- Midsize brands such as El Pollo Loco and Tropical Smoothie became unlikely pandemic successes.
- Now, these chains, including Jack in the Box, are looking to bring in new franchisees to grow.
- Here’s a look at each brand’s strategies and what it takes to become a franchisee.
- See more stories on Insider’s business page.
National restaurant chains such as Domino’s Pizza, Chipotle Mexican Grill, McDonald’s, Wingstop, and Taco Bell thrived during the pandemic thanks to strong digital and delivery ordering platforms, menu popularity, and drive-thru lanes.
But they aren’t the only businesses to find success during the pandemic. Some midsize brands, including those in turnaround mode prior to the pandemic, are coming out of the health crisis with bullish plans for franchising growth and looking for franchise partners to make their ambitious plans come to life.
Among the unlikely successes include Jack in the Box, Noodles & Company, El Pollo Loco, and Fazoli’s. When comparing critical sales metrics called same-store sales, Jack in the Box even outperformed burger rivals McDonald’s and Burger King.
As a result, Jack in the Box, known for its all-day breakfast, is relaunching its franchising program after putting it on pause for 10 years.
“Over the last year, we’ve really proved that during the pandemic, we can be pandemic resistant,” said Darin Harris, the CEO of Jack in the Box. “We’ve been receiving interest from outside franchisees and existing. We’re really excited to build and grow units.”
Here’s a look at the winning strategies of each brand, the brand’s unit growth goals, and what it takes to become a franchisee for these companies.
Jack in the Box
Headquarters: San Diego
Initial franchising costs: Total investment to open a single franchise is $1,651,500 to $2,638,600, 2021 franchise disclosure documents showed
Average unit volume: $1.65 million systemwide in 2020
Total restaurants: 2,237
Planned unit growth: 20 to 25 new locations in 2021
Key markets: Initial growth is expected in existing Western and Southern US markets. Then the brand intends to “fill in” other markets such as North Carolina, South Carolina, and Nashville, Tennessee. The potential exists to add up to 1,200 more locations in 21 states.
While other big brands such as McDonald’s and Taco Bell were trimming menus and reducing breakfast options during the pandemic, Jack in the Box did the opposite.
The chain, known for having a variety of fast-food choices, from tacos to burgers, added nearly 20 new menu items in 2020, including Tiny Tacos, a new fried-chicken sandwich called the Cluck Sandwich, Jumbo Breakfast Platter, and Sauced & Loaded Fries.
Jack in the Box is also known for its all-day breakfast, which includes everything from egg-and-sausage-stuffed burritos to chicken biscuit sandwiches.
“Our breakfast and late-night business — they’ve been vital during the pandemic,” said Darin Harris, the CEO of Jack in the Box.
When it comes to same-store sales, a key metric that measures a company’s financial performance, Jack in the Box has outperformed its key burger rivals. Its systemwide same-store sales increased 4% in the fiscal year 2020.
By comparison, in 2020, Burger King’s same-store sales declined 7.9%, while McDonald’s eked out a 0.4% increase.
Those results prompted Jack in the Box to relaunch its franchising program for the first time in a decade. The goal is to open 20 to 25 restaurants this year with a prototype that reduces development costs by 20%. The company plans to concentrate on building stores in existing markets, which have the potential to expand by an additional 900 to 1,200 locations in 21 states, Harris said.
Noodles & Company
Headquarters: Broomfield, Colorado
Initial franchising costs: Between $684,000 and $870,000, including a $35,000 initial franchise fee
Average unit volume: $1.168 million
Total restaurants: 76 franchise and 378 corporate-owned restaurants at the end of 2020
Planned unit growth: Two to four in 2021
Key markets: Southern and Southwestern markets, including Alabama, Florida, Georgia, New Mexico, South Carolina, and Texas
Noodles & Company is a fast-casual pasta chain with locations in 29 states that’s turning to franchisees to enter new markets, especially in the South and Southwest.
To prove that it’s serious, in late 2020 it appointed John Ramsay, who has previously worked at chains such as TGI Fridays, Marco’s Pizza, and Jack in the Box, as its first vice president of franchise sales.
Pivoting during the pandemic has been difficult for fast-casual restaurants because their food takes longer to prepare. Because Noodles’ dishes typically take between four and six minutes to cook, traditional drive-thru isn’t an option for the chain, Ramsay said.
Instead, Noodles ramped up its rollout of pickup sites during the pandemic, and this has helped it navigate the waves of bans on on-site dining. It also saw strong delivery sales, which it offers through a mix of both aggregators and its own app and website.
Its fourth-quarter digital sales more than doubled year over year and accounted for nearly two-thirds of all sales.
Noodles has used its loyalty program to attract customers to its own orderings channels. It charges a 15% premium on its prices for orders through third-party services, which offsets the fees and puts the margins in line with its own delivery channels, and the company said the aggregators bring new customers to the brand.
In February, Noodles unveiled a new multiple-unit franchise strategy. Ramsay said the chain, which has its biggest presence in the Midwest, would use franchisees with local insights to enter new markets.
Restaurants can range in square footage from 1,800 to 2,700, and the company said outdoor patios are “highly desirable.” Most of the new restaurants are expected to have pickup windows. The company said it is also considering ghost kitchens, which would have significantly smaller square footage.
El Pollo Loco
Headquarters: Costa Mesa, California
Initial franchising costs: Between $770,000 and $2,097,000, which includes a franchise fee of $40,000
Average unit volume: $1.9 million for company-owned stores
Total restaurants: 478
Planned unit growth: 100 to 150 over the next five years
Key markets: West and Southwest, including Colorado, New Mexico, and Texas. Then, in 2024, it plans to move into untapped markets in the Midwest and East.
El Pollo Loco was a chain in transition before the pandemic.
The former Starbucks executive Bernard Acoca was named the chief executive of the fire-grilled-chicken chain in 2018. He spent the first two years of his tenure investing in talent, branding, and simplifying operations. His next goal was to reboot franchising, but then the pandemic hit.
Plans to grow were stalled as the chain pivoted its operations to cater to off-premises orders. That meant relying more heavily on its drive-thru lanes and its value-oriented healthy chicken meals.
El Pollo Loco’s drive-thru lanes generated 45% of total sales pre-pandemic. That’s well below the average of 70% to 80% for most fast-food chains, Acoca said. But El Pollo Loco’s drive-thru business now accounts for 70% of the company’s sales.
That pandemic lift is “holding steady,” Acoca said.
The company also rolled out GPS-enabled curbside pickup during the pandemic, which has helped drive digital sales. The digital upgrade was already in the works, but it was fast-tracked last summer when it became clear that consumers needed a safe, contactless alternative to picking up takeout.
“What should have taken six months, we managed to test and launch in literally six weeks,” Acoca said of the September rollout of curbside pickup.
Like Jack in the Box, the company didn’t let up on menu innovation. The chain introduced keto-friendly burritos and chicken bowls during the pandemic. Having bundled family-meal options, a staple of the El Pollo Loco menu, also served the brand well during the pandemic. Those grilled-chicken meals, which represent about 30% of sales, come with side dishes such as macaroni and cheese, pinto beans, mashed potatoes, and the new cilantro lime cauliflower rice.
“That business to this day is up 10% year over year. The beauty of our business: We didn’t have to reinvent ourselves during COVID. We just simply accentuated those certain aspects of our brand that were always strengths of ours,” Acoca said.
El Pollo Loco closed 2020 with same-store sales down 0.2%. A large part of that decline was the result of tough pandemic conditions in Los Angeles, a core market for the brand. Excluding Los Angeles, the brand’s same-store sales for 2020 would have been up 3.3%.
But the brand is beating its peers. In 2020, same-store sales in the quick-service sector declined 6.2%, and they dropped 5.5% among public chains, Technomic reported.
The company is now gearing up for aggressive expansion in 2021 under two new restaurant designs that cater to growing demands for takeout, drive-thru, and delivery. Over the next five years, El Pollo Loco intends to add anywhere between 100 and 150 restaurants.
The company also plans to remodel more than 300 of its 478 existing restaurants over the next few years as it leans into a new prototype that costs less. Acoca said franchisees building stores with the new prototype, which includes dual drive-thru lanes, will save about $200,000 to $400,000 per store.
“I think it’ll be one of the most aggressive expansion periods in the company’s history because we’ll start adding restaurants at a really healthy and aggressive clip,” Acoca said.
Headquarters: Charlotte, North Carolina
Initial franchising costs: Between $259,000 and $502,500, including a $42,500 franchise fee; you need a $500,000 net worth, including at least $120,000 in
, to become a franchisee
Average unit volume: $499,624 per the company’s most recent franchise disclosure document
Total restaurants: 104
Planned unit growth: 35 by the end of 2021
Key markets: Suburban areas in states where it already has a presence
Clean Juice prides itself on being the only USDA-certified organic-juice-bar franchise. In addition to a range of juices, the cafés sell light meals, including wraps and acai bowls.
Landon Eckles, who founded the chain in 2015 with his wife, Kat, said sales struggled at the start of the pandemic, but quickly rebounded. He attributed this rebound to an increased focus on healthy diets and the company’s ability to pivot during the pandemic. The company’s pivot plan included selling bulk packs of ingredients so that customers could prepare their own juices at home; launching a new app with options for delivery, collection, and curbside pickup; and ramping up its availability of third-party delivery through DoorDash,
, and Grubhub.
The chain has also proactively helped its franchisees during the pandemic, Eckles said. Clean Juice made sure franchisees had access to clear Paycheck Protection Program information from its finance team and worked with them to get rents cuts.
The company has continued to expand even during the pandemic, Eckles said. Clean Juice added another 29 franchise locations in 2020, including sites in three new states.
It plans to award more than 60 franchise units in 2021, with approximately 35 of them opening doors by the end of this year. It already has planned units set to open in Connecticut and South Florida, alongside intense growth planned for the Dallas-Fort Worth area.
Eckles said that Clean Juice performed especially well in suburban markets, and that this is where it wants to target new franchisees. The chain has cafés in 28 states, and it wants to expand in areas where it already has a presence, so it can build brand density without cannibalizing stores.
Most locations have one general manager, one assistant manager, between three and five shift leaders, and around 15 to 18 “Juiceristas,” or baristas for juice.
Stores have to open within nine months of signing a franchise agreement.
The company said it’s heavily involved in the site-selection process and doesn’t let franchisees sign a lease for a retail space until the site has been approved, and most times visited, by its director of real estate. The company said it also works closely with real-estate brokers during the lease negotiations.
Tropical Smoothie Cafe
Initial franchising costs: Between $257,500 and $560,500, with an average cost of $370,000, including an initial franchise fee of between $15,000 and $30,000; you need at least a $350,000 net worth, including $125,000 in liquidity, to become a franchisee
Average unit volume: $840,622
Total restaurants: More than 950 cafés
Planned unit growth: 130 in 2021
Key markets: Suburban areas in its core markets (New York, Michigan, Florida), as well as in new and emerging markets (Georgia, Ohio, Texas, Illinois)
In addition to smoothies, Tropical Smoothie Cafe sells an expansive range of light meals and snacks, including wraps, quesadillas, and salad bowls.
The company has just one corporate-owned store and is expecting to open its 1,000th store in 2021.
Cheryl Fletcher, TSC’s chief development officer, said the company has seen “significant growth” over the past five years in both the number of franchise units and the average unit volume. It has more than 940 cafés across 44 states and expects an additional 130 to open in 2021, making it a record year for the chain. In total, it has more than 660 new units in the pipeline, and it signed 95 new franchise agreements in the first quarter of 2021.
The company has reallocated its corporate workforce so it can focus on helping franchisees during the pandemic. Staff has helped franchisees secure $29 million in Paycheck Protection Program funds, as well as a combined $1.8 million in rent relief across more than 250 cafés.
In March 2020, TSC also halved the royalty fees for franchisees for eight weeks.
The business adapted quickly to the pandemic, Fletcher said. This included knuckling down on contactless delivery — both branded and through third parties — and curbside pickup. Digital sales now make up 34% of all orders — up from 24% pre-pandemic.
Total same-store sales were up 15.8% year over year in January and February 2021.
TSC opened 99 new units in 2020, and 25 in the first quarter of 2021.
The company is open to a variety of unit styles, including ones with and without drive-thrus, and freestanding, endcap, and in-line locations. Cafés should be between 1,200 and 1,800 square feet, and ideally at least 20 feet wide.
Headquarters: Lexington, Kentucky
Initial franchising costs: Between $800,200 and $1.75 million, depending on the site type, including a $40,000 franchise fee; you need around a $750,000 net worth, including at least $250,000 in liquidity, to become a franchisee
Average unit volume: Around $1.2 million across all restaurants
Total restaurants: More than 215 across both franchise and corporate-owned in 28 states
Planned unit growth: At least 15 new franchised restaurants in 2021
Key markets: Fazoli’s wants to expand its presence in growing markets in the Midwest and South, but also wants to enter new markets in Texas and LA
Fazoli’s, a fast-casual chain owned by Sentinel Capital Partners, specializes in Italian-American food.
The company has seen its sales boom during the pandemic and posted its most successful quarter ever in Q1 2021. Its March sales were up 85% year over year, and traffic was up 78%. In the year to late March, its sales were up nearly 10%.
Much of that success is tied to its bet on the virtual-brand trend. The Italian chain began testing a delivery-only brand, Wingville, at about a dozen restaurants before the pandemic. The chain has since expanded the virtual chicken-wing concept to all restaurants. Some company-owned stores are generating about $3,000 a week in new revenue from the virtual concept.
“It’s an $11 million business for us right now,” Carl Howard, Fazoli’s CEO, told Insider earlier this year.
Howard recently said that the chain is now launching a “pretty aggressive” franchise growth strategy in 2020.
It plans to open at least 15 new restaurants in 2021, which Howard said would be the biggest growth in a decade — and the real figure could be much higher, he added.
It’s already opened three sites in 2021 — in Georgia, Iowa, and Florida — and signed 20 new franchise agreements to develop a record 50 locations in the year to April.
Its expansion plan includes targeting conversions of existing quick-service or fast-casual restaurants. Franchisees who convert their existing shells into a Fazoli’s can sign a short five-year term, versus the typical 15-year commitment, with no down payment, no franchise fees, and no royalty fees in the first year. Howard said this means that franchisees can get a 2,000- to 3,500-square-foot restaurant open for under $350,000.
Franchisees have previously successfully converted former Burger King, Steak ‘n Shake, and Pizza Hut restaurants, he said.
The company is targeting suburban retail areas, and it’s essential that franchise sites have a drive-thru.
It usually takes 12 to 16 months for a site to open after the franchisee signs their development agreement, though this can be within two months for conversions.
Howard said that Fazoli’s model leads to “extreme profitability” for its franchisees, and the chain has had a 95% unit continuity rate since 2015.
Fazoli’s aims to become a 300-unit brand in the next three years, Howard said.