The vision of sitting on a sidewalk, outside of a cafe in Paris is a romantic one. The fresh pastries and delicious coffee make for a delectable meal, along with enchanting atmosphere. Too bad getting to Paris is expensive and out of reach for most of us. Instead, we can have the next best thing: Paris Baguette, the franchised chain of quick service bakery cafes.They offer Parisian-style pastries, sandwiches, and coffee drinks at over 3,000 locations worldwide and are looking to grow that number with new franchisees in the United States.
The Beginning of Paris Baguette
Paris Baguette has a long history, starting in South Korea in 1945 with a company called Sangmidang that was created by Chang-sung Hur. They started as a small bakery that introduced bread to the country. They also played a vital role in feeding the people of Korea after the Korean War left most of the country in shambles. In 1947, Hur created the first anthracite oven in the industry, which helped to cut costs and improve the overall quality of the bread that they made.
For the next 40 years, Sangmidang experienced continued success and several business name changes. In 1986, under the name Samlip, they were chosen as the official supplier of bread and cakes for the Asian games of that year, as well as Olympics that would be held in Seoul in 1988. This, of course, was a great honor for the company.
1988 was also the year that Samlip founded Paris Baguette and opened its first location in Gwanghwamun, Korea. Since that time, they have opened over 3,000 locations in several countries throughout the world. Most of their locations are located in South Korea, but they have also opened stores in the United States, France, Vietnam, and Singapore. They are currently seeking qualified, experienced franchisees to help grow their presence in the U.S. market.
Opening a Paris Baguette Location
The people at Paris Baguette are serious about expanding their brand across the world and they know that in order to be successful at that, they have to help their franchisees be successful as well. That is why they are committed to being as helpful as possible to new franchisees and setting them up for success from the beginning.
It all starts with careful selection. Paris Baguette is ambitious and eager to grow, but not at the expense of quality. They are selective in whom to which they sell their licenses. They are seeking qualified franchisees with experience in food service and financial strength. They want to be sure that those that are running their franchised locations, are capable of handling the responsibilities and navigating the business to profitability.
A large part of being qualified to purchase a license is having the liquid cash to pay for it. Paris Baguette sells their licenses for $50,000 and they are not currently offering any sort of financing help to pay for it. The purchaser will have to have the liquid funds to pay for the license outright.
Once the application process is accepted and the license is bought, Paris Baguette will be there to assist with the building and launching of your new location. They will be there to help scout potential locations for the new store, as well as negotiate the terms of the lease with the landlord. They will also be instrumental in designing the store location and securing architects and contractors to complete the renovation.
Before the store can open, both the franchisee and their staff will need to be trained in the ways of Paris Baguette. It is incredibly important that the new location follow the same recipes and guidelines as all locations, in order to adhere to the standards set forth by Paris Baguette. For this, the franchisor will provide a comprehensive training program that lasts 14 weeks. The in-depth training course serves to ensure that product quality is optimal and that all items are prepared to specifications and expectations.
Product preparation is not the only area in which Paris Baguette will guide the new franchisee. They also provide training on the operation of the store. They will be there to assist the owner through the grand opening process, and thereafter for any questions that may arise concerning successful operation. Paris Baguette is committed to seeing their franchisees succeed and willing to provide all the help they can to see that each location reaches its full potential.
The entire process, from obtaining the license to grand opening, is estimated to cost between $730,000 and $1,200,000, which is average for the type and size of business that it is. According to Paris Baguette, their average location brings in $2.1 million per year, making it extremely feasible for the franchisee to make back those start up costs within the first year of operation.
Paris Baguette is also being selective with the path they wish to take to expand the brand. Currently, they are only looking to open locations within certain states: California, Nevada, New Jersey, New York, Pennsylvania, and Virginia. They also have future plans to tap into the markets in Georgia, Hawaii, Texas, and Washington. While they are not currently seeking licensees in other states, they are open to inquiries and franchisees in those areas are encouraged to gather information. If enough interest in an area is generated, it may persuade Paris Baguette to pursue those markets, as well.
Sustaining a Profitable Business
Despite Paris Baguette’s 70+ year history that began in Korea, they have only been a presence in the United States market since 2005. With most of their U.S. locations being in California, most notably in the greater Los Angeles area, it can be hard to predict how a French-inspired cafe will fair in most of the middle America areas of the country.
Demographics can certainly play a role in the sustainability of a cafe, so keeping that in mind while trying to find the right location to open your franchise is important. Also, you will want to examine the statistics of the locations that are, or were, operating successfully already. Paris Baguette has stated that their average locations are generating over $2 million in revenue per year, but without knowing how many locations those figures are coming from and where they are located, those numbers don’t mean a whole lot.
Since beginning to sell franchises in the United States, Paris Baguette has maintained a slow but steady growth rate of 16. This number is very low in comparison to the national average of 97, but it still exhibits positive growth. More Paris Baguette locations are opening than closing, which is good news for the aspiring owner, but could point to potential problems within their franchise system. When examining this kind of data, it is important to consider the reasons for the statistics being presented. Why are they not growing as fast as the average franchise system in the U.S.? It could be due to lack of interest from franchisees, causing very few investors to apply for licenses. It could also be due to problems preventing locations from opening, or a high number of closures. To examine the number of closures plaguing the brand, we look to the turnover rate. For Paris Baguette, it comes in with an extremely healthy turnover rate of 1.19 percent. This means that a minute percentage of locations that open are either terminated, transferred, or reacquired.
When considering both of these pieces of data, it leads the researcher to conclude that there simply is not enough interest in the brand from investors to give them the growth rate that they are looking for. This can be good news for a franchisee interested in this particular brand, as it is less competition. With a slower growth rate, it gives a new franchisee the opportunity to stake claim on a territory that is not already claimed. Paris Baguettes offers its franchisees territory rights, so if someone has already opened a location in your area, you would be barred from opening another. Getting into the game before someone else gives you the edge of location choice, which can be crucial in niche markets.
Establishing your franchise location in an area with high demand for French-style eats will certainly put you in a good position to operate a profitable, sustainable business. Having access to the expertise of Paris Baguette and their willingness to assist you along the way will only add to your likelihood of success. But that having that access will cost you. Paris Baguette charges their franchisees a royalty fee of 5 percent of sales, and an advertising fee of 1 percent. This is a small price to pay for the ongoing business relationship and mentorship provided by Paris Baguette. Most franchisors charge higher rates and provide less in return.
Making the Decision
Given their enthusiasm for expansion and their willingness to support their new franchisees, Paris Baguette appears to be a solid choice for an investment. No business venture is a guaranteed success but having so many positives in their favor makes them seem like a safer choice than a brand that is experiencing negative growth and low sales volumes. Combining the research on the company with the knowledge of the demographics of the target audience and proposed location will give the investor a better picture of what the potential outcome will be.
It is also important to note the skills of the investor. Hiring competent staff and management to handle the day-to-day workings is important, but if you are investing in an industry with which you have no experience or skill, you leave yourself at a disadvantage. Managers can help with most of the operation, but it is best to be familiar with your industry, in the event that your management fails or is unable to perform their duties as assigned.
The combination of franchise system health and knowledge and comfortability of the owner/operator make for a powerful dynamic in opening a franchise. Paris Baguette has the power behind it to launch the competent franchisee to success and expand their brand across the American and international markets.