Lake Forest-based Johnny Rockets Group Inc. is looking to step in for reluctant lenders in a bid to drive growth via franchisees.
The 1940s-themed hamburger chain is looking to jumpstart a U.S. expansion by launching a finance arm to help current and new franchisees get loans for restaurants.
Johnny Rockets has formed a Lake Forest-based company, Tysons Franchise Finance LLC, to offer expansion financing to franchisees.
The finance company, started this month, is backed by Virginia’s Red Zone Capital Management Co., the private equity owner of Johnny Rockets.
“Because financing has been difficult to obtain, our ownership group is stepping up to help current franchisees fulfill their development commitments and to help new potential franchises,” said John Fuller, chief executive at Johnny Rockets. “We clearly think it’s a differentiator from other restaurants out there.”
The financing company plans to make loans for up to 50% to 70% of the initial investment for a Johnny Rockets. The company doesn’t plan to own direct stakes in franchises.
The average Johnny Rockets fran- chise requires about $636,000 to $875,000 in an initial investment.
Since the credit crisis that hit in late 2008, restaurant franchisees have found it hard to get financing from banks and other lend-ers.
That’s left many restaurant companies delaying franchise ex-pansions or forging ahead on their own with company-owned restaurants.
The downturn actually spurred demand for franchises, according to Fuller.
“We have seen an increase in inquiries by people looking to open a Johnny Rockets,” he said. “The overall lack of financing has kept those inquires from becoming new partners.”
Johnny Rockets plans to work with franchisee borrowers on locations and business plans.
“The standard franchise stuff,” Fuller said.
Approved plans then are submitted to Tysons, which then decides on whether to fund them. Loans are set to run from five to seven years.
“It’s clearly designed as an incentive to help accelerate growth,” Fuller said.
Fuller, who took the top spot from former boss Lee Sanders in January, has been working to keep up a development clip.
Expansion Plan
Johnny Rockets has 285 U.S. restaurants, including 10 in OC, and 35 in 11 other countries including Canada, Turkey and Qatar.
The company wants to double the num-ber of restaurants in the next three to five years.
“We have very aggressive plans to continue to open restaurants,” Fuller said. “Even the downturn isn’t slowing us down.”
Johnny Rockets is looking to open an additional 40 to 45 franchised restaurants this year. About five to six will be abroad, according to Fuller.
The company has seen growth outside the U.S., where the chain’s Americana diner theme plays well.
“We do extremely well in Kuwait and Dubai,” Fuller said. Franchisees there “are great at developing and executing the brand.”
The company is pushing three ideas for growth: sport lounges, mobile kitchens and what Johnny Rockets calls its fast model, which is a smaller restaurant that offers a streamlined menu.
The smaller fast model has shifted Johnny Rocket’s focus on real estate.
“It’s making us look at real estate we may have overlooked in the past,” Fuller said.
A franchisee recently started a smaller Johnny Rockets in downtown Chicago, according to Fuller.
“It’s working great as they are doing big numbers in small footage,” he said.
Like other restaurant operators, Johnny Rockets has felt the impact of the downturn but is seeing a mild turnaround in same-store sales, Fuller said.
“We’ve having a lot more positive comp sales days than we were seeing in the past 12 months,” he said.
$230 Million in Sales
The company has yearly revenue of about $230 million from its own restaurants and fees and royalties from franchises.
Red Zone Capital acquired Johnny Rockets in 2007.
The private equity firm also owns Six Flags, where Johnny Rockets operates at the company’s theme parks.
Johnny Rockets also has restaurants on several cruises ships with Miami’s Royal Caribbean Cruises Ltd.
