Franchising is the business model behind the massive homogenization of the American foodscape. A local entrepreneur licenses a larger brand, often buying supplies and other necessities for running a restaurant as well. This has worked very well for many fast food and quick-serve chains, so why isn’t popular burrito eatery Chipotle interested in opening franchises?
When it works, franchising is a system that helps a business to expand rapidly while minimizing risk. The franchisee puts up capital to open and rent or build the restaurant, but they have the security of opening a restaurant with an existing brand, recipes, and supply chain. The larger brand gambles its reputation on the competence of the franchisee, but they aren’t the one putting up money to open a new restaurant.
Right now, fast-food and table service restaurants alike are depending on the franchise model more, not less. TGI Friday’s, for example, recently announced plans to sell more than 300 corporate-owned restaurants to current franchisees who probably know how to run a restaurant by now. Burger King has sold more than 1,200 corporate-owned restaurants to franchisees in the last four years, keeping only 52 to test new ideas and products. The King also expanded globally, opening almost 1,500 new restaurants with franchisees making the investment. If the cutting-edge chain restaurants are just sitting back and raking in franchise fees, why doesn’t Chipotle do that?
Hayley Peterson over at Business Insider wondered about this and did the logical thing: she asked. A Chipotle spokesperson explained that in the chain business, franchising is how companies raise money for further expansion, or how they find local people willing to work hard to make a business succeed. “We have plenty of money for growth (more than $1 billion in cash on our books) and don’t have trouble attracting great people to run our restaurants,” the Chipotle representative explained.
Owning all of its restaurants also lets Chipotle control the company’s “food culture,” as they phrase it. It isn’t just the experience in restaurants that is important to customers, but whether the brand operates according to its reputation. When they market antibiotic-free meat and GMO-free tortillas, how do they know an operator won’t go rogue and serve conventionally raised meat to cut costs?
Why Chipotle Doesn’t Franchise [Business Insider]
by Laura Northrup via Consumerist
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