When Vancouver franchisor Pokerrito opened its 11th location on Renfrew Street in mid-October, it demonstrated that innovative and popular restaurant chains can add locations even as other entrepreneurs in the restaurant industry struggle.
All current stores are in Metro Vancouver but Pokerrito has sold master franchise rights to Mexico City and is awaiting that franchisee to open a first location in the Mexican capital soon.
A corporately owned location is readying to open in a newly leased property in Toronto.
Executing well in the franchising game can be trickier than simply expanding a corporately owned chain.
Pokerrito owner Jung Moon told BIV he had experience running a Japanese sushi restaurant before the 2016 launch of his first Pokerrito location—a poke restaurant on Dunsmuir Street in downtown Vancouver.
That demonstrated his passion for restaurants and Asian cuisine.
“I chose downtown deliberately,” Moon said of his first location. “With the high rent, intense competition, and demanding customers, if we could make it there, we could make it anywhere. It was trial by fire, but it validated our concept.”
By 2019, when he started franchising the concept, he operated two Pokerrito eateries. Today, four of Moon’s 11 locations are corporately owned, with seven separate franchisees owning one location each.
Moon uses corporately owned locations to test new products, he said.
Moon’s aim is to grow his chain, but not as fast as possible or to reach some per-determined numerical target.
“I'm cautious about putting specific numbers out there,” he said. “I've seen too many [franchisors] chase growth targets and lose what made them special.”
If success in Mexico City and Toronto materializes, he said he would look for more new territories to expand.
“Whether that becomes 30 locations or 70 by 2030, I'm less concerned about the number than making sure each one represents what Pokerrito stands for.”
Veteran franchisors have tips
Entrepreneurs with decades of experience in franchising say sure-footed, steady growth is wise, as is rejecting prospective franchisees who do not feel like a good fit for the business even if they have ample resources.
“It's always easier to say that no to someone before they start than six months into the game,” said Brian Scudamore, who in 1998 started franchising 1-800-GOT-JUNK? and has built it to around 150 franchises.
Scudamore also owns and built the 50-franchise WOW 1 Day Painting and the 50-franchise Shack Shine.
“If you bring on a franchise partner and they've paid a big fee and you haven't delivered what you've promised, or they're not happy and they want out, it's very, very difficult and expensive to part ways,” he said.
Scudamore added that he sees many young franchisors bring people into their businesses because they have money instead of people who have the skills and character traits needed to thrive.
Another big tip is to avoid franchising a business before it is what Scudamore called a “well-oiled, well-systematized machine.”
Franchises must rely on a system, and not the skill base of the founder, Scudamore said.
That is why it is hard to franchise surgery, he said, explaining that surgeons learn their skills over many years and are regulated to practice.
Health-care tasks, therefore, are very different from straightforward tasks involved in junk removal, house painting and window washing.
A successful franchising company must be able to consistently execute its offering in the same way in every city the owner wants to be in, Scudamore said.
A key question Scudamore said he asks himself is: “Is it simple enough that you can create the technological systems and the operating systems that someone can repeat the success that you've created?”
Another key point is that successful franchises usually also have a point of differentiation. They stand out because of something distinctive that they offer, he said.
When it came to launching 1-800-GOT-JUNK?, Scudamore’s vision was to have shiny trucks, uniformed workers, on-time service and an upfront price list—something he said the industry lacked at the time.
Mistakes can happen.
Scudamore said one was getting involved with a moving company.
He said he thrives on positive energy, and that he parted ways with the company because of the feeling customers often had when jobs were completed.
“We discovered it wasn't a happy business,” he said.
Customers who have junk taken away are relieved. When they have their houses painted or washed, they feel the joy, he said.
Scudamore said that when someone’s possessions are moved, the customer still feels angst at having to unpack, or they find an item is missing or broken and they are not necessarily happy.
“Moving is a commodity-based business,” he said. “It is very, very competitive and we found it a challenge to truly stand out.”
Bruce Fox, who worked for years helping Boston Pizza expand its franchising and more recently helping steer Browns Restaurant Group to 83 locations, added some other lessons.
He said aspiring franchisors should hire a professional group of advisors because processes can be tricky.
Fox was COO at Browns and is now a business advisor at the company, which has 68 Browns Socialhouse restaurants as well as eateries branded Browns Crafthouse, Liberty Kitchen and Scotty Browns.
All of those locations are franchised except for one Browns Socialhouse and one Browns Crafthouse, said Fox, who sometimes acts as a consultant at his Catalyst Hospitality Consulting Group.
“You need an understanding lender too,” Fox said.
“That’s a banker who has actually seen inside franchise systems and knows what the capital requirements are, and the timing and what the cycles look like.”
Fox said one-time fees tend to rise along with the total investment needed to open a franchised location, and with expected annual revenue.
One-time fees also often rise based on the size of the franchised chain and how well established the franchisor’s brand is in a market.
Browns’ franchises pay a $75,000 one-time fee and then contribute an ongoing six-per-cent royalty.
Unlike many franchised chains, Browns does not require franchisees to pay a separate marketing fee. That is because, Fox said, disputes commonly erupt between franchisors and franchisees on what kind of advertising should take place.
Browns has no advertising at all, which eliminates that potential source for conflict, he said.
Moon’s Pokerrito charges a $30,000 one-time fee—something that Fox described as being “fairly low.” Pokerrito also charges a six-per-cent royalty and a two-per-cent marketing fee.
The total buildout cost for a franchisee at Pokerrito is likely about $450,000, Moon told BIV. In contrast, Fox estimated that a Browns Socialhouse buildout costs in the $3.5 million to $4 million range.
“The biggest lesson: franchising isn't about losing quality control,” Moon said. “It's about multiplying your impact through the right partners. Your first franchisee is the most important. They set the tone for everyone who follows.”
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