Flexible real estate and a new prototype are now on the table.
Why is now the right time for Perkins Restaurant & Bakery to launch a nationwide franchise initiative?
New Chief Development Officer Peter Ortiz says it begins with legacy. The chain has been around since 1958 and has nearly 300 locations, so brand awareness remains strong. Then there’s the right type of leadership. After filing bankruptcy twice in eight years and losing dozens of stores, Perkins landed in the hands of Huddle House parent ASCENT Hospitality Management, a group that will put “a ton of money into the business.”
Finally, there’s Ortiz himself, who was hired a few months ago to lead the charge. The industry veteran came to Perkins with more than 30 years of experience, including past stops at Moe’s Southwest Grill, QDOBA, Potbelly, and Schlotzsky’s. Throughout his career, Ortiz has netted sales of nearly 2,000 franchises in the U.S. and internationally.
All the necessary pieces are in place to make a major grow effort in the coming years. “This initiative has happened because the ownership of this company believes in its brand and wants to grow it nationwide,” Ortiz says. “We've changed our mentality when it comes to the brand itself. When you think of a Perkins, you think of a ground-up type of building. We're looking at doing endcaps, inline, retrofits. We have a number of different formats—flexible footprint formats—that we're utilizing now that will make cost of entry into the brand a lot less expensive.”
Although Perkins is receiving inquiries from all over, the plan is to target markets where the brand has the most name recognition. A few examples are Florida, Minnesota, Tennessee, Wisconsin, Iowa, Pennsylvania, and Mississippi. After filling those areas, the brand will move toward contiguous states and go from there.
To increase the appeal of its franchise offering, Perkins brought in design firm Louis + Partners, a company that’s worked to modernize the likes of Hilton, IHOP and Chili’s. As part of the process, Perkins shrunk its prototype to 4,100 square feet and constructed it in a way that leverages the growing takeout and delivery business. Renderings of the upcoming design showcase pickup lockers inside the store and a mobile order window on the outside.
“I'm all about real estate, and the day of those 5,000, 6,000, 7,000-square-foot places—that's just a dinosaur," Ortiz says. "We’re to be at 4,100 square feet and still be able to provide the same great service that we did in the past.”
Ortiz expects growth to come from both new and existing franchisees. In terms of how many stores he’d like to sign, the executive frames it up by describing his ideal customer.
Perkins wants multi-unit, multi-segment operators—groups that are eager to add something new to their portfolio. In Ortiz’s experience, he’s sold to the top owners in the U.S. who committed to anywhere from three to 23 units. For Perkins specifically, he believes the brand is capable of selling 20 to 30 franchises in the fiscal year, which started in May.
The chain also has roughly 80 company-run units that it's willing to refranchise. That type of deal would come with a development component, meaning operators that accept those refranchised stores would be expected to develop additional locations.
“I'd like to believe that we're going to bring in at least three to five owners who are going to do multiple unit deals. It's hard to say,” Ortiz says. “If you know me from Focus Brands or from Qdoba or from Potbelly, my average buyer at those companies averaged about 10 per deal. It could be that we sell three and we sell 30. I like to believe, to be very conservative here, that we'd like to go out and do 20 or 30 units this year.”
Perkins is primarily known for its breakfast offerings, a daypart that suffered greatly during the pandemic because of workers remaining home the loss of the morning routine. The initial hit was massive. In mid-April 2020, breakfast transactions were down 54 percent compared to a year ago, according to the NPD Group.
But as restrictions have eased, the daypart has come back to life. Ortiz assures existing and new franchisees see value in the segment, and that he hasn’t seen operators shy away from it. It’s been the opposite, really—the pipeline is growing by the day.
It’s also important to note that Perkins’ package features a high-performing lunch and dinner business, as well. The dayparts break down to the following: Lunch, 33 percent; breakfast, 32 percent; dinner 27 percent; and late night, 8 percent. So when Ortiz sells to multi-unit operators, he doesn’t solely mention breakfast because he knows franchisees are interested in a brand with the total package.
“When people say Perkins, they think breakfast, but there's a huge population out there that knows us for lunch and dinner, as well,” Ortiz says. “That's what I'm selling to these groups. I'm selling to them that, ‘Hey, listen, we're just not breakfast. We’re four dayparts basically.’ And they're buying into it because they can see that the numbers reflect that four dayparts, not just breakfast. They can see that we are getting back to normal post-COVID, we've made changes in our business to promote the business even further. And so the interest level has been great. I'm excited about the future with this company.” Right now, the real estate market is a mixed bag, the executive notes. On one hand, it's true that many restaurants went out of business and vacancies have shot up. Ortiz even spoke to a couple of landlords recently who were interested in housing a Perkins franchise. However, Perkins isn’t the only restaurant that realizes this, meaning the competition for these spaces is quite fierce. Ortiz says there are plenty of opportunities, but one just has to move quickly to capitalize.
Another potential obstacle is the labor shortage, but the operators Ortiz has spoken to expect that headwind to cease in the next few months. One particular franchisee told Ortiz that he was having difficulty finding general managers, but also noted that his search shouldn’t take much longer, especially with enhanced unemployment benefits coming to an end in half of states before the end of July.
Stores that are scheduled to open in the near term haven’t been slowed either. Perkins just reopened in Edinboro, Pennsylvania, which had been shuttered for six years after a building fire in 2015. The new restaurant is owned by franchisee JDK Management, Perkins’ largest multi-unit operating group with more than 30 years of industry experience. Three to four more restaurants will be ready to go in the next few weeks, as well, Ortiz says.
“The labor shortage has not stopped it,” the executive says. “My guess is that because the groups that are opening the new locations have infrastructure already and individuals that would have been working for them for years, they have been able to overcome the labor shortage and been able to bring some of their people to open the new stores.”
In his decades of experience, Ortiz has learned that his job goes beyond selling a franchise. Instead, it’s more like searching for a needle in a haystack. In other words, he wants to comb through several choices before settling on the right operators to expand the Perkins brand. Ortiz is looking for backgrounds in real estate and construction—the types of areas where the biggest mistakes are made when a restaurant attempts to grow. It helps that Perkins already has groups like that within the system, some of which own as many as 50 locations. Ortiz says potential franchisees appreciate that expertise and are more likely to join a restaurant company that includes like-minded operators that are on their level.
To Ortiz, all those factors are needed to grow a restaurant responsibly. So his true goals aren’t really numbers, per say. It’s bringing in the best possible owners.
“If that means two a year, then that's what we do because it doesn't make any sense to sell a bunch of units to stores that are going to close,” Ortiz says. “So we can't have that. My promise to them is to help them to be successful and do it with the right brand. We have the legs to do it. But we just can't sell to anybody. Our ops team is prepared to turn down anybody who is not qualified whether they own multi-units, multi-segment, they can still fail. We're going to be very, very picky in growing this brand.”