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Smashburger Sees Franchisees as Investors, Not Revenue Stream

Inside a Smashburger in Kentucky
Being served as customer #27 inside a Kentucky Smashburger, photo/bmm

In a recent interview, Tom Ryan, founder and chief concept officer of the Smashburger chain shared his experiences in building his own “better burger” empire after hitting the 100th store mark last April.  One bit of advice he shared with peers,

We've learned and adopted the value of looking at franchise partners as investors, instead of as a revenue stream. It's a big mistake that a lot of the older chains have made. We are actually partners  [in the true sense] with our franchise partners. We call it One Smashburger!

In talking with Quick Serve Leader, Ryan said while the industry was focused on Five Guys Burger’s exponential growth across America, his Denver-based chain was looking at places like St. Louis, Jacksonville, Atlanta and Charlotte. He said each store has opened up to an incredible amount of local hype and buzz.

Ryan feels their Smashburger team energy comes from their goal in serving customers, 

Smashburger's goal is to put fresh, hand-crafted burgers back into people's lives. People have always loved burgers, but the industry has not been giving people burgers in a fresh and modern way, in terms of food and experience.

Ryan said tapping into that unmet demand is hugely energizing. Just because the burger market is saturated and there are a lot of players, doesn’t mean there isn’t still a lot of opportunity. Smashburger plans to open 500 stores in late 2013.

The company’s founder said part of Smashburger’s success has been related to their organizational structure. Ryan explained,

We have a tremendously diverse set of people. We are really focused on bringing in really strong, industry-focused expertise, and matching those with very, very strong analytical business types.


Article:  Smashburger Founder Talks Buzz Marketing, Being Unique, Leadership Lessons

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Mr. Blue MauMau's picture

News article on Smashburger put into public forum discussion

There has been a lot of comment postings under the Smashburger news clipping so I've converted the article to a Public Forum Discussion on Smashburger. Public Forums are meant for long-term and robust public discussions.

Comments under news articles, as opposed to our forum area, are meant to focus on the article -- to ask questions of the author or to give additional insights into what the author wrote.

Bob Frankman's picture

"I don't eat frogs. Honest."

Snake Eyes Frog

"Don't look so glum, friend. It would be bad business for me to eat my business partners and franchise investors. I don't eat frogs anymore. I learned my lessons from my partners at Quiznos and 1-2-3 Fit. Honest. Wanna share a cheese burger, lettuce, tomatoes on a sesame seed bun?"

michael webster's picture

Excellent Caption, Bob!

This picture says it all!  It will take a lot more than an excitable VP for most potential franchisees to trust a Schaden product, in my opinion.

Smashburger Sees Franchisees as Investors, Not Revenue ?

hahahahahahahahahaha. Any entity owned in part or whole by Dick Schaden sees franchisees exclusively as revenue. For Smashburger franchisees the next few years will be a long, financially and emotionally, painful ride.

Who Is Pulling The Levers Does Matter

It's the difference between getting sizzle and getting burned. Dick's modus operendi is to suck franchisees dry through high food prices, predatory couponing, using franchisee ad money to sell more restaurants, putting restaurants within sight of each other and churning them over and over. Those policies are good for Dick and bad for franchisees. Those who doubt need to ask a former/current Quiznos or Fitness 123 franchisee or check out stories concerning Q's fall from 6,000 to 2,000 restaurants and looming bankruptcy. As for buying into a Schaden enterprise and being swindled by Dick and his pack of hyenas you can't be first but you WILL be next.

Who cares who pulls the levers at Smashburger? It sizzles

News over the last few days is how the market continues to shift towards better burgers and that Smashburger continues to lead the pack. It's surprising.

Financial Times
http://www.ft.com/intl/cms/s/0/31d541b0-e071-11e0-bd01-00144feabdc0.html#axzz1YAcoDgmb

Smashburger got those in the Middle East to buy into them as well with their first international franchise sales:

http://www.marketwatch.com/story/smashburger-announces-first-international-expansion-with-development-agreement-for-middle-east-2011-09-07

before long it is

another super saturated concept started by knock off artist who have no original ideas to be or maintain the market leader. Furthrmore, they will resort to bogos and other types of margin squeeze tactics to reduce franchisee profits.

The good thing is

BMM will have more whining franchisees to blame the salesman, government, franchiser, sba, Santa Clause, and the tooth fairy; anyone but themselves.

Troll

The troll says whine, whine whine whine. It must be nice going through life being snarky and whiny at the same time.

snarky and whiny = snarny

It's quite lovely. The snarky adds that delicate balance to the whine and rounds it out a bit. It is a fine whine.

Whiny and snarky = whisky

You got it backwards. The snarky added to a delicate whine rounds off a shot of whiskey.

The good thing indeed

You should know that whining is good. Your comments will attract even more people who whine like you. You constantly blame others for their faults but never blame yourself. You blame franchisees, Santa Claus, the tooth fairy and other posters for inadequacies. But I never hear yours.

More whining from you about how others whine. What a whiner.

"You constantly blame others

"You constantly blame others for their faults but never blame yourself"

This is hilarious and so befitting of BMM! I guess is is the blame game on a socialized level.

"You constantly blame others

"You constantly blame others fo their faults but never blame yourself. " LOL This is hilarious. Welcome to socialized blaming!

"You constantly blame others

"You constantly blame others fo their faults but never blame yourself. " LOL This is hilarious. Welcome to socialized blaming!

You need a smashburger with that whine.

If you wait a bit I am sure you guys will be doling out BOGOs; naturally at the expense of your franchisees. I can not wait for the dollar menu.

Barbara Jorgensen's picture

Sad. Bob you have a way of making something very sad

into something funny.  The reason it is funny, is comedy only works if there is truth to it.  The frog should have a sign on it.  The sign should say, "A perfect mark!"  The snake should have a sign on it," I am the Devil who deceived Eve in the garden.  After doing business with our corporation, you will know the difference between a good zor and a evil zor.  Just sign on the dotted line and I will take you on a rollar coaster ride that leads to financial hell. Better yet just hand over all your assets to us.  Why waste precious time?"     

RichardSolomon's picture

No devil deceived Eve in any garden. The "tree of life"

symbolizes secular knowledge, the acquisition of which makes it harder to "believe" stories that are not logically explicable.

Beginning to acquire secular knowledge is always feared by all priests. That's why very orthodox Jewish leaders try to prevent their children from studying secular subjects (except something they may need to learn in order to make a living), and Catholics maintained an "Index" promulgated by the Pope of books and materials Catholics would be committing sin to read.

The Garden of Eden expulsion story is an allegory of blank mind people coming into possession of ordinary secular knowledge - which is why God responds the way She does when Adam tells her he was hiding because he was naked - "who told you you were naked?"

The whole earth is the Garden of Eden, and by our waste and spoliation of it, we are gradually and forever being expelled from its great beauty and function. The truth of the Garden of Eden story is that conservation is critical to a continued enjoyment of natural beauty.

Thus endeth the lesson.

Barbara Jorgensen's picture

It wasn't the tree of life.

It was the tree of the knowledge of good and evil. God told Adam if he ate of the "Tree of knowledge of Good and Evil", he would die. Then God preceded to make him a woman, so Adam would not be alone. 

In Genesis 3:4, And the serpent said unto the woman, Ye shall not surely die.  (It was an out and out lie.)  The serpent continued in Genesis 3:5 For God doth know that in the day ye eat therefore, then your eyes shall be opened, and ye shall be as gods, knowing good and evil. 

The serpent knew if he tempted Eve and she did eat this would be the first sin.  Adam ate the fruit and immediately they knew they were naked.  The consequences for disobedience was they would die, be thrown out of the garden where they did not have to work.  Death, work, and they would learn quickly what calamity was.  Eve had to experience extreme pain when giving birth. 

The consequenses for disobedience to God is horrible.  Human nature hasn't changed.  People still want to be somebody, top dog, and they still disobey God, and will always suffer the consequences.  King Solomon was the wisest man who ever lived.  He blew it big time.

 You can't tell me that Q and 123 Fit did not know the consequences that people would have to face after signing on the dotted line.  All they have done is premeditated.  There is story after story of people suffering because of their unethical business practices.  People just stay away from them.    

Bob Frankman's picture

Correction, tree of knowledge

Barbara, good catch. I wrote "tree of life" in following the comment thread but it most definitely should have been the "tree of the knowledge of good and evil" that increased Adam and Eve's knowledge - as you point out. The tree of life would give eternal life. I knew better but was sloppy because I had my eye on my cartoon.

Alas, people have indeed fallen short of the mark. Then there are some people who want to drag us down to be marks.

RichardSolomon's picture

Actually, according to what I consider to be the better theology

on the subject, it is the tree of life. The reason for that is that in Christian mysticism that tree prefigures the tree on which Christ was crucified. The timeline goes from the tree in Genesis to the moment in the desert described in Exodus when Moses hangs a serpent on a forked piece of wood and then to the crucifixion of Christ. In this way  Christian mystics believe that the tree in Genesis was itself a form of prefiguration of Christ and of the crucifixion.

That Chirst is considered as the Alpha and the Omega - the beginning adn the end - that Biblical continuum fits the theological construct.

As a manifestation of God, Christ is aware of the entire human history of achievement, error, agony and celebration.

As the appointer of Peter to lead a universal church, Christ can be considered the patron saint of franchising.

Oh Brother

Barbara, do you believe the Garden of Eden was a real place and that Eve was created from Adam's rib? What about Moses parting the Red Sea? (Google "sea of reeds") How about Jonah being in the belly of a fish/whale for 3 days? Do you take the Bible literally?

RichardSolomon's picture

King Solomon had more girlfriends than Bill Clinton and John

Edwards and Jack Kennedy. That just made him seem smart. Don't go thinking that every testosteroned up bozo is the wisest person in the world.

Furthermore, before you go off about God's law, consider for a moment that the role of the snake in the Garden of Eden story is to prefigure the legal profession - showing people how to game the system and then also raking it in when the shit hits the fan.

There are many dimensions to the stories in the Bible. If it were simple priests couldn't make fortunes telling other folks what it is all supposed to mean.

Since you are on this subject, did you know that Saint Barbara - Santa Barbara - is the patron saint of Merlot?

Bob Frankman's picture

Tree of Life through shaded eyes

Live and learn. I always thought the Garden of Eden story was an allegory about fertility (the snake), sex (the fruit) and the maturation and new responsibilities that follow. Solomon points out that partaking of the tree of life is about taking in secular learning and has once again shown me that my mind has been in the gutter – as usual.

Hidden in plain sight

"We've learned and adopted the value of looking at franchise partners as investors, instead of as a revenue stream."

Hmmm.. Sounds like what is being said is that they're interested in initial licensing and development fees, not ongoing royalties. After all, they’re looking for investors, not revenue streams, Right?

Guest makes sense

Mr. Solomon, the Guest and his sarcasm makes sense. He doesn't need to take a nap. What I gather him saying is this -

Since the VP says that Smashburger isn't interested in royalties but rather investors and partners, then surely they must have done something to the franchising relationship to make this the case (sarcasm). After all, in traditional franchising, the franchisor achieves revenues to itself through royalties paid by client franchisees. If Smashburger is just seeking "investors" then it must be selling stocks in the franchising company to the franchisees in order for them to be in a position in the board to direct the franchisor what strategic direction it must pursue.

Surely the VP also could not be talking about selected franchisees, who can only advise the franchisor and pay its fees, as "partners". That term would not be entirely honest in describing the relationship.

RichardSolomon's picture

When SmashBurgers first got started I warned the franchise

investing community that this was a FranWhack - completely and totally not investment worthy and just hype and bullshit.

The people behind SB are notorious for incredibly bad behavior, and their victims are lined up around many many blocks, especially in others of their so called "concepts".

If you or anyone else attempt to sort this situation out using any kind of logic, you will just hit a brick wall.

The SB frachisees are headed for franchise financial oblivion and will be wailing a lot louder by end of this year.

Like all such, however, they will probably not do anything that might help them because (1) they don't believe they could have ended up in such a terrible situation; (2) they won't stand together and provide the resources necesary for effective, militant group action; (3) They want someone to sort it out for them and not charge them anything for doing that; (4) They expect that some state or federal government agency will fix this because it is the right thing to do (and can't understand why there is no protection).

Instead they will start some kind of rump group and send email traffic amongst themselves that will all get back to the franchisor who will retaliate against those who are seen to be instigators. If this follows the normal course, these folks will disappear and shut up or be defaulted out of business before they can be protected. This is not some social event. It has to be organized and run as though it were a miitary operation. But running your mouth "doesn't cost anything" - so they think, so they will do all the wrong things until the situation is much much worse and harder to deal with.

This is not going to go away or get any better by itself. Remember, you heard it here first.

michael webster's picture

Group Denial

We had a better discussion about the group dynamics in the Tasti Di-Lite conversion situation.

Much of what Richard says is accurate, but the metaphor of "military operation" leaves much to be desired.  

The scope of changing or resisting an improper advance by the franchisor is always local in nature.  Five or six guys or gals plan a breakout strategy - but their mistake is to believe that the need 20 others instead of 2 or 3.

When a franchise system is irredeemiably done, there is no value to a large group trying to break out of the prison.  They must sneak out in smaller groups.  Bankrutpcy, non competes, distribution supply chains, and many other factors weigh in favour of the small organized group who wishes to leave a defunct system.  Only the small and nimble groups survive- the bigger groups that wait around for a saviour simply die.

FuwaFuwaUsagi's picture

I can't help it; I love this

I can't help it; I love this guy.

Smashburger in the crystal ball

"The SB frachisees are headed for franchise financial oblivion and will be wailing a lot louder by end of this year." — Richard Solomon

I'm no fan of Smashburger but this sounds like a very fast change. There's only three months left to the year so we will know very soon how accurate this prognostication is. I take it that you know something that the rest of us don't. The company looks like it's in a growth spurt at the moment. When things are going up, a lot of things are tucked under the rug.

RichardSolomon's picture

The exact date and moment of the turn is not firm, but the turn

is coming and soon.

The initial buildup period - skim the cream off the sucker population - is nearing its end. Now that we have 'em lets fleece 'em is about to begin.

Bugsy Denaro's picture

Avoid Smashburgers and buy Smashburger instead

When SmashBurgers first got started I warned the franchise investing community that this was a FranWhack. (Mr. Solomon the Wise)

Heys. I been avoiding all 'dem Smashburgers just like you advised. Dere's dis other franchise called Smashburger that I been telling peoples to snatch up while locations last.

Ray,

give it a rest.

Tom the troll is back

Tommy the troll is back calling people Ray this time.

Grrrrr

I'm the mean ole troll.

And where did they learn this

And where did they learn this behavior? When they learned it why didn't they apply that philosophy for the sake of the thousands of "investors" in quiznos?

Barbara Jorgensen's picture

I don't believe this article.

Once someone taste fast money, they will not settle for anything else.  Once a thief, always a thief.  Just because they say they will view their zee's as partners, does not mean they will do it.  They will pick two or three zee's to be their example of success.  They will screw as many people as they can.  They did with Q and 123 Fit. 

RichardSolomon's picture

Jeez, Barb - lighten up, OK - it's Friday and the weekend is

coming up.

You can't just wallow in abject sadness forever, Some sarcastic humor once a day or so is a necessary contrapuntal rythm.

In the natural order of things, just as God created them, there are predators and prey. Why would you think it would be any different amongst humans than it is amongst the other creatures of nature? It isn't. There are penalties for not being strong and cunning. Even monkeys use tools. Why not people? If you showed up to an investment fest inadequately equipped and lost everything, you are at least partly at fault. Had you insisted upon doing things in reality mode, you would have showed up with some adequate weapon to deal with it.

Bob's gallows humor is a welcome relief.

Barbara Jorgensen's picture

I like Bob. He does make me laugh.

The reality behind it is not funny.  I did laugh at it because the truth behind it. 

The truth behind this is if you are not the one who gets hurt, it is easy to say, "Get over it."  When one gets hurt big time it takes years to get over.  It hurts real people who have to survive.  Our only fault was trusting that this corporation was on our side.  It doesn't make sense that a zor would purposely hurt their zees.  I don't think like a crook.        

michael webster's picture

Not true Barbara

Barbara writes: " Our only fault was trusting that this corporation was on our side.  It doesn't make sense that a zor would purposely hurt their zees.  I don't think like a crook. "

Barbara what you say about your reasoning is not true.  At one time, you started to formulate the "phantom dream" waved in front of you by the franchisor.  But you gave up trying to explain your own complicity in the fraud - and I don't mean legal or ethical complicity.  

You owe yourself, and so BMM, an obejctive explanation about how what was dangled in front of you seemed to compelling on an emotional level that you and your husband threw caution to the wind and grabbed this ring.

Only when you see how you allowed this fraud will you be able to move on.  (And no, I don't blame you for being defrauded anymore than I would blame someone for being hit by a train.   This isn't about blame, it is about understanding and education.)

FuwaFuwaUsagi's picture

You owe yourself, and so BMM,

You owe yourself, and so BMM, an obejctive explanation about how what was dangled in front of you seemed to compelling on an emotional level that you and your husband threw caution to the wind and grabbed this ring.

Only when you see how you allowed this fraud will you be able to move on.  (And no, I don't blame you for being defrauded anymore than I would blame someone for being hit by a train.   This isn't about blame, it is about

By the way, the good Barister is right in this.  He has it exactly right.   You might want to consider when two guys from such opposite sides of the tracks as the good Barrister and I keep telling you the same thing that it might merit consideration.

Boudica Lawson's picture

You want what now?

Good heavens.

So Barabara posts for the first time in ages (Hi Barbara) and suddenly she owes herself and BMM some kind of  explanation for her feelings?

Michael, I feel disappointed to read the above quote from you.  You have a slightly better understanding than most on how fraud works in a psychological capacity and I can see that you are at least trying to demonstrate  the purchasers' psychological response and how important it is to resolving the  bad decision franchise problem.....

.....But,you already know the answer as to how what "was dangled in front of you seemed so compelling" as it's written on your blog, so you don't want the answer to know the answer so I'm having trouble convincing myself of a more noble reason for your post than the one I unfortunately have in mind.

I very much respect you (insofar as anyone can via the internet) and agree very much with your pysch angle on things but this comment of yours lacks the compassion I have come to expect from you in its purpose, even though you  try to soften your arrow by saying you hold no blame for where the target might lay.....

Why is BMM so fascinated with  having franchisees admit 5 or 10 or whatever % of the blame towards themselves?

 Why, everytime someone says they got a bum deal and it looks like something dodgy might  have happended or they can prove, as in the case of Oldsword, has been happening, do people have to insist on  franchisees allocating a percentage of fault to themselves before we will acknowledge the rest of the problem?

Where do we draw the line?  Am I deserving of scorn when I am 30% culpable but worthy of jurisprudence when I'm 28% culpable?

And why, if there are some obscure market intelligence reasons for finding that" blame percentage" do people do it in a way and using language that negates any likelihood of  a frank discussion that could make meaningful contribution to said market intelligence?

What for?

Why wouldn't good franchising and smart businesses be more concerned about the things they control and can change- such as it's own "percentage of blame" in bum deals rather than the part it cannot- which in this case is the poor, sheeplike, neanderthal, dumb, apathetic consumer/franchisee?

Fuwa, why should Barbara follow the argument you present- that two opposite guys saying the same thing must have merit?

Merit is based on well, merit.

In context and with due consideration to other facts.

Is that not what we try to tell would be franchisees all the time? To research things for themselves, to be savvy and wise to false logic... and now you want to argue points based on good cop- bad cop?

 If some BMM posters want someone to admit the mistakes they made in franchising so that everyone can learn and we can all work out what percentage of blame we can arbitrarily appoint across the board to franchisees, then fine, ask Me, because I am better placed to deal with the emotional fallout for something that will get none of us anywhere because apportioning fault is a fools game.

I'll start the"blame me, I was naive"  ball rolling  by admitting that I was completely stupid when I thought the lawyer I spoke to about my franchise contract had any idea what he was talking about. When he replied to my question about how my franchise agreement compared to others with "all franchise agreements are written this way" I should have recognised he was not directly answering my question and found another lawyer.... I seriously had no idea that lawyer types could be so damned clever to make their fee as I thought if I was paying them they were obliged to act in my interests.

Now that was stupid.

To be fair though I will admit something else: I wanted the business I bought and was fooled by the "someone else wants to buy the same territory" line. I should have recognised it for what it was. As it turned out, someone else DID want to buy my territory but they were as much a fool as I was. The use of such a line would ring alarm bells now, and it did  at the tiime but I didn't listen as I was keen on what I wanted( yes Michael, there's your pet point).

There were not enough other alarm bells ringing at the time so I thought I was being paranoid. This" I am going to be screwed out of a territory I have paid a deposit for" thing drew my attention away from other factors that deserved more of my attention.

I didn't recognise a diversonary tactic for what it was. Is that mistake a grounds to sue me or vilify me as some kind of loser?

Apparently.

Michael, if you want some expamples of how the brain works ( or doesn't work) when making bad decisions, I am happy to oblige publicly if you can convince me that my answers won't be used to "cool the mark".

As for you Fuwa,  I hope your exceptional  life experience and authoratative position  brings you everything that such a position demands.

"Why is BMM so fascinated

"Why is BMM so fascinated with  having franchisees admit 5 or 10 or whatever % of the blame towards themselves? " BOUDIN

I'll have what you're smoking, Boudin. 5%-10% responsibility? Hahahaha. Time for a bong hit.

michael webster's picture

Not about Feelings or Blame

Boudica correctly writes:

"So Barabara posts for the first time in ages (Hi Barbara) and suddenly she owes herself and BMM some kind of  explanation for her feelings?

Michael, I feel disappointed to read the above quote from you.  You have a slightly better understanding than most on how fraud works in a psychological capacity and I can see that you are at least trying to demonstrate  the purchasers' psychological response and how important it is to resolving the  bad decision franchise problem....."

No, this is not about feelings, blame, or self remorse.

Fraud is like magic, but, unlike a good magic trick, over time you can see through the tawdry exercise. Magic is designed to entertain and keeps you enthralled, long after the show.

Fraud is different. With time and distance,  you wonder how the fraud trick worked on you.  You remember seeing the red warning lights and driving through them - sometimes increasing your speed as you saw the light turn red.

You become a mechanic of some parts of social psychoology, and you see how the fraud trick worked, how to deflect its power - and you acquire wisdom which you can transfer to others.

I have great respect for both Barbara, Oldsword, yourself, plus countless others.  I have great hopes that they will acquire the wisdom about the complicity of self and explain how the trick worked on them.  And will explain in due course, for all our benefit.  It will not be about blame, remorse, nor failure. It will be about redemption and wisdom gained.

FuwaFuwaUsagi's picture

And I love this guy

And I love this guy too....very good Michael.

michael webster's picture

Standing

Fuwa, you will lose your standing with the quasi Libertarian movement if you admit to "loving" a pinko Canadian!  (Although, I probably as ungovernable as you.)

FuwaFuwaUsagi's picture

Ah ya'll can't help it,

Ah ya'll can't help it, living in an igloo surrounded by seals and polar bears does thing to your mind  : )

Darnelle White's picture

In praise of whining

I think we often forget the power of whining. Here are how some of history's leaders would advise whiners.

  • Pharoah to the Israelites: "Look. Your ancestors knew the risks that you might end up in the lowest class when they immigrated to this rich country that has institutional slavery. They were blinded by their dreams of making it big in the big city. Their blindness has put you here. Let's face facts. You're incapable of delivering yourselves and all your whining and crying aint' going to magically give you a deliverer who can. So stop your moaning and get back to work."

  • King George to the colonists: "How dare you colonists moan and whine that the benefits, rights and infrastructure that our enlightened civilization has given you isn't worth the taxes that you pay."

  • Santa Anna to Texas Revolutionaries: "You are the dummies who immigrated here to Tejas in the first place. Stop crying about our way of life. If you don't like it, move back to the United States and get on with your life."

Unfortunately for those leaders, this world is shaped by whining.

Big Tex might dream of the glory of Davy Crockett, proactively shooting bullets at Santa Anna's men. In doing so, he forgets all the gossip, letters and communicaton from the little people back home that gave buy-in and support to the revolution.

I believe Solomon, Webster and others don't mind whiners. They just prefer complainers who pay them attorney and association fees.

Bob Frankman's picture

The squeaky wheel gets the grease

I wanted to share this quote I just found on whining.

I don't really know of the Jewish tradition of comedy, only the Jewish tradition of not keeping your mouth shut. Complaining about all that is hard, unfair or ridiculous in life having strong feelings, and not being able to suppress them. That, to me, is Jewish.  - Fred Melamed

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