United kingdom
07 April 2008
There are only two branches of Mexican restaurant Barburrito — in Piccadilly Gardens, which launched in November 2005, and at the Trafford Centre, which opened in November 2007. But its founders believe their concept, dubbed “fast-casual dining”, is ripe for rolling out into a chain.
Turnover for the year ended March 2008 was £1.2m, up from £700,000 the previous year, and the target for the current financial year is £2m.
Owners Morgan Davies and Paul Kilpatrick know they should capitalise on this growth with more restaurants. They have plans for 10 by 2010, with number three opening towards the end of 2008.
In June 2007, two angel investors put in £350,000 of equity. But if Barburrito is to continue to expand beyond a trio it will need more cash.
Obvious route
Franchising might seem an obvious route for speedy growth, especially given the popularity and success of this model within the food sector.
But despite receiving at least one email enquiry a month about franchising the business, Davies is less than keen. Instead he is talking to potential investors, as he looks for further investment of up to £2m.
“A lot of small businesses make the mistake of thinking "we can franchise this, people like it'. It seems like a no-brainer,” Davies told
Crain's.
“But unless you have the correct infrastructure in place you will invariably damage the quality of your business.
“We want to maintain the quality of the offering in terms of the quality of the food, the way the store looks and our level of customer service.”
Robust franchisee controls are built into any good franchise plan and Davies concedes that the idea of relinquishing control is the reason why he'd rather look to other means of growing the business. “I am confident we can do it but I want to have developed the business to a critical mass of stores myself so that we control it,” he said, adding there was more to be done in terms of developing the concept and the way the business is run.
“Having opened the second I would say we are 90 per cent there. I wouldn't want to do franchising until we were 99 per cent there,” he said.
Davies' and Kilpatrick's attitude to franchising the business is “not now”, rather than “not ever” as they concentrate on finding further investment and Davies sees franchising the business too soon as a “cop-out”.
They are worried that if they start “messing around” with franchise models now, it will make it much harder to secure additional investment and later to sell the business, should they wish.
Davies said: “If we have got real ambition for this business we want to have control of it ourselves and our vision in terms of expansion will, at some point, involve big investors who want to take 100 per cent control or a large per cent control and keep us involved — they are not going to want a whole load of franchisees involved.”
But Davies doesn't rule franchising out as a future option.
“Once we have our critical mass of stores we will look at additional investment options. They will include the involvement of large restaurant groups, organic growth, and we will reconsider franchising as an option,” he said.
“I'd say in a couple of year's time we'd be in a position where we could go down that route.”
Source :
www.crainsmanchesterbusiness.co.uk
