Cooking up a good deal

By Phil Mellows

- Last updated on GMT

Related tags Food Franchising

Franchising: An option for licensees
Franchising: An option for licensees
Licensees thinking of franchising out their kitchen need to take into account a multitude of factors and potential pitfalls, reports Phil Mellows.

Kitchen franchises have long been a feature of the pub landscape, though probably not one the average customer has noticed.

They have proved useful for many licensees who want to offer food but don't want to get involved in a catering operation. But there are plenty of pitfalls — and plenty of factors to consider before you take the plunge.

A good franchisee in the kitchen really can build your business, as people who come in for the food boost your drinks sales.

A bad franchisee, however, can drag you down. If customers are disappointed by the food they're not going to blame the kitchen. They'll blame the pub.

So franchises tend to work best in wet-led pubs. The more food you expect to do, the greater the risk.

Not only do you have to feel confident that your business is right for a franchised kitchen, but also that you have the right franchisee serving the right food on the right sort of deal.

And while there are certainly success stories, catering consultant Carl May, of Catered4, has a short answer for anyone asking him whether they should franchise out their kitchen: "Don't do it".

"It's a bumpy one. Your reputation rests on what comes out of your kitchen. Just think: if 50% of your take is food, you're handing responsibility for 50% of your business to another operator.

"If you're going to take food seriously I believe you have to do it yourself, and if that means buying in skills, then that's what you have to do.

"Why should you rely on somebody else's reputation?

"Rather than franchise out, I've recently advised a couple of my clients to have a self-employed chef and incentivise them by offering them a share of the business if they stay longer than three years."

May is also concerned about the legal side of letting somebody else run your kitchen. As the owner of the business you are legally responsible for food safety and fire risk, for instance.

Rachel Jones, who specialises in hospitality health and safety at her company A470 Training, advises caution.

"If you're franchising out the whole kitchen operation and you want the franchisee to be liable, you'll need a watertight franchise agreement," she says. "If you have previously run the food operation you will want them to follow your own systems.

"But the best thing to do is to talk to your local environmental health officer. A great deal of variation occurs in the approaches of different local authorities."

In fact, the advice from the Chartered Institute of Environmental Health is to continue to treat the kitchen as your own.

"Legally, you are still responsible for providing safe food," the organisation advises.

The franchise dilemma

The following are just some of the questions you should ask yourself when deciding whether to franchise out your kitchen:

8226 What percentage of take do you expect to come from food? Are you prepared to give responsibility for that to somebody else?

8226 Are you providing a ready-fitted kitchen? Who's going to maintain it? Who's responsible for health & safety?

8226 What's the best deal? Will you take a percentage of the food sales or charge a rent? Or both?

8226 Does your franchisee understand your business? Can you work together to achieve the same ends?

8226 Will the style of food suit the needs of existing customers and attract the sort of customers you want to attract?

8226 Who's producing the menus? Who's promoting the food?

8226 Will customers be ordering food at the bar? Will your staff or the kitchen's staff be taking it to the table?

8226 What training is required for your own staff? How much do they need to know about how the kitchen works? Do they need to understand the menu? Taste the food?

Case study: The multiple operator

Seven of the eight pubs run by Nick Griffin under the south-east's Pleisure Pubs banner have franchised their kitchens.

At one, the Speaker in London's Westminster, the manager runs the franchise, paying a small weekly flat fee for kitchen costs and taking all profits from a simple doorstep sandwich-based menu.

The others have outside caterers who pay 12.5% of their turnover to Pleisure.

"They are effectively paying pro-rata," explains Griffin. "So if their business goes down — some pubs have a seasonal food trade — they pay less.

"Otherwise they'd leave and we want to keep them in there for consistency in the food offer."

A good franchisee can be hard to pin down, he says. "It took us a year to find the new one at Drakes, in Maidstone, Kent.

"They need to show an entrepreneurial spirit. We waive the first three months' rent to enable them to invest in the business, then leave them to get on with it.

"Every franchisee is different and we have to treat each separately. If they're not good with computers we'll do the menu for them.

"Sometimes we need them to do a particular style of food. At Brighton's Great Eastern we serve Cajun dishes to go with its range of American whiskeys."

One of two Thai franchises in the group, the kitchen at Office in Brighton's North Laine area, has spun off into a restaurant nearby.

Both kitchens share the brand name Krua Anne, providing cross-marketing opportunities.

"We've been franchising kitchens for 15 years and I don't think we've had a single complaint about the food," Griffin adds. "It's because the franchisee's income depends on the quality of what they do.

"Ours are all fairly small pubs, and very wet-led. It wouldn't be cost-effective for us to do the food ourselves. We'd be trapped by staffing regulations. It would be a nightmare."

Case study: The lessee

Fuller's lessee Gerry O'Brien has run the Churchill Arms in London's Kensington for 26 years, and for the past 20 has franchised out the pub's famous Thai food operation.

In fact, O'Brien believes his was the first pub in London to serve Thai food 23 years ago when he hired his first chef after sampling some dishes.

When that chef was head-hunted to run his own restaurant the couple who took over from him were originally on the staff, too, but soon became franchisees.

They pay a monthly rent and keep the takings, from which they take care of a staff of 20 part-timers working in the kitchen and waiting at tables in the pub's 85-cover dining area from midday to 10pm every day.

"I went down the franchise route to take the pressure off myself," he explains.

"I couldn't be in two places at one time and I knew my priority had to be to look after the pub. It was also a good opportunity for the couple to have their own business."

It's important, though, that the two sides of the operation work closely together, and O'Brien maintains the kitchen equipment, carries out regular health & safety checks and even vets the pub's new kitchen staff.

"The menu changes every year or so, and we make sure the barstaff are familiar with it and all the ingredients. Customers order food at the bar so my people have to be able to explain and recommend the various dishes.

"While the franchisees are encouraged to think of it as their business, it's not really separate from the pub — and certainly the customers don't know the difference.

"The two businesses have grown up alongside each other. They're part of the same family."

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