What the experts won't tell you about franchising your QSR
In this wide ranging interview Sam Nash MD of award winning Sandwich chain Nashi talks about the direction of the business and gives his insight about how to get your franchising strategy right.
QSR Media: What's been happening at Nashi in the last 12 months?
Sam: The last twelve months have been spent refining the Nashi franchise model, improving existing store systems and profitability, opening new stores, and searching for new Greenfield sites that suit the Nashi model.
It’s also been an exciting year of “Product” research and development, thanks to a Sandwich Safari to both New York and London through the ‘Australian Sandwich Association’.
Nashi has also invested in a ‘brand’ refresh, which I feel was essential after 10 years of trading.
We won the Australian Sandwich Awards for best retail chain/franchise, as well as our coffee blend winning the Australian Coffee Bean Awards for best coffee blend overall for the category of chain/franchise.
We have also split our business into two entities; Nashi Wholesaling Pty Ltd (Wholesale supply to store and corporate catering) and Nashi Corporation Pty Ltd (Nashi retail outlets). Nashi Corporation P/L is now a customer of Nashi Wholesaling P/L.
Nashi ‘franchised’ stores will also be customers of Nashi Wholesaling P/L. This way, we are able to micro-manage the business more accurately at both the ‘wholesale’ level as well as the ‘retail store’ level.
QSR Media: You've been franchising, what's happening here?
Sam: Nashi has held off on launching the Nashi Franchise program, as we feel that the financial modeling needs to be refined to maximise the benefits to potential and future franchisees. This refinement is related to wholesale supply costing (COGS) to the franchisee, as well as waste management and how to deal with it. The challenges of dealing with fresh food with a 12-hour shelf life needs a system to support this kind of waste exposure for single business franchisee operators.
Nashi wants to get this franchise modeling correct. It’s been a 10-year development of a terrific and successful business. We will not rush the franchise roll out until we are comfortable with the franchise financial model.
QSR Media: Where do you see the opportunities in the QSR sector?
Nashi QSR opportunities
I see further development in the increasing coffee market. Australians have developed an appreciation of a good coffee.
I also see a development of “Bloomer” sandwiches. For us this is an expansion from our wedge sandwiches, using an artisan round loaf as oppose to the traditional square block loaf. Nashi has successfully launch the bloomer range and will have added another 3 lines within the next two months, taking it to 5 lines.
We have also developed a Summer Soup range to meet the needs of those not wanting to eat sandwiches all summer. These soups will become an all-season product. We have already launched the Pho (Chicken noodle soup with fresh herbs), as well as Gyoza with soba noodles. There will be one or two additional lines launched by the start of winter this year. They all use the same fragrant broth, but the flavours are different depending on the paste within each line. I.e., We use a miso paste in the Gyoza.
The cold ingredients are packaged and displayed in the sandwich fridge. On purchase, we add the fragrant broth at the counter via a hot water urn. Its Quick and its fresh. The customers love it!
QSR opportunities in general
For the QSR sector in general, I see the development and expansion of Vietnamese cuisine concepts in Australia to be the next 'hot' QSR category, specialising in rice paper rolls and pho. This seems to be the new sushi hype from 10-15 years ago.
QSR Media: What advice would you give someone if they are thinking of franchising their QSR?
Sam: Be sure that the franchise model works. Just because the model works as a company store format, does not necessarily mean that it will work for franchise stores.
To test the franchise model, apply your existing stores into this financial format with the relevant fee and purchasing costs to see if there is enough profitability for both the franchisee and franchisor.
Generally, you know your business more than most consultants. Make sure you completely understand their recommendations and modeling. Don't just accept that its correct.
The wastage component of our business was not factored into the COGS formula, which meant that our COGS were actually higher than the modeling predicted. In a company store format, we are able to transfer stock between stores during the lunch periods. Franchisees don’t necessarily have the same luxury. This is part of the issue we are currently rectifying as far as franchising is concerned.
QSR Media: What are some of your goals for the year?
Sam: Conclude a sound business model for our franchise system and roll out our first franchisee.
Expand our current kitchen to double its production capacity.
Locate new sites that suit the Nashi model, both within the Melbourne CBD, as well as targeting some larger hospitals.
Convert all existing stores to the new brand format.
Continue to build our Corporate Catering division and store growth in order to improve our ‘economies of scale’ in the kitchen.
QSR Media: Any other comments?
Sam: We are starting to see an uplift in sales within our stores.
The biggest challenges seem to be the movement of large corporations from building to building. It can effect one store negatively, but then another one positively. Fortunately our stores are spread in most areas of the CBD and Docklands, so we are bound to be hit with both effects. There is significant movement/shifting of large organizations at the moment. Predicting future revenues with unknown variables can be rather challenging.
I’m also seeing a growing demand/need in the awareness for calorie counts on our products. This will definitely be a marketing advantage in the future in order to satisfy consumers’ dietary requirements/curiosity.
