Domestic, international franchisors circle Springfield for expansion

From Dunkin Donuts to Zaxby’s, Springfield recently has become a hotspot for franchisors seeking a foothold in Missouri.

Those businesses are not alone. Newcomers from custom homebuilding firms to pizza buffets are sniffing out the city for expansion, begging the question: What puts the Queen City on the radar?

For Nanaimo, British Columbia-based Alair Enterprises Canada Ltd., Springfield is one of many markets under consideration. The custom home building and remodeling company has 64 locations in Canada, 13 in six U.S. states, and this month will add Missouri, New York, New Jersey and North Carolina to the list for development.

“Obviously, we want to be everywhere at some point, but choosing the market starts with where there is an opportunity,” said Alair spokesman Adam McCaa.

Alair’s model is a little different from the norm. McCaa said a regional partner – such as St. Louis-based real estate agent Timothy Estepp – buys in to test the market for each state. According to AlairFranchise.com, that state license goes for between $168,820 and $363,855. Once enough projects have run through the pilot office to prove viable, Alair then branches out to individual cities.

For Orange City, Iowa-based The Pizza Ranch Inc., southerly expansion is a more immediately localized effort. Franchise Development Director Marilyn Mayberry said the pizza and fried chicken buffet chain entered Kansas City in 2012. She said St. Joseph is on tap for the third quarter, and the company is seeking franchisees in Springfield, Branson, Jefferson City and Columbia.

“We see great markets in Missouri, and it’s natural for our footprint,” Mayberry said, citing Pizza Ranch’s 197 locations in 13 states, with most centered around the northern Midwest. “We look at if (a market is) vibrant and growing. Springfield has a healthy population, nice growth and a good workforce.”

Market factors
A population of 165,378, according to 2015 estimates from the U.S. Census Bureau, might automatically put the Queen City at the top of many lists for new branches.

Steve Rafferty, senior director of business development for Dunkin’ Brands Group Inc., said population was only one feature playing into Dunkin’ Donuts return to Springfield last winter after a 16-year absence.

“What’s changed since 1999 are two things: national advertising that helps ease the entry and a more efficient supply chain,” Rafferty said, noting much of the effort in those two areas was previously directed toward the brand’s stronghold in the northeast.

With marketing and logistics aligned, Rafferty said the company now looks at factors that have worked in its core market when examining new territories.

Residential density and strong retail presence, he said, are what generate store traffic.

“The brand has a standard of no more than two turns to get into the drive-thru lane,” said Cory Roebuck, who operates the 4020 S. Campbell Ave. doughnut store.

He said other factors for his Dunkin’ Donuts were the traffic count of 25,000 cars per day, being on the “commuter” side of the street and his preference that the store be easily accessible from a highway.

“That’s one of the reasons we went with Dunkin’ – they have a formula to determine what is successful,” Roebuck said.

For Pizza Ranch, market size is less of a factor than finding potential operators. For instance, a Pizza Ranch franchisee in February opened a new store in northwest Missouri Maryville, with a population of roughly 12,000.

While prerequisites don’t include restaurant experience, Mayberry said there are financial measures for franchisees. Total investment costs – including a $30,000 franchise fee – range from $1.03 million-$1.4 million for renovated and leased spaces to $1.8 million-$2.8 million for newly constructed restaurants.

Another brand seeking expansion in Missouri is Cinnabon Inc. The bakery and coffee shop requires previous restaurant management experience, but it doesn’t go for stand-alone buildings unless paired with a Schlotzsky’s deli through parent company Focus Brands.

As an indulgent impulse brand, Cinnabon Vice President of Real Estate Okey Reese said the company targets areas with a captive audience. Expansion is aimed at retail shopping centers, such as Battlefield Mall, and airports, casinos and theme parks.

“We have a great relationship with that developer,” Reese said of Simon Property Group LP. “We feel Battlefield is well positioned as a super-regional enclosed mall, and there aren’t a lot of malls in the area.”

Zaxby’s also recently expanded its Missouri footprint. The Athens, Ga.-based chicken restaurant chain, which operates more than 700 stores nationwide, signed a five-store deal with local business partners Jason Pullman and Jeff Hebbel. The first store is under construction at 3220 E. Sunshine St., and when complete will bring the state’s store count to three following the two operating in Columbia.

Big on franchisees
Since first coming stateside in 2014 to Phoenix, Alair has converted pre-existing independent companies, including contractors, remodelers and some interior designers.

Chief Development Officer Rob Cecil said Alair’s market research has more to do with the would-be franchisees than the geographic elements.

“Overwhelmingly it’s two factors: What is their existing standing and relationship with their market, and how are they managing the company financially?” Cecil said.

“If you’re a struggling contractor, you probably won’t be attractive to Alair.”

Despite fast growth, Cecil said the company only now is starting to take the brakes off marketing the U.S. expansion by building industry interest. January, he said, was the first time Alair participated in a trade show as a company, rather than through an individual unit.

While the event netted a New York franchisee, Cecil said most applicants find their way to the company through word-of-mouth.

“If I knew that was the silver bullet, I’d buy a bunch of them,” he said of trade shows. “But we haven’t found a silver bullet.”

Still, Cecil admits the pitch – asking proprietors to pay sizable sums to hand over their self-built brand – is a tough sell. Those who do buy in, he said, seek to grow their company’s already strong sales but lack the support systems and relevant experience in areas like accounting, marketing or training to scale infrastructure accordingly.

“Most industries experience ups and downs, and construction is at the top of that list,” Cecil said. “(Owners) are looking for solutions to their problems, even if they aren’t experiencing them now. Things might be good, but they don’t want to build their business up just to tear it down three years from now.”