Originally posted at Fast Casual on May 15 2020. Original article here.
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By Niko Frangos, president, Rascal House
Survival has been the focus of most restaurant brands over the last several weeks, but as we move further into the COVID-19 pandemic, some brands may be ready to think about growth as well. Economic downturns and high unemployment rates typically lead to an increase in people interested in franchising, so now is the perfect time to capitalize on that opportunity.
1. Show your strengths
Restaurants, in general, tend to always be relevant, but some are weathering this storm better than others. Unit economics are crucial right now, and restaurants with tight margins are faring far worse than those with more breathing room in their profit and loss statements. Organized brands with great unit economics should stay viable. For brands with low margins or nuanced customer bases, it may be hard to survive months of much lower sales.
If you operate a restaurant brand that is staying strong, now is a great time to demonstrate that strength to potential franchisees. For example, Rascal House has many different business channels (pickup, built-in delivery and takeout all with a very diverse, yet simple menu offering) which has allowed our restaurants to adapt as needed during unique times to make up for lost sales in certain areas. This is a sales proposition we use during normal circumstances, but it is even more compelling to potential franchisees right now.
Restaurants of all kinds are making changes to their business models, menus, operations and more to survive. Many brands have had to learn on-the-job with carryout packaging, delivery and online ordering, which may affect their margins. Check your expenses relative to any adjustments you’ve made during the pandemic, so you can ensure your brand is viable before, during and after COVID-19.
Consider what your brand’s strengths were prior to COVID-19. In many cases, these will still be relevant and appealing to investors and potential franchisees. Know the core elements to your value proposition and focus on those. For example, a diverse menu and approachable price point help differentiate Rascal House, but for other brands it may be things like a small footprint or unique daypart sales. If you can show how your brand is well suited for the future and can provide insulation for franchisees from future crises, youll be attractive to investors even while many restaurants are struggling.
2. Take advantage of the positives
There is a unique opportunity right now in many areas. For example, real estate conversations have changed. Restaurants that grow now may have much more favorable lease terms than they would have had three months ago. It’s important to remember that restaurants that open now will face different circumstances — less traffic, different customer requests and government restrictions — but you can use these factors to negotiate on a lease. Talk to brokers to learn what is going on in your market and identify potential opportunities. Lower rents gives new restaurants more room in the budget to ramp up sales after they open.
The hiring pool has also improved. As more people file for unemployment, you have more candidates. It’s never good when there are more people looking for work, but you can both be opportunistic as a brand and help the labor pool by continuing to grow and hire. Plus, new restaurants will face less competition as many restaurants have been forced to permanently close.
3. Start the legwork now
The franchise sales process will likely take longer now than it did last year. You can’t host Discovery Day in person. You can’t quickly travel to other markets to look at potential sites. That said, it is a great time to start vetting potential franchisees. Spend this time identifying the right franchisee candidates and making sure it is a good fit for both sides. Potential franchisees can use this time to vet their franchisor options and talk to lenders. The lending landscape has changed, so it’s good to start asking questions now to see what your options will be.
Many of these tips will also work to help increase sales during and after COVID-19. Focus on your brand’s strengths in your marketing messages and operations — promote your best-selling items and consider pairing down your menu if necessary. You can also prep now to be ready to increase sales when normalcy begins to return.
There are not a lot of great options for investors due to stock market uncertainty right now, and many previously employed people are looking for new opportunities that offer more insulation from changes in the economy. If you can show your brand’s strengths, it is a great time for franchisee recruitment.
Rascal House is a Cleveland-based fast casual restaurant franchise serving pizza, burgers, wings and more.