Americans love their Tex-Mex restaurants, and their burritos. Fast casual burrito chains have been popping up all over the country and pleasing their customers with favorite flavors. Freebirds World Burrito aims to stand out from the crowd by offering a wider variety of options and heavily theming their restaurants. The quick service restaurant industry can be a hard one to break into, considering the brand loyalty many consumers have to their tried and true favorites. Freebirds believes they have the specialties and the uniqueness to rise above the noise and make a name for themselves as a national brand.
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Freebird’s Beginnings
In 1987, Mark Orfalea conceptualized the idea for a chicken-based restaurant in Isla Vista, California, with the intent of delivering good food to the students of UC Santa Barbara. After running into problems with having too much chicken left over at the end of the day, his aunt gave him the idea to marinate the remaining chicken and use it to make burritos. With that piece of advice, Orfalea redirected his thoughts about restaurant design and Freebirds World Burrito was created.
Orfalea came up with the name of his restaurant as an homage to his father, whose favorite song was Free Bird by Lynyrd Skynyrd. He incorporated another tribute to his father with the “man on a motorcycle”, which depicts a motorcycle and its passenger crashing through the wall of the restaurant. His father was an avid motorcycle enthusiast who first became interested in them during his time in Europe as a soldier in WWII. These elements would go on to inspire the rock and roll theming of all the restaurant locations.
After experiencing success with his first location, Orfalea began focusing on expanding and turning his restaurant into a chain. In 1991, he conducted a nationwide search of college towns in America, looking for the ideal location for his next restaurant. He settled on College Station, Texas, in the Northgate District, for its close proximity to Texas A&M University. Orfalea brought in his friends, Bobby Parr, David Bomer, and Pierre Dube, to run the Texas location. Pierre Dube eventually would take over the Texas location from Orfalea and concentrate on the expansion efforts. Orfalea would remain as the sole owner of the Isla Vista location.
Between 1991 and 2007, Dube would grow the Freebirds brand to 19 locations across Texas. In 2007, he sold the company to Tavistock Group, a California-based investment firm, through their restaurant division. At the time of purchase, Tavistock announced plans to build an additional 40 restaurants across the southwestern United States.
Along with continued expansion with corporate-owned stores, Freebirds has also been selling franchise locations since 2011. According to an interview with their vice president of franchise development, their first franchised location opened in July of 2012. That same franchisee was anticipated to have their fifth location opened by the end of March 2013.
Joining Freebirds’ Franchise Expansion
Purchasing a franchise license from Freebirds World Burrito allows you to open a restaurant under their name and provide customers in your territory with their expansive food options. Freebirds’ desire to expand across southwest America, and beyond, will best be realized with the help of franchisees in diversified areas. Finding the right buyer in the right location is paramount to their mission to become a national quick service chain.
Freebirds reserves the right to be selective with to whom they sell their licenses. Most restaurant franchisors are more inclined to sell licenses to those that they believe are qualified to handle the responsibility of running a restaurant. Having the financial backing to cover costs, as well as strong experience in food service are just some of the qualifications they seek. Selling to a potential restaurateur with little to no startup capital and minimal experience can be a risky move for the brand, as failure of the location can bring bad publicity to the entire name.
According to the latest data available, Freebirds World Burrito franchise licenses are being sold for $25,000 each, and there are no discounts for the purchase of multiple licenses. Estimated start up costs required to open a new Freebirds location are ranging from $769,000 and $878,000.
The average Freebirds location is a brick and mortar storefront with seating indoors. Required equipment and supplies to open include kitchen appliances, point of sale computers and cash registers, and seating furniture for guests to enjoy their meal. The start up costs will also cover initial inventory stocking, as well as hiring and training staff. Franchisees can help offset some of the costs by choosing a location that is already built and designed to house a restaurant. Brand new structures, or those that need extensive renovations to support the functionality of food service, will require much larger budgets than those that are ready for a restaurant.
Current Franchise Success Rates
Despite the 2013 interview with Chris Cheek, vice president of franchise development, stating that they had at least one franchisee who was preparing to open their fifth location, there seems to be no evidence that Freebirds currently has any franchised locations operating successfully. Their net franchise growth rate is zero, and they are not reporting any turnover. While the possibility of skewed or flat-out inaccurate statistics exists, it appears that if they were ever able to open these franchised locations, they have since closed.
These figures raise many red flags to potential buyers. Investing in a restaurant franchise requires a great sum of money, as well as a lot of effort. Spending that amount of money and putting in several months’ worth of work to have the restaurant flop, or even fail to open at all, would result in a huge loss to the investor. It would also look bad for Freebirds themselves.
During the interview with QSR Magazine, Cheek stated that they were focused on wide-spread expansion. Their method for achieving this expansion involved looking for the best, most qualified franchisees, instead of solely focusing on location and energetic markets. It is possible that in the last five years, they have not yet found the ideal circumstances for selling and launching franchised locations, but it is improbable. There are plenty of qualified franchisees seeking new opportunities that would be interested in at least exploring the opportunities available with Freebirds. The question of why they have not seen any substantial franchise growth remains.
Possible Problems Within the Franchise System
Savvy franchisees know what they are looking for before investing in a brand. Healthy franchise systems, low to average royalty fees, and adequate support are on most buyers’ list of requirements. Something about Freebirds is keeping investors from lining up to take their piece of the Tex-Mex pie, and it is resulting in some disappointing figures for the brand.
Like most franchises,Freebirds World Burrito charges ongoing fees to its franchisees. They charge a 4 percent royalty fee to franchisors, once they have bought and opened their store. This is below the national average of 6 percent and appears to be a good deal. The problem with their ongoing fees appears when we look at their advertising fees. The national average for ad fees is 2 percent of total sales. Freebirds doubles that and charges 4 percent. While these two figures equal out to being comparable with the national averages for both fees, the way the fees are presented can leave a sour taste in the mouth of investors.
Another problem that potential franchisees may see with the Freebirds brand is that for the price they pay to be a part of the system, they receive very little in return. Most franchisors offer at least some form of training to their new owners to help with the transition and ensure their customers receive the best service. Freebirds provides none of this. Not only does this speak to the value of what they offer, it also provides insight into the level of support that Freebirds is willing to give their franchisees.
Given these problems, it is not hard to understand why investors may shy away from Freebirds. Owning a franchised location comes with enormous amounts of pressure to stay consistent with the brands guidelines. Having no training and minimal support can make that nearly impossible for franchisors to do. They cannot meet the standards of the restaurant if they don’t know what they are, or how to achieve them.
The lack of communication also speaks to Freebirds’ level of commitment to their franchisees. They want help from other owners to see their goal of nation-wide expansion come to fruition, but have no intentions of helping them succeed. It makes Freebirds appear to care more about their level of recognition than they do about providing quality product and experience to their customers. As long as they grow according to their projections, the rest does not interest them.
Choosing the Right Franchise Opportunity
No amount of prior experience can replace the training and support provided by a franchisor. All restaurants have different needs and models of business. Expecting a new franchisee to step in and know how to run a location right off the bat is irresponsible on the part of the franchisor. It’s bad for their brand name and can be devastating to the franchisor.
An investor looking for the right brand to buy into should always do their research. Not all franchises are good fits with all franchisees. It’s important to find the right fit before buying a license, as very few franchisors offer any sort of refund on the license once it has been purchased. Investors that have looked into Freebirds and that have noted some of the issues within their system would most likely turn their attentions elsewhere.
Freebirds World Burrito’s attempt at rapid expansion across the United States through franchising is at a standstill. They have been unsuccessful, so far, in their pursuits to find interested, qualified franchisees, and it is not much of a surprise. Regardless of their popularity in Texas, investors have to feel comfortable sinking their money into a company, and Freebird does very little to put their franchisees’ minds at ease. Unless they adjust their current practices, it appears they will be stuck in a growth rut with no foreseeable way out.