The key to building a successful, multi-brand franchise portfolio

The key to building a successful, multi-brand franchise portfolio

Daniel During, principal and managing director of Thomas Klein International, shares his thoughts on what’s needed to create a winning formula for franchise concept expansion.

In our over-catered, uber-copied world of restaurant franchises, it can feel as if the only way to succeed is to stand out from the crowd. However, doing so involves major risks as well. If your concept is accepted by the public, you have everything to gain. On the other hand, if you are just a little too daring, too out-of-the-box, you may fail. The question is, how do you find the right balance between innovation and risk?

Finding a happy medium

Personally, I am a big fan of creating my own concepts and developing them into franchises that are unique and respond to a market need. However, as explained, this can bring significant accompanying risks. The simple formula, then, would be to use franchise concepts that are proven and have been successful. But how do you then attract customers to a franchise concept that has already been replicated dozens of times? There are operators and investors who pride themselves on developing their own contemporary franchisable concepts. Others, meanwhile, rely on their strength to identify potentially successful standalone franchisable concepts across the world that can be implemented, with or without adaptation, in a different market. The second alternative seems to provide a happy medium between opening already established franchise brands, with no differentiation factor, and creating a new franchise brand from scratch.

Identifying the common factors

Markets worldwide have certain aspects in common. The Hong Kong lifestyle bears similarities to that found in Dubai, with people bumping into each other after work and deciding, last minute, to go out partying or dining. This is very different
to the London mechanism, whereby afterwork drinks and dinners are planned weeks ahead. In Berlin, on the other hand, plans tend to be made ahead as well, but the venues are much more casual, with queuing in the street to access a venue the norm. The key is to find franchise concepts that not only respond to the needs of the Berliners, the Shanghainese, the Parisians or New Yorkers, but also meet the societal demands of Dubai, Abu Dhabi, Beirut or Qatar. Being able to identify those correlations is a critical factor for determining the success of the investment.

Long-term goals

Besides questions around the concept, there is another that needs thought: ‘Why are you doing this?’ Perhaps to make money? To gain status? To have a place to meet with your friends? To impress your future mother-in-law? Let’s assume for a moment that your goal is to make money from operating franchises, while at the same time building a reputation for yourself. Maybe – and why not – it’s also to have the opportunity, in the future, to entice other investors to get involved. Perhaps you even hope to eventually create an IPO and float your company on the market.

Offering a strategic mix

In the past five years, Dubai has become an exemplary model of onemanshow companies that have succeeded in becoming global franchise emporia. Logic suggests, therefore, that the way to reduce risk and potentialize profits would be to offer a strategic mix of the lot. The proven restaurant brand franchise will act as your low-risk plowing horse, guaranteeing your ongoing revenue, while the imported singlestore brand, which you convert into a franchise, will additionally secure your place in the exclusivity wagon. Your locally developed concept will work as a catalyst to position you as the socially responsible innovator who commits to giving back to the society in which you operate.

Prioritizing wider responsibilities

Beyond financial success, there is a window of opportunity to marry F&B with both corporate social responsibility (CSR) and sustainability. Restaurants CAN be sustainable; you don’t have to harm the planet. We can be responsible in our consumption of animal protein and in the way we utilize resources. We can filter local water, negating the need to import it. We don’t have to abuse animals in order to have fun. We can look at consuming alternative sources of protein or even rely on the use of second cuts and offal to respectfully use every single byproduct of the animal. Another way of sharpening the focus on sustainability is to reduce our water usage. This can be achieved by having efficient dishwashers or using enzymes, for example, to degrease water, providing an opportunity to reuse it after filtering. When it comes to saving energy, filtering and recycling air can reduce the amount of energy required to chill fresh air from outside.

Education matters

Finally, and perhaps the most important step in this process, is to find ways to educate the local community. Teach others how to implement these measures at home, in their everyday routine, perhaps by means of free seminars and workshops that are made open to the public. The investment in these initiatives should never be underestimated, with the benefits felt far beyond the impact on the environment and society. Your payback can be huge, encompassing business leaders, homemakers and housekeeping staff. Each of them will become a marketing tool, with every seminar attendee playing the role of brand ambassador.
On reflection, perhaps becoming a successful franchise operator or investor today requires more than simply having the right brand and knowing how to manage it. Added to these criteria is the increasingly important one of embracing responsibility toward both the environment and the world that we will leave to our children and our children’s children. Now THAT is a successful company!

Daniel During
Principal and managing director
Thomas Klein International

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