Mak­ing it ca­sual

Inside Franchise Business - - Industry Spotlight -

Full-ser­vice res­tau­rant chains dom­i­nate the ca­sual din­ing scene, with fran­chises from the US fea­tur­ing promi­nently in Aus­tralia.

Des­ti­na­tion ea­ter­ies are pop­u­lar with con­sumers while ca­sual-din­ing precincts are favourable for fran­chisors, writes Noha Sha­heed.

A new Euromon­i­tor In­ter­na­tional re­port, Full-Ser­vice Restau­rants in Aus­tralia, says North Amer­i­can full-ser­vice res­tau­rant chains ac­count for 42 per cent of value sales and 29 per cent of out­lets in Aus­tralia.

“These restau­rants tend to serve mostly fam­i­lies and larger groups, as their of­fer­ing usu­ally in­cludes good deals for chil­dren’s menus, and food por­tions tend to be larger,” says re­port au­thor Ju­lia Illera, se­nior re­search an­a­lyst at Euromon­i­tor In­ter­na­tional.

A ca­sual-din­ing des­ti­na­tion could be de­fined as a food out­let where cus­tomers dine in groups and spend at least half an hour eat­ing.

One ex­am­ple is the Sin­ga­pore fran­chise The Rotisserie, which of­fers a com­fort-food menu cov­er­ing break­fast, lunch and din­ner – from cof­fee dur­ing the day to al­co­hol at night. Meals come in large por­tions at af­ford­able prices, with each food prod­uct pre­pared fresh daily.

“Our tar­get cus­tomers are work­ing pro­fes­sion­als in their early 20s to late 50s, fam­i­lies and events or­gan­is­ers who are fre­quent party plan­ners,” says MD Ja­son Pope. “Our food has a broad cus­tomer ap­peal – a dine-in meal with col­leagues, a packed sand­wich on the go or an in­ti­mate fam­ily cel­e­bra­tion.”

CEO Ross Worth of home-grown ca­sual-din­ing chain Hog’s Aus­tralia says its au­di­ence is ex­tremely di­verse. “We cater for ev­ery­one be­tween 18 and 54 years specif­i­cally, and in­cluded within this de­mo­graphic are fam­i­lies, cor­po­rates, par­ties and events, date nights and just gen­eral catch-ups.”

TAR­GET CUS­TOMERS

“Our pri­mary tar­get cus­tomers are 20 to 50 year olds, with a slight male skew, and se­condary are young fam­i­lies,” says Twelve Boar fran­chisor Rick Palesh. The brand of­fers Amer­i­can-style bar­be­cue tai­lored to the Aus­tralian mar­ket.

“Our cus­tomers are un­pre­ten­tious, re­laxed and ca­sual ‘food­ies’,” he says.

Mil­len­ni­als are a key tar­get group for lo­cal fast-ca­sual fran­chise Rozzi’s Ital­ian Can­teen. Di­rec­tor Dean Salomone says the group had a spe­cial­ist con­sul­tancy group con­duct ex­ten­sive mar­ket re­search to clearly iden­tify the ideal cus­tomer. The find­ings were 58 per cent fe­male, 42 per cent male and 49 per cent be­tween 18 and 34 years old, “which is a strong re­flec­tion on our abil­ity to en­gage with mil­len­ni­als”.

Costa Anas­tasiadis, who heads up lo­cal Hel­lenic din­ing chain Zeus Street Greek, says this brand also tar­gets mil­len­ni­als and grow­ing fam­i­lies. As does Aus­tralia/New Zealand fran­chise La Porchetta, CEO Sara Pan­ta­leo say­ing its pri­mary cus­tomers are fam­i­lies, with se­condary mar­kets of young peo­ple and baby boomers.

DE­LIV­ERY AND TECH

De­liv­ery tech­nol­ogy has been a big dis­rup­tor in the res­tau­rant space,

Zeus Street Greek

par­tic­u­larly with mo­bile apps be­ing used for book­ing ta­bles or or­der­ing home­de­liv­ery food.

In the Euromon­i­tor res­tau­rant re­port, Illera says com­peti­tors in other chan­nels, in­clud­ing 100 per cent home-de­liv­ery/ take­away, cafes/bars and fast food, will con­tinue to pose a po­ten­tial threat to growth in the full-ser­vice res­tau­rant space.

“In fact, these chan­nels are ex­pected to out­pace full-ser­vice as busier life­styles en­cour­age Aus­tralians to opt for more con­ve­nient food op­tions that can be or­dered and picked up or de­liv­ered faster than wait­ing for a meal at a full-ser­vice res­tau­rant.”

So how are fran­chised ca­sual-din­ing chains meet­ing these chal­lenges?

THE ROTISSERIE

Pope says The Rotisserie has two store mod­els, ex­press and res­tau­rant.

“An ex­press unit is suited to food courts or shop­ping cen­tres while a res­tau­rant is larger and suited to din­ing precincts and shop­ping cen­tres.

“Our con­cept is based on ca­sual din­ing and take­away for­mats. With the fast-ca­sual trend sweep­ing Aus­tralia, more con­sumers are look­ing for speedy meals with good food qual­ity. That is what The Rotisserie is built around, ‘Fresh Food Fast’. We put out good-qual­ity food with the flex­i­bil­ity of hav­ing it on the go,” says Pope.

Black­board spe­cials are added to the menu reg­u­larly, with higher-per­form­ing meals even­tu­ally be­ing in­cluded on the per­ma­nent menu.

In terms of food trends and the rise of var­ied di­etary needs, Pope says the group is work­ing on spe­cific di­etary op­tions.

For de­liv­er­ies, the com­pany is work­ing with third-party companies to man­age the lo­gis­tics. As the com­pany rolls out new tech­nol­ogy, fran­chisees will in­cur fixed costs, with sup­port and train­ing from head of­fice.

“As a new, young com­pany, we are re­cep­tive to trends in tech­nol­ogy and will be al­lo­cat­ing funds and time for train­ing, which in turn gen­er­ates value for the busi­ness,” says Pope.

Mas­ter fran­chisees in­vest in a 10-year term start­ing from $130,000 (li­cence fee only, does not in­clude store fitout cost). For a five-year term, fran­chisees buy in for $350,000-plus (in­cludes store fitout/ set-up and li­cence fee).

Sup­port in­cludes:

• Full turnkey es­tab­lish­ment

• Ini­tial train­ing and startup help

• Ven­dor se­lec­tion

• Site se­lec­tion and con­struc­tion help

• Mar­ket­ing sup­port

How­ever, Pope says it can be a chal­lenge for fran­chisees to main­tain qual­ity stan­dards and the brand’s rep­u­ta­tion.

“Po­ten­tial buy­ers should be legally and fi­nan­cially in­formed be­fore sign­ing on the dot­ted line. The lease and fran­chise agree­ment should be stud­ied in de­tail, and prospec­tive fran­chisees should ask plenty of ques­tions to clar­ify any doubts.

“Speak to dif­fer­ent peo­ple and do back­ground checks on the fran­chise you are en­ter­ing into.”

LA PORCHETTA

Pan­ta­leo says La Porchetta is a home­made Ital­ian kitchen con­cept which runs a stan­dard kitchen with a full res­tau­rant menu, and a pizza kitchen.

“We’ve been around for more than 30 years and have grown be­cause we un­der­stand our cus­tomer,” she says.

“The ideal site for us is in a sub­ur­ban area, be­cause peo­ple now want to eat lo­cally. There’s also a grow­ing mar­ket for take­away and home de­liv­ery.”

For fran­chisees, La Porchetta has a flat-fee sys­tem and stan­dard­ised menu. How­ever, fran­chisees can cre­ate a spe­cials board to cater for lo­cal tastes.

“We’ve made sure our menu has lighter op­tions, as well as op­tions for veg­e­tar­i­ans and peo­ple with spe­cial di­etary needs,” says Pan­ta­leo. “We’ve been cus­tomis­ing our meals for our din­ers since we started.”

As well as the menu be­ing re­viewed an­nu­ally, fran­chisees need to en­sure they “stay across chang­ing food trends and can meet cus­tomer de­mand at a na­tional level, as well as pro­vide menu items that re­flect lo­cal de­mo­graph­ics”.

“As well as the point-of-sale sys­tem we use, we’ve in­tro­duced on­line or­der­ing and driver track­ing,” says Pan­ta­leo. “We’ve also in­tro­duced new mar­ket­ing plat­forms. Tech­nol­ogy is a very big part of ev­ery­thing we do, in­clud­ing en­gag­ing

It’s very im­por­tant

to lis­ten to your cus­tomers. That’s one the most im­por­tant

el­e­ments of a suc­cess­ful busi­ness.

with our cus­tomers on­line, be­cause that’s where they now are.”

On­line por­tals and apps have trans­ac­tion fees, and home de­liv­ery is be­ing tri­alled.

“In a highly com­pet­i­tive mar­ket, you need to make sure you de­liver at ev­ery touch point,” says Pan­ta­leo. “It’s very im­por­tant to lis­ten to your cus­tomers. That’s one the most im­por­tant el­e­ments of a suc­cess­ful busi­ness.”

Meals are made from scratch with fresh in­gre­di­ents at La Porchetta, which can be a chal­lenge. Fran­chisees must fol­low fran­chisor pro­cesses and pro­ce­dures to en­sure con­sis­tency across the brand.

The ini­tial in­vest­ment in a fran­chise starts from $450,000, de­pend­ing on the size and lo­ca­tion of the res­tau­rant. The fran­chise terms are 10 years, and fran­chisees ben­e­fit from full train­ing, on-site vis­its, reg­u­lar con­tacts from fran­chise sup­port coaches, and mar­ket­ing.

Pan­ta­leo says an ideal fran­chisee is some­one who loves food, has en­tre­pre­neur­ial drive and is pas­sion­ate about greet­ing cus­tomers. “They need to en­joy rolling up their sleeves and be­ing owner/op­er­a­tors. We have amaz­ing hus­band-and-wife teams and fran­chisees who are in a busi­ness part­ner­ship in which they com­ple­ment each other’s skills, and that works very well.”

Her ad­vice for po­ten­tial buy­ers con­sid­er­ing the ca­sual-din­ing space: “Don’t think it’s a pas­sive in­vest­ment. It is a busi­ness in which you will need to work. If you love the food in­dus­try, you will love it.

“Make sure you are aligned to the cul­ture of the brand and that you love it, be­cause it’s like a mar­riage. If you don’t fall in love with it, you can’t suc­ceed.”

TWELVE BOAR

Palesh says the Twelve Boar model al­lows fran­chisees to pro­duce qual­ity smoked bar­be­cue cuts with­out need­ing to be a “pit­mas­ter”, and with­out com­pro­mis­ing on taste.

He says the model en­tails “low skill and low labour costs” but can still de­liver “con­sis­tent and ex­cel­lent qual­ity”.

Palesh says in­for­mal din­ing is the pri­mary busi­ness, and a “healthy menu” is not nec­es­sar­ily im­por­tant. As most prod­ucts are made in house, the food has min­i­mal fillers and preser­va­tives. “There is al­ways room to in­tro­duce sal­ads and the like,” he says.

Each new menu item is given the Twelve Boar touch to make it dis­tinct to the brand.

“This food cat­e­gory does not leave much room for the likes of ve­g­ans and veg­e­tar­i­ans,” he ad­mits. “On the flip side, most of our food is gluten free.”

Home de­liv­ery is not of­fered be­cause of ter­ri­tory is­sues, and also be­cause the of­fer­ing does not nec­es­sar­ily travel well.

“Peo­ple do not eat out just to eat. In our ever-evolv­ing so­cial cul­ture, peo­ple are con­tin­u­ally look­ing for an ex­pe­ri­ence. It’s also a form of so­cial in­ter­ac­tion,” says Palesh. “Although there is a place for home de­liv­er­ies and other con­ve­niences, it’s sim­ply not for ev­ery­one – or for all the time.”

Palesh says a chal­lenge for the busi­ness is that it is all about a new con­cept in Aus­tralia, so cus­tomers are still de­vel­op­ing an un­der­stand­ing of what Amer­i­can bar­be­cue is.

The ini­tial in­vest­ment for a fran­chisee ranges from $150,000 to $350,000, de­pend­ing on such fac­tors as lo­ca­tion, fitout con­tri­bu­tion and store size. Fran­chise terms are for five years with an op­tion to re­new for an­other five. Fran­chisees ben­e­fit from train­ing and mar­ket­ing sup­port.

An ideal fran­chisee is an owner/op­er­a­tor who en­joys pro­vid­ing cus­tomer ser­vice.

“We feel that less hospi­tal­ity ex­pe­ri­ence is bet­ter for our fran­chise model, as the fran­chisee can come in with a fresh per­spec­tive and be happy to learn the sys­tems cre­ated for them.”

Be­fore you do in­vest - home­work, home­work and then some more

home­work.

ROZZI’S ITAL­IAN CAN­TEEN

Rozzi’s Ital­ian Can­teen of­fers Ital­ian-in­spired dishes within the break­fast and lunch space,

and din­ner where ap­pli­ca­ble.

Salomone says that with two mod­els, Fresh Kitchen and Ital­ian Can­teen, there are three shop­ping-cen­tre sites suit­able for the busi­ness: fresh food, fash­ion or des­ti­na­tion sites within cen­tres with a min­i­mum of three feed­ers for foot traf­fic.

“We are in the re­search and devel­op­ment stage of an ex­press ver­sion of Rozzi’s with a view to tri­alling a site,” Salomone says. “Should the trial be suc­cess­ful, we will look at our ex­press ver­sion as a po­ten­tial food­court prop­erty play, to com­ple­ment our Fresh Kitchen and Ital­ian Can­teen mod­els.”

He says one of the ben­e­fits of the Rozzi’s model is a com­pet­i­tive cost of goods with ef­fi­cient labour per­cent­ages. “Once our stores have opened and set­tled, we al­low our fran­chise part­ners to re­view their sales trends and ad­just their cat­e­gory mix to suit their lo­cal clien­tele.”

For Rozzi’s, in­for­mal din­ing is crit­i­cal as it is not a full a-la-carte ser­vice and more of a value of­fer. “We have some great healthy op­tions in our salad and break­fast ranges. We have built our en­tire menu range with a view there will al­ways healthy op­tions.

“It’s su­per im­por­tant for con­sumers to feel they have op­tions. We cur­rently have gluten-free and vegetarian op­tions in our salad, piz­zas and pasta ranges,” says Salomone.

Menus are re­viewed an­nu­ally, but he says this is likely to move to a six-monthly re­view.

He also says a chal­lenge of the busi­ness is site se­lec­tion in a crowded real-es­tate mar­ket.

The ini­tial in­vest­ment for fran­chisees can range from $300,000 (for smaller kioskstyle sites) through to $750,000 for sites of up to 200 sqm. Ini­tial train­ing, mar­ket­ing sup­port, prod­uct in­no­va­tion and on­go­ing sup­port is in­cluded.

“Be­fore you do in­vest - home­work, home­work and then some more home­work,” ad­vises Salomone. “Ide­ally, you also re­ally like the prod­uct/cui­sine you’re sell­ing and pro­duc­ing ev­ery day.”

HOG’S BREATH

Aus­tralian fran­chise sys­tem Hog’s Breath has more than 80 lo­ca­tions through­out Aus­tralia and New Zealand.

“Healthy eat­ing is a huge el­e­ment of our menu,” says Worth. “We con­stantly re­fer to the com­pany Tree of Life Nu­tri­tion for ex­ter­nal ex­pert ad­vice, and al­ways try to en­sure our menus are both current and in­no­va­tive while re­main­ing ex­cel­lent value for money. We look to make menu up­dates ev­ery 12 months.

“We want ev­ery diner to ex­pe­ri­ence our ‘ hog’spi­tal­ity’ and cater to all di­etary re­quire­ments in­clud­ing gluten-free, lac­to­sein­tol­er­ant, ve­gan and vegetarian.”

Worth says de­liv­ery is also a pri­or­ity. “We’ve just part­nered with De­liv­eroo to ex­plore this ex­cit­ing area, and have five restau­rants tri­alling it,” he says.

“We’re also con­tin­u­ously work­ing on stream­lin­ing other av­enues such as driv­ethrough and cus­tomer pick-up.”

Tech­nol­ogy is also a pri­or­ity. “We part­ner with an on­line book­ing process (Dimmi) and have suc­cess­fully tri­alled the abil­ity to or­der at the ta­ble via IPADS. We’re also look­ing at launch­ing an of­fi­cial app that will of­fer a full suite of ini­tia­tives.

“We will cer­tainly con­tinue to grow and evolve with tech­nol­ogy and, de­pend­ing on what ini­tia­tives are taken up by our busi­ness own­ers, there could be a small cap­i­tal in­vest­ment re­quired.”

Tak­ing into ac­count the foot­print size and the con­cept - an ex­press model or a fullser­vice res­tau­rant - the ini­tial fran­chise in­vest­ment can range from $150,000 to $1 mil­lion. Fran­chise terms are 10 years with an op­tion to re­new for an­other 10. Fran­chisees ben­e­fit from the fran­chisor’s lever­age in buy­ing stock and equip­ment.

“We of­fer full train­ing, coach­ing and men­tor­ing along with strate­gic mar­ket­ing ad­vice by in­ter­nal and ex­ter­nal par­ties,” says Worth.

While he agrees that there is huge com­pe­ti­tion in the ca­sual-din­ing sec­tor, he says the brand is aware that growth and va­ri­ety are im­por­tant.

This is why the brand has de­vel­oped a

new ex­press model.

“This comes in the form of a food truck that can visit events, or a smaller static foot­print for such lo­ca­tions as air­ports, food courts, cin­e­mas or petrol sta­tions.

“Ob­vi­ously this is also a great op­por­tu­nity for po­ten­tial fran­chisees that do not have the cap­i­tal for a full res­tau­rant model.”

ZEUS STREET GREEK

Zeus Street Greek (ZSG) co-founder/GM Anas­tasiadis says the fran­chise “is not a cookie-cut­ter busi­ness”, but a tried-andtested model.

While healthy food is not a pri­or­ity, serv­ing up “hon­est” food is cru­cial.

“For us, it’s about trans­parency in our food of­fer­ing.”

Anas­tasiadis says cus­tomers, par­tic­u­larly mil­len­ni­als, are in­ter­ested in where the prod­uct has come from, such as sus­tain­able and eth­i­cal farm­ing. How­ever, by de­fault the Mediter­ranean diet is gluten-free and has a large veg­etable of­fer­ing. ZSG has an an­nual menu change which comes with a 10 per cent shift.

Mean­while, Anas­tasiadis dis­agrees with the Euromon­i­tor prediction that hospi­tal­ity brands with full de­liv­ery will pose a threat to ca­sual din­ing.

“I think there is a gen­eral over­sup­ply in the sec­tor,” he says. “Over time, qual­ity of­fer­ings will be more avail­able and con­sumers will be more as­tute in their choices.

“Not ev­ery­thing trav­els well or can be de­liv­ered.”

He says third-party de­liv­ery ac­counts for 20 per cent of trade, with the ex­cep­tion of food-court sites. A cloud­based POS sys­tem used by the net­work is in­cluded in the es­tab­lish­ment costs.

Ini­tial in­vest­ment costs for fran­chisees are:

• Res­tau­rant - $580,000 to $650,000,

li­censed, higher foot traf­fic

• Ex­press - $300,000 to $350,000, food-court lunch trade, Thurs­day nights and week­ends.

Terms are five years with an op­tion to re­new for a fur­ther five. Train­ing, in­no­va­tion and a buddy sys­tem among fran­chisees are in­cluded.

Anas­tasiadis says the first three to six months can of­ten be chal­leng­ing be­cause for many fran­chisees it is of­ten a ma­jor ca­reer shift. Fran­chisees can ex­pect to be work­ing 60- to 70-hour weeks at the start. Af­ter a while fran­chisees can start tak­ing days off and be less hands on.

“Tell your fam­ily to hang on for the ride,” says Anas­tasiadis. “There are long hours at the start, but it’s worth it at the end.”

STEVE COSTI’S FA­MOUS FISH

Fa­mous Fish orig­i­nates from the Costi’s Seafood brand which has been around since 1958.

In 2014, Steve Costi and for­mer Michel’s Patis­serie co-owner Jon Sully with a group of part­ners evolved the brand, the menu and the busi­ness model.

“We’ve not only drawn much of our in­spi­ra­tion from the sea­side, which is re­flected in the aes­thet­ics of the stores, we’ve also cre­ated an over­all ex­pe­ri­ence that is both in keep­ing with what every­day Aus­tralians have come to know

“As a new, young com­pany, we are re­cep­tive to trends in tech­nol­ogy and will be al­lo­cat­ing funds and time for train­ing,

which in turn gen­er­ates value for the

busi­ness.”

and love about fish and chips,” says GM Sal El-Houli.

He says the model is dy­namic enough to ap­ply across sev­eral dif­fer­ent store for­mats, from CBD food courts that start at 50 sqm through to strip and/or ca­sual din­ing/res­tau­rant precincts rang­ing from 120 to 150 sqm.

“Ide­ally, the site needs to have a de­mo­graphic mix of nearby res­i­den­tial and com­mer­cial/re­tail,” he says.

“At the mo­ment there is not a fully in­te­grated seafood fran­chise op­er­a­tor in Aus­tralia. With seafood/fish and chips be­ing the num­ber-one take­away food through­out Aus­tralia by in­de­pen­dent food busi­nesses, we be­lieve there is a sig­nif­i­cant gap in the mar­ket for a qual­ity seafood and fish-and-chip of­fer across the coun­try,” says El-Houli.

He says a healthy menu is very im­por­tant to the brand. “This has been some­thing we have worked hard on. We have mar­keted much of our of­fer­ings that are grill- and salad-based to high­light the fact we do have an ex­ten­sive healthy of­fer in ad­di­tion to our tra­di­tional fis­hand-chip of­fer.

“In­for­mal din­ing is also an im­por­tant tran­si­tion for fish and chips in gen­eral, and some­thing we are also con­scious of and work­ing to­ward com­mu­ni­cat­ing clearly to our cus­tomers.”

But while the busi­ness is known for its seafood, the menu is broader. “We have a spread of prod­uct cat­e­gories, with burg­ers, pas­tas, soft-shell tacos, lamb, beef and chicken prod­ucts, sal­ads, and much more.”

El-Houli says a chal­lenge is be­ing con­sis­tent enough and bold enough with brand com­mu­ni­ca­tion to cus­tomers.

While de­liv­ery is on the radar for the

There are no sil­ver bul­lets in this ca­per, and it takes time to get the busi­ness to

where it needs to be.

short to medium term, tech­nol­ogy at store level comes in the form of self-or­der­ing tablets for cus­tomers.

“There is an up­front hard­ware cost for fran­chisees and on­go­ing an­nual soft­ware costs, but the key met­rics as a re­sult of hav­ing these re­ally do stack up,” says El-Houli. “At the mo­ment, a solid chunk of our cus­tomers use this chan­nel to or­der, and on av­er­age spend nearly 25 per cent more when us­ing them.

“On­line or­der­ing is be­ing worked on, with the or­der­ing app a lit­tle fur­ther down

the track.” he says.

As for in­vest­ment lev­els, some Fa­mous Fish stores have re­quired less than $200,000 (af­ter ap­ply­ing the fitout con­tri­bu­tion) for a turnkey op­er­a­tion, but this can stretch to $450,000. The two big vari­ables are the size of the ten­ancy, and whether or not the fran­chisor can se­cure a fitout con­tri­bu­tion from the land­lord. Fran­chise terms are five years with an op­tion to re­new for an­other five.

“We is­sue 100 per cent of fitout in­cen­tives from the land­lords to our fran­chisees, as ul­ti­mately this would po­ten­tially mean fran­chisees can look to scale up quicker and be­come mul­ti­site fran­chisees, so it’s a win-win for ev­ery­one,” says El-Houli.

He be­lieves in­vest­ing in a hospi­tal­ity fran­chise re­quires the right at­ti­tude. “If your mind­set and mo­tives for com­ing into a busi­ness like this aren’t es­tab­lished on a sound plat­form, it is very likely the in­dus­try will churn you out fairly quickly.

“There are no sil­ver bul­lets in this ca­per, and it takes time to get the busi­ness to where it needs to be. It re­quires hard work and ded­i­ca­tion.”

La Porchetta

Twelve Boar

Rozzi's Ital­ian Can­teen

Hog's Breath

Steve Costi's Fa­mous Fish

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