Multinational franchises like McDonald’s and KFC started small and worked their way up the food chain over
decades. That methodical approach to growth seems too slow for the owners of two Albuquerque businesses.
Before Olo Yogurt Studio opened its first store in 2010 and WisePies served its first pizza in 2014, the owners of both ventures planned to become franchises – and to waste no time doing it.
Olo Yogurt opened a second store – a carbon copy of its colorful original – within three years and was strengthening its brand for further expansion. WisePies was less than a year old when it announced its intention to open 20 new stores within a year and to offer franchise licenses for $35,000. In December, the company signed a $5 million deal for naming rights to the University of New Mexico “Pit” – now the WisePies Arena.
The franchise or chain-store model isn’t the only way for a business to grow, but its appeal is obvious. A franchisor can recruit talented go-getters who want to run a business with a built-in market, name recognition and institutional support. And they can do it without draining their capital budgets, as franchisees typically pay much of their own startup costs.
The franchise model increases the business’s revenue exponentially and quickly – and for lots less money than the franchisor would pay to open and run numerous stores on its own. The franchisor gets a royalty and other ongoing fees – say, for advertising – from individual stores in return for letting the franchisee use its marketing and operating strategies, and brand name.
The franchisee receives other benefits besides branding and advertising. Franchise contracts differ, but the franchisor usually trains the franchisee in store management, and provides ongoing support and bulk rates on franchise-specific supplies and goods. Some franchises build the store’s exterior – especially when the building is essential to brand recognition – and leave the interior setup to the franchisee.