Food Franchises – Feature Story
This article appeared in Issue 3#5 (July/August 2009) of Business Franchise Australia & New Zealand
FOOD GLORIOUS FOOD!
Many food franchisees and business owners say they chose to buy into the food industry because they believe it is recession proof. Let’s face it – everyone needs to eat.
Kate Carnell, Chief Executive of The Australian Food and Grocery Council, recently commented on food and grocery at a National Press Club address: “It’s not only a big industry – it’s a vital industry – not only to the wealth, but more importantly, to the health of this nation. Simply stated, we can’t live without food.”
Under the food ‘umbrella’ there are several franchising opportunities available in both Australia and New Zealand, and the selection is almost endless. You can buy a franchise that offers sandwiches, wraps, salads, baked potatoes, burgers, chicken, pizzas, noodles, sushi, Mexican, bread, donuts, muffins, pastries, coffee, chocolate, juice or ice-cream!
Food franchises can operate as quick service restaurants with dine in and/or takeaway; full service restaurants, bakeries and cafes; specialty foods and beverages; express stores; supermarkets; and other retail food outlets. You can operate your food franchise in a food court, a shopping centre, shopping strip, a stand-alone outlet or from a mobile van.
Rival franchise systems recognise that competition puts pressure on delivering the best franchise offering and they need to demonstrate their unique qualities to potential franchise owners.
Seemingly on the increase, different franchises are striving to find fresh ways to help promote their particular business, whether it is focusing on healthy food, attention grabbing advertising campaigns, fresh and innovative promotions, or establishing alliances with other brands.
No longer does ‘fast food’ necessarily mean ‘junk food’. There are now many established healthy food franchises in the fast food market.
In the early 1980s Pure+Natural arrived; and the 1990s introduced us to MYO (make your own) and Healthy Habits. With a marked increase in consumer demand for healthier meal options, the last decade has witnessed the emergence of new brands. Some of these include Boost Juice Bars, Grill’d, GO Sushi, Souvlakihut, Spudbar, SumoSalad, Trios fresh & tasty and Wok Me.
Katherine Sampson, Founder and Managing Director of the Healthy Habits franchise, comments on her leadership in healthy fast food. Sampson opened her first Healthy Habits store in 1992 and admits she was one of the first business owners to take advantage of consumers moving towards healthier eating patterns.
“When I started Healthy Habits, we were on the cusp of the healthy fast food phenomenon in Australia and it quickly escalated with others popping up in quick succession”, says Sampson.
However, says Sampson, other businesses quickly appeared. “You never own any market for long, particularly when others see the profits that can be made, so the first mover advantage is everything.”
Pizzacutters first opened in 1998 to offer premium quality gourmet pizza to the fast growing take away and home delivery market. The founding brothers developed their concept to fill a void in the market by offering a fresh, quality alternative.
Starting with a store in Northern Sydney, Pizzacutters has expanded into other locations around Sydney and is set to grow further through franchising. Pizzacutters has been crowned best pizza in NSW five times, judged by top chefs and food critics for product originality, flavour and quality.
Another Australian fast food franchise, Grill’d was launched in March 2004, born from founder Simon Crowe’s desire to create a decent, healthy hamburger. Crowe positioned Grill’d as your local, healthy burger expert. The concept continues to capitalise on increasing consumer demand for nutritious, great tasting meals.
Unfazed by the economic downturn, Crowe comments, “Grill’d is well placed to benefit from tighter economic conditions in 2009, as consumers trade down from full service to convenient restaurants with a strong value proposition. We are well regarded in this space, particularly amongst young families looking for convenient, quality and nutritious meal solutions.”
Souvlakihut recently introduced a clever promotion where kids eat for free. For every $15 an adult spends on dining in, two children under 12 years make a choice from the new children’s menu, at no extra cost.
During a much bigger campaign to support National Families Week 2009, Anthony Koutoufides, AFL legend and father of two, encouraged Melbourne families to spend more time together, launching Family Fun Day at his Souvlakihut franchise in Templestowe. He persuaded his colleagues to do the same at a number of stores across Melbourne.
Andrew Fuller, a child psychologist who specialises in the wellbeing of young people and their families, claims the family meal is in danger of being resigned to the history books due to busy lifestyles and longer working hours. He happily backed the Souvlakihut campaign. “It’s great to see someone in the public eye take a stance on this issue.”
“Meal times are especially important,” adds Fuller. “As a daily ritual, shared meals help improve family relationships, and help foster a warmer environment where family members feel they can share thoughts and feelings.”
Nando’s are just as well known for their cheeky advertising as they are for their great PERi PERi chicken. Their latest campaign to hit the airwaves is designed to encourage people to achieve the ‘elevated state of Portugasm’.
National Marketing Manager, Justin Monaghan says, “We’ll be taking the Portugasm message to the streets using radio, and out of home and online media. Strong brands deliver compelling functional and emotional benefits. The aim of the Portugasm campaign is to communicate these benefits as they relate to Nando’s.
“The Nando’s offer delivers strongly at a functional level with great taste, fresh ingredients, preparation to order and a healthier cooking method. It’s important to also communicate the emotional aspects of the brand and we believe the light hearted, tongue-in-cheek nature of the Portugasm campaign does this.”
The Xpresso Delight philosophy is based on transplanting the cafe experience into the workplace, by placing gourmet-quality coffee machines into business and retail environments. The machines generate passive income for franchisees with the coffee charged at just $1 per cup.
Wayne Mandic, Master Agent for Xpresso Delight WA, has gained nine franchisees in just 20 months. One of his initiatives is securing cross promotions.
“I have been working with other organisations to get them to promote our services to their customers. This kind of cross promotion can increase franchisee exposure and help to source new customers with little or no financial outlay. We have already posted some success in this area with the likes of Bartercard and Lavish Channel.
Red Rooster has recently teamed up with two AFL clubs (Fremantle and Sydney Swans) and V8 Super Cars (Kelly Racing). With head office based in Perth, Red Rooster felt supporting the Fremantle Dockers at a local level was particularly important to their brand.
Strategically, the sponsorships of the two AFL clubs and the V8s are crucial for growing as a brand, for both exposure and identity within the sporting industry. These national sponsorships assist Red Rooster to getting their message across to target markets, which in turn helps its franchisees.
Co-branding & express outlets
Forming brand alliances and add-on business offerings are also becoming popular, especially within food franchising.
A 2007 article by Owen Wright, Asia-Pacific Centre for Franchising Excellence, Griffith University, explored the then new phenomena of the use of co-branding in franchising, to stimulate and rejuvenate growth in a mature franchising sector.
Wright used McDonald’s/McCafe as his case study, the co-branded arrangement which evolved in Australia. As he explained, co-branding involves combining two brands to create a single product or offering. It embraces a collaborative venture to further the interests of two or more organisations in a planned, strategic format.
The McCafe concept was adopted in 1999 as a mainstream initiative for McDonald’s and was developed to reinvigorate the McDonald’s brand.
Wright said retail co-branding is dominated by businesses that provide convenience benefits to consumers, eg. fast food franchises teaming up with service stations (fuel retail) and grocery stores, as demonstrated by McDonald’s and Hungry Jacks with Shell and BP.
He said an important part of the co-branding function is providing separate values to the respective target audiences, yet combining the experiences of both brands at the point of exchange.
Illustrating the reasons why McDonald’s entered into a co-branding arrangement, Wright said it was to attract customers, obtain a competitive advantage, and to reinvigorate brand equity and growth incentives.
Wright claimed that combined operations provided extra sales without proportional increases in variable costs such as labour, store maintenance and storage facilities. He also found that operational savings at franchisor and franchisee levels and higher price-to-asset ratios increased profitability – for both franchisor and franchisee.
Eagle Boys Pizza and NightOwl convenience stores are two franchised brands that have recently joined forces in QLD. A NightOwl in Mackay has expanded its successful convenience retail business by opening an Eagle Boys Express store, to provide customers with quality pizza on the go.
The Express Store is an Eagle Boys’ initiative that can operate in a space as small as six square metres. It makes use of new technology allowing pizzas to be prepared in-store in a third of the time as traditional pizzas. NightOwl Mackay now sells up to 800 pizzas a week!
Tamara Goodes, co-franchisee comments, “Eagle Boys already operates successful Express Stores in service stations, sporting stadiums and domestic airports. Opening an Express Store is a great addition to our business, as it is simple and easy to manage and enables us to provide our customers with even more convenience products.”
Eagle Boys Managing Director, Todd Clayton, spruiks the benefits: “The Express Store works because the costs associated with a traditional pizza store do not apply, as pizza bases are prepared off-site. Express Stores operate in small spaces – rent and labour costs are significantly reduced.”
Retail Food Group Limited (RFG) owns and manages the franchise systems for Donut King, Michel’s Patisserie, Brumby’s Bakeries and bb’s cafe. While these brands commonly operate in shopping centres, there are significant opportunities in other high-traffic areas.
Tracey Catterall, Acting Chief Marketing Officer of RFG demonstrates: “The first outlet of RFG’s franchise systems to open in a service station was a Donut King at Allendale in Cessnock, NSW in late 2008.
“Entering the service station food retail market is certainly a new direction for RFG and each of our franchise systems. Donut King and Brumby’s GO! are also entering the lucrative service station food retail market.”
Recently, Donut King opened its first airport store at the Brisbane International Airport. RFG confirms a new service station outlet opening in VIC and potentially a further five in SA within the next 12 months.
Product development & value meals
Trios fresh & tasty spend around $100,000 annually on research and development in Australia. Instead of simply dictating to their customers, Trios is keen to ensure their belief in what customers are craving matches up in reality.
Every three months, independent consultants question Trios customers after they’ve eaten. One result has been the launch of new product flavours. In a six week cycle, Trios presents a new product promotion.
Chief Marketing Director, Sam Elia, says new product innovations have resulted in a marked increase in sales. “We haven’t lost any other wrap sales either – we’ve actually increased.”
The current Trios promotion is ‘Greek Treat’ wraps – Trios thick Laffé flatbread with grilled seasoned chicken or lamb, and cucumber, tomatoes, onions, lettuce and tasty Tzatziki sauce. The next promotion sees the return of last year’s popular ‘Parma-licious’ – hot chicken parmagiana wraps in Hawaiian, Mexican and Italian styles.
RFG’s research shows that consumers are increasingly looking for value, without compromising on quality. This means franchisors need to help their franchisees communicate their value and quality to customers.
This is being achieved by helping franchisees create value deals for their customers eg. a coffee and donut at Donut King; bundled bread deals at Brumby’s; a coffee and cake at Michel’s Patisserie; or coffee and muffin at bb’s cafe.
By working with product development, using economies of scale and working existing supplier relationships, franchisors like RFG can create quality value deals for customers without cutting franchisees’ profit margins. They are also looking at other ways of driving value without discounting the franchisees’ margins, such as competitions, and gifts with purchase.
Likewise, Wendy’s has launched their new Value Menu with a range of snacks and treats priced at just $3, as part of a strategy designed to ensure their stores continue to offer customers an appealing and affordable treat range.
“The Wendy’s Value Menu was introduced largely in recognition of the current financial climate and will be very relevant to budget conscious customers,” said Peter Lokan, Wendy’s General Manager of Marketing.
“In these challenging times all businesses need to remain relevant to the consumer and that was certainly a driving factor for the introduction of this menu.
“We wanted to ensure our franchisees were able to provide a menu that represented exceptional value. We also wanted it to include some of the treats our customers have come to know and love, yet maintaining a strong focus on taste and quality.”
Lokan says, “As well as providing our franchisees with an even greater offering, we’re anticipating the Value Menu will deliver some strong results.”
While many franchises have reacted to the downturn by introducing discount meal-deals, Crust Gourmet Pizza Bars has headed in the opposite direction by establishing a new range of premium Upper Crust pizzas.
Designed to cater to people’s growing desire to cut back on costs but still enjoy high quality, gourmet foods, the Upper Crust range comprises six new pizzas served as 15 x 9” slabs intended to share.
“In this financial climate, people are looking for affordable luxuries”, says Crust’s Creative Chef Peter Augoustis. “Everyone is cutting back, but they still want top quality, and that’s where Upper Crust fits in. The pizzas are of a quality you’d expect from a top-class restaurant but they are served as takeaway.”
Retailed at $23 each, the six Upper Crust pizzas boast the kind of ingredients you would expect to see on a restaurant menu, including slow cooked braised lamb and caramelised figs stuffed with mascarpone.
Shingle Inn Cafes offer a diverse range of food and coffee to either dine-in or take away. Product innovation is one of Shingle Inn’s core brand values and never has it been more important than now, according to Director Andrew Bellchambers.
“In the current economic climate we’re particularly focused on producing superior quality, innovative products that give us a reason to communicate with customers and an impetus for them to buy,” says Mr Bellchambers.
“Our research and development team are focussed on constant innovation and utilising the market intelligence we gather through product sales and international research to provide the foundation for developing new products that will lead to either ongoing sales in the case of products added to our core offering or a spike for promotional sales products.”
Mr Bellchambers says one such upcoming short term promotion features an individual serve decadent chocolate pudding. “We know chocolate is a popular product, especially as the weather gets cooler and we’re confident this warm, moist, delicious self-saucing pudding served with cream or ice cream is going to be a winner.”
To support the promotion Shingle Inn is launching radio commercials, media test-tasting and additional in-store signage, managed by the company’s experienced marketing team.
Marketing and training
Zarraffa’s Coffee has introduced quarterly marketing workshops for their franchisees, which are focused on local area marketing. The topics for each workshop are actually suggested by the franchisees.
Focused on franchisee collaboration, the workshops are designed to share successful local area marketing initiatives, with the guidance of Head Office marketing. Zarraffa’s Coffee Marketing Manager, Sarah Schoeller, said that a number of positive outcomes have resulted from the workshops.
“This new concept has been developed to ensure that franchisees are proactive in their local area marketing and can network with other franchisees to openly discuss marketing opportunities and in particular, what works and what doesn’t”, said Ms Schoeller.
“They also promote an open discussion where I can get insight into the needs of the franchisee and assist them with marketing strategy and planning, something that is foreign to most small business owners.”
Marketing itself as an alternative to coffee is theobroma Chocolate Lounge, which focuses on handmade Belgian styled chocolate products. The concept was conceived by the founders in response to the demand for high quality chocolates and chocolate beverages.
George Roiniotis, Director of theobroma, explains, “In our research, chocolate surfaced as the point of difference – and everybody loves chocolate. We do offer coffee and tea, but the main focus is on chocolate.”
At Spudbar, the franchise has been busy working on some programs to help their franchisees via improved staff training and through local area marketing.
Kirsten Roberts, CEO of Spudbar International comments, “Our Staff Training Program has been developed to assist the franchisees in getting the most from their employees, by ensuring that they have been thoroughly trained in all areas of the store operations.
“The program is modular and self-paced, starting with a staff program (Book 1) which is subsequently built on with a manager program (Book 2) and franchisee program (Book 3). We have just completed the roll out of books 1 & 2, with the roll out of Book 3 due to be completed by August.”
Barbecue and fried chicken chain CHOOKS fresh & tasty is sponsoring its franchisees to complete a ‘Beyond Survival’ training course through Westpac which is worth $25,000.
Chief Chook Steve Hansen said the first two modules of the course were completed by most of CHOOKS franchisees at the franchise group’s first quarterly franchisee conference last February.
“The ‘Beyond Survival’ training course is helping CHOOKS franchisees to make better decisions based on the knowledge of what their true business position is weekly, not only monthly or quarterly or when they catch up with their accountant,” he said.
“We believe it is the perfect timing for our franchisees to increase their business skills as we face the economic downturn and higher competition as people become more conservative with their money.”