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Expanding Your Franchise

It works in Phoenix, but will it fly in Toledo? Learn the here and there of expanding a regional concept.
January 1, 2008
URL: http://www.entrepreneur.com/article/187678

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."

Thinking Outside the Box

For Anthony Geisler, LA Boxing was merely an after-work destination--a dingy boxing gym where he could break a sweat and burn off stress from his day at the office. For Sean McCully, 35, who opened the Costa Mesa, California, gym in 1992, it was a place where he and other boxers, mixed martial artists and fighters could work out. They both knew the idea of a gym with a boxing ring, plenty of bags and classes taught by former fighters was a great idea, but franchising the concept wasn't the plan from the get-go.

In the beginning, McCully, who was working at LA Fitness, hoped to create a boxing-specific program within the LA Fitness shell. After receiving negative feedback from the higher-ups, he left the company and took his idea down the street--which was still far from the city in his gym's moniker. "Sean's original concept wasn't really that sophisticated," says Geisler, 31, of naming the first gym. "It wasn't that he wanted it to be ritzy Hollywood. The name just rolls off your tongue and sounds familiar to people."

Geisler joined as a member in 2002 but quickly saw the potential of the popular gym. So he approached McCully with the idea of opening additional locations. "In essence, I was the first franchisee," he says. His first stop: Aliso Viejo, California, a suburban town filled with "moms, dads, strollers and vans. I knew that's where the product would go." And he was right: The gym out-grossed the original one immediately. For the next location, he tested an older, lower-income demographic, and that gym also did exceptionally well. It was at that point that Geisler knew he was on to something. So in early 2004, he stepped in as president and formed LA Boxing Franchise Corp. From there, McCully and Geisler built their team, developed the brand, designed a line of boxing gloves and filled a warehouse with bags, mats and boxing rings.

As predicted, it wasn't long before their first franchisee came knocking. But to their surprise, the former police officer didn't actually live nearby--or even in California. "If anybody had to take a wild guess [about where] our first franchisee would come from, [it'd be] SoCal," says Geisler. "We [never] thought in our wildest dreams that we'd go to Albuquerque, New Mexico, right out of the gate." Still, the New Mexico gym held the biggest grand opening in LA Boxing's still-short history.

Even after that, the franchise didn't return to its regional roots. Instead, it headed to Chantilly, Virginia, when Tate Marshall, an athletic serial entrepreneur, discovered LA Boxing in 2005 just as it began expanding out of California. He and his wife, Nancy, 41, signed on immediately.

Though Marshall, 42, knew people would embrace the concept, he was worried about having a gym called LA Boxing on the East Coast. "When you're on the East Coast and you hear 'LA,' you think of Hollywood and movie stars; you don't think boxing," he says. "So the first thing I wanted to do was change the name."

Geisler says this was a common concern for many franchisees, but he was adamant about keeping the name. He was confident that the region-specific name wouldn't be detrimental to business and even saw it as a benefit. "I think the name has mass appeal wherever you are," says Geisler. "It just meant overcoming the objection that 'LA' has a certain stigma."

For Marshall and other franchisees, that meant educating customers. Once he got customers through the door, the perception of LA Boxing as a froufrou gym immediately disappeared, and they were hooked. In hindsight, Marshall, whose year-old business saw sales of more than $500,000 in 2007, is happy to have the Los Angeles association, adding, "I've made some bad decisions in business, and changing [the name] would have been one of them."

Having a regional tie has been valuable across the board, helping the franchise bring in $6 million this year. Geisler points out that the top five stores aren't even in Southern California, and the majority of top-grossing locations are actually on the East Coast--Marshall's being No. 1. "I definitely think the LA Boxing name had a hand in us moving across the country," says Geisler. "I don't believe we would be as appealing if we were Bob's Boxing."

Geisler sees his growth strategy as a player in the company's success. He focused on expanding as quickly and efficiently as possible before competitors had a chance to surface. He wanted to keep LA Boxing "the only boxing/kickboxing/mixed martial arts franchise in the world," protecting both his company and its franchisees. Once he had significant padding between LA Boxing and its competition, Geisler was able to concentrate on introducing merchandise, which was another area where the regional tie played an important role. Now based in Santa Ana, California, the 100-store franchise has to keep other regions in mind when introducing apparel. "If we based our goods off of what works in our climate, we'd be sending tank tops to people in the snow," explains Geisler, adding that regions with a military presence prefer camouflage boxing gloves, while the pink ones sell best on the West Coast. In the coming years, he plans to roll out more products and expand into the Midwest and the Northern states.

All in all, the stories behind these entrepreneurs show that research and education as well as a passion for your business are the most important factors in opening a region-based franchise in a new area. Though every audience may not embrace every concept, food or product, Flores puts it best: "If you don't try, you won't know."

New Franchise on the Block

When it comes to opening a franchise that started off as a regional phenomenon, "the market will always tell you what it wants," says Anthony Geisler, president of LA Boxing Franchise Corp. Keeping that in mind, Mike Lassiter, founder of franchise consultancy Franchising Concepts, offers some advice for opening a franchise in unfamiliar territory.