Franchise Expansion Is “A Delicate Balance”

North County Times:

Franchising can help a restaurant chain expand quickly, but it can also set up the chain for catastrophe if new locations don’t measure up to the original, diners and industry experts said last week as a beloved restaurant moved to re-establish itself in Southern California.

A franchisee opened a Bob’s Big Boy in Temecula, its 13th and southernmost California location, on July 23. The chain had 160 locations a generation ago, but many failed after letting standards slip, according to several people who remembered its heyday. A location in San Marcos, for example, served the trademark double-decker cheeseburgers without its traditional “red relish,” which resembles pickle relish mixed with ketchup, two of them said.

The “old” Bob’s provides a cautionary tale to its new incarnation as well as to other chains seeking to add franchise locations in San Diego County, several people in the industry said. Those include Daphne’s Greek Cafe and Pat & Oscar’s, both San Diego-based chains that decided relatively recently to include franchises.

Franchising can reduce the need to raise funds by issuing bonds, borrowing from a bank or selling shares in the company. An entrepreneur who wants to open a location may pay $50,000 or $500,000 for the right to do so, depending on the chain.

In choosing a franchisee, a chain typically looks at management experience and sometimes experience in owning and running small businesses.