Turning Around a Troubled Franchise

When Chris Tobin decided to take over the Salsarita’s Fresh Cantina franchise location in Myrtle Beach, South Carolina, he knew the chips were stacked against him. Not only was he facing a tough economic environment when he purchased the franchise in March 2009, but it also hadn’t fared very well under its prior owners. “Previous ownership of the restaurant had really let both service and quality go downhill, and I felt it would be extremely difficult to rebuild the customer base,” says Tobin. “It’s hard enough to find ways to drive new customers to [try] your restaurant, but to get old customers who previously had a bad experience back? I feared this might be an impossible task.”

It has proven to be difficult--but not impossible. Sales are up double digits from the previous year, and Tobin is extremely pleased with the results. He even has plans to expand to other locations.

How can you emulate Tobin’s success? Here’s the scoop on just how Tobin did it along with additional advice from Jeff Elgin, CEO of FranChoice Inc., a network of franchise referral consultants.

1. Determine the franchise’s true potential by finding out why the franchise is hurting. “Research the market and figure out why the business is failing before you buy it,” says Tobin. “Is it failing because of its own negligence or is it failing due to outside factors that are out of the current business owners’ control, such as traffic patterns or location of the business?” Tobin also operates a MaggieMoo’s Ice Cream & Treatery franchise in the Myrtle Beach area, so he knew the area well, and he did his due diligence to learn about the staff and systems behind the brand. When he saw the systems at work and tasted the quality of the food at successful Salsarita’s locations, he knew that the franchise was one that he could believe in.

If you’re not as familiar with the area you’re considering as Tobin was, check out how well other operators in the area are doing, advises Elgin. If others are successful, then there’s a good chance that you can be, too.

2. Keep your expectations in check. “If the cause of the struggle is not the current operator, you can pretty much assume that you will struggle just as much if you buy the business, so you’d better be completely prepared for a tough time,” warns Elgin.

3. Seek out support from the franchisor. Elgin recommends asking the franchisor what kind of assistance they will provide if you buy the franchise and seeing how they respond. Listen for specific commitments such as staff assistance, marketing dollars, or remodeling credits. “[What they offer] is often the acid test of their belief that the operation can be turned around,” says Elgin. “If they don’t believe that’s possible, they probably won’t commit many resources to the effort.”

4. Make the necessary changes before opening your doors for business. Tobin determined that the franchise wasn’t doing well largely due to maintenance issues, so he immediately got to work servicing the equipment, painting, and refinishing the table tops. “All changes must be implemented before you encourage trial and, more importantly, re-trial,” says Tobin.

5. Focus on the customer. “A customer focus in the key to success in most businesses, but it is often not the primary focus of people who are struggling,” says Elgin.

Tobin focused on training existing staff and new team members on the brand’s system and recipes in order to ensure consistency. “To overcome the reputation of this restaurant,” he says, “we needed to dazzle every person who walked through the door.”

6. Reach out to your local community and market the business like crazy. Tobin has been able to reach out to the Myrtle Beach community as well as create an additional stream of revenue by catering to local businesses: “The positive word-of-mouth that has spread continually sends customers to re-try our brand.”

7. Be prepared to work hard. “Taking over an existing business is in many ways more challenging than starting from scratch,” warns Tobin. “It is easier to train people to do something entirely new than it is to retrain them and break bad habits that have developed over time. It is also easier to get people in your community to try a new [business] than it is to get them back to a [business] where they may have had a bad experience.” Still, if you have the energy, commitment, and desire, you, like Tobin, can make a go of it and experience the financial rewards of a successful turnaround.