I recommend that Noodles & Co. adopts franchising to boost its growth. As proved by McDonald’s-like quick-casual restaurants, expanding through franchising presents a way to rapidly establish a presence in the market and lock in a market position for products or services. On the one hand, franchising could provide a fast growing speed that Noodles and Co. needs to keep pace with intense competitive openings, as a study commissioned by the board of directors found that tactic could help swell the company’s ranks to 250 restaurants in less than five years.
On the other hand, franchising would give the company a small capital commitment and the chance to grow on other people’s capital, as opposed to the $80 million capital overhead imposed by a pure company-owned strategy. Moreover, other factors favoring franchising include franchisees’ local knowledge and high motivation due to the fact that they work for themselves. Learning from Panera and Applebee’s franchising strategy, Noodles & Co. ould apply careful selection of high-quality franchisees and effective management of franchisee relationships to overcome its big concern in loss of control, output quality and brand culture through franchising.
Firstly, instead of setting a low entrance barrier for franchisees, Noodles & Co. may start with considering only well-established operators who already have experience in running restaurants.
They may bring along their knowledge and business expertise which would help drive the success of the business and also reduce the training cost of the company. Secondly, the company should devote sufficient resources and attention to the franchising effort.
It should get highly involved in activities with the franchisees, such as monitoring and control, risk sharing, tutoring, assisting with real estate selection and acquisition, as well as restaurant design and construction.
Together with the standardized system, these efforts would facilitate and ensure the low variance in output quality among franchise outlets. Last by not least, the company should continue placing a big emphasis on the people side of the franchising relationship, by trying to understand the franchisees’ culture as an organization and get to know the franchisees’ team. This would promote and maintain the team’s quality and culture.
Compared to joint-venture partners and strategic partners who may emphasize efficiency and/or cost reduction, franchisees would be easier and more willing to accommodate Noodles and Co. ’s culture. To sum up, I recommend that Noodles & Co. learns from its comparable businesses, and effectively conducts franchising to meet its need to grow fast as well as maintain its quality and culture.