Multi-Unit Franchisee Magazine Issue III, 2011 | Page 57

knew they could trust us, providing the
tions are simplified.
“Customer service is customer ser- financing,” says Dev.
Since then, the Sagars have tapped
vice,” says Sunita. “The food is different,
the POS system is different, but the skills community banks for their various exare the same. You offer good food and pansions. It’s part of Sunita’s philosophy
good service in a clean environment. It’s of commitment to the local community.
all about using the basic skills.”
“We believe in getting involved, and that
For Cary Albert, adding Cinnabon includes community banks,” she says.
franchises to his Schlotzsky’s shops in “We have gotten funding from a lot of
North Texas didn’t just require the same community banks.”
Regional banks backed Reimer’s hotel
basic skills—it required the same staff,
the same space, the same utilities, and the locations, but the Einstein Bros. expansame overhead—all of which
brings in new customers and
drives residual sales. “It’s bringing an added value into the
brand,” says Albert, who now
has five Schlotzsky’s and five
Cinnabon franchises, with three
more dual-brand locations under development and another
seven planned. “The only additional overhead is the cost of
the product.”
Albert has seen Cinnabon
sales grow to between 5 percent and 8 percent of each location’s take. With store sales that
Sunita and Dev Sagar
range from $1 million to $1.6
million, that’s not insignificant. “Worst sion is an all-equity proposition; he and
case, that’s $50,000 a year you wouldn’t his partner are funding that themselves.
have,” he says, “plus the additional sales Adding a third hotel to his stable, howyou’re getting at Schlotzsky’s, like soda ever, was a different story. The project was
sales. It’s definitely added value.”
ready to go in 2008, but that’s when, as
Reimer says, “the whole world changed.”
Financing!
Reimer’s previous financiers weren’t
When seeking funds for a new, comple- interested in another hotel, so he went
mentary brand, franchisees can point to to several different banks. Some weren’t
the success of their existing businesses as interested in the project at all, while others
proof of their management acumen. For wanted a major equity investment from
instance, Elias’s Menchie’s addition was Reimer. “Ultimately U.S. Bank financed
funded by private lenders. After financing it,” he says. “I had to put more equity in
Moe’s with commercial loans, he was able it than I planned on, but less than what
to attract that private funding because of some others had quoted.”
SBA 504 loans have helped Albert
his consistent growth and strong P&L
with his rapid Schlotzsky’s/Cinnabon
history with Moe’s.
The Sagars’ first location, a Denny’s in expansion. After developing one new
the San Francisco Bay area, was financed store (slated to open in September) with
out of their own savings, with the help of a conventional loan from J.P. Morgan,
local community banks. Sunita had 17 to Albert was able to put another three into
18 years of experience in food service by the works, thanks to new SBA legislathen, and Dev had a successful comput- tion from Congress.
er-support business to his credit. “They
“They raised the limit to $5.5 mil-

lion, which gave me another $3.5 million
more to work with,” he says. “Each store
is $1.2 million to $1.5 million, with the
SBA guarantee at 40 percent of that. So
with the new limit, I can develop four or
five more units using SBA money.” Plus,
the SBA requires only 10 percent down,
he says, compared with 20 percent to 25
percent with conventional lending. “That
keeps more capital in my coffers,” he says.
“It lets me expand more rapidly.”
Blass has borrowed heavily to fund
both his construction business
and the Miracle Method franchise. “We’ve financed quite a
bit in both businesses, because
I’m confident that, given a little
bit of time, it will be worth it,”
he says. “But I’ve got a lot of
debt. At a conference recently,
we heard what other entrepreneurs’ credit scores were, and
that helped. I thought it was
just me.”
One thing that’s helped Blass
with budgeting is the fact that
he has a pension from his previous career in government. “I
don’t have to have a salary at
this point,” he says. “That gives me the
ability to reinvest my cheapest form of
capital, which is my time.”
Synergy!

Having a successful first business to build
on helps not only financially, but operationally as well. One of the advantages
of operating three different concepts,
the Sagars have found, is that they can
apply good ideas from one franchisor in
operating their other businesses. “Each
brand, each franchise, has its own systems,” says Sunita. “We can choose the
best and apply it to them all.”
For instance, Baja Fresh has wellestablished fund-raising and catering
methods, Sunita says. The franchisees
work with community organizations,
schools, sports teams, and the like on
fund-raising events. The organizations
drive traffic into the restaurants, and
then reap 20 percent of the proceeds. It
makes sense for the Sagars’ Denny’s and

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