Wienerschnitzel wants more franchisees—and it’s open to fresh faces.
“My job is to recruit new blood,” said Ted Milburn, the Irvine-based chain’s first-ever director of franchise development.
It’s a bid to reignite growth at the fast food hot dog chain, which saw sales and its number of restaurants slim down during the recession.
Parent Galardi Group Inc. brought Milburn on at the start of this year, and he’s selling three kinds of franchises to attract operators with different experience levels and financial heft.
Data and estimates from restaurant researcher Technomic Inc. in Chicago show the number of Wienerschnitzel locations dropped from 360 to 322 between 2008 and 2014.
A spokesperson for the privately held chain pegged the current total at 320.
All are franchised, according to state records.
The chain plans to join in the growth, with 10 company-owned stores expected to open in the next five years, Milburn said.
The rest of the franchises will be spread over a combination of experienced multiconcept operators who would add multiple units and individual franchisees who might have restaurant experience but lack startup capital.
Milburn said Wienerschnitzel has “agreement in principle” for new locations in California and Texas.
The chain can pitch prospective new franchisees on an operation that’s back on a growth track after a rough ride during the recession, according to Technomic.
Systemwide revenue fell by an estimated $61 million to $213 million—a 22% drop—between 2008 and 2010. Average sales per unit dropped 15% from $745,000 to $634,000 over the same period.
There have been slow and steady increases since, with the chain’s systemwide sales back up to about $230 million, and per-unit revenue around $705,000. Each is up by about 10% from 2010 but still lag prerecession levels.
State filings show top Wienershnitzels have sales volumes of $848,000 to nearly $1.6 million while the bottom quarter reported sales between $260,000 and $583,000.
New Look
Milburn plans to offer different kinds of franchises, smaller units and restaurants in nontraditional locations—each of which are less expensive to open.
A traditional or “full” franchise has a $32,000 franchise fee, 6% in royalty and marketing fees, and costs $489,000 to $1.3 million to open, state filings show.
The documents show nontraditional sites could include storefronts, kiosks, and inside convenience stores, gas stations and department stores.
Galardi also offers what it calls a “business & facility” franchise that has the same fees as a traditional location but costs far less to open—about $64,000 to $146,000, according to filings.
A third type Galardi terms a “limited” franchise costs $20,000 to $156,000 to open—with no initial franchise fee.
“This is a unique setup,” said Candice Lee, a franchise attorney with Palmieri, Tyler, Wiener, Wilhelm & Waldron LLP in Irvine, when asked about the third type. “Upfront costs are significantly lower.”
Filings show limited franchisees would pay variable rent based on net sales rather than a royalty percentage.
Milburn likened the limited franchise deal to one at Atlanta-based Chick-fil-A Inc., which on its website sets out a low-cost franchise program for people with business experience but less startup capital.
“Partner programs allow passionate people to become franchisees, [and the chain] can grow without having to run the stores themselves,” said Darren Tristano, Technomic executive vice president.
Franchise filings show Wienerschnitzel had 245 full, eight “business & facility,” and 69 limited franchises at the end of 2014 in 10 states and Guam. About 70% of its restaurants are in California.
Milburn said he could see the chain getting to “500 to 1,000 units.”
Most will be the company’s “Heritage” model restaurant, Milburn said. That model hearkens to its classic A-frame look out of use since the 1970s.
The new building design is 732 square feet and can be drive-thru only.
Milburn previously ran franchise development for Richardson, Texas-based Crest Foods Inc. and Scottsdale, Ariz.-based Kahala Corp.
Crest franchises Brick House Subs and a Mrs. Fields-type concept for Nestle called Toll House Café. Kahala’s brands include Blimpie’s Subs and Cold Stone Creamery.
Wienerschnitzel has an ice cream franchise—Tastee-Freez—in addition to hot dogs.
Dog Race
Resurgent sales and lower barriers to entry pit Wienerschnitzel’s plans for signing up new franchisees against a number of hot dog chains, including Dog Haus International Inc. in Pasadena, Pink’s Hot Dogs in Hollywood, Jody Maroni’s Sausage Kingdom in Burbank, and Portillo Restaurant Group in Oak Brook, Ill.
Dog Haus has 10 locations and 65 “coming soon,” according to its website. Its Orange County franchisee has said it plans a dozen restaurants here, with Santa Ana and Fullerton locations already open.
Pink’s has about a dozen locations, most in amusement parks, including several operated by Newport Beach-based Palace Entertainment Inc. None are local.
Jody Maroni’s has four locations, with none in OC.
Portillo’s has about 40 locations, 90% of them in Illinois and one in Buena
Park.
“Traditionally, [hot dogs are offered by] independent restaurants or are part of a larger menu,” said Darren Tristano, executive vice president of Chicago-based restaurant researcher Technomic Inc., who pointed to the Sonic chain, which works “not only … hot dogs but regional favorites into their broader offering.”
