Franchising is a popular method for expanding business. Through a licensing relationship a franchisor, or business owner, essentially sells a franchisee the rights to open a new business location. For instance, the UFC Gym franchise has many franchise locations, all of which were sold to various franchisees across the country. Once the UFC Gym franchise finds a new franchisee, the franchisee is granted the right to build their own location using preexisting systems, regulations, etc.
Franchising is an attractive business model for anyone new (or not) to the industry. Unlike an independent business, which requires growing from the ground up, a franchise comes with a pre-established, and usually successful, operational system. Through extensive training programs, franchisees learn all the ropes behind the business, eliminating the daunting trial and error process. Not to mention, a franchise comes with brand recognition is built right in.
FRANCHISING IS AN ATTRACTIVE BUSINESS MODEL FOR ANYONE NEW TO THE INDUSTRY.
Anyone looking to purchase a franchise will be given a Franchise Disclosure Document (FDD). It’s imperative that any franchisee fully understand the components and contents in any business’ FDD. Consisting of 23 different parts, the FDD, a legally mandated document, outlines different key pieces of information involved in franchise purchase. For instance, a Franchise Disclosure Document tells the interested franchisee more about the total fees and costs associated with purchasing the franchise of their choice.
The overall intention of the document is transparency. Both the company and franchisee need to be on the same wavelength in order for the purchase and future management of the business to run smoothly. Click here to see a more in-depth description and analysis of the Franchise Disclosure Document.
Little Caesar’s Franchise History
Currently, Little Caesars is the third largest pizza chain in the US with international locations in Asia, the Middle East, Australia, Canada, Latin America, and the Caribbean. Little Caesars has thousands of locations across the country and partners with some of the nation’s biggest corporations, such as Pepsi-Cola. It’s difficult to imagine that the pizza titan began with a really great blind date.
In 1954, Mike Ilitch’s father decided to set his son up on a blind date with Marian Bayoff. Needless to say, the two hit it off and were married within just several months. Happily married, the two decided to invest their life savings into a pizza store in Garden City, Michigan, a suburb near Detroit. This became first Little Caesar’s location. A small and charming restaurant, Marian kept record of the restaurant’s sales in a spiral notebook.
What began as a small Pizza Restaurant took off, filling with customers each day. As demand grew, the couple decided to open the first franchise location in 1962 in Warren, Michigan. The Warren location was the beginning of the franchise Little Caesar’s has become today.
As the franchise expanded, the Ilitches invested more time and money into the quality of their franchise locations. The two chose their employees carefully, considering all their workers to be part of one big family. According to the Little Caesar’s website, Marian was even quoted to say: “I consider Little Caesars my eighth child.”
In addition to the couple’s attention to their employees, the Ilithch couple paid close attention to their ingredient quality. In 1971, Mike and Marian purchased a mushroom farm to improve the quality and pricing of the mushrooms on their pizzas. In 1985, the Little Caesar’s Love Kitchen was created and began traveling around the country, making free pizzas for the hungry, homeless, and disaster survivors. For its service to underserved communities across the country, The Little Caesar’s Love Kitchen received its first President’s Volunteer Action Award from George H.W. Bush in 1991 and went on to receive the award again from President Bill Clinton.
Despite the consistent expansion and growth, Little Caesar’s retained Mike and Marian’s initial ideals of quality food and service. In fact, the franchise has even stayed in the family and is currently run by Christopher Ilitch, President and CEO of Ilitch Holdings.
Franchising Since 1962
Malina Bayoff Illitch, Director, Treasurer, and Corporate Secretary.
Christopher Illitch, Director and Vice President.
Barry Crane, Vice President–Distribution.
Edward Gleich, Senior Vice President–Global Marketing.
David Gray, Senior Vice President, Strategic Initiatives.
Initial Fees for the Little Caesar’s Franchise
The standard initial franchise fee for purchasing a franchise for your first restaurant is $20,000. For an existing franchisee purchasing an additional franchise, the fee is $15,000. There is also a non-refundable $5,000 initial franchise deposit fee due within 30 days after the franchisor approves the site of the proposed restaurant.
Little Caesar’s does not offer direct or indirect financing.
Training and Assistance
Before opening the new Little Caesar’s, each franchisee must attend the franchisor’s training program. Only one person from each restaurant is required to attend and complete the program to full completion. Typically, the training program lasts approximately six to eight weeks, however this length may be changed at any time. The program consists of a two-day real-estate training program, a food certification, and a six-week initial training process.
Aside from the food safety certification fee, the franchisor will provide training manuals, materials and instructors free of charge. All other expenses incurred during the training program, including transportation, meals, and lodging must be paid by the franchisee.
The franchisee may send additional employees to the training program with a few of $250 per attendee. If at any time the franchisor believes the employee does not possess the necessary skills to run a Little Caesar’s restaurant, the franchisor may terminate the Franchise Agreement at any point.
Location of the Little Caesar’s Franchise
The Franchise Agreement grants franchisees the right to operate a Little Caesar’s location only at the Approved Location. The Approved Location may not be relocated without consent from the franchisor. Once the location is approved, the franchisee may only operate the restaurant at the approved location.
The franchisee is forbidden from relocating without prior written approval. In order to be considered for relocation, the new territory must be within a mile radius of the original and must meet all necessary requirements. Typically, this mile radius is the “Protected Territory” for the franchisee.
Term of Agreement and Renewal
Generally, the length of the franchise term is 10 years and begins the date that the restaurant opens for business. Generally, the franchisor allows 1 renewal term of 10 years at the end of the initial term. However, all renewals are subject to certain contractual requirements. In order to renew, often the franchisor requires a written notice of the franchisee’s intent to renew. The franchisee must satisfy and provide the necessary fees and finances.
The franchisor and affiliates reserve the right to establish, operate, or license others to establish Non-Traditional Restaurants within your protected territory. Non-traditional Restaurants includes food trucks, sports stadiums, colleges, national parks, etc. The protected territory does not grant any exclusivity regarding potential customers within the area.
Restrictions on What the Franchisee May Sell
In general terms, the franchisee is expected to purchase all current and future products, ingredients, equipment, and materials used or sold by his/her restaurant from Blue Line or other sources designated by the franchisor. Franchisees may propose additional suppliers, however the franchisor is under no obligation to consider or approve additional suppliers. There are no outlined criteria for approving suppliers. If the franchisor decides to review proposed suppliers, they will provide notice of approval/disapproval within 90 days.
The franchisor has an agreement with Pepsi-Cola, designating Pepsi-Cola as the sole supplier of certain beverages to Little Caesar’s restaurants.
All restaurant signage needed for the restaurant must be purchased from a vendor on the franchisor’s approved vendor list. Additionally, all advertising and promotional materials must be approved by the franchisor.
The Little Caesar’s franchise outlines a table of franchisee obligations within Item 9 of the FDD. These obligations include site selection and acquisition, pre-opening purchases, site development, initial and ongoing training, site opening, fees, compliance with standards, trademarks and proprietary information, restrictions on products, among others. In order to carry out the Franchise Agreement, a franchisee must fulfill all of these obligations.
At the end of 2017, Little Caesar’s had a total of 4,332 locations across the country.