Friday, November 5, 2010

A health check on franchising

The economy may still be a tough slog for restaurateurs, but franchise specialists are betting the recovery is far enough along to nudge veteran operators and newcomers into opening places again.

“It’s starting to ease, yes,” says Russ Umphenour, the quick-service industry who currently serves as CEO and president of Focus Brands. “People are starting to take their heads out of the sand, to look around and say, ‘What’s out there for me to try?’”

Focus, the franchisor of Moe’s Southwest Grill, Schlotzsky’s, Cinnabon and Carvel, has noticed stepped-up interest in particular from professionals who were forced by the times to switch livelihoods.

“A lot of people who have been laid off or who walked away with packages, they’re looking at what they want to do with themselves,” explains Umphenour. After being burned by the corporate world, they’re interested in going into business for themselves. “We’ve gotten our share of those people,” he says.

At the same time, according to Umphenhour, seasoned franchisees have started sniffing around for expansion opportunities after a near-hibernation. “Like everyone else, they were hunkered down and not looking for growth.”

Focus recently armed itself with a new option for both parties: the Auntie Anne’s pretzel concept. It bought rights to the bakery chain a few weeks ago.

About six months earlier, the private-equity firm that owns Focus, Roark Capital, added the WingStop chicken-wings chain to its portfolio. (WingStop operates independently of Focus, as does McAlister’s Deli, another franchisor in Roark’s fold. Indeed, all of the parent company’s holdings are franchisors.)

Roark and its affiliate are hardly alone in expanding their stables of franchise concepts. As Focus was grabbing Auntie Anne’s, the Wayne Gretzky of franchising, Subway CEO Fred DeLuca, was buying rights to the bankrupt Taco Del Mar chain through his little-known second company, Franchise Brands, licensor of Mama DeLuca’s Pizza Now.

Clearly franchisors are betting the classic foodservice development model is about to be refueled. It’s a vote of confidence in the business.

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