Brandau: Buying what franchisors are selling

Photo Credits: Anton_Ivanov / Shutterstock.com 

Had the announcement of TGI Friday’s impending refranchising initiative been made four months ago instead of four days ago, I might have had a much more cynical opinion of the deal. I used to think selling off company-owned locations to franchisees was a move only to limit exposure to rising costs for labor or real estate and to trade operations headaches for steady cash flow. I did not really believe the arguments for “strategic focus” in refranchising stories I used to write, but then I moved to a different job with a bigger management role. Now I totally understand the value of what restaurant brands like Burger King, Jack in the Box, Wendy’s and Applebee’s sought when they refranchised large portions of their company-owned store base to franchise operators. The balance of “working in your business” and “working on your business” seems harder to strike than ever — then again, maybe it’s just me after the first job move of my career. But by transitioning away from working “in” the restaurants toward more working “on” them by refranchising, several brands have shown the ability to think more strategically, including Fridays. Chiefly, Fridays has a remodeling initiative underway that it can accelerate through refranchising. Each deal includes requirements for reimaging acquired stores, and because Fridays is selling large packs of stores at a time rather than onesies and twosies, it likely will be dealing with the large multiunit franchisees with the ability to self-fund or easily finance the initiative. The brand’s menu R&D pipeline also seems more active, as Fridays works on expanding bar offerings and on following the splash it made with its Endless Appetizers promotion.Burger King completed its near-total refranchising earlier this year, and, well, we know what that brand has been up to. Wendy’s was able to rationalize its store portfolio regionally by hanging onto some of its core Midwest markets and letting local franchisees reignite growth in the West. The brand also decided to completely refranchise the Canadian market, which is a prelude to accelerated growth in the market. Wendy’s has had perhaps one of the most successful reimaging programs the past two years, and its refranchising of more than 400 locations will end up supercharging that pace. It’s the same thing on a much smaller scale for me at 1851 Magazine or any franchisee in a single unit. The more an owner can delegate important daily tasks to a well-trained staff, the more time she has to think about the big picture and what can move her location forward. Getting to worry less about daily deadlines allows the owner to think about long-term planning for the next three, six or even 12 months. In the bigger picture in the franchise industry, it means that brands that have made major refranchising moves likely would be worth watching closely over the near term. Some of the bigger ideas to hit the industry just might come from them.