ALBUQUERQUE, N.M. — Albuquerque teems with franchises – from the likes of Subway to Anytime Fitness, a sea of out-of-state companies have landed in the Duke City by way of individual entrepreneurs.
But a few Albuquerque-based companies are going against the tide: WisePies Pizza & Salad and Pizza 9 are selling franchises to grow the chains both inside and outside of New Mexico.
Just 1½ years removed from its debut, WisePies has signed agreements with 15 franchise groups who plan to open more than 300 stores in the next five years. Markets include Phoenix and Las Vegas, Nev., said company spokeswoman Season Elliott.
WisePies didn’t do this on a lark: Selling franchises was always the goal.
Owned by businessman Steven B. Chavez and contractor/restaurateur Michael Baird, WisePies began laying the franchise groundwork even before the first store opened in 2014. Preparing to franchise took two years and cost an estimated $1 million, Elliott said. Expenses included the development of product, training manuals and franchising agreements, plus legal research and more.
The expected payoff is that WisePies could grow two or three times faster than it might have otherwise, an important move given mounting competition.
“By choosing the franchise model versus the corporately owned model, we were able to bring the concept to market faster (and it) allowed us to be more competitive in a rapidly expanding, fast-casual pizza marketplace and bring in individual investors that have a focused interest on the opening and performance (of) an individual store or group of stores,” Elliott said in a statement.
Pizza 9 has grown to 18 stores (and counting) since its 2008 inception – and all but one are franchises. CEO and co-founder Hass Aslami said franchising gives his company – which charges an $18,500 franchise fee and 5½ percent of gross sales in royalties – quicker access to capital and manpower, but that it must be done strategically. Pizza 9 has intentionally stuck close to home, with no current store farther than Farmington. It is nearing a deal to open the El Paso market, but Aslami said he has no plans to go far. Selling a franchise in, say, Delaware might be tempting, but supporting it would be too much of “an ordeal.”
“I would not do that,” he said. “A lot of new franchisors fall into that trap.”
To ensure franchisees will represent the brand well, Pizza 9 does homework, even taking potential investors to dinner to observe how they treat servers.
“With franchising, you do lose certain control but, if you’re selective, it can work to your advantage,” he said.
Other locally owned chains have avoided franchising.
Dion’s, for example, owns its 20 existing stores, including out-of-state locations.
Marketing Director Deena Crawley said the company has been approached by potential franchisees, but doesn’t want to cede control.
“Our product and our experience could be altered, and we never wanted to do that to our brand,” she said.
For Weck’s owner Art Kaplan, franchising heightens costs and expectations.
Kaplan, who has 10 Weck’s around Albuquerque, has instead used licensees to add locations outside the metro. Licensees operate the Weck’s in Farmington and Santa Fe.
For $15,000 upfront and monthly payments totaling 3 percent of gross sales, Weck’s licensees get the name and recipes. Kaplan requires them to meet certain quality and service standards, but they’re otherwise responsible for hiring and training employees, and picking a location. They have leeway when it comes to the menu – they can take off items if they want – and their decor.
Kaplan – who himself operates under similar terms as the local licensee for Le Peep – said he prefers it to the oftentimes-strict rules and responsibilities that come with franchising. He said just creating the necessary legal documents to franchise could cost $100,000.
“We never wanted to go to that effort, even though you obviously make twice the royalty. It’s just a lot more work, a lot more effort, a lot more liability on the part of a franchisor to almost guarantee success,” he said.