Owning a franchised business isn’t easy, even for folks who have decades of business experience. As Sonic franchisee Mike James put it, “It was a shit show. We figured it out.”
James worked in commercial real estate before pursuing business ownership. With the help of his business partner, he bought 21 Little Caesars units in Michigan five years ago.
“We bought it thinking it would be a little side gig,” James said. “I told my wife … that it would be five, 10 hours a week and she’s like, ‘What are you talking about?’” Sure enough, James realized almost immediately it would take up much more of his time.
James was one of four panelists on the “Four Under 40” panel at the Restaurant Finance & Development Conference in Las Vegas November 14. Franchisees Kamal Singh, Shehzaan Chunara and Nick Rhoads joined James, with Michael Eagan of Synovus Bank moderating.
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Singh’s company, Emerge Inc., owns Taco Bell, Sonic, Pizza Hut and KFC units. Chunara Group owns restaurants in multiple brands, such as Checkers, Dunkin, My Eye Lab and Take 5 Oil Change. Rhoads’ group, Heritage Partners, is an investment company.
Access to Capital
One of the most challenging parts of becoming a franchise owner, especially for younger operators and people of color, is access to capital.
For Singh, he wasn’t “sharp enough” to get outside capital initially. “Fortunately, that worked for us,” he said. Emerge buys underperforming restaurants and turns them around. “That’s worked for us as well.”
Chunara also hasn’t taken outside capital. His father started the franchise group in the ‘90s after moving to the United States from India. “I wouldn’t want to take outside capital. For us, personally, I don’t think that would work,” Chunara said. “I wouldn’t want to feel like I have someone else’s money that I’m responsible for.”
Singh and Chunara’s stories are rare but impressive, James pointed out.
“When I went to go buy the first Caesars, I was getting ready to sign my life away, every dollar including my taxes from the following year, to do this deal,” James said. He was telling his soon-to-be business partner his plan before the partner offered to put up 90 percent of the capital required, and the two would equally share ownership. “I thought about it for about 20 seconds and said, ‘Yeah, OK, let’s do this.’”
Real Estate
In a tough real estate market, finding good locations at a fair price can hinder growth for franchisees.
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“At the end of the day, if you have a development agreement that’s too cumbersome and too aggressive, you need to address that with your partner, which is your franchise partner, and they need to work with you on that because they shouldn’t want you to develop bad stores,” James said. His group focuses on tertiary markets, where any given brand has performed well.
High interest rates and construction costs are making it a challenge for development right now, Singh said.
“Everybody’s chasing the same dirt,” he said. One way to get the most bang for your buck, Singh said, is to buy a larger plot of land and develop a few brands on the same property. “That’s where we’re able to save costs and be more efficient.”
The Restaurant Finance & Development Conference, presented by the Restaurant Finance Monitor, Franchise Times and Food On Demand, runs Monday, November 13, through Wednesday, November 15, at the Bellagio in Las Vegas. Next year’s RFDC will be held November 11-13, 2024, at the Fountainebleau in Las Vegas.