Article
Church's Chicken sweetens franchising deals
The Southern chicken chain introduces a modular building prototype, leasing packages and more in order to speed up store openings by franchisees.
April 1, 2009
*Click hereto view a slideshow of the unveiling of Church's Chicken's modular prototype.
Church's Chicken has launched several initiatives to grow its franchise development, starting with a new modular building. The new prototype, unveiled yesterday in Lawrenceville, Ga., cuts expenses and development time to save start-up costs.
"The objective was to try to lower the cost of the project but also to try to render a little bit more control of the timeline into the hands of the franchisees," said Paul Brown, vice president of franchise sales for Church's Chicken.
Although it will be another two weeks before the final cost is tabulated, Church's Chicken estimates that the pre-fabricated buildings will cost 25 percent less than its traditional stand-alone structure, Brown said. The low-end of pricing for a traditional structure is about $660,000.
The cost savings come mainly from tax advantages from the different asset classification, Brown said. The modular building's mobility allows it to be depreciated like equipment.
The building's steel infrastructure also can translate into discounts in insurance premiums. Operators also save by using re-manufactured store equipment — a 55 percent savings.
Additionally, a Light Stat energy management system will cut annual utility costs by more than 10 percent.
Other savings come from time saved during construction. With the modular unit, site work can be completed at the same time as building construction. Brown estimates the modular units cut development time by three to eight weeks.
Constructing the building off site also means a reduction in project management and coordination of various trades, another money saver.
"That really helps us save a lot of capital," Brown said.
Modular features
The modular buildings are factory built by Los Angeles-based Madison Industries and equipped with all necessary lighting, kitchen hoods, doors and fixtures. Kitchen equipment is shipped to the site during site work and installed as soon as the building arrives and is set in place — another time saver.
Madison Industries has four locations at which to build the units and enable shipment at an affordable price.
As demonstrated by the Lawrenceville unit, the modular buildings are set up within minutes of arrival to the site, Brown said. The store arrives in two halves, is anchored to the footers and connected together rather quickly. The store will be ready within three days and open for business in 10, allowing for training.
Church's Chicken president and CEO Harsha V. Agadi praised the modular units ability to speed up franchise development and make it more affordable.
"An added advantage to the modular unit is its instant marketability which will have franchisees up and running faster without compromising value, quality or safety," Agadi said.
The modular store has a slightly smaller footprint than the store's traditional prototype. The 1,750 square-foot building has 23 seats in the dining room, down 10 from the traditional standard.
Brown said he doesn't see the smaller seating capacity affecting operations in most locations. The company is considering a 1,200-square-foot model to replace its small walk-up neighborhood units. It also may look into developing a larger store for regions where in-store dining is more popular.
While Church's Chicken used modular buildings about 30 years ago, the new structures have advanced well beyond their forebears. Advances in metal extrusion and other technology have allowed for a building of equal quality to traditional construction, he said.
The modular store is designed to fit local building requirements, with each unit built according to pre-approved state building codes depending on the location.
"We're attempting to circumvent any local building issues by going straight to the state building department," Brown said.
More programs
Church's Chicken also is developing initiatives to help new franchisees obtain financing and cut development costs, a common challenge in today's economy.
One program is an internally funded equipment leasing program in which the company would directly lease full equipment packages to franchisees. The leasing program, valued at $200,000-$220,000, would cover all necessary equipment, from smallwares to fryers, Brown said.
Church's Chicken is offering an 11 percent annual rate on the seven-year leasing package — a rate equal to the corporation's cost, Brown said. Franchisees can purchase the equipment at the end of the lease for $20,000-$30,000.
Brown said franchisees with great credit may be able to getter a better deal by purchasing the equipment with financing. But it's a good deal for those who need to lease.
"We're not necessarily trying to compete with lending alternatives on the street," he said. "But we do want to be that lender of last or almost last resort for our franchisees just to make sure that the deal gets done."
Church's Chicken is also working with various finance and leasing companies that would allow the company to sponsor a special financing program designed around the modular building's asset qualification. The goal is to offer "attractive financing at market rate," he said.
Other development initiatives include a special deal on store conversion programs and a new unit for college, airport or other enclosed locations. The new 368-square-foot kiosk will feature the full menu and all the necessary equipment, but with ventless fryers to accommodate the setting.
Brown said the incentives were popular at the Lawrenceville unveiling. More than 50 franchisees and a number of prospective operators from around the country attended the event.
Franchisees seemed excited about the new prototype and the variety of incentives, he said. Church's Chicken was busy throughout the day negotiating agreements, including one for four stores in the Seattle area. That franchisee will likely open at least two modular units, he said.
"One thing we heard from our franchisees is urgency," Brown said. "We heard two messages yesterday. One of them was, 'How can we get financed,' and (the other was) 'How can we get open faster.'"
Church's Chicken seems determined to answer both.
Related Media
Subscribe
Get the latest news and resources from QSR Web.
