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The current landscape of restaurant franchising is difficult — complex supply chains, high costs and labor shortages. Vanity seats, expensive dining rooms and over-equipped kitchens may be impressive to look at, but the numbers don’t work. Franchisors must remember that they are in the royalty business, and if they want their royalties to grow, their franchisees must want to keep opening new locations.
Profitable franchises that are built to do more volume in less space typically have lower opening costs and can operate with fewer employees. These are the only franchises that will continue to grow. Franchisors will only attract smart, experienced franchisees and investors, trimming the fat on bloated franchise models and concentrating on what makes money – so much money that franchisees want to keep opening more locations.
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More volume in less space
In food franchises, you need to design smaller and more efficient kitchens and dining rooms that reflect the popularity of eating out. Using off-premise partners like Olo or Uber Eats will increase revenue. Co-packers will eliminate your need for certain equipment, reduce labor in the kitchen, and allow you to open smaller, more efficient locations.
The public has made its choice when it comes to off-site dining – so instead of investing in excess capacity, invest in your technology suite. Franchisors must optimize delivery and fulfillment services, as well as find ways to actively engage and market to their customers. Nowadays, customers want to eat what they want, where they want and how they want. If you can’t serve your customers in their preferred way, someone else will.
Related: How one woman turned pandemic-induced boredom and a makeshift garage art studio into a thriving franchise
A bargain menu
Franchisors can’t forget the 80-20 rule — 80% of your sales come from 20% of your menu items. The other 80% of your menu items eat into margins and complicate operations. Your customers don’t even like these items, so don’t waste your time on them. Menu discipline and menu engineering allow you to eliminate food and labor costs, waste and errors that degrade your brand.
Service industries are not immune to this rule. Be relentless about building your menu with items and services that are profitable, easy to execute, and make you famous. Stop doing something else.
Automate or lose
Work out as much work and as many mistakes as possible. Ordering kiosks and vending machines provide customers with a streamlined experience while allowing restaurants to reduce costly labor. Those who do not change with the times will be left behind.
Saving money with modern technology allows businesses to allocate funds to care for existing employees. Finding new labor is much more difficult than looking after your internal winners – don’t take them for granted.
Rise Southern Biscuits, an emerging franchise that is growing rapidly, recently stopped serving dinner at its restaurants. It also added kiosks and vending machines. In that time, revenue has increased by more than 20% and profits have doubled, despite closing at 2pm every day. Employees, especially high performing managers, are well compensated. There is practically no turnover. This is how you build a company that will last.
Related: 9 Things You Should Know Before Franchising Your Business
Don’t hire more people – hire the right people
Justin Rosenberg, CEO of Honeygrow, recently appeared on the Sam Oches podcast Take-out. In his conversation with Oches, Rosenberg discussed making some mistakes with Honeygrow’s growth and how he was able to turn the tide by scaling back his business model. Specifically, he talks about the importance of hiring the right people rather than building a large administrative infrastructure.
G&A expenses can add up quickly. Being smart about the people you hire can ensure you don’t sink your business with a bloated budget. If your food franchise is struggling, take a cue from Rosenberg and take a hard look at how you can restructure your management model.
Related: Free Webinar | January 19: What you need to know about buying a franchise in 2023
Simplicity leads to more real estate opportunities
Acquiring great real estate is hard. Winning the real estate game can be the difference between stagnant growth and explosive growth. The simplified business model allows you to fit your business into a wider variety of spaces.
Opportunities to expand operations into non-traditional spaces can be key to building momentum. Places like airports, cruise ships, truck stops, and stadiums offer unique challenges, but they can be highly visible and highly profitable. Building a simple business plan allows you to be able to take advantage of these opportunities when they come.
Don’t overlook conversion opportunities. After the recent rise in interest rates, more and more vacant retail and dining spaces are available. Placing your business in these spaces translates into cheaper initial construction and faster franchise growth. Less money upfront means a faster path to profit.
Related: 5 Important Considerations for Growing a Quick Service Restaurant Franchise
Digital marketing matters
Long gone are the days of expensive marketing campaigns that cover large territories that won’t benefit your growth. Even someone like Salt Bae can become a national phenomenon with the right message. A mom-and-pop shop in Wichita can achieve global recognition with the right campaign.
If you are a franchise operating in the southwest with plans to focus growth in that area, marketing on the east coast is a waste of time and money. Cutting irrelevant geographies from your marketing plan is cost-effective. Grow in the garden you planted.
Disclosure: I am the CEO of Fransmart, a franchise group partnered with Rise Southern Biscuits.