Food franchises offer a recipe for success
Fraser McKay looks at how opportunities in the food and beverages sector have become some of the most high profile in the franchise industry.
No matter what the economic conditions, franchises in the food and beverages sector continue to be popular with those looking to invest in a successful business opportunity.
As one of the oldest franchise sectors, the food and beverage industry now accounts for £30 billion a year in the UK.
Not surprisingly, takeaways, coffee shops and bakeries are now among the most popular franchises available, with many of the businesses proving so successful they have become household names.
Trevor Haynes, Area Development Manager for Subway Stores, explains: “Where consumers are likely to cut back on luxury products and non-essential items, they are still likely to treat themselves to a sandwich or a cookie.
“What’s more, with people working extra long hours, the demand for quick and fresh food is on the increase.”
As with all franchise opportunities, those looking to invest in a brand should carry out their due diligence to ensure that the opportunity suits them, as Robert Burton, UK Master Franchise Owner for Auntie Anne’s pretzels, points out: “The pros are you buy into a proven brand. In the case of Auntie Anne’s, it is a worldwide brand and we pass on the know-how to you during training. We also supply all the shop fitting, designing and equipment in a turnkey approach. The food and paper goods supplies are already set up using tried and tested proprietary ingredients meaning that customers receive a consistent pretzel wherever they are in the UK.
“The only cons are that you pay an initial fee and a regular Management Service Fee but as franchise owners obtain so much value from the latter, they could not set the business up at a lesser cost.”
Once the potential franchise owner has decided that they wish to invest in an established food and beverages brand, they need to create a shortlist, advises Robert Burton.
“Firstly do your homework on the options available,” he adds. “Then decide if you would prefer to work more 9-5 hours rather than late night openings – this puts many people off. Check out the experience of the franchisor and talk to their existing franchise owners to get their opinion of how things are with the franchisor. Also make sure you have enough funds and get to know the franchisor.”
Trevor Haynes continues: “As any business person knows, the strength of a brand is something that really sets you apart from the competition. We know that people like to buy brands because they trust the product and know what they can expect in terms of quality and price – buying lunch from a Subway store is no different.”
Andy Hirst, Head of Franchise Development at Domino’s Pizza, states that his company has the advantage of having been established in the UK for more than 25 years, while its commitment to product and service has seen the brand win numerous awards.
“Domino’s has continued to produce year-on-year sales growth consistently since 1990 and one in three of our franchise owners have businesses worth over £1 million,” he adds.
“The highest standards are key to our business too. Customers know when they order a Domino’s that they’ll get a piping hot, freshly made pizza in less than 30 minutes. Our ongoing new product development programme means we regularly introduce tasty new pizzas, sides and desserts to entice new customers and keep our menus exciting.”
On the menu
A big consideration when considering a franchise in the food and beverage sector is the investment required. By their very nature, they cannot be run from home and usually require premises, staff and equipment in order to prepare and serve the products.
Andy Hirst explains further: “The cost of a food franchise varies from franchise to franchise and can depend on a range of factors such as the nature of the business – i.e. whether it’s delivery only or operates from stores with eat-in facilities – and the product itself. The investment level will also be linked to the return on investment franchise owners can expect to achieve.”
However, not all high street food and beverages franchises are out of the majority of people’s price range, says Trevor Haynes, who adds: “Subway Stores’ start-up costs are remarkably low for a franchise of our size and stature, and franchise owners can often purchase dependable outlet equipment through Subway’s purchasing power. In fact, in some cases, traditional Subway outlets can be opened for as little as around £100,000.”
Key to any new franchise owner’s success – whatever the sector – is the level of training provided as part of the initial investment package. Although previous experience in a similar field is sometimes desirable, one of the benefits of franchising is that a brand’s proven business method can be taught to candidates ranging from total novices to the highly experienced.
Andy Hirst states that Domino’s franchise owners can come from all walks of life: “We have a complete cross-section of highly successful franchise owners including a former barrister, car mechanic, IT director, ex-Navy officer and even a champion gymnast. All of them bring their own skills, which are applied to their stores in various ways.”
Some food and beverages franchises, such as Auntie Anne’s that do not originate in the UK, may stipulate that their new franchise owners visit the company’s international headquarters.
Robert Burton confirms that training is vital to the success of his franchise owners, adding: “We send our franchise owners to Auntie Anne’s USA headquarters for their initial training and then they come back to the UK for a further week’s training. We provide ongoing training, mystery shoppers and audits to ensure that our franchise owners make and bake Auntie Anne’s pretzels to the high standards we expect.”
Both Andy Hirst and Trevor Haynes say their respective franchise opportunities operate their training programmes along equally high guidelines.
“Subway provides a first-class training and a development structure for franchise owners and Store Managers,” says Trevor Haynes. “So far this year, the UK arm of Subway Worldwide Training – based at the company’s UK headquarters in Cambridge – has delivered training courses to over 200 personnel.
“In addition to face-to-face training, Subway Stores also runs the University of Subway – a well-established online training programme co-ordinated by the worldwide headquarters for Subway Stores in Connecticut, USA. Offering over 700 online courses for store staff and managers, the university has delivered training for over 5.5 million participants.”
A serious consideration for anyone looking to invest in a franchise is the level of extra training and further services that the franchisor provides to ensure that a launch is followed by years of continuing success.
“At Domino’s we also pride ourselves on innovative marketing and other notable benefits of choosing our franchise include a central marketing fund worth over £20 million,” explains Andy Hirst. “This includes activities such as high profile national TV sponsorships and advertising, which would be almost impossible for a start-up business to achieve. Plus, we continue to look for new ways to engage with our customers and make pizza ordering even easier using the latest technology.
“Ongoing support is provided too, so if you’ve never been involved in marketing or don’t have any IT experience, head office and field-based teams will provide all the advice and assistance you need.”
Despite the robust nature of food and beverage franchises, the industry has not been without its hurdles, particularly with the increasing trend for people to eat more healthy choices. Many of the big name food and beverage franchises tackled this with great success.
Richard Forte, UK Senior Vice-President and Chief Operations Officer at McDonald’s, says: “Our menu now gives our customers a greater choice, including salads, fruit bags, organic milk and fruit choice, while still offering McDonald’s favourites such as the Big Mac.”
Subway has followed a similar strategy, as Trevor Haynes explains: “We are making continuous improvements to our nutrition credentials. We’ve made significant progress, including our work around salt reduction, where we’ve already cut the average salt content across our products by 33 per cent and have signed up to the Government Responsibility Deal to make further reductions.
“We offer our customers the chance to get one of their five-a-day simply by adding all of the fresh salad items to their sub at no additional cost.”
With such help and innovation from established food and beverages franchises, the future for the sector’s franchise owners continues to look healthy, a view backed by Robert Burton: “It is remarkably buoyant given the current economy. Our sales are up year-on-year in all stores where we have been operating for longer than 12 months.
“Our new store sales are very encouraging and we seem to be winning business away from the more traditional ‘grab and go’ snack food retailers. As we are virtually unique in the UK, we are enjoying great customer support and sales are above our budgets on many stores.”
Trevor Haynes, says that Subway Store has plans to treble its number of stores in non-traditional locations, such as within convenience stores, on petrol station forecourts, on university campuses and at transport hubs.
“The expansion will create 3,000 jobs over the next five years and Subway Stores is looking for new franchise owners to get on board,” he adds.
“The physical layout of a Subway store can be easily adapted for a variety of properties making it ideal for non-traditional locations. A franchise offers landlords many advantages including flexibility in terms of space and design, high rental returns and increased market share.”
McDonald’s also has a very busy year ahead as Official Restaurant of the London 2012 Olympic Games and plans to open 20 new franchised restaurants.
“I think food and beverage franchises will continue to flourish as people will always need to eat and drink no matter what the economic environment,” says Richard Forte. “Our sector is very dynamic and competitive and no two days are the same.”