Franchise forward
Franchising has been the path to success for countless American foodservice entrepreneurs. But the decision process for finding your dream brand is harder than it’s ever been, with more emerging brands, fast casuals, and once-corporate-only chains diving into the franchise game.
For the last nine years, QSR has published the Best Franchise Deals report as a way for you to sort through the clutter and land on the perfect brand fit. And while we’ve had various methodologies for selecting those companies in the past—primarily weighing return on investment, franchise incentives, and unique brand attributes—this year we’ve stepped up our game with a Franchise Council, made up of five franchise experts who’ve built careers in the industry and know a good deal when they see one.
The council members, who participated anonymously, pored over a near-record number of submissions. They evaluated key financials, franchisor support, and brand elements; reviewed Franchise Disclosure Documents; and provided valuable feedback on the path to a final list.
The result? A 2019 Best Franchise Deals list that features a diverse mix of established names, as well as up-and-coming players cutting across the U.S. limited-service restaurant industry.
Check out past reports:
Nékter Juice Bar
Total U.S. Units: 126
U.S. Franchised Units: 80
Systemwide Sales: $75,000,000
Franchise Fee: $35,000
Total Start-Up Costs: $211,500–$462,600
Royalty: 6% of net sales
Renewal Fee: $5,000
Marketing Fee: 2% of net sales
Nékter’s star is shining bright these days. With an AUV of around $800,000 and start-up costs topping out at $463,000, the 126-unit concept continues to attract franchisees interested in an emerging brand with a health halo and promising ROI potential.
On trend by embracing fresh, pure ingredients and shunning artificial flavors, sugars, and fillers, Nékter’s menu features fresh-pressed juices alongside açai bowls, smoothies, and a frozen treat called Skoop crafted from cashew milk and plant-based ingredients.
“While many brands are now trying to adjust to consumer trends, revisiting their values and scrambling to clean up their menus, a clean menu focused on fresh, high-quality ingredients and nothing else has always been at the very core of Nékter,” says founder and CEO Steve Schulze.
Schulze adds that franchisees come to the nine-year-old brand headquartered in Santa Ana, California, because they have “fallen in love with the brand marketing and product that is behind it.”
The expert take: “With approximately 80 franchised locations and about 35 company-owned locations, this company is 100 percent invested in the operational success at the unit level. Adding a modest investment and a closure rate of 2 percent, this company is strong.”
Cinnabon
Total U.S. Units: 924
U.S. Franchised Units: 923
Systemwide Sales: $332,432,234
Franchise Fee: $30,000
Total Start-Up Costs: $181,900–$340,400 (traditional); $108,500–$368,100 (nontraditional)
Royalty: 6% of net sales (for full bakery)
Renewal Fee: 10% of the then-current initial franchisee fee for same bakery type
Marketing Fee: 1.5% of net sales (but may be adjusted
A longtime leader in the snacking industry with its signature, flavor-packed cinnamon rolls, Cinnabon continues a run of impressive growth. The Atlanta-based chain added 43 franchised units in 2018 and plans to open 66 more in 2019. That would bring Cinnabon to more than 1,000 domestic locations and strengthen its position as a quick-service powerhouse.
Median net sales for Cinnabon’s enclosed mall franchises reached $505,000 last year, while airport franchises scored a robust $848,000. Those tallies spark positive ROI potential given Cinnabon’s healthy unit-level economics, which include cost of goods and labor averages that are less than 22 and 29 percent, respectively.
As a member of the FOCUS Brands family alongside national names like Auntie Anne’s and Jamba Juice, Cinnabon gives franchisees access to extensive support in areas such as marketing, real estate, consumer insights, design, and technology—“Tools and resources that wouldn’t typically be available for a singular brand,” says Cinnabon president Kristen Hartman. This empowers the pursuit of new opportunities, whether that’s the newly launched e-commerce platform and catering or new venues such as food trucks and food carts.
The expert take: “Let’s not ignore the phenomenal story behind [former Cinnabon and now FOCUS Brands president] Kat Cole’s journey to prominence—a former Hooters waitress who busted her tail to rise to the top. A … forward-thinking and results-oriented female leader matters big-time in today’s world. Huge for branding and company culture. Cinnabon was a strong brand before Cole’s story was shared with the masses, and now … Cinnabon is an omnipresent fixture in mass-media stories. Big win all around.”
Freddy’s Frozen Custard & Steakburgers
Total U.S. Units: 328
U.S. Franchised Units: 303
Systemwide Sales: $474,703,049
Franchise Fee: $25,000
Total Start-Up Costs: $590,469–$1,986,315
Royalty: 4.5% of gross receipts
Renewal Fee: $8,333.33
Marketing Fee: 0.375% of net sales
Freddy’s has found a place on QSR’s Best Franchise Deals list before—in 2012 and 2013, specifically—and continues to show itself a compelling deal, especially as AUV reaches $1.5 million.
To the benefit of its franchise partners, Freddy’s touts industry-low combined royalty and marketing fees, along with exclusive regional territories and hefty corporate support.
“We focus on the success of our franchisees by supporting them with innovative site-selection tools, savings in construction costs, engaging training material, creative advertising, and guest engagement platforms,” says Freddy’s cofounder and chief operating officer Scott Redler.
The Wichita, Kansas–born brand has nearly doubled in size over the last three years, growing from 163 units at the start of 2016 to 306 units at the close of 2018. Freddy’s now operates in 32 states and recently signed agreements to open units in Wisconsin and New Jersey, while it will also debut its first international units later this year at the Mall of the Emirates and the Dubai Mall.
The expert take: “Having a transparent and efficient labor management approach contributes to a strong return on investment for franchisees. A transparent labor cost percentage of approximately 30 percent can empower franchisees to attract and retain top talent … and provide a competitive advantage.”
Chicken Salad Chick
Total U.S. Units: 104
U.S. Franchised Units: 73
Systemwide Sales: $110,000,000
Franchise Fee: $50,000
Total Start-Up Costs: $483,000–$648,000
Royalty: 5% of gross sales
Renewal Fee: $3,500
Marketing Fee: $10,000
Though other fast-casual chains possess greater financial resources and longer operating histories, Chicken Salad Chick competes with convenience, courteous service, and a menu anchored by—what else?—scratch-made, Southern-style chicken salad. That’s been a winning approach for the 11-year-old brand headquartered in Auburn, Alabama.
In 2018, Chicken Salad Chick celebrated the opening of its 100th unit, debuted in three new states, scored $110 million in system-wide sales, and reported a 10 percent increase in year-over-year AUV, which has climbed to $1.15 million.
“In three years’ time, we more than tripled in size, achieving a 238 percent increase in units open and operating and AUV growth of more than 30 percent,” says the brand’s director of franchise development, Carrie Evans.
Leadership now aims to keep the momentum going. This year, Chicken Salad Chick is on pace to open 45 new units, including a number in new markets across the Southeast, Midwest, and Texas. The company is also revamping its catering program to create a fourth strong revenue stream for franchisees.
The expert take: “With a very low closure ratio and 30 company-owned operations, this franchisor seems to have a lot of positive momentum and long-term dedication to running successful operations.”
Scooter’s Coffee
Total U.S. Units: 206
U.S. Franchised Units: 199
Systemwide Sales: $79,509,861
Franchise Fee: $40,000
Total Start-Up Costs: $351,000–$587,000
Royalty: 6% of net sales
Renewal Fee: $10,000 or 25% of then-current initial franchise fee
Marketing Fee: 2% of net sales
Striving to become the nation’s top drive-thru coffee franchise, Scooter’s closed 2018 with nearly 200 stores and has just as many new-store commitments in its development pipeline, including 65 units slated to open this calendar year. And bolstered by a fifth consecutive year of positive system-wide same-store sales growth, the Omaha, Nebraska–based brand now enjoys AUV of around $500,000.
“Serving amazing drinks by amazing people … amazingly fast does not go out of style,” says director of franchise recruitment Kelly Crummer in a nod to Scooter’s brand promise.
Scooter’s two business models—a kiosk and coffeehouse—present different opportunities for franchisees, while its focus on the drive-thru model reinforces a commitment to speed of service, a valuable point of differentiation given the on-the-go nature of coffee consumption.
“We know the key to growth is having a great model, discipline, and taking care of your franchisees,” Crummer adds. “I’m proud of the people, processes, systems, and support we have in place that help us leverage our vertically integrated model to create amazing experiences for our customers and world-class support for our franchisees.”
The expert take: “[Scooter’s has a] fantastic regional presence in the Midwest, where it has focused on growth. Excellent media coverage, solid regional brand recognition, and phenomenal social media work.”
Jersey Mike’s Subs
Total U.S. Units: 1,494
U.S. Franchised Units: 1,412
Systemwide Sales: $1,148,487,224
Franchise Fee: $18,500
Total Start-Up Costs: $237,419–$766,971
Royalty: 6.5% of gross sales
Renewal Fee: No renewal fee provided franchisee in good standing
Marketing Fee: 5% of gross sales
When 17-year-old Peter Cancro secured a small loan from his high school football coach in 1971 to purchase the Jersey Shore sub shop he began working in three years prior, he couldn’t have possibly imagined the future ahead. Today, Jersey Mike’s features some 1,500 units across the country, and system-wide sales of $1.15 billion.
In 2018, the brand opened 167 new locations and experienced a 5 percent increase in same-store sales. Of that new-store development, 70 percent came from within the system, a direct reflection of the company’s efforts to prioritize its existing franchise network.
Whether it’s seamlessly integrating Uber Eats, DoorDash, and Grubhub; unveiling a new mobile app; or crafting training procedures that help operators learn how to be more efficient and profitable, Jersey Mike’s president Hoyt Jones says, the company is “consistently investing in innovation to ensure that franchisees have all the resources they need to succeed.”
The expert take: “One of the best brands out there as far as living up to its brand promise. With the annual day/month of giving, recent moves to [switch to] no-antibiotics pork, and countless franchise owners who do wonders for their communities … Jersey Mike’s consistent and sustainable growth is hard to question.”
Newk’s Eatery
Total U.S. Units: 125
U.S. Franchised Units: 102
Systemwide Sales: $226,144,470
Franchise Fee: $40,000
Total Start-Up Costs: $932,000–$1,131,000
Royalty: 5% of net sales
Renewal Fee: $5,000
Marketing Fee: 1.5% of net sales
Since its founding in 2004, Newk’s has focused on a straightforward formula of serving made-from-scratch seasonal dishes from an open-view kitchen that allows guests to see, hear, and smell the artistry of cooking. That no-nonsense formula has propelled strong results. Newk’s AUV sits just shy of $2 million, while the Mississippi-based chain’s unit count has surpassed 125 restaurants.
With an eye on honoring its franchisees’ investment, Newk’s has implemented process changes all the way back to site selection so that franchisees begin the savings upfront. Enhancing architectural plans and providing improved value of engineering materials, for instance, have lowered construction costs by 20 percent.
“This diligence sets Newk’s apart from competitors with similar growth rates,” says Newk’s chief development officer Chris Cheek.
In addition, the company’s newest restaurants feature a smaller “Generation 2” design that reduces Newk’s prototypical square footage by more than 1,000 square feet. In a competitive real estate environment, this tighter design allows franchisees to cut occupancy costs without hampering sales capacity.
The expert take: “Incredibly profitable and plenty of room to grow. Very strong franchisee support. Emerging brand with healthy options.”
Auntie Anne’s
Total U.S. Units: 1,295
U.S. Franchised Units: 1,282
Systemwide Sales:$692,054,184
Franchise Fee: $30,000
Total Start-Up Costs: $199,475–$385,100
Royalty: 7% of net sales
Renewal Fee: 50% of then-current initial franchisee fee for a 20-year renewal; $2,000 for a one-year renewal term
Now in its 31st year, Auntie Anne’s continues to evolve and solidify its place as a snack category leader. The Lancaster, Pennsylvania–based company, which boasts some 1,300 U.S. locations, consistently unveils new recipes, develops revenue plays like catering, and hunts new opportunities to peddle its soft pretzels.
Beyond the enclosed mall locations often associated with the brand—units that claim AUV of nearly $540,000—Auntie Anne’s continues entering nontraditional venues such as airports, universities, and military bases, while it has also captured success with food trucks that allow fans to enjoy Auntie Anne’s product at fairs, college campuses, parks, and stadiums.
“There is so much opportunity to grow [at Auntie Anne’s], including opening new stores and taking our pretzels to the people,” says Auntie Anne’s president Heather Neary.
Like sister concept Cinnabon, Auntie Anne’s benefits from its place in the FOCUS Brands’ enterprise. Experienced teams specializing in real estate, development, operations, marketing, supply chain, and IT ensure Auntie Anne’s franchisees have the necessary tools and resources to succeed.
The expert take: “Steady, low-cost concept with great mobile service options. Part of a very experienced system that has strategically figured out how to keep this mall giant thriving.”
Wingstop
Total U.S. Units: 1,124
U.S. Franchised Units: 1,095
Systemwide Sales: $1.3 billion
Franchise Fee: $10,000–$20,000
Total Start-Up Costs: $340,815–$631,292
Royalty: 6% of net sales
Renewal Fee: 25% of the sum of then-current development fee and franchise fee
Marketing Fee: Franchise agreement allows Wingstop to unilaterally establish a contribution rate up to 4% of gross sales
A previous Best Franchise Deals honoree, Wingstop earns another nod with a 15th consecutive year of same-store sales growth, relatively modest cost of entry for a brand with an AUV of nearly $1.1 million, and plenty of marketplace momentum. The Dallas-based concept saw revenues climb 16 percent to $1.3 billion this past year, while it also added 119 new restaurants to push its franchised unit count over 1,000.
Wingstop has been able to sustain its impressive run of same-store sales growth thanks to a mix of national advertising campaigns that enhance brand awareness, a delivery rollout that pairs convenience with swelling brand awareness, and digital innovations—digital kiosks and in-store lockers to expedite pickup, to name just two—that provide a convenient ordering experience for customers and increase efficiencies on the restaurants’ back ends.
With their eyes set on becoming a top 10 global restaurant brand, Wingstop leadership is focused on extending sales growth, flavor development, continued investment in technology, and expansion into additional international markets, such as France in 2019.
The expert take: “Very affordable, popular concept that continues to thrive in unit count and performance. Steady year-over-year growth due to superior management. … Solid branding with a healthy ad spend on national media buys also a plus.”
