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Making It with Jon Davids
225 - "This is the Worst Franchise To Own" | Gregg Majewski, Craveworthy Brands
00:10:26
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- [00:00]
A
This clip of Making it with John Davids features John talking to Greg Majewski, CEO of Crave Worthy Brands and former CEO of Jimmy John's.
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B
What's the gold standard franchise out there today?
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C
I mean, Chick Fil A is obviously the biggest one out there based on volume and everything else. And they care so much about having the franchisees be in place for the longest time. You could own one, you know, you can only own one store because they knew that they were going to make money. They wanted the service, right? They wanted the brand protected. And because of that they won big. Now they're doing $9.2 million a store. You know, as they announced today, I believe that number is so ridiculously big that they've done everything right. There's other ones that have done great. Obviously Jimmy John's did an incredible job. We took first time operators that had no restaurant experience, got them to buy into the culture of this brand and the DNA worked their butts off to build a brand and then they were seeing 25, 30% profit back in the day. And because of that we were able to make so many great steps that we created these one stores to now some of them have 30, 40 restaurants today and they started with one and it was their whole net worth at the time that they put into it. Those are successful stories. You have other stories of failures. Burger IM was the biggest one in the industry. That just happened where that guy completely didn't care about his franchisees at all and got sued out of his brains and is now can never sell another franchise in any industry because he broke so many laws. I mean, so there's good and there's bad all the time.
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B
Why did Quiznos fail?
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C
In true honesty, they over leveraged their franchisees. They were the bank and they were competing against a market that was about speed at the point and they were the slowest sandwich in the world. So it was more of a fact that wrong time, wrong place, sandwich was good, but yet we just destroyed them back then. I mean we could produce a sandwich in 15 seconds. And you stood there, you know, twiddling your thumbs in a Quiznos back in the day for four or five minutes to wait for that same sandwich. It was a combination of everything. But their franchise group got a little greedy. They became the bank.
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B
And then looking at a player like Subway who you said has a subpart sandwich, why are they, what is it like 27,000 locations? That might be wrong, but it's a lot.
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C
So Subway built their model on buying a job. So there's franchise groups out there that sell and you buy yourself a job and you have to have multiple stores to get out of that point. But most Subway franchisees back in the day and had one, two or three that was. And they would make 30 to 40 thousand dollars. They weren't making a ton of money. You know where you could go and buy one? Jimmy John's back in the day and I had stores that netted 2:50, 300,000. You know, why would you ever compete? But yet they had a niche that they wanted to be everywhere their sales as a collective group went up. The franchisee or made a ton of money. The franchisee did not. Jimmy John's and our brands and anything I do at Craveworthy make sure that my franchisees have this protected territory so they I don't put stores on top of each other so we can go ahead and have more sales. I'll lose sales on my side so my franchisee has more sales. And Subway would put them within, as you, everyone knows, within every two blocks in some areas in urban spaces. How are you going to do volume in that? You're not 37,000.
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B
37,000 locations. I mean, yeah, you need a lot of dense space to make that happen. So talk about your group right now. So you've got Dirty Doe. What are your other assets?
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C
So we have Kingis Grill, BD's Mongolian flat top Grill, Tsum Tsum Mediterranean Crafted Burger and Bar, Wing it on and Budlong Southern Chicken. Those are the ones that are out front. And then we have a virtual group of brands called Crave Worthy Kitchen that we put into our existing restaurants. So those brick and mortar ones get to operate Crave Worthy Kitchen as well, which is a bunch of virtual brands. And each one of our brands has three unique virtual brands that go with it that they then can add another 2 to 300,000 in incremental top line revenue. So they can franchisees can pay gna through those other services.
- [04:15]
A
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B
All right, so If I'm understanding what you're saying, this is the model where you have one physical restaurant location, but you operate two or three or four brands out of it. And is that so you can play on DoorDash and UberEats with other names?
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C
Correct. And so we do that in other names, different products completely. And now we're going so far is that you can actually come into Genghis and order Lucky Cat while you're sitting in Genghis. So we're allowing our customers to have that variety of choice. We're not ashamed of having these other brands. We love these other brands. The brands are outstanding. So why not have that customer come in and get it when they want to dine in as well and just build my top line revenue so my franchisees can have a bigger win all the time. So more sales, using the GNA that they already have and making sure that they're able to win. And because it's the same franchise fee, same purchasing dollars, same marketing, everything, they don't have to pay these enormous fees to other virtual brands that are out there like Mr. Beast burgers and stuff like that, that take a huge, huge percent of what you do.
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B
But isn't the downside there that they have to worry about maintaining multiple brands and brand image, an Instagram page or. They don't have to do that.
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C
We do all that. They don't do any of that. That's the part of being a franchisee. We handle all that. We handle the marketing and handle all that. Their kitchen, when an order comes in, it's just another item that they have to make. They don't even know a difference because it's entrained in what we do.
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B
And then on your side, doesn't that become cumbersome? Do you ever wish, I wish I didn't have 19 brands. I wish I had four.
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C
No, because my. If my franchisees are winning, that means I win. And if I can help them pay their rent through other revenue streams, then all they do is become more profitable. And if they're more profitable, that's going to lead them to opening up another store. And if they open up another store, means I'm going to make more money. So it's this constant ebb and flow of how you build the business.
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B
What do you think about the doordash grubhub model? Obviously they had a surge during COVID I don't know how they're doing now. Do you think they're A, are they friends of the restaurants? And B, do they survive in the next 10 years.
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C
So they're a necessary evil of the restaurant space. There's something that helped save the restaurant industry during COVID no doubt about it. But they're a necessary evil now because the consumer has changed the way that they eat and they are so used to doing it. And kids, especially this younger generation, will order a 99 cent burger from McDonald's, pay a $7 delivery fee and now have an $8 burger. It's extremely stupid, but at the same time it's what has been built into our DNA. I think for us to long term be successful, their fees are going to have to drop and they're going to have to figure out a way money on less, just like all of us, because the restaurants can't continue to afford to pay 20% to them to sort of COVID everything. But they're not going anywhere. The model will just change.
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B
So you think that they're around and what about the whole world of like classic restaurant delivery? Is that just obs? I mean, aside from if you're Domino's, is that just obsolete now?
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C
No, I think the right brands will focus on that and I think that's going to be the biggest win for the brands that want to get into it again. You'll see doordash sort of hover around and be there and then you'll start seeing like everything of changing guards and people will start bringing delivery back to themselves because they'll want to control the product. And being able to deliver yourself to your customer in 10 minutes instead of doordash waiting for a driver to come, waiting for the food to get out and then them having their doordash and grubhub orders and picking up three orders at the same time and going all over the place. Restaurants are going to go back to wanting their food to be king. And so you'll see pizza. And again, Jimmy John's created a whole segment in delivery. We were the third number biggest food item that was delivered. It was pizza, Chinese food and then subs. And that was all Jimmy John's back in the day. And now everyone delivers. So I do think you'll see these brands going back and focusing on what they should be.
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B
I've heard the stat that restaurants have the highest failure rate of any business. I don't know if that's true or not, but it's definitely a high failure rate. Why are restaurants so hard to operate so?
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C
Because most people that get into it think it's going to be simple and it's a lifelong dream of theirs to open up their own restaurant and those fail. Most franchise concepts don't fail. So if you go and become a franchisee of a concept, your chance of success is not even remotely what that other figure is, but independent struggle. They've never done it before. But yet, because you cook at home, there's so many that think, oh, I cook at home. I cook these great meat, big meals. I can do this no problem. And then they realize they can't. I mean, there's shows all over cable about restaurant impossible and restaurant failures. There's a reason why they're out there. It's not easy, but it is easy to fix if you put the operations in the right spot.
- [09:40]
A
Thanks for listening. Get my best stuff to your inbox@johndavid.com I'll talk to you next time. This episode is brought to you by my Playbook website selling machine, available right now@johndavids.com playbook most companies want websites that look nice. But a lot of nice looking websites don't sell. What you really want is a website that grabs attention, builds trust and turns visitors into buyers while you sleep. That's what this Playbook gives you. Based on 10 years of work we've done at Influicity optimizing websites for 7, 8 and 9 figure brands. Download the Playbook now at johndavids.com playbook that's johndavids.com Playbook.