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How to Franchise?

J

junospizza

New member
Hey,

I’ve opened a pizza place after college and its been running for a couple of years, have had steady sales growth and fairly loyal customer base. We offer home delivery and take out only.

I’m considering opening a couple of more pizzerias in the same city/state. I would like to know if there are any good resources or books that could teach my about:
  • Recipe protection (as I open more outlets)
  • Inventory management
  • Franchising math and models
Its currently a mom-n-pop store and want to know what it would take for me to expand to a few more outlets without compromising quality and management. Any books, articles or websites that you guys could refer me to would be really helpful.

Thanks,
Juno
 
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Hi Juno:

As you apparently are getting no responses I thought I would try to help.

We have worked with some outfits from their first store to now hundreds.

Just my observation not personal experience. The most successful operations did not start by looking for franchisees. They were approached by folks asking if they would give them a franchise. If that is happening to you I would say you have a very good chance of success.

Conversely we have had dozens of situations where we were selected to do the first shop by some who stated right off they were planing to do 100 stores and they never got past the first one or two

George Mills.
 
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I, too, held off on answering your post…

My 1st question to you is, “Why should I franchise with you?” With so many other options out there, why is you place so special?

If your place is that special & you have the sales, then the next step, IMHBCO, is to open several more units, on you own, with your own dime…

Now, you have something more folks may be interested in…

Many states have their own unique franchising rules…it is not a cheap venture…

When you have that 3rd spot open, I have a contact for you, but he’s not interested in a 1-unit operator…just his preference
 
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Recipe protection? This is pizza, not rocket science. I very much doubt any one of us is doing some thing so unique in the recipe department that protection is an issue.

Advice above is good. Why would anyone consider franchising from a one unit outfit? If you find someone that wants to join you with the name and business plan for a second store and is willing to put up the money, that is called a “partner”.

When you have a system in place that is proven to be replicable with support systems in place for new entrants you might have something to offer a franchisee… but how are you going to sell than until you have proven it by rolling out a few units?
 
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I think you will need a lot of branches and a strong brand name before you can even think of franchising.

I to want to expand my pizza outlet and intend to use a business model I used in a previous industry. It works like this:-

On your second store go into business as a partner with one of your best managers (split can vary depending on how much they can invest, we did 77% / 33%) and the hands on managing partner takes the first $20,000 profit as a wage and the rest split. You can then open as many of these store as you like as you train and motivate your managers into potential partners.

After a few years your partners will have their own managers who may want to be a partner, so then you go into a three way partnership (33%, 33%, 33%) again, then managing partner takes the first $20,000 as a wage. (We did a few stores 57%, 33%, 10% so you can mix it up).

The best thing with this, is you will know your new partners as you have worked with them, and they should know your business model already.

Sam
 
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George Mills:
Hi Juno:

Just my observation not personal experience. The most successful operations did not start by looking for franchisees. They were approached by folks asking if they would give them a franchise. If that is happening to you I would say you have a very good chance of success.

George Mills.
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Hi George,
We did get approached by a few people to franchise. They were mostly people who had businesses in other states or cities and thought my pizzas would work there. So that’s why I was asking. Thanks for your insight!
 
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@bodegahwy
I actually believe a large part of pizza making is an art form. So recipes do matter. And protection does matter. It’s not just about slapping on tomato on dough and voila. In fact, unique recipes help build brands and create enough differentiation that makes one pizza more memorable than others! You guys can chime in if I’m wrong?? That said, you are right about creating replicable systems of operations and maybe scaling up. I just put up this post because I received franchise offers from outside. Thanks for writing.

@pizzasam
Thanks for your advice. One of the hardest things to find is good management. Your suggestion takes care of that to a large extent. It’s a very different and organic way of looking at growth. I like the idea of empowering people within the company to incite growth! I will definitely keep it in mind in the upcoming years.

@Patriot’sPizza
Appreciate you taking the time to write. If and when I do reach the 3rd store, I’ll hit you up!

What I would like to know, if there are books or resources which I can learn about how franchising works (ie licensing percentages, operations, marketing, etc). So if I do take a meeting for franchise opportunities I am prepared.

thanks
Juno
 
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junospizza:
resources which I can learn about how franchising works
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We attended seminars at food shows, met with our business lawyer, got “bigger” accountants, and spoke with those who had gone through the process already before attempting to franchise.

Franchising is an expensive and time-consuming process with lots of legal and accounting hoops to jump through. If you want every Juno’s Pizza to look just like every other Juno’s Pizza and offer exactly the same items in exactly the same manner, then franchising is the way to go. Franchising is all about control and “cookie cutter” sameness.

On the other hand, you might want to look into setting up a licensing agreement instead. If you don’t care that other Juno’s Pizzas add different foods to the menu or are run with variations from your 1st store, then Licensing might be an option. You have much less control and legal strength, but you can generate revenue from your concept for much less up-front (and ongoing) cost and with many fewer hoops to jump through. Be sure to take a look at licensing.

…

One way to protect recipes is to not give them out. You have a 3rd-party package things like your spice mix for your sauce or your secret ingredients for your dough recipe and then have a distributor sell them to your franchisee/licensee. Your product can’t be exactly duplicated without purchasing the premix packets.
 
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“I actually believe a large part of pizza making is an art form. So recipes do matter. And protection does matter. It’s not just about slapping on tomato on dough and voila. In fact, unique recipes help build brands and create enough differentiation that makes one pizza more memorable than others!”

I will grant you all of that… but: Making a good pizza is not difficult. Coming up with a good recipe for sauce or dough is a few hours work and a few hundred spent on food for testing… not to say that I can duplicate your recipe or anyone else’s… just that a competent operator can come up with one that is just is good without a lot of brain damage.

It is MUCH harder to provide consistancy in product and service and that is where a well run franchising operation offers value.

You also mention branding, and rightly so. A brand is a great thing, but it is only valuable to the extent that a consumer recognizes and associates value with it. Take the name of my place to some city 500 miles away and you are starting from scratch. If I can offer a package of marketing materials to build brand so you do not have to create that out of thin air, there is value there as well… but the value comes from the kit of materials and the road map… not the sauce since no one has tried that yet.

All a long winded way of saying do not get too hyped up on the recipe side of the equation when thinking about franchising; the value lies elsewhere.
 
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Or you can set up and just sell supplies…Spice packs, boxes, takeout cups, bags, etc…You make a margin on sales of supplies without all the hassle of a true franchise…
 
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bodegahwy:
It is MUCH harder to provide consistancy in product and service and that is where a well run franchising operation offers value.

You also mention branding, and rightly so. A brand is a great thing, but it is only valuable to the extent that a consumer recognizes and associates value with it. Take the name of my place to some city 500 miles away and you are starting from scratch. If I can offer a package of marketing materials to build brand so you do not have to create that out of thin air, there is value there as well… but the value comes from the kit of materials and the road map… not the sauce since no one has tried that yet.

All a long winded way of saying do not get too hyped up on the recipe side of the equation when thinking about franchising; the value lies elsewhere.
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I get what you are trying to say, and thanks for clearing that up for me! I was actually getting worked up about the recipe protection and ingredients, but like you said: marketing packets, systems of operations and ‘road maps’ are more important in the start of a new outlets. cheers
 
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