Jollibee’s locations in the U.S. average $4.4 million in sales per year. | Photo: Shutterstock.
The franchise business is not easy.
How not easy is it? Only 17% of franchise companies ever reach 100 locations, according to Matt Haller, CEO of the International Franchise Association.
Haller was speaking at the CREATE Conference in Nashville, a three-day event for emerging restaurants run by Informa Connect, the parent company of Restaurant Business and sister publication Nation’s Restaurant News.
That’s not the only statistic Haller presented suggesting a difficult business. Profit margins for franchisors improved last year to 15% of revenues, from 12% in 2023. But that remains well below the 20% post-pandemic high-water mark in 2021.
Haller suggested that profit margins are likely to decline again this year. “Poor sales is something we’re really seeing across the franchising community as a spike this year, as well as persistently high inflation issues,” he said.
Here are some other takeaways from the conference.
How Jollibee fixed its U.S. business
Jollibee, the Philippines-based chicken concept, has had a presence in the U.S. since 1998. But that doesn’t mean it has always been a good presence. “Success in your home country doesn’t necessarily mean success elsewhere,” Maribeth Dela Cruz, president of Jollibee, said at CREATE. “Especially in a market that is as highly competitive as the U.S.”
She admitted that the company made “a lot of missteps” in its U.S. effort. But Jollibee then started focusing on Philippine communities in the U.S., targeting consumers who longed for a “taste of home.”
It had a big impact. “Our store openings became big events,” Dela Cruz said. “We had long lines out the door for several months. People would make a five- to eight-hour drive to get to Jollibee.”
That created a “buzz,” she said, that helped generate interest at other locations and fueled the brand’s growth. Dela Cruz said the company now has $4.4 million average unit volumes and has generated 57 straight months of positive same-store sales. The company is now starting to franchise.
The road to $27 million AUVs
Speaking of average unit volumes, the average Din Tai Fung generates $27 million per year, which still almost sounds like a mistake.
So how does the brand do it? That’s a good question. “Truly, we just do the basics really, really well,” said Jessica Chao, head of brand marketing for the chain. “We’re not a brand of gimmicks.”
She said that the company focuses on training. It makes employees feel they have a career and not just a job. Employees greet every customer as they come in and wish them goodbye when they leave. “If you have happy and engaged employees, you have higher guest satisfaction.”
Chao also said the company is “obsessed with little details.” Every table is spotlit so customers can focus on the food. “People eat with their eyes,” she said. “Our cuisine is about theatrics.”
The kids love Chili’s
Who is driving success at Chili’s and other casual-dining chains? Gen Z.
While the younger generation is under tremendous economic pressure, they have been driving a lot of the success that casual-dining chains have had this year. According to Technomic, 25% of spending at casual-dining brands has come from Gen Z consumers. That’s up from 23% last year.
That is a bullish sign for the future, said Robert Byrne, director of consumer and industry insights with Technomic. “This casual-dining story has legs,” he said. “Gen Z has embraced casual dining, which I think is fabulous.”
Take your time
Domino’s, which won the NRN “Brand Icon” award this week, just launched a brand refresh, its first in 12 years. But the development of the new look, including new logos, a new jingle, a new font and a new black-and-gold box for specialty pizzas, took some time to get right.
“It looks so simple,” said Kate Trumbull, chief marketing officer for the Ann Arbor, Michigan-based chain. “But it was 20 months in the making.”
Domino’s two years ago launched a new strategy, which CEO Russell Weiner calls “Hungry for More,” that is more focused on the chain’s pizzas. “It became very apparent that we had to rethink and reimagine all of that,” Trumbull said.
So the company looked back to the 1970s and 1980s for inspiration on the colors. The music strategy was important. And it was also vital to have a platform that could work around the world. Thus the tagline Dommminos, with three m’s. “It was just kind of like lightning in a bottle,” Trumbull said.
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