Blog Hotspot for Franchise News ...

Our thoughts again turn to the restaurant industry, especially the quick-service restaurant sector. Our Top 100 Global Franchises was dominated by the QSR franchises and for those considering expansion, either on a domestic or an international level, have to figure out how to negotiate a tricky and competitive market.

Franchise Times has an eye-opening story about the QSR sector in their most recent issue. It starts in Quaker Steak & Lube unit and the promises its founders made 35 years ago: that customers are having fun and feeling the food is unique. When a number of customers responded ‘No’ to both questions, Quaker Steak & Lube begin a root-and-branch examination of how their business functions. They encouraged staff to have more fun with customers and spend more time with them, while adding on extras wherever possible.

The result: Franchise Times reports that Quaker have enjoyed steady growth over the last year, despite the economic downturn and the exceedingly-competitive QSR sector. The reason: “They put more scrutiny on where they spend their dollars,”  Ken Cole, Quaker CEO, told the magazine.

Here’s how Franchise Times breaks down the restaurant sector at the moment:

A more discerning consumer is insisting on strong value and customer service and is punishing brands that don’t provide them to their satisfaction. Diners “are less influenced by prestige and more influenced by performance,” said Malcolm Knapp, publisher of the Knapp Track, a monthly report which tracks casual dining sales.

There’s a lot to chew on in this article, pertaining back to issues we were discussing yesterday. More and more, franchises are being asked to deliver a unique experience, unique even from other franchises operating under the same umbrella. If you’re a prospective restauranteur/franchisee, keep in this mind.

You’ll not only be expected to deliver a product that’s original, but an experience as well.

The sandwich franchise market is one of the most competitive in the food franchising sector. Overheads are low and margins are tight, which creates a saturated market that franchisees have to compete tooth-and-nail in in order to make a splash.

There’s a very interesting dispatch on sandwich franchising in the latest issue of Franchise Times magazine. The story centers around the introduction of the $5 dollar foot-long sub by Subway last year. The idea, which was quickly copied by other sandwich franchisees, was met with some consternation by franchisees like Jim Underwood of Alabama, who thought the discount would further eat into their profits (no pun intended).

The end result has been quite different.

Underwood isn’t hesitant anymore. “I’m paying a little extra food costs, and am getting a little less on the bottom line as a percentage,” he said. “But I had the best year ever, profit-wise, in 2008. So how could I really complain too much? It worked.”

He’s not the only one who had a good year. Subway’s sales were up 17 percent last year, according to the restaurant-consulting firm Technomic—a hefty amount for such a giant chain. Much of the credit goes to that $5 promotion, timed perfectly at the outset of a recession that would turn diners into value-conscious consumers.

At the same time that ice cream franchises are enjoying a resurgence, sandwich franchises are providing great sustenance to franchisees during the recession. It’s easy to understand why: their food is a cheap, healthier alternative, and for prospective franchisees, easier to purchase than a massive unit during a time when banks have little capital. The Franchising Times article is well worth the read, as it speaks with a variety of people in sandwich franchising about the future of the industry.  It also testifies to the advantages of offering discounts to attract new customers.

As a side note, the foot-long discount was introduced by a franchisee in Florida before eventually being taken up by the franchisor and put into effect on a national level. This kind of initiative shows how effective franchisees can be at bringing about change.

Here at the Franchise Direct blog, we are always looking to keep franchisees abreast of new technological developments that might help them generate new business solutions. So we feel dutybound to blog about this recent Wall Street Journal story about a new study from the Center for Hospitality Research at Cornell University on dining technology.

Nearly 2,000 restaurant-goers were asked their opinion on the usefulness of a number of computer technologies that are meant to improve their dining experience, such as online reservations or paying with a cell-phone. Some of the findings will be of great interest to food franchisees with eat-in options.

• The most popular restaurant technologies are pagers and online reservation systems
• Diners prefer technology that increases convenience at the beginning stages of the meal, instead of the end.
• Diners rarely use cell-phone payment.

Also, we’ve written extensively about the state of the pizza franchise industry in the past. Pizza franchises with take-out/ delivery options might be interested to learn about the latest innovation in pizza boxes: the green pizza box (it’s called that even if it is made out of cardboard). The video below explains all:

Here are two very interesting food franchising trends spotted in the Wall Street Journal lately. Both have emerged as responses to the recession and one in particular illustrates the kind of ingenuity franchisees will need to beat this downturn.

Food franchises purchasing empty food franchises: As the number of failed restaurants begins to add up, successful food franchises are looking to convert these empty sites into their own brand image.

The story quotes Mike Nolan, CDO of Panera Bread, a food franchise that has been taking over a number out-of-business Bennigan’s restaurants. Mr Nolan confirms the general consensus of this blog that there’s no better time to open a franchise than during a recession.

“Our experience says the best time to grow, all else considered, is during times of recession,” says Mr. Nolan.

With the risks and capitol involved with building new units, franchisors are beginning to target the growing number of vacant restaurant spaces. This will be a trend to watch over the coming weeks and months.

Free food: The WSJ also reports that some Denny’s restaurants are giving away one Grand Slamwich if you and a friend both order one tomorrow. Meanwhile, Cici’s Pizza is spreading one million pennies across the floor of its stores offering free and discounted pizzas should customers discover a lucky coin with a sticker on the bottom.

Free food is probably the natural extension of the ‘In Rainbows’ approach to dining, in which customers at select restaurants pay what they feel is the deserved price for their meal. This is perhaps a sign of how desperate some restaurateurs are to get diners into their establishments. But our research shows that consumers are still willing to pay for a meal, they’re just far more selective. One hopes that the occasional free meal will attract more customers.

It’s hard to pick up a magazine or turn on the TV or radio these days without coming across a story about Twitter, the microblogging phenomenon that has taken the world by storm. Just as many entrepreneurs have been scratching their heads to try to find a way to make social networking applications like Facebook work for their business, they are now turning to Twitter for a business edge. And some are finding one.

Mobile franchisees looking to increase their visibility should take a page out of the book of Kogi BBQ in Los Angeles. The Wall Street Journal recently blogged about Kogi and their exceedingly popular food fusion: Korean tacos. Given the demographics of Southern California, they have access to a potentially massive market, but like every small business in LA, they have to find better ways to reach customers. Kogi BBQ turned to Twitter, as you’ll see here. Having built up a small cult following, Kogi began to ‘tweet’ its locations, and soon found two hour lines forming outside its vans, as 400 people a night enjoyed a Korean taco.

As Jeffiner Steinhauer of the New York Times writes:

The truck capitalizes on emerging technology by sending out Twitter alerts so fans know where to find it at any given time.

Franchisees are getting in the act, such as this Subway franchise in Preston in the UK. But it’s not only business people on the ground level using Twitter effectively. In this editorial for Forbes, Mike Schaffner, who directs IT for the Valve and Measurement Group of Cameron in Houston, talks about how Twitter has helped him cement better connections in the business world.

He says:

Twitter is like a party with old friends and new acquaintances where the conversations drift between the serious and the trivial, and back again.

The frustrating thing about social media applications like Twitter is that soon as enough of the population have mastered it, some new technology always seems to come around and take it place. In the short term, and possibly the long term, Twitter has proven to be very effective for a number of businesses and it’s the kind of thing franchisees should be experimenting with to raise their profile.

How about you? Are you finding Twitter to be an effective way to reach customers or promote your business or merely a distraction?