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Franchise Chatter Guide: How Trendy, ‘Better’ Brands Are Taking a Big Bite Out of Sales From Old-Time Franchisors

14 Mar

The fast-casual segment is creating as many new choices for potential franchisees as it is for consumers. It may even sway them from investing in traditional fast-food chains. The Technomic Top 150 report identifies the fastest-growing brands by sales and number of units, separating those earning more than $50 million in annual sales and those earning below that mark.

Major Players

Shake Shack

Shake_Shack_Madison_Square

This top-performing fast-casual has humble beginnings: Shake Shack started out as a hot dog cart in Madison Square Park in Manhattan. Created by Danny Meyer’s Union Square Hospitality Group (USHG), it was established to support the Madison Square Park Conservancy’s first art installation.

For three consecutive summers, fans couldn’t get enough of the food. Then, in 2004, USHG won a contract to open a permanent kiosk in the park and Shake Shack was born. Today, the chain has more than 20 units and earned more than $62 million in sales in 2013, according to Technomic estimates.

Shake Shack calls itself a “modern day ‘roadside’ burger stand” with a menu of burgers, hot dogs, frozen custard, shakes, beer and wine. The brand has not indicated plans to franchise.

Zoës Kitchen

Zoes Kitchen

This concept, founded in 1995 by Zoë and Marcus Cassimus in Birmingham, Ala., has grown to more than 100 units nationwide. Typical menu items include chicken-orzo soup, hummus, Greek and chicken salads, sandwiches, kabobs and other entrees.

In March 2014, the parent company, Zoe’s Kitchen Inc., filed for an $80.5 million initial public offering of stock, cementing the company’s reputation as a leader in the fast-casual segment. The company is still majority owned by private-equity firm Brentwood Associates and is based in Plano, Texas.

The recent IPO may be an indication that Zoës Kitchen will accelerate its franchise program. At the end of 2013, the company had 94 company-owned Zoës Kitchen restaurants and eight franchised units according to Nation’s Restaurant News. Average unit volume was near $1.5 million, the company said in its filing.

Hot Head Burritos

Hot Head Burritos

While this chain was No. 1 on Technomic’s list of fastest-growing companies by percentage of change in sales from 2012 to 2013, it lagged in number of units compared to others in the field. Hot Head Burritos saw a 48 percent increase in sales year-to-year, raking in some $50.4 million in 2013.

The brand was founded by Cynthia and Raymond Wiley. Ray Wiley had been a franchisee of a major restaurant chain for more than 25 years and managed his own multi-unit restaurant company. He joined his wife, a paralegal, in creating Hot Head Burritos, opening the first store in 2007.

The number of units is growing, despite Technomic’s year-end list. According to the company website, there are now 55 Hot Head Burritos open and many more in development. Existing units are located primarily in Ohio, but also Indiana, Pennsylvania, Michigan, Kentucky and Florida.

Dickey’s Barbecue Pit

Dickey's Barbecue Pit Photo from gainsborough.road

The brand has been around since 1941 with its roots in Dallas, Texas, where Travis Dickey opened the first restaurant. Brothers Roland Dickey and T.D. Dickey, Jr. took over the business in 1967, expanding to become a well-known staple in North Texas.

And even though it began franchising in 1994, Dickey’s Barbecue Pit has only recently reached its stride as a national brand. Roland Dickey, Jr. became president of the company in 2006 and it has achieved many accolades including being named one of the top fastest-growing companies by Inc. magazine.

Dickey’s differentiates itself in the market by smoking all of its meats on site at every location. According to Technomic, Dickey’s ended 2013 with 370 units, a 29 percent increase from the previous year. Sales hit $331 million.

Habit Burger Grill

The Habit Burger Grill 2

Habit Burger Grill also has a long history. The first restaurant opened in Santa Barbara, Calif., in 1969, as a small stand serving char-grilled burgers t0 visitors at Goleta Beach. When one of its young employees, Brent Reichard, and his brother Bruce Reichard, eventually bought the business, they made some changes, including offering daily-baked buns that were also grilled, as well as fresh, locally sourced produce for toppings.

Other beach-inspired menu items included a fresh-grilled albacore sandwich made with line-caught tuna; a chicken sandwich topped with crisp bacon and velvety avocado; and crisp salads made to order.

Habit Burger Grill has grown to more than 85 units by the end of 2013 with sales of $113 million. It has recently branched out from its base in California to open units in Arizona and Utah.

Ones to Watch

Technomic’s report not only identified fast-casual leaders, it also pointed out those concepts whose appeal may be starting to wane with customers. Among those brands that saw the largest system-wide decreases in sales in 2013 were Paradise Bakery & Cafe, Così and Taco Bueno, while those that saw decreases in units were Qdoba Mexican Grill, Atlanta Bread Company and Straw Hat Pizza. Still, fast-casual seems to be the new way to invest in food-service franchises and analysts predict growth will continue for the foreseeable future.

– See more at: http://www.franchisechatter.com/2014/05/19/franchise-chatter-guide-trendy-better-brands-create-enticing-new-choices-for-restaurant-franchisees/#sthash.OTYONfKy.dpuf

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Posted by on March 14, 2015 in Uncategorized

 

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