer than ever and by properly listening to and bold writing and has been introduced 24,000 to be ranked second and third what people have to say in real-time brands in a bid to compete with the growing respectively. will be able to focus their social content and competition from gourmet burger On Facebook, McDonald’s dominates the excel experiences.” restaurants. list with over 60 million followers, leaving Matt Biespiel, senior director of Global KFC (39m) and (26m) left to battle Marketing, said: “McDonald’s is a fun and for second and third ranking. Papa John’s modern brand and this was a progressive (3.9m) and Nando’s (3.5m) complete the top way to turn our packaging into art and five. support a community where fashion is an McDonald’s also leads the way on expression. Instagram, amassing over one million “The company has also committed followers, almost ten times as many to sourcing 100% of all fiber-based followers as second place Subway (112,700) packaging from recycled or certified and third place Nando’s (112,300). sources by 2020. Kat Hounsell, sales and marketing director “We’re proud of the progress we’ve made and initiatives like this are important to our customers who care about the planet,” “Every day 69 million customers visit McDonald’s chief questions sugar tax McDonald’s around the world and this new packaging will be a noticeable effectiveness change. It was fun to join these ideas together and create playful pieces that McDonalds UK chief executive, Paul Pomroy has questioned how connect our customers to the Brand.” effective the sugar tax would be in tackling the growing obesity The re-designed carry-out bags, cups crisis. and sandwich boxes were launched by a South Florida McDonald’s franchise who Jamie Oliver has been campaigning for I’m not sure taxation is going to solve brought the company the McDCouture the government to introduce a tax on high everything. It’s been done in different Fashion Show with the help of the Miami sugar drinks as part of its obesity strategy, markets in different parts of Europe. International University of Art & Design. which is expected in the coming months. Interestingly, a lot of those markets have However Pomroy believes the real way pulled that. For me, it goes deeper in to tackle obesity is through ‘education, terms of education.” information and choice’. Public Health released a report Pomroy told the Yorkshire Post: last week supporting a sugar tax, amongst “Obesity in the UK is an issue, but it’s a number of other measures in the fight a complex issue. It’s far more complex against obesity. However, a spokesperson than just putting it at one retailer’s door, for David Cameron said the Prime Minister whether through taxation or whichever was against the policy, something that is way they look at it. It’s also about lifestyle sure to receive mixed views. and education.”

12 | FOOD FRANCHISE WINTER 2016

News round-up

Burger King to trial alcohol in UK sites Burger King could become the first fast food chain to sell alcohol in its UK restaurants after announcing a trial at the end of the month in four sites.

The burger franchise have made public the UK. A message on the McDonald’s UK their plans to sell American beers in plastic Burger King already sells alcohol in some website says: “It isn’t something that we bottles from this month onwards. parts of the US, Singapore, Venezuela and have experienced customer demand for or It has applied for drinks licences at just Spain through its’ kiosk-style Whopper Bars. something that fits with the family-friendly four branches so far, in Newcastle-under- A spokeswoman for Burger King in Britain focus of our restaurants in the UK.” Lyme, Blackpool, Hull and Bury St Edmunds. said: “We’re just catching up with the rest of The businesses are thought to be seeking If the licences are granted, Burger King will the world, really.” an on-licence meaning that the beverages are be able to sell alcohol from 10am to 11pm Market rivals McDonald’s have not made only to be consumed on restaurant premises seven days a week, and could then apply for a move into the alcohol market over here and not taken away. licences nationwide. At present there are but do serve alcohol at some of its European more than 700 Burger King restaurants in branches.

Chopstix await planning permission for new site Chopstix Noodle Bar will open on Market Street in a bid to tap into the student demographic and should its planning application be successful the owners promise their customers a “trip to the orient”.

Chopstix Group co-founder Sam Elia There are currently 11 toppings on equipment.” said: “A recent survey we conducted offer, including ‘Sweet and Sour Chicken’, “It is not anticipated that this will have showed that one in four of our customers which the business describes as “Tasty any adverse effect on the amenity of are students. We believe that Cambridge, coated chicken prepared with fresh onions, residents at Radcliffe Court by reason with its prestigious university and high peppers and for that sweet touch of noise and odour impacts, since the level of tourism is an ideal location to pineapples, cooked in our flavoursome residential apartments do not have introduce the Chopstix Noodle Bar brand. Sweet and Sour sauce”. There will also be windows or openings facing the rear void. “We look forward to providing fresher, two bases to choose between - vegetable The equipment will be fitted with the faster and healthier Oriental food at noodles and egg-fried rice - as well as a necessary filters to limit odour impacts.” great value for money to the Cambridge number of extras. Regarding its opening hours, the community.” In its planning application, Chopstix application says: “The proposed opening The building Chopstix plans to move says residents will not be affected by the hours will be 9am to 11pm Monday to into is on one of the busiest shopping noise and smell of food being prepared. Sunday. streets in Cambridge, and right next to the “The proposed development incorporates Cambridge City Council now has 56 days market. a kitchen,” it says. “Which will necessitate to reject the application if it wishes to do The noodle chain, which has over 50 the use of extraction and ventilation so. sites across the UK and the Republic of Ireland, offers an “Oriental quick-service take away restaurant”. On its website, Chopstix says: “We only use quality ingredients, cooking fresh to deliver delicious and nutritious meals for our customers.” Customers will be able to choose a medium-sized box with one topping for £4.50 or a large box with double the toppings for £5.50.

14 | FOOD FRANCHISE WINTER 2016 Harry Ramsden’s head to Doha Subway US will Iconic British brand, Harry Ramsden’s, has opened its first now measure its overseas outlet in over a decade. The glittering launch event was and commented; “We are delighted that sandwiches after hosted by Mr Ahmed Hassan Bilal, Harry Ramsden’s first overseas outlet in legal proceedings Chairman of AHB Trading and over ten years has now officially opened. Contracting Company which holds “As our brand continues to go from Following a lawsuit accusing the Qatar franchise and was attended strength to strength in the UK as a the chain of serving sandwiches by prominent dignitaries from Doha, result of our successful repositioning, smaller than advertised, Subway Qatar and influential business leaders we are now turning our attention further including Mr Hussain Ibrahim Alfardan, afield. With the master franchises for US has agreed to measure its Chairman of the Alfardan Group, one Qatar and signed, further 6-inch and 12-inch subs. of the most successful family-owned openings are imminent. conglomerates in the Arabian Gulf. “Currently, we are also in talks with Subway will start making its sandwiches To celebrate the official opening of various international parties so we bigger after a lawsuit claiming the chain’s new Harry Ramsden’s at the luxurious anticipate new Harry Ramsden’s outlets footlong sandwiches are shorter than Pearl development in Doha, guests at opening in different parts of the world, advertised, according to a settlement the 100 cover restaurant enjoyed an in the not too distant future.” proposal announced Monday. array of items from the wide ranging Subway came under fire two years Harry Ramsden’s menu, including the ago when a photo went viral showing a fish and chips for which the brand is footlong sub next to a tape measure that world famous. showed the bun was actually 11 inches. Harry Ramsden’s CEO Joe Teixeira The photo prompted a class-action also attended the opening event in Doha lawsuit from Subway consumers who said they were cheated out of an inch of their sandwiches. Subway has now agreed to start commits to serving requiring franchisees to measure the bread they serve to ensure that footlong subs cage-free eggs in US by end of 2016 are 12 inches and 6-inch subs are no less than 6 inches, according to the settlement Taco Bell today announced that all of its U.S. corporate and agreement. franchise-owned restaurants will exclusively serve cage-free Doctor’s Associates Inc. (DAI), the eggs by December 31, 2016. franchisor of Subway Sandwich Shops, announced a settlement has been proposed to 100 percent cage-free eggs by the end in a class action lawsuit about the The brand said that it expects to be of 2016 is a tremendous commitment that marketing of Six Inch and Footlong Subway the first national quick service restaurant will quickly improve the lives of countless sandwiches. to completely implement the change. animals and further cement the future of “In settlement, DAI has agreed to certain According to the Humane Society of the egg production as being one without cages,” practice changes for the benefit of all United States, approximately 500,000 hens said Josh Balk, Senior Food Policy Director, Subway® customers and to pay legal fees each year will benefit from this change. The Humane Society of the United States. and class representative service awards,” “We are a brand that has our finger on Taco Bell also confirmed that by the the company said. the pulse of not only what appeals to our beginning of 2016, it will deliver on its “A federal court must approve the customers’ tastes but also the issues they stated goal of removing artificial flavours settlement before it becomes final. The care most about, and they tell us they want and colours, added trans-fat, high fructose Court has scheduled a Settlement Fairness food that’s simple and easy to understand,” corn syrup, and unsustainable palm oil Hearing for January 15, 2016 and set said Brian Niccol, CEO, Taco Bell Corp. from its core menu items. The company December 16, 2015 as the deadline for “Implementing this change at record pace also plans to introduce aspartame-free diet filing objections to the settlement,” the underscores that we are always listening Pepsi products in all of its U.S. restaurants company said. and responding to our customers, while beginning in early 2016. The restaurant chain will edit its training doing what is right for our business.” The company plans to expand its policies materials and franchisee protocols, Taco Bell’s eggs will be verified as related to food simplicity, transparency and “which had previously allowed for a “American Humane Certified” based on choice in coming months, to complement small tolerance in the size of a footlong cage-free egg production standards set by its stated goal of eliminating additional sandwich,” to require that a footlong must the American Humane Association. preservatives and additives where possible be at least 12 inches. “Delivering a sustainable and safe egg by end of 2017. A hearing for final approval of the supply to Taco Bell restaurants nationwide “Ingredient transparency is more settlement is scheduled for January, in one year is possible due to the brand’s important than ever to the next generation according to Subway. large yet flexible infrastructure, and years of Taco Bell customers. That is why we of close collaboration with our partners,” Liz remain hungry and challenge ourselves to Matthews, Chief Food Innovation Officer, set ambitious yet achievable commitments Taco Bell Corp, said. that make our food better, without ever “Taco Bell has catapulted itself ahead of compromising the flavour that our fans other major restaurant chains. Switching crave,” said Matthews.

WINTER 2016 FOOD FRANCHISE | 15 News round-up

Yum! Brands China restructuring a ‘natural progression’ for business, says Euromonitor

Euromonitor called the decision of Yum Brands splitting its China business into a separate company a “remarkable move”.

Euromonitor International Head of Global consumers demand products that are both Foodservice, Michael Schaefer said, “The highly novel and tailor-made to Chinese decision by YUM! Brands to spin off its palates. For Yum! Brands, these shifts China business is both a remarkable move came at a time when the company’s China and a natural progression for the company. operations faced unprecedented fallout from Remarkable given that even three years ago a series of food-safety scandals.” the idea of hiving off YUM! Brands’ China “The new corporate structure offers the operations to unlock value elsewhere would company’s new China franchise partner an have made little sense; natural given the opportunity to reboot its brands, investing company’s recent struggles.” in innovation and logistics at a crucial point “The Chinese fast food market combines in the evolution of China’s consumer market. vast sales and impressive growth with More broadly, the move is part of an ongoing an unparalleled rate of evolution. Local shift in the global franchiser-franchisee operators continue to target global standards relationship, with bigger, better-resourced, of quality and service, while product cycles more-nimble partners vital to global brands. continue to shorten as sophisticated

Early reports suggest that McDonald’s all-day breakfast has been a success According to a study by the NPD Group, the initial signs are good for the burger giant and has found that the two-month-old all-day breakfast offering, has been successful in attracting new or lapsed buyers. Findings also suggested that there is a direct increase in lunch visits.

The NPD study, which is based on analyst and author of the study said: “This its receipt harvesting service, Checkout preliminary review of McDonald’s all- TrackingSM, suggests that there was day breakfast offer suggests consumers a sizeable lift in breakfast food orders are receptive to ordering McDonald’s throughout the day at the time their breakfast foods beyond traditional research was conducted. breakfast hours. Looking at the purchase behaviour “It’s early and there are other questions of McDonald’s breakfast buyers who to answer as time goes on, but for now it purchased breakfast foods beyond is working.” traditional breakfast hours, NPD found Orders of breakfast foods throughout that a third of these buyers had not the day increased from 39 percent purchased from McDonald’s at all prior to pre-launch to 47 percent post-launch, the all-day breakfast launch on October 6. according to the NPD Checkout Tracking Among consumers purchasing breakfast study, which analysed a database foods at McDonald’s during lunch hours, containing receipts from more than 27,000 61 percent of their receipts also included McDonald’s static buyers who visited non-breakfast items, which contributed to before and after the McDonald’s all-day a bump in average spend. breakfast launch. Bonnie Riggs, NPD restaurant industry

16 | FOOD FRANCHISE WINTER 2016 WINTER 2016 FOOD FRANCHISE | 17 News round-up

Harry Ramsden’s launch takeover of Chamberlains Chamberlains Fish & Chips, which opened in Oldbury, Birmingham, almost five years ago, has been sold to Harry Ramsden’s.

The deal on the 74 seater restaurant and Commenting on the deal, Joe Teixeira, He adds: “I’m confident that Harry takeaway was completed last week and CEO of Harry Ramsden’s, added: “Like Ramsden’s will bring in extra trade and that will see the site rebranded by Easter next Chamberlain’s, ours is a brand which is when our existing customers come and see year. The takeover will see co-owner Simon enjoyed by families and friends coming that the product is the same, they will keep Shaw steps-away from the business, but his together to treat themselves to one of the coming back.” business partner Daniel Lynch will be staying nation’s favourite meals, so we are delighted on under the franchise along with its 17 staff. to take over as Simon bows out. They have Chamberlains currently serves around done an exceptional job in building up a 3,000 covers in its restaurant each week with Commenting on the deal Daniel said: respected, quality outlet which is hugely a further 8,000 passing through its takeaway. “Simon wanted to pull back from the popular within the local community. We will It is the first established fish and chip business and Harry Ramsden’s offered us the maintain, and in time strive to exceed, the business to be acquired by Harry Ramsden’s right price at the right time. I’m happy with high standards already in place and wish as part of its recent expansion plan, having the decision. Simon all the very best as he at last, enjoys focused on opening new outlets up until some well-deserved leisure time.” now. “Harry Ramsden’s first approached us The decision to sell has met with mixed about three months ago and then about six views, with some customers claiming weeks ago they came to look around. They Chamberlains has “sold out”. Dan comments: really liked our product and how we prepare “I don’t believe that is the case. We’ve and cook it, so that’s all going to stay the spoken to people in the group and we know same. The biggest change really will be the where Harry Ramsden’s wants to go and we alternative menu that we offer, which will support that. Harry Ramsden’s is gradually be replaced by the Harry Ramsden’s menu, closing all the franchises that don’t work and, although there are some dishes on there they with the new structure in place and a new really liked so they’ve said some of those will emphasis on quality, I think they are going in stay too.” the right direction.”

Wok&Go set to double number of UK stores in 2016 2016 is set to be an exciting year for Wok&Go, with plans to double the number of UK stores in the next 12 months, penetrating in new markets such as Essex, Kent, the Midlands, Scotland and Central London.

The Asian-style noodle bar currently the establishment of clusters of new Seeds Consulting, the London-based operates 20 sites in the UK and 1 in restaurants in the North of England and food business developer, is behind Kuwait City, with Dubai opening in Q1 East Midlands. The company will also open the recent acceleration in the brand’s 2016. 15 new restaurants in Essex via a franchise growth rate and Director Matteo Frigeri Commenting on the developments, Des agreement, as well as in Manchester commented: “We only partner with Pheby, founder of Wok&Go: “Noodles Piccadilly, Chatham, Winchester, Glasgow exciting and strong concepts that have are the new trend in quick-casual. Few and a break into the Central London the potential to become market leaders other products are so healthy, convenient, market with a brand new site on Finchley worldwide in their segment. Wok&Go’s portable and customisable and they Road. appeal has proven to be enormous in the definitely have the cool factor. Our food Des Pheby added: “We are not just UK and abroad. is the secret behind our success and the developing new stores, we are also “Its rapid growth comes from the fact strong performance of our first 20 stores working on a few other projects, it fits so many customer trends – health, has attracted investment from established in particular a grab and go offer to convenience, personalisation, theatricality operators and investment groups, leading complement our core menu, which is made – and it has a flexible model that has been to an amazing growth rate.” to order in front of the customer in an proven to work in high streets, shopping Part of the growth will come from open kitchen.” malls and non-traditional locations.”

18 | FOOD FRANCHISE WINTER 2016 Starbucks to Expand Espresso Papa John’s Portfolio with Latte Macchiato Franchisee Wins Scottish Asian Starting on the 5th of January, Starbucks will offer a new core beverage that is crafted with two simple ingredients: Business Award espresso and milk. Leading pizza franchise, Papa John’s, has announced franchisees The new Latte Macchiato features select locations in Latin America. Zulfiqar Haidar and Iftikhar steamed whole milk that is perfectly Latte Macchiato is the newest aerated and free-poured creating addition to Starbucks espresso beverage Haidar have won the Outstanding dense foam reminiscent of meringue. portfolio that includes the Flat White, Achievement Category in the The beverage is then marked by slowly which Starbucks launched in U.S. and Scottish Asian Business Awards poured, full espresso shots, creating Canada stores last year. Both beverages held at the Glasgow City Hotel on a signature espresso dot. Starbucks are uniquely handcrafted to bring out baristas will use this carefully crafted the inherent flavours in espresso and 9 December. technique to draw out an intensely bold steamed milk. and roasted flavour that highlights the Latte Macchiato joins the existing core The ceremony which marked the tenth Starbucks espresso in the beverage. espresso family, which includes Doppio anniversary of the awards, showcased the Latte Macchiato will be available in Espresso, Caffé Americano, Flat White, achievements, determination and hard work of Starbucks stores in the U.S., Canada, and Cappuccino, and Caffé Latte. Scottish Asian business men and women at the forefront of their industries. Zulfiqar Haidar runs three Papa John’s in Glasgow with his brother Iftikhar and has recently opened a fourth store in Paisley. He commented: Pizza Hut continues rise with “Our new Paisley Papa John’s store was selected nine consecutive quarters of specifically due to the area’s high unemployment. We work with our local job centres to help bring growth the long term unemployed back into work. “By training new recruits we give them a skillset Pizza Hut Restaurants has announced like for like sales and offer them a real future by creating a win-win growth of 6.2% with nine quarters of consecutive growth. situation,” continues Zulfiqar. “All we require is enthusiasm and in return, he franchise business has also of our people, new technologies, new we offer extensive one-to-one training in-store, outstripped the market in like for like audiences such as millennials and backed up by Papa Johns’ excellent online training sales growth in 45 out of 52 weeks further innovations in the menu.” program. So with the right dedication and effort according to Coffer Peach Business Throughout 2015, Pizza Hut any member of staff can make their mark and Tracker. Restaurants has refurbished 71 have the chance to become a supervisor or The results are testament to a Huts, with half of the portfolio now manager in one of the stores. successful year for the business, complete. The business has invested in “We are delighted that our work has been which has remained focused on its modernising the concept, whilst staying recognised in this way and look forward to refurbishment and restructuring true to its roots; this includes offering creating more new jobs for the local community programme, funded through a broader a high quality décor, with a clear, as we grow.” £60 million investment which began in American-inspired personality, along Anthony Round business development 2012 when Rutland Partners acquired with new innovations in the menu. manager, Papa John’s commented: “We are the business. Pizza Hut Restaurants recently particularly proud of the achievements of Zulfiqar Commenting on the results, CEO launched its first ever apprenticeship and Iftikhar and their team and will continue to Pizza Hut Restaurants, Jens Hofma programme, which offers a range of support them in their future plans for expansion in said: “This year we have continued our qualifications from level 1 through the region. focus on delivering our restructuring to degree level apprenticeships. The The potential business and demand for Papa programme. Already our refurbished latter is in partnership with Manchester John’s is such that I know they are already looking estate has played an instrumental role in Metropolitan University and underlines at potentially opening a fifth store in Scotland our business success. We’ve seen a mix the business’s commitment to providing soon.” of new customers and increased spend opportunities for employees. per head at our restaurants, with each Together these elements are helping refurbished Hut experiencing significant encourage improved guest satisfaction sales uplift. and increasing spend per customer. “The next year will be hugely Each refurbished Hut has experienced important and I believe there has a sales uplift between 10 – 40% never been a more exciting time in depending on the level of investment. the business. We are already in a good Throughout the next year, Pizza Hut place but we have a huge remaining Restaurants will refurbish a further 70 growth opportunity – particularly as Huts, providing further growth potential we continue to unlock the potential for the business.

WINTER 2016 FOOD FRANCHISE | 19 News round-up SUBWAY® Stores’ Kick Off 2016 With SUBCARD® Competition and In-store Promotions Return of popular promotions and launch of the SUBCARD® l oyalty scheme The SUBWAY® brand announced today a bolster the activity. range of activities aimed at driving traffic into To support the new premium offer - Steak stores during the Q1 period. & Cheese Sub and Steak & Bacon Melt - 6th January sees the return of the popular from the 6th January the SUBWAY® brand Big Beef & Chorizo Melt to SUBWAY® will also offer customers the chance to win stores. Featuring a juicy beef patty topped free Subs or Salads for a year, in an exciting with spicy Chorizo slices and melted cheese, new competition. Customers will be entered the Big Beef & Chorizo Melt will be part of into a prize draw when they spend £4 or the popular SUBWAY £3 LUNCH™ offer. more in-store, and scan their SUBCARD® or The new menu addition will be supported SUBCARD® app. The competition runs from by a heavy weight, mobile led cross-channel 6th January until 2nd February 2016 and the campaign, featuring a new 20 second TV lucky winners be will announced through the advert, on screen from 6th January. The duration of the campaign. comprehensive mobile campaign will involve Commenting on the activity and launch targeted adverts that take into account of the competition, Roger Cusa, Head of proximity to the store and user behaviour, Marketing for the SUBWAY® brand in UK to determine how regularly they eat ‘food and Ireland, said: “For us, Quarter 1 is all Melt is back on the menu, as well as our on the go’. From January until March, the about getting customers excited about the new Premium Subs. This aligns with our SUBWAY® brand will also take over the SUBWAY® brand with tasty new menu call for customers to ‘stay picky’ when 11am spot on Newslink radio, resulting in items and rewarding promotions. We know choosing their favourite Subs on-the-go. Our huge exposure across all commercial radio customers look for variety, quality and value SUBCARD® competition will reward loyal, stations. A robust outdoor campaign, national when it comes to lunch choices – which existing customers and will be supported by press and video on demand support will also is why the well-loved Big Beef & Chorizo a comprehensive social media campaign.”

Costa to open first food-led store in London The coffee shop chain opened its first food-led concept store, Costa Fresco, on Tottenham Court Road.

The one-off store, which includes an in- good food.” actual exchange rates. house bakery, was created in response to She added: “We are committed to Kate Swann, CEO of SSP Group, growing consumer demand for choice and continuing to delight our customers, and said: “SSP has delivered strong results in quality. The store features a unique take as we look to grow we have listened to 2015, with operating profit up over 17% on Costa’s traditional menu, introducing what they want – great food, alongside and good like-for-like sales growth across a tailored food offering in a bespoke great coffee in a welcoming environment.” all regions. We continue to focus on environment. SSP Group profits soar to £76.8million delivering our strategic objectives, driving The new Costa Fresco menu includes The food group who represent a large sales growth in our existing portfolio hand crafted, freshly baked sweet and number of food franchises through and winning new contracts which are savoury options including a Rustico Dry their forecourt locations have posted a extending our international operations, Cured Ham and Mature Cheddar with strong rise in annual profits according to whilst remaining committed to operating Vine Ripened Tomatoes Flatbread and the financial results. an efficient business.” the Roasted Pork Belly with Caramelised According to the results, operating profit “The new financial year has started in Braeburn Apple and Onion Ciabatta. rose to £97.4 million, up 17.6% in constant line with our expectations and whilst a Carol Welch, Costa’s Group Brand currency, and 10.1% at actual exchange degree of uncertainty always exists around Marketing and Digital Innovation Director, rates. Like-for-like sales were up 3.7% passenger numbers in the short term, we described the new store as “a fusion of driven by growth in air passenger travel continue to be well placed to benefit from London’s handcrafted bakeries linked to and retailing initiatives the structural growth opportunities in our our heritage and the Italian passion and Revenues grew to £1,833 million: up markets.” gusto for vibrant ingredients and genuinely 4.3% on a constant currency basis; 0.3% at

20 | FOOD FRANCHISE WINTER 2016 Franchises perform well as coffee market expands and sales rise 10% The UK coffee shop market has reported a 10% sales growth on last year and a total turnover in 2015 of £7.9 billion, according to the latest report from Allegra World Coffee Portal.

The Project Café 2016 UK report has the British economy and more importantly that took the number one spot as the leading revealed the branded coffee chain market their impact on the daily lives of everyday seller of speciality coffee with an estimated recorded a £3.3 billion turnover across consumers. 169 million cups sold annually. The business 6,495 outlets, following outlet growth of “With a market now valued at £7.9 billion, has also, for the sixth year running, been 12%, adding 714 stores during 2015 and no-one can ignore the fact that coffee is big voted the nation’s favourite chain by Allegra’s delivering sales growth of 15%. business.” independent panel of consumers. A greater commitment to coffee by the The non-specialist sector took a further Indeed it is Costa Coffee (1,992 outlets) non-specialist sector, such as pubs and 2% share of the market and now represents who lead the way in the UK market in terms fast food outlets, has seen 10.5% growth, 39% of the total market, compared to of branded stores with Starbucks (849) and reaching 7,976 establishments with a strong the branded chains with 31% and the Caffe Nero (62) coffee offering. independents with 30%. Physical expansion by leading chains is a Speaking about the latest finding by the Daily visits to coffee shops have increased strong driver of growth, particularly market group, Jeffrey Young, MD of the Allegra overall and 16% of coffee shop visitors went leader Costa which added 171 UK outlets Group commented, “The strong market at least once a day in 2015, a 2% increase and had sales growth of 14% in calendar year growth of the past 12 months has exceeded on 2014. Coffee shop visitors drank around 2015. our own estimates. 2.2 billion cups of coffee per year in coffee In Allegra’s survey of over 16,000 “This provides further evidence of the shops. consumers, artisan chain Harris + Hoole was growing importance of coffee shops to In terms of food franchises it was Costa ranked number one for coffee quality.

WHAT IS A FRANCHISOR LOOKING FOR IN THE PERFECT FRANCHISEE?

After several years working with food has a structure with operations, finance, chisee. Larger franchises would rather franchisors, I have come to the marketing and other key divisions to sup- look for sheer operators. In all cases, conclusion that there are some key port the new franchise. This profile often franchisors want franchisees that are ingredients associated with the success comes with expertise in location selec- committed to executing brand standards of any food franchise, regardless of the tion, another big plus. On an international consistently. franchisor’s system and business model. level, such features are no longer just preferable, but rather a necessity. Because hospitality is about service and A very important one is financial. The people, franchisors look also for passion ability to make the investment in the Previous restaurant experience with for the sector throughout the franchisee’s restaurant(s), including working capital, similar food concepts (not in a franchise organisation. This is why the rent deposits and, if applicable, key mon- relationship) and multi-site retail experi- demonstrated ability to build and ey is paramount. Food is a capital-inten- ence (non-food) are also welcome be- manage a strong team is highly valued in sive business that becomes established cause part of that skillset can be reused a franchise partner. after at least one year so it is important in the franchise business. that the franchisee with the franchisor’s Last but not least, the obvious ones: help is able to formulate some realistic It goes without saying that corporate or commercial acumen, leadership, good forecasts and a sensible funding strategy multi site individual franchisees will have communication are all present in profit- from the outset. the appetite and the ability to develop able franchisees and core ingredients in the franchise over multiple locations, the recipe for the franchise system long- A great franchisee can be spotted al- either organically and via the debt and term success. ready at the early stages: someone that equity models. Franchisors prefer to spends time to visit various locations of work with few territorial franchisees than the franchisor, not just the nearest one, with a myriad of individual ones. This is Matteo Frigeri that wants to speak with existing fran- why the best opportunities exist with up Business Director chisees, that asks the franchisor good and coming franchises, with which such Seeds Consulting questions about how the model works opportunities are still available. and that submit a thorough business plan is building the foundations not only In smaller franchise systems, franchisees 13 Eardley Road, of its own success, but also of a prosper- can be a driving force in the ongoing London SW16 6DA UK ous relationship with the franchisor. development of the concept, so such +44-(0)20 8769 0935 creativity, when it is not an uncontrolled Franchisors value previous multi-site deviation from the standards but a experience with other food franchises, managed innovation process within the especially when the franchisee already system, should be sought-after in a fran-

21 | FOOD FRANCHISE SPRING 2016 WINTER 2016 FOOD FRANCHISE | 21 News round-up

Burger King rolls out new breakfast menu The brand announced the rollout of its new breakfast menu nationwide.

This new menu features a range of breakfast options including Croissan’wiches and English Muffins. The Croissan’wiches are croissant buns filled with American cheese, an egg patty and filling of choice. Choices include Bacon or Sausage and Double Croissan’wich, which offers both options. Also on offer are the Bacon or Sausage King Muffin; featuring cheese, an egg patty and filling, all sandwiched between a toasted English muffin. A breakfast platter is also available; which includes a sausage patty, a serving announce the national rollout of breakfast in times of the day.” of scrambled eggs, six mini pancakes, an the UK. The new line up also offers a variety of English muffin and mini hash browns. Coffee “We are firmly committed to delivering desserts and those with a sweet tooth can go is available in a range of three lattes, in innovative, great-tasting food and the new for mini pancakes, a muffin or start the day Caramel, Vanilla or Mocha flavours breakfast menu has something for everyone with a doughnut. Talking about the launch, Matthew at affordable prices. Burger King will stop serving their Bresnahan, Marketing Director, Northern “We always listen to our guests and are breakfast menu at 10.30am. Europe, Russia, & Africa, Burger King Brand excited to be able to offer them the delicious said: “The Burger King brand is thrilled to taste of Burger King brand products at all

Starbucks post strong figures in latest financial report Starbucks one of the world’s most recognisable coffee brands has reported global like-for-like store sales have increased 8% over the last quarter.

In Europe, Middle East and Asia (EMEA) “Our results underscore the success of like-for-like sales have increased 5% and the investments we continue to make in this is thought to be largely due to a 3% our people and business, in new beverage increase in store traffic. and food innovation and in groundbreaking Consolidated net revenues for the group technology innovation that is deepening were up 18% over Q4 to $4.9 billion, with our connection to customers everywhere.” operating income rising 13% to $969.4 Starbucks recently opened its first million. For the year end, the coffee giant Reserve bar in the UK, offering a higher- saw like-for-like store sales increase 7% end coffee experience, evenings menu and globally, 4% in EMEA, net revenues up a no-queue system. The coffee brand also 17% to $19.2 billion, and operating income rolled-out mobile pay and order across 150 up 17% to $3.6 billion. of its London locations. Howard Schultz, Chairman and CEO Globally, Starbucks opened 524 new of Starbucks, said: “Starbucks record Q4 stores in the quarter, including the first financial results, highlighted by stunning sites in Panama and Azerbaijan. In 2016 comp store sales increases of 8% globally, they aim to continue with their rapid 9% in the U.S. driven by a 4% increase in expansion, launching another 1,800 new global traffic, demonstrate the strength sites. and relevance of the Starbucks brand around the world.

22 | FOOD FRANCHISE WINTER 2016 business profile

THE 200 DEGREES STORY In 2011 a group of friends, each with a passion for great coffee, grew tired of big corporate coffee and inconsistent artisan start-ups.

We saw an opportunity to create opportunities to people who get coffee A 200 Degrees franchise let’s you build something altogether more personal and like we do and think the idea of owning a successful business that sets new hand-crafted but with the often missing a stylish shop that serves outstanding standards, appealing to people looking ingredient of reliable quality, and so, 200 coffee is something rather beautiful. for quality coffee in a stylish environment Degrees Coffee was born. By choosing to join the franchise, you with great customer service. can reap all the rewards of being your All of us put our hearts and taste buds own boss, but with the reassurance SETUP into creating the perfect cup of coffee of using our tried and tested business The use of a licensed brand with a and forming a company that did things model and by working with an proven track record of success and an the right way. We began by sourcing established operations team you will award-winning ethically traded beans, investing in top jumpstart your new business with a •Comprehensive Barista training quality roasting equipment and working caffeine jolt. We’ve done the hard •Management training, coaching and tirelessly to come up with an outstanding work and can promise you fantastic development to help you grow and espresso blend. beans and beautiful blends matched by develop your business in line with our comprehensive Barista training and top standards We now hand roast coffee at a slightly quality equipment. • Provision of IT and software lower temperature (around 200o development, hosting and support Centigrade) giving it a smooth taste You’ll also be using a developed and •Full set up and ongoing support and that’s a little sweeter and we are very successful brand with extensive support training proud of our signature blend, Brazilian including a wide range of marketing Love Affair. materials and advice from hospitality YOU GET experts. That’s how we do things. High •The use of a licensed brand with a Our flagship Coffee Shop in Nottingham standards and attention to detail means proven track record of success has won plaudits and awards -the next is that your marketing efforts will have •Set up assistance about to open near Nottingham Station greater impact from day one, helping to •Comprehensive Barista training very soon. make your new coffee shop a success. •Management training, coaching and development to help you grow and We believe that coffee shop interiors The UK has woken up to coffee. develop your business in line with our should accommodate, not dominate, and Coffee is big business in the UK, and the standards much of the 200 degrees philosophy is industry is still growing. In fact, after 15 •A turnkey venue with award-winning based around serving coffee, keeping years of considerable growth the coffee design and build input marketing to a minimum and letting shop sector continues to be one of the •Advice on staff recruitment people get on with their day. Meet most successful in the country. One in •Provision of IT and software with friends, do some work or sit on every five coffee shop visitors make a development, hosting and support social media for 6 hours, it’s all a big daily pilgrimage for their favourite cup, •Ongoing support, training thumbs up icon to us. Customers can generating an estimated turnover of £7.6 and communication even take some of the essence of 200 billion a year. Degrees home with them; as we also sell WANT TO KNOW MORE? our hand-roasted beans retail and online. But, with our high streets jam packed full For more information about 200 Degrees, of soulless big brands, it’s time for some our Coffee Shops and the franchise We aim to be an all round great fresh, independent thinking. opportunity please contact us at company, and that applies to our coffee, [email protected] venues, service standards, marketing and more importantly, the way we treat people.

WHY ARE WE FRANCHISING? With a select group of equally passionate and like-minded franchisees we now want to spread the word and serve 200 Degrees across the UK. That’s why we’re offering a limited number of franchise

WINTER 2016 FOOD FRANCHISE | 23 News round-up

Mixed results for big brands in children’s health league table A new league table ranking the health of children’s food in 21 of the UK’s most popular restaurant chains has revealed mixed results, with famous brands like Burger King and KFC scoring low marks.

The study published by the Soil with every meal (up from 6 chains in 2013) Association’s Out to Lunch campaign, their and 9 chains include information on where first in two years, has seen some significant ingredients come from on the menu (up from improvements made by a small number of 5). chains, but has also uncovered continuing Restaurants have a big role to play in widespread poor practice with many influencing what children think good food restaurants failing to serve fresh food or looks like – going out used to be seen healthy choices. as a treat, but research shows it’s more Three chains still offer children free or common now with 40% of parents eating discounted refills of high calorie sugary out with their kids at least once a fortnight. drinks as standard (Café Rouge, Frankie & Meanwhile, 66% of parents say they don’t Benny’s, Pizza Hut). Just two fizzy drinks will think kids’ food in restaurants is good see a child stack up 17.5 sugar cubes. enough. The size of the chain does not determine Speaking about the findings, Rob Percival position in the league table. Jamie’s Italian from the Soil Association said; “Our 2015 (the smallest chain) and (the league table includes big winners and big second largest chain) are both in the top losers - adults expect to be offered real food have proved it’s possible to make 5. (the second smallest chain) and and real choices in restaurants and we think major improvements – we’re now calling on KFC (the third largest chain) are both in the children deserve the same. other restaurants to raise the bar and give bottom 5. “We’ve found some up-market eateries are our kids the food they deserve.” Despite much continuing bad practice, it designing menus that make healthy eating Jamie’s Italian topped the table with a is clear that a revolution in kids’ food on the for children almost impossible, and price is no score of 64 out of 80 (up from 50 two years high street is underway. The league table guarantee of quality - lower cost restaurants ago), and Prezzo was the biggest climber, reveals significant positive changes - 10 are outperforming more expensive chains. moving an impressive 13 places to 6th chains are serving a portion of veg or salad “Since our first league table and position.

Harry Ramsden’s Awards New Franchise Harry Ramsden’s, the iconic British brand, world famous for its fish and chips, has signed a new franchise agreement for a further territory in England.

The brand has awarded the franchise for Joe Teixeira, CEO of Harry Ramsden’s To date and as a result of recent Essex, Hertfordshire and Cambridgeshire comments; ‘‘As a result of the brand’s franchising agreements, 18 Harry to Bobby Khangura and Lacky Sohal of successful repositioning, our franchising Ramsden’s openings have taken place Larentia Limited who already have vast proposition is continuing to attract high across the network experience operating within the UK food levels of interest both at home and abroad. and new outlets are also trading well in and beverage franchise sector. That we have now signed seven major Yorkshire, Scotland and Sussex with more Under the terms of the new agreement, agreements in a relatively short space of UK openings expected within the next few 28 Harry Ramsden’s outlets will open time is testament to the undeniable appeal months. across the region within the next six and longevity of Harry Ramsden’s.” Internationally, as part of franchise years, bringing with them approximately Bobby Khangura added: “We have agreements for Qatar and the Kingdom of 200 new jobs. A number of sites in the watched the resurgence of the Harry Saudi Arabia (KSA), the first new overseas area are currently being assessed for their Ramsden’s brand with great interest over Harry Ramsden’s outlet opens imminently suitability however it is anticipated that the past couple of years and are delighted at The Pearl in Doha and the brand is set the first new outlet will open in Southend, to now be part of the brand’s ongoing to open its doors once again in the KSA, early in 2016. evolution.” after a ten year absence.

24 | FOOD FRANCHISE WINTER 2016 Papa John’s continue to grow with Nottingham opening Leading pizza franchise, Papa John’s, has announced franchisee

Leading pizza franchise, Papa John’s, has city centre and there are around 30,000 business in the new outlet,” continues Abdul. announced franchisee Abdul Kasana has people living in the local area and take-aways “In addition, for our opening, we have cooked opened the latest Papa John’s in Nottingham and food delivery are a popular part of the up some special offers plus free sampling so Bulwell. Abdul who also runs the culture. Plus, our new Papa John’s store is customers can ‘taste a slice’ and try before Nottingham Arnold outlet, will now employ situated next to the 24 hour Tesco, so we they buy! more than 20 people to deliver Papa John’s anticipate much passing trade from hungry top quality pizza to local residents. grocery shoppers! “The new store opening is an exciting development for the team and more will Former education consultant turned “Our first store in Arnold is just a couple follow! We have already secured the sight Papa John’s franchisee last summer, Abdul, of miles away and is always busy. Word has for our next Papa John’s which will open next explains why Nottingham is a great location already spread of Papa John’s great pizza, year,” Abdul concludes. for Papa John’s: “Nottingham Bulwell is made with 100% fresh dough for a better situated on the northwest of Nottingham natural flavour and this will help grow the

Cereal Killer Café to offer international franchising

The Cereal Killer Café which shot to fame earlier in the year with their offering of retro cereals and breakfast items currently has two sites in London, but founders Alan Costa follow other vendors with and Gary Keery are in talks with a staff pay rises Vancouver businessman to open a Canadian branch. Costa has followed other franchises such as Starbucks to Gary Keery told reporters: “We’re looking at a give all of its staff a pay rise ahead of the introduction of franchise model for the cafe. Not like Starbucks the new National Living Wage next year. but we’re meeting someone from Vancouver today.” The coffee giant has announced significant investment in our teams. The café, which has been hit with controversy that, 12,500 baristas will see their pay “We wrote to every single barista in since it opened last year, came under fire recently increase and all Costa employees will September to let them know about our when it was the target of an ‘anti-gentrification’ earn a minimum of £7.40 an hour, once plans and the response has been very protest organised by anarchist group Class War. they have completed their initial training positive. Windows at the property were smashed and (trainees will earn £7.20 an hour). “We have chosen to pay the same graffiti daubed across the exterior of the unit as a Those working for the company in rates to everyone as we strongly believe large crowd gathered, but it was business as usual one of their London venues will earn that if two people are making the same the following day as the owners cheekily tweeted: a minimum of £8.20 an hour rising to contribution they should receive the “open as usual, come and see our new shopfront.” over £9. same pay and that it should be linked to The new pay rates will apply to all training and skills levels, not age. Costa team members, including those “At Costa we believe there are under 25 years old, and will mean that no barriers to entry and no limits the pay of a barista in Costa is in excess to progress. We are committed to of the National Living Wage some six investing in our people through pay, months before its introduction in April training, apprenticeships, job creation 2016. and career opportunities and we’re Chris Rogers, Managing Director of proud to be leading the way in our Costa, said: “Our baristas are the heart sector. Costa is a true British success and soul of our business and make story and we are, of course, delighted to Costa the successful company it is share this success with our baristas.” today. Whitbread, the parent company of “We have been working on Costa, announced earlier this month introducing new rates of pay and that prices are set to increase to progression scales for some time now mitigate the cost of implementing the and today’s announcement represents a National Living Wage.

WINTER 2016 FOOD FRANCHISE | 25 News round-up

McDonald’s release premium burger range McDonald’s is to launch a premium range of burgers in Britain to head off growing competition from rival chains such as and Shake Shack.

The burgers, called the Signature chains, particularly in the US where Five feedback. Collection, will include the thickest ever Guys and Shake Shack were founded. “At McDonald’s we are committed to patty sold by McDonald’s. They have been The new burgers will be served in brioche- listening to our customers and evolving our developed in conjunction with chefs from style buns. They will cost £4.69. menu to offer something for everyone,” he Michelin-starred restaurants. McDonald’s is taking advantage of its new said. The new burgers will be trialled at 28 table service system to launch the burgers. “When the chef council started to develop restaurants in London, the south and The extra thickness of the meat means this new premium offering, we worked with a Manchester before being rolled out to 400 customers will have to wait for their burger brief generated by our customers – they told McDonald’s restaurants next summer. to be served, in contrast to the company’s us they wanted thicker beef patties and high They could also be sold in McDonald’s traditional hamburgers and Big Macs. quality ingredients, freshly prepared. restaurants around the world if they prove Duncan Cruttenden, Food Development “We’ve crafted a range that is a truly popular in the UK. The company is facing Director, said the burgers had been exciting permanent addition to our menu.” growing competition from gourmet burger developed with the help of customer

Pinkberry franchise sold to QSR giant Kahala Brands Kahala Brands, a global leader in the quick-service industry, along with its associated companies, has acquired the premium frozen yogurt brand, Pinkberry, based in Santa Monica, California.

The fast food giant, which hit sales of £1bn The comment was one of many made by the brand is aiming to hit its £1.5bn target, last year and currently has 880 UK sites, is the CEO who also discussed the impact of as well as the introduction of breakfast and growing its core business and expanding its the National Living Wage and how the brand 24-hour trading, all business decisions which food and beverage offer to hit the target. would deal with it without pushing up prices. follow a trend in consumer buying habits. Talking to reporters, Martin Shuker, CEO Mr Shuker believes that by tackling the issue KFC is owned by YUM Brands and the UK of KFC UK & Ireland, said: “We need to prove now it will give KFC an edge over the likes of & Ireland branch employs around 25,000 and build a strong enough breakfast business McDonald’s and Burger King. people, with approximately 900 apprentices. in order to be able to facilitate [24-hour A push towards healthier meals, including trading].” rice boxes and burritos, is one of the ways

26 | FOOD FRANCHISE WINTER 2016 Domino’s announce strong Dum Dum growth in Q3 Donutterie to Pizza giant, Domino’s has reported a 14.9% like-for-like sales continue UK growth in its UK division over the last 13-week period. openings

System sales hit £200m for the period Our international businesses also Dum Dum Donutterie, the artisan in the UK, a 20.7% increase on the same continue to show encouraging signs of period in 2014. In the year to date, sales improvement. We enter the final quarter doughnut and croissant store, is have reached £597.0m, a 17% increase of the year with good momentum, now offering franchises in the UK on last year and like-for-like sales growth are confident of beating our previous and internationally. of 11.8%. expectations for the full year and remain David Wild, CEO of Domino’s excited about our longer term growth Paul Hurley, founder and doughnut chef, Pizza, said: “We are delighted by this prospects.” launched the company in 2013 and it now has performance as our UK business goes Total system sales across the whole four stores in East London and an outlet in from strength to strength, reflecting the group reached £214.5m for the 13-week Harrods. Its first international store will open in success of our strategic and marketing period and £641.2m for the year to date. Dubai and there are nine further outlets scheduled initiatives. It represents the eighth During the period 12 new stores for the UAE over the next five years. consecutive quarter of double digit like opened in the UK bringing the total year The company says that its Dum Dum doughnuts for like sales growth as we continue to to date to 33 and the Group remains on are handmade with only natural ingredients focus on delivering great food with great course to open a minimum of 50 stores and are baked rather than fried. This traditional service, using our best in class digital in the UK during 2015. patisserie-based baking process, which is patented platforms. in Europe and the U.S., means that the doughnuts are significantly lower in fat than its competitors. Speaking about the products and plans for 2016 Hurley says: “Our doughnuts are the tastiest you Jasper’s offer exciting new can find, and they are made with honesty, natural ingredients and real baking passion. Our success opportunities in 2016 has everything to do with years of dedication, excellent product and the support of a community Jasper’s Catering Franchise are entering 2016 on the back of loyal Dum Dum followers.” of another successful year and are now looking to expand The doughnuts are baked freshly each day and their business further by recruiting new franchisees. the top-selling doughnut is the Zebra, containing chocolate buttercream and ganache. Other varieties include crême brûlée, toffee apple, Speaking to Food Franchise, a empire on, and take home a good salary almond cream and pistachio. Dum Dum also representative from the catering in your very first year! offers the FroDough, an ice-cream doughnut and franchise said: “As 2015 draws to a bespoke giant doughnut cakes. close, the air at our office is filled with “No other franchise we know does “This has been a big year for us brand wise, a sense of optimism and hope that the this… We literally do the hard work for product wise and outlet wise so we believe that coming 12 months will aspire to be the you in the run up to your grand opening our new website, delivery service and future best ones yet. We make resolutions … so when you open your doors, global expansion plans will only bring us closer and set goals for our own personal you already have customers in your to our goal of sharing our doughnuts with as achievements and want to do the same exclusive territory ordering from you.” many people as possible across the world,” Hurley for our franchisees. added. Jasper’s are currently seeking new Initially in the UK the opportunity is available to “At some point, you may have franchisees and offer many benefits a limited number of investors and internationally, expressed an interest in owning your including. the company is targeting Asia next year. own food business. This says to us that you are highly ambitious, tenacious and • Multiple revenue streams in a resilient have a burning desire to better yourself. marketplace • A minimum of 4 appointments with “Here at Jasper’s Catering Franchise, new customers every week for the we have those same feelings too – first 12 months’ worth £1,000,000 in that’s why over the last year, we have business opportunity. worked extremely hard to give people • 9 months trading without paying like you the best start in business management service fees ownership possible. • £40,000 worth of free stock (at sale value) in your first six months of trading “We now have the know-how and • The chance to be making profits in systems in process to give you the year one! chance to start your business on £3k a • 66% gross profit margins week turnover. This means you have a • No high street rents and rates as they solid foundation to build your catering operate from commercial premises

WINTER 2016 FOOD FRANCHISE | 27 News round-up

Starbucks launch Mobile Order & Pay in the UK Coffee giant allow customers to pre-order their favourite drinks and food in over 150 London stores and save time in the queue.

The scheme which was launched a few weeks back, exclusively within the Starbucks App, offers customers greater convenience and the ability to customise their drink and food orders as well as time savings of up to 10-15 minutes. Using the App allows customers to order ahead from the Starbucks menu. Following confirmation, orders are immediately sent to the chosen local Starbucks store where baristas begin preparing the order and an approximate collection time is sent to the customer to pick up their order directly from their barista – skipping the queue. Users of the App are also rewarded with exclusive opportunities to earn Stars with the My Starbucks Rewards loyalty programme. helping them to get their correct order, fast. needs for convenience and customisation at The App has received a very positive “We Brits are famous for queuing, but any time of the day.” response from customers in the United in an age of such sophisticated technology Mobile Order & Pay is initially available States where it has been available since ‘why wait?’. With more people leading busier on iOS in 150 stores in London for the first December 2014. According to customer lifestyles than ever, saving minutes can really trial phase of the technology. The launch of feedback, the App typically saves commuters help, so we are excited to be bringing Mobile the UK trial follows a successful pilot in the and working people 10-15 minutes in their Order & Pay to our London customers – the US where Mobile Order & Pay surpassed all day; parents with young children find it first to have this feature outside of the US,” expectations and has just extended to over easier to order ahead than stand in line, while said Ian Cranna, vice president Marketing & 7,000 stores nationwide as well as to the speech- and hearing-impaired customers Category for Starbucks EMEA. “We think the Android platform. have hailed the App as a “game changer” in easy-to-use feature will meet our customers’

Hospitality wages on the rise across the UK according to Q3 results Wages in the hospitality sector increased by 5.1% in October compared to the previous month, according to the latest figures from the Office for National Statistics.

The UK Labour Market release from to last year, with 85 vacancies available time last year, which means hundreds of the ONS revealed that the average wage between September and November 2015. thousands of families are going into the in the ‘accommodation and food service Across the whole of the UK economy, festive season with the security and hope activities’ industry was £244 in October there are more than half a million more for the future that work brings. 2015, up from £240 in September. people in work compared to this time “Next year we will build on this positive In the most recent quarter (September last year, bringing the total number in story with the introduction of the National 2015), 2,253 workforce jobs were created employment to 31.3 million. Living Wage and the new offer of 30 hours in the industry, increasing from 2,228 Priti Patel, employment minister, said: free childcare for working families. In this in the previous quarter and 2,171 in the “We are ending the year on a high, with way we are delivering the high-wage, same quarter in 2014. a record rate of employment, and wages low-welfare society with opportunity and There has also been a 12.9% increase continuing to grow. security at its heart that we know the in vacancies in the accommodation and “Today’s figures show half-a-million British people want.” foodservice activities industry compared more people in work compared to this

28 | FOOD FRANCHISE WINTER 2016 business profile

ALL HAIL THE WRAP! EXCITING NEW FRANCHISE OPPORTUNITIES WITH WRAP IT UP

They say that if you can create a product every customer, just the way they want that ticks more than one box for the it and we aim to become the ‘Subway’ of consumer then you are on to a winner, the wrap world. if you can then turn this business into a food franchise then success is “We’ve managed to expand and stayed guaranteed. One brand that has done true to our original philosophy of both of these things is Wrap It Up! sourcing only fresh natural ingredients to bring our customers authentic world Wrap It Up’s mission is to make gourmet food at an affordable price. wraps and fresh salads in front of the customer, all of which are inspired by “Our focus is firmly on authenticity, we food from around the world. We are employ chefs from around the world revolutionising fast food by putting to keep our food true to its origins and wraps on the map as a tasty, healthy we work hard to find the best suppliers alternative and are one of the fastest meaning we offer a high quality product growing food franchises in the country. that can be served in all of our units. The acquisition and redevelopment of Managing Director, Tayub Mushtaq “We have 13 stores, 12 of these are in a large commercial kitchen has been a says: “We have seen the different forms London, a notoriously competitive huge project that has seen substantial of street food, how it’s served and market, which proves that if you can the ingredients that are used and we make it here you can make it anywhere. investment, but it means that we can came up with the idea of putting this We have also opened in Manchester and offer consistency and quality on a large combination of global products together are looking for franchisees to help us scale and support up to 100 shops. under one roof. grow even further. Last year the turnover for the business “We serve fresh wraps for each and rocketed 50% to £3.1m and we forecast growth of 30-50% year-on-year until 2018.”

After an appearance on Dragon’s Den and raising nearly £800,000 through crowd funding (double our target) confidence in the brand is high there has never been a better time to invest in Wrap It Up!

If you’re interested in finding out about the fantastic franchise opportunities that Wrap It Up! offer then why not visit our website www.wrapitup.co.uk

WINTER 2016 FOOD FRANCHISE | 29 INTERNATIONAL NEWS

Carl’s Jr start legal action after franchisee ‘broke deal’ Carl’s Jr, the US based burger franchise are said to have issued proceedings against a franchisee that they claim ‘broke a deal’ which involved the opening of 30 sites in the Ontario area.

The franchise lodged a breach of contract case in the California federal court, against 6Points Food Services Ltd. In the case Carl’s Jr. says it entered into an agreement granting 6Points the nonexclusive right to develop 30 Carl’s Jr. restaurants subject to terms including fees and a roadmap for opening all 30 franchises by Jan. 31, 2020, with deadlines along the way. The individual franchise agreements also included payment of royalties in the amount of 5 percent of gross sales, a 3 percent gross sales advertising fee and $150 per month for an advertising fund. Instead of fulfilling its obligations, Carl’s Jr claims, 6Points failed to open the required company Westbridge Capital Ltd, the owners purported rescission is, in fact, an attempt three restaurants by the first deadline of of 6Points. In early 2013 they set about to exit CJR’s franchise system because of its Jan. 31, 2015, and has only opened four starting a chain of Carl’s Jr. franchises in inability to operate successfully by reason of restaurants to date, only half of the eight Ontario. its own mismanagement.” it agreed to have open by the same date According to the case 6Points Food Seven months after it opened its fourth in 2016. In addition, Carl’s Jr. says 6Points Services Ltd, sent a letter in November saying franchise, 6Points sent a letter to Carl’s owes it at least $87,078.37 in royalties per it was backing out of its agreement and Jr. saying it failed to properly disclose the franchise agreement, and failed to obtain ceasing operation of its existing restaurants information under Canadian law, including and deliver a letter of credit worth CA$1 in January over alleged failures by Carl’s Jr. its neglect to mention it did not have plans million ($721,000) resulting in damages to be to disclose information in accordance with for marketing efforts in Canada on par with determined at trial. Canadian law. Instead, Carl’s Jr. says its its American campaign and its misleading The legal proceedings are set to be partner is simply in over its head. them about its existing franchises in Canada, challenged by Michael Levine and Michael asking for a refund of $7 million and saying it Meekins. Levine is a primary owner, with “6Points’ assertion of inadequate disclosure will close its existing Carl’s Jr. restaurants and 37.85 percent, of Canadian investment is a pretext,” the complaint reads. “6Points halt plans to open more.

Yum! Brands raise $640m for World Hunger Relief Yum! Brands announced its World Hunger Relief effort has raised $640 million in cash and food donations in the fight against global hunger since the program’s inception in 2007.

Yum! Brands’ World Hunger Relief effort the company’s global World Hunger Relief as we strive for a world with zero hunger,” is the world’s largest private-sector hunger effort and is a way for Yum! employees says Jay Aldous, director of global private relief initiative, spanning more than 125 to fight global hunger and make a lasting partnerships. “The impact this partnership countries, more than 41,000 KFC, Pizza impact in a community in need. has made over the years has helped set Hut, and Taco Bell restaurants and 1.5 “We’re a company with a Huge Heart millions of children on the path towards million associates. The initiative began and it’s our privilege and responsibility to reaching their full potential.” in 2007 in an effort to raise awareness, Feed the World by making a difference In 2007, there were nearly 1 billion volunteerism, and funds for the World in global hunger,” says Yum CEO Greg people suffering from chronic hunger Food Programme (WFP) and other hunger Creed. “I’m enormously proud of the hard around the world. Today, this number relief agencies. Yum! also adopted the work and passion of our associates and has been reduced to 795 million people, community of Jinotega, Nicaragua, this franchisees around the globe who have according to the United Nations. Every year, as part of the company’s new Feed raised $640 million in cash and food U.S. dollar raised by Yum!’s World Hunger the World Ambassador Program, which donations, providing 2.6 billion nutritious Relief efforts goes directly toward WFP’s supports infrastructure improvements at meals for women and children.” operations to fight hunger worldwide, local schools that WFP serves. The new “Yum! Brands continues to be WFP’s mostly to school meals programs. employee leadership program is part of leading private sector fundraising partner

30 | FOOD FRANCHISE WINTER 2016 Denny’s head to Dubai

Denny’s, one of the largest family dining chains across the globe, have announced the opening of two new restaurant locations in Dubai, .

In early December, the brand known Investment, L.L.C., the master franchisee of United States, and are pleased to open our as ‘America’s Diner’ launched a flagship Denny’s for the Gulf Region. The partnership new restaurants in Dubai which demonstrate location in Dubai which follows on from the encompasses an exclusive agreement the global demand for what Denny’s offers: recent opening at the Al Ghurair Centre in to develop Denny’s restaurants in nine classic American comfort food served in September. Both restaurants introduce the countries within the Middle East over the a welcoming environment at an everyday brand’s new Heritage design elements to next 10 years. value.” the region, featuring a warm and welcoming “Our Dubai openings mark a significant Denny’s Senior Vice President of Global atmosphere pronounced by a unique balance milestone for Denny’s as we continue to Development, Steve Dunn, added, “Denny’s of natural wood tones, earthy textures, make progress expanding America’s Diner is one of the largest family dining chains modern colours and metal accents. internationally,” commented John Miller, across the globe, and we are excited to add The two new Dubai locations are the first Denny’s President and Chief Executive Dubai to the list of international destinations of 30 franchise restaurants planned for the Officer. “We have built a brand that has offering our unique diner experience.” area by regional franchise partner Advance garnered a loyal following well beyond the

Papa John’s commit to Antibiotic-Free chicken Papa John’s announced that its grilled chicken pizza toppings and chicken poppers will consist of poultry that is raised without human and animal antibiotics, as well as fed a 100 percent vegetarian diet, by summer 2016. The company has already made concrete strides toward this commitment by securing Taco Bell to fund $1m into contracts with its suppliers, ensuring that they are on track to complete the process on schedule. scholarships Promising to never serve chickens raised with antibiotics in its grilled chicken pizza toppings This is a one-of-a-kind opportunity for the next generation or chicken poppers is just one of many proof of leaders. points that supports Papa John’s unwavering commitment to quality. Papa John’s goal has In its inaugural phase, the Taco Bell direct funds to their higher educational always been to offer its customers the highest- Foundation will award a total of $1 institute upon enrolment. quality ingredients, and it has recently taken million Live Más Scholarships for post- Scholarship awards must be utilised the extra step by boosting its transparency and high school education to 220 teens and at an accredited post-high school/ even educating its consumers on what certain young adults (ages 16–24) with unique post-secondary educational programs ingredients are and why they are in consumers’ dreams and passions. (including accredited two- and four- food. Specific awards will vary and range year college, universities, vocational- “This antibiotics initiative embodies everything from $2,500–$25,000 per individual to technical, and trade schools) for tuition, our brand stands for,” says John Schnatter, enable the dreamers, innovators, and required fees, books, and course- founder and CEO of Papa John’s. “I started this creators of this generation to find their specific supplies. company over 31 years ago on a foundation of place in the world and realize their full Applicants are asked to create and quality and a commitment to my customers to potential. submit a video (two minutes or less in deliver on a promise of ‘Better Ingredients. Better In 2016, there will be 220 length) that tells the story of their life’s Pizza.’ By serving high-quality chicken products scholarships awarded to deserving passion. They will not be evaluated on without added human or animal antibiotics, we’re recipients, ranging from $2,500 to how well the video is made, but on how just taking the next step on our journey to always $25,000 each. All awards will be they show their talents and explain why get ‘Better.’” directed by the Taco Bell Foundation they should be considered for a Live Papa John’s will be the first national pizza chain to Scholarship America, which will Más Scholarship. to pledge removal of antibiotics from its grilled work with selected candidates and chicken pizza toppings and chicken poppers.

WINTER 2016 FOOD FRANCHISE | 31 INTERNATIONAL NEWS

Sonic to add 33 new franchise ‘drive-ins’ in US Sonic Drive-In have announced the expansion of two existing franchise agreements and the addition of two new franchise agreements for a total of 33 new drive-ins to the state of California over the next seven years.

The new California drive-ins will be located in the regions of Los Angeles, Palm Springs, Central Valley, and Northern California including Sacramento and the Bay Area. Beyond this planned expansion, the Sonic development team is actively seeking additional franchisees in California. The 33 drive-ins are planned for multiple markets across the state: 11 in Sacramento; 12 in the San Francisco Bay Area; three in west Los Angeles; five between Bakersfield and Stockton; and two in the Palm Springs area. All planned drive-ins should be serving customers by 2022, bringing more than 1,500 new jobs to the state over seven years. There are currently 68 open drive-ins operating in California, and this announcement brings the total of upcoming drive-ins to 101. “As a franchise-centric brand with more than 60 years of heritage, Sonic is a smart choice for motivated entrepreneurs interested in building a business with an established, respected brand,” says John Budd, chief development and strategy officer brand and in the state, these franchisees will franchise group with multiple drive-ins in for Sonic. “These new and existing partners exemplify the kind of success that comes California already, signed on for 14 additional in California represent some of the best in from bringing Sonic Drive-In to previously locations, expanding their footprint in Los the business, with a great deal of restaurant underserved markets.” Angeles and Sacramento over the next few and multiunit experience. As we continue Pacific Drive-Ins, led by Max Gelwix and years. to seek qualified partners for the Sonic Kasey Suryan, an existing and successful

Firenza pen 25 store deal just two months after launching franchise opportunity Less than two months after officially launching its franchise opportunity, Firenza, the latest contender emerging in the race to dominate the booming fast-casual pizza segment, signed its first franchise agreement, a multiunit deal for the development of 25 restaurants throughout the Southeast.

The stores will be developed over products—in a sophisticated and highly eight, chef-inspired signature . Once the next 10 years—specifically in the welcoming environment.” the 10-inch pizzas are assembled, they’re Richmond, Virginia metro area and Selling “Pizza Like Never Before,” Firenza baked in an open flame stone-hearth oven Eastern North Carolina—with the first offers fresh-baked pizzas with unlimited and guaranteed to be done within five one scheduled to open within the next 12 toppings per customer’s choice, for one minutes. months. low price. The pizza dough is made in-house daily “We look forward to expanding Firenza’s Customers can pick and choose from and hand-stretched to order right in front presence in the Southeast,” says Garry nearly 40 toppings—six signature sauces, of the customers. Once the pizza dough is Fitchett, who signed the development seven cheeses, nine meats, and 17 stretched, customers can customize their agreement with his brother. “Firenza veggies—and watch their customized pies pizzas with unlimited toppings for one low simply offers today’s demanding customers assembled right in front of them. For those price. what they crave—originality, speed of customers who don’t want to create their service, customization and premium pizzas from scratch, Firenza also offers

32 | FOOD FRANCHISE WINTER 2016 business profile

PAPA JOHN’S FRANCHISEE OPENS FOURTH WELSH STORE IN A YEAR Leading pizza franchise, Papa John’s, has an- nounced franchisee, Umar Malik, is expanding in Wales! He has now opened his fourth Welsh Papa John’s inside a year. Umar adds Cardiff to his portfolio of franchised outlets which also include Neath, Newport and Swansea, to a further Swansea store which he opened in 2014

“I first discovered a passion for variable costs come down with greater pizza while studying for my MBA in Papa John’s was founded in the USA purchasing power and therefore profits Carlisle,” explains Umar. “I worked as a in 1984 and now has more than can be increased. delivery driver for a rival firm and later 300 stores across the UK and 4,800 discovered Papa John’s. The concept stores in 40 international markets “To become a successful Papa John’s of ‘Better Ingredients, Better Pizza’ and territories. Papa John’s is the only franchisee you need to be motivated, impressed me from the outset. I’d branded pizza chain to use only 100% enthusiastic, hard-working and want to never seen repeat business like it and fresh dough, giving a better natural be part of a growing team. Exceptional customers just kept coming back for flavour and the Company’s unique interpersonal and people skills are more! tomato sauce is made from the best essential, as you’ll be dealing with “I funded my first Swansea Papa Californian tomatoes, picked and customers as well as leading your team John’s through savings plus a business packed from vine to can in just six on a daily basis. In addition to excellent loan from HSBC South West Wales hours. written and spoken communication Business,” continues Umar. “HSBC fully skills, you you’ll have to be an organiser understood the Papa John’s franchise Combine popular pizza with excellent with a can-do attitude - someone model and its potential, so securing the customer service, rapid delivery who gets things done. You’ll have to necessary funding was straight-forward. times, a strong brand, comprehensive be dedicated and passionate enough staff training and some hard hitting to adapt to a proven way of working. “Since then, the franchise has gone marketing support, backed by national And you’ll need the ability to roll your from strength to strength and I have TV advertising and the franchise serves- sleeves up and get stuck in, which opened four stores this year and up a fantastic offer for those looking for means everything from making pizza progress won’t stop here!” confirms a quality investment opportunity. through to managing staff. Umar. “With the help of the Papa “For those interested in becoming John’s franchisee incentive scheme I Tempting incentive deals give part of Papa John’s success story, we am looking at opening five additional franchisees a helping hand at the outset provide all the assistance and training stores, also in Wales, next year too! to ensure they will be quick to taste needed to get your successful Papa success. Papa John’s is aiming to attract John’s up and running. With a record “As the capital of Wales, Cardiff is a more enthusiastic and business minded number of traditional openings last great location,” continues Umar. “It’s a franchisees and therefore deals can year, there has never been a better time big city and people were missing out! I include marketing support, equipment to join Papa John’s.” am now delighted to have trained up 30 and reduced royalty payments. staff ready to be able to deliver on our For further information please visit: special opening promotions.” Anthony Round, business development www.papajohns.co.uk/franchise call: Papa John’s is one of the largest pizza manager, Papa John’s explains: “Once 0844 567 0937 or e-mail: companies in the world. As a franchise, a franchisee is trading successfully, [email protected] the Company supplies all the assistance there is the opportunity to run multiple needed to get your successful Papa retail franchised outlets. We are seeing John’s up and running including help more franchisees wishing to expand with location selection and full turnkey and several are now aiming for 20 solution to opening the store plus full stores each. For multiple retail stores, training. economies of scale can be realised as

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FOOD FRANCHISE WINTER 2016 Franchisee Q&A

Setting up a business can be extremely difficult and there are many hard choices that you will need to make. One of the safest types of investment you can make is to buy a franchise.

Franchising offers the franchisee a proven unit are often far higher thanks to large franchising it is still the job of the business model, which has a clear target brand presence. franchisor to sell their model, to recruit audience and a customer base. It will also new investors and to help the business have all of the logistics in place to offer a The training and support is another reason grow. consistent product and the same levels of why franchising is so popular. When you service at all sites across the country. are in need of advice it is there whether So how do they do this and what in the form of the franchisor or another makes the investor become a There are many benefits that make franchisee and you can rest assured that franchisee? franchising such an interesting proposition someone else has experienced difficulties and there is a saying that suggests that that you can learn from. The training In this feature we speak to some of franchising is ‘a business for yourself, not required to run a franchise is almost those who have invested in a franchise by yourself’. The prospect of becoming always included in a franchise fee, this is and learn about what made them take on your own boss is one of the major reasons because the very nature of the franchise a business in this sector. We hear about that many go into franchising but with the as a whole doing well is that you do well. their individual journeys, how they raised aforementioned security. Success for a franchisee can lead to more the money and why they chose a certain sites, a bigger market share and increase brand. We also look at their early trading The risks are far lower when entering a profits. It would be foolish for them not to and if it was what they expected. Finally franchise compared to an independent offer the best training. we get some insight into the market and business and whilst the initial investment their plans for the future in our Franchisee may be more the returns in a franchised With all of the positives that go with Q&A.

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MEET THE FRANCHISEES The franchisees are the core of the business, they are the faces that greet you when a new store opens and they are the ones tasked with leading the brand forward. All of them have different stories and differing levels of experience in the industry, but the goals remain the same, to make a return on their money, a profitable business and maybe expand. So let’s meet the franchisees…

Alan Fulton

Cafe2U, Aberdeen South - Alan, who has a background of working in the hotel and catering industry is now a fully trained barista and will be using his new van to serve high-quality espresso-based coffee, tea, hot chocolate and sweet treats to customers at non-traditional locations in the South of Aberdeen.

UMAR MALIK

Papa John’s, Wales - MBA graduate Umar Malik opened his first Papa John’s franchise on Dilwyn Street in Swansea last October after moving from the Midlands to Swansea to pursue what he believed to be better growth potential for the chain in South Wales. Malik started in the business as a delivery driver for Pizza Hut less than ten years ago to supplement studying for his business management degree at Derby University. A request from his then boss, to check out the market competition got Umar hooked and since then he has gone on to become a multi-site operator.

SPENCER & VANESSA MATTIA

Subway, Hampshire – Spencer and Vanessa are a successful husband and wife team in Hampshire. The couple opened their first store in Chineham, Basingstoke in December 2014. After the success of their first store Spencer and Vanessa soon decided to open another, nearby at Brighton Hill, in June 2015.

MATT EZRA & Daniella Pitrakou

Coffee Republic, Romford, Essex – Matt and his partner Daniella had dreams of running their own business after spending a total of twenty five years working for others. They decided on franchising and opened their first site in South Street, Romford in October 2015.

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STARTING OUT

What made you decide to open the SUBWAY® brand and our research more senior hotel manager roles. I also up as a franchisee in the food and indicated that it would be a good franchise experienced working with stand-alone drink market? to buy. units which gave me the understanding how to effectively operate a business from AF: During my entire working life I have ME: I decided to open a food and drink top to bottom on a daily basis, which has always been involved in the industry and franchise as myself and my partner stood me in good shape in this venture. it’s what I know and love. The familiarity of Daniella had always wanted to run the industry has also been a great comfort our own business, and together have UM: I have had various roles in my life! during the Cafe2U business launch a combined experience of 25 years in These include working for a rival pizza process. hospitality and retail so it made perfect firm, being operations manager for a dairy, sense for us. marketing roles plus I spent time doing an UM: I first discovered a passion for pizza MBA in Carlisle. while studying for my Business degree. I What did you do prior to becoming worked as a delivery driver for a rival firm a franchisee? SVM: I was an IT Contractor and Vanessa and later discovered Papa John’s. The was a Marketing Manager. concept of ‘Better Ingredients, Better AF: My prior work experiences have been Pizza’ impressed me from the outset. all in the catering industry. After college ME: Prior to becoming a franchisee, I’d never seen repeat business like it. I progressed into the 4star chain hotel I worked as a food sales/hospitality Customers just kept coming back for more. market, mainly food and beverage manager manager for very well-known and SVM: We were both passionate about roles in my early career, progressing onto respected global retail brand.

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How did you know which food concept of only using the highest quality franchisee, not only was it an affordable franchise to choose? ingredients and 100% fresh dough to option for us, but we also found that create a top quality pizza with a better the development agent’s office was only AF: After the decision was made that natural flavour is really popular and I eight miles away from our home. From coffee would be the driving force of wanted to join a growing company. The an economic and logistical perspective the new venture, it was a basic Google incentive scheme run by Papa John’s for it became much easier for us to progress search and then lots of reading about franchisees which offers hot deals on with the SUBWAY® brand. the franchise. As it happened, a current equipment plus some reduced franchisee franchise was for sale in my local area and fees was also really helpful and a big ME: When choosing a franchise, you have I was allowed to spend a day with them to incentive to get us up and running. It gave to look at the brand and you have to ask cement my findings. At all times during my us the freedom to invest the funds saved questions- Do you believe in it? Do you research Café2U were the market leader into marketing to ensure our newest store agree with its values? Can you see yourself and met all my criteria. openings ‘went down well’! as part of it? and most importantly, can you see it making you successful? You UM: It seemed like everyone wanted SVM: We looked at a couple of different have to do your research. a piece of Papa John’s! Papa John’s brands but costs prohibited many of them. We investigated becoming a SUBWAY®

WHICH FRANCHISE?

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FINANCE

How did you go about funding way. so securing the necessary funding was your franchise? UM: All costs were clearly explained by straight-forward. Papa John’s. AF: The majority of the funds have been SVM: The original budget for one store SVM: We originally approached a supported by my parents as loan and from beginning to end was around couple of different banks and spoke to investment. £150,000. The final bill was £194,000. fellow franchisees, who offered their recommendations. We eventually chose UM: A mix of my own investment and a ME: Our Budget, made open and to go with HSBC who were very helpful loan from the HSBC South West Wales transparent from the beginning, from our from the beginning and are supportive of Business. 1st meeting with the Head of Franchising the SUBWAY® brand and business model. at , was ca. £150,000 They have helped us with the finance for SVM: With a combination of our savings, - £200,000. Our eventual cost from our second store too. It certainly pays leasing the property and re-mortgaging beginning, to opening was £180,000. to speak to different lenders and other our home. franchisees for their advice and guidance How much support did you receive when it comes to finance. ME: We funded the Franchise costs from banks and other lenders? ourselves ME: On this occasion we did not need AF: I was put in touch with Franchise any support from the banks. However, What was your initial budget Finance who assisted me with the bank Coffee Republic, courtesy of the Head of and were extra costs visible side of the purchase, again the same Franchising have forged relationships with from the start? manner applied in this part also, faultless 3 major lenders, High Street Banks, under is a word I have used when being asked for the Enterprise Finance Guarantee (EFG) AF: The outlay from my side was £20,000, my opinion of this type. Scheme, which was and is available, should in regards to extras all fees up until signing we consider additional franchise locations of the paperwork were laid out from the UM: HSBC has known Papa John’s for with Coffee Republic in the future, which start and did not alter. After signing up, all a number of years and they understand is our intention to grow our business. other fees have been dealt with in similar the franchise model and its potential,

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Was there clear, coherent UM: Yes! Papa John’s is set up to help location and the strict criteria of site contract laid out? franchisees become profitable. The team approval and into the fit out, training and want you to do well and so they tell opening. ME: Absolutely, as part of Coffee Republic you straight what is expected. Nothing Policy, openness and transparency at every is hidden and the whole process is Do you feel that the contracts stage, even before we place the deposit completely transparent. Papa John’s you have in place are secure and to secure our interest, we were invited to doesn’t recruit franchisees for the sake that they protect you from any their Head Office to view the contract with of recruiting! They are looking for long additional liabilities? our legal advisor, and all our questions term partners to work with to succeed and about the contract were answered to our growing a successful business. UM: Yes, from both sides. complete satisfaction, and invited to seek ME: Yes, absolutely. independent legal advice, which we did. ME: Yes, we accepted totally that this has to be a ‘partnership’ and we were reassured that in every aspect we would Were all of the facts made clear be supported at every stage of the to you and were you happy with process, which we were by both Head of what was expected from you as Franchising and the Head of Operations a franchisee? and his team, at every stage of site Legal

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MARKETING

How much do you have to pay How much internal marketing of the CR Operations Team, and our into the marketing budget or is do you do in comparison to dedicated Head Office Operations this included in your franchise that which is provided by the Manager to involve ourselves in local fee? franchisor? promotions, with offers for local businesses, colleges and local councils. AF: We pay a weekly fee of £9.40. AF: Very little as the franchise does a Coffee Republic, at no cost, prepare the UM: The franchise fee for each franchise quarterly marketing box for us which keeps marketing for such promotions, printing is unit gives you the right to use the all aspects fresh and interesting. at our cost. We have undertaken a number Papa John’s trademarks, its systems for of successful promotions locally so far. preparing, marketing and selling food UM: Papa John’s has a dedicated products, its information, specifications, marketing team which works to support knowhow and other confidential and its franchisees. Specialist promotions are Do you feel that you have the proprietary information. In addition there regularly being developed, the company support from those at the head is a franchise royalty fee of 5% of the undertakes radio and TV advertising of the brand? net sales and a 5% National marketing campaigns and sponsorships. In addition, contribution. Papa John’s runs specific reward schemes AF: Absolutely, I deal with my franchise to keep customers coming back for more! development managers on a weekly basis, SVM: 4.5% of our net sales covers regional We also have our own marketing strategy also the top brass make a great effort to and national marketing campaigns. for each Papa John’s franchise we run. speak directly on a regular basis. This involves leafleting, wobble boards and UM: Yes, absolutely. Papa John’s is ME: 1.5% weekly from our NET Sales as special pizza promotions. focused on constant improvement to part of the weekly royalties. This covers 5 evolve with us as franchisees. It is a seasonal campaigns throughout the year SVM: We are working on marketing partnership between franchisee and which all of the CR Estate are involved in, ideas all the time for any opportunity franchisor. all marketing material and POS for those in our stores to increase sales including campaigns, and also all of the extensive special promotions for Halloween, Easter, ME: Absolutely, the Head of Franchising NPD to support the new food and drinks Christmas, Black Friday, Father’s Day, is always available to us as is the Head of products released with each campaign. Mother’s Day etc. Operations and the Head Office Team, we cannot reiterate the support we have been ME: We are encouraged with the support given, to the highest standard.

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How much support were you accessible. given following the signing of UM: Yes, I work with my franchise business ME: What we like about Coffee Republic is the franchise lease? manager (FBM) who I talk to about three that they ‘listen’ if we have an idea about a times per week. My Food and Beverage new product for example they will research AF: Since the franchise allocate a franchise Manager and all the Papa John’s team are it and then consider introducing it to the development manager to all franchisees approachable and easy to communicate product range. you have the opportunity to contact the with. Cafe2U support team daily if required. Is there someone available to SVM: Our regional development agent’s offer guidance should you need UM: Training is the key support area. As office is our main point of contact and we it and is this support instant? a franchisee I was provided with in-store are in regular contact with them. training plus head-office training. Once my AF: Yes, a dedicated development manager first store was opened, a support manager ME: Yes, we receive the weekly Republic is placed with you for the duration. from Papa John’s worked with me for the Report, informing all of the Coffee first week to ensure we got off to a great Republic Estate with all of the news, UM: Yes, my franchise business manager is start. After that I was confident on my seasonal campaigns, new products, always available. own and Papa John’s was confident I could ordering and all we need to know deliver. SVM: We have instant support from the How easy is it for you to make development agent’s office. SVM: As soon as we purchased the suggestions relating to the franchise and agreed a location it was forward movement of the brand ME: Our dedicated Operations Manager, all systems go, we had and still do have as a whole? who visits us regularly is the first point of dedicated support assigned to us from our contact, otherwise we can talk to the Head development agent’s office. AF: Very simple: you can go through your of Operations or the Head of Franchising if ME: We were guided totally through the development manager or contact head we need help. fit our process, the design team were office and speak to the relevant person. very helpful and the overall support was unquestionable. UM: Easy! I don’t know if my suggestions would be accepted though as the franchise Do you have regular contact already offers a tried and tested business with head office? model. SVM: There is a forum where we can make AF: Yes, we have a weekly newsletter sent suggestions about marketing at a regional out from Head Office and all staff are level. SUPPORT

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STAFFSTAFF

Did you have to take on existing provided but I needed to do the ‘leg work’ ME: Yes Coffee Republic give us guidelines staff following your takeover or myself. on suggested pay scales for the various was your site brand new? roles, all of which are competitive. SVM: We received support from local UM: We opened new sites so needed franchisees and the development agent’s How much training did you have to recruit staff for all our stores. So for office who guided us with recruitment and to give staff prior to opening example we have recruited new managers also helped us with staff training. and were you fully briefed to do to run the Neath Papa Johns and the this? Newport store. The two new outlets have ME: Coffee Republic were very proactive also created around 30 further new jobs in assisting us to recruit our team, they UM: Staff must be fully trained to deliver for local residents. advertised the vacancies on their website, the best service and best pizza in town! recruitment posters in our windows prior Papa John’s provides an online modular SVM: No we didn’t as our site was brand to opening, using the various agencies to training system which makes training staff new. advertise the roles etc. straight forward, this plus the hands on training we provide ensures staff are fully ME: Our site was brand new also. Does the model that you ready to meet the demands of their role! operate allow for you to offer Papa John’s also organises a free head- How much help did you receive competitive rates of pay? office training scheme for managers, in terms of recruitment? which is a five day course plus an exam SVM: The pay that we offer in our stores at the end so we can ensure our staff are UM: Papa John’s provided training on how is slightly better than minimum wage, so properly equipped when they are ready to to recruit and how to interview. All the people have left roles with other retailers step up to management level. necessary tools and paperwork including to join us. application forms and contracts were

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SVM: The SUBWAY® brand provides course is conducted at Coffee Republic necessary to ensure this. excellent training, support and resources Head Office. The same course is then given for new franchisees, store managers and to all staff, this time in your bar, on site. SVM: The training process is a joint effort Sandwich Artists ™. Training was carried Coffee Republic make all their food fresh between the development agent’s office out in a variety of ways, via online training on site daily, and this is very important to and the franchisee. courses with The University of SUBWAY® the brand. and in-store training within existing stores. ME: After initial training, it is the ME: Included in the franchise fee, is a Does the franchisor help franchisees responsibility to train new 2 part training course, 5 days, firstly for with this process or is it the staff, however the Coffee Republic Training the 2 key personnel (the franchisee plus franchisee’s responsibility? Team are very happy at no cost to support one), to Barista Standard for the Coffee the training of any individual new member & Beverage Side of the business, and UM: As a franchisee I am responsible for of the team, should they require extra Food Health & Hygiene Standard for the making sure my staff are fully trained and support. food range to Coffee Republic Menu. This Papa John’s provides all the tools and help

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THE FUTURE

Do you have plans or for our top quality pizza was exciting! I AF: If you are a people person and enjoy requirements that mean you will only joined Papa John’s last year, but plan the daily variety, then it’s for you and you open further sites? to open four more outlets within the next will succeed! two years. AF: Not currently, but never say never! UM: Papa John’s is growing and the UM: I run two Papa John’s in Swansea SVM: We would like to open a third store opportunity is there for ambitious, hard- plus Newport and Neath and we have just within the next 12 months; we are looking working franchisees to become part of opened in Cardiff. Our first Swansea store for appropriate locations all the time. that growth. This is due to the quality and covered one half of Swansea but it soon ME: Yes this is part of our future plans. popularity of the product and the support became clear there was a demand for a We are very proud to be a part of the for the brand. I really can’t speak for other second outlet to cover the other half of biggest growth of Coffee Republic since franchises. the city. 2009, since their franchise model was re- launched in June 2013, by the now Head SVM: Yes, I think the key to success in the Soon, residents from near-by Neath and of Franchising, and to be a part of the 30 food and drink industry will be healthier also Newport wanted a slice of the action! new UK franchises planned into Q2 of choices, made well and delivered quickly Potential customers were phoning and 2016. with excellent customer service. emailing us to ask when we would deliver ME: I cannot speak for other brands, but a store in their town! It was clear Papa Would you recommend with Coffee Republic, definitely, yes. John’s was really tempting taste buds and franchising in the food and drink launching to that amount of enthusiasm industry in the future?

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TOP TIPS

What top tip would you give to interpersonal and people skills are SVM: Do up front research into the brand somebody looking to operate a important, as you’ll be dealing with and the possibilities and potential issues franchise? customers as well as leading your team on by meeting people who are already doing a daily basis. it. Offer some time for free to work for AF: Select a franchise type that you have an existing franchisee in order to fully some knowledge of or background in, and In addition you’ll have to be an organiser understand the business. the transition from being employed to with a can-do attitude - someone who gets running your own business is much more things done. You’ll have to be dedicated ME: Do your due diligence, ask all you pleasant and rewarding. and passionate enough to adapt to a need to know, make sure that this is right proven way of working. And you’ll need the for you, seek independent legal advice UM: To become a successful Papa John’s ability to roll your sleeves up and get stuck about any contract and importantly, franchisee you need to be motivated, in, which means everything from making are you reassured by the processes and enthusiastic, hard-working and want pizza through to managing staff. franchisor has in place, and that all is open to be part of a growing team. Good and transparent.

WINTER 2016 FOOD FRANCHISE | 45 business profile

WOK&GO’S FRANCHISE Wok&Go is all about fresh, nutritious, tasty food cooked in front of your eyes and served to you in minutes.

The spark that started the Wok&Go flame is But what sets Wok&Go apart from other Dubai opening in 2016. Pheby comments a simple one: a love of the taste, aromas and noodle bars? It is different from buffet-style “noodles are the new trend in quick- overall experience of Asian dining in New noodle concepts where food sits in a hot casual, few other products are so healthy, York City. It’s quick, casual and immediately container for hours - it’s made fresh to order convenient, portable and customisable and approachable – perfect for any audience. in front of your eyes, with the added value they definitely have the cool factor. Our of entertainment and theatricality via an food is the secret behind our success and The concept was formed in 2007 by founder open kitchen. There is an extensive menu the strong performance of our first 20 stores Des Pheby, he wanted to “recreate the to choose from yet all are fully customisable has attracted investment from established taste of Asia in a relaxed atmosphere” by with an option to create your own box. operators and investment groups, leading to offering noodle boxes inspired by popular an amazing growth rate”. Thai, Malaysian, Indonesian, Chinese and Wok&Go first opened its doors in Chester Japanese cuisines. Choose from noodle and in 2008 and has grown into a unique, With Wok&Go set to have its busiest year- rice dishes, soups, sides and salads all made brand-led fusion food chain, now operating to-date, penetrating in new markets such to order in minutes to either quickly slurp up 20 company owned and franchised sites as Essex via a 15-store area development at high tables, or box up and takeaway. throughout the UK, one in Kuwait City and agreement, Kent, the Midlands, Scotland,

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Central London, and the South Coast along presence, now is the time to become part of WOK MAKES THE IDEAL WOK&GO with advanced discussions with multiple the Wok&Go journey. FRANCHISEE? international markets, they are yet again strengthening their position as an industry WOK WILL YOU HAVE ACCESS TO? Wok&Go has franchisees from all ethnic leader. origins, ages and career backgrounds. All Wok&Go is dedicated to helping franchisees franchisees tend to have the same traits FINANCIALS make their business a success with a team in common; self-motivated, organised, behind the scenes at head office providing motivational and customer service focused. The minimum invested for a Wok&Go all the support needed to make the journey Above all, a willingness to commit to franchise is £150,000. The licence fee – from signing up to seeing a healthy profit – Wok&Go’s defined brand standards and will be £15,000 plus VAT. The rest of the as smooth as possible. offer genuine hospitality. However the ideals investment goes towards equipment, vary depending on whether the person is a tills and fitting out of the unit. A very You will receive a robust four week training National or International franchise partner. competitive initial investment package with course including: solid long term profits. Operating profit for a If looking to start a National franchise, it is typical owner store is between £50,000 and • Cooking techniques in Wok&Go’s a popular choice for those wishing to take a £100,000 per annum. unique Asian fusion style new and interesting career path as few are • Cooking equipment and utensils from the catering profession. People with WHY FRANCHISE WITH • Food and Hygiene training managerial experience are desirable, but WOK&GO? • Ingredient selection and processing more importantly they look for those who • Equipment and premises cleaning are entrepreneurial, passionate and believe This fast-growing, dynamic young business • Maintaining stock levels and supplier in the Wok&Go brand. has doubled in size year-on-year. Wok&Go management has tapped into today’s taste and lifestyle • Customer service excellence In variation, Wok&Go has a very specific choices with fast, authentic, good-value If opting for the managed franchise criteria for International franchise partners. food tantalising the taste buds and purse option you will have access to on-going They want to work with companies with a strings of today’s consumer. Wok&Go has support: solid Food & Beverage or retail experience big plans – it is already the fastest growing • Finding the right site for your new that have the appetite, funding and ability to franchise in their market in the country. business venture build a successful Wok&Go business quickly Wok&Go also offer a managed franchise • Negotiating the deal on your property in their domestic markets. option which is only offered by a few other lease companies. With minimum hands-on work • Securing funding and investment required, it is a particularly popular option • Sourcing chefs and staff with investors looking for multiple sites. • Tried and tested launch programme • Procuring great value, top quality Wok&Go’s growth stems from the fact it equipment fits so many customer trends, alongside • Expertise in recruitment and HR matters its flexible model that has proven to work • Continual marketing support in high streets, shopping malls and non- traditional locations. With big expansion plans and an increasing international

For more information about Wok&Go’s franchising options visit www.wokandgo.co.uk Alternatively, contact Matteo Frigeri at [email protected]

WINTER 2016 FOOD FRANCHISE | 47 buying a franchise

BUYING A FRANCHISE 10 THINGS TO CONSIDER

When it comes to investing in a business one of the most important things that you can do is due diligence checks. There are a set of questions that you must ask of yourself and other advisors to work out if the investment is a viable one. Franchising is no different and over the following pages we will break down the questioning process, and look at the things you should clarify before you make an investment.

The following questions and topic areas Before we examine the key areas of sector for some time or have the relevant are by no means the final list of thigs that setting up and investing in a franchise experience. Food is a passion and a high you should look for but by revealing the the most important factor to consider percentage of those that choose to open top ten areas that we, and our readers is you. As the franchisee or potential or buy a business in this sector will be consider to be the most important, it is franchisee, you must first consider if this interested in food at some level. hoped that you will gain a better under- is something that you want. In the food standing of the complexities of franchis- and drink industry many of those that ing. decide to franchise have operated in the

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THE FRANCHISOR

What’s the story of the franchisor and what is their business record and reputation like?

When it comes to buying a franchise it is easy to fall for the figures and the dream. Two of the most important things are that you first like the product and secondly that you like the franchisor. Meeting with them in a formal manner allows you to obtain all of the investment materials and information, but making a less formal approach is sometimes best. You need to explore the synergies that you both may have and look at if the model they offer is the right one for you and them. The investment of buying a franchise and the way that the contracts are laid out Speaking to existing franchisees opens Another important question to ask could means that you may now only be making your eyes to the business opportunities be: Is the franchisor’s infrastructure com- a cash investment but a time investment. that lay ahead. They are further down prehensive and stable? Deals to open multiple sites over several the line and can tell you in the business Be careful to make sure that the story of years’ means that you have to believe in and the model has met or surpassed their a business growing from five sites to fifty the franchise and trust the franchisors expectations. Make sure that you also go in a small period of time does not whisk expectations. to franchisees other than those that are you away. Look closely at the initial sites recommended by the franchisor. Testimo- and see how they have developed and Look at the franchisors background and nials are great but you want to make sure look also at the company owned sites, find out about existing franchisees. What that there is a balanced viewpoint from how are they performing and how can you kind of person are they and how have which you can work. replicate and build on these successes. they developed since investing.

CONSUMER DEMAND sector as to whether or not the coffee and If other businesses are doing well then it burger markets are becoming saturated. is either the offering or the fact that there This is not the case, coffee and gourmet is high demand. Is there strong consumer burgers have never been in such high demand for it? demand. Is the demand expected to continue? Another key factor is to look at whether Whilst we all know the importance Consumers want a products that is of or not the demand is set to continue rising of branding, at the end of the day the the quality that they expect, for the price or if it is already high will it plateau and product is what the customers come to they pay. They want it served efficiently remain there. Making sure that you have your business for. Making sure that you and to be as described. Making sure that a good base is one thing and that there choose a product which is in demand is you are entering a strong market is very is a high demand but making sure that it key. Over the last 18 months there have important and you should not shy away is sustainable is another. Franchising is a been countless debates in the food to go from competition in the small area as you. long term investment and whilst it is the responsibility of the franchisor to develop and adapt with consumer trends, it is the responsibility of the franchisee to make sure that their voice is heard as they are the business owner at the coal face. Pass- ing on ideas and communicating is vital to make sure that the business thrives, and that consumers remain interested.

Are there many competitors?

Competition is healthy and again this reflects the fact that there is so much de- mand for certain products in the market. There are a whole range of pizza shops, some gourmet and others that we would traditionally see as a takeaway. Nearly all of the pizza franchises that you can invest in here in the UK offer delivery and have

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Their national campaigns in both print and uct appeals to you and you would shop their plans for the future, are they chang- on TV mean that they are now recognised there, then is stands to reason that others ing the way that they serve customers, brands and it doesn’t matter where the would. Believing in the product and the are they bringing in new technology and customers live, if you have a franchise you model gives you a far higher chance of are the updating the menu? It is safe to will have a delivery catchment area. There success and this passion for the brand is say that most of the big brands will be will always be a crossover but picking the something that you could take forward. looking at their menu regularly and will right brand and offering a great service have a plan for items well in advance. will see you beat the competition. How does its quality compare to the competition? Are you confident you can Could more competitors market the franchisor’s product enter the market in the next With high quality being one of the most successfully in your market- few years? important things for the consumer, you must look to make sure that the fran- place? There has been something of a shift away chise you are investing in offers this. Enjoying a particular product that a from brands in the last few years, with If they are far superior to the competi- franchisor sells is one thing but making consumers looking or a more bespoke tion then sales will surely follow. Since sure that you can promote the items is product. This has led to many independ- the recession spending habits have another. One particular area where a new ent openings and more could follow. changed massively, and in recent years investor fails is when they come to buy a the amount spent on food has slowly food franchise is they just expect that it Is the product or service of outstanding started to rise. With a rise in the amount will sell. With some of the larger brands quality? that your new customers will be willing in the sector this may be the case but to spend, they will also expect a higher with a franchise that may only have one As previously mentioned service and quality. or two units you might be competing as quality are vital and that is something that if you were an independent trader. you must look at. Do you believe in the Should you feel that the quality of one of The lower the number of sites the smaller product and the service that the franchise the franchises that you look at is not as the amount of money that goes into the offers, if not then it is best to stay away. It high as others, do not rule them out. This advertising budget, it is there for vital is perhaps best to look at franchises as if is the chance for you to have your say. that you are passionate about the prod- you would buy from them. If the prod- Ask questions to the franchisor about uct and that you can promote it well.

what you are committing to and some of the profits that you need. You must put LEGAL AGREEMENTS & the potential dangers that may lie in the your faith in the franchisor that they will CONTRACTS contract are key. help you to achieve your goals and in terms of the contract this should outline Have you reviewed the The whole process of having a contract is how much help they will offer. Your ex- that both parties are happy with how the pectations are important, and in terms of franchise agreement with an partnership will progress. In essence it is what the franchisor expects from you. It is independent legal advisor who a job contract and it protects not just the vital that you make sure that the contract specialises in franchise law? franchisor but you as the new franchisee. does not put you at financial risk or that it forces you to over-commit. Franchise agreements can be very com- Are the terms of the The contract should highlight the num- plicated and need to be finely dissected, ber of stores that you will open and any doing this yourself can be very time con- agreement in line with your additional investments of time or money suming and you may not be familiar with expectations? that you will be required to make. This some of the terminology or finer points. agreement will act as a guideline and you It is therefore vital that you consult a Your expectations of the business will will know what both parties expect and specialist in franchise law, who will guide be take on trust at first, you will look at when. you through the process. Making sure that the opportunity that is being offered and you have a thorough understanding of hope that it is a model that will gain you Does it cover the challenges you will face in running an independent business?

Despite joining a larger business you will be operating as an individual. This may unnerve some as they feel that they could be isolated should anything goes wrong. Having a solid contract protects the franchisee as the main brand will not want to see them struggle. Having a contract in place will outline any help that you can and have huge marketing budgets.

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Do you feel pressure to sign agreements in place to ensure the best the same. Before you put pen to paper possible return from your investments. and part with your money it is vital that before you’re absolutely you understand the business you are ready? Are there any outstanding investing in. If they have a history of legal legal actions against the action against them or they are notorious There should be little or no pressure to for changing contracts and making life sign the contract. The investment is yours franchisor? difficult for investors then this has to be and whilst the franchisor may be keen for taken into account. you to open quickly and begin trading you Due diligence is very important and whilst must make sure that you have all of the the franchisor may wish to look into your background it is important for you to do

FRANCHISOR’S FINANCIAL PROFILE

Is the franchisor financially strong and stable?

Before you sign with the franchisor you must fully understand the risk that you are undertaking, look at the financial records of the company, which they will provide and pick through them to fully understand the business. With smaller franchises the fee that you pay could go a long way towards the total value of the business and if it is the first franchise then you have to make sure that the market is busy enough and demand is high enough to support your investment.

Does the franchisor provide financial information which you can take to your accountant?

They should do. The franchisor is try- ing to win your investment and they will do everything to highlight the potential Have the franchisors got a good record Ask your franchisor if they are going to of the opportunity. As the franchisee it at running the business, are they best make a disclosure document available. is crucial that you are allowed access to equipped to take the franchise to market Looking at this will give you the insight their financial information and that you and secure the correct marketing. Ask also that you need to make an investment and can have it reviewed independently. There if they are informed enough to keep up to make sure that you are getting the full are many factors that can determine the with latest trends and that they can give picture before investment. profitability of a business and if you are you the guidance required to grow your the first investor then you must consider franchise. Does it cover the challenges whether the financial forecasts that are you will face in running an provided are realistic. Are you confident business? franchisor will still be in What is the background and business many years from Despite joining a larger business you experience of senior now? will be operating as an individual. This management? may unnerve some as they feel that they Nobody wants to invest in a business that could be isolated should anything goes Making sure that you have faith in the will fail, it is therefore important that the wrong. Having a solid contract protects business you are going into goes without franchisor outlines their business plans for the franchisee as the main brand will question. When conducting you research the next few tears. Is there anything that not want to see them struggle. Having you must look also at the background of could jeopardise the business and if so a contract in place will outline any help those at the helm of the franchise. This how can this be resolved? that you can ask for in the event of an might not be as important with larger Does the franchisor make available a emergency. franchises but it is still worth looking at. “Disclosure” document?

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COSTS

What is the total cost going to be for your franchise?

This is perhaps one of the most important questions that you can ask and I would say that it is vital that you understand the total financial commitment. In terms of signing for a franchise you may be made aware of the franchise fee but it is impor- tant to understand if there is going to be additional payments.

There may also be an opportunity for you to negotiate on the franchise fee as the exactly what the payment will get them. also allow for any contingencies and if you commitment to more than one unit or a If there are additional things that need to have a multi-site contract you may often larger unit any mean that you offer a more be paid for upfront then this could make have to prove that you have the working attractive stream of investment. Opening the deal less attractive or it could put the capital to open the other sites when you multiple sites means that there will be franchisee at financial risk. Many fran- said that you would. certain elements you do not need such as chisors allow for you to lend a portion of Has the franchisor established a pre- additional training so it is worth trying to the fee from the banks. If you are placing arranged financial services program for negotiate a better deal. Franchisors will be your own home down as insurance for franchisees? keen to hear you proposals as the more the money and then you need more you sites they have the bigger the brand and could be in jeopardy. Making sure that Establishing a financial services program the greater the chance of profitability. you fully understand the financial costs of offers the franchisee the best possible the business and the bottom line of what financial advice and means that they can Does this include: equipment, is required allows you to make better get their questions answered quickly. inventory, leasehold im- financial plans. For the franchisor it is beneficial to have provements, advertising and this sort of advice in place as it allows What is the minimum cash for quick dispute resolution and means promotion? What other costs that they can have a uniform answer to a are included? commitment you must problem for all franchisees. This initiative make? could help both parties equally and allows It is all well and good saying that the all franchisees to fit in line with the same franchise will cost a certain amount but Again this looks at the total that you need guidelines. it is up to the franchisee to discover to invest in order to open a site. You must

PROPERTY reduced and you can make a substantial in the interests of both parties. Getting saving. financial assistance from the franchisor Does the franchisor own the can reduce the amount that you have to Is the franchisor prepared to commit and may mean that in the long land or building? go on the head lease? term you can finance additional sites. One of the most important pieces of re- search that you can make is as to whether Asking if the franchisor is willing to go on or not the franchisor owns the land or the head lease will show you that they are the building that your site is in. If you are committed to the site and that they will making a financial commitment you need oversee and problems that occur. They to know that the site isn’t going to be sold will share some of the responsibility and or change hands during your tenancy. may offer larger protection than if you Making sure that you are not subletting were to go alone. the property will give you piece of mind that there is little to no risk of eviction. Will the franchisor provide you with financial assistance? If you already own the property and feel that this will be a good site to operate Some of the larger food franchises are from then you may be able to negotiate now so big that in a way they are consid- on the price of the franchisee as you can ered as property companies on the side. incorporate this into any deal. The cost Asking them if they are willing to buy a associated with acquiring sites will be property or help you secure a site can be

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those in the industry is the buying power will cover the set up costs of a business FRANCHISE FEES & that franchises gain. Franchisors can gain including the purchasing of any equip- ON-GOING ROYALTY favourable discount for themselves the ment that may be needed. It will also more stores that they operate. If they cover the shop fit so that the brand is PAYMENTS are able to buy in bulk at a cheaper price equally represented across the country. they can pass these savings on to their It will also pay for uniforms and training How is the franchisor own company run stores. They also gain a manuals, in some case it includes internal marketing fee paid for as a percentage of marketing and any opening stock that is compensated? franchisee sales and this helps to promote required. the brand at a very low cost, therefore The franchisor will be compensated for ensuring growth. selling their model in the forms of an What do you receive in ex- upfront fee and as a percentage of sales change for on-going royalty What does the franchise fee once the franchisee is operational. They payments? will analyse the market and the potential cover? for a new site and they will set a figure In exchange for the ongoing royalty that they would like to receive in the form This will be outlined from the very start payments, the franchisee is essentially of royalties, this is usually between 2 - 8% and it will be a package for the franchisee. operating under licence. They are paying of all profits. The franchisor will decide the fee they to run their business under the branding would like and what they will give the of a much bigger company. Another thing that is often overlooked by franchisee in exchange. A typical package

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the public are demanding they must pass one who is thinking of parting with the MARKETING & this information. money. You should speak to the franchisor RESEARCH and find out how they plan to spend your Will you, as a potential money. The research that they have Does the franchisor thor- franchisee, have access to previously undertaken should be made available to give you a clear picture of oughly research new markets marketing and product where the brand is heading. using reliable and credible information regarding your market research methods? industry as well as your Will the franchisor assist you specific business? in the development of your When it comes to marketing there is very business plan? little that can be done by the franchisee in Despite the fact that you are working terms of where the money is spent. They under a franchise agreement you are still The franchisor will have their own busi- will agree a marketing fee with the an independent business of sorts. To this franchisor as part of the franchise ness plan from when they launched their end it is well within your remit to look at first site. This is something that they will agreement and be expected to pay this the market and to understand where you either every month or on an annual basis. have tweaked continuously and should fees are being spent. If you feel that the be a good reference point for you. They company is missing something then you will have written a business plan that they There are a few things that can be done should feedback to them and if you feel to ensure that their money is being would suggest is a good starting point. that there are opportunities that they Remember though that there is always well spent, they can first of all conduct are missing you should look at ways of research prior to signing to find out the room for change and they will be willing implementing them. In terms of internal to hear your thoughts. strategy that the business following suits marketing you can speak to customers their needs. As always with the franchisee and gain insights that the main company Franchisors will have a style guide and in trying to win the business they will want will be interested in. to outline their plans for the future to the essence when you part with your franchise fee you are buying a business franchisee. If the franchisee hears that As a potential franchisee you have a and the plan to run it. there is a new trend or a new concept that certain amount of power as you are the

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EXPANSION & Brands must also be aware of existing What are the target markets for or proposed developments, is the site GROWTH growth? near to large office blocks that fits in with the transient nature of the workers Every business will have a certain target based there, and are they in a travel site What is the franchisor’s plan for audience and by understanding this you where passing grab and go customers are targeted expansion? gain a better knowledge of how your food frequent. franchise can perform. Businesses like Asking the franchisor about their plans for Papa John’s for example target highly pop- the business is very important. You should ulated areas where there is high footfall, Will your franchise be located look at any potential growth and how they also make sure that the wider area where future traffic and many people are looking at the has a demand to cater for the delivery demand are likely to be? opportunity. If they are planning to open options that they offer. Some businesses a certain number of site over the course like to go into an area with car parking or If there is a new development in your of a year then ask how will this affect you the space to add a drive through, other catchment area it is important to find and will there be any benefits from them like areas that are heavily populated with out if it is your site that will cater for this doing this. students. Retail units on industrial sites increase of demand or if another site is where competition is low compared to required. Will you be given the option to You will also want to protect you invest- the number of people can also be popular. expand or to open another site and can ment and if the franchisors growth plans It is also worth looking for a site in the you do this without affecting your existing are too high risk, figure out the best way middle of a food court or a busy shopping business, these are questions you must to protect what you have. If they have a area to ensure that you have a large client consider. plan that you feel will put your investment base. in jeopardy then you must inform them.

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GEOGRAPHICAL ritory from which to operate and in some it or they do not wish to open another cases this will be a whole country. This store they could be in jeopardy of having PROTECTION allows them to choose who can open and someone else invest nearby. where. One area where there can be little or no Are you required to open more contest however is if somebody repre- than one site? Multi-site franchisees shouldn’t find this senting another brand or an independent area of franchising a problem either. They decides to open. Sadly this is the nature This is a matter the contract that you have will have opened their first location and of the food industry and if another busi- signed. If you have committed to a single it is then the norm that they open the ness owner decides that there is room site franchise contract then the answer second site in close proximity. If they are for them to operate a profitable business is no. This does not mean however that in a large city and the demand is high they then so be it. One thing that can be done you are limited to on franchise and there might want to take a second unit in order to combat this threat is to find a site that are always opportunities to negotiate to catch all of the trade. The franchisee is not surrounded by similar businesses in the purchase of another site. If you are a must think about the demand and make the first place. Making sure that you are successful franchisee then you may even sure that they don’t cannibalise their in an area of high footfall and that those be asked to open another site but you are existing business. walking past recognise your brand is key, not obliged to take another one on if it is this can lead to new or returning sales not in line with your contract. The danger in terms of the geographi- and allows you to build up a key customer cal protection that businesses are given base in one area. lies with the single unit franchisees. As Are other franchisees a business the franchisor will want to Can company owned site open representing the same brand, open as many sites as possible as this allowed to operate in close increases the brand profile and the size near to one of your sites? of their business. It also generates them proximity or do you have Again this is very rare as they will not more money. If the franchisee feels that want to put a franchise off opening a geographical protection? there is a gap in the market and that they second site. If however they feel that they are missing trade by not having more For somebody who has taken on a master are missing out on business and the exit- than one site in a certain area, then they franchise the opportunity for others to ing franchisee can’t or won’t open another may offer another site. The single site open in a close proximity shouldn’t come location then they may be left with little franchisee will nearly always be offered in to play. They will have agreed a set ter- choice. It is common practise for all the second site, but if they cannot afford

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fusal on new sites and they will be given ers are saying that the site could be bigger CONCLUSION the right to apply or appeal for any new or if another should open then feeding properties that come on the market. this back to the franchisor is important. Owning a food franchise is a big commitment and making sure that you Do you get first refusal on In terms of making an appeal against a fully understand what you are doing is the new site then the franchisee must do a certain sites and can you pre- difference between a good investment few things. If the franchisee believes that and a bad one. There are many rewards vent other openings? there is not the calling for a second site in for taking an independent slice of a the area or that it will have a branded market and the financial rewards Yes, the existing franchisee will usually get detrimental effect on their business then the first refusal on a new site, but if they of those operating as a food franchise can they must inform the franchisor. They be very lucrative. There is also a level of are on a single unit franchise agreement would need to outline the market and they may be overlooked. security that you get from working under show that their customer comes from a a brand and by paying a marketing fee in certain area of town and that they will line with other franchisees you always get There is something of an unwritten rule lose this trade if another site were to that the franchisee will keep the fran- a bigger marketing presence and so the open. The franchisors will listen to this as brand evolves. chisor updated with the performance of they want to know if their bottom line will the market and the customer feedback be affected and if they are ruining existing about the brands presence. If the custom- sites.

WINTER 2016 FOOD FRANCHISE | 57 BE INSPIRED

BE INSPIRED We all know how difficult entering the world of food franchising can be and the amount of hard work that it takes to succeed in the industry. Failing to put the time and effort in can be a costly mistake for franchisees, but for some the rewards can be fantastic. One couple who have shown the drive to succeed are Richard and Rosie McLucas and in this issue we have named them as our inspiring franchisees

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Richard and Rosie have tasted much established name, so by franchising I success at their Muffin Break site in the have already cut one of the hardest parts St Enoch Shopping Centre, Glasgow, out. I also really do believe in the Muffin and now they’re keen for more. After 8 Break brand and I think this is priceless, months of good trading the pair have believing in what I do every day really been inspired to consider opening their does motivate me and I think the stores next site. We spoke to Richard about success reflects this. I also happened to their journey and the plans for the future. know someone that already had a Muffin Break in Australia, so this helped my So Richard, did you have a background decision by being able to talk to in the food and drink industry prior to someone that has already done it.” opening a food franchise? What made Muffin Break stand “Not really, I have worked in a few pubs out? and clubs this is as close as I had ever got to the food and drink industry! I “Muffin Break stood out for me as a did used to help a few friends out, they great brand with their artisan baking and looking stores was a factor, they have a organised music events such as ‘T In The fantastic coffee. Knowing that everything very welcoming feel to them.” Park’, was a really fast paced working I would be selling had been freshly made environment, I guess that’s a skill I can (sometimes by my own fair hands!) gave transfer to working in Muffin Break.” How long did the process take me real pride and I think this is what sold from making a franchise it for me. One of my pet hates is ‘plastic’ What made you choose the food that is sold by some bigger cof- enquiry to opening your first franchise model over running fee shops, I saw a gap in the market for store and how did you find the an independent business? wholesome food in a café environment process? and jumped at it. Also, having seen other “Muffin Break already has a really well Muffin Break branches with fantastic “We first made an enquiry into becoming franchisees in February 2014, 6 months later we had a site in mind, however that later changed. Because of this change of site, we ended up taking a year to go from enquiry to opening. We were an exception however.”

What plans or commitments do you have to opening more sites in the future?

“Due to the success of our first Muffin Break store, we are really keen to expand and become multi store operators for the brand. Muffin Break has been growing rapidly and shows no sign of stopping which is great for us. Watch this space next year!”

How did you fund the venture and how easy was it to secure the capital?

“We funded the venture with 30% of our own money, the remaining 70% came from a bank loan. Muffin Break’s finance team were invaluable with their support. They helped us to secure funding using the strong relationships they have with big name high street banks.”

How clear is the franchise agreement with Muffin Break?

“The franchise agreement is very

WINTER 2016 FOOD FRANCHISE | 59 BE INSPIRED

our store. This did not come overnight, “Personally, I feel that the market is transparent and we had no issues but a year on we can now see the strong at the moment, the coffee and whatsoever. Our legal support took a success coming through and the rewards cake culture is certainly present, not only look and agreed it was unflawed and are well worth the hard work. that it’s becoming more and more fair.” popular! The future certainly looks bright “One of the best things for us is seeing from our point of view. Why would you recommend customers come from the ‘bigger names’ franchising to others? in the coffee shop industry to us. Our “The potential for growth is enormous, product sells itself and we believe our with this growth comes competition, but freshly baked ethos outshines all of the we are not worried by this. We will stick “Everyone is different, however for us competition these big names bring. to the basics of freshly baked, good franchising has definitely been the way wholesome food, fantastic coffee and to go. We have the comfort of knowing “We are seeing loyal customers come excellent customer service and continue whatever happens a fantastic back up through our door on a regular basis and to be successful.” team are always behind us ready to help. when running your own franchise this There really is the feeling that whoever is one of the most obvious signs you’re we need to speak to, whether it be doing something right! I think part of Finance, Marketing, or our allocated our success rate with loyal customers is business consultant they are always down to the brilliant loyalty card we have there. across Muffin Break branches in the UK, this offers all customers every 6th coffee “The brand that we are promoting sells free. To me, this is giving something back itself, it is well established and as it to our customers – a way of saying thank grows the name Muffin Break is going you.” to become more and more recognised. We have some new product initiatives for next year that we are really excited to be How would you describe the a part of. market at the moment in terms of demand, number of stores, “Since becoming franchisees at Muffin competition and growth? Break, we have seen a great success in

60 | FOOD FRANCHISE WINTER 2016 www.sherrards.com

WINTER 2016 FOOD FRANCHISE | 61

SH0348 FoodFranchising Ad AW.indd 1 08/12/2015 11:10 AVOIDING FRANCHISE RISK

AVOIDING FRANCHISE RISK Starting up any business can be difficult, you could be on the first leg of your journey as a sole trader with an idea or concept that you think might work, or you could already be running a business with plans to expand. Small businesses and start-ups are fuelled by passion, they rely on a lot of hard work and determination. The amount of work that you put into a project is consuming and business owners become very protective of their ideas and their brand.

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Whilst success in any business is not guar- FRANSHISEE COMPATIBILITY Running a background check on the anteed, it is hoped that sales will grow in individual who is applying to be a line with your customer base. Opportuni- It goes without saying that choosing the franchisee is important, looking at their ties may come and go but getting your right franchisee for you is important, it has previous dealings in the industry will tell timing right in terms of expanding is vital. to be first of all somebody that you trust you if they have a good record and how Franchising offers you a quick way to to operate their arm of the business in their previous businesses have performed. grow your model in line with demand, but the way that you would like them too, and Businesses that are similar to yours but understanding what it entails could be the that secondly they are passionate about have failed under their guidance could act difference between success and failure. the project and will portray that to the as a warning sign. Ask the questions in an customers. honest open way and try to Aside from the time and effort that is in- understand the dynamics of any problems vested there are also substantial sums of There is a certain amount of due diligence that they might have had. It is important money involved in setting up a business, that is required when it comes to a select- not to jump to conclusions about their so it goes without saying that a prudent ing a food franchise and this is the sole previous dealings but to instead give them franchisor will want to do whatever it can responsibility of the franchisee. Mak- a chance to explain. This get you off on to ensure that its business and brand are ing sure that you are not blinded by the a level playing field and shows that you protected. money that may be on offer or the ability have trust and are willing to trust them to expand quickly is something to con- moving forward. If you do decide to franchise your busi- sider strongly. If you are in the business ness then there are several things that for a quick win then cracks in the concept Another good reason for doing the back- you need to do in order to make sure it is or the model could appear. By asking the ground check is that you can see if they properly protected – here are our top 10 question of whether or not they have any still have dealings in a similar marketplace. things to consider. previous experience in the food industry If they are currently operating or investing you can gain a few clues. in the same market as the franchise that you offer there could be a

WINTER 2016 FOOD FRANCHISE | 63 AVOIDING FRANCHISE RISK

a conflict of interests. Whilst the THE FRANCHISE CONTRACT tions, if you are a franchisor it is important experience they have might be beneficial, that you offer a consistent message there is always a danger that they may For both parties the franchise agreement What the prospective franchisee really have motives to transfer custom or that is the one tool that they can both use to wants to know is the likely total invest- they will not spend the time required to eliminate risks and in truth is the best ment costs including all equipment costs run the business as you have envisaged. form of protection. In the document the and working capital needed to operate This can lead to poor sales and can harm franchisor will outline everything that the business. Unfortunately this informa- the business financially and from a brand they expect from their new franchisee tion is not always immediately transpar- perspective. and providing that it is well written the ent and this is where the franchisor must franchisee will understand what they are eliminate risk. Providing a franchisee a full Talking of finance, the final check is to see committing too. breakdown of the investment and what that they can fund the venture. Find out they get for their money will ensure that if they are wasting your time or can they FINANCE they can properly budget and that they commit to the funding you require. You are less likely to fail with payments. may have also put in place a deal for them The level of investment in franchise op- to open multiple sites so it is important portunities varies from a few thousand The bank must assess the risk of lending to understand if they have the capital to pounds up to several million pounds if you to you and decide whether security is commit to this contract and that they can are offering a multi-unit deal to the fran- required. This will depend on their evalua- fully fund the various components of be- chisee. For the franchisee there will be tion of your business as a whole the prime ing one of your franchisees. many unsuitable opportunities and these source of repayment will be cash gener- are easy to eliminate on price, inability to ated by your business and no amount of Unlike other franchise models in the UK, deliver the income you require, business security will ever be acceptable if they such as plumbing franchises and garden- type and industry sector. So to ensure feel that your business is not viable. ing franchises, which are often more your growth it is important that you get manual, food franchises are usually run your pricing and offering correct. The last thing they want to do is realise by somebody with previous experience in any security - they would much rather see the sector. People with a passion for food For the investor the Internet is invaluable a successful business continuing to trade. usually enter the industry many years when researching information on fran- before they decide open a franchise and chises, as are trade magazines and exhibi- then remain in it.

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The banks will often recommend that expansion and must not sign property COMPETITION you take independent advice from your deals in advance of finding franchisees solicitor before you provide security. If to run them. Doing this can be fatal as A franchisor’s risk does not only lie no security is available, they may be able payments will still have to be made on the solely in the hands of the franchisee they to consider finance under the Govern- properties and this can be very costly if choose, but in their own decisions and ment’s Enterprise Finance Guarantee, if they remain vacant. what their competitors do. Marketing your business is eligible. This is a Govern- plays a big part in this. You should always ment backed scheme to guarantee 75% of The second area where a business can keep an eye on other businesses in your borrowing (for both businesses under and gain security form their property is in the market and look at what they are doing. over 2 years established) where security planning stage of selecting new units. If they are marketing their products, no is not available and where that lack of Meeting with the franchisee and discuss- matter what the scale, then you have to security is the only bar to a bank lending ing who is going to own the site is the be willing to do the same. In this aspect the money. first major factor, this highlights where of the industry size does not necessarily any debts will lie and ensures that either matter. If you have a street food trader PROPERTY the franchisor or franchisee will have to that is offering products of a higher qual- budget the working capital to keep up-to- ity at a cheaper price ask how you can win There are two main types of security that date with payments, thus avoiding finan- or maintain customers. Ask questions of a franchise can gain from property. Firstly, cial risk. Another benefit once you have yourself such as can we do this better and if they own the site then this is an asset decided on who will own the property is how? This constant push to stay ahead of and can be used as such if they need that you can puck the location. Entering the competition offers security in itself. If to raise more capital for the business. the market in an area that fits well with you can increase your customer numbers, Taking a business loan out or a mortgage your target market or your demographic the demand for you products and the for other properties can be one way of should guarantee sales and turnover. Ar- number of sites then the franchise will ensuring growth and can lead to the rapid eas with high footfall or that are in busy strengthen. Recruiting more franchisees expansion a brand. There are however areas such as shopping centres, cinemas means that more money is invested in the risks that come with operating a franchise or high streets are usually popular in the business and this gives you the best possi- when it comes to property. Franchisors food franchise industry, but be warned ble platform for success. must budget appropriately in terms of they can come with a premium.

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TRAINING place is highly valuable. In truth it is what legislation. The legislation put in place makes a particular franchise valuable and meant that any business entity, which Training your franchisees to operate the is what make franchisees believe in the conducts a business under a name other business in the manner with which you system and make them willing to invest. than that of its owner must make the run the company owned sites is impor- name and address of the owner of that tant. By making sure that they operate in There are many forms of intellectual business known to the public. the same way as you do, you can ensure property, which may be relevant in a consistency across the brand and this will franchise arrangement and these can be There is a distinction between a trade help build reputation. Writing a training divided into two categories. Those which name and a trademark which usually manual and offering classes as well as an are registered and those which are not. takes the form of a design or logo. The induction programme for all new fran- The items that go through the registra- only protection given to the owner of chisees is an operational necessity. tion process are things such as, patents, a trade name sits in Common Law, this trademarks and registered designs. Things means that a legitimate business con- Any failings that come about as a result of such as trade names and logos, which are fronted by someone using the same or a poor training or poor service are reflected not registered may include trade secrets, very similar trade name must sue in court on the brand and the business name. This know-how, etc. and convince the judge that the infringer means that if one of you franchisees does is ‘passing off’ the copycat business as something that will lose them custom- With regards to trade names, until 1980 the original business. Trademarks, on ers, these customers are less likely to there existed a Trade Names Registry, and the other hand, are capable of statutory try another site and are therefore a lost this kept details of the trade names under protection by virtue of legislation. customer. which businesses traded if that name was different from the name of the owner of The Patents Office, which contains the LEGAL TRADEMARKS ETC. the business. This system made it possible Trade Marks Registry, provides facilities for a member of the public to pay and for the registration of trademarks so long The need for franchisors protect their discover who the owner of a particular as they qualify for registration by the cri- intellectual property is vital and experts business was. teria laid out in the legislation. A registra- in this field such as Manzoor Ishani have tion without any conditions attaching will explained to us why getting a grasp on the The Business Names Registry was soon give rights to its owner to use the marks, legal protections is in their best interest. abolished as freedom of information and the owner of such a registered mark Trademarks and branding as well as the became more commonplace during the is, much more able to prevent infringe- legal protection that a franchisor has in ‘Thatcher’ years, and it was replaced by ment of the trademark.

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Where a mark is not capable of regis- infringer has caused the owner harm in BRAND MANAGEMENT tration because it does not qualify (for some way. example, it is either descriptive or non- By allowing somebody else to oper- distinctive) the owner of a mark may still In a franchise operation, the franchisor ate under your branding as a franchised obtain protection against infringement usually owns the trademark and the unit, and allowing them to run their own but, again, at common law in ‘passing off’. franchisee is merely the user. If an owner business it is important to remember that never uses a mark itself, it may later be they are ultimately answering to you. The To succeed in a passing off action, the argued that the franchisee should be reg- brand is yours and managing that brand in owner has to show the following: istered in his place. It is therefore advis- the best possible way is imperative. able, both for franchisor and franchisee, •The trade name/mark in question to ensure that the franchise agreement Where a business has multiple franchisees belongs to them and that they have a clearly defines who the owner is, that the there is a collective responsibility for them reputation in that trade name/mark and ‘user relationship’ is clearly set out and to protect the integrity of the brand, if the goodwill it generates. where the mark is a registered trademark, they make a mistake that upsets or deters •A misrepresentation has been made by that the authority of the franchisee to use a customer or does something that will the infringer leading people into think- that trademark is registered at the Trade receive negative attention, then they have ing that they are dealing with your trade Mark Registry. to remember that it might not be just their name/mark. store that is affected. As the franchisor •Such a misrepresentation and use by the you must make sure that you have the

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SOCIAL MEDIA & WEBSITES or for the business as this is a good way Where complaints or criticisms are to expand their customer base. The thing waivered it is the job of the franchisor Social media is a very powerful tool and that you have to make sure of is that to oversee the responses. Training you making sure that you hold the keys to they understand the way they are talking franchisees the way you would like to the branding side of this is tool is vital. If about the business and the brand. Make deal with issue offers continuity and you are in charge of the master accounts sure that they are reporting the news and consistency. It is good practice to advise for social media and for the website you ethos of the business in the way that you them against anything that may affect the have a certain level of protection. Using desire and that they are not doing any- rest of the business, the brand or other you website and social media to release thing that may put the brand at risk. franchisees. In recent years the ‘citizen official news allows you to be in control. It reviewer’ has become very dangerous also means that you can pull all the Getting your franchisees to say that the for those in the food industry – making various businesses together and that you views they post on social media are theirs sure that confrontation does not escalate can release information to a larger and are not those of the franchise is a online where it can be shared quickly and audience. good starting point but it might be worth easily can be the difference between putting together a style guide for the way losing customers. Obviously it would be silly to say to you would like them to use the branding franchisees that they are not allowed their and the way that they can communicate own social media accounts either personal with audiences on behalf of you.

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INSURANCE own policies in their own name but it is been plenty of due diligence taking often worth mentioning to them about place in order to get to market with the Protecting your business and indeed your any coverage you have in place. franchise opportunity, and there will be a franchise opportunity should be pretty proven track record to rely on. straightforward if you follow the previ- The legal definition of franchise insur- Franchisors tend to only offer ously mentioned tips, but one thing that ance is: A group plan for groups too small franchising if there is a high enough de- goes without saying is to make sure you to get typical group coverage. The plan mand for their products or if they are properly insured. issues members an individual contract cannot expand on their own to meet their with individual underwriting and the same demand. This means that there is some As a franchisor and a business owner you provisions for all. Members typically have security for them in that they know what will be aware of the insurance policies the employer’s approval. Known also as the public are looking for. that are required to operate. These can wholesale insurance. be things such as building and contents By completing the correct checks and by insurance and also public liability. As you By informing the franchisees about the choosing the right franchisees to go into are welcoming customers into your busi- availability of insurances that you have in business with they will ensure minimal ness it is vital that you are covered for any place they may receive favourable rates. risk. If you are a franchisee then it is your accidents or incidents that they may have. If you are the property owner or you own duty to make sure that you do not over assets such as equipment in the business commit to the franchisor and that you do Having financial insurance for loss sus- it may be easier for them to take out a not put yourself at risk. If you are invested tained by disaster or emergency should policy under the guise of franchisee insur- in the business at any level, either as a also be in place. These policies are all ance. single-unit franchisee or as a multi-unit good and well for your own peace of mind franchisee it is in your interest to protect but what about for the franchisees enter- OVERVIEW the business. Some franchisees are often ing the business? only concerned about their stores but Overall franchising is a relatively safe in truth, future commitments and plans Franchisees will be able to take out their model for an investor. There will have could be put in jeopardy if the brand fails.

WINTER 2016 FOOD FRANCHISE | 69 Social Media – Share your message, news and images on across social media and make sure that you are at 6 the forefront of the consumer’s mind.

Legal – Protect your brand and business concept with trademarks and copyright. Branding – Stand out from the crowd and build an ethical brand that keeps consumers coming back. State your values from the start 5 and tell people why you are different.

Property – Ensure that payments and up- keep are maintained on any properties that you own and that you select locations for your franchisees that are in high demand 4 areas with little competition. Finance – Seek proof that the franchisee can fund their arm of the business and ask also if they have the required working £ capital. Also make sure that they are not over-committed financially to cut the risk £ £ 3 of them pulling out.

Check the contract – Clearly outline what you expect from a franchisee and the commitments they 2 are making to the business.

Choose your franchisees – Make sure all franchisees meet your criteria and that they are the best possible 1 candidates to take your brand forward.

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MEET SHERRARDS SOLICITORS THE LEGAL FRANCHISING EXPERTS As the food industry is constantly evolving, it’s safe to say it’s a lucrative market to be part of.

From outlets offering a more emphasised strongly enough. As all Many food franchisees go on to innovative dining experience through franchise contracts for your network operate multiple outlets and will technology, to the introduction will be the same, it is important to get need to employ further staff and of newer flavours to suit even the it right from the outset because one lease property for their premises. A fussiest of palettes, food franchisors defective franchise agreement will complex set-up requires solicitors are increasingly expected to ensure mean all your franchise agreements who can negotiate on your behalf, every box is ticked to flourish in such will be defective, with the possible offer high quality employment a strong marketplace. consequent loss of your whole law support, and unfortunately on network. occasion, resolve disputes. As a law To build a successful food business firm with a wide range of commercial takes more than just energy and Some of the high street’s most services, we can take care of all of this passion – it requires a good business recognised food brands work with for you and more. head, exceptional leadership skills, our Franchising Team to expand the ability to communicate with their businesses here in the UK and And when it comes to export, people at all levels, the support overseas – names such as Dominos, experience of international of specialist professionals in law, Muffin Break, , development and master licence property and accountancy, and of Esquires Coffee Houses, Café Fratelli agreements, and how to organise course a sprinkling of good luck! and multi-unit franchisees within the and structure a franchise business Harry Ramsdens network. We are internationally becomes hugely The successful franchisors and proud that our client base has grown important. Our membership of franchisees Sherrards work with largely due to the recommendations international alliance of law and have all sought professional advice of clients such as these. accountancy firms Alliott Group from the outset, as robust legal ensures a safe pair of hands wherever foundations are essential and pay Successful franchisees such as Mike in the world your business takes you. dividends as the business goes Arbuckle, franchise MD of Muffin through its life cycle. Break UK, who has worked with us to We can help you get started in manage the constant changes to its franchising or further develop The prospective franchisor will need property portfolio of over 50 outlets your business – contact Sherrards expert advice on whether their in retail shopping centres comments: Solicitors in St Albans (01727 business model can be understood, “Sherrards were recommended to 832830) or London (020 7478 9010). mastered and therefore replicated us because of their retail experience Alternatively, please email by another business owner, whether and because of the fact they could [email protected] or visit here in the UK or overseas, and provide City-level expertise at our website www.sherrards.com whether franchising offers the best regional rates ... and deliver it with route to growth. If the answer is ‘yes’, good old-fashioned service.” there will flow the need for a well- drafted master franchise agreement and possibly, regional and developer franchise agreements. Franchising OUR MEMBERSHIP OF INTERNATIONAL your business in other locations requires you to be in full control ALLIANCE OF LAW AND ACCOUNTAN- of your assets and to have highly CY FIRMS ALLIOTT GROUP ENSURES A developed systems and processes. As such, your legal contracts must SAFE PAIR OF HANDS WHEREVER IN be water tight and forward oriented. THE WORLD YOUR BUSINESS TAKES The importance of this cannot be YOU.

WINTER 2016 FOOD FRANCHISE | 71 ONE TO WATCH

As always with Food Franchise magazine we aim to give you the best possible insight into the world of franchising. We also report on the latest trends and on the businesses that are doing something differently in the market. In our ‘One to Watch’ feature we look at a small brand who have huge potential and look at their model, the people behind the concept and their future. In this issue we speak to experienced franchisor, Dominic Richards, who operates BAP, an exciting sandwich franchise in the North West of England.

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SO WHAT IS BAP? A second store in Stockport followed in “Each site has got outdoor seating and August 2012 and the Warrington branch that is something that we look for when BAP is a successful and rapidly growing began trading in December 2012. we choose our sites. The location is key chain of food-to-go outlets specialising for us as we need to have a blend of in sandwiches, baguettes and coffee, all In late 2013 the fourth Bap store began passing customers and those that sit in. freshly made right in front of you. The feeding a hungry customers of Wigan, In the summer you can barely get a seat company which was established in 2005, their first franchise location and this is outside and this is great, it shows that sees thousands of customers return for growth that is expected to continue. there is demand and that we are getting fresh, affordable baguettes, premier cof- our offering right.” fee and superior snacks to enjoy in one THE MODEL of their four locations or to take away. Why do customers choose BAP? The size of the sandwich market has Dominic is confident of the franchise According to Dominic: “Customers like increased dramatically over the past ten model and can see a real gap in the BAP because it is a warmer, friendlier years. It’s estimated that consumers in market, saying: We have some really and a more honest British brand, Serv- the buy around 2 billion premium branding and we have invested ing British taste buds with great food, sandwiches every year worth around a lot in making sure that the design, style fresh ingredients, hassle-free ordering £3.5 billion. and layout of each store is just right. and better value.

Around 16% of these sales (£560 million) “I like to think that we have a different “We are really lucky with all of our sites are from dedicated sandwich and coffee type of customer base than some of in that we have a wide range of custom- shops such as BAP, meaning that no the other chains that operate on the ers. We have the girls from the travel other daytime snack is as popular as the high street. We offer a friendly service agents and the offices across the road, sandwich. In the UK consumers eat more and our customers love the choice that that come in every lunch and we have a sandwiches than any other kind of fast we offer, something that we constantly great breakfast trade where we do a lot food snack, and that includes burgers work on. of take away items. We have a coffee and even crisps so making sure that you make a good one is vital. According to the brand – “What we do is simple; how we do it is simply brilliant!”

The business first opened its doors to serve the people of Altrincham with a site on George Street, the main shop- ping area of the busy South Manchester town. The operation was independ- ent, ran by different owners and whilst performing well it had plenty of scope to do better. After working for some of the largest food franchises in the UK as a multi-site franchisee, Dominic decided to go his own way. After meeting with a friend who was operating BAP, he decided to step in and give some advice. Before long Dominic had taken over and after grasping the size of the market and the high consumer demand for fresh, be- spoke sandwiches he decided to expand.

“Talking about the first venture Domi- nic said: “I came into the business and thought that it could do with some small changes, the branding was great and it’s something that we are very proud of, it makes us really stand out on the street and most people thought that we were a chain despite having just the one unit.

“I am always tinkering away, making changes and trying new things. I thought that with a little spruce up and a refit to the current style with our warm wooden seating and colour schemes we could make BAP something special.”

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THE FOOD “We also run a specials board so we can Having visited BAP it is quite clear that offer seasonal sandwiches and items such they are attracting a whole new audience Talking about the menu and the concept at as salad boxes and jacket potatoes. The into their sites and the potential to grow the Altrincham site, Dominic said: “Every beauty of the concept is that the meal into one of the major players in the sand- item offered on our menu was designed to starts as a blank canvas and you can add wich market. Their warm friendly service be a better British alternative to the soul- whatever you like to the sandwiches and and great tasting, fresh food at affordable less American offerings of others, we don’t other items.” prices will attract a broad range of custom- use the sweeter breads that others use, we The future ers and franchisees. This is an opportu- are a British brand and we want the bread nity not to be missed whichever of those to taste, like bread! The future of BAP looks to be in safe brackets you fall into. hands and by offering such a premium “We make it to a British recipe and it product at a fair market price the sales Definitely a brand to watch in 2016 and is baked fresh every 4 hours to ensure look set to continue. Talking about the beyond. consistency and to give the best possible future of company run stores Dominic taste. highlighted that he hoped to open another 5-10 company owned stores in the near The BAP Franchise Ethos “We have large preparation areas and we future. In terms of the franchising side of things he was even more confident, saying: At BAP, we like to keep things can offer a wide range of fillings. They are simple; Great food from fresher made to our own secret recipes and fresh “We’ve had so much positive response to the business and the franchise enquiries ingredients with better value and less of from our own kitchens, so are tastier than the faff of our American cousins BAP is the mass produced factory fare of some of have been rolling in. “We have already secured a big deal in the ‘straight-talking’ and our business better our competition. for it, so you can earn more: Our salads and vegetables are fresher as Middle East, where somebody has taken they are all sourced from local suppliers the Master Franchise. Over their investors are really keen to bring Western brands • Our stores are smart, warm and com- who in turn get them fresh from local fortable – And because our store designs markets. into that part of the wold. The master franchisee will be opening their first site in are simple, they cost less for you to set- up and offer a friendlier atmosphere than “I guess the one thing that really makes us February 2016 and I was there last week to finalise a few plans. the brash designs of others. stand out is that as well as offering baps • Our ingredients are fresher an and wraps we have a good baguette trade. “Back on these shores we are equally ex- d from local suppliers – so you don’t need to wait for deliveries from far away fac- “Our baguettes come in three sizes, small, cited. We have put in place some conserv- ative figures based on the applications we tories and have more control of your own medium and mega and each size of ba- store’s food costs. guette has a single price – no matter what have and the time it takes to open a site the fillings. The same follows for our great- and we believe that we could have six new city centre sites in 2016. This will then • Our image is honest and clear – so you value meal deals; each sized meal-deal has will not pay over the odds to sustain the a single price no matter what baguette is pave the way for another ten the year after and fourteen more by the end of 2018.” megalithic brand chosen. advertising required by others.

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We’ve all had these desires to become recent times and it’s now more diverse brands, including some great food our own boss – a desire to break free than ever before, with the UK proving and beverage franchises like Chicking, from the corporate structure, allowing fertile breeding ground for franchises of Coffee Bike, Colombiano, Coyote Ugly, yourself to think independently all shapes and sizes. The industry is now Greens Steak House, Tubz, Tutti Frutti, and create freely. To have all of the ripe with opportunities for franchise and Waffle Delight, and at the heart of responsibility. To be the sole reason first-timers hoping to get a foot in the unparalleled information, opportunities, that a venture is successful. door, and even for hardened business and contacts, spanning every area of You may have an extraordinary owners looking to expand their franchising conceivable. entrepreneurial spirit, exceptional business portfolio. leadership skills, unfaltering Whether you’re searching for the right determination and a willingness to With much of the work already done for franchise system, or you simply wish provide the highest level of energy and you – the brand building, the marketing to find out more about the industry, effort, culminating in allowing you to strategy, the idea development – a huge The Franchise Show’s comprehensive do so. part of getting started in franchising exhibitor line-up and conference Unfortunately, not everyone fulfils isn’t running the business itself, but schedule is a great place to start. You’ll said desires and they’re relinquished researching and pinpointing a franchise discover over 150 Franchise brands back into the back of the brain, after model to suit your budget, character from the UK & further afield, as well as all, there are never any guarantees and ambition. information on everything from master when it comes to starting up your own franchise operations to retail franchises, business. THE FRANCHISE SHOW and with the compelling seminar But taking the risk to venture out on schedule, finding the right information your own can be a scary prospect. Over the last six years, The Franchise has never been easier. Franchising Show has helped thousands of people For some, investing into a franchise to make their move into business, Does the franchise that you’re model is the perfect fit. It’s all there, offering access to the very latest interested in have a strong brand? Good boxed up and ready to go. If businesses information and opportunities within processes? Is it an easily replicated came flat-packed from a certain retail this fast-moving industry. model? Profitable? The show will allow giant that we’re not inclined to name, you to scope out the industry and they’d probably look like franchises. The Franchise Show represents the process an abundance of information, industry’s diversity to its fullest, leading to you making informed, Not to mention that the franchise continually delivering an event that educated decisions. industry has seen significant growth in puts visitors in front of over 150

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International Opportunities the UK. We have a number of great provide you with the answers to all of High investment, high return brands from The United States, Spain, your burning questions. opportunities are also available at Italy and the rest of the world who are Each free seminar focuses on a different The Franchise Show, offering visitors looking for UK master franchisors at the franchise sector; starting with a the chance to meet people who event. brief introduction to franchising, the have successfully established master seminars look at the characteristics of franchises. To complement the huge These brands offer a unique and the market, investment levels, expected number of UK brands at the show, exclusive opportunity to bring a globally return, skills needed, the common many international franchises will successful brand into the UK. If you pitfalls and the day-today operations. be present, all looking for willing think you have want it takes to do franchisees to take the reins of their this, you can arrange a one-to-one If Franchising sounds like an investment concepts to the UK. appointment, at the show, to discuss that you might like to make, then where what’s involved – please call better to start than The Franchise Show, As such, many of the international 0800 157 7950 if you’re interested in on the 19th and 20th February 2016 at brands exhibiting at the show are not taking part. the ExCel London. currently trading in the UK, and are therefore offering you the opportunity SEMINARS This article was brought to you in to acquire the Master Franchise association with The Franchise Show. To License. This will provide you with Via a series of 30-minute seminars register for your for your free ticket, call the exponential benefits of being delivered by the most respected and 0800 157 7950 or visit responsible for not just one, but a experienced professionals in the www.thefranchiseshow.co.uk whole network of these Franchises in industry, The Franchise Show will

78 | FOOD FRANCHISE WINTER 2016 WORKING CAPITAL & franchising In the world of food franchising there are two main business aims to fulfill and two parties to please. The aim is to cover the goals and aspirations of both the franchisor and the franchisee.

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For the franchisor there is the ambition one is that other people have already fixed assets such as facilities and equip- to grow their business and the brand. tried and tested the system and their ment, working capital is considered a part They will look to recruit franchisees and experience provides you with lots of of operating capital. Gross working capital offer them a model that has already been information that will help you decide on equals to current assets. Working capital proven and also offer them the chance to the right amount of working capital. is calculated as current assets minus cur- make a good return on their investments. rent liabilities. If current assets are less For the franchisee there will be the se- To decide how much you need, start by than current liabilities, an entity has a curity of operating under a big brand and testing your financial projections against working capital deficiency, also called a eliminating the risk of operating an inde- the experience of existing franchisees. working capital deficit. pendent business is a busy marketplace. Speak to as many as is practically possible and ask them about the level of Put simply it is the excess of current In order for a franchisee to enter into a sales they are achieving and the costs in assets over current liabilities and the franchise agreement they must meet the their business. Timing is critical so be sure provisions that you need to make to demands of the franchisor. They must to ask how long it took them to reach continue operating. meet the asking price in terms of their current level of sales. Then return to buying the franchise rights but they must your business plan and amend your Once a franchisee has decided which also put have the funds to meet future assumptions to reflect your knowledge. franchise is right for them, they have commitments, this falls under the bracket researched the model and know all the of working capital and is something that WHAT IS WORKING CAPITAL? costs involved in getting set up, the next many first time investors overlook. thing for them to consider is how much The official definition of Working capi- working capital they need? In terms of assessing the required benefits tal is that it is a financial metric which of working capital, one of the best represents operating liquidity available to businesses to invest in is a franchise. Of a business, organisation or other entity, By preparing a cash flow forecast for the the many benefits of buying a franchise, including governmental entity. Along with new business they will have a projected

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timeline of when the money will come a lender who will want to satisfy them- business owner and franchisees to into the business and when it will need selves that there is sufficient working understand and hardest to work out. A to go out. For those operating in the capital. useful tool for determining your working franchise world they will be able to capital needs is by creating an operat- conduct research from existing Those who self-fund usually assume that ing cycle. The operating cycle analyses franchisees, and understand the way they will have no problem getting finance the accounts receivable, inventory and similar models work. if they run into problems and this can be accounts payable in separate cycles and a fatal error. When the time comes to can be done each day, week, month or The big consideration that they need to raise capital they will need to approach year. make is that this is not an exact science. a lender and admit that they failed to Customers may spend more based on plan their cash flow properly, that their The accounts receivable or sales are location, the promotions that you have business is in difficulty and that they analysed by the average number of days running or the time of the year. For the need emergency funding. This will not be it takes to hit a target account. Inven- same reasons they may also spend less. an attractive proposition for any lender tory and stock levels are analysed by the Other businesses with similar products obtaining finance could prove difficult. average number of days it takes to turn or other franchisees of the same brand Where these individuals may have the over the sale of a product (from the point in your catchment area may affect sales upper hand is that they have more equity it comes in your door to the point it is too. Where sales are not always guaran- share and have more to lend the money converted to cash or an account receiv- teed expenses such as stock, business against. able). Accounts payable are analysed rates, taxes, rent and wages will be. by the average number of days it takes Therefore it is vital that you have extra Many experts state that one of the to pay a supplier invoice, the staff their cash available to allow for this. This is the most common reasons for the failure wages or the property owner their rent. working capital in your business. of a proven business model such as a franchise is that the new investor under- Most businesses cannot finance the THE RISKS estimates the amount of working capital operating cycle (accounts receivable days they will need. They simply run out of + inventory days) with accounts payable In the franchising the people who are cash, even though their business could financing alone. Consequently, working most at risk are those who have the be hitting sales targets. capital financing is needed. This shortfall resources to fund their franchise by is typically covered by the net profits themselves without the need for finance. generated internally or by externally Franchisees that need to raise finance Working capital is one of the most dif- borrowed funds or by a combination of will have their business plan reviewed by ficult financial concepts for the small- the two.

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CHALLENGES unpredictable how long they will take to tal needs. These funds might be injected pay you and you may need more working from your own personal resources or from The big challenge is to predict how quickly capital a result. a family member, a friend or a third-party your sales will grow in the early days of investor. the business. If your forecast is too ambi- SOLUTIONS tious and you don’t achieve your targets, •Creditors. If you have a particularly good you could run out of cash. If your forecast Most businesses will need short-term relationship established with your fran- is too pessimistic, the business plan may working capital at some point in their chisor or your creditors, you might be able not appear strong enough for a lender operations, whilst some small businesses to solicit their help in providing short-term to approve your financing. Try and be as have enough cash reserves to fund work- working capital. If you have paid on time realistic as possible and talking to existing ing capital needs it is very rare. in the past, a trade creditor may be willing franchisees will help you benefit from to extend terms to enable you to meet their experience. If a new venture or franchise experiences payment. For instance, if you are heading a need for short-term working capital dur- into the busiest period of the year or you Then you need to decide how much of ing its first few years of operation, you will are in need of funding for equipment to a “buffer” you think you will need, the have several potential sources of funding. continue trading they may delay taking amount of cash remaining in your cash The important thing is to plan ahead. If their fees, or grant you an extension. flow forecast at the end of each month. you get caught off guard, you could end This will depend on the nature of your up putting your business at risk. •Factoring. Factoring is another resource business. For example, if your business for short-term working capital financing. is cash based such as a coffee shop, you Here are the five most common sources Once you have filled an order, a factoring know that your sales will be received in of short-term working capital financing: company buys your account receivable the same month and you will most likely and then handles the collection. This type have credit terms with your suppliers, •Equity. If your business is in its first year of financing is more expensive than con- so you can more accurately predict your of operation and has not yet become ventional bank financing but is often used cash flow. If your business issues invoices, profitable, then you might have to rely on by new businesses. say to large business clients, it can be equity funds for short-term working capi-

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•Line of credit. Lines of credit are not OTHER CONSIDERATIONS Another consideration is that you do not often given by banks to new businesses. forget to include VAT in your cash flow However, if your new business is a fran- Once you start to trade you will need to projections if this applies to your busi- chise then you could get a line of credit monitor your performance against your ness as this can have a significant impact. from the franchisor. The business, as forecast. If you have underestimated your The timing of VAT coming in and out of part of a proven model, should be well- working capital you will be able to see your business and when you submit VAT capitalised by equity and you have good why and where the difference has oc- returns will change your cash flow con- collateral, your business might qualify for curred. Should you need to raise finance siderably. It is a common mistake for new one. A line of credit allows you to borrow such as an overdraft to cover a short franchisees to forget the VAT implications, funds for short-term needs when they term issue, you will be able to explain to especially on the start-up costs. arise. The funds are repaid once you col- your bank exactly why the situation has lect the accounts receivable that resulted occurred. Finally, look at the monthly cash outgo- from the short-term sales peak. Lines of ings of the business and ask yourself, credit typically are made for one year at a Hopefully, by now, you can see just how if my sales were delayed, what impact time and are expected to be paid off for important it is to prepare a detailed, would that have on my cash flow and 30 to 60 consecutive days sometime dur- monthly, profit and loss and cash flow build in sufficient extra funding to cover a ing the year to ensure that the funds are forecasts for your new business and by in- reasonable shortfall. used for short-term needs only. corporating a projected balance sheet you can be sure that all the numbers add up. Overall you should be able to see that •Short-term personal loan. While your working capital has a direct impact on new business may not qualify for a line of To run a successful business you don’t cash flow in a business. Since cash flow credit from a bank, you might have suc- have to know how to do everything, but is the name of the game for all business cess in obtaining a one-time short-term you do need to understand what you can owners, a good understanding of work- loan (less than a year) to finance your do and where you don’t have the neces- ing capital is imperative to making any temporary working capital needs. If you sary skills. If finance is not your strong venture successful. have established a good banking relation- point, don’t ignore this attention to your ship with a banker, he or she might be working capital, it could cost you your willing to provide a short-term note for business. one order or for a seasonal inventory and/ or accounts receivable buildup.

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PROTECTING YOUR FRANCHISE BUSINESS

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Protecting your franchise recruitment policies and processes, because the consistent and uniform business because being as certain as it can be that delivery of products and services to has the right franchisee on board in the customers lies at the heart of the Franchisors invest substantial time, first place can go a long way towards franchise model: for example, the money and effort into building up their avoiding franchisee-related problems experience in a McDonald’s restaurant businesses, so it goes without saying arising later down the line. is expected to be the same in Lands that a prudent franchisor will want to do End as in John O’Groats, and, probably, whatever it can to ensure that its business That said, even though the franchisor in any other McDonald’s eatery around and brand are protected. and franchisee’s interests are in essence the world. It simply will not do if one Franchise businesses are exposed in aligned (because it’s in everyone’s franchisee takes it upon himself to sell numerous ways. Typically the problems interests that the business is a success) burgers of a different quality than other franchisors tend to face are as a result of: things do go wrong in franchising so it is franchisees do, or decides not to offer important that the franchisor equips itself certain happy meal deals, and so forth. • adverse publicity; as best it can to deal with such issues Again, the franchise agreement and the promptly when they come up. franchise manual must set out in clear • franchisees who step out of line or who terms what is required of the franchisee in fail to operate their franchise well; and/or Well-drafted franchise agreements will this regard. It is essential that franchisors therefore be very heavily weighted in closely monitor all franchisees and act • abuse of the franchisor’s “intellectual favour of the franchisor and contain swiftly as soon as it comes to light that property”. lengthy, detailed provisions as to how a franchisee is failing to adhere to the the franchisee is to behave. They will required standards. Whilst it is impossible to guarantee also include provisions that give the complete protection against such risks, franchisor protective rights and powers in As is always, prevention is better than there are a number of steps a franchisor the event that the franchisee steps out of cure; it’s all well and good having a robust can take to limit or avoid its exposure. line or fails to meet the (high) operational franchise agreement that one can turn standards set by the franchisor. Ultimately to when things go wrong, but steps Franchisee issues the franchisor will have the right to should be taken with the aim of avoiding terminate the franchise relationship but problems arising in the first place, or even When entering into a franchise such rights should only be exercised as a containing them when they crop up. agreement, the franchisor is opening its matter of last resort. door to the franchisee and giving the Mention has already been made of franchisee rights to use its established Whatever the franchise business, ensuring recruitment processes, but franchisors brand and business system for financial that the franchisee provides a service can also gain a measure of protection by gain. Doing so opens the franchisor up which is consistent with the expectation recognising that the franchise relationship to risk, so it is therefore of paramount associated with the brand to the end is a two-way process and so should importance that the grant of those rights customer is of critical importance because ensure that their franchisees are well- is very tightly controlled. serious adverse publicity can arise if the trained and supported and at all times expected standards of service are not made to feel part of a fantastic business. It may seem obvious, but establishing met. control starts with ensuring that the Perhaps the biggest threat to a franchisor franchisor has in place sound franchisee This is especially so in franchising, is when a franchisee competes with the

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alone” because they think they can set are, the chances are they will be deemed franchisor is and what it does, and so is up their own business doing exactly the to be unreasonable and therefore hugely valuable. Franchisors therefore same thing but free from the trappings unenforceable with the result that the need to protect these rights as far as is of the franchise agreement and all of the franchisor is essentially powerless to possible. costs and obligations that come with it. It stop the franchisee from competing. happens with surprising frequency and, The Franchisor’s business will in most when it does, the threat posed to the This is why it is very important for cases use a symbol, logo, mark or franchise brand can be seismic. If every franchisors to consult specialist franchise slogan of sorts, to identify its goods or ex-franchisee can (or is allowed to) break lawyers to draft the franchise agreement. services. This is called its trademark, and away and engage in unfair competition, If a franchisor finds itself in a situation is probably the most important form of IP. making use of the knowledge he where it has a franchisee who is running acquired as a former franchisee, the foul of the non-compete provisions in A good example is the McDonald’s’ franchise network could unravel very the franchise agreement, it is essential golden arches symbol of “M”, which is quickly. that the franchisor acts without delay to of course instantly recognisable. In the protect its rights because any delay in UK, trademarks are capable of statutory Arguably the most protective clauses in doing so could prejudice the franchisor’s protection by virtue of legislation and any franchise agreement are therefore position considerably. It must also be so can be registered at the Trade Marks those that govern non-competition. By borne in mind that the chances are Registry subject to certain criteria being these clauses, typically the franchisee that the rest of the franchise network met. Registration will usually give the gives promises to the franchisor that will be keeping a watchful eye on owner of the mark the right to prevent whilst he is a franchisee, and for a what is happening, eager to see how a third party from using (“infringing”) period of time after he ceases to be a far the franchisor will go to protect its it without the owner’s authority. There franchisee: business brand. In such circumstances, is also a scheme for registration on a franchisors should be prepared to Europe-wide basis. (1) he will not compete with the have to resort to Court action should it franchisor or any of its franchisees for a become necessary to do so, because Franchisors can achieve an additional certain period of time (usually a year); sometimes that will be the franchisor’s layer of protection by putting third parties only option. on notice of their trademark rights by (2) he will not try and poach any of the using the symbol ®. franchisor’s employees or customers; and Understanding “IP” If a franchisor’s trade mark is not rights and confidential registered – either because the franchisor (3) he will not use or disclose any information simply hasn’t registered it or has not confidential information and/or IP been able to - the franchisor can still imparted or licensed to him while he was Intellectual property (“IP” for short) protect its trademark but only by a franchisee. means the franchisor’s trademarks, bringing a legal claim for what is called patents, trade names, copyright and “passing off”, but proving a passing off The franchisor must be careful to ensure confidential information. It is the claim will often present a much higher that these clauses are not too wide in business’s marketplace identity: a logo, hurdle to overcome than would a claim their ambit or ambiguous because, if they a mascot, a slogan; it says who the to enforce a registered trademark. The

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emphasised strongly enough.

Another form of IP is copyright. In the franchise context, copyright will exist in various ways: for example, the operations manual, leaflets, brochures, adverts, paraphernalia and so forth. Whoever creates the material (ie: its author or artist) has rights (copyrights) over it, which can be enforced. The franchisor itself may well be the creator of the material, in which case it will have the “protection” in the form of the right to enforce the copyright, but if a third party has produced the material and therefore owns the copyright, the franchisor needs to take care to ensure that it takes a designed to protect the franchisor’s against common risks that can pose a transfer or ownership of the copyright rights as far as possible and this threat to its business and ensure that the from the owner so that the franchisor has protection is achieved by including right franchisee for the job is recruited rights of enforcement directly, otherwise, clauses that, for example: at the outset, because that can save if an instance of copyright infringement headaches down the line. by a third party arises, the franchisor will • Carefully-define the various IP rights be left in the situation of having to look to and record that the franchisor is the Franchisors need to accept that the author to do something about it. owner of these rights and is merely problems will nevertheless arise in the granting the franchisee a license to use course of the business and being in the In the case of copyright, enforcement them; best position possible to deal with those ultimately involves the bringing of Court issues means having in place robust proceedings but would-be infringers can • Spell-out that the various rights are policies, procedures and well-drafted be warned-off by the use of a copyright being licensed to the franchisee solely franchise documentation. notice, which involves displaying the for the purposes of the franchise and symbol ©, and also showing the date it not for any other reason, and that those It is important that franchisors also was first published along with the name rights come to an end the moment the recognise that their intellectual of the entity who claims the rights to it. franchise agreement comes to an end. property lies at the very heart of the This should include specific provisions value of the franchise business and Then there is confidential information. as to the use of social media, including so merits protection by means of (1) For example, trade secrets, recipes, the right of the franchisor to have strictly controlling how those rights are know-how. This will invariably be of administrator rights over any forms of licensed to franchisees; (2) registration, significant value to the franchisor and the social media being used, as well as full where possible; and (3) adopting other franchisor will wish to ensure that it does rights of access for monitoring purposes; measures designed to warn-off would-be not come into the hands of competitors infringers. or otherwise come into the public • Require franchisees to comply strictly domain. with all instructions given to them by the When a franchisor and a franchisee franchisor; and Barney Laurence is an Associate Solicitor within enter into a franchise agreement, the the Litigation and Dispute franchisor grants that franchisee rights to •Accurately define what is meant by Resolution department make use of its IP rights and confidential “Confidential Information”. at Sherrards Solicitors, information. This is essentially what the specialising in actions involving franchise- franchisee pays the franchisor for. The No franchise business is bulletproof, but related disputes and High franchise agreement therefore needs the franchisor can put in place various Court injunctions. The to contain strict control mechanisms safeguards that provide protection firm advises franchisors and franchisees in a multitude of sectors. A number of well-known brand names in the food franchise FRANCHISORS CAN ACHIEVE AN sector count on Sherrards for timely, business-focused legal advice including ADDITIONAL LAYER OF PROTECTION BY Dominos, Southern Fried Chicken, Café PUTTING THIRD PARTIES ON NOTICE OF Fratelli, Esquires Coffee and Muffin Break. For further information, please contact Barney THEIR TRADEMARK RIGHTS BY USING THE Laurence on 01727 738975, e-mail SYMBOL ®. [email protected] or visit www.sherrards.com WINTER 2016 FOOD FRANCHISE | 87 WHAT CAN UK BUSINESSES EXPECT IN 2016/17

In the Autumn statement last year, George Osborne believed it was his priority to rebuild Britain

He conceded that world growth forecasts than many analysts expected. able to keep this revenue, rather than had been revised, in part because of having to hand over money for ministers to ongoing problems in the Eurozone. In the BUSINESS, ENTERPRISE reallocate. UK, the economy is expected to grow a AND EMPLOYMENT IN little faster than originally predicted over 2016/17 The continuing economic recovery is the next two years, before slowing down expected to facilitate the creation of “more somewhat towards the end of the decade. In a boost for SMEs, the Chancellor than a million” extra jobs during the next confirmed that the small business rate relief five years. Higher than expected tax revenues and scheme would be extended for another lower interest payments on government year. Around 600,000 firms are expected to There is, however, likely to be concern that debt handed the Chancellor more flexibility benefit as a result. the Department for Business budget is to than many analysts expected. be slashed by 17 per cent. The apprenticeship levy is expected to In the Autumn statement last year, George raise £3billion a year. This will be set at 0.5 TAX Osborne believed it was his priority to per cent of the payroll bill, although the rebuild Britain. Chancellor has claimed that only two per A new, increased rate of stamp duty land cent of employers will be eligible to pay. tax is to be introduced for buy-to-let and He conceded that world growth forecasts second homes. This will be three per cent had been revised, in part because of Pushing ahead with his plans to devolve higher than the normal rate and takes ongoing problems in the Eurozone. In the greater spending powers to local effect from April 2016. The Chancellor said UK, the economy is expected to grow a authorities, Mr Osborne said that 26 new this will raise £1billion by 2021, although little faster than originally predicted over or extended enterprise zones were being there are concerns it will have a significant the next two years, before slowing down created around the country. impact on the buy-to-let sector. There will somewhat towards the end of the decade. The Government will be doing away with also be a consultation on accelerating the Higher than expected tax revenues and uniform business rates and devolving stamp duty land tax on transactions from lower interest payments on government power to set the rates to local councils. 30 days to 14. debt handed the Chancellor more flexibility The local authorities will soon also be

88 | FOOD FRANCHISE WINTER 2016 From 2019, Mr Osborne announced that By the end of this Parliament, everyone in Capital Gains Tax (CGT) will need to be EDUCATION the UK will have digital tax accounts. The paid within 30 days of selling a residential reduction in administration costs form part property. The Chancellor announced that school of £1.9billion savings for HMRC. funding would get a “real terms” increase of Following intense criticism, some of £10billion and that both free school meals which came from his own MPs, Mr and the pupil premium will be maintained. Need more help? Osborne announced that plans to cut tax credits by £4.4billion would be scrapped As part of an ongoing initiative to end local This feature aims to altogether. The Chancellor said he had authority control, sixth form colleges will be give some informal listened to people’s concerns and would be able to become academies, meaning they hints and tips. Our abandoning the policy. He said the change will no longer have to pay VAT. tax department in tack had been made possible by an and McPhersons improvement in public finances. There will also be a shake-up of school Financial Solutions funding arrangements, with a new system are offering The climb-down means that the welfare cap set to be implemented by the Education businesses free advice so get in touch will be breached in the early years of this Secretary in 2017. now to arrange your meeting. Parliament, but Mr Osborne is confident Simply email Peter Watters that it will be met before the next General TAX EVASION, AVOIDANCE [email protected] Election. AND AGGRESSIVE TAX or call our Head Office on 01424 730000 PLANNING for a free consultation at McPhersons’ The Welsh Assembly is to be handed London, Bexhill or Hastings offices. powers to set its own rates of income Mr Osborne pledged to tackle tax tax without the need for a national avoidance and announced that the referendum. Government would work to create one of the most “digitally advanced” tax systems the planet.

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MARKET WATCH Of all the questions that we receive here at the Food Franchise office, a large proportion of them are to do with finance and the safety of investing in a business with the franchise sector. With that in mind we continue our Market Watch feature and bring you all of the latest news in terms of the global financial markets, and how the food franchises that are listed are performing.

When it comes to food franchises, is performing is to look that the stock we can gauge the success of a business each franchisee has a responsibility market. This gives the investor an insight and see how aggressive they are being in not only for their part of the business, into the inner workings of a company. It terms of growth. but they have an unwritten duty to the can highlight any changes to the board other franchisees too. If one part of and any investments by directors. The The share price of a business can act as the franchising mechanism goes wrong businesses also have a public duty to a guide as to their position in a certain then it can have detrimental effects announce any deals that will affect the market and as well as highlighting the on the rest of the group or brand. One share price such as expansion, closures or aforementioned growth. It can also show way to monitor the way that a franchise takeovers. It is on the stock market that banking predictions and offer a foresight

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Share in Focus – Domino’s Pizza (DOM) GROWTH about 227, as it tries to “overcome Domino’s Pizza Group PLC (DOM) has the challenges it has faced as a small been one of the best performing stocks Britain’s Domino’s Pizza Group PLC operator in the country”, the company over the last 18 months and with some (DOM.L) recently revealed that it would said. minor fluctuations it looks as though be forming a joint venture with Domino’s they will continue a steady rise over the Pizza Enterprises (DMP.AX) to buy Joey’s Upon meeting certain performance goals, next 12 months. The share has had its Pizza for 45 million euros (33 million the deal value could be elevated to 79 stock rating noted as ‘Upgrades’ with the pounds), thus creating Germany’s largest million euros, a spokesperson for the recommendation being set at ‘Buy’ by pizza delivery group. German arm of the business said. analysts at Berenberg. The pizza giant which is listed in the Domino’s has struggled to grow in Domino’s will acquire Joey’s through Consumer Services sector within UK Germany, the world’s fourth-largest pizza a new joint venture between DPE and Main Market now has a target price market but the new deal is expected to DPG, where the new company would at 1200 on its stock according to the accelerate this and as a result the share have 2/3rd representation from Australia- analysts. This prediction would indicate price has started to break parity and listed Domino’s Pizza Enterprise. Fifteen that the company believes there is a climb once more. of the 20 stores will be absorbed by the potential upside of 19.4% from their The latest deal would bring the total new joint venture, while the remaining current price. number of stores under Domino’s to will be closed according to the company.

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TECHNOLOGY Year’s Day was expected to be Domino’s even released an app called the Tummy busiest day of the year with almost Translator, which interprets a stomach’s Domino’s has introduced a number of 2.3m slices of pizza are expected to be rumbles into a pizza order. ways to speed up the pizza ordering delivered. Stores across Britain, nearly process in the past few months, all of which are run as a franchise model, Domino’s Pizza Group, listed on London’s constantly looking at the technology that prepared for a 97pc increase in orders FTSE 250 Index, reported operating they use and looking at the role it plays compared to any usual weekday, and the profits of £34.6m in the six months to in the future of food franchises. public delivered. the end of June, from £29.8m in the previous year. Like-for-like sales grew In the latest development the delivery Speaking about strong festive trading 10.3pc in the UK and 6.5pc in Ireland. chain has unveiled an even faster option and the link with technology, Simon for pizza fans in the UK who own an Wallis, head of sales at Domino’s UK, In the UK, it has more than 900 stores Apple watch. said: “Pairing the new easy order with the and is expanding fast. The company Apple watch – the ultimate convenience expects to deliver 15m more pizzas in The company has launched a “one-tap” gadget – is a match made in heaven. 2016 compared with 2015, boosted by easy order app for the Apple watch so The possibilities of smartwatch ordering the European football championship those wanting pizza need only tap once mean our pizza fans will never be and the Olympic Games. There are on the screen. The nearest local store will further than a wrist tap away from their currently 163,625,607 shares in issue then prepare the order ready to deliver. emergency ‘pepperoni passion’ or ‘Texas with the average daily volume traded BBQ’,” being 227,173. Market capitalisation for Following a festive period in which the LON:DOM is £1,682,071,240 GBP. The technology was a popular gift and where The pizza giant have also recently 52 week high for the stock is 1121 while pizza sales rocketed the franchise have introduced a way for Xbox users to the 52 week low for the stock is 648. seen even further growth. Indeed New order pizza via their consoles and it

92 | FOOD FRANCHISE WINTER 2016 MARKET WATCH HOT OR Dominos Not DOM In order to give our readers the most accurate +23.1% overview of the ever-changing markets, we look at how certain stocks have performed over a three month period and rate them accordingly on our Hot or Not chart. McDonalds MCD Dominos (DOM) – As you will see from the some of their options setting up umbrella share in focus section of the Market Watch companies in the Far East. The brand will +21.2% feature, Dominos have performed well spend the early part of the year building on over the last three months. By investing in their new ventures and should bounce back foreign market places and keeping ahead over the next few months. Marstons when it comes to technology the pizza giant have cemented themselves at the top of the Dunkin Brands (DNKN) – Dunkin Brands MARS stocks. Those who have followed the share have seen fluctuations over the last few +7.9% and who read the last issue will notice that months and have ultimately ended down they price has risen from 832.50p to 1025p. by around 12%. The shares have fallen With a gain of 23.1%, this is definitely one from $48.94 to $43.04 and will be a cause to keep on the right side of. for concern for some investors. Over the next three months this will be one of the Yum Brands McDonald’s (MCD) – You may recall that shares that we focus heavily on as the brand YUM our Editor spoke with BBC radio earlier in expands globally, especially across the UK. the year and was asked about what was -8.5% going wrong at McDonalds, in truth any (KKD) – The ‘Donut’ giants issues have been sorted and the burger have performed well over the recent months Dunkin Brands giant is once again on the rise. A strong and will be boosted by sales over a busy DNKN performance in Europe and the UK as well festive period. Investment across the world as gains in the US has seen the stock rise however and rapid expansion means that -12% 21.2% in the last three months. Starting at the share price has taken a small hit. Shares $97.12 and climbing to $117.71 the brand are down from $17.31 to $14.99 for a loss is in the ascendency. of 13.4%. Shrewd investors will note the Krispy Kreme early year rises that the brand have made KKD Marston’s (MARS) – The UK pub giant over recent years and by the time we next has been boosted over the last three go to print there could be a real climb for -13.4% months and has seen a huge rise in their Krispy Kreme. share p[rice. The results of strong trading especially in the run up to the festive period Papa John’s (PZZA) - It really is amazing sees the share rise from 152.5p to 164.7p the difference a few months can make in Papa John’s for a 7.9% gain. the investment world. With pizza sales on PZZA the rise Papa John’s have had a sustained Yum Brands (YUM) – Yum brands, the period of growth both in the market and in -16.4% business behind the Taco Bell, KFC terms of number of stores. From the heights and Pizza Hut Delivery franchises, find of this chart earlier in 2015 they now find themselves lower on this scale than in themselves at the bottom. The brands have previous issues but we feel that it is seen shares fall from $67.73 to $56.60, something of a false reading. Yum are wiping out nearly 16.4% of their value. trading down 8.5% with their share over Performance in the UK is growing rapidly the last three months down to $73.40 from and we wouldn’t be surprised to see another $80.22. In truth the brand have diversified surge in early 2016.

WINTER 2016 FOOD FRANCHISE | 93 diary dates

Dates for your diary Find out what events are taking place in the world of franchising over the next few months

Join thousands of entrepreneurs and business •Find out what you need to know as new franchisee owners at The Franchise Show, the best franchise •Discover industries that are new, or that you might not event in the country. Meet with the best proven franchise have considered. opportunities, all under one roof. Every industry. Every •Get advice on the wide range of financial options from The Franchise Show investment level. Full-time and part-time. experts. •Talk face-to-face with hundreds of the best franchise Excel London •Meet over 100 of the top franchises opportunities expanding in your area! 19th-20th •Take Advantage of 60 Free Seminars and In-Depth workshops. February 2016 •Get the help you need in deciding which franchise is right for you.

Hotelympia is the UK’s largest foodservice and hospitality This is the place for you to improve your business event and the most important event for any professional performance and customer offering - for your hotel, wanting to gain access to the latest products and thinking. restaurant, pub, café or catering company - through It is the best place to find real innovation and ideas. guaranteed access to the latest products across food and The National Franchise drink, catering equipment, interiors, technology, careers, Exhibition Hotelympia delivers innovation and networking and waste management solutions. Excel London opportunities for exhibitors and visitors that can’t be found anywhere else on this scale. 29th Feb - 3rd March 2016

Discover how to run your own business with the support Franchising experts such as Anytime Fitness, Cafe2U of an established brand at London’s largest franchise and McDonald’s will be on hand to give free advice at exhibition. over 70 free seminars as well as one-to-one guidance from solicitors, banks, careers advisors, and the British Join thousands of visitors who are looking to adopt one Franchise Association (bfa). British and International of the UK’s most successful business models by owning a Franchise Exhibition franchise. With hundreds on offer, there is something to Everything has been approved by the British Franchise Olympia London suit all tastes and budgets. Business sectors include food Association (bfa), which means that you can browse with & drink, property, retail, care, finance and fitness. confidence that they are an accredited model. 12th-13th March 2016

25 up and coming Food Franchises IN THE There are more and more options available in the world of food franchising and we showcase the 25 brands that are expecting big growth in 2016 – We also catch up NEXT with some of the brands on last year’s list and find out how they got on. How to choose the right Food Franchise ISSUE Entering the world of franchising can be daunting for even the most hardened investor, so we speak to some industry experts about choosing the right franchise for you. Advantages and disadvantages of a franchise resale We look at the pros and cons of taking over a franchise resale and see if the risks outweigh the rewards. you can advertise your menu and your brand as well as interact with customers is vital if you want to grow.

94 | FOOD FRANCHISE WINTER 2016 WINTER 2016 FOOD FRANCHISE | 95 HUNGRY FOR SUCCESS? Say Hello! We make gourmet wraps fresh in front of you, inspired by food from around the world. We are revolutionising fast food by putting wraps on the map as a tasty, healthy alternative.

FRANCHISING NATIONALLY For more information visit our website www.wrapitup.co.uk 96 | FOOD FRANCHISE WINTER 2016