January 2015 Living Large: How to Build a Bigger Franchise
BY BETH EWEN
How to build a bigger and more profitable franchise? ‘Living Large’ will follow three emerging systems through a year’s worth of challenges: Bottle & Bottega, Executive Care and Wild Wing Cafe.
The high-energy style of Nancy Bigley, CEO of Bottle & Bottega, took its toll last year on the seven-person executive team at her budding franchise, a wine-sipping/art-making/entertainment studio chain based in Chicago that she and her business partner, Stephanie King-Myers, have built to 16 stores.
“We’re a fun business, we’re a creative business, and somehow we lost the fun. I was losing key people along the way,” says Bigley. “Our numbers haven’t changed as far as our targets and what we want to achieve, but what I’m focused on now is culture.”
As she charged ahead with plans and goals and to-do lists, she often asked her team how they were doing, urging work-life balance and letting them know she didn’t expect them to work around-the-clock, as she and her co-owner do. But she believes that message wasn’t being heard, and burnout began.
Armed with a book called “The One Thing” by Gary Keller, which her entire team read, plus a brainstorming session when she called everyone together and asked what was wrong, she now has stripped away the clutter.
The company has two simply stated goals: adding new units and increasing unit volumes for franchisees. All staffers regularly evaluate their to-do list against those goals. And if an item on the list won’t help reach that goal, “we’re just not going to do it,” Bigley says.
Each team member now has one hour blocked off each day to focus on “the one thing that’s going to move the needle toward your goals. We’re holding each other accountable, and we’re all aligned around it,” Bigley says. Best of all, “we’re starting to move the needle.”
“We’re a fun business, we’re a creative business, and somehow we lost the fun.”
— Nancy Bigley, Bottle & Bottega
Bottle & Bottega started franchising in 2012, and it’s been a blur ever since as they’ve tried to gain a toehold in an industry that’s barely a decade old. Painting with a Twist is the leader, Bigley says, with unit counts well into the hundreds. But there’s plenty of wide-open space for her franchise, she believes, and she wants to reach a total unit count between 20 and 30 in 2015.
They’re targeting Illinois, their home base, and Florida, and just added two new franchisees in that state. Texas and California are additional targets. To improve the business model, she’s pushing her suppliers for better prices on such items as aprons and paints for participants. “We’re always pushing on those bigger items. And we’re looking at consolidating with a national partner on office supplies.”
She added two new subcommittees of franchisees last year, on technology and marketing. “We really leverage them now,” she says about franchisees. “They’ve been really great about helping keep us focused, and bringing things up we didn’t think about.”
But she’s not straying from the brand’s original strategy, a point of pride as losing focus is a young franchisor’s common enemy. “This is a great business model, and the numbers worked,” she says, something she analyzed in depth before deciding to buy into the brand. “So we spent a lot of time before moving forward to identify those key differentiators. We haven’t shifted from those.”
What has shifted is her role as CEO—still as competitive as ever, says the former executive with Dunkin’ Brands and a Dwyer Group brand. “I’m very competitive so I’m not going to lie” that she doesn’t closely track the competition. “But I have my targets. I have my plan. I don’t get caught up in, this person is growing faster than we are. That can start making your head go in crazy places.”
But now she’s seeing herself as a coach and a mentor, and above all, the person who sets the tone. “Saying the words and saying what your company is about—people aren’t believing it because they’re not living it. I didn’t realize that that should be my No. 1 focus. I should be spending more time just having these conversations over and over again.” Only then, she believes, will the key message become part of a young brand’s DNA.
Executive Care founder seeks to be smartest guy in the room
Unlike most home healthcare franchises, Executive Care offers skilled nursing services along with more typical and lower-level care like bathing and grooming and serving meals.
Doing so is much more complex and full of potential for errors, but also adds mightily to the top line. “We thought why not take advantage of the full continuum of care, just for the full revenue stream. Why give that business away to somebody else,” says Lenny Verkhoglaz, CEO of the Hackensack, New Jersey-based brand.
He also insists on accreditation for his franchisees, by CHAP, the Community Health Accreditation Program, which costs about $10,000 per owner plus about $6,000 to $8,000 for consultants to help the owner prepare.
“We’re not known, so the goal this year is to build brand awareness.”
— Lenny Verkhoglaz, Executive Care
Few private-pay home healthcare franchises require this step (providers that accept Medicare or Medicaid must do so), and again, revenue is the reason. Because hospitals under the Affordable Care Act must reduce re-admission rates or pay a fine, they’re seeking providers like Executive Care to discharge patients, but can do so only to those accredited.
It’s all incredibly complicated, but Verkhoglaz sees his role as being the smartest guy in the room—or at least, the best informed—so he can help his franchisees avoid the many mistakes waiting to be made in healthcare.
He and his wife started providing care in 2003, but didn’t begin franchising Executive Care until 2013. In other words, they learned the hard way. “We don’t want anyone to fail because they don’t know about these things,” he says.
Executive Care has 12 units open so far, and wants to add 20 more in 2015. His big obstacle: Nobody knows his brand name in an industry dominated by the likes of Comfort Keepers, Home Instead and Brightstar.
Plus, the complicated revenue streams he targets make for an equally complex sales process. He’s entered into contracts with what he calls two of the top three brokers in franchising, and is working to ink a third.
Because brokers require a nominal fee up front and then earn commission on the back end, when a franchise is awarded, he finds the arrangements cost-effective. “Those organizations are prestigious. So far they are getting us lots of good candidates,” he says. He will also return to using portals in 2015, to get his name in front of more prospects and direct them to his website.
Verkhoglaz was a tech executive with marquee names like Goldman Sachs, CitiBank and Chase, so he counts Executive Care’s technology as a key attraction. A cloud-based platform allows franchisees to, for example, offer a client care portal with care notes and an email function, or handle billing with its complex coding requirements, or check on a caregiver’s arrival time at a client’s home. The technology platform is free for franchisees for the first six months, and then $450 a month after that.
Verkhoglaz continues to identify new ways for franchisees to make money, to bolster sales below $350,000 at the two units he can report in his franchise disclosure document, because they were operating from September 2013 to August 2014. His corporate stores generate more than $3 million.
And he continues to be out front. He’s identified a contractor who works with the Veterans Administration, for example, in the wake of last year’s scandal involving long wait times to provide care. He’s already ahead of federal law changes in 2014 that ended the exemption for companion caregivers from overtime pay, and ended the former practice that allowed live-in caregivers to be paid a flat rate rather than hourly.
“I saw a lot of people crying in Kansas City,” he says, where he attended a national convention of caregivers last fall. “They said, ‘We don’t know what to do.’” Verkhoglaz already has a plan in place.
His could be called a hard way to make a living, but he’d likely say the challenge only adds to a fulfilling line of work. Where’s the fun—or the competitive edge—if everything is easy? “That’s my mission, to keep everyone informed,” he says.
At Wild Wing Café, searching for operators with a bit of an edge
Here’s something you don’t hear very often from a franchisor: “We want rebel franchisees who go out there and make it happen.” Those are words from Tom Lewison, CEO of Wild Wing Café, who took the top spot in July and is charged with getting the 24-year-old chain growing.
It has 36 units so far, certainly respectable but not up to snuff considering franchising began in 1995. Backed by new investor Axum Capital Partners, which bought Wild Wing Café from its founders in 2012, Lewison will apply his skills honed at Bojangles.
Bojangles was 24 years old, too, when he started there, with 180 units, and it reached 500 by the time Lewison left. He’s also a franchisee himself, owning and operating 22 Wendy’s restaurants and 15 Qdoba Mexican Grills.
That’s the source of his love for independent operators. “We want entrepreneurs who want to push the envelope,” he says. “Do they have that wild edge? Do they know what’s hip and cool?
“We’re not about compliance. Our restaurants are not cookie-cutter,” and neither are its franchisees. He acknowledges the stance raises questions—if the franchisor’s role is about protecting the brand above all, looking for “rebel” franchisees might seem risky. “Some people will say, are you kidding me?”
But he points to the brand’s roots as an event-driven concept, hosting live entertainment since the beginning and identifying bands like Hootie & the Blowfish in their very early days. Restaurants host “Beard-toberfest” events in October, featuring a lot of facial hair and craft beer, or big oyster roasts with live music. “We don’t know of anyone who has that point of difference,” Lewison says.
While most casual-dining concepts have gone to value menus—two for $20 entrées, for example—Wild Wing Café hasn’t had to cut prices because people come for the entire experience. Average checks held steady through the recession as a result, he claims.
He also acknowledges the Goliath in the space—Buffalo Wild Wings—although he doesn’t like to mention them by name. “They’ve done a great job of carving out exactly who they are,” he allows when this reporter mentions the brand.
And that’s what Wild Wing Café worked to do for 60 intense days this past summer, after Lewison arrived and the team pored over data and research from the beginning of the chain to now.
“We will be a little patient with it. We want to crawl, then walk, then run.”
— Tom Lewison, Wild Wing Café
As an example of the power of independent owners, he points to Dave McFarland, a franchisee in Asheville, North Carolina, and Knoxville, Tennessee. He just converted an old boathouse on a lake into a Wild Wing Café, with outdoor volleyball courts and former boat pieces converted to interior décor. “It’s really cool,” says Lewison.
Lewison has slated seven restaurants to open in 2015, then 10 for 2016. He’ll focus intently on existing franchisees, because he believes if current owners aren’t opening more units, something’s wrong with the model. By 2017, he believes Wild Wing Café will be opening 15 to 20 stores a year and that will push above 20 at some point after that.
Lewison has tweaked the business model by, for example, redesigning site selection criteria by type of location, and testing a marketing plan at one store with a grassroots effort. “We call it Operation Bootstrap,” he explains. “We got a group together and talked about facility enhancement, we talked to our bartenders and asked what we should do with local craft beers. We put point-of-sale materials in the restaurants” to push certain items. “We trained our servers and gave them new uniforms so they felt good and looked good.”
Then they “bought a little radio advertising and we threw a party, and invited our guests to tell us what they thought.” Sales increased by double digits and have remained high, so the effort will be tested at more stores and then rolled out system-wide if results are as strong.
Lewison acknowledges seven new stores in the next year is not an outlandish number, but he’s fine with that. “This is not a sprint, it’s a marathon. We will be a little patient with it,” he says.
“Maybe I have a different perspective because I’m a franchisee and have invested a lot, and our franchisees have invested a lot, too. We want to crawl, then walk, then run” to protect their investment.