Is Now a Good Time to Become a Franchisee?

Alright. So is now a good time to become a franchisee? This is a very popular question that no one really has a great answer to. But if you're dreaming of business ownership or you're worried about the current economic climate, which many aspiring entrepreneurs are, you're gonna wonder, "Is now a good time to become a franchisee?" So today, we have Dustin Thompson and Mike Wootton, two of our directors of franchise development here at Jack in the Box. And we're gonna dive into this question, and we'll take a look at how franchisors and franchisees are leveraging the current economic conditions to position themselves for significant growth when the economy inevitably turns around. So, Dustin, you wanna get us started here and talk about the current economic overview? Yeah. Absolutely. So I think just to kind of to start here, one thing I've learned about the economy is the economy obviously always evolves and always changes. It seems like people know where it's going and then it switches directions and nobody knows where it's going. But the one thing that kind of stays true is that people are consistently investing in businesses. And I think what you find is that a lot of entrepreneurs really try to go in on the times that people think are maybe buy low, sell high moments. They wanna get in when a lot of people are not getting in or people have maybe slowed down from getting into any line of business. So I think right now, is a very interesting time because, you know, with franchising continuing to grow, I was reading recently, and just to state some facts from the IFA release, which is the International Franchise Association. They projected franchising to grow at a faster rate than the entire US economy, in 2024 or 2025, which was basically 2.5% growth in establishments, 2.4% growth in 2025, which exceeds the broader economic projections of 1.9%. Another stat that they shared, was that the total franchise output projected was to exceed nine hundred and thirty six point four billion in 2025, which is a four point four percent increase over, twenty twenty four. So when you look at someone with the IFA who really has their pulse on the business and they're stating that the industry continues to grow and even outpace the US economy. I think that makes franchising, you know, really enticing, to take a look at the franchise or, but we get a lot of questions in the development process. Mike, like, what are some of the questions that you typically see when it pertains to the economy and is now a good time? What do you see or what kind of questions are you getting? And and I'll kind of share mine later. Yeah. This year. Yeah. I mean, we have these conversations with candidates every day and two of the big ones, number one, you know, a lot of people when the economy has uncertainty, they come to us with the potential that they're looking at, you know, exiting their current job. They're not confident in where their company is. I wanna start something on my own. And so that conversation kind of begins about, okay, what's it look like to open my own business? And that's kinda obviously the core of where franchising is an opportunity to create something for yourself, some long term, you know, equities, some long term real estate holdings, all of those things are exciting when you look at a brand like Jack in the Box and the opportunities that we offer. But what sometimes people forget is when you talk to us, these restaurants don't open overnight. So, you know, as we're sitting here with an economy that's a little bit kind of up and down, kind of moving in kind of different directions and a lot of uncertainty, people forget that this process takes eighteen to twenty four months. So the time to get into these restaurants and get into a franchise really is now to let some of these things kinda, you know, wash out, so to speak, so that the timing is right for you to maybe hit, an economy that's really kind of firing on all cylinders, when you're ready to actually open your business. Yeah. I think that's one of the key things that when I when we have this initial discussion with franchise prospects is that they don't take into they don't take into mind, you know, how far out the timeline is. A lot of that is not necessarily jack in the box or or slowing you down. A lot of that is gonna be the real estate process, permitting, construction. And obviously, that's an entire video in and of itself talking about future content on that. But that I completely agree. I mean, what does the economic climate look like two years from now? Because ultimately, that's kind of what you're looking to buy. It's that time frame. And I think that's something that just, again, a lot of people miss out on. I think when you look at the timelines of a restaurant, especially locally, a lot of when you drive by a local restaurant being built and you see it being built, you don't necessarily think that all the things that happened before you saw, you know, breaking ground, you only think about, hey. It took them three to six months to build this restaurant. You know, I can get my store open in three to six months. Is that possible? Maybe. For a restaurant of our size and the real estate that we're looking for, probably not as likely, unless you came to the table with real estate. But I completely agree. That timeline, again, is something you have to take into consideration. Do we think interest rates are gonna drop in two years? Nobody knows that. I've seen projections, you know, from every economist, out there. But, you know, we just have to go based on what we think the demand is gonna be. And the demand for fast food, I feel like, is definitely there. With that demand, Mike, what do you like, labor. That's a question I always get about the processes. What about labor? You know, how many employees do I have in my store? How many do I typically have how many am I gonna hire? What is the hire process? How do you guys help us in the hiring process? Do you have, you know, how is the latest you know, several years ago, during COVID, we saw, you know, some labor discussions around, you know, labor. What do we see there? I mean, what do you see in that regard? Yeah. I mean, labor is a big big issue, obviously, in our business with the amount of employees that you might have in a Jack in the Box restaurant. But we are seeing some easing of labor shortages. So people are out there looking for work, which is a good thing. Wages are up, so that is a challenge. But brands like Jack in the Box, things we're doing, are trying to pull labor out of the restaurants. We're doing things with automation. We're doing things with AI. We're doing things to try to remove labor from the restaurant in order to kinda keep our economic model for the restaurant in line. People are there. I mean, I always tell people when they talk to me, if you're gonna get into the restaurant business, you gotta love working with people because it's really a people business. Everybody has great food if it's done correctly. What sets people apart and builds great businesses is how they handle their people. So being able to go out, find those individuals, and be really excited and energized about giving people opportunities is the key piece here, and they're out there. You just have to go out and enjoy giving people that opportunity and then seeing them suit and helping them and seeing them succeed and giving them opportunity. That's that's kind of how I feel about labor. Yeah. One of the what I'll often, you know, when I get that question about labor, one thing that I'll throw back with franchise candidates is, like, you know, we would be, you know, silly to assume that candidates aren't looking at multiple brands at the same time. But I always ask, you know, when you have you looked at what Jack in the Box has stated publicly what we're doing to invest in our business when it comes to technology, when it comes to automation, when it comes to training? And when you're looking at these brands, are you asking those questions? Because a lot of people, I don't think, even know to ask that question. What are you doing in this day and age with labor and with increasing labor costs to reduce labor costs or reduce labor, in my restaurant? Like you said, to keep the percentages in place. And I think that's where Jack in the Box kinda stands out. We've always been an innovator in that regard. And we're doing things with automation just like many brands are. But not only is it just keeping current with what we see our competitors doing, but it's just also what you should expect with any model that you're investing in is that the brand is reinvesting into the model to keep it current with today's standards with labor building costs. We see Jack in the Box obviously does a good job of that. What do you like we've seen trends come and go. Right? You obviously see industry trends. Then we see specific within the QSR industry, we see trends. One of the things that we've seen is demand for affordability, demand for convenience, faster drive throughs, personal services, things like that. What do you see with consumer trends when as in the last let's just give it a time frame, three to six months. What kind of questions are you getting from your prospects about trends in the industry? Well, I mean, the consumer right now in my mind is really looking for a couple of different factors. Number one, affordability. You've gotta have something there that is affordable, but they also want a premium product at the same time. I think Jack in the Box does a nice job there with kind of working with barbell pricing where you've got opportunities there with limited time offers and things that are maybe premium. And then on the other end of that, you've got value. So that's kind of a key thing that I think Jack does with our diverse menu. But it's the usual suspects. It's convenience. It's gotta be speed of service, customer experience. Those are the key things. I mean, there's a lot of different, you know, ways people can spend their money out there. They don't wanna be frustrated. They don't wanna feel like they're mired in lines. They wanna have access to technology now. That's really changed considerably, since the COVID years. You know, we're seeing more and more sales go through third party delivery services. We're we're making sure that we're current and easily accessible on all of those different platforms. So that's kinda where things are going in QSR. There still is a place for sit down in dining restaurant, and I think Jack in the Box is gonna make sure we have that available in most scenarios. But, it really just comes down to speed of service, accessibility, quality, and, a great customer experience overall. You might wanna add a couple things, Dustin, on top of that. I'm not sure. Yeah. One thing recently, that I've really seen a trend in really the last six or so months is somebody that when they're looking at Jack in the Box, what do they see as a one of the biggest competitive advantages? And honestly, it's the twenty four seven footprint of Jack in the Box. What I constantly hear is prior to COVID, we had a lot of restaurants that stayed open late or were twenty four seven. That has gone by the wayside, and there's still a great demand for people that want good quality food late at night. And there's just not many brands that fill that void. So I think one of the trends is really people wanting that twenty four seven access to the menu, that kind of went by the wayside during COVID and Jack in the Box has that. Most of our stores are gonna be twenty four seven. There are a few exceptions, but most of our stores are operating twenty four seven. And, honestly, us focusing on the twenty four seven model means that we also focus on building a menu that really caters to the late night crowd. Right? So I think that's something else, as part of when you think about a brand and you think about consumer trends, you know, that late meal at night, or those who work late to get off and want a really, good meal, that's something that we have to focus on here as a brand. Not only just innovating our menu, but also really the marketing behind that to let people know that we have those late night options, especially when it's a such a differentiator in today's economy with fewer and fewer QSR restaurants staying open late night, which I think is extremely important. Let's talk about kind of let's go a different direction, I guess. I would say less about the economy. Let's talk more about how the economy is effecting and growing in certain markets, right, where we're seeing really hot markets. One thing I've seen, you know, really the southeast has continued to surge. You know, I'm sure affordable housing over time was a big cause of that, warmer weather, you know, longer summers, if you will. You know, places like Florida, Georgia, the Carolinas, Tennessee. We're all seeing a lot of growth in the industry within those markets amongst not only just the QSR industry, but housing people, you know, buying a new house and transferring here. What are you seeing? I represent the southeast here at our brand. What are you seeing in your markets, Michael? Like, what are kind of some hot spots, and what do you see in the future there? It's interesting. We've seen kind of the hidden gem of the Midwest has really been active. You know, those are just steady markets. Not you know, from our perspective, not as much burger competition in some of those states. So I've seen a lot of activity in Wisconsin, Michigan, and Illinois, areas where people say, oh, they're people are leaving these states. I don't see it. There's still steady, really, really well backed economies, and, real estate opportunities in those states are plentiful. There's a lot of opportunity in those states, whether it be second generation real estate or just, edge growth like you see in the southeast with new power centers, etcetera, coming up. There's opportunity in a lot of those states that, people sometimes look over those states. And, you know, we always say the flyover states, but there's a lot of opportunity. Like, when you start really boiling down and looking at the economic factors of building a restaurant in some of those states, they're attractive. So, we have been seeing quite a bit of, interest in specifically Illinois and Michigan. Been a lot of growth in both of those states from an interest in Jack in the Box. Well, I think too I mean, kinda piggybacking on that. When you think about Jack in the Box's footprint, we have a lot of white space east of Mississippi, which is where a lot of the growth that we've talked about in this year. Getting ready. That's where it's happening. But we've seen a tremendous amount of growth in those markets or at least interest, with development commitments in several new states. But the white space opportunity is there. So if you're a franchisee of an existing system and you wanna maintain that footprint of your current storage and you're looking to expand, Jack in the Box would probably be a really good partner for you to at least consider, for that expansion. What about the prime locations? I mean, obviously, Jack in the Box again with white space availability. Where do you see the footprint of Jack in the Box going? Look and just as some background of that, Jack in the Box currently we have several models. We've got a smaller drive through only model that's around thirteen hundred and fifty square feet. Then we have kind of a medium sized model that's gonna be around twenty two hundred to twenty four hundred square feet. And then you've got kind of a larger model. And really the big difference between all of those is that the kitchen relatively stays the same size. You're just adding on the dining room and maybe some area in the back, or maybe some training area or some additional storage. So that really you're just adding to the seating, in the front of the restaurant. So, Mike, where do you see that going? Where do you see the trend? I mean, what from prospects that you're talking to, what are they looking for? Are they looking for a bigger? Are they looking for medium size? Are they looking for smaller? What are you seeing? I would say mainly medium or small. The only caveat to that would be, if it's a potential second generation space that has a larger footprint building. I haven't had a lot of people interested in building the larger footprint, but it does translate really, really well if you were to look at, like, a second gen space, a closed restaurant and a great opportunity, real estate wise, you can go in there, build one with bigger seating, and be successful. But a lot of times they might look at it. Do you think a lot of that is the cost factor of the larger prototype versus, say, a medium to smaller? Do you think that's a large part of it, or is it a close knit size? I do. I mean, when you look at, the dining room factor and what that cost is to build out all of that finished space, it does add significantly to your overall cost. So, in today's climate, I believe we're somewhere in the neighborhood, and you correct me if I'm wrong, John, or Dustin, but around eighty percent in most of our scenarios is drive through carryout third party delivery. So that dining room currently is necessary and a great piece to the business. Don't get me wrong. But maybe not what it was in the, you know, late eighties, early nineties where you would have a seventy five seat restaurant. So, I don't think you necessarily need to do it unless you're in one of these markets that you're like, hey. Projections are huge. This is got to be that a plus kind of market kind of gym, so to speak. You know? That might be a scenario where you would build a bigger one. Another scenario is you're going in sometimes and especially markets that are developed, if you're in kind of, let's say, the big twenty, DMA cities, you're gonna have a hard time finding just, you know, large three quarter to one acre pads. Right? So you're trying to maybe use some of our smaller flexible space buildings to make the space work from a from a site plan layout standpoint. Yeah. I think, you know, when I have those discussions with candidates, it's always interesting to me just the questions, obviously, that we received everybody. Some people really wanna lead with real estate. It's a franchising play, but they really like the real estate aspect of it. Maybe they have a background in real estate, so that really kind of comes together. It's a nice package for them. Some people have no real estate experience getting into business. And so maybe they don't ask that question. But I always like to bring up, you know, don't think about necessarily the size of your location. We already have the footprints. That's that's you know, you're buying into a system. We've got that. Our construction & real estate team have done the homework there. The real key is the real estate. And as you mentioned, finding the right real estate is probably the most important aspect of that component. And then what or that process or decision tree, if you will. From there, I think our team will help you identify if a lease makes sense or if a purchase makes sense. I mean, sometimes you may have a purchase and it may be a b plus property, but you can find a lease that's on an a plus property that may be a lot better, you know, long term. So part of that is really working with our real estate team, which, you know, again, is part of our process. That's included as part of your franchise fee. But our real estate team will work with you on helping identify real estate in those markets, but also understand what makes one site better for a Jack in the Box restaurant than another. Even if that means, hey, if you were really getting in to buy the real estate, maybe you should consider doing a lease because again, three to five locations over a period of time in our development schedule. You're gonna have to focus on getting those stores open. This lease may be a prime opportunity in a great market. Maybe you should pass on owning the real estate at this time. Right? I mean Yeah. I mean, going back to our economy conversation, I mean, as far as acquiring real estate, I think over the next two years, the timing might be right to be able to advantageously hit, some sellers. Right? Because everybody wants to own, and it's always kind of the first thing out of their mouth is I wanna own the real estate, which, you know, by no means are we trying to avoid that. But to get those a locations, you gotta have the timing right where they're willing to sell. And with the economy maybe being in flux right now is the time to really try to explore those options. And, it's always easiest to make a move when everyone else is a little bit hesitant. So, I think being able to get your hands on that A real estate, over the next couple years while you're in that development cycle, you really could find some gems. Yeah. I think that has me thinking about I think and you're seeing it more and more. So our candidates are getting more and more educated, which is great because our conversations are more productive. But the question that I received too is, do you guys ever look at conversions? Right? And I think now you've got a lot of QSR, you know, a lot of QSR restaurants that, are shifting or they're moving or they're closing. There's old businesses that have closed. What do you see about, you know, a conversion? I mean, I I really like the idea of conversion. I think one thing that's misunderstood is I think many people think it's cheaper because the building's already in place, that it's cheaper to do a conversion. And we know that that's not always the case. In some cases, it can be more expensive to do a conversion. And I think that's where, we kinda have to, you know, share with candidates. That's just not truthful. I mean, it would be great if it was, but that's not always the case. What do you see, with a conversion? Pros, cons? What do you typically see? There's nothing to Well, I say that, like, in in the economy standpoint. Right? Because going back to the real estate discussion, a lot of times, the conversion is on an a plus location, or an a location, and we wanna get into that spot. And it makes sense for us to take a look at that. So kinda give me your thoughts on that. Well, I agree. The number one thing you gotta make sure of is take a step back just because it's there and available. Make sure it's the right location for a Jack. Right? It's gotta be in a viable market that you see a future for the next twenty years. That's usually kind of the viability of a building, right, twenty years down the road. Has the market moved on, or are we still in the right spot here where this conversion's available? A lot of times people see it and think, hey. This is easy. Let's jump on it. And it's never easy. Because if you usually or you're in a conversion scenario, there's, like you said, there's things behind those walls that have been neglected. There is expenses there that are gonna pop up along the way. Not to say everything's fixable. Everything can be worked with, but it isn't necessarily gonna be easy. And I think sometimes people think, oh, this is easy. A conversion's easy. It's never easy. There's a lot that goes into it. But I think the other keys to piece I just mentioned was make sure it's in the right location. Do your due diligence. Work with our real estate team. Let's make sure the demographics, the psychographics, the traffic is viable, not just today, but is the market staying there for fifteen to twenty years? And then a big thing people always wanna say is, you gotta check. Why did this restaurant close? You know, there's usually some story that you can dig in with real estate agents, local people that are around. Is it something outside of the factor of the real estate that made it close? Then it's a much more attractive, you know, opportunity. Yeah. Perfect. Yeah. No. I I completely agree with that. I mean, conversions, again, a lot of times seem like they're gonna be easier, and they are definitely not going to be easier in some cases. But, again, partnering with the right brand, I think, will assist you in that with having a team meeting with Jack in the Box has been in the business over seventy years at this point. So we've got a lot of experience here, on our team, that can help you walk through different scenarios and different real estate footprints and conversions or end caps or free standing. We can help you out with all that, so don't sweat the small stuff there. We'll definitely help you there. So let's talk about question for you. I'm gonna throw one at you last time. So, you know, as as every franchisor like us is out looking for new candidates, an opportunity arises a lot with, incentives. So talk to me a little bit about what's going on with Jack. Our new FDD just arrived within the last, month, couple weeks. What are we doing to make an incentive valuable, for new franchisees coming into the system so that they can get their business kind of stable underneath them as they get started? Yeah. I think we, you know, we do a good job with that. I mean, I think part of being a franchisor is understanding the climate, right, that we're in. And our team did a really phenomenal job, in our new FDD with our new incentive. So you really basically have two options. We have two good incentive options. Again, these are mix and match. You choose what you want. But the first one, which I would say is probably the least popular of the two, but still as an option is a hundred and fifty thousand dollar interest free loan. So that goes into the building of your restaurant. There are some nuances to that, but essentially, it's an interest free loan. And we just recoup that investment, through the royalties paid. Our royalty here is five percent, to frame that. The second incentive, which is by far to that I've seen is the most popular, is going to be the, royalty incentive. So we just left an old royalty incentive, and we made it even better. I thought that one was, you know, top tier of the industry. And then we went to the new one where we're basically in select markets. And then if you guys need to understand, you know, what the select market is, just reach out to Mike or myself, and then we'll be sure to share that with you. But for select markets, we have an incentive for a flat two percent royalty the first five years that your stores are open. And the key thing to remember there is that and I think this is often overlooked as well. That applies to every store, the first five years of every store within that development agreement. So if you sign up for five stores, it's the first five years of each of those five. And the caveats to that are, you know, you've got to meet your development schedule. You know, you can't fall behind or be in default. Let's just be clear. But the key is that is a really robust incentive, for our franchisees. And I think it really moves the needle as far as really what brands can do for their candidates in the process. So I know this has been a long video, but let summarize. We've talked about the current state of the economy. We've talked about some some data around the industry. The IFA shared some of their data, the projected growth numbers, with franchising. You know, we've talked about different things when it comes to areas of growth, the hot markets, what we're seeing as far as conversions and real estate footprints and construction. Let's bring it all in here and summarize really the key points of this. I think one thing is when you're looking at a brand, you've gotta look at a brand that's gonna be positioned for the future. Right? They're gonna be investing in technology. They're gonna be investing in ways to reduce your labor costs. You know, obviously improving margin, things like that. I think the thing to make it as easy as I can and clearly stated as I can, sometimes the best time to get into something is when people slow down. Right? Because we know, as Mike shared earlier, you're looking at eighteen to twenty four months out from today before your first store opens if you sign today. So when you're looking at the future, now would probably be a good time or at least a time to consider your future when it comes to franchising. Everybody comes to franchising from a different background, whether it be you're looking to transition out of corporate, which is an entire topic of itself where a lot of times when the economy's, roaring, people don't look at another industry because they're doing so well in the industry they're in. And then a lot of times when things start shifting south, that's when people start looking. They look for something different. And that's just the psychology of why people buy. But, I would say don't wait until you see the clear signal. Right? The all clear, hey. Let's move forward. Now is the best time. Because you may have missed the best time to get in, waiting for that best sign on your end. Mike, what about you? In conclusion, what do you see? What's some advice? Some things you would leave at the end of the the podcast here? Yeah. I mean, like you said, nothing happens quickly in restaurant development. You have to make moves maybe when you're a little bit uncomfortable. Those are the ones that are the most successful. And our business is changing rapidly. Rapidly. I mean, technology, innovation that's gonna occur in our industry over the next two years really could improve the quality of our franchisees, right, and their potential profitability. So there's a lot of things that, are changing rapidly in the economy at large. And if you're willing to make those moves now, you could be in a position to benefit from making the move before everyone's ready. Just like you said that you wait for the all clear, everybody's already gonna have their engines running, and, you're gonna be a little bit behind the eight ball. Yeah. I mean, sound advice and I appreciate if you made it to the end of this video, congrats to you. This is a long one, but if you made it to the end, we really appreciate you listening. And if you have any questions, feel free to to leave a comment, send an email to our team. If you're interested in the Jack in the Box franchise, we'd love to have you if you have any questions about anything to cover or any additional questions about the investment or where we're looking to grow, please submit an inquiry form on our website, and either Mike or myself will be in touch with you, in the very near future. Yeah. Thanks a lot. It was great to chat today, and hopefully we gave some good info. Hopefully, everybody enjoyed it. That's the key. Right? Is that we're able to leave those little tiny tidbits if we can of information. But, again, we try to be as transparent as we can to share as much information as we can with our candidates. We wanna make sure this is a good fit for you because, ultimately, a better fit for you means you're gonna be happier, with your choice down the road. So we really appreciate everybody stopping by and watching our video, and we hope you have a wonderful day.