The right mix

Franchises seem to be hot on the menu these days, with more and more foreign brand names setting up shop in Trinidad and Tobago.

President of one of the newest entries, Church’s Chicken, Hala Moddelmog was in town last week to talk about franchising to Amcham members. While the local franchise has been sewn up by the Pizzaboys Group, Moddelmog gave the local business community some tips in a fast growing business. Proof of how fast the market is going, two more food franchises have opened up since Church’s came on the scene in November. And, another has left, with McDonalds making an exit that same month. Franchising is big business worldwide. In the US, one out of every $3 spent on goods and services is spent at a franchise business. Internationally, franchises are worth about US$1.6 trillion in sales.

Moddelmog said the attraction is mostly in being able to use tried and tested systems and brand name. “You don’t have to re-invent the wheel,” she said. While it is a tough market, Moddelmog is confident about her brand. The secret is in giving the franchisee leeway, she explained. “For international brands we offer the ability to be flexible with menu,” she said but noted with franchising there is a fine line. “You can’t get so far off the mark that it’s no longer your brand,” she added. “We’ve got to stay on top and make sure they don’t go off the mark.” The Church’s boss said the company looks for franchisees with a proven track record and while the background does not have to be in food, the company looks for people who understand the retail business. Franchisees, of course, also have to be well capitalised. “Franchising offers people a chance to succeed, manage and direct their own businesses without having to assume all of the associated risk of start up,” she said.

The earliest franchises, she noted, date back to the middle ages when the Catholic Church granted them to tax collectors, who retained a percentage of the money they collected and turned the rest over to the church. Moddelmog said according to the National Franchise Council (NFC), there are more than 2,000 franchisors and over 300,000 franchised businesses operating in the United States. She noted that franchised businesses employ nearly eight million people in the US. Additionally, franchise business is expected to generate $1 trillion in US retail sales this year. “Franchising accounts for more than 40 percent of all retail sales. One out of every three dollars spent by Americans for goods and services is spent in a franchised business.” Globally, the fast food industry has the highest percentage of franchised systems capturing 18 percent of the franchise population. The World Franchise Council estimates the annual sales of franchise business at $1.6 trillion.

Franchising, she said, is about buying into a proven system. She noted that the franchisor provides a brand mark — knowledge and expertise, while the franchisee provides the local knowledge and pool of skilled workers. “But some think that franchisors, and in our case —restaurant franchisors, provide only products and secret recipes. Many are surprised to learn that just scratches the surface.” She explained that franchisors provide an operating system with valuable services such as architectural designs, operations, co-operative purchasing, strategic marketing, training programmes, re-search and development, and business support. “So as you can see, a potential franchisee can launch a business without having to re-invent a brand mark. That is the value of franchising.” She used Church’s Chicken as an example and noted that they “provide extra value” particularly to their international franchisees by allowing a great deal of flexibility on the menu to accommodate local taste. “It is one of our unique selling propositions.” Moddelmog added that while there are pitfalls associated with franchise ownership, they are very few. “However, there are some that people must understand before entering into a franchise venture.” There must be fees and royalties to be paid to the franchisor, but she explained that these fees provide access to an established brand mark and a proven operating system, both of which can provide tremendous value.

Some franchisees, she noted, can be tightly supervised if needed, but added that it is to the franchisee’s benefit that all franchised units abide by a similar set of guidelines so that each guest has a consistent experience. “That is why the franchisee agreement is such an invaluable tool, because it protects the rights of both the franchisor and the franchisee for a multiple year period. All in all, franchising is good business and has yielded excellent result for Church’s.” Church’s Chicken has over 1,500 restaurants with operations in 12 countries around the world. The company has a presence in places such as South Africa, Indonesia, Saipan, Canada, Mexico, Jamaica, Honduras, Costa Rica, Panama, Venezuela and Puerto Rico. Moddelmog added that in 1979, Church’s opened its first restaurant in Puerto Rico and now its franchise partner operates over 90 restaurants with greater brand penetration and recognition than any other chicken competitor.

Church’s currently has signed agreements in 39 countries with 16 different. “We were not only impressed with Mario and Norman’s proven track record, but also with their determination to grow the brand, and grow it quickly,” she said. Moddelmog added that apart from meeting the experience and financial requirements, potential franchisees need to be able to fit into the Church’s way of doing business. “We’re looking for a personality fit,” she said. “It’s more fun with somebody who has the right chemistry.” Church’s is happy with Pizzaboys Group which is ahead of schedule with the 20 restaurant agreement. The group has opened six restaurants in the past three months. “Most of our franchisees don’t move that fast,” Moddelmog said.