Franchise Update Magazine Issue IV, 2013 | Page 17

The menu worked: we had guests
lining up for lunch and dinner even
during the long years of the recession.
What needed reengineering was our
unit economics. Given the tight reins
held by banks for franchise loans, we had
to make our business above reproach.
Further, we wanted to deliver a big

reward to our franchisees for taking a
larger risk with our concept.
The restaurant business is very simple, but it is simple like rocket science,
in that thousands of details must be
reviewed, modified, and improved.
So we looked at every number on our
spreadsheet, every line item, and every
possible place to improve ROI, with the
goal of creating incredible units with
incredible volume.
As a result, our chain now boasts one
of the best sales-to-investment ratios in
the business. With an average buildout cost of $550,000 (after landlord/
tenant improvement) and with average unit sales of $1.7 million, we offer
franchisees a 3:1 sales-to-investment
ratio. When compared with most restaurant franchises, which usually offer
a 2:1 ratio at best, we think Fresh To
Order is a strong and differentiated
investment opportunity.
Today, as we continue expansion,
we keep the span of control very tight
through a robust franchise infrastructure. Unlike other restaurant brands
that keep their franchisee support team
small, with one person often overseeing
30 or 40 units and multiple franchisees,
Fresh To Order has created a team that
allows for one franchisee support person for every 10 restaurants. We call it

“concierge support,” and it does mean a
bigger overhead. To our brand, however,
this additional expenditure is critical to
keeping our unit economics high and
our brand promise consistent across all
restaurants, markets, and franchisees.
We’ve also created a system that
allows us to constantly analyze and
compare profit-and-loss statements for
both corporate and franchise units in a
consistent manner, so we can quickly
identify outliers if we have concerns
about costs or opportunities for further
improvement.
While we “hurried” to create incredible unit economics, we took a little more
time readying our concept for growth.
We realized early on that acceptance of
our brand would take more time than
our fast casual colleagues. Our average
menu items are priced comparably, but
slightly higher than some of the fast
casual leaders. For example, our average ticket price is about $1 more than
Panera Bread. The superior service,
however, and the flavors, freshness, and
quality of the food more than make up
for that extra dollar—but it took time
for diners to understand the value. I’d
like to say that for $1 more the customer
gets $3 to $4 more in perceived value.
We are pacing our rate of growth

(6 to 8 units in various stages of development each year) because we want
to make certain that we deliver on our
brand promise at every new opening.
More important, this rate of growth
assures the success of our franchisees,
who are never rushed to the point of
failure. Our franchise agreement is
pretty standard (most franchisees agree

to build at least three restaurants in a
market), but we are flexible with opening milestones and will “wait for great”
so as not to place undue pressure on
our franchisees to open new stores if
all the necessary elements of success
are not present.
Some brands do fall into the trap of
signing agreements that never come to
fruition. To avoid this trap, we’ve made
the conscious decision to pace ourselves
and “right-size” our growth projections
for the concept and our franchisees.
Since our growth goal is about a 50/50
mix of corporate and franchise locations,
franchisees are our partners, not our

customers. We want restaurants to be
built solidly, and we want a long-term,
positive relationship with our franchisees, to the benefit of all.
In the end, the route we took to
build and grow Fresh To Order was
inspired by something a trusted men ѽ