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An Edible Arrangement

Making food franchises work on campus
University Business, Nov 2010
USC Hospitality, which handles dining services for two University of Southern California campuses, recently welcomed 14 new concepts, including California Pizza Kitchen.

For Mike Freeman, the projected arrival of a Wendy's in fall 2012 in the student union at The University of North Carolina at Chapel Hill is not just about tasty burgers.

As director of auxiliary services for Carolina Dining Services, Freeman had worked with his colleagues and obtained student feedback to determine that Wendy's could best deliver on the wish list items for the campus' next potential food franchise. The fast food franchise will provide late night business hours, breakfast meal options, a name with national recognition, and low prices. Officials hope the expected newcomer will help reduce foot traffic during lunchtime in Lenoir Dining Hall, which can serve close to 7,500 mid-day meals.

"We needed a hamburger operation, but we also wanted something that had a lot of versatility to it," notes Freeman. Using MarketMATCH, a planning tool from the institution's food service provider, ARAMARK, his team discovered that Wendy's ranked high when students were given a group of name brand choices. Subsequent conversations with student leaders and ARAMARK representatives helped Freeman and his colleagues conclude that Wendy's was the best fit. Though voted in with students' support last spring, the franchise wasn't entirely welcomed. A few students expressed concerns over whether a national brand would practice sustainability methods in their campus operation and what they considered to be a lack of healthy eating options.

University of North Florida officials decided to replace an Asian franchise experiencing poor sales with a Chick-N-Grill, a franchise that other institutions have found to be successful.

With architectural plans now under way, Carolina Dining Services expects to start off Wendy's as a 24/7 operation for one year. "We'll let customers vote with their feet," adds Freeman of this final test on whether it was the right choice.

College campuses are considered "nontraditional markets" for franchises—since they don't provide a street location and serve as small or express versions of a full-scale eatery. Both franchisors and franchisees are now turning to higher education as a potential growth opportunity to help offset the economic downturn. "Franchisors and franchisees are having difficulty gaining financing for traditional, street-front locations," says Ann Marie Solomon, ARAMARK's vice president of national brand partnerships. "Many brands that previously had no interest in nontraditional locations are now targeting it as a growth market."

Establishing a food service franchise partnership—from agreement to design and space build-out—can take a few months. Here's what campus officials can do to help make the process go smoothly.

Food service franchises can perk up campus dining. Tom Mac Dermott, president of Clarion Group food service consultants, finds it's ideal to use a company with franchising as its primary business model. These franchisors have definite operating standards that are enforced and any significant deviation from these standards reflects on the franchise as a whole. He says a franchise choice should also fit the profile of the student body in terms of taste and ethnicity.

Brian Day, Chartwells' director of operational support, notes that, for institutions drawing a large student population from outside the regional area, some might not be familiar with a local bestselling brand. "You really have to be kind of careful that the brand has enough penetration," he says. Those unfamiliar with a brand may not be excited enough about having it on campus for it to succeed.

Bob Hassmiller, chief executive officer for the National Association of College Auxiliary Services, suggests that administrators consider how a particular franchise would blend with the institution's dining culture. For instance, some colleges are tremendously responsive to fair trade issues, so a coffee brand would ideally need to meet that demand. Or if a campus has a well-loved pizza concept, it would be in their best interest not to put in an outside pizza chain.

When comparing various franchise brands, innovation is another factor. How committed is each franchise to keeping its brand fresh? That's a question ARAMARK's Solomon advises asking. "A successful franchise has to have a formal commitment to keeping their brand relevant to customers," she explains. "This means a robust promotional program and schedule for updating menus and refreshing the look and feel of the brand so it doesn't become stale."

Before choosing a brand partner, officials must also consider the up-front investment, food, and labor costs, as well as any required fees and royalties. "Ensure that you have enough student customers on campus to deliver the sales needed to support all of the cost categories," Solomon says.

Michael Brandon, director of brand development for Compass Group North America, Chartwells' parent company, believes the key is a good blend of internal and external brands on a campus. "An appropriate mix of appealing franchised brands and local concepts will keep dining dollars on campus," explains Brandon, who is involved in creating franchise agreements. On the other hand, overuse of franchised brands can be an economical detriment to dining operations, as the institution will wind up spending an exorbitant amount on brand royalties and advertising fees.

What's on the menu? A USC student survey found they wanted a pizza franchise in their new campus center, so administrators served one.

Top name brands can attract customer attention and dollars, but when are they the right choice? John Coker, executive vice president of AVI Fresh, which has campus partnerships with Subway, Taco Bell, and Pizza Hut, says national franchises generally work best in a large university setting. But certain factors, such as generating a strong sales volume, must be likely. "You have to have a certain amount of traffic flow to make a national franchise financially viable for the university and the food service contractor," he notes.

This past summer, USC Hospitality, which is operated by the institution and handles dining services for two University of Southern California campuses, welcomed 14 new concepts, including California Pizza Kitchen and Panda Express. National brands bring with them proven systems—and a following, says Director Kris Klinger.

Thomas Newcomb, president of Campus Dining, a food service consulting firm, finds that large public universities typically have enough students to afford and support it.

On the other hand, Coker notes, national brands don't generally change their menus on a regular basis. "When the student is there for four straight years, the exact same menu is there and that can become complacent."

'You have to have a certain amount of traffic flow to make a national franchise financially viable for the university and the food service contractor.'  -John Coker, AVI Fresh

Having a few national franchise brands as anchors to a food court can help draw traffic, but Solomon cautions that the key is understanding if each brand is going to be profitable enough to sustain the longer-term investment. "While the popularity and brand recognition of a franchise can help attract customers to the food court, the real goal is to make sure the brand can deliver the customers needed to support its survival."

Regional brands have their share of incentives, such as local recognition. Klinger of USC Hospitality says his department sees the value in having a number of national partners but also wants to provide nearby choices students are familiar with. Local and regional-based concepts range from Wahoo's Fish Tacos and Poquito Mas to Lemonade Restaurant and Daphne's Greek Cafè.

Deciding which brands to include can mean looking beyond just the menu. In 2005, Mac Dermott of the Clarion Group negotiated a five-year agreement for Bryant University (R.I.) for an independent pizza operator to reside in a food service facility within a new residence hall. After officials considered half a dozen proposals, the contract was awarded to Ronzio Pizza, a Rhode Island restaurant, which is required per its contract to provide late-night hours. Mac Dermott says this was a plus with Bryant's rural setting.

Working to satisfy the campus customer factored heavily on a recent Pepperdine University (Calif.) franchise decision, as well. In September, its Malibu campus welcomed a new 500-square-foot cafe location for Los Angeles-based La Brea Bakery, which serves breads and baked goods, soups, sandwiches, and salads. It's the artisan bakery's first facility directed at a college campus audience.

Peter Loh, director of West Coast operations for Sodexo, which has Pepperdine as a client, explains there were a number of bakery franchises already in the food service provider's brand portfolio, but La Brea turned out to be the best match because it already had a strong recognition with students. "La Brea means a lot to them," he adds.

It took about a year to bring the bakery to Pepperdine. La Brea Bakery chefs added a personal touch by creating a new "Willie the Wave" sandwich, named for the Christian university's sports mascot. Students voted in a contest for picking the top choice of ingredients. The winning combo is a turkey BLT, complete with smoked applewood bacon and provolone cheese in country wheat bread.

Alex Pang, associate vice president at Pepperdine, says, "The students are very happy to have a little bit of a high-end restaurant here that they can order from, and the product is being made in front of their eyes."

Despite carefully made decisions, franchises can get stale or become irrelevant. Customer traffic slows down. Sales don't measure up to expectations. A brand can get lax in innovation - not just menu-wise but also in its operating systems, explains Brandon.

A franchise can just fall out of fashion. In summer 2009, the University of North Florida's new student union opened with a food court containing four Chartwells concepts: Quiznos (sandwiches), a Coyote Jacks (burgers), Salsaritas (Mexican fare), and Yan Can Cook (Asian fare). The first three offerings caught on well but the latter just wasn't catching on with customers. "We just did not have the sales happening at Yan Can Cook right from day one," explains Vince Smyth, director of auxiliary services.

For a potential solution, Yan Can Cook's menu was changed to be more appealing, but there was no significant difference in sales. After March vacation break, UNF officials brought in Chick-N-Grill, a South Florida franchise that had caught on at fellow Chartwells institutions, as another dining option. Chick-N-Grill's sales over the last six weeks of spring academic term fared much better. So a swap was made.

"There were some that very much liked the Asian concept and were disappointed to see it go," says Smyth. He adds that most constituents were happy to see that campus dining was "moving in a direction that would suit the majority."

Day from Chartwells encountered a similar scenario with a struggling franchise at McNee State University (La.). Students expressed interest in having local cuisine as a food option, "So our [Chartwells] director developed a concept that's all Louisiana home-style cooking." Resulting sales have been booming. "They asked for it and we gave it to them and it's successful," Day adds.

The reach of the brand can play a factor in its success, according to Solomon. Some regional brands thrive in one part of the country but their distribution system does not allow them to get their products beyond a certain geographic area. "Some regional brands do have the potential to expand their reach but you have to be careful that they can get their product where it needs to be," notes Solomon, "while maintaining the product integrity and price point."

Other names may just be too trendy. Pepperdine's Pang points to a southern-based donut brand that came to West Coast higher ed institutions a few years back that eventually began to fade in interest. "You need to make sure a brand will sustain and excel on a campus," he advises, "and that the demand for the product will be ongoing."

At USC Hospitality, a Wolfgang Puck restaurant had been a franchise for 10 years until a student survey convinced officials it was time for a change. The survey listed this restaurant as well as California Pizza Kitchen as food options for the new Ronald Tutor Campus Center, which opened this fall. As it turns out, there was much greater student demand for California Pizza Kitchen (77 percent) compared to Wolfgang Puck (42.8 percent).

Though Kliger says that USC Hospitality might be open again to partnering with that brand in the future, "it was the students who requested the change, so we made that change."

Franchises can have peculiarities that may impact working relationships. When the University of North Florida installed a major coffee franchise on campus three years ago, Smyth recalls the company had been firm on some matters, such as requiring UNF to follow specific color shades for the walls and tiles. "They went as far as to say ‘You can't buy your own icemaker; you have to buy it from us because it creates its own size and shape of ice cube,'" he explains. "You have costs associated with that that do go up."

As Ann Pulczinski, senior director of retail and catering for Sodexo's campus services division, notes, certain restrictions may not be palatable to the institution. Or a franchise might require a certain square footage or certain equipment that cannot fit or be supported in the available real estate.

Another potential issue is that the method of distribution for the product may just not be there, says Pulczinski. In addition, she explains, not all brands franchise. "There are some crowd favorites out there that no one can bring to the table."

During negotiations, Mac Dermott recommends administrators develop their own understanding of a brand's potential for generating sales and profits rather than rely on franchisor projections, which may overstate sales and understate costs. "Franchise fees and royalties are costs associated with the concept that are in addition to the usual food, labor, and other operating costs of any facility."

Also when negotiating, try to either eliminate or significantly reduce the advertising/marketing fees that the brand collects, advises Brandon. "Because campus retail is considered a captive environment, these locations receive minimal direct benefit from advertising that brands generate through standard forms of media."

Thoroughly examine build-out costs and student input, as well, says Loh of Sodexo. "If you don't do your homework, a hundred thousand dollar brand in North Dakota may cost three hundred thousand in San Francisco. If you are not prepared for it, you are going to be in shock." He adds that it's important to research who your customers are.

Successful brands on campuses are ones that continue to innovate. Being in constant contact with the student customer base can help, Solomon says. "We survey students twice a year to make sure we always have a pulse on their dining needs and brand preferences," she explains. "This helps us to identify which brands will be most successful on that particular campus."

Dave Prentkowski, food services director at University of Notre Dame (Ind.) which counts Burger King and Sbarro Italian restaurants among its franchises, thinks it is important for administrators to understand a brand's marketing and advertising strategies. "If the brands require advertising percentage fees, the school needs to consider the value of that to them."

With long-term contracts, Prentkowski recommends making sure the institution will have enough time to recoup the investment. Also consider who will be responsible for the design and build-out phase, and what impact it will have on the campus' way of doing business.

Coker of AVI Fresh says administrators should ask questions such as:

  • Why would this brand be wanted here?
  • What will the brand do for the institution?
  • Does the ROI have enough staying power for a five- or 10-year agreement?

Brandon says Chartwells insists that a brand's personnel conduct regular site visits. "We want to make sure someone from the franchisor is visiting our units and evaluating them and [we] are getting the full benefit of their knowledge as well."

Take a good look at a brand owner's history and stability with franchising, suggests Newcomb. Pulczinski thinks a new dimension for dealing with franchises could happen in the future. "I think we need to be more mindful going forward about what kind of flexibility we have with a franchisee. If we think in five years they need to be refreshed and we can't without penalty, then that's something we need to be deciding on the front end nowadays."

About every five years, Carolina Dining Services at UNC Chapel-Hill conducts an assessment of food services, says Freeman, to get a snapshot of "where we are now and what the students feel we need to move forward on in some areas." ARAMARK representatives come to campus and collect information through focus groups and methods such as conducting exit surveys.

At UNF, auxiliary services staff members met with Student Government representatives and a food advisory council to discuss Yan Can Cook's performance as part of their decision process. Smyth also suggests finding out what students are buying in the local communities to see what might be popular.

In addition, consider talking with administrators at other institutions. Smyth and auxiliary directors at fellow public Florida universities meet twice a year to talk about campus dining services. He explains, "Understanding your own unique community is to understand what their desires and needs are and what you can do."