Experienced franchisee attracted to the Huddle House corporate culture, food and unit-level economics.
Mike Lokhandwala joined the restaurant business when he first moved to the U.S. from Bangalore, India, in 2002. “My first job in the industry was with Popeye’s Chicken and Biscuits. I was a cook. That was my first encounter with the restaurant industry,” he says. He would eventually graduate from college and work his way up to management in another chicken concept, Church’s, before getting into franchising. In the four years between 2010 and 2014, Lokhandwala and his team opened eight new restaurants in the Atlanta market. Today, he’s an active franchisee with Wing Stop and just joined the Huddle House family in early 2016 when he acquired the Valdosta, GA, location. He is currently adding more locations. This is his story.
How did Huddle House pop up on your radar?
Pretty much there was an encounter with a project I had done from the ground up. There was an endcap space available in that building, so I approached Huddle House corporate because I wanted to put a breakfast concept in the endcap space. So that is how the initial encounter started. The idea was to actually lease it out to corporate or another franchisee, but I learned more about the brand within those conversations and there were three things that really attracted me to the brand. To be specific, it was the brand culture that I experienced through corporate and talking to other franchisees; the good food that is on the menu; and the compelling unit economics of the Huddle House brand.
So, when you saw the endcap and you thought ‘breakfast franchise,’ you went immediately to Huddle House. Why is that?
So this was actually in Conyers, Georgia, and I live in Snellville, so the thing that stood out was the evolution remodel package. I passed a corporate restaurant on Centerville Highway that really was eye-catching and attractive. I went and dined in and the overall experience was phenomenal, from the service to the food, and that is what initially ignited me to explore more about the brand.
Let’s talk a little bit about your take on the brand culture with Huddle House.
Huddle House is a 50-year-old iconic brand. The servant leadership model within the executive team, from the CEO to the team operations and marketing development — it is phenomenal support. That is a big plus for me. Secondly, Huddle House has a niche market in the local communities where no other franchisor goes. Huddle House serves the smaller communities with less than 5,000 people, and that is one thing that really attracts me. That and of course the food.
Do you have a menu favorite?
My new favorite is the fully loaded hashbrowns with pretty much everything on it.
When you think about what Huddle House does for small towns, is there a reason you are attracted to that? Did you grow up in a small town? What about small towns appeals to you?
I am looking at it more from a diversified franchisee point of view. With a lot of competition in the metro cities I think it gives me a competitive edge to continue my franchise portfolio and cater to markets that have opportunities. And again, the evolution model. For me to remodel a restaurant in the metro area I am competing with hundreds of other restaurants, but doing the same thing in a small town, I think the impact is much more effective.
Talk to me a little bit about how the unit-level economics compare to other opportunities.
Let’s start with the food cost and the labor costs. The key thing, I think, is the supply chain being in-house, which is a big plus. Of course, food and labor are the two largest components of our P&L (Profit & Loss statement). Looking at it from a diversified brand perspective, out of all the brands that I have, this brand has the lowest food costs, so that is the biggest catch. With so many menu offerings and items, it is pretty impressive how Huddle House maintains this, with the key to their success, of course, being the in-house supply chain model that they have. That was one of the key things that struck me before I became a franchisee when I was first discovering the brand.
Breakfast menu items tend to be the biggest sellers, and those are also traditionally the least expensive items on the menu. Is that something that played into your decision making?
Definitely. With the majority of our sales coming from the first shift, the breakfast shift, yes, that drills down to the breakfast portion making a larger impact on that food cost.
Obviously you came into the system as someone with a lot of experience with food franchises and franchise ownership. What kind of support did you get from corporate that you felt was important for somebody with your level of investment experience?
I believe it is more about the onboarding process. It was black and white (compared to other concepts), to be honest, starting from the FDD (Franchise Disclosure Document), which covers pretty much everything. Besides that, like I said from day one, it was about servant leadership. I was able to pick up the phone and talk to Michael, Ty and Tom (CEO Michael Abt, COO Ty Counts and CFO Tom Cossuto). These are great executives with a lot of experience. They bring in a lot of experience so I had a list of questions, and they were always available. Besides that, we had several meetings one-on-one, and the access to information was seamless.
Do you have any particular plans in mind to add more units with Huddle House?
Definitely, I am thinking about adding more units with Huddle House. That is the gameplan and that is why I have come here. This time around, the brand possesses a great opportunity. There are definitely a lot of opportunities to grow and that is on my agenda. As a franchisee, I am looking to at least add 8 to 10 more units to my portfolio at Huddle House.
Are you going to look into building from the ground up or are you going to look into acquiring existing stock?
It will be most likely a part of both, strategically. I think the brand is focusing on a lot of remodels, so that is going to be part of the strategy initially. Definitely I would love to add a few units from the ground up as well.
What is your take on the brand direction where Huddle House is headed in the next five to ten years?
I believe Michael has been with the system for over three years now and he has done a phenomenal job turning around this brand. I am pretty sure they have a great strategic road map ahead of them. They are taking one step at a time and doing the right things, from menu innovation to the remodels and the new look of the evolution package. Also the operations, systems and processes that are being implemented. Training is big on the radar. There are a lot of resources being used from corporate and the right people are being hired.
What do you think might be the most important consideration for a prospective multi-unit owner?
The three biggest things, like I said earlier, is the brand culture. Very important and it’s not something to talk about but you should experience it and if you don’t then just don’t be part of it. The second thing is the great food. The brand has turned around and we have a great menu offering. The last thing is the compelling unit economics. If you were to compare this brand and the unit economics with the other competition out there, it is going to be hard to find something to compare to this. These three are the main things that I would recommend to a prospective franchisee who is onboarding into Huddle House.
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