ARTICLES

Building the perfect franchise
PROFIT MAGAZINE
Eve Lazarus

As a 23-year Boston Pizza franchisee, Hank Van Poelgeest has seen his share of restaurant openings - but never one in winter. So he was relieved to wake up January 17 in St. John's, Nfld. and look out the window to see no sign of snow and the thermometer hovering around zero. The day marked the official opening of the first Boston Pizza franchise on the island, and a winter storm would have wreaked havoc.

The restaurant launch was the culmination of months of planning. The location had been carefully chosen. As part of preparations to delight the desired throngs of paying customers, head office provided a team of nine to help hire and train staff. The restaurant had even hosted four grand-opening dress rehearsals and a party for 400 on the previous Saturday. And a national ad campaign combined with word of mouth helped snag customers from nearby competitors such as the Keg, East Side Mario's and Mike's. When the doors opened at 11 a.m., any fears Van Poelgeest had of empty seats disappeared faster than the pepperoni on a six-year-old's pizza as locals filled both the 180-seat restaurant and its accompanying 80-seat sports bar. More than 100 newly trained staff cooked and served pizza and pasta dishes throughout the day and into the night. "We wanted to use the first couple of weeks as a slow beginning," says Van Poelgeest, "but we've never had a slow beginning."

Supporting franchisees such as Van Poelgeest in just about every manner possible has played a huge role in making Boston Pizza International Inc. the king of casual dining in Canada. Since 1964, the Richmond, B.C.-based franchisor has quietly and steadily opened its outlets in small towns - mostly in Western Canada - wooing the appetites and wallets of families and teens looking for an inexpensive meal, and of young adults who hang out at the bar. In the past five years, Boston Pizza has opened more than 100 restaurants without closing any, giving it 226 corporate or franchised restaurants in Canada and another 40 stateside. Its system-wide revenue reached $435 million in 2004, up from $370 million a year earlier - giving the company a 17% growth rate in an industry that's satisfied with 4%. (Even same-store sales, the key indicator in the foodservice business, have grown at an annual clip of 6.3% since 1995.) Excluding franchisees, the firm still turned a 2004 profit of $2.5 million on revenue of $40 million.

Few companies can grow this quickly on this scale. Even fewer can add employees, product lines and disparate locations while maintaining product quality, service levels and a healthy bottom line. But Boston Pizza achieves the dream of countless entrepreneurs by carefully selecting and supporting its business partners, picking the right markets to serve, marketing the heck out of its product and building an experienced management team. Its expansion formula is a textbook example for any company looking to grow.
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Best in the business

As it chases its dream of establishing a Boston Pizza outlet in every country in the world, the company would do well to follow its own example. Whereas few Western-based restaurants have managed to push past the Prairies or across the 49th parallel, Boston Pizza has established a toehold in Ontario, Quebec and Atlantic Canada. Now it's in the midst of a full-scale invasion of Eastern Canada, with plans to grow from four to 50 restaurants in Quebec over the next five years, and another 25 in Ontario this year alone. Wherever the company travels, says chairman George Melville, the vision is the same: to be the best franchisor in the restaurant business. "All the way along, we have built an organization that can serve its customer, which is the franchisee," he says. "We'll continue to do that when we go into new territories and grow. Our vision is to create an organization that will carry on forever."

Boston Pizza's history is already decades longer than most Easterners know. In 1964, Greek immigrant Gus Agioritis opened the first Boston Pizza and Spaghetti House in Edmonton. According to company legend, Agioritis had jumped ship in Vancouver six years earlier with just $26 in his pocket and the clothes on his back; Boston was the first and only name considered for his restaurant: "It only had six letters, it was easy to remember and it was a famous city," said Agioritis. By 1970, the chain comprised 17 locations, 15 of them franchised. Ex-RCMP officer Jim Treliving was one of the franchises. Enamoured with the opportunity, Treliving recruited accountant George Melville, and the pair built a chain of 16 franchises in B.C. before raising $3.5 million in 1983 to acquire Boston Pizza's corporate operation and the franchising rights that went with it. System-wide sales at the time: $30 million from 44 outlets.

While Melville describes himself as conservative and Treliving as more of a risk-taker, both thrive on the "personality of the business" and its ability to make money. "It's a very exciting business and very much a people business to be involved in, but it is a very good business model as well," says Melville. "We had good food and a fun environment and all those kind of things, so the real key to the business was simply driving volume and controlling costs, and everything else worked."

Guided by the company mantra, "Think like a customer, deliver outstanding food value/quality and work closely with partners," Treliving and Melville honed their business strategy in the 10 years following their takeover. Targeting rural areas, which offered residents plenty of fast food but little in the way of casual, sit-down dining, Boston Pizza aims to capture families and young adults with its dual restaurant/bar concept. The model allows the firm to generate business from lunchtime to last call, while its focus on pizza and pasta keeps food costs - and the average customer cheque - low. (Boston Pizza's food costs equal about 25% of revenue, compared with 38% industry-wide.)

With a firm focus on franchising, Treliving and Melville established systems and standards intended to enhance Boston Pizza as it expanded. By 1993, the chain had swelled to 89 restaurants, and the partners brought in Mike Cordoba, a chartered accountant by training, to help perfect the formula. "Probably the biggest secret of our success," says Cordoba, who is now Boston Pizza's CEO, "is understanding franchising inside and out and understanding what it takes to be a successful franchisee."
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Fit like a glove

Face it: you can't be in two places at once. So expanding into new markets with a new branch office or division means putting the right people in charge and trusting them to execute your vision. The stakes are high: the wrong person at the helm can dampen employee morale, diminish your company's standards and damage its reputation-not to mention profit margins.

In fact, struggling franchisees threaten the franchise system and the core business itself. With so much riding on the relationship, choosing the right franchisee is critical. "It's a fine line," says Melville. "You want somebody who is entrepreneurial and yet can work within a system. A lot of times you need some business acumen and some money, but you also need a personality." He recalls one franchisee who possessed only two of the three. "He was basically a jerk," says Melville. However, management believed it could offset the franchisee's lack of social skills by surrounding him with a talented general manager and support team. It didn't work; within six months the GM had quit and the franchisee was failing. "The idea that you can build a team around somebody who isn't a team-builder is a mistake," says Melville.