Time is on franchisors’ side

One of the earliest authors on personal success in the United States, Napoleon Hill, once wrote, “Every adversity, every failure, every heartache carries with it the seed of an equal or greater benefit.” It’s not the first quote to peddle the sentiment that people or companies are made stronger by adversity, but I like it for the “seed of equal or greater benefit” part. For any person or brand that plans strategically, past adversity is not needed in order to enjoy success in the present. But when we do encounter our challenges and do what is necessary to power through them, the resulting success not only sets us up to enjoy when we finally win, but also to win again. Perhaps that is why, rather than look for the hottest new franchise brand to have formed in the past few years, some of the industry’s most respected — and most sought-after — multiunit operators have looked to more mature franchisors that have shown longevity and resilience for their next investments. Tony Lutfi, founder and CEO of Marlu Investments, recently added the Captain D’s fast-casual seafood brand to his already expansive portfolio that includes more than 160 locations in restaurant brands like Jack in the Box, Sizzler, Little Caesars and Arby’s. While Captain D’s is certainly re-emerging as a top brand and franchise investment, thanks to recent upgrades to its prototype design and popular new menu items like grilled seafood, the 45-year-old brand is by no means brand new, which was a major positive in Lutfi’s due-diligence process. During the Restaurant Finance & Development Conference, Lutfi noted during a panel session that he prefers to look for brands that have been operating for 25 years or more and have “faced the down cycle at least once and recovered.” “Great brands are going to come up,” Lutfi told conference attendees. “But we pay just as much attention to the risk as the opportunity.” During the same panel, franchisee Bob Berg echoed Lutfi’s sentiment that many companies offer multiunit operators reassurance by demonstrating longevity. “I find new concepts very exciting, but we’ve never pulled the trigger,” said Berg, whose company is the largest franchisee of Popeyes Louisiana Kitchen, with 150 stores in seven states, and also operates about 200 units of Taco Bell and Burger King. “We feel more comfortable. We like to see the brands we invest in that withstood the test of time.” Often, franchise brands are eager to talk about their recent successes in turning around a sleepy brand or in accelerating growth with a jolt of new ideas but don’t want to talk about the prior period that necessitated the turnaround. I can understand that, but I would encourage brand leaders not to shy away from the “adversity” part of the “overcoming adversity” story. Sophisticated operators like Lutfi or Berg seem to take Napoleon Hill’s view that prior struggles, depending on how they are handled, help companies not only recover but also take a major step forward. That path takes time to play out for companies, but more often than not, they are rewarded for it.