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Philly Pretzel Factory CEO Dan DiZio, Wing Zone CEO Matt Friedman and Checkers CEO Rick Silva on why they are expanding in this economy.
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When you are the boss and it's your money on the line you just can't afford to have any false hopes about the economy you have to be absolutely realistic about whether -- makes sense to expand and an economy.
That's never fully recovered since the last recession that's why.
We love to have on folks we're taking a chance to expand despite the bad news knowing all the risk.
Joining us now is -- -- EO he -- CEO.
Philly pretzel factory Matt Friedman CEO of -- zone.
And Rick -- CEO of checkers and rally's in between these guys we have about a thousand restaurants listed so well we've got a well represented.
-- I wanna go to you first and ask each one of -- -- -- matter part why expand now I mean with -- with an economy that's barely growing along at about.
And anemic 2% why why are you expanding this time.
Well for us our concept is based on value so.
Right now all the marketplaces -- for -- to grow we -- start franchising through government five so we ran into.
The wall -- of on the economy in 20072008.
So for us we've been expanding through the economy because the value based.
What we're seeing the cost go up dramatically in the commodities the flower that we use we also see there's even the realty market even know what's going down a little bit.
There's shopping centers and -- senators the 14100.
200 square feet that we usually get go into.
On the rents are just hot we do realize that we're salt pretzels here it's just not going -- and it's important for us to be able to.
Provider a situation for franchisees to be able to make a profit.
We haven't even talked about regulatory costs and taxes going up up -- you got about seventy locations why are you expand.
Well franchising -- model right now and you know it's been it's been a great run for us -- zone but really we've been able to -- -- -- was some new and innovative models.
Some non traditional ones go growing on a military bases moments this year were expanding it to major college markets as well even -- casinos.
So we've taken a little different approach with our franchising model when looking at.
Probably some nontraditional formats we can get into his little -- 500 square feet.
And it does really allow us to expand the brand and grow and becoming global or are they you know its existing sometimes tough times force innovations.
That you wouldn't have thought of if if it was perhaps better times Rick.
You have 778.
Restaurants and your thinking of XP.
And -- -- of that number why now.
We're actually expanding both in the company and the franchise side it's great time for us to expand we've got a very value centric brand and so.
-- fact the last two years we've had positive comp sales every single month.
We're already 5% this year.
But we've we've been able like some of the other folks on the fund on the program -- -- will design very efficient buildings and fast.
In fact last year we rolled out.
500000 dollars to build.
Without real state that restaurant deliver one point two million dollars in sales last year.
That's a great -- -- investment -- when you've got those numbers you definitely wanna live and let let me just repeat at a cost under 300000 dollars in -- make it a million bucks from -- 500000 dollars to build and that's without real estate were -- within that restaurant.
Sold one point two million dollars last year.
That's all about to two point that's -- investment racial over two to once and cry and that's -- We have very very strong targets up we got to remember -- were a lot of.
Great companies built up in the late seventies when we were growing with -- even more constraints we have I think indeed now that companies like FedEx so you can expand -- in a down market but Dan.
Look at what's dragging it down let's start with -- that new health care law because.
Now if you have over fifty employees.
You're forced to pay out money that you work -- to pay out before is that.
-- curbing the number of employees that you might want to.
Higher -- that we don't form multi unit franchise owners who have multiples stores.
And their start to come up on that fifty employees I mean something they're -- -- I just talked to a -- to other day.
Said he's at forty employees and he's concerned about expansion because he doesn't -- -- get over that fifty and it's very fought for him a proposition.
Britain I hear that all the time for restaurant -- and we talked to quite if you hear that it is really forcing people to come by either that or switching people from full time which is now defined is.
As thirty hours a week.
It's a part time -- are you being forced to do anything like that Rick.
Absolutely our franchisees are finding cost pressures not only of the Health Care Reform but it increased taxation and increased regulation and they're going to have to make some decisions were fortunate our business model still very very healthy and they've got -- a little bit of room in the margins.
But when they get them -- who don't like the federal government we can't run deficits you go you go out of business if you don't balance to books and so.
They have to find ways of finding efficiencies we've helped we've helped our franchisees with technology in the restaurants to help them be even more profitable with their labor in the food cost.
That the end the day.
You'll see a lot of small businesses I'm afraid having to pass on those costs onto the consumers.
In to your point to the employees as well by having to reduce the number of full time employees will -- what about you do you actually go out and try to try to help -- figure franchisee folks who can't on their own figure out how to cope with all these new expenses.
Well we've got a great franchise support system were based here in Atlanta Georgia.
You know our our main business model is -- owner operator model so it's a simple model.
Typically -- wings and can operate with as few as eight to ten full and part time employees so.
Yeah we really believe in the simplicity model and we really own a core.
Product which is wings in a variety of flavors so.
It's it's been a great run for us and and the prognosis for us -- our franchise model is is bearish wrong.
Dan owed taxes is always a problem course you have a business but now -- days.
Did the last tax overhaul was supposed to simplify things I think it's made things a lot more complicated what -- you -- Obviously it's very concerning again trying to know the rules is really important and at least we know where we -- -- I feel like our franchisees with the new model that we Cree which is a smaller scale down -- our normal stores fourteen hard to 18100 square feet.
Now bringing down that you weren't fifty square feet allows them to be more profitable and ultimately -- -- him more taxes.
-- -- -- guys we only have chance for one cents from each of you starting with Rick.
Rick if there was one guy that was controlling this economy from inside the beltway what would you -- to do would orders simplify your life.
Focus on job creation for small businesses that's the few although we need to move this economy forward franchisees are perfect source.
And Matt how would you get that done what's the best thing.
That the government to do to make that happen.
Well this is a simple answer for me this is about.
Lending requirements are lending.
Ability for people to own small businesses especially franchise it's very difficult to get a small business loan right now.
And I think that that can drive the economy by really investing in some of the entrepreneurs in this country and Dan again the president's listening to you what would you tell.
I would ask him -- can really focus on the job creation freeing up their capital so that franchisees like mine that want to grow we have franchisees don't wanna get involved.
What they're limited without going through the protocol of of -- a loan and it's a difficult challenge.
-- to -- Matt -- -- that Rick -- you're all heroes thank you for doing what you do for keeping our economy growing appreciate you guys coming up.
Thank you okay thank you for outside -- that's thank you.
