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Refranchising Gets Hot Again in the Restaurant Industry

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"Restaurant organizations, in general, like to work with fewer franchisees" and those who have better infrastructure because "the individual franchisee is going to be very needy," Tristano says. "The multi-unit franchisee is going to have an infrastructure in place to deal with issues that come up."

Tom Kelley, principal of AccessPoint Media Group, and a brand consultant for restaurants, suppliers, retail, and hospitality, offers a less rosy picture of the process of refranchising.

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"A lot of times unfortunately it's not part of a strategic plan; it's a knee-jerk reaction of having to raise cash or wanting to focus on a new concept," he says.

Many times the locations that chains are looking to get rid of are undesirable or those that have not been updated. While franchisees are likely to get a good deal on the purchase of locations, they also take a big risk, Kelley says.

"Those really don't attract the best franchisees so if the company can't save them it's somewhat unlikely that the franchisee can" without resources to update them, he says.

Guillermo Perales, the largest Latino franchisee and CEO of Sun Holdings, is one multi-brand franchisee with the resources to take advantage of buying company-owned stores. His group acquired 51 company-owned Arby's locations in July. That brings his roster of Popeye's, Golden Corral, Burger King, CiCi's, and Del Taco locations to 390, mainly in Dallas.

Earlier this year, Perales' group purchased 96 Burger King stores.

While Perales was able to acquire the Arby's restaurants at a discount, he says they were appealing for several other reasons including: location (most are in Dallas), an exclusivity agreement to develop 15 more stores in the area, confidence in Arby's management (it was bought by Roark Capital in 2011), as well as the fact that it was a concept that didn't compete with his existing brands.

"They had brought in leadership that I had known from the past and they're going to overhaul the concept by giving it a new look and new products so I'm betting on the upside," he says. "We're always looking for concepts to expand. I think we would do a much better job here than they can."

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