There are quite a few very popular chains of restraunts that seem to do well in the locations they exsist, continually open more locations, but fail to expand into other areas of the country.
Why is this?
I suppose distribution and suppliers can be tricky but even then there are some rogue locations out there operatining all by their lonesome.
Examples:
Chick-Fil-A, all over the southeast. Advertise heavily, always opening new locations. Try to find one in Minneapolis and only one exsists (on the U of M campus), Milwaukee used to have them in their food courts now all I see is one at a mall in Racine.
Sonic, I get their TV ads all day long. I’ve never seen one in Florida, Wisconsin, or Minnesota. I think Chicago may have a few.
Steak N’ Shake- The farthest north I can find one is Chicago. I believe there used to be one north of Madison but I guess it closed down.
In-N-Out Burger- Never been to one. I guess they choose to stick in California and never expand?
So why don’t these place ever expand into other markets?
Nope, nearest Sonic is about 110 miles to the south. Why they advertise in the chicago market is beyond me. It’s not as though I get commericals for other businesses in the Champaign, IL region.
Perhaps its a matter of timing.A lot of the most desirable urban areas are already saturated with food chains.It could be hard to get the kind of traffic that’s needed.
It’s an interesting question I have wondered about myself. For example, Dunkin’ Donuts – very heavy presence (saturation, even) here in New England, much less presence elsewhere. In Southeast Ohio, I notice, Tim Horton’s has suddenly occupied the niche, which now makes it much harder for Dunkin’ Donuts to get established there.
And similarly, I don’t understand the “lone outpost” phenomenon. For example, there’s a rest stop in Maine that has a Popeye’s Fried Chicken, which, for a while, was the only one around for hundreds of miles. How could that possibly be viable?
I think the loners all have stories that relate to the franchisee, not the chain.
Chains are sold like everything else, by salespeople. And they know and work the local areas most. If a southern chain has distribution out of Atlanta, the sales force uses that as a marketing asset when talking to prospects. But if a prospect lands in their lap, like a Minneapolitan who goes to Atlanta for a franchise convention, they will still try to work with him. A guy with more money than savvy may simply want to bring his favorite food in his new home town, forgoing the advantages of good supply routes, and advertising that is all in another region. If you have a lot of money going in, say enough to open the store without heavy loans, then your margin is high enough to cover that sort of thing.
I wondered particularily about Chick-Fil-A.
Their chicken sandwich is unique enough that I don’t think it gets much competition from the deep-fried or slimy grilled versions McDonalds or Burger King offers.
Saturating a market may not be the right thing but open 4-6 free standing locations in the Twin Cities metro area and I guarantee they’ll be packed during the lunch and dinner hour.
I recall when Minneapolis had the only Wendy’s for 200 miles. People were lined up outside and down the block at lunchtime. If you have a good product, the people come to you.
There was (and for all I know still is) a Chick-fil-A restaurant in the mall in Salinas, CA. That’s quite a leap from the home base. I’m not certain, but their corporate policy of not opening for business on Sundays may not play as well in California, which is more secular and religiously diversified than the Deep South.
As I look at the web site, it appears the Salinas location is gone, but there are a few up in the Sacramento area, and a couple scattered around other parts of Nor Cal.
Chains that are family owned often see no purpose to expanding into tenuous markets. Carl’s Jr. stayed quite entrenched in California/Nevada until the Karchers started giving up control. When the company went public, it started expanding, and, frankly, got its head handed to it on a platter at first doing so. Eventually, of course, they managed almost nationwide expansion by simply buying up the Hardee’s chain.
Expanding a chain into an area is difficult, because unless you have a niche that is unfilled, you are attempting to take business away from established competitors. For example, although everyone agrees that In-n-Out has much better food than McDonalds does, you don’t see In-n-Out trying to push out much because they would have to take business away from Mickey D’s, BK, Wendy’s, et al. That means ramping up a much bigger advertising campaign, establishing new supply chains, etc. Why take the risk?
I have heard that in-and-out has looked at expanding, but they are afraid they will lose control of the supply-chain, lose quality, and wreck the brand.
Chains don’t go national overnight. Dunkin’ Donuts was a New England chain for decades and has recently expanded. Perhaps in twenty years they will be off the list.
Expanding is not risk free. Boston Market went bankrupt trying it.
In N Out has expanded a lot in the last 10-15 years. I remember when the only In N Out in the SF Bay Area was in Milpitas or Fremont or someplace like that, now they’re all over, as well as in Nevada and Arizona, as someone already mentioned.
Chick Fil A has a restaurant in Orange County in Southern California, and apparently some others in California too. I find it kind of fascinating that they’ve leapt over the intervening space between California and their traditional home in the South.
Still, I fervently hope all food chains suffer from cyclical rises and falling. If they don’t, it’ll just be the shoe store event horizon all over again, but with ketchup this time.
It is my understanding that Chick Fil A does not operate the traditional fast-food franchise model. Although each ‘owner’ buys in for $5000, he/she becomes an quasi-employee of Chick Fil A and each location is corporate.
This is probably why they aren’t everywhere, because the company has to fund each new location.
BTW, I personally knew the owner of what was then (1990s), the only Chick Fil A in Maryland. Corporate forbids you from dabbling in any other kind of food franchise business. He tried, they found out, they fired him and he lost the ‘franchise’.
Now there are at least 20 that I know of around here.
States have different rules about franchising which makes some areas more attractive for expansion. Certain states (like Illinois) require the filing of “Uniform Franchise Offering Circulars” which contain lots and lots of operations data about the typical chain unit. Basically, it’s a guide book of everything a franchisee needs to know about running a restaurant. They are filed with the state(s) and readily available for anyone who wants to see it (there are several companies that do nothing but provide copies of these for people).
In researching certain restaurants I learned that some chains intentionally avoid expanding into states that require the UFOC so that their operations can remain more opaque. Successful chains are often rabid about keeping their operations rules secret.
Chik-fil-a is one of those companies. From their website:
What the heck happenned to DD, by the way?
I went back to Chapel Hill/Durham a couple years back and both of the ones I used to work at had converted to another franchise, one of them after decades of operation.
The one next to my old house in Akron converted into a Donut Connection, as, apparently, did the one next to the hospital in Cuyahoga Falls. I pretty much have to cross the county line to get to one.
Is DD having serious trouble? Did Fred the Baker dying set them back 30 years?
They’re still going strong in New England, they’re on every corner really. I’m used to seeing less of them when I travel elsewhere, but I couldn’t imagine the Boston area without the chain. If they never make it out of New England I wouldn’t be surprised, but we’re so addicted to Dunkies here that I doubt it will ever go away.