Power Couple Transforms One-Unit Business Into Franchising Empire

By Fast Casual

Andrew K. and Shauna Smith pretty much define the phrase, “power couple.” The husband-and-wife duo started their entrepreneurship journey 10 years ago by opening a single Kneaders Bakery franchise in Utah but have since created a franchising empire netting more than $190 million annually.

Their brand development and franchise company — Four Foods Group — oversees 155 restaurant locations, including Little Caesars Pizza, Kneaders Bakery & Café, Swig, R&R BBQ and Mo’Bettahs. With two to five additional sites in development or under construction every month, FFG has ranked among Inc. Magazine’s 500/5000 Fastest Growing Companies in America for seven consecutive years and employs more than 4,000 people.

“We have about 12-15 new brands from across the country that approach us on a monthly basis,” said Andrew K. Smith, the Entrepreneur of The Year 2017 Utah Region Award Winner. “There are several that have not made it past our initial assessment, but we have about eight brands that are currently under review to be added to our portfolio sometime over the next 12-18 months.”

Smith and his wife — who was named one of Utah Business Magazine’s 30 Women to Watch in 2018 — are very careful, however, about adding to their family of brands.

“Our sweet spot is when we find an emerging brand that is still small, say two to three units, and looking to grow and scale, that needs the skills and capital of a group like ours,” Shauna Smith said.

Although Andrew said there are a lot of great concepts around, most aren’t competitive enough in their verticals or don’t have the financial performance he desires at the store level.

“There are very few brands that perform at a high level, but those are the ones we are always in the market for,” he said.

Take, for example, the couple’s newest brand — Swig n’ Sweets — an 18-unit brand operating in Utah and Arizona, which Smith describes as a unique mixed beverage and sweets company.

“I also liked the store level economics and the ability it has to capture food and beverage dollars that are not competing with other companies during those day parts, ie. Before lunch, after lunch, and after dinner,” he said. “Those are extremely untapped dollars. Thus, our interest in getting involved in that business.”

The Smiths “involvement” included helping to rebrand the soda chain in
October. Changes included simplifying the logo and restaurant decor in hopes that the new look would better resonate with the soda chain’s customers, said Nicole Tanner, Swig founder and co-owner.

“We have so much hope for the future of this beloved brand, and trust that our guests will step into this new era alongside us,” she said.

How it all began

While operating that first Kneaders unit in 2008, Andrew said he developed an innovative partnership model that would not only benefit Four Foods Group and its shareholders but also their operator-partners as well. Every partner, for example, receives equity, which ensures consistent hands-on ownership at all levels of the business, he said.

During that time, Andrew and Shauna also negotiated an exclusive multi-state development agreement between Four Foods Group and Kneaders’ parent company, GCW Corporation. In 2015, they added the development rights for up to 110 locations throughout 15 states west of the Mississippi.

“Since 2008, Four Foods Group has experienced remarkable growth, every year,” said Smith, who now operates 43 Kneaders across four states with 11 more under development. “Same-store sales year over year continue to trend upward, even as the market in many sectors remains flat.”

Growth fueling growth

Although Kneaders became a solid brand for the husband and wife team, they wanted to create more opportunity. Nearly two years ago, they secured $35 million of growth capital and selected R&R Barbecue as one of their next brands to develop throughout the Western United States. They purchased the two-unit chain and 24 months later were operating seven locations with five more scheduled to open by end of 2019.

On a roll, the Smiths, last year, not only acquired The Soda Shop, an up-and-coming player in the gourmet soda fountain drink and sweets arena, based in Gilbert, Arizona, but also bought Swig n’ Sweets. The Smiths then secured an additional $33 million of growth capital to acquire 48 Little Caesar Restaurants in Alabama and Louisiana and have furthered this investment to include a total of 71 units in the Southeast managed out of their Birmingham, Alabama, office.

“We have learned so much and enjoyed the journey with both franchise and non-franchise brands,” Shauna Smith said. “We have invested in both because they were brands that we found an immense amount of opportunity.”

The best is yet to come, Shauna said.

“We’re opportunistic and will seek the best brands with the most opportunity,” she said. “Our future looks a lot like our past 10 years but with more jet fuel. We plan to invest in and scale eight to 10 brands over the next decade.”

Running on technology

The Smiths have embraced technology as a way to grow their business, not only using it before and during the design and build process of each restaurant but also for setup and management of each store at the unit level.

“We literally identify, negotiate, design/build every restaurant in all 12 states we are in,” Andrew Smith said. “Therefore, we are good at what we do: building and scaling restaurants.”

The team, for example, has developed manuals within the company to streamline the development, commissioning and setup and opening of all new restaurants.

“Those manuals give every team member a step by step process of how to build and open a restaurant for each one of our brands,” Andrew Smith said. “This doesn’t exist for companies this size (emerging brands with three-10 units). But we create this for each of our portfolio companies.”

Technology solutions from finance and accounting software to metric and data-driven analysis and reporting are also imperative.

“This includes everything from financial structuring, financing and building of all restaurants, to key performance metric analysis, menu engineering and vendor negotiating to ensure we have the best profit margin, without sacrificing food quality and service,” Andrew Smith said. “We also handle all reporting, accounting and annual taxes for each brand all under our roof. There is no outsourcing of any of these finance functions.

Lastly, the company team even relies on technology that it developed, coded and built in-house, to manage training and onboarding, social media marketing and centralized merchandising and purchasing before it gets to the stores.

“As we know, any time you can buy in bulk, you can get a better price and have more purchasing power,” he said. “We do this at our centralized operations center, for all brands, and can typically save an additional 1-2 percent of EBITDA by doing this.”

Enhancing the customer experience

FFG not only uses technology to help run a tight business but to also offer a digital-savvy customer service. It’s added a variety of third-party technology platforms at all its brands, for example, including online ordering, kiosks, mobile apps and consumer-purchasing tracking.

“There is a lot of great new technology coming into play within the F&B industry, but very little is ready for game time yet in my opinion,” he said. “I like to see things play out a bit. With my background in the past of founding, building and developing tech-related companies, I know it takes some time to get things right in technology before it is ironed out.”

Andrew Smith will speak at the 2019
Restaurant Franchising and Innovation Summit, March 11-13 in Louisville.

This article provided by NewsEdge.