Do Your Homework Before You Open a Franchise Business -- or, in This Case, Five
Franchise Players is Entrepreneur's Q&A interview column that puts the spotlight on franchisees. If you're a franchisee witih advice and tips to share, email firstname.lastname@example.org
"If you carry entrepreneurial DNA, working a 9-to-5 job just isn’t an option," Michael Dravo says, explaining his need to work for himself. In that context, he started with an HVAC franchise but has now moved into his "passion," the food and beverage industry -- specifically five Hurricane Grill & Wings restaurants in Florida and Alabama. Of course every franchise has its own unique pros and cons and problems, so Dravo made a point of carrying out some deep research, speaking with multiple franchisees and even restaurant guests to determine the lay of the land at Hurricane. "The decisions you make on the front end will heavily impact the long-term health of the business," Dravo says he's learned.
Name: Michael Dravo
Franchise owned: Hurricane Grill & Wings (currently five locations across Florida and Alabama.)
How long have you owned a franchise? I first became a franchisee with a home services franchise called One Hour Air Conditioning and Heat in 2005. This was interesting because I did not know the first thing about HVAC, but had good business instincts, experience managing people and a fundamentally sound work ethic. This franchisor had an extremely strong training program, which gave me what I needed to grow a moderately successful HVAC business. This move set up the groundwork for me to follow my passion and explore the food and beverage industry. I was then able to join and open my first location of Hurricane Grill & Wings in 2007, with a second in 2008.
Why franchising? Leaving a secure job and opening a new business can be intimidating, not to mention a tough sell on a wife with newborn twins! But if you carry entrepreneurial DNA, working a 9-to-5 job just isn’t an option. Finding the right franchise that can guide you through the systems of an established brand makes success much more attainable, however not guaranteed. You must be prepared to sacrifice and put in the hours it takes to understand your business, and more importantly the people that drive it. For Hurricane Grill & Wings, this means your employees and guests.
What were you doing before you became a franchise owner? I was working as an outside sales consultant.
How much would you estimate you spent before you were officially open for business? I paid $15,000 for each agreed-upon territory, with another $15,000 due upon opening our doors. With nine restaurant franchises under management, and five of them Hurricane Grill & Wings, we figured out how to get these built in 45 days. Most contractors require a deposit upon signing a contract, and that could be between 25 percent and 50 percent. You can plan on 25 percent of your total build-out coming out of your pocket prior to opening your doors.
For each of my Hurricane Grill & Wings locations, I have spent anywhere from $500,000 to $950,000 to open. We keep an eye out for second-generation spaces, which can dramatically reduce construction costs. If you can get a line of credit from your bank, it’s possible to open your doors without [funds] coming out of pocket for 60 days.
Where did you get most of your advice/do most of your research? I did basic reconnaissance and went to multiple franchisees and spoke with them. I also talked to guests while I was visiting the locations, as a patron, to get a feel of how the brand was perceived. Additionally, I asked the guests I spoke with what they liked most and why, and how many times a month they visited Hurricane Grill & Wings -- surprisingly, the average answer was one to three times per week!. I also watched what the demographics were coming in and out of the restaurant and at what times.
What were the most unexpected challenges of opening your franchise? The biggest challenge for me was having a lot of things I wanted to do inside my business, but having to stay within the lines laid down by the franchisor, which in the long run is what protects the brand’s identity.
What advice do you have for individuals who want to own their own franchise? Do your research! The decisions you make on the front end will heavily impact the long-term health of the business. Some of these decisions are:
- Know your franchisor: Research your potential business partner, and realize that you are entering into a business partnership. Review [the franchisor's] principles for making decisions and planning for the future of your business. Learn their background, and ask them what the five- and 10-year plans for the concept are. Additionally, find out if their goals, business motives and practices align with yours. The only way to do this is by asking a lot of questions!
- Financing and build-out: It is important to understand thoroughly your financial obligations by asking yourself a number of questions: How long will you carry your debt service and what will that mean for cash flow? What is your expectation for ROI, and is it realistic? Last, what sales do you need to have a shot at hitting your expectations? Talk to established franchisees to find out if your expectations are possible.
- Location and lease negotiation: Have a professional review your lease. Also, look at AUVs for the brand you are committed to and try to keep your occupancy expenses under 8 percent [for concepts similar to Hurricane Grill & Wings]. Make sure that you don’t get “sold” by a commercial realtor in regards to location. Do your research thoroughly and on the spot, and look at the demographics for some of the most successful locations in the brand and try to replicate or use as a comparison in your own search.
- Build-out: Once construction starts, it can feel like a runaway train. Work with the franchisor and your architect heavily on the front end to ensure you have a solid construction plan, as change orders take a massive toll on budget. Additionally, budget 10 percent for a contingency fund for those last-minute construction snafus.
What is next for you and your business? My partner Bill Luebbert and I have plans to open 25 Hurricane Grill & Wings units over the next five years. We’ve opened two more locations over the last 12 months, with the most recent opening in February in Mobile, Alabama. As chief operating officer of our hospitality-management company, I will take charge of most of the 2015 building of infrastructure to ensure operations and profitability are in place for our next nine units. We will continue our plan to be a multi-brand hospitality-management company.