Franchising Can Win in a Downturn
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If you’ve been dreaming about expanding your small business, there are options even in a recession. In fact, this is a great time to franchise, according to both a longtime Hawaii franchiser and a newcomer.
L&L Hawaiian Barbecue, the state’s franchise king, with restaurants stretching from New York to New Zealand, opened five more in the midst of this summer’s downturn. That’s despite as much as $300,000 to $400,000 in build-out costs, $35,000 for franchise rights and another 4 percent to L&L monthly (including 1 percent for advertising).
“Quick-service restaurants, they’ve weathered it,” says L&L Chief Operating Officer Bryan Andaya.
California’s Redondo Beach, Santa Ana, San Diego and Fullerton, and Honolulu all have new L&Ls. It’s a testament to price point, brand recognition and the way some opportunities crop up in a poor economy.
“It’s a fabulous time for franchising,” Andaya says, “IF you’ve got the capital. … And that’s a big if. But if you do, it’s an excellent time to look for opportunities. For franchises like ours, because we’ve developed a brand, we offer a sense of security. Franchises are doing well, especially on the lower end with fast food and quick service.”
The newest local L&L, run by brother and sister Tim and Vivi Pang, opened in the lower campus just a week before fall classes began at the University of Hawaii-Manoa.
Photo: Olivier Koning
One customer, Elaine Chun, says the economic slump limited her to one lunch out a week, and price was a major factor.
“If I buy something out I try to stay within $5, but it definitely has to taste good,” says Chun, who chose L&L that day because she knows and trusts the brand.
That was good news for co-owner Vivi Pang.
“Because L&L is a brand name, we felt confident, even in a down economy, that we’ll do good,” says the young franchisee.
The recession is a great opportunity for another new kid on the block, Richard Craft, Jr., who is franchising his “Blazin’ Steaks” restaurants for Mainland expansion.
“My product is so much cheaper than everyone else’s, so I can survive,” says Craft, who in less than three years has opened 17 restaurants in Hawaii, some just steps away from an L&L. Another five local outlets are in the works.
“That’s why McDonald’s is so busy,” says Craft. “People just don’t have the money to go out and eat at an expensive place.”
Craft started Blazin’ Steaks (named after his 9-year-old son, Blazin) as a series of partnerships, with many proprietors. But, he says, he moved toward franchising because partnerships left him vulnerable to losses his partners incurred.
“The benefit of franchising (for me) is really about liability,” says Craft. “Right now, as a partner with every person, it means I own every store, so every store is in my name. So if they don’t pay the rent, I’m on the hook. But if you’re franchising, the liability is a lot lower.”
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