Franchise restaurants make a comeback

According to a recent article in the The Wall Street Journal, franchise restaurants are beginning to make a comeback and lenders are returning to business once again.  But many of the iconic brands that we are used to are freshening up their image, menus, and expanding into new territories.


Fast-casual dining is becoming more popular and restaurant chains “are now less likely to resemble their brand’s current image,” according to Wally Butkus, partner in Restaurant Research LLC.  McDonald’s in the Oakbrook Ill. area has transformed their stores from the red and white playgrounds into more adult-friendly seating, FOCUS Brands hired an architect to design new buildings with a smaller footprint and while Papa John’s was reluctant to spend the money necessary for a remodel, Don Graham vice president of development says, “once we heard feedback from their customers, they all came on board.”


During the recession, franchisors were less likely to spend the money to conduct remodels, but tired looking restaurants generate lower sales and companies now are getting more sophisticated. Major brands like Dunkin’ and Wendy’s have since launched major remodeling programs.   EVP for Techtnomic Darren Tristano knows, “fast-casual concepts are incredibly appealing because they generate high sales compared to investment.” 


As customers continue to become more value-conscious, companies across the board are making adjustments to a fast causal concept and increasing their emphasis on franchise growth. 


Read full article text here

Bloomberg’s Small Business Report with John Tucker reports that a rise in small business confidence and improved consumer demand is helping propel a gauge of franchise businesses higher.  The franchise business index, developed by IHS insight on behalf of IFA, increased by 0.3 percent in February which is the sixth consecutively monthly gain, reported Tucker.  The measure shows the economic environment for franchise businesses by examining employment indicators, personal consumption, small business optimism and credit availability of the industry.

John Tucker reports that in an industry with more than 735,000 franchise businesses last year, employing more than 7.9 million workers and bringing in $745 billion in sales, around 80% still say limited access to credit is holding them back.   

Click here to listen to John Tucker’s Small Business Report on IFA’s Franchise Business Index. 

Here are some other news clips covering the release of the FBI, which will be released each month going forward:

Posted by Jenna Weisbord, IFA Manager of Communications & Marketing

IFA urges lenders conference to bank on franchising

IFA Board Members and President & CEO Steve Caldeira headlined an unprecedented franchise lending panel at CBA LIVE, the annual conference of the Consumer Bankers Association (CBA), a meeting that drew over 1,000 of the nation’s retail banking leaders to Austin, Texas Monday in a sign of the improving outlook in the economy and the financial services sector.

The panel, titled “Engaging in Franchise Lending: Growing Bank Loans in 2012 Using a Proven Concept,” featured IFA Board Members Shelly Sun, CEO and Co-Founder of BrightStar Care, and Darrell Johnson, President & CEO of FRANdata, along with Lynetta Tipton Steed, Division Head of Business & Community Banking at Regions Financial Corporation, and Bank of America Line of Business Executive Joe DiNicola.

Caldeira discussed the IFA’s Credit Access Campaign, launched last April, which has now attracted the involvement of a diverse range of organizations from the Financial Services Roundtable and the Independent Community Bankers of America, to the Hispanic Alliance for Prosperity Institute and the National Association of Women Business Owners. 

“While the credit crunch has eased somewhat, franchising needs significantly more capital to return to strong growth and job creation,” Caldeira said. “We’re here to raise awareness about the advantages of franchising as a proven, scalable, lower-risk small business model, and the unique tools and turn-key solutions available to increase franchising lending and a healthy return on investment. Now is the time.”

Johnson described FRANdata’s Bank Credit Report, an in-depth financial analysis available to franchisors that translates complex data from the FTC-required Financial Disclosure Document (FDD) into a language lenders can readily understand, thereby facilitating the loan process. 

DiNicola described a new tool developed by the IFA, CBA and FRANdata called a “Franchise Lending Template” – a result of the IFA’s 2011 Small Business Lending Summit, that he said will help lenders understand franchise lending, spurring more investment. “We’re committed to it. We are here to help our colleagues understand the benefits of this particular business model and all the opportunity there,” DiNicola said. Lending executives attending the session included Greg Jaeger, SVP and Chief Credit Officer of U.S. Bank, along with executives from Union Bank, HSBC, PNC and others.

DiNicola, Steed, CBA Small Business Committee chairman and HSBC business banking chief Mark Luppi and others will attend IFA’s upcoming 2nd Small Business Lending Summit in Washington April 17, where franchise and finance leaders will gather to seek ways to expand access to credit. Acting chief of the Office of the Comptroller of the Currency (OCC) John Walsh, Acting FDIC Chairman Martin Gruenberg, SBA Administrator Karen Mills, and House Majority Whip Kevin McCarthy (R-Calif.) are scheduled to address the Summit.

For more information about the invitation-only event, please contact Beth Solomon at bsolomon@franchise.org.

CICI’s Pizza CEO on Managing Food Costs

Consumers are feeling the rise of fuel, food and travel and as commodity prices are generally on the rise, CiCi’s Pizza has been able to absorb many of those costs.  CEO Mike Shumsky talks with Neil Cavuto on Fox Business on how his company has been able to manage food costs. 

According to CEO Mike Shumsky, “the CiCi business model is a unique model where we value the consumer mind set.” Being able to absorb costs, like owning their own store delivery system, creating an in house purchasing function and doing advanced buying, allows CiCi’s Pizza to continue to keep their prices low and benefit their loyal customers. 

The equation for CiCi’s restaurants requires them to be efficient in managing commodity costs, and when you’re “in the business of feeding million” as Shumsky says, “the most important part is to a run a restaurant that provides value to customers.”

According to IFA’s December Franchise Business Economic Outlook Report, plans for new business are restrained by the tax and regulatory uncertainties, yet CiCi’s Pizza has been able to continue to show signs of growth and Shumsky claims that CiCi’s, like many restaurant chains, will only raise costs as “a last resort.”

“One thing to remember is that systems within the restaurant are pretty sophisticated and help us absorb those commodity costs as they come along,” according to Shumsky.  

To view the entire video clip click here.

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