I like your posts hack. Let me just add this When a franchise scales to 2k units (using the example of JJs) the relevant AUV number is more likely the AUV of the last 100-200 units vs the system wide avg (estimated or stated) I think you know why.

I think nets closer 8-10% are more likely & probably not in year 1.

Yes-once the market becomes saturated-the stores will begin to cannibalize themselves to a certain degree-probably the biggest drawback to the sub and pizza models is the density of buildout desired by the Franchisor-I know of some small midwest markets for JJ for example that they were pushing for a 20 store commitment to lock up a market-almost double the number I think is correct for the markets-

Also-its important to look at the average for the 2nd and 3rd years for new locations-in some models many new locations will open to big numbers and it can take as long as a year for a store to find its true numbers-

you are correct sir! (on both points-just wanted to highlight the fact that expecting a big paycheck from a new store in the first year is naive)

He won't make that much-of course it depends if he is building or buying with cash or is financing. If there is debt service-this will usually take a significant portion of free cash flow in the first year at least(and of course he will need to work in his store unless he is cash rich and doesn't care if things are run correctly)

Hey guys thanks for all the relevant responses. This amazing thread has made me think a good bit.

After assessing the profit potential, Upfront investment, And time required to run the store right.....I have decided that right now a pizza/sub shop isn't in the cards. The opportunity cost of passing up some big omaha games in my area is too great right now to justify an hourly of 30-40 bucks at a jimmy johns or pizza shop.

When games slow down I might reconsider . Or when I can be confident that sales will be over a million a year.


Thanks again all.

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that store is probably just around or marginally above break even-but you provide very little information so this is a complete guess based on your volume estimate alone

I'm currently looking for a location in up and coming town, for a Subway / Pizza Pizza.

Would choosing a small town be better than big city? Since owners would prefer to be in big city?

Any existing SUBWAY owners want to share insight on what is a good location? What is priority.

1. Inside mall
2. Near School | or University
3. Near offices
4. Major Roads
5. Other franchises ( Mcdonalds )

Some questions-

are you looking to buy existing or build?

How small a town? (meaning is it a town of 20k, 50k or 100k?) If its towards the larger end of the spectrum, how many franchisees share the market?

How many stores of the models you are looking at are in the market currently, and what does the franchisor see as full build out?

These questions are important before deciding if a smaller market is correct for you-you can save on some keys like rent in a smaller market, and generally the labor will be lower, but you face a distinct possibility of a limited market-and as such a lower ceiling on sales-

I don't own any Subways but I can speak to site selection-all of your examples can be factors in selecting a location-but really site selection is specific to each market, and it would be difficult to give more than generic answers-you can find examples near each of your influencers that have killed it and that have bombed.

So it's been about a year for me with the PJ concept. A wild, wild ride...

What questions do you have?

Hey man. Just pmed ya.

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Great thread with tons on knowledge, thanks to everyone who has contributed.

I would like some advice or input from those who have more knowledge than I on franchising. I'm in a rural town north of Atlanta, Ga we have a county population of about 24k and about 300k tourist annually. I would like to open a Little Caesars or Smoothie King. We have a Pizza Hut, Dominos, and Papas Pizza and only one smoothie/shake place. For pizza I feel the market here is stout but being more visible and the first as you come into town would offset that. With the Smoothie King setting up next door to our largest gym or beside a busy strip mall would be my choice but looking at current locations I think this would be the smallest town not counting tourist pop. What are your thoughts/ideas in regards to both and current market being in a rural/tourist area. Anything else you might consider?

tell about your experiences with delivery, and how much do you spend on insurance for your drivers?

Would you do a short summary of how it went?

Was it a positive experience? Make/Lose $? Love/Hate it? unforeseen problems etc

pokerhack - i'll have to get back to you on how much insurance is for drivers. I don't have the exact figure off the top of my head, a few grand annually though.

Some thoughts...

1. The delivery business is tough one, and expensive too! My original labor figures were based on paying drivers a tip credited wage, and I've gone away from that model to avoid any potential violations of labor laws. Now we pay full min wage to our drivers plus a mileage reimbursement for every delivery, and labor has become bloated as a result. I don't see a way to get this back in line without some serious sales building.

2. Higher sales fixes all problems! My February was an extremely profitable one. Playoff football and superbowl helps a lot and so does snow and freezing temperatures. Trick is to make the other 11 months looks like February, which is not easy, especially in summer months.

3. Someone asked if it was a positive experience. All experience is positive, even if it teaches me to never be in the delivery business ever again, or to never get into a franchise model, etc. But I haven't come to those conclusions yet, I'm still learning. It's been hectic, most weeks I put in 7 days, and I have a partner who does the same. It's not a walk in the park, for sure.

4. I believe at my level of sales of 1M annually, someone willing to work and put it long hours (+60 hours, probably closer to 70-80) can bring down 150k (that includes their own salary and their profit from the store). If you hire a manager but manage to motivate the manager to run the operation right, I'd say you can still bring home 100K in profit (before your personal income tax expense, of course). My market has a high cost of doing business, from rent to insurance to utilities to taxes to minimum wage, etc. 1M in sales elsewhere might product a much, much higher profit margin.

5. What's on my mind now about 1 year in? That I've had enough of this wild ride trying to learn how to manage a business like this, managing teenage kids and fully grown delivery drivers, and that I'm probably better suited working on my business than in it... I'm giving serious thought on how to recruit a good manager, how to compensate him or her properly to provide the incentive to care for my business more than I would myself. ANY THOUGHTS ON THIS WOULD BE MUCH APPRECIATED!!

Any other questions I'm happy to help where I can.

Grow your own manager by developing one of your assistant managers or shift runners.

Train every assistant as though you are training them to run a store. Your business will be better off in the long run even if none of them never actually take that step.

Heater and Brian -
You both made similar comments and I believe them both to be a great approach to cultivating a manager to run the business.

However, in reality, it's a lot more difficult to do. Turnover is super high, and the talent pool is lacking. To hire someone at minimum wage and then expect to groom them into a high caliber manager is a paradox. I barely even have any shift runners; I close most nights and my partner opens most days. At most I have piemakers...

I'm now leaning towards hiring for the position, someone with management food experience, but not necessarily with PJ.

Do either of you run your own fast food biz and have you found that grooming your assistants was the best approach, rather than hiring for the management position?

One of my best friends was a general manager for PJs at 19 and an area supervisor at 22-23. I lived and worked with him at PJs as a driver while in college for about a year. He wasn't in school, obviously. He works as hard as anyone I've known. I watched him teach everyone around him as much as possible, all the time. He showed and explained labor and food cost numbers to teens and drivers. He would have certain 16-17 year olds come in on weekend mornings at open and teach them everything about setting up the store, doing prep, etc. He would get people together with a box of cheese and explain like he was talking to a five year old exactly how much it cost to not level a cheese cup. Everyone knew how and why dough was pulled hourly. At the top of every hour, every day, there would be multiple people heading to the back of the store to check dough. Everyone was expected to be able to perform every in store job adequately.

It sounds obsessive, but he wasn't a dick about it all. He had a really good attitude about everything and made it a positive thing. This was in a nine store area and by the time he was done as GM there, four or five of his people were GMs in those other stores. He worked about 45-50 hours a week, while other GMs were working 65+ and struggling. He didn't have to handle ownership responsibilities as well, though.

I worked in a few different pizza places in my late teens and early twenties. I've seen poorly run, average, and what he did. The current environment may be different, you're in a different location, may have more overhead and not able to pay as much, etc. It takes a certain personality, for sure. I could not do what he did as well he did. If I were in that position, though, I would try. The difference in efficiency and the quality of the people that I worked with vs. other places was astounding.

I used to and it is the best way. If you hire someone already developed, you are hiring someone who is/was willing to move on. It also helps to reduce turnover in the employees who would like to move up (a good thing).

NJK- I am going to lean towards the "grow your own" philosophy as well, for several reasons:

First, if you are going to grow as an organization you will always need "bench strength" for your system, and this means having people that can, and are interested in, stepping in to a managers position. If you do this organically you will find that you have better results in getting performance from your existing crew as well as I think you will get some better candidates initially if they know that opportunities to grow exist with the system.

Second, Heater's response about his experience I think is spot on in terms of what you can expect from your team if you treat them all like they have a place in, and a future with, your organization.

Third, you need to be able to separate yourself from the day to day running of your location somewhat if you plan on growing to more locations. For you to be able to do this and work ON the business instead of IN the business (as you have stated that you think this is your strength) you will need to be able to trust your team and the system you have invested in (PJ) will be able to sustain and grow sales without your involvement in every ticket. It really is the biggest challenge you will face, people you think have the most potential will disappoint you and sometime someone you thought was a knucklehead initially will pleasantly surprise you by growing into one of your best leaders.

Everyone that is in a management position currently in our system started with us as a line crew member(some have moved up quickly, others not as quickly). We have tried on a couple of occasions looking outside for these jobs, but I have never been happy with the results.

1. Do you mean you and your partner could bring in 150k each off 1M in sales or 150k total?

2. Did you buy all new equipment or was it used?

3. How much of a safety net do you have if something breaks (like the oven)?

4. How often do you deal with customer complaints? And how do you handle them? Any prank calls?

Excellent feedback guys, appreciate it. This thread is really coming along nicely, I always pick up useful info here.

heater / pokerhack -
Heater, the GM you describe is an exceptional person to run a PJ and more important sounds like an excellent leader, someone who can rally the troops, ie: teenagers, hard to please drivers, etc. This is exactly what I'm looking for, someone to replace me, for the reasons that pokerhack has eloquently explained, and I believe that is the reason why no one has worked out yet. My bar is high! This guys sounds like a better GM than me, and I would pay this individual on the high end of the range and incentivize with bonus structure on sales, food and labor cost targets, and service metrics. I have tried this with GM's in training already, and either I have asked people to go, or they have folded under the pressure. These were organic picks, folks that were running shifts prior to me coming aboard, and most recently with a driver I pulled inside (he worked out the best, but unfortunately left for personal reasons).

Minimum wage here is 8.75 so I almost always start people here, and give them the opportunity to advance from there. But it seems most people that have potential don't want to put in the effort and time required while making just the 8.75, and receiving 25-50 cent raises when milestones are reached, and those that stick around don't have the potential to be manager, and hover around the 8.75 mark with low level responsibilities. I get fed up easily with disrespectful employees, those with bad attitude and poor work ethic, so that's part of the reason why turn over is high - I come down hard when I detect that sort of behavior. Maybe I need to forgive the eye rolls and loud sighs when trying to explain why cheese needs to be fluffed daily and portion cups should always be used and never packed in tightly, but when it's your business and your $, it gets emotionally difficult to let those things slide. And IMO, someone who is acting that way has not bought in to the PJ way of doing things, and they probably will never be management material. Maybe this is the wrong approach, but I'm not sure I can lower my standards personally.

Hack - in your concept (5g, right?) can you a little about the hierarchy (title and responsibility, like line crew, shift lead, manager) and pay structure (minimum wage to begin, then what sort of raises do they get and for what?) and how much time your current managers spent in each of these positions. I'm trying to understand what the normal lifecycle is for a manager who starts as a crew member, how long it takes, and how they are compensated.

The ultimate goal, as I mentioned and hack re-iterated, is to work ON and not IN the business. Without a good mgmt team in place this is impossible, so getting a capable and honest manager is of paramount important and priority. Hack, my goal is not necessarily growth of store count, but growth in profitability. That will most likely require acquiring additional units, but I think if these stores are run optimally, 2-4 units is the ideal number for my ambitions. I won't think about expanding though until I've nailed it in this first store, and a manager of high quality is a major milestone in doing so.

1. Not each partner; store profit + GM's pay will be around 150K. This is a huge generalization and at this sales level it could be anywhere from 0-250K depending on a gazillion factors. One quick example is cheese price. It has come down a lot since last year, and could go back up...

2. all used, thought I replaced a few things and I'm constantly repairing others. However, cost of repair and cost of some new equipment was negotiated during the purchase, and I recommend that to anyone buying existing

3. what do you mean safety net? in terms of what? We have a double decker middleby oven so if one stops working (as it has, though nothing really "breaks" completely) I can use the other while I schedule repairs. If my makeline refrigerator stops working, and it has, I move things to the walk-in while I wait for the repairman

4. Daily, customers complain regularly about everything, from speed of service, to rude behavior over the phone or in person, to price, to product quality, to items missing or incorrectly prepared, the list goes on. We Tdo our best to treat these customers respestfully and fix the problem immediately, and in many cases give free stuff away. Coach employees not to think in terms of "oh the customer just wants something free" although many customer may actually feel this way. It doesn't matter, haggling with a paying customer is not a recipe for success. We try to handle all complaints right away, before they hit the web or get logged in the PJ system. Fixing the issue and giving credits works well. But this is all easier said that done in practice when a customer calls cursing you out or when it's clearly not your fault but has ruined the customer's experience anyway. You must learn to think objectively in terms of sales dollars that already paying customer represents over the course of say, one year, vs the cost to acquire a new customer...

Pranks, yes, we get them, or customer who call place an order and then when it's done and on it's way over the customer cancels, etc. We get it all, stolen credit cards and chargebacks, etc. We put processed in place to mitigate this, but they will still happen. Cost of doing biz. Not sure if anyone has more to say on this?

Thanks for the reply. I meant safety net in terms of X amount of money you have put away in case something happens.

I used to work in a franchise pizza place for 7+ years and have done everything except own.

For prank calls:
1. Caller ID helps. Be skeptical if a call comes in from a private number. If I was suspicious, I used to let the customer know that I would be calling back to confirm their order. If they don't answer, I'd try them again and leave a message. I wouldn't make the order if I they didn't answer the phone to confirm the order.

2. Large orders that come in with no coupons or discounts (people generally don't like paying $100 for 6 pizzas and will either object to paying that much or ask for the specials before ordering). Again, I would let them know I'd be calling back to confirm and needed them to answer before sending out the order.

Lastly, we had a notes in our cpu system to handle mistakes/issues. This was important because we could write details on what happened and what we did to rectify the issue. We had a instances where a customer would receive a credit, use it, and then the next week would claim they had a credit and become demanding.