Gary and Jennie Grassia have been happily married for 17 years. During
that time they have built both a family and a business. For many years, Jennie’s parents owned a franchise called “Little Gym” that provided athletic activity and developmental education for young children. Jennie and Gary started working at the gym in high school and college, respectively, eventually becoming managers of the two facilities in the franchise, and then partners. In the fall of 2008 the opportunity to start a new franchise by themselves became available: Simply Fondue.
Simply Fondue is a restaurant franchise operation that is based on fondue cooking. A fondue restaurant is one where the raw food is cooked at the table by the customer. The food arrives at the table cut into bite-sized segments and is then cooked to taste by the customers using long forks. Fondue is generally thought of by Americans as dipping food in cheese and chocolate-which is certainly part of the experience. However, “fondue” comes from a French word “to melt.” So in addition to the cheese and chocolate fondues, there is also hot oil or broth, which can be used to cook a variety of items, including beef, chicken, shrimp, and mushrooms. The restaurant has a real competitive advantage in comparison to other restaurant operations because it does not require a large kitchen staff to cook the food; only preparation is needed. For this particular Simply Fondue’s market, the typical ticket for an individual plate at the restaurant will average approximately $45. Thus, the restaurant is thought of as a high-quality (because you can see your food being cooked), higher-priced meal experience.
The Grassias had become familiar with the Simply Fondue franchise 12 years before by frequenting a nearby Simply Fondue. They had known for a while they wanted to start another business, so they had been doing a widerange examination of different types of franchises available. They were drawn to the restaurant business, since there always seemed to be demand and there were many wellestablished franchisors. They were drawn to fondue franchises, since it seemed like a unique niche, but one with growing demand. There are two major franchise chains that offer such food. Gary visited with both major franchise groups, but the leadership of the Simply Fondue franchise operation really impressed him. He was convinced that this would be the most supportive franchisor. One critical key issue that became clear for Gary and Jennie when they were involved with the child development franchise was the importance of strong support by the franchisor. Franchisors promise support in return for the monthly royalty payments that the franchisee must pay. However, the follow-through and willingness to help the franchisee succeed is often less than promised. Thus, one of the key issues that Gary focused on when making his evaluation of the two franchise systems was which one was actually going to be the most helpful to them. He found that the total costs of the franchise purchased from either group would be the same, and the nature of what was promised was largely the same. Thus, the judgment of which franchise to buy would be based on which one of the franchisors would actually follow through on what it promised. They began to look at locations for a restaurant in the large southwestern city in which they lived. However, by early 2008 they realized that the corporate franchisor was also looking to open a corporate store in their city. In fact, the franchisor had already begun lease negotiations to open a store in a very popular downtown area. Using the contacts that he had developed in his research on the businesses, Gary contacted the president of the franchisor company. During the next few conversations it became clear that the franchisor president wanted either a company, or privately owned franchise in this downtown location, but it was too good a location to not have something in place soon. The Grassias were able to arrange to buy the franchise and take over the lease negotiations. The funding for the purchase of the franchise, the preparation of the restaurant, and other initial costs came from a Small Business Administration loan.
The preparation of the site took longer than expected: nine months. The space had been a storage location prior to their purchase and lacked everything needed for the restaurant. However, they did not have to pay rent during the construction phase, so even though it took a long time, it was not nearly as costly as it might have been. In most retail operations, the key ingredient for success is often said to be location, location, location, but the Grassias’ experience highlights the fact that while that is true, another variable is the cost of that location. Their location is much cheaper than many in the same downtown area because, although they have a street-front entrance, their restaurant is actually downstairs in a basement.
The restaurant is open and is performing well. The success of the business has led the Grassias to start the process of opening another restaurant. The learning associated with the Simply Fondue restaurant has given the couple the confidence to believe they now have the rich skills necessary to do the next restaurant by themselves without a franchise. The royalty fees that are paid to the franchisor can be up to 4 percent of the revenue of the business. Retaining that fee can be a critical factor in profitability. The success of the business has also allowed Gary to go into the business only two days a week. Those two days are the busiest in the restaurant, Friday and Saturday, so he spends 15 hours both days working, but it does now allow him to spend more time at home. There is still plenty of work done from home, but the Grassias find the greatest benefit of being an entrepreneur is the ability to spend more time with the family.
Running a successful franchise has allowed the Grassias to refine their management skills. Today the family uses five key elements in that management. One is
Open Table, in which individuals can reserve a table electronically. The Grassias have found 80 percent of their customers use this system. The restaurant is open only for dinner due to the cooking time for the food at the tables. The fact such a high percentage of reservations come through this system means each morning they can tell what the night’s business will be. If the level of reservations does not appear to be at the level they desire for the evening, they can work either through Facebook or via their own e-mail list of customers to offer a one-night special. The result is that they can almost exactly predict what their customer activity will be in a day. They also have employed Groupon effectively, especially during the slower summer months to generate cash flow. However, they have found they have to provide very specific limitations on their Groupon coupon to prevent abuse. They limit an offer to two coupons per table and they also ensure that the coupon is not for the entire cost of a meal. Failure to do so means that two to three people could come in and share a single meal among themselves.
What Advice Do the Grassias Have for New Entrepreneurs?
1. Work with people. It does not pay in the long run to yell and make unreasonable demands. The restaurant was in a historical building and putting up the signage they really wanted was a problem. However, by working with the owners of the building they were eventually able to achieve a positive setup.
2. Keep lines of communication open with your partner and those with whom you have to deal on a regular basis, such as lenders, leaseholders, and so on. They all want you to be successful as that is how they will get paid. These relationships are mutually beneficial, and a solid relationship is the key to their success.
3. Run your franchise in the manner that the franchisors suggest. Why pay for a franchise if you are not going to do what they suggest? They have systems that are proven. Take full advantage of that. Beyond that, if you do not oblige as they suggest and something goes wrong, you cannot go back to the franchisors for support.
1. What other restaurants that are franchises are you familiar with?
2. Would a fondue franchise work in your city or section of the city?
3. Is a franchise approach to your first business a good way to develop skills needed to run your own business?
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