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ACAI EXPRESS ON FAST TRACK TO U.S. EXPANSION

The cornerstone of Acai Express® fast casual menu is the acai berry, a purple, antioxidant-rich stone fruit that hails from the Amazon River basin. The Acai Express® franchise differentiates itself by using only 100% pure, Grade A, organic acai berries to promote a healthy lifestyle.

ACAI EXPRESS ON FAST TRACK TO U.S. EXPANSION
Leading Organic Super Food Franchise Signs Two New U.S. Franchisees

New York, New York, September 19, 2018 – Acai Express®, the Puerto Rico-based lifestyle brand that offers an acai berry fresh fruit and nutrient-rich menu for healthier living, has awarded two U.S. franchises: one in Denver, Colorado and the other in Rockaway Township, New Jersey.

These new franchisees, signed shortly after Acai Express® entered the U.S market in May, speak to the popularity and health benefits of the acai berry and consumer demand for the turnkey Acai Express® franchise concept. From their humble beginnings as a single San Juan surf side food truck, Acai Express® has grown to thirteen (13) locations in Puerto Rico, and three (3) franchise locations in Cocoa Beach, FL; Denver, CO, and Rockaway Township, NJ.

The cornerstone of Acai Express® fast casual menu is the acai berry, a purple, antioxidant-rich stone fruit that hails from the Amazon River basin. The Acai Express® franchise differentiates itself by using only 100% pure, Grade A, organic acai berries to promote a healthy lifestyle. The menu of high quality, high nutrient meals, grain bowls, and/or desserts includes acai, oatmeal and pitaya bowls, smoothies, salads, juices and lemonades. ”The preference for a healthy lifestyle and the demand for a super food based diet has never been stronger.” Says Acai Express® founder, Hector Westerband. He envisions Acai Express® outposts in every city in America and around the globe.

“Acai Express® offers a high quality alternative to fast food, with healthy fresh foods that taste
great and are good for you.” Says Denver, CO franchisee, Jacob Kahn. “In addition to a turnkey operating system and its entrepreneurial spirit, I was particularly drawn to the Acai Express® brands commitment to social responsibility. Specifically, the support Acai Express® provides the Brazilian communities where the acai berry is grown to help conserve the Amazon rainforest. I am excited to be bringing the brand to Colorado.”

New franchisee George Paul in NJ agrees, “I decided to become an Acai Express franchisee because I believe there is a growing trend in the restaurant industry for healthier options not only among fitness conscious individuals but also amongst teens, Millennials and even the older generations. I believe Acai Express Superfood Bowls is well positioned to succeed with its Superfood menu and commitment to providing our guests with healthful and freshly made products in an atmosphere that promotes fitness, wellness, and positivity.”

Acai Express® launched its U.S. expansion effort with the help of franchise industry expert, Gary Occhiogrosso, founder of Franchise Growth Solutions, LLC. Mr. Occhiogrosso has over 30 years’ experience in franchise development and sales, and was integral to the success of nationally recognized brands including Ranch *1, Desert Moon Fresh Mexican Grille, and brands found under the multi-brand franchisor, TRUFOODS, LLC.
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ABOUT ACAI EXPRESS®
Acai Express® is an Acai-based super food shop that uses fresh and organic ingredients to create nutrition-rich meals for active and adventurous consumers who are proactive about their health and wellbeing. From one surfside food truck in Puerto Rico in 2013, Acai Express has grown into a recognized lifestyle brand available in 15 locations in the Puerto Rico and the U.S. Acai Express combines the growing trend toward one bowl meals, super food ingredients, and fresh fruit smoothies in a socially responsible business model.

ABOUT FRANCHISE GROWTH SOLUTIONS, LLC
Franchise Growth Solutions, LLC is a strategic planning, franchise development and sales organization offering franchise sales, brand concept and development, strategic planning, real estate and architectural development, vendor management, lead generation, and advertising, marketing and PR including social media. Franchise Growth Solutions’ proven “Coach, Mentor & Grow®” system puts both franchisors and potential franchisees on the fast track to growth. Membership in Franchise Growth Solutions’ client portfolio is by recommendation only.
For more information on ACAI EXPRESS® fast casual restaurant concept, please visit acaiexpress.com. For information on owning your own ACAIEXPRESS® franchise, please contact Gary Occhiogrosso at 917.991.2465 or via email at [email protected]

The Importance of Franchisors Building Relationships With Their Franchisees

The Importance of Franchisors Building Relationships With Their Franchisees…

Photo by rawpixel on Unsplash

“Over my forty-plus years representing franchisors, I have seen too many franchisors fail because they do not realize how important it is for their franchisees to succeed and make money.”

The Importance of Franchisors Building Relationships With Their Franchisees
By Gary Occhiogrosso- Founder of Franchise Growth Solutions, LLC.

When Onboarding new franchisees the franchisor should always remember that a common thread to success is the franchisor’s culture of support, co-operation, communication, education, and profitability with their franchisees. Building an ongoing relationship with its franchise community can mean the difference between growing a restaurant brand to hundreds of units or failing before ever making a mark in the industry.

Without these critical components in place, a restaurant franchisee can quickly go “off the rails” and compromise brand standards. It’s not long before many of these franchisees negatively redefine the brand. Poor service, improperly prepared menu items, lesser quality ingredients and overall appearance and cleanliness of the restaurant are just a few reasons why a healthy relationship with your franchise owner is essential.

It Starts At the Beginning.

Creating the proper franchisor /franchisee relationship builds success for both. This relationship building must begin right from the start. Successful restaurant franchisors know that ramp-up time and getting a new restaurant profitable takes smart planning and hard work by both the franchisor and the franchisee. The training, support, communication and ongoing assistance the franchisee receives early on in the relationship can set the tone for the entire term of the franchise agreement.

One of the most crucial steps a franchisor can take begins when selecting a franchisee. Franchisors should conduct an in-depth interview as part of a thorough vetting process. Along with the obvious discussions such as past management and business experience, time commitment to the operation and funding, franchisors must also explore the core business values of the franchise candidate. Spending this time upfront to examine the candidate’s vision, expectations and the overall business plan goes a long way into understanding if the potential franchisee shares common goals with the franchisor. It is also the first step in building brand value and a robust, lasting business relationship.

Increase Your Communication And Reduce Your Failure

New businesses can fail for a variety of reasons. Although the vast number of restaurant failures are due to undercapitalization, it could also be the result of substandard operations, inefficient marketing, poor location and changing consumer trends. In addition, a failure in a franchised restaurant may be the result of the franchisee working outside the franchisor’s branded system. Franchisees can destroy their business by implementing procedures and introducing products that are counterintuitive to the brand image. Franchise owners often lack the time, experience and money to do proper research on a new product or a new procedure, never realizing that it may disrupt the entire system. Conversely, franchisors must always be aware and teach the idea that “everything touches everything else.” Building a healthy relationship and a clear channel of communication with the franchise owner can often prevent franchise owners from circumventing the system in the first place.

Harold Kestenbaum noted franchise attorney who has specialized in franchise law and other matters relating to franchising since 1977 explains: “Over my forty-plus years representing franchisors, I have seen too many franchisors fail because they do not realize how important it is for their franchisees to succeed and make money. Franchising is a two-way street, and to be a successful franchisor, you, as the franchisor, must understand this and make it happen. Franchisors cannot be successful if they think that it’s only them who should make money. Ray Kroc knew that franchising could only work if the franchisees made money along with the franchisor. Supporting your franchisees from the outset, and not when they are choking is imperative and franchisors need to realize this. One such way to make this collaborative effort work is by creating a franchisee advisory board. Franchisors with more than ten franchisees need to implement this without the franchisees asking for this. A franchisee advisory board will show the franchisees that you are trying to make them be a part of the system and that you want their input. Franchising is not an autocratic method of doing business; it is a collaborative method of doing business.”

Looking in the Mirror Helps

It’s easier to blame the franchisee for failure than franchisors like to admit. Franchisee behavior is often a reflection of the franchisor. Some franchisors are quick to dismiss why proper onboarding, relationship building, creating brand value, and adequate franchise support are vital to the success of the new business. When a franchisee loses confidence in the franchisor, it is complicated to turn back. Franchisees stray or “go rogue” because franchisors fail to supply the “rails” that the franchisee must run on.

An open, working relationship between the franchisor and the franchisee is the most important aspect of brand success. Franchisors must take a very active role in the franchise operation, perhaps more than they want. Supplying great tools, conducting superior training, regular visits to the restaurant to evaluate the goals and progress of the business is a crucial commitment a franchisor must make. Communication, transparency, ongoing coaching and counseling are the essential elements of relationship building. The ROI for these efforts will be opening hundreds or even thousands of franchised restaurants locations.

Franchisees Need To Have An Exit Strategy

Identify a qualified advisor who can aid in developing a formal exit plan. An advisor could be an experienced attorney, financial advisor or accountant, who can assist with the various implications and tax issues regarding the sale or transfer of ownership. Surveys of small business owners indicate that their CPA is considered the most trusted advisor.
Establish the primary exit goal, for example, transitioning to a family member, sale to a third party, the franchisor or private equity group.

Franchisees Need To Have An Exit Strategy

Ed Teixeira – Contributor
Relying on 35 years of franchise industry knowledge

Franchisees seek to sell their business for a variety of reasons including burnout, personal issues, retirement or new opportunities. Whatever, the reason, every franchise ought to have an existing exit plan whether the execution of the plan takes place or not.

The Exit Planning Institute reports that: “Roughly six million privately held companies are operating in the United States, with approximately $30 trillion in sales. An owner who is “ready” with an attractive business greatly increases the odds that the business will survive a transition of hands. The question is, how ready are business owners?” Although this report doesn’t indicate whether it includes franchises, we’ll assume these statistics can apply to the franchise industry.

A survey of Long Island business owners was conducted by Dr. Richard Chan of Stony Brook University and Christopher Snider of the Exit Planning Institute. Franchisees should compare the results to their own situation as a franchise owner.

* 74% of businesses are family owned
* 63% have no board of directors or advisory board
* 50% consider ownership transition a top priority but 50% were not ready to transition their business
* 43% had no exit plan
* 17% had a written transition or exit plan
* 60% had not determined what they need to obtain from the sale of their company
* 82% had no outside resource or advisors to assist in an exit plan
* Their most trusted advisor was their CPA

Fundamentals of a Franchise Exit Strategy

Franchisees, whether they operate one or more units should have a written plan in place for either selling their business or transitioning ownership to a family member. For franchisees, this issue is particularly important since unlike independent business owners, the sale of a franchise is subject to franchisor approval, that can require equipment and location upgrades, which in the case of certain franchises can be costly. Many a franchise sales transaction was canceled because neither the seller or buyer would do remodel upgrades. In addition, there are important tax considerations that come into play because of the franchise sale. The lack of an exit plan and the related decisions that need to be made can impact the value of the franchise when it’s time to sell.

How to Begin

Identify a qualified advisor who can aid in developing a formal exit plan. An advisor could be an experienced attorney, financial advisor or accountant, who can assist with the various implications and tax issues regarding the sale or transfer of ownership. Surveys of small business owners indicate that their CPA is considered the most trusted advisor.
Establish the primary exit goal, for example, transitioning to a family member, sale to a third party, the franchisor or private equity group.
Set a range of time for selling or transitioning ownership of the business, such as two-five years or longer.
Decide whether you’ll want to stay involved in the business as an advisor, minority owner, etc. Some buyers want the seller to stay involved for a period of time while others want a clean break. It depends on the buyer.
List those items or actions that could increase the value of the business. Sometimes a few changes can make a major difference in value.
A marginally profitable business can be very difficult to sell, according to BizBuySell, only 20% of all businesses listed for sale actually sell. Finding a buyer on the open market can be a long process. Some businesses can be difficult to value, and the selling price may be much lower than expected.

Payment Terms

Seller financing has always been a mainstay of selling a business. Many buyers are reluctant to pay all cash and use most of their capital. Some buyers also feel that a business should pay for itself and are wary of a seller who wants all cash or who wants the carry-back note secured by additional collateral or personal guarantees. What sellers seem to be saying, at least as perceived by the buyer, is that they don’t have a lot of confidence in the business or in the buyer or perhaps both. However, if we look at statistics, it’s apparent that sellers receive a much higher purchase price if they accept terms.

Studies reveal that, on average, a seller who sells for all cash receives only 70% of the asking price. Sellers who are willing to accept terms receive, on average, 86% of the asking price. That difference on a business listed for $250,000, meaning that the seller who is willing to accept terms will receive about $40,000 more than the seller who is asking all cash, which is compelling reasons for a seller to accept terms.

The Buyers Expect Certain Financial Information

Who does the franchise financials? How believable are the numbers? If the franchise has a bookkeeper, will they let a buyer contact him or her? Can you get a copy of the franchise credit report? Is the franchise on good terms with the major suppliers? Three years of financial information is expected. Equipment contracts or leases or any other financial obligations of the business. They will expect to see receivables and payables and hidden obligations of the business. Be prepared to present some information regarding the performance of the franchise network.

Valuing the Selling Price of the Franchise

The easiest, and probably the most reliable method of putting a recommended selling price on a small business is what is commonly referred to as the discretionary cash flow or the discretionary earnings method. This method is based on the actual earnings of the business and is determined by the profit and loss statement. To figure out the cash flow or actual earnings of the business, it is necessary to make certain adjustments to the profit and loss statement. These adjustments, when added to the profit of the business, determine the “real cash flow” of the business. Add the owner’s salary, perks, family perks, and salary, business trips, company vehicles, and other discretionary expenses. This total cash flow figure is then multiplied by a number applicable to the specific franchise category. For franchises, the average multiple can range from 2 to 4 times SDE. The discretionary earnings method is appropriate for small businesses and franchises many business brokers encourage to use. There are other valuation models available. The Business Brokerage Press sells a Reference Guide for Businesses and Franchises that provides numerous valuation models.

Franchisees should have an exit plan in place to sell their franchise. A formal exit plan will enable the franchise owner to maximize the value of their franchise whether the sale is planned or not.
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About the Author
Ed Teixeira
Ed Teixeira is Chief Operating Officer of Franchise Grade and was the founder and President of FranchiseKnowHow, L.L.C. a franchise consulting firm. Ed has over 35 years’ experience as a Senior Executive for franchisors in the retail, healthcare, manufacturing and software industries and was also a franchisee. Ed has consulted clients to franchise their existing business and those seeking strategic solutions to operational, marketing and franchise relations issues. He has transacted international licensing in Europe, Asia, and South America. Ed is the author of Franchising from the Inside Out and The Franchise Buyers Manual and has spoken at a number of venues including the International Franchise Expo and the Chinese Franchise Association in Shanghai, China. He has conducted seminars, written numerous articles on the subject of franchising and has been interviewed on TV and radio and has testified as an expert witness on franchising. He is a franchise valuation expert by the Business Brokerage Press. Ed can be contacted at [email protected]

With A Focus On Healthy, High Quality Menus, Fast Casual Franchised Restaurants Sprint In A New Direction

As enticing as these food offerings may be to our palate Consumers may find themselves paying almost double what they would at a traditional fast food location. Locally sourced, organic and sustainable food suppliers still see this segment as small compared to conventionally processed ingredients, so access and availability remain a challenge.


Photo by Jade Wulfraat on Unsplash

Quick With A Focus On Healthy, High Quality Menus, Fast Casual Franchised Restaurants Sprint In A New Direction
By Gary Occhiogrosso

As recently as 15 years ago the idea that you could grab a nutritious, healthy and still tasty meal from a drive-thru or fast food restaurant was unheard of. It wasn’t until the post-Y2K era that fast food customers started to become aware with what they ate. As the Millennial generation started spending money on food outside the home the industry has been “forced” to move toward healthier, high-quality menu alternatives. Once begun this movement toward fresher, greener menus have continued to accelerate at an ever increased pace.

Does Better for You equal Better for Business

Consumer attitudes regarding the link between diet and health have shifted. Data shows that Millennials and aging baby boomers are taking a more proactive approach to healthy eating. Many have adjusted their dietary choices to promote better health. The demographic with higher levels of education and more disposable income is pushing this trend forward. These health-conscious consumers take the time to research before they dine out. In addition, they seem more willing to pay higher prices to ensure that what goes into their bodies is nutritious.

With this new consumer focus on nutrition, sustainability and ‘clean food’ comes a revolution in the Quick Service Restaurant (QSR) industry. According to a recent article in Business Leader, 83% of Americans believe that fast food from traditional Quick Service franchises is not healthy. This has created the rise of the ‘better for you’ brands that now compete with fast food quick-service McDonald’s, Burger King, and KFC. For example, healthy quick service brands such as Dig Inn, By Chloe, and Sweetgreen are creating their own niche by specializing in organic, locally sourced meal options that contain more vegetables and fewer calories than traditional burgers and fries.

Quality comes with a Cost
As enticing as these food offerings may be to our palate Consumers may find themselves paying almost double what they would at a traditional fast food location. Locally sourced, organic and sustainable food suppliers still see this segment as small compared to conventionally processed ingredients, so access and availability remain a challenge. As a result, many healthier focused chains are developing altogether new selling propositions by positioning “value with reasons” as a way to compete with the traditional fast food chains of the industry. These “better for you” concepts post nutritional information, health benefits as well as the sourcing and methods used in their products. The emphasis is on local, clean, humanely raised and organic.

One such concept is Salad and Go. Branded as a healthy drive-thru option, Salad and Go offers large salads, smoothies, soup and breakfast with an “Always Organic” list of ingredients. In addition, the brand highlights their competitive prices. Salad and Go currently has in 10 locations in the U.S. with plans to nearly double that number by the end of 2018.

Another U.S. chain, LocoL, offers food made only from local ingredients. Founders & Chefs Roy Choi and Daniel Patterson claim “We at LocoL want to live in a world where eating healthy doesn’t take a lot of money or time.”

New quick service food concepts like these are branding their menu items as healthy, high quality alternatives to the sugar, fat, and salt-heavy meals provided by traditional fast food franchises. Recently developed QSR concepts give consumers a choice. Whether it’s organic, farm to table, all natural, gluten free, vegan or humanely raised, the race to innovate and meet this rising consumer trend has never been more of a priority in the Quick Service Restaurant segment than it is today.

Forcing Innovation in Traditional Brands
As new brands continue to make their mark in the minds of U.S. consumers, established brands are attempting to keep up with changing demands. Fast food chains such as Taco Bell have promised to use cage-free eggs and reduce artificial ingredients, and McDonald’s has started selling antibiotic free chicken, and now cooks many of its items to order and offers more salads. It is yet to be seen if that alone will be enough to keep the long-standing leaders in the QSR industry on top.

Serving up Quality, Quickly and Consistently
These QSR pioneers are faced with the challenge of living up to the expectations of an informed, proactive consumer. These newer concepts must not only live up to the marketing message but also ensure that their operations can provide consistent, quality products in every location. Their business models must be replicable and easily managed. This may also prove to be a challenge when food is being prepared to order using fresh locally sourced ingredients instead of processed or precooked menu items. If they can accomplish these tasks, the potential for growth is unlimited.

Regardless of the challenges facing these new “better for you brands”, the move away from traditional fast food to healthier quick service food options is unstoppable. As a means to address consumer concerns, in late 2017, the FDA announced new regulations requiring large restaurant chains to add calorie counts to their menus by 2018. This, combined with health-conscious consumers, will continue to push these new QSR chains to sharpen their competitive edge by offering a wider variety of great tasting, healthier options. As I see it, the success of the “better for you” fast casual concepts will depend on their adaptability to trends, consistency in product, as well as the price point and expense management.
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About the Author:
Gary Occhiogrosso is the Founder of Franchise Growth Solutions, which is a co-operative based franchise development and sales firm. Their “Coach, Mentor & Grow Program” focuses on helping Franchisors with their franchise development, strategic planning, advertising, selling franchises and guiding franchisors in raising growth capital. Gary started his career in franchising as a franchisee of Dunkin Donuts before launching the Ranch *1 Franchise program with its founders. He is the former President of TRUFOODS, LLC a multi-brand franchisor and former COO of Desert Moon Fresh Mexican Grille. He advises several emerging and growing brands in the franchise industry. Gary was selected as “Top 25 Fast Casual Restaurant Executive in the USA” by Fast Casual Magazine and named “Top 50 CXO’s” by SmartCEO Magazine. In addition, Gary is an adjunct instructor at New York University on the topics of Restaurant Concept & Business Development as well Entrepreneurship. He has published numerous articles on the topics of Franchising, Entrepreneurship, Sales, and Marketing. He was also the host of the “Small Business & Franchise Show” broadcast over AM970 in New York City and the founder of FranchiseMoneyMaker.com

Building a Trusting, Engaged, and Accountable Workplace Culture

“What is the culture of this company” to a front-line staff member, the receptionist, the janitor, or anyone in between and you will receive a different answer.

Company Culture – What does this Mean?
By Jennifer Cook, Chief Operations Officer
http://www.symbiancehr.net/

When working with our clients we often have the leadership team explain to us what the culture of the organization is. Sometimes it is comprehensive, other times the description is brief, and still other times the culture sounds oddly like a list of core values. Unfortunately, for most organizations, if you ask the same question “What is the culture of this company” to a front-line staff member, the receptionist, the janitor, or anyone in between and you will receive a different answer. It is a discouraging fact, however, it should also be a wake-up call for leadership to consider their efforts to reinforce the desired culture and message the cultural goals so it permeates across the enterprise.

Remember, culture is simple terms can be defined as the actions and behavioral norms of the organization. Therefore, regardless of what you think the culture is, or what you desire it to be, if you do not influence and impact the behaviors of the workforce to model and demonstrate the desired culture it will not exist.
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It is important that all employees within your business work together and share accountability. Employees who work together towards the same overall goal to help their workplace to become more accountable, in turn, make the business more productive and successful.

The Impact of Failed Accountability
By Laura Goad, HCM Consultant

Great leaders know that positive accountability creates a culture of trust, engagement, and excellent performance. The impact of failed accountability can be detrimental to your business. When employees do not have a system of accountability in place, things can quickly fall apart. Lack of accountability causes a culture problem within your business. When no one trusts each other at work to do what they are assigned to do, employee morale suffers. Employees feel like they can’t trust their supervisor. They feel undervalued, and when employees aren’t feeling valued, they are less likely to be engaged with their work.

Lack of accountability in the workplace often stems from ineffective leadership practices. To achieve the goals of your business, it is important that all employees within your business work together and share accountability. Employees who work together towards the same overall goal to help their workplace to become more accountable, in turn, make the business more productive and successful.

Change your workplace culture so that accountability is included. Lead by example. Make sure employees know that they’ll be accountable for their work by creating guidelines about how you’ll monitor their productivity. Set weekly goals and deliverables, which will in return motivate employees to complete takes on a regular basis. Finally, praise them when you find them doing things right.
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About SymbianceHR
The seasoned professionals that make up the SymbianceHR Team bring to the table over 40 years of hands on experience in all areas of Human Capital Management.

Small and medium sized business seem to be placed in an area where they find themselves either too small to have an in-house Human Resources department (HR) or not large enough to have the resources necessary to keep the in-house HR staff up to date on recent modifications, additions and new policies.

In essence, a large portion of the small to medium sized business are operating out of compliance, or in an ineffective, and costly manner. Much in part to the fact that they have either not exercised discipline in the area of Human Resources or have mistakenly seen it as an expenditure entry as opposed to a cost reduction source.

With an abundance of resources, our Team stands ready when our clients, or potential clients, need us most. Whether that is for covering questions or concerns pertaining to: hiring, firing, benefits, employee retention, compliance, or lack thereof, regulatory updates, and recordkeeping or a quick study of current policies and procedures for conformity.

One of a business’s greatest assets is their employee base (Human Capital), however with that great asset comes, at times, great challenges. We work with our clients to guide them through the challenging times as well as the not-so-challenging, assisting them toward accomplishing their goals, while often saving them time, money and stress in the process.
http://www.symbiancehr.net/
SymbianceHR – Your Challenges. Our Solutions. A Successful Relationship.

Connecticut-Based Riko’s Thin Crust Pizza To Capitalize On Fast-Casual Food Boom With National Franchise Opportunities

Riko’s Thin Crust Pizza has teamed with franchise industry expert, Gary Occhiogrosso,founder of Franchise Growth Solutions, LLC, to expand the turnkey Riko’s Thin Crust Pizza casual QSR (quick service restaurant) business model from 3 locations in 2018 to 15 locations by 2020. Riko’s Thin Crust Pizza franchises are currently available in CT, RI, NY, NJ, and along the Eastern Seaboard.

Connecticut-Based Riko’s Thin Crust Pizza To Capitalize On Fast-Casual Food Boom With National Franchise Opportunities

Riko's Pizza of Connecticut

Stamford, CT: Riko’s, the Connecticut-based chain that has defined thin crust pizza in Fairfield County, moves to franchise the regional Riko’s brand nationally, according to founders, Rico Imbrogno and Luigi Cardillo.

A CONNECTICUT FAVORITE

“Pizza is America’s #1 comfort food*,” contends co-founder and brand namesake, Rico Imbrogno. “And, perfect pizza begins with the perfect crust. Not surprisingly, two-thirds of consumers prefer a thin crust pizza.” Business Insider concurs, naming the $45 billion pizza industry the fastest growing segment of all fast-casual restaurants with thin crust and new toppings leading the trends.

A staple for pizza lovers in Fairfield County, CT, Riko’s began with a single location in 2011 on Selleck Street in Stamford. That establishment, famed for its thin crust, hot oil pizza, quickly expanded from a takeout and delivery eatery into an 80-seat full-service dining spot. A second location with a full bar area was added in 2016 on Hope Street in Stamford. A third Fairfield County “Express” version opened in 2018 on Connecticut Avenue in Norwalk, CT. Each offers a complete menu of high-quality thin crust pizzas, salads, chicken wings.

FRANCHISES NOW AVAILABLE

Riko’s Thin Crust Pizza has teamed with franchise industry expert, Gary Occhiogrosso, founder of Franchise Growth Solutions, LLC, to expand the turnkey Riko’s Thin Crust Pizza casual QSR (quick service restaurant) business model from 3 locations in 2018 to 15 locations by 2020. Riko’s Thin Crust Pizza franchises are currently available in CT, RI, NY, NJ, and along the Eastern Seaboard.

Mr. Occhiogrosso has over 30 years experience in franchise development and sales and was integral to the success of nationally recognized brands including Ranch *1, Desert Moon Fresh Mexican Grille, and those found under the multi-brand franchisor, TRUFOODS, LLC.

ABOUT RIKO’S THIN CRUST PIZZA

Riko’s Thin Crust Pizza is a chain of “new generation” pizzerias located in Fairfield County, CT. using a recipe handed down for generations; Riko’s offers authentic Italian fare using the highest quality and fresh ingredients. Known for its thin crust pizza, Riko’s also offers a full complement of salads, wings and other menu items.

ABOUT FRANCHISE GROWTH SOLUTIONS, LLC

Franchise Growth Solutions, LLC is a strategic planning, franchise development and sales organization offering franchise sales, brand concept and development, strategic planning, real estate and architectural development, vendor management, lead generation, advertising, marketing and PR including social media. Franchise Growth Solutions’ proven “Coach, Mentor & Grow®” system puts both franchisors and potential franchisees on the fast track to growth. Membership in Franchise Growth Solutions’ client portfolio is by recommendation only. Offer by prospectus only.

*Source: Harris Poll 2017, 2018

The franchise sales information contained herein does not constitute an offer to sell a franchise. The offer of a franchise can only be made through the delivery of a Franchise Disclosure Document (FDD.) Certain states require that we register the FDD in those states. Such registration, or exemption, does not constitute approval of the information in the FDD by that state agency. The communications on this web site are not directed by us to the residents of any of those states. Moreover, we will not offer or sell franchises in those states unless we have registered the FDD (or obtained an applicable exemption from registration) and delivered the FDD to the prospective franchisee in compliance with applicable law.

Contact:
Gary Occhiogrosso
Franchise Growth Solutions
917-991-2465
[email protected]

PEOPLE HAVE TO EAT, DON’T THEY? – WHAT’S HAPPENING ON MAIN STREET?

We have pointed out many times that the restaurant industry is a great leading indicator for the economy as a whole. If that theory prevails, there is no boom ahead.

RESTAURANT INDUSTRY – PEOPLE HAVE TO EAT, DON’T THEY? – WHAT’S HAPPENING ON MAIN STREET?
By Roger Lipton

While the restaurant stocks mark time this summer, at historically high valuations, it is a good time to consider the major trends within the group.

There has been little specific news, since quarterly earnings reports for the period ending 6/30 or 7/31 have yet to be released. However, we can surmise what’s happening in a general sense, and consider whether there have been any major “inflection points” that we can take advantage of. In short, though the general economy, as reported by our “business friendly” administration, is picking up steam, there is little in the hospitality sector, including restaurants and retail, that indicates there is any growing momentum.

To be sure, there is more comfort and confidence by consumers as well as restaurant operators than there was a few years ago and especially back in ’08 and ’09. The public is more secure in their employment, though wage increases are still lagging the numerical employment statistics. The general economy may be on the verge of 4% real GDP growth in Q2, but same store sales and traffic are showing very modest progress.

According to Miller Pulse, Fast Food (QSR) same store sales were up 2.2% in June, the same as May, up just modestly from 1.6% in April and an average of about 0.8% in Q1 which was negatively affected by winter weather. Traffic has improved from a negative 2.7% in Q1, but is still negative every month in Q2, by an average of 0.8%.
It is the same story in Casual Dining, with traffic improving from an average of about 1.8% in Q1 but still negative every month in Q2, and down about 1.0% for the quarter. Same store sales were up about 0.8% in Q2, barely up from a positive 0.4% in Q1.

We have pointed out many times that the restaurant industry is a great leading indicator for the economy as a whole. If that theory prevails, there is no boom ahead. Though some industry observers are touting the better trends, we continue to hear the country western refrain: “Down so long, it looks like up to me”.

Anecdotally, we hear that consumers are feeling better, but still spending carefully, just as the reported sales and traffic results indicate. Job security may be better, but exposure (if not actual expenses) for health care is a substantial financial burden for many families. The housing and auto industries are increasingly sluggish as interest rates rise, and these are important portions of the economy. Gasoline prices are higher again than a couple of years ago and also help to absorb the discretionary spending from slightly higher wages. Restaurant operators are feeling better because sales have stabilized at least, but higher wage, occupancy and even commodity costs are conspiring to keep profits subdued even if sales are firming by point or two. Very few operators are building new stores, preferring to renovate and/or expand current facilities or acquire other operators. Quite a few chains, Jack in the Box, Dunkin Donuts and Chili’s have difficulty meeting return on investment hurdle rates with real estate costs so high, even though interest rates are historically so low. As interest rates rise, more operators will find themselves in the same boat, unable to afford new locations.

Among the restaurant companies that are doing relatively well, we can point to McDonald’s, Wingstop, Domino’s, the Darden concepts, Del Taco, and Texas Roadhouse. Companies that are “holding their own”, with varying degrees of difficulty, include Wendy’s, Burger King, Denny’s, Popeye’s, Cheesecake Factory, Chuy’s, Starbucks, Dunkin Donuts, and Bloomin Brands. There are quite a few companies, more than the few listed first above, that are re-inventing themselves to some degree, including Bojangles, Jack in the Box, Habit, Famous Dave’s, Sonic, Dave & Buster’s, Red Robin, Papa Murphy’s, Buffalo Wild Wings, Tim Horton’s, Applebee’s, Ihop, Chipotle, and Zoe’s, and others. You can read about almost all of these companies at the “corporate description” site on this website, accessed from our Home Page. None of the above listings are meant to be all inclusive, and managements are encouraged to give us a call if we have mis-categorized someone. These listing are meant to illustrate that there are more chains that are currently challenged than are firing on all cylinders.

Earnings reports will start to come in for Q2 ending 6/30 in a couple of weeks. Based upon the apparently still sluggish trends, we see no reason why July and early August numbers will give management a reason to risk the prediction of a strong fall season. There is just no reason to stick their neck out. Guidance will likely be conservative, leaving room to UPOD (under promise and over deliver). We will do our best to read between the lines and report to you the “reality” rather than the “story”.

Learn more about Roger Lipton at: http://www.liptonfinancialservices.com

Inclusion used to Create a Competitive Advantage

In various work activities and in the execution of job duties, there is a myriad of opportunities to leverage the existing diversity of the organization to enhance the development of solutions to solve everyday business challenges.


Inclusion used to Create a Competitive Advantage
By Warren Cook

Over the past few decades, organizations have repeatedly asked me to “bring them diversity” and help them improve how they are viewed by the workforce and rest of the world. The request is fundamentally wrong and the strategy to enhance the workforce and create both ROI and a competitive advantage remain in an inclusion strategy.

Inclusion is the act of being inclusive, to include others. In various work activities and in the execution of job duties, there is a myriad of opportunities to leverage the existing diversity of the organization to enhance the development of solutions to solve everyday business challenges.

I encourage business leaders and human resource professionals to step back and analyze their current practices and approach to Diversity & Inclusion, and instead formulate a new strategy that does not focus on creating the diversity that already exists, but instead focuses on the development of programs that involve and include members of the workforce in creative and innovative ways to use their diverse characteristics as a competitive advantage.

If after reading this short article on this topic you are asking yourself “How can we turn inclusion into ROI and a competitive advantage”, then it is time to call me to schedule training for you and your leadership team on Creating ROI from Diversity and Inclusion. You can reach me at 302.276.3302 or via email at [email protected]

Tim Horton’s – RESTAURANT BRANDS INTERNATIONAL

The lawsuits will be settled at some point, there may or may not be monetary damages applied to QSR, but that will be one time in nature, easy to overlook by investors. Especially in light of the operating initiatives outlined just today, including delivery, advertising of all day breakfast and a new kids menu, roll out of a new loyalty program, profit margins and EBITDA at TH will be very difficult to improve from the current level and could even come down.

By Roger Lipton

RESTAURANT BRANDS INTERNATIONAL – Conclusion

This morning’s release by Restaurant Brands International relating to initiatives at Tim Horton’s, its now admittedly troubled subsidiary that contributes about half of its corporate EBITDA tells us a lot about the prospects for the RBI over the next few years. The now well-publicized lawsuits by the franchisees have obviously gotten the attention of their parent company. RBI management acknowledged today that “some things could have been handled better, but management has changed……in an effort to bolster that relationship….and it’s just going to be a matter of time to prove out that this is a new day, and there’s a very sincere interest in working collaboratively with all the franchisees”.

Recall that Tim Horton’s is the largest contributor to RBI’s cash flow and earnings, and the distribution margins, along with G&A efficiencies at TH have been major contributors to the overall corporate progress. To be precise, the “cost of sales” at TH distribution has gone from 99.2% in 2014, on a straight line, to 83.3% in 2015 to 78.0% in 2016, 76.6% in 2017, finally up ticking modestly to 77.9% (up 160 bp YTY) in Q1’18. (Might the franchisee complaints have anything to do with the recent uptick?). At the same time, TH segment G&A went from 4.6% in ’14, to 3.2% in 2015, to 2.6% in 2016 with a modest uptick in calendar ’17 to 2.9%. In just the last two years ending 12/31/17: total corporate adjusted EBITDA, grew $480M, up 28.8%. The Tim Horton segment grew $229M, representing 47.7% of the total increase (up 11.8% in ’16, slowed to 5.9% growth in ’17, and decreased 5.0% in Q1’18). Burger King contributed $143.6M of the two-year increase (29.9% of the corporate total) and Popeye’s contributed $106.9M, all of it in ’17. The improvement in CGS at TH contributed $122M of that. G&A efficiencies at TH contributed another $5.9M. So the better distribution margin and G&A “efficiencies” accounted for 127.9M or 55.8% of the two year EBITDA improvement at Tim Horton’s.

The first quarter of Q1’18 showed total corporate adjusted EBITDA up by 12.2% or $54.5M. That included an increase of $27.0M at BK, or 14.4%, a contribution of $38.5M from Popeye’s versus nothing a year earlier, and a decrease of $11.0M at TH with non-recurring adjustments (to be discussed later) flowing through TH’s first quarter results.

The lawsuits will be settled at some point, there may or may not be monetary damages applied to QSR, but that will be one time in nature, easy to overlook by investors. Especially in light of the operating initiatives outlined just today, including delivery, advertising of all day breakfast and a new kids menu, roll out of a new loyalty program, profit margins and EBITDA at TH will be very difficult to improve from the current level and could even come down.

Summarizing the entire situation, RBI management is very smart, but they are not magicians. Popeye’s has a great deal of potential, but corporate efficiencies may be more difficult to employ here, especially considering the history at Tim Horton’s and Popeye’s is too small to move the corporate needle by much. Even though Burger King’s contribution could continue to grow at a 15-20% rate (not without their own set of challenges), TH will be hard pressed to grow from here. There is an increasingly aggressive competitor called Starbucks, Dunkin’ Donuts is not going away and McDonald’s does all day breakfast and all three have a head start against the latest programs at Tim Horton’s. We view QSR as an adequately leveraged (and valued) single digit growth company over the next several years.

Company Overview

Restaurant Brands International was created in December 2014 from the merger of then Burger King Worldwide (BKW) and Tim Hortons International (THI). Early in 2017, Popeye’s Louisiana Kitchen was added to the portfolio. Headquartered in Oakville, Ontario, the company is now the operator and franchisor of over 24,000 Burger King (BK), Tim Horton (TH), and Popeye’s (PLKI) brand restaurants generating system-wide sales of over $29B in over 100 countries. All three brands are virtually 100% franchised and are operated as independent segments from their traditional headquarters (BK in Miami, FL, TH in Oakville, Ontario, and Popeye’s in Atlanta, GA.) to preserve their respective heritages.

BK is the second largest burger chain by locations (after McDonald’s), and third largest by sales (after Wendy’s). The menu features its signature flame-grilled hamburgers, chicken and other specialty sandwiches, french fries, desserts and beverages. In 2017, the system generated a little over $20B in sales from approximately 16,800 units (about 48% in the US). The principal sources of the BK segment revenues are franchise royalties (normally 4.5% in the US) and fees, since the chain is nearly 100% franchised. The remaining revenues derive from the 12% of BK locations leased or subleased to franchisees and from sales at 52 company units. QSR does not discuss the development costs of a new Burger King, but the largest franchisee, Carrols Restaurant Group (TAST) does. As described by TAST in their 10K, the initial cost of franchisee fee, equipment, signage & other interior costs is approximately $400,000. Additionally, their cost of land ranges from $500k to 900k and the cost of building and site improvements generally ranges from $850k to 1,025k. Using the midpoint of these numbers, the total development cost would be $2,037,000 – a fairly high total cost for a unit that averages $1.3 million. In spite of a sales/investment ratio (fully capitalized) well below the long accepted 1:1 objective, the Burger King system continues to thrive. We attribute TAST operating success and BKs continuing unit development to the fact that many units were built years ago (with lower development costs), the long term operating success of the system that attracts build-to-suit development, and of course the very low interest rate environment of the past decade. It is also worth noting that QSR does not indicate how many units are “traditional” versus “non-traditional” such as kiosks, food courts, etc. We suggest that not too many units in the US in particular, are built from the ground up these days, and fewer still will be built if interest rates rise. Of course, in any event, BKs primary expansion will be overseas from this point forward.

Tim Hortons quick service restaurants have a menu that includes premium blend coffee, tea, espresso-based hot and cold specialty drinks, fresh baked goods, (donuts, cookies, muffins, pastries), grilled paninis, sandwiches, wraps and soups. It generates about $6.7B in system-wide sales from about 4,700 units (about 80% in Canada). The TH segment generates revenue from sales of supplies and equipment and packaged products to retailers; from property revenues from the 80% of properties leased or subleased to franchisees; from franchise royalties and fees; and from sales at 24 company restaurants.

While BK’s supply operations are largely outsourced to approved third parties (procured in the US by a purchasing entity jointly managed with franchisees), TH operates a significant supply system to procure, store and distribute raw materials, and supplies to most of its Canadian restaurants (US units are supplied by a third-party distributors). It operates 2 roasting facilities for blending coffee for its Canadian and US restaurants (and retail), and it operates facilities for the manufacture of icings and fills for its products, though all donuts are purchased from a third-party supplier. TH has a variety of franchise agreements which largely reflect the extent of its ownership interest in franchised locations. Franchisees who lease land and/or buildings from the company typically pay a royalty rate of 3%-5% plus rent of 8.5% to 10.5% of sales. Where the premises is owned by the franchisee or is subleased from TH or leased from a third party, the royalty rate is higher; and where the franchisee essentially operates a fully outfitted company property (i.e. includes equipment, signage and trade fixtures), a rate of about 20% covers royalties and rent.

Popeyes Louisiana Kitchen, Inc. (PLKI), QSR’s most recently completed acquisition, develops, operates and franchises over 2,700 quick service restaurants with system-wide sales in 2016 of $3.4B in 48 states, D.C., and 25 foreign countries. Popeyes specializes in strongly flavored Louisiana-style offerings, particularly chicken, but also fried shrimp, red beans and other regional specialties. PLKI is nearly entirely franchised (98% of system’s units). The US stores averaged about 2.7k square feet with AUV’s of $1.4M in 2016. US franchisees generated EBITDAR of $340K on average (23% margin). From 2008 through 2016, comps averaged 3.2% (though slowing in 2016, and further in 2017), which was the major factor in the 4.9% CAGR in the AUV’s and EBITDAR margin expansion of over 500bps (along with new store performance). In 2016 revenues were $268.9M ($108.3M company stores, $154.8M from franchise royalties & fees, $5.8M rent from franchised restaurants), EBIT at $74.5M (27.7% margin), EBITDA of $84.6 (31.5% margin) with free cash flow of $56.0M (20.8% margin). Aside from the strong financial track record, QSR said Popeyes leadership position in the chicken QSR category (26.5% market share in 2016, up from 25.5 in 2015) fits well in its brand portfolio. Also attractive, obviously is the “asset light” highly franchised structure, with further growth potential, especially overseas.

3G Restaurant Brands Holdings LP (3G RBH), with 43.6% voting rights, provides 3G effective control of QSR. 3G is an international activist fund specializing in consumer brands and a frequent partner with Berkshire Hathaway, which provided $3B to finance the TH acquisition in the form of 9% preferred equity, redeemed in late ‘17. The 3G playbook is to acquire and fix up mature brands (e.g. Anheuser-Busch InBev SA/NV (Euronext Brussels: ABI) and The Kraft Heinz Co (NYSE: KHC), but unlike most activist investors, 3G is a patient investor, with an investment horizon measured in years. In order to judge QSR’s future, including incorporation of PLKI, it’s worthwhile to understand 3G’s historical initiatives in turning around BK and TH.

Burger King – For at least a decade before 2010, management and franchisees had been in growing conflict over repeated failures to revive the brand. The conflict peaked with a franchisee lawsuit charging management with driving system sales with promotions (specifically $1 Double Cheeseburgers) that were good for royalties but costly for franchisees. Into this poisonous atmosphere, 3G stepped up to acquire the company. The fund, which had been instrumental in assembling global beer behemoth AB InBev, also had established a reputation as a long-term investor that achieved strong returns by turning around flagging brands, often with aggressive cost cutting and management changes.

When 3G acquired the company in October 2010, it promptly installed partners onto the board and inserted itself in operations, staffing key executive positions with partners from a deep bench of proven managers from other investments. It instituted cost controls centered on zero-based budgeting (every budget item must be justified afresh each year). It moved quickly to restore trust with the franchisee community by giving them a larger voice in the decision-making process and by making franchisee profitability a top priority. This included simplifying the menu and eliminating money-losing promotions. To this end, new menu introductions and LTO’s aim more for flavor variations on legacy standards (e.g. “Angry Whopper”) than additions that are more operationally challenging. Management has, however, attempted to fill gaps in the core menu with added or improved items such as salads, chicken strips, beverages and desserts. These additions aim to broaden brand appeal beyond its traditional young male customer to include women and seniors. Management also attacked overhead bloat, again using the zero-based budgeting which requires justification of both historical and incremental expenses. The payoff was a reduction in G&A from $356M in 2010 to about $160M by 2015 and 2016. The dramatic reduction in G&A, while improving profitability at the franchisor level, has not been without controversy, however. Some franchisees feel that support has been compromised along with the reduction of expenditures on behalf of the franchise system. The response of the franchisor has predictably been something like “in every large system some franchisees are happier than others, but our priority continues to be the profitability and financial health of every franchisee”.

Additionally, the company accelerated a refranchising initiative that had been under way, becoming virtually 100% franchised by 2013 (from 89% at acquisition in 2010). Importantly, the 1,200+ refranchised units were placed with the system’s strongest hands, such as Carrol’s Restaurant Group (NASDAQ: TAST), BK’s largest franchisor and an exceptional operator. As of year-end 2017, only 26 company stores remained, which the company has intended to retain principally for test purposes. The new management also launched a store re-imaging initiative of the US and Canadian stores. The company provides incentives, principally in royalty and advertising fund relief, to accelerate the pace of remodeling. According to management, the remodels cost about $300K per unit and drive a 10%-14% sales lift. At the end of 2017, we estimate over 70% of the stores have been remodeled.

Finally, it launched a strong international push, particularly into under-penetrated regions. In a departure from BK’s traditional franchise agreements, the company aims to accelerate international growth through master franchise joint ventures (MFJVs) and master development agreements with experienced local partners. The structure of these agreements varies significantly, but in general local partners are granted exclusive regional rights to develop or sub-franchise units. The partners commit to aggressive development targets and franchisee support. They usually pay discounted upfront fees and royalty rates (vs the usual 5% rate) based on the characteristics of each market. The partners make substantial upfront equity contributions, while the company usually obtains a meaningful minority stake in the MFJV’s with little or no capital contribution. Of course, this enhanced growth comes with financial and brand risks, principally because the company’s operational control over sub-franchisees is weaker than with direct franchisees. QSR believes it protects against these risks by entering agreements with experienced, well-capitalized partners supported by strong management teams.

So far, results at Burger King have been impressive. The unit growth rate has more than tripled in the 8 years since the acquisition vs the preceding 6 years—from 1.5% CAGR, to 6.5% unit growth in ’17. (In validation of the MFJV strategy, the international MFJV’s have generated most of BK’s 3,800+ unit growth since acquisition, notably: Brazil >600 in 2017, up from <150 in 2011, China >650 units in 2017, up from <90 in 2012 and Russia >400 units in 2017, up from <90 in 2012.) There has been an increase over six years in AUV’s from $1M to $1.4M and a 30% increase in profitability (according to management).

Tim Hortons At the time of the December 2014 merger, the TH brand did have its challenges, but overall performance was strong. In the five years before the merger system units grew at a 5% annual pace, while quarterly same store sales (20Q’s) averaged 3.1% in Canada and 4.1% in the US, turning negative only once, in Q1’13, and then only modestly (-0.3% Can & -0.5% US). Meanwhile, operating margins were consistently around 20% and free cash flows averaged around $300M, with average FCF margins ~11.0%. The company’s challenges were (and are) to protect the brand’s Canadian dominance (>40% traffic share), particularly from the encroachments of SBUX, to expand in the US where it has struggled to gain critical mass, and to exploit the large untapped opportunity it sees on other continents (~1% system units are located outside North America). In Canada, management’s principal focus is on solidifying its lunch and breakfast dayparts and improving its coffee business. In the US it closed 27 underperforming stores in New York and Maine during 2017, to concentrate instead on building density in priority markets in the Midwest. To that end, it has signed development area agreements with partners in the Cincinnati and Columbus, Ohio DMAs and the state of Minnesota. Internationally, it also concluded MFJV agreements with partners in Mexico, Great Britain and the Philippines.

The company has focused on G&A which, at $78.9M, was down 15.4% in 2016 over 2015, the first full year of operation under new management, then rose back to $91.0M in 2017. (The reductions may be more significant when compared with the pre-acquisition G&A levels, > $150M USD, but it isn’t clear this is an apples-to-apples comparison.) While TH’s capital-intensive supply chain operations seem ripe for management overhaul, nothing on that front has been reported yet. While management disclosed that though it will be maintaining capital incentives to remodel stores, which it deems an important priority, it seems this is aimed more at the smaller franchisees. Separately it has announced it will be reducing capital support for new stores, principally the leased and subleased locations. This shift to a more asset-light corporate structure is consistent with its strategy for seeking out larger, well-capitalized MFJV partners to drive growth.

As of the end of 2017, with only 3 full years of TH ownership under its belt, the results were promising, but have proved to be controversial. This “progress” at the franchisor level has apparently not been shared at the franchisee level, at least as described in a number of lawsuits filed by something like half of the Canadian franchisee base, and US franchisees as well. They claim that, while their sales progress has stalled, QSR has raised the price of supplies and food, contracting franchise margins further. Additionally, the franchisee lawsuit claims that advertising contributions have been “misallocated” somehow to reduce corporate overhead. Since most of the improvement from 2015 through 2017 within the TH operating results came from “distribution” and to some lesser extent G&A efficiencies, the strained relationship with franchisees is obviously a material development. While management may claim that they went through similar “growing pains” after acquiring Burger King, there was not a similar distribution segment, and BK has built sales more successfully than TH, which takes the sting out of higher costs. As strong as MCD has been vs. BK, SBUX is an even more powerful dominant competitor in the coffee segment.

Restaurant Brands International Consolidated On a consolidated basis, QSR’s EBIT in 2016, at $1.666.7M was up about 90% over a pro-forma $875.6M USD for 2014 (i.e. assuming TH was owned the entire year), driving 1,950bps of operating margin expansion to 40.2% from 20.7%. Calendar year 2017 showed a further increase of 4.1% to $1.735M.

As a result of its acquisition strategy, QSR is leveraged at the top of the range for peer “pure play” franchisors. Total net debt at 3/31/17 of $11.4B was about 5.1X adjusted TTM EBITDA of $2.25M versus 4-5X more typically for its franchising peers. The current dividend, yielding 2.86% requires over $500M of the free cash flow and management has allocated C700M over the next four years to help TH franchisees with re-imaging stores.

QSR: Current Developments – Per Q1’18 Corporate Release and Conference Call

“Adjusted Diluted” earnings, on a “New Standard” were $0.66 vs. $0.67 a year earlier, which is the number that seems to be carried by analysts and the reporting services. GAAP earnings, reported on a “Previous Standard” were $0.66 vs $0.36. The difference in “Standards” relate (among other things) to franchise agreement amortization, amortization of deferred financing costs and debt issuance costs, reflection of advertising fund contributions and expenses, supply chain related revenues at TH, and foreign exchange impact. Forgive us for presenting these technical features of the reporting approach, but this is an unusually complex financial structure, obviously requiring these various methods of disclosure.

In any event, the “organic” EBITDA for Q1’18 was up 5.0%, including Popeye’s, driven primarily by an increase in revenues at BK and PLK, partially offset by a decrease in supply chain related revenues at TH. A breakdown of Adjusted EBITDA by Segment is roughly as follows: Tim Horton’s was down 4.3% to $250M, Burger King was up 14.4% to $215M and Popeye’s was up $80% to $40M. We’ve “mixed and matched” these numbers between the “adjusted New and Previous Standards”, but, in spite of the reporting complexity, we have confidence that the direction and order of magnitude is indicative of the operating trends. More simplistically, comps were down 0.3% at TH, up 3.8% at BK, and up 3.2% at PLK. Systemwide sales growth was up 2.1% at TH, up 11.3% at BK and up 10.9% at PLK.

Per the conference call: Tim Horton’s reported flat sales in Canada and softness in the US. Early in the call, management addressed the tension in the TH franchise system, describing the press as mischaracterizing RBI intentions, citing inaccurate information that “usually reflect a purposely negative tone dictated by a group of dissident franchisees”. Changes have been made in communication strategy, both with the press and the franchisees, which will presumably bear fruit over time. First quarter sales at TH reflected softness in coffee sales, partially offset by breakfast foods. The results of some new lunch products are encouraging. A new Brand President at TH, Alex Macedo, previously President of Burger King, North America, is leading the effort. A “Winning Together” plan has been put in place, based on restaurant experience, product excellence and brand communications. A new TH restaurant design, called the Welcome Image has been put in place at 10 locations, with an encouraging customer response. Management “admittedly should have done more of this in the past……we are confident that this plan will help us achieve long term sustainable comparable sales growth for TIMs.”

We won’t dwell here on the Burger King discussion. Delivery and technology applications are among the current programs. Suffice to say that results within this segment continue to be fine and the positive prospects are undiminished.

Popeye’s is focusing on delivery and technology as well, and international franchising is a major focus, Brazil being the first master agreement. With EBITDA of $40M in Q1’18 out of close to $500M for RBI in total, substantial improvement within this segment will not affect short to intermediate term overall results in a major way.

The single largest “elephant in the room”, supply chain margins at TH, was addressed when the question was asked relative to the Q1’18 decline at TH in supply chain revenues. Management responded that “we passed on some supply chain savings to our franchisees through a reduction in pricing in the second half of last year. We continued to maintain this pricing for franchisees, so margins in the first quarter of 2018 are relatively consistent sequentially with the margins from the second half of last year. Looking ahead…. we expect the organic growth profile at TIM’s to improve throughout the year.” Maybe.

Our conclusion regarding the prospects for QSR is provided at the beginning of this article.
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Franchise Your Business www.frangrow.com

The Success of Acai Express – Now a Franchise in the USA.

“We provide a system that is simple to operate with no experience needed.” Our Acai Berries are harvested from the Amazon Rainforest. This discourages deforestation while at the same time creating financial opportunities for local farmers. We are committed to a culture of appreciation to our guests, franchisees, and team members.’
– Hector Westerband, Founder, and CEO – Acai Express

Watch The Founder of Acai Express explain the reasons why Acai Express is a hit.
https://lnkd.in/dhearqw

The Success of Acai Express – Now a Franchise in the USA.

Our story starts with crashing waves and bustling street corners. In July 2013, Hector Westerband, an avid surfer, founded Acai Express in his homeland of Puerto Rico. Beginning with a single food truck in Guaynabo, Hector wanted to promote a healthy lifestyle centered on the nutrient-rich acai berry. The rapid popularity of his food truck meant he quickly expanded the brand to open franchises elsewhere on the island (13 locations in Puerto Rico as of 2018…)

At Acai Express our mission is to provide our customers the best experience with the highest quality products. We strive to promote a healthy existence by offering customers a lifestyle brand with products that benefit our minds, our bodies, and our souls. Our products are created with the active and health-conscious consumer in mind creating a socially responsible business model.

Our Acai Berries are harvested from the Amazon Rainforest. This discourages deforestation while at the same time creating financial opportunities for local farmers. We are committed to a culture of appreciation to our guests, franchisees, and team members.

As an Acai Express franchisee you will benefit from distinct competitive advantages. We provide an innovative marketing program with a unique and lively shop design. Our menu offers 100% organic “Grade A” acai with other high-quality products and has all day sales potential. With three flexible business models, we provide a system that is simple to operate with no experience needed. Our franchise model offers a low-cost entry, with protected territories, comprehensive training, and an experienced management team.

For franchise information please contact:[email protected]
Notice Regarding Franchise Offers and Sales

This information is not intended as an offer to sell, or the solicitation of an offer to buy, a franchise. It is for information purposes only. There are approximately 14 countries and 15 US states that regulate the offer and sale of franchises. The countries are Australia, Brazil, Belgium, Canada (provinces of Alberta, British Columbia, Manitoba, New Brunswick, Ontario and Prince Edward Island), China, France, Indonesia, Italy, Japan, Malaysia, Mexico, Russia, South Korea, Spain, and the United States of America. The US states are California, Hawaii, Illinois, Indiana, Maryland, Michigan, Minnesota, New York, North Dakota, Oregon, Rhode Island, South Dakota, Virginia, Washington, and Wisconsin. If you are a resident of one of these states or countries, are receiving this message in one of these states or countries, or intend to operate a franchise in any of these states or countries, we will not offer you a franchise unless and until we have complied with any applicable pre-sale registration and/or disclosure requirements in the applicable jurisdiction.
This offering is not an offering of a franchise. In New York (USA), an offering of a franchise can only be made by a prospectus that has been previously filed and registered with the Department of Law of the State of New York. The application for registration of an offering prospectus or the acceptance and filing thereof by the Department of Law as required by the New York law does not constitute approval of the offering or the sale of such franchise by the Department of Law or the attorney general of New York.
© 2017 Harold L. Kestenbaum, Esq.