American franchises bring their brands to Canada with gusto.
Canadian consumers are in for a treat — a few of them, in fact. A slew of U.S. franchises are opening operations on this side of the border, and Canucks are welcoming them with enthusiasm. A recent study from Chicago-based foodservice research firm, Technomic Inc., notes a recent trend towards U.S. chain operators heading north to feed a market of neighbouring customers with similar taste buds.Canada’s strong economy increases the country’s appeal, whether companies are selling handmade burgers, sticky-sweet chicken wings or frozen desserts.This year’s Franchise Report highlights three American companies making the most of the Canadian market.
HIGH FIVE
Five Guys Burgers and Fries takes a bite out of the market.
President Barack Obama knows good grub. During his first visit to Canada, he stocked up on beaver-tail pastries, and when he buys lunch for his White House staff, it’s Five Guys burgers all around. A 2009 NBC special presenting a day-in-the-life of the Obama administration showed the President himself visiting a Five Guys joint and carrying brown paper bags back to the oval office.The chain is popular with regular folks in theWashington, D.C., area, too, but its grassroots beginnings took place in neighbouring Virginia. In 1986, Jerry and Janie Murrell, along with their four sons, family run business had a simple mission: serve handmade burgers and fresh-cut fries, prepared with the same care as a home-cooked meal. The less-is-more menu quickly caught on with locals and began
attracting attention from surrounding areas, and, just like that, Five Guys Burgers and Fries became a hit.
Throughout the 1980s and ’90s the business — and the family — grew. A fifth brother was born and four eat-in locations opened. In 2003, the owners started offering franchise opportunities and, within 18 months, sold options for more than 300 units. Today, Five Guys boasts more than 750 units with more than 1,500 in development. “I wasn’t sure about franchising at first. I was afraid we wouldn’t be able to transfer our ideas and values about running the business,” says Jerry
Murrell, Five Guys CEO. “We invested a lot into our franchise system and training program right from the beginning.”
Murrell is modest about the company’s success. “There are many good hamburgers on the market, and we don’t tell people that we have a superior product,” he says. Instead, Five Guys differentiates itself from the competition by using only the best ingredients to make its hand-formed burgers and fresh-baked bread. “We’re fanatical about our products and we don’t choose ingredients based on price.We have a certain profitmargin, and we control it by raising our prices if wemust.We never cut on labour or quality,”Murrell says. The result is higher operating costs than most other burger chains.
The founding family never pursued expansion but responded positively to an overwhelming franchising demand. In January 2010, Five Guysmade its Canadian debut inMedicine Hat,Alta., and severalmore locations have opened since. There are three master franchisors in Canada: Five Star North America has four stores in operation,with rights to open more in British Columbia and Alberta; Five G Canada has opened one store, with rights in Saskatchewan and Manitoba; and Bantam Restaurant Group has two locations, with rights in Ontario and Quebec. Currently, the development rights are soldout in Canada and the U.S., while the chain explores possible expansion in Europe.
“Five Guys development and operations teams are incredibly supportive. We had experience in real estate, but this was our first foray into the restaurant business, and they gave us the comfort level to go where we hadn’t before,” saysWayne Sellers, Bantam principal partner. Sellers and his business partner, Caleb Koeppel, opened their first store in suburban Montreal in July 2010, and a second location in Kingston, Ont., soon after. Bantam plans to open 65 units in greater Montreal, Ottawa and areas surrounding the Greater Toronto Area. Sellers and Koeppel both hail from the U.S. but were confident the brand would succeed in Canada. “A lot of folks from Ontario and Quebec are already familiar with Five Guys from vacationing in the U.S. Plus, all we really needed to know was that Canadians like burgers. The food is so good, it’s that simple,” Sellers says.
So far, Sellers’ prediction is holding true. Sales in Montreal are matching forecasts, and the Kingston location is exceeding expectations. “Kingston is booming, and our sales keep going up every month,” he says. Bantam has submitted plans for its next location, in Ottawa, and average opening costs have ranged between $300,000 and $500,000, depending on the store. The main challenge has been translating everything, including signage and the operating system
into French for Quebec-based stores.
“If people like fresh food, they’ll love Five Guys. There are no freezers; fresh bread is delivered; patties and fresh-cut fries are prepared every morning. Five Guys doesn’t use any preservatives,” says Sellers, those personal favourite is a cheeseburger with grilled onions, mayonnaise, pickles and barbecue sauce. A standard burger comes with two patties, but customers can add more (or take one off). They can also choose from 15 toppings at no additional cost. Beyond its trademark burgers and fries, Five Guys sells hotdogs, grilled cheese and veggie sandwiches.
So, when the Ottawa location opens, we’ll see if Prime Minister Stephen Harper follows Obama’s led on this one.
FLIP SIDE
Five Guys Burgers and Fries has a cult-like following. The brand is so popular franchise opportunities in the U.S. and Canada have been distributed. But, that doesn’t mean future opportunities won’t become available. In the event that they do, franchise costs are as follows:
• Per restaurant franchisee fee: $25,000
• Development fee: $50,000
• Royalty fee: six per cent
• Marketing fee: three per cent
(split equally between national and local promotions)
WING SPAN
Buffalo WildWings is bringing authentic New York-style. chicken wings across the border.
Formany consumers, chicken wings are the ultimate hands-on nosh. Restaurant chalkboards and menus across the continent champion the dish, often along with its sidekicks: cold beer and sports. Chicken wings can be sticky, crispy,moist, spicy, juicy and sweet.And,when prepared with the evangelical gusto of a bona fide wing nut,mouthwateringly delicious.
On average, Canadians consume thousands of pounds of chicken each year and, soon, they’ll have another wing joint to pile into with friends to catch the game. Minneapolis, Minn.-based Buffalo Wild Wings Grill and Bar, one of the 10 fastest-growing chains in the U.S.,
is set to open its first Canadian location this spring in Oshawa, Ont.
Known colloquially as B-Dubs, the restaurant offers 14 signature wing sauces, including spicy garlic, Asian zing and mango habanero as well as salads, appetizers, burgers, sandwiches and other specialty fare. Buffalo Wild Wings is the home of “tablegating,” akin to tailgating, which encourages patrons to push tables together to accommodate groups. It also has its own Buzztime Trivia system and enough big-screen televisions to make customers feel they’re part of the action.
The company was founded in 1981 when owners Jim Disbrow and Scott Lowery moved from Buffalo, N.Y., to Kent, Ohio. They couldn’t find a restaurant to satisfy their cravings for authenticNewYork-style chicken wings and, rather than make frequent road trips, they opened their own wing joint close to home. Since then, Buffalo Wild Wings has grown to include more than 726 units in America (257 corporate stores and 469 franchises), and B-Dubs customers are fanatical about the brand, which has received dozens of awards across the U.S. for best wings and best sports bar.
“We received many requests to open a location in Canada,” says MoSawda, Buffalo Wild Wings’ senior vice-president of Franchising and Development.“We did our research, and we know Canadians love great wings, great beer and a friendly neighbourhood venue where they can relax and catch the hockey game.” Currently, the company has signed two leases; one in Oshawa and another in Mississauga, Ont. A third lease is in negotiation for a restaurant in Newmarket, Ont. Beyond Ontario, the plan is to open restaurants in British Columbia, followed by Quebec. Sawda hopes to see 100 new Canadian locations within the next few years.
And,while plans are in place to franchise the chain inCanada, the locations opening in 2011 will be corporate. The all-Canadian management team for the Oshawa restaurant is in training, and a Canadian regional manager will oversee the development and opening of other Ontario locations. An average unit employs between 50 and 70 people and requires about 5,700 square feet to seat approximately 300 guests. Suburban aficionados will be the first to experience the newest wings on themarket, but there are plans to open downtown Toronto locations, too.
“We want our franchisees to be successful. Right now we’re working out the details and going through a learning phase,” Sawda explains. “We’ll start
opening franchises in 2012 and will be able to share the knowledge we gain over the coming year with those franchisees. This is our first international market,
and we’re committed to longterm growth, not short-term gain.” Figures for franchise, royalty and advertising fees have yet to be determined, but company reps
expect to work with amix ofmaster andmulti-unit franchisees, depending on the province.Management is also considering expansion to the United Kingdom, Australia, Japan and theMiddle East.
But, no matter the country, there are a few things that never change. The B-Dub team is encouraged to be guest-driven, team-focused, community- connected and dedicated to excellence. The chain also offers fresh Buffalo, New York-style wings, and although the Canadian menu will mirror its U.S. counterpart, there will be a few changes to reflect domestic tastes. “We like to have local craft beer on tap whenever possible, and there is plenty to choose from in Canada.We’re also introducing new sauces such as honey-garlic,which is well-liked in the Canadian market as well as sweet potato fries,” Sawda says. To date, expansion is
going well with just a couple challenges along the way, including legal issues regarding similarly named competitor chain, Wild Wing Restaurants. In fact, at press time the rival’s founder had launched legal proceedings against the U.S. company. Despite the controversy, plans to open the Oshawa store by spring are on track and, soon, Canadian wing-lovers will join the throngs of American B-Dubs fans already getting their hands dirty.
WING IT
Buffalo Wild Wings (BWW) customers are passionate for the brand and its tasty food. Connecting with the community is a huge part of the chain’s success. At the time of publication, more than 3.7-million people “liked” the BWW Facebook fan page, which displays a long list of comments, questions and praise from devotees, many asking when a BWW will be opening in their hometown.
CHILL OUT
Menchie’s brings custom frozen yogurt to Canada.
On a winter evening in Toronto’s Annex neighbourhood, Menchie’s frozen yogurt is as bright, and nearly as busy, as a discotheque. Familiesmingle in the flashy white and pink interior holding waffle bowls of ‘fro-yo du jour.’ This is the second Canadian location of the California-based chain, and lineups have been steady since the store opened last October.
It was a similiar lineup that convinced brothers Michael and David Shneer, master franchisors for Menchie’s Canada, to bring the brand across the border. “In September 2009, a friend invited me down to California to check out a booming self-serve frozen yogurt concept called Menchie’s. There was a lineup out the door at the first store I visited. I had never seen anything like it,” Michael Shneer recalls. The reception in Canada has been just as impressive: people lined up outside for more than an hour in 3°C temperature the night the Toronto store opened. The first location, which opened in Vaughan, Ont., in September 2010, is equally as busy.
The Menchie’s tale is true love story. The brand’s founders, husband-and-wife team Adam and Danna Caldwell, had one of their first dates at a self-serve frozen yogurt shop.That day, the pair fell in love with each other and with the idea of opening their own frozen yogurt joint. The first Menchie’s opened in Los Angeles in 2007, and by the end of 2010, the company had 57 stores globally with 100more in development.This year, Menchie’s will open in Australia, Japan, Mexico and Morocco. Michael and David Shneer have the franchise rights for all of Canada and are committed to opening 100 locations in a five-year period. Menchie’s Canada is a franchise-focused business with the Toronto corporate store as its training centre. Franchisees across the country have already signed contracts and several new locations are expected to be under construction within the first quarter of 2011.
A lot of folks have fallen in love with Menchie’s, including celebrities such as Justin Bieber, Brittany Spears and Taylor Swift — paparazzi even hang around the brand’s L.A. stores hoping to catch a celebrity snacker.
One attraction is the chain’s self-serve concept that allows customers to mix-and-match 18 evolving flavours of frozen yogurt with more than 40 toppings. Think chocolate cake fro-yo with pecans and rainbow sprinkles or, for the more health-conscious guest, a scoop of Georgia peach topped with non-fat granola and fresh strawberries. Whatever the combination, the cost is determined by weight, not ingredients. Menchie’s charges $0.49 per ounce, so a five-ounce cup costs $2.45 and a 10-ounce cup costs $4.90 — a competitive price when compared against other frozen-treat establishments.
The company mission is to make people smile. “Menchie’s is more than a frozen yogurt store. It’s a family friendly gathering destination focused on customer service. The experience creates loyal brand fans and attracts new customers all the time,” says Amit Kleinberger, Menchie’s Global Headquarters CEO.
Shneer and his brother shopped around when they were considering a business opportunity, and the Menchie’s approach was a strong selling point. “While everybody else was talking to us about their yogurt, Menchie’s was talking about the brand and what it means to people,” Shneer says. “The Menchie’s self-serve concept is a lot of fun for kids and adults.We give out stickers; there’s a giant chalkboard in the store that people can write messages on; we play great music. It’s a place where you want to hang out.”
The Canadian stores and products are identical to their U.S. counterparts. At first, it was a challenge finding a domestic supplier who could get the formula right, but now all the yogurt is made with fresh milk from a Canadian dairy. Menchie’s is proud of its high-quality products and differentiates itself from many of its competitors that use powder-based yogurt. Another thing that stands out about Menchie’s, is its strict policy on samples: customers can try as many flavours as they like. “We encourage sampling. With many other brands, you can ask for one sample and that’s usually ok, but a second? a third? a fourth? Most of the time a customer would be made to feel uncomfortable asking for so many tastes,” Shneer says. His favourite fro-yo concoction is cookies and cream mixed with piña colada, topped with toasted coconut, Oreo cookies and fresh strawberries. You can bet it took more than a few samples to figure that out.
GET THE SCOOP
Menchie’s franchises are opening across the country and, despite Canada’s cold winter, the chilly treats are selling like hotcakes. Franchise opportunities are available and estimated total costs, including equipment and lease hold, range from $230,000 to $600,000, depending on the size of the store and whether franchisees buy or lease equipment. Franchise fee: $30,000 Brand development fee: two per cent of gross sales Royalty fee: six per cent of gross sales Preferred size: about 1,400 square feet.
