Franchised Restaurant Operations vs. Corporate-Owned Operations

By Vladik Rikhter

buffalo-wild-wings

There’s a shift happening in the restaurant industry other than changing consumer preferences. It’s the rise of company-owned vs. franchised operations.

Previously, we’ve discussed the regional success of In-N-Out Burger. This is a restaurant chain that came of age with McDonald’s. When the two restaurant chains came to a fork in the road, they took separate paths. McDonald’s experienced explosive growth, while In-N-Out Burger grew slowly but steadily, eventually reaching cult-like status among foodies.

Today, In-N-Out Burger continues to grow while McDonald’s will have to close more restaurants than it opens for the first time in 40 years.

Other major chains are starting to get a clue. Chipotle, which McDonald’s has been criticized for trying to chase, has seen its revenue soar by 155% over the past five years. Panera’s saw five-year revenue growth of 77%. It should be noted that Chipotle is 100-percent company owned, while Panera is a mix of company-owned and franchised locations.

It should also be noted that during this time period, the proportion of company-owned locations has increased slightly at Panera. While this has slowed down total system sales, Panera’s revenue rose 7.2% on a 2.4% comparable-sales increase at company-owned locations. Chipotle is expanding its footprint at almost twice the right of Panera.

Then came the news that Buffalo Wild Wings spent $160 million buying out franchisees. Corporate-owned locations have been registering faster sales growth than franchisees have for seven straight quarters. The company is focused on rolling out changes that franchisees are slower at implementing, particularly “guest experience captains” and store redesigns.

Brand Experience Reigns Supreme

You may ask, what is a guest experience captain? This is a position Buffalo Wild Wings created at its 500 company-owned operations. The employee’s job is to help deliver the ultimate social experience for sports fans, from introducing new guests to product and promotional offers to managing audio/visual equipment.

Similarly, Panera has been rolling out Panera 2.0 at its corporate-owned locations. This concept is designed to help reduce customer friction at cafes through digital access and improved operational processes. It really works, too. I didn’t have to wait 20 minutes to stand on line for a tomato soup last week.

It all comes down to improving operations for a better customer experience. It’s about being the moment with your customers to respond to their needs in real time.

We’re certainly not saying that franchised operations don’t work. Many times, they work with great success.

Maybe you don’t have the resources to roll out an entirely new service system in your restaurants. Or maybe you are a franchisee wondering how you can better meet the high bar your brand has set. Considering using your existing technology to gain better insights into your business.

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