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The Sharing Economy for Restaurant Operators
If you have ever bought or sold items on eBay, reserved a room on Airbnb, or taken a ride with Uber, you have participated in the sharing economy. "Hey, I've got a car and can use a few extra bucks. You need a ride to the airport and are willing to pay me."
It's actually an age-old system. Economic redistribution of goods and services to match supply and demand seamlessly and at a low transactional cost to all participants. Its resurgence today on a large scale is facilitated by online platform technology that runs in the background to sidestep middlemen and their inefficiencies. With on-premises dining curtailed by the pandemic, there is an oversupply of restaurant kitchen capacity. Meanwhile, the pandemic has accelerated consumer adaptation to the food delivery market. In its wake, scores of virtual brand concepts have emerged and are in search of affordable kitchen space and labor.
Rishi Nigam, a senior executive at Atlanta-based Franklin Junction, recognizes this and curates an online marketplace to bring them together. He notes that one only has to scroll through their restaurant industry news feed to know that more than 100,000 restaurant units have been forced to shutter with many others hanging on, trying to get through the pandemic.
Host, Not Ghost, Kitchens
Franklin Junction's business model is to offer restaurants with excess kitchen space and staffing to become "Host Kitchens®" (not ghost) sites for the company's "partner concept" clients looking to expand into new markets. As you likely know, in the past, rapid geographic expansion was an expensive proposition. It could require franchising or, at the very least, an investment in hiring, promotion and real estate commitments.
As of this writing (mid-February), Franklin Junction has Host Kitchen clients in 41 states and is soliciting Host agreements with operators, including hotels, grocery stores, institutional facilities, and chain restaurant sites. That said, a full quarter of Franklin Junction's more than 500 Host Kitchens are independent operators, which can supplement their current delivery sales with one of more than 20 "partner concepts", including Wow Bao, Nathan's Famous, The Captain's Boil, and Fuzzy's Taco Shop.
You might have heard about Franklin Junction in the trade press. Here are some of the business model and operation details of this platform for independent operators, including thousands of RestaurantOwner.com members, who might be interested in participating in this pandemic-borne program.
"We assess kitchen equipment, location, and staffing to determine which of our partner concepts will be successful at a prospective Host," says Nigam. "When we find a good match between our partners and a qualified Host, we take care of the licensing, marketing, and accounting, as well as assist with arrangements for purchasing and delivery services," he adds. Franklin Junction works with all distributors and third-party delivery companies.
"The consumer transaction," says Nigam, "is also seamless for partner and Host". Consumers place orders via delivery portals such as Uber Eats, Postmates, DoorDash and Grubhub. The Host is notified via dedicated tablet hardware provided by Franklin Junction, which arranges for the third-party drivers to pick up and deliver. The tablet aggregates orders from all virtual concepts and delivery sites into one device.
"Moreover," says Nigam, "Franklin Junction handles all financial transactions -- including paying Hosts." Because of the large number of participating Host units, Franklin Junction is able to negotiate discounted fees from third-party delivery companies to lower costs. Says Nigam, "Partner concepts taper their menus to top-selling items to ensure sales and simplify inventory and preparation."
A Weekly Cash Flow Boost
As you might imagine, Hosts seek a healthy percentage of partner sales being prepped at and delivered from their units. Especially since the platform has helped partner concepts grow significantly. "Wow Bao and Nathan's Famous doubled the number of units from which they are selling by leveraging Franklin Junction for growth development," says Nigam. The Captain's Boil, a Canadian seafood boil concept, has leveraged Franklin Junction to enter the U.S. market successfully via 200 Host units in less than three months.
Nigam believes Franklin Junction could also be an opportunity for operators who do not want their own brand and menu but simply desire a business model dedicated to fulfilling orders for partner Franklin Junction concepts. That said, the arrangement seems to promise a particular boon to independent concepts with their own stream of on-and off-premises restaurant business, but which could use a weekly cash flow boost.
For an initial sign-up fee of $2,500 per concept, operators can look forward to what Nigam describes as "a healthy 10-20% sales boost." Nigam says his company seeks to provide at least $2,000/week for each partner concept with a goal of adding 3 concepts to each Host location. Qualified Hosts can offer multiple concepts. (Franklin Junction's sales percentage formula is explained in more detail with a non-disclosure agreement.)
That is the top line. As for the bottom line, says Nigam, "The host does not have to acquire additional equipment," adding, beyond the entry fee, the only additional expenses are the food costs to fulfill partner concept orders. "For nearly all Hosts, we find there are no additional labor costs since the relationship tends to optimize back-of-the-house staffing," says Nigam.
Prospective Hosts and partner concepts can get more information about Franklin Junction, including contractual obligations and operational detail, by visiting www.franklinjunction.com or sending an e-mail to [email protected].
