Expanding Your Franchise

It works in Phoenix, but will it fly in Toledo? Learn the here and there of expanding a regional concept.

Sure, an entrepreneur may have the most innovative product in the city or the hottest restaurant on the block, but that may not mean anything in a different corner of the country. A thriving garden center in suburban Ohio may not fly in New York City, and health-conscious Southern California might not take to Philly's favorite greasy spoon. But for some entrepreneurs, a regional phenomenon can do just as well in new territories--it just might require some extra tweaking, marketing, research and customer education on behalf of the soon-to-be national franchisor.

Spreading the Aloha Spirit
Ask someone in Montana or Massachusetts what a plate lunch is, and you'll probably get a blank stare. Then ask any native of Hawaii, and they'll describe a lunch consisting of two scoops of white rice, one scoop of macaroni salad and a meat entree. After explaining the concept, which dates back to the island's plantation days, they'll probably refer you to L&L Drive-Inn--something else most mainlanders haven't heard of.

When Eddie Flores Jr., 61, and Kam Johnson, 59, bought L&L Drive-Inn in 1976, the concept of plate lunches wasn't something they had to market or educate the local people about. But they did see a need for some modifications to the plate lunch menu and decided to add barbecue chicken and beef to the selections. The restaurant quickly became popular, and by 1999, the pair had nearly 50 locations across the state.

It wasn't until that year that Flores decided to expand outside Hawaii. "Everyone told me it wasn't going to work," he says. "[They said] it's too regional." Even so, he traveled to California to research the market. Before opening the first store there in 2000, Flores and Johnson made some additional modifications, but this time to the restaurant's name. "It's the same concept, but we had to repackage it [as L&L Hawaiian Barbecue]," explains Flores. "Hawaiian is always a magical word, and everybody eats barbecue." The change went over well--proven by the first store's success and the franchise's continued growth on the mainland. Flores also attributes the expansion's initial success to former Hawaii residents who've moved to California and remained loyal customers.

Finding comparable demographics helped Ben Gudoy Jr. build his Southern California L&L locations. After working for the L&L corporate office, Gudoy helped launch the Gardena, California, location in 2001. A year later, he relocated to San Diego, where he saw potential with the region's strong military and Asian populations. "Location is key to how your store is actually going to do," explains Gudoy, 37. "We targeted places where we saw ties and knew people would eat the starches we offered." The plate lunch concept also appealed to the area's large Hispanic population, and eventually word-of-mouth brought in customers of all kinds. "Being born and raised in Hawaii, I thought the food was great," he says. "But it was just a matter of [whether] the people here would like it." So he focused on getting the customers in the door so they could judge for themselves.

"It's just a matter of educating," explains Flores. "They just don't understand the concept. But once they try it, they'll eat it." He points to New York City as a region that needed additional education since Asian food isn't as widely embraced on the East Coast. After the franchise's success in California, Flores and his team moved on to Las Vegas. Since then, they've been gradually moving both north and east, hitting Washington, Colorado and beyond.

Along the way, they've continued studying their demographics while educating consumers about their Hawaiian concept. Researching and testing their new audiences has helped them create the best products for those regions. In California, they introduced a healthier plate lunch, featuring mixed greens and brown rice. In Texas, where they plan to open next month, the menu will include Texas barbecue paired with baked beans or coleslaw. "We decided if we're going to hit a different market, [we have to] change and adapt to it," says Flores, adding that L&L still stays true to the plate lunch concept and the Hawaiian culture, which is why all franchisees are required to train in Hawaii.

Though Gudoy, a college graduate, wasn't too keen on the idea of sweating in the kitchen as part of the vigorous training program, he agrees that it's important to know the whole operation. It helped him get a good handle on running a business so he could focus on spreading the region-specific concept. "It was hard because we had to learn [that part] along the way," says Gudoy. "There was no book that said, 'This is how it's supposed to go.'" On the flip side, he sees the newness as something that may have worked in his favor, helping each of his eight stores bring in about $45,000 to $90,000 a month. "It was such a different franchise," he says. "It wasn't something where we had to compete."

But today, Flores says, L&L has its share of copycats; he's seen so-called Hawaiian barbecue joints pop up all over. "People just start opening without really understanding the Hawaiian culture," he explains. "They've never been to Hawaii, and they don't know how to cook the food. They just see us doing well and copy us." But with nearly 200 stores across the nation and prospects in New Zealand, he's not too worried. Says Flores, "We just have to maintain our quality and position and continue to expand."

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This article was originally published in the January 2008 print edition of Entrepreneur with the headline: Outward Bound.

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