Is Franchising the Right Business Model for You?

Franchising is another path to business ownership. However, it’s not as simple as identifying a concept, opening the doors and then “…they will come…”. In fact, there are many challenges when it comes to becoming a franchisee.

David Cesarini, Domino’s Pizza franchisee, owns four stores–three in Ann Arbor and one in E. Lansing– and is an example of hard work, dedication and overcoming the challenges of making hard business choices when confronted with significant business challenges.

Cesarini, graduated from University of Maryland with a degree in Economics and earned his M.B.A. at St. Joseph’s University. He worked in Domino’s Pizza’s corporate offices and would eventually leave his corporate role to become a franchisee.

I asked him to share his thoughts regarding franchising.

Lee: How did you get started? What steps did you take to own your own business?
To own a Domino’s, there are franchise development classes you need to take in addition to showing a stable personal balance sheet with the access to funds to invest and working capital. Since you had to be a successful manager for a full year or hold a Domino’s Corporate position for two years to be approved as a franchisee, I decided to start my career with Domino’s corporate, worked in a Domino’s Pizza store and then was offered me a position as a Franchise Consultant.

After completing several roles, my brother-in-law and asked if I wanted to partner in an eight store franchise in the Ann Arbor-area. I wanted to fulfill my original dream of owning my own business, so I left Domino’s Corporate and started as a 49% partner of 8 stores in 2002 until I bought out my partner in 2007 and have owned 100% of the company since then.

Lee: You had corporate experience prior to starting a franchise. Did this have an impact on your decision and how did the overall experience benefit you?
My corporate experience did have an impact on my ultimate decision to be a business owner and a Domino’s Pizza franchisee. First, I was able to understand the contract and standards a franchisor enforces on their franchisees. Second, I was able to oversee and work with hundreds of different franchisees around the country in the areas of marketing, finance, business planning, and operations. Third, I built a strong network of relationships within the Domino’s franchise and corporate system. I have genuinely positive relationships with the leaders of Domino’s corporate and strong connections with some of the most successful franchisees in the world.

Lee: What are the overall benefits of being affiliated with a major brand and being a franchisee?
1. Technology: I believe we are currently leading our industry (as well as others) in using technology to communicate more effectively with our customers, operate our stores more efficiently, and giving us information to make better decisions in running our business.

2. Protecting the brand and building the brand: We have had an amazing run with new marketing direction and new and inspired pizzas. I rely on corporate to keep challenging our product development team to focus on not just better quality, but to keep our advertising fresh so we continue to grow customers.

3 . Part of a larger community: You are not alone and many of the ever-changing laws that impact our business can be faced as a collective larger voice than if I were on my own.

Lee: What challenges did you have to overcome starting out and how did corporate help you navigate these obstacles?
We tried to get bigger (in store count) before getting better in the stores we currently were operating. Being average, or even slightly above average, is not a strong position to grow additional stores. The strength of our brand will only get us so far. Showing consistent operational performance and creating a strong financial foundation is what we should have done before expanding from our original 8 stores to 12+ stores.

We did not determine and project if we could survive a downturn in our business from the extra risk in growing or investing to buy our stores. It took me too long to realize that I could not be as successful if I thought I had all of the answers, or did not reach out and ask for help, or support when I needed it.

Lee: Lessons learned?
Make your business better, before getting bigger. It will also be a mistake to wait for the “perfect time”, or thinking you have to be perfect before expanding. I have learned to set a minimum standard of performance in addition to having a solid bench strength of people.

There is a relationship between risk and return, but you must be willing to accept and prepare yourself for the full risk in going after the big return. If you can’t handle that, then you must re-evaluate your plan.

And one of the key factors in my turnaround is reaching out to the people treating them like a partner, and not just as franchisor.

Lee: You grew to 12 stores and then contracted to 4 stores. Why? What benefits have resulted from having fewer stores?
Downsizing was needed and now looking back, one of the best decisions I have made given my circumstances. This event stands out as a defining time in my life that forced me to GROW as a businessman and person.

Five years ago, when most were starting to struggle from skyrocketing costs and declining sales, my business partner and I realized that two families could not be fully supported by the business we owned (at the time, we had 8 stores). We were falling towards our low point in financial health of our business.

I quickly realized that I had to focus on our business, not an exit strategy since I inherited a mountain of debt and barely enough cash in the bank to pay our bills. I was drowning. With the help of my trusted supervisor, Eric Marlow, and my loyal management team we made a commitment to give it one last strong effort to fix our business and find a way to recover.

I started to shed as much non-essential expenses, to stream line our processes to reduce costs and sell off 4 of my lower volume stores and use the money to pay off debt and become more liquid. Today, I am 100% owner of my 4 stores and sales have increased by over 75% with 5 consecutive record years.

Lee: What advice would you give to those considering franchising?
1. You need to be passionate with what you want to own. If you are just getting involved in a franchise to make money or a living, then you will fall behind the competitors who really have a passion and a higher commitment to be the best in their industry.

2. Franchising is a partnership. If you want to own a business for 100% full independence, then franchising may not be right for you.

3. Work hard: You have to be involved in your business. You have to also work ON your business, not just IN it. Plan on working hard- since most things in life worth achieving takes hard work (and smart work).

4. I feel getting BETTER before getting BIGGER is what I learned from this and it was the right decision for me.

Lee: Any regrets leaving corporate?
I have no regrets with my 12 years with corporate and then franchising.