Franchise 411

NACS Show: Performing proper due diligence when scouting QSR brands

Published in CSP Daily News

By  Abbie Westra, Editor-in-Chief, Convenience Store Products

Schultz Hartgrove

ATLANTA -- The question of the day, said Schultz Hartgrove of Einstein Noah Restaurant Group, is "do you franchise, or do you 'Bobby Flay'?".

Hartgrove conjured the celebrity chef who has built his own personal brand--and restaurant empire--during a NACS Show education session on foodservice franchising.

Building a proprietary foodservice brand may be more profitable in the long run--emphasis on the long. But for every week that goes by without a strong foodservice program, said Hartgrove, you lose out on 2% on potential profits. "That's 2% that you're never going to get back."

Hartgrove, along with Tommy Hunt, president of E-Z Stop Food Marts Inc., Maryville, Tenn., and Chris McCurdy, NRS sales director of convenience east for Anheuser-Busch InBev, provided not the answers for how to partner with a quick-service restaurant (QSR), but rather what questions a retailer must ask him or herself before becoming a franchisee.

Assuming you're not going the way of Bobby Flay, Hunt recommends retailers begin their journey to find the right QSR partner by performing due diligence on themselves.

For every potential location, consider the following:

  • Competitive layout: What QSRs are in the area, including competitors as well as other units of your potential QSR brand.
  • Traffic: Do you have more traffic in the morning, at lunchtime, or during the evening drive time? If you're busy in the morning, a QSR with a strong breakfast program is crucial. Some QSR brands, meanwhile, look for franchisees with strong dinner potential; can you deliver?
  • Demographics: Are you located in an industrial area, where mornings may be bustling, but evenings are slow? Is there a high school nearby? A shopping district? Review census data online to determine the income levels and household makeups of your market.
  • Site specifics: Will you need to purchase more property to fit the franchise, or tear out existing construction? Will you be required to have a drive-thru--and if so, is the back of your building aesthetically pleasing? Do you need extra parking for the additional employees and customers? Will your oil partner take issue with sharing signage with a QSR brand?

The inside of your store requires another set of questions, including any additional water and sewage requirements and local and state health-department mandates. QSRs require considerable refrigerated and dry storage for food as well as cups, lids and other packaging. Based on labor allocation between the c-store and the QSR, consider the distance between foodservice offerings and the c-store checkout. Hunt explained how he places Baskin-Robbins kiosks near the c-store register so employees can fluidly go back and forth.

When it comes performing due diligence on the right franchise partner, Hunt and Hartgrove recommend examining top-performers across the country and in your specific market. A 2012 Harris Poll EquiTrend QSR study put Subway at No. 1 in terms of brand recognition, reputation and consumers' willingness to spend money with the brand. The sandwich chain was followed by Dairy Queen, Wendy's, Five Guys, Chick-fil-A, McDonald's and Burger King.

Another study from CREST found Starbucks and McDonald's at the top of the heap in terms of incremental-visit growth.

When looking at industry rankings, be sure to consider whether the study ranks by number of units or unit volumes. Subway leads in chain size but has lower unit volume than many of its competitors. For Chick-fil-A, the opposite is true.

From the customer point of view, a few crucial elements are required to meet their QSR expectations. Perhaps most important: the broken-record issue of clean restrooms.

"Everyone knows bathrooms are the most important [element], why do we keep talking about this?" said Hartgrove.

QSR customers--and QSR franchisors themselves--will look for a clean, clutter-free space. "Go to a Chick-fil-A, what's on the counter? The cash register," said Hartgrove, who acknowledges this will be a tough challenge for the impulse-heavy c-store channel.

Customer service, said Hartgrove, "is where you're going to win the battle for the hearts and minds of the consumer." He recommends using the "Norm standard" of hospitality, an environment where everyone knows your name.

Of course, it's not just the c-store retailer making the decision; a QSR brand must also want to partner with you. QSRs, Hartgrove said, look for potential franchisees who are willing and capable of committing to the standards of the brand and its consumer.

"It only takes one bad apple to spoil the whole bunch."

hot & cold food, QSR
By Abbie Westra, Editor-in-Chief, Convenience Store Products
View More Articles By Abbie Westra