Raving to Grow

Polly LaHue

By Polly LaHue

Anyone in this biz who's getting it right knows a lot about juggling.

And if you check out the guys at Raving Brands skillfully tossing around multiple brands, you'll see something akin to a street performer keeping a chainsaw, a bowling ball, a brick and a hardboiled egg aloft. Difficult? No doubt. Impressive? You bet.

Atlanta-based Raving Brands' feats are drawing quite the crowd these days. The company was formed in 2000 by 39-year-old entrepreneur Martin Sprock, the Raving Brands' CEO, with the launch of Moe's Southwest Grill. Moe's joined Sprock's first venture, Planet Smoothie, which debuted in 1995. The company quickly acquired PJ's Coffee in 2002, and founded Mama Fu's Asian House in 2003. But then somebody tossed a head of lettuce, a Chilean sea bass and a rack of ribs into the mix and Raving Brands launched Doc Green's Gourmet Salads and Bonehead's Seafood at the end of last year, in addition to acquiring Shanes's Rib Shack.

Smoothie joint, coffeehouse, noodle nook, salad spot—what makes a brand a Raving Brand? Company officials cite two key characteristics: a healthy menu twist and a high-energy environment. "We firmly believe in providing healthier choices for consumers," says Matt Andrew, VP of Finance for Raving Brands. The high-energy environment includes music, colorful and visually appealing décor, high-quality graphics, a trademark greeting, great price points and good portions.

"We're certainly not the inventors of fast casual," Andrew says, "but we choose to play in that space because it aligns with our values." Andrew credits the company's success and growth, in part, to being able to provide an alternative at a price point somewhere between casual dining and fast food. "Consumers want the quality of casual dining at the price of fast casual," he explains, "Many times for just a dollar or so more (than fast food)."

The company clearly values the simplicity of its franchising system. All stores are franchised, with the exception of one store per brand, which then becomes the R&D/training/testing store and sales model. Andrew says the company wanted to build a franchise system from the ground up through operations, technology products like POS and accounting systems and an infrastructure of marketing and operating "consultants," corporate staffers who help guide franchisees through local store marketing, vendor issues, brand standards and the like.

"You can't build that blueprint and have that same blueprint for company-owned stores and franchisee support stores," Andrew explains. "They're two different sets of plans. Very early on, we cautiously decided to be in one business, and with that came focus. We just don't get the conflict from competing with our franchisees. We wanted to be the best franchising company with the best brands available."

Franchising fees are $20,000 per unit per brand, with the exception of Planet Smoothies, which run $22,500 per unit. Royalty fees are 5% across the board. Average startup costs vary widely, from $150,000 for Planet Smoothies to $450,000 for Mama Fu's.

REAL ESTATE: A KEY INGREDIENT
"When you run seven brands like we do, and you're a pure franchise company, it's your responsibility to be on the lookout for the top real estate sites across the company," Andrew says. "Real estate is a big component of what we do, but it's no more important than running great stores, supporting franchisees, etc. We don't put any more weight behind it, but it's the most obvious to most people." Andrew believes Raving Brands' real estate mettle depends heavily on the old "location, location, location" adage, but that "many companies can buy out eight great locations and still be out of business in six months because they didn't execute well."

While Raving Brands may downplay the importance of that real estate ball it's juggling, the firm's approach to property selection leaves little to chance. An inhouse team of eight manages a network of 400 brokers and dealers across the country who are on the lookout for the next Moe's or Doc's. While colocating is prevalent, cobranding is not. Andrew says it is natural for the company to buy up two end caps in a strip mall, but brands do not share kitchens.

Whether it's the real estate or the catchy brand names, the company is clearly drawing attention among a veritable "who's who" list of potential investors. Arby's veteran Steve Smith signed an agreement last year to open 30 Moe's Southwest Grill locations and 20 Mama Fu's throughout Michigan. Former Darden Restaurants president Dick Rivera has reportedly had talks with Raving Brands, but Andrew couldn't provide details about the outcome of those negotiations.

"We've been very blessed to have (attracted) attention from these people, but we've never really leveraged that like some companies might have," Andrew says. "We just haven't ever changed our sales strategy." In fact, Andrew admits the company has no direct sales approach. Franchisees learn of the company through word of and mouth must endure a diligent vetting process. "We feel like we're going to become family—it's a 20-year arrangement, renewable for 10 years—and we're going to be with these people for quite a long time," Andrew explains. "We want to make sure they have the financial background, but also the same cultural values and characteristics."

BUILDING BOOM
If license agreements are any indication, there seems to be no shortage of interested and qualified franchisees. The company store for Doc's was scheduled to open February 1, with commitments slated for 50 more. A March opening in Atlanta for Bonehead's Seafood was planned, with 10 franchises soon to follow. Locations are being sought for Shane's, and the company has plans for at least 10 stores.

Growth continues for the first four Raving Brands concepts as well. Moe's has 800 new stores planned, with 60 PJ's, 90 Planet Smoothies and an additional 250 Mama Fu's locations in the works.

Has all this success pushed Raving Brands to go public? The question hangs in the air like one of the many skillfully juggled brands. "Our focus is to run our stores and to help our franchisees run their stores," Andrew offers. "We're here to block and tackle, to make sure our franchisees can successfully run their stores in their neighborhood, drive their sales and same store sales and to increase their profitability. That's what we focus on." While he admits the company is approached frequently about a possible purchase, he contends that company meetings are focused on franchisee issues 95 percent of the time.

"We, as the stewards of the brands we own and control, are constantly looking to increase ultimate profitability for the franchisees," Andrew says. "We do that through driving more traffic into their stores and monitoring and always negotiating for better prices from vendors."

And, of course, by keeping all those concepts in the air.