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Why Applebee’s largest franchisee is developing Paneras

panera bread exterior

Flynn Restaurant Group, an Applebee’s and Taco Bell franchisee with annual sales exceeding $1.7 billion, has added a new growth vehicle to its fold through the purchase of 47 Panera Bread Co. units.

Forty-five of the fast-casual bakery-cafes were acquired from Panera, and two were bought from a franchisee, Golden Gate Bread LLC.  The stores are located in the San Francisco Bay area and Washington.  Terms were not disclosed for either deal.

The transaction with the franchisor also includes development rights for six more stores.

The 53 Panera outlets are an addition to the 481 Applebee’s restaurants and the 201 or so Taco Bells that Flynn Restaurant Group operates.  “We have been looking for some time to plant a flag in the fast casual segment,” said CEO and founder Greg Flynn. 

The Panera units will likely provide a quicker payback than additional Applebee’s or Taco Bell outlets, according to data from Technomic’s 2015 Top 100 Franchisor Chain Restaurant Benchmarking Report. The study, an evaluation of top restaurant franchise concepts, found that the sales-to-investment ratio for a Panera franchised store is about 1.2, meaning a franchisee can more than recoup the costs of a new unit quickly. The S/I ratio for Applebee’s and Taco Bell are .5 and .9, respectively, Technomic noted, adding that the higher the ratio, the faster a franchisee is likely to recover the costs of a new unit. 

The study also found that Panera has enjoyed a faster expansion rate in recent years than the two more mature concepts. Last year the number of franchised Panera locations grew by 5.1 percent, compared with a gait of .5 percent for Applebee’s and 2.4 percent for Taco Bell, according to Technomic, a research company owned by Restaurant Business’ parent company, Winsight LLC.

However, Panera’s royalties and advertising fees are higher, at 10 percent of sales (vs. 9.3 percent for Applebee’s and 9.8 percent for Taco Bell), and its sales per square foot undershoot Taco Bell’s average, $481 to $524. Applebee’s typical sales per square foot are $474.

Flynn Restaurant Group is the first new franchisee for Panera in a decade, the franchisor said.

 S/I Ratio2014 Franchise Sales Growth2014 Franchise Unit GrowthRevenue per square footRoyalty + Ad fees
Taco Bell0.96.3%2.4%$5249.8%
Panera1.25.2%5.1%$48110%
Applebee's0.51.3%0.5%$4749.3%

 

Source: Technomic's 2015 Top 100 Franchisor Chain Restaurant Benchmarking Report

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