new retirement workforce - the aarcsuperstores/whclubs bar/restaurants convenience stores specialty...

New Retirement Workforce

We started in 2011, when we saw communities who needed a retail advocate, someone who understood real estate and could negotiate connecting retailers and brokers. We now serve over 200 communities, maintaining a 5 client to 1 employee ratio.

Experience + Team work

Consumer Confidence

18 Year High

“The high level of confidence reflects a sturdy economic expansion in the U.S. that’s about to turn nine years old with no end in sight. Job openings are at a record high and unemployment is at a 17-year low.”

The Conference BoardConsumer Confidence Index®

retail is not dying

it’s changing

Eddie Lampert,President, CEO &

top shareholder of Sears Holdings

Jeff Bezos,Founder Amazon

Apocalypse Catalyst

of overallRetail Sales

are conductedOnline

US Census Bureau

9%

Income & Price ChangesFrom 1996 – 2016 Core Consumer Goods have been Inflated by 55%Significantly Higher Cost:• +200% - College Tuition and Textbooks• +125% - Childcare• +120% - Healthcare• +65% - Food and Beverage• +60% - Housing CostsMore Affordable:• -45% - Cellphone Service• -70% - Software• -72% - Toys• -95% - TVs

40% of the US Population Incomes have not Kept Up with Inflation

Result: Consumers Cannot Keep Up with Inflation and are Shopping at Lower Cost Retailers and Less at Higher Image/Brand Stores

Necessities

Luxury Items

Source: Lee Holman & Greg Buzek, IHL Group, Beyond the “Retail Apocalypse” to a bright Future, August 2018

Shrinking Middle ClassOver the last 40 Years the Middle Class has Shrunk from 61% to 50%

Upper Class has Grown by 50% in Numbers

Lower Class has Grown from 25% to 29%

Over the last 30 Years Malls were Built in Areas thought to be Middle Class

Source: Pew Research Center


Retail Sales UpRetail Sales are Up $190.6b through the First 7 Months of 2018• That is the Annual Retail Trade for The Netherlands. This is just US Growth in 7

Months

Fastest Growing Retail Segments• +29.0% - Mass Merchants, Supercenters, Off-Price• +14.8% - Convenience/Gas• +5.5% - Restaurants• +5.5% - Specialty Softgoods• +4.3% - Drug Stores, Cosmetics, Vitamins• +3.9% - Food and Beverage Stores• +2.9% - Specialty Hardgoods

Declining Retail Segments• -0.3% - Department Stores

The struggle is in the malls. They must focus on discount and off-price retailers to replace the department store anchors that are closing. Malls must focus on churches, medical facilities and other retail formats to be the traffic drivers for their centers to succeed.


Retail is Growing2017• 2,354 New Openings• 558 New “Core Retail” Stores (Core Retail is chains with > 50 Stores)• 1,787 New Restaurants Opening in 2017

2018• 3,835 New Openings• 2,012 New “Core Retail” Stores• 1,823 New Restaurants

Source: IHL Group, Company Reports


Retail is Growing

Superstores/WH Clubs

Bar / Restaurants

Convenience Stores

Specialty Softgoods

Specialty Hardgoods

Fast Food

Mass Merchandisers

Drug Stores

Department Stores

Food / Grocery

% Net Opening Stores vs NetClosing

% Banners Closing Stores % Banners Gaining Stores

For each companyclosing stores

2.7are opening stores


83%17%

3% 85%

44%

40%36%49%23%

34%

34%14%

54%16%

68%

26%

21%

24%

30%36%


Retail is Growing

1.0 is breakeven number of opening vsclosing

Source: IHL Group, CompanyReports


Convenience Stores


Fast Food

Bar / Restaurants

Food / Grocery

Specialty Hardgoods

Mass Merchandisers

Drug Stores

Specialty Softgoods

Department Stores

Retail Growth

• Fastest Growing Retailers: Dollar, C-Stores, Beauty, and Specialty Hardgoods

• What’s Growing Mirrors the Incomes of Consumers:• More Discounters• Less Mid-Range Luxury



Walgreens

7-Eleven

Dollar General

Couche-Tard

Dollar Tree

O’ Reilly

Great Clips

Autozone

Fantastic Sam’s

Five Below

Ulta Beauty

Sherwin Williams

MINISO

Marathon Oil

Harbor Freight

Tractor Supply

Plans for 2018 Retail Store Count Growth

Retail Decline

• Many of these Retailers Have been Shrinking for a Decade• Outdated Business Models or Market Issues?



Rite Aid

Stripes C-Stores

Toys R Us

Mattress Firm

Best Buy

Radio Shack

The Bon Ton

Sears/Kmart

Signet Jewelers

Ascena Retail

Charming Charlie

Gymboree

Payless Shoesource

The Children’s Place

Orchard Supply

Perfumania

Plans for 2018 Retail Stores Decline

Restaurant Growth

• Coffee, Chicken & Pizza Driving Growth• Fast Food is the Fastest Growing



Plans for 2018 Restaurant Count Growth

Starbucks

Freshii

Jersey Mike’s

Wendy’s

Domino’s

Chick-Fil-A

MOD Pizza

Taco Bell

Tim Horton’s

Noble Romans

Dunkin’ Donuts

Culver’s

Zaxby’s

Fuzzy’s Taco Shop

Popeye’s

WingStop

Restaurant Decline

• 500 Closings for Subway Represents Less than 3% of Their Store Total• Franchise Concepts Lends Itself to Faster Growth, Sometimes These Don’t

Work Out• Table Service Chains are Struggling• 1,358 restaurants closing doors out of a total of 192,150 or 0.7%

Source: IHL Group, CompanyReportsSource: IHL Group, CompanyReports


Subway

Teavana

Chipotle

McDonald’s

Pizza Hut

Quizno’s

Simple Simon’s Pizza

Coffee Beanery

Ben & Jerry’s

Burger King

Au Bon Pain

Macaroni Grill

TGIFridays

Church’s Chicken

Dairy Queen

Orange Leaf

Plans for 2018 Restaurant Count Decline

retail is not dying

it’s changing

In ConclusionRetail in the US is Right-Sizing and Retailers Need to Up Their Game

Retail is Constantly Changing• In 1990 we had 4 Wal-Mart Superstores, in 2000 we had 1,500+• Many People Thought This Would Have a Negative Effect but Retail not Only

Survived, It Grew

US Population is Continues to Increase Building in Retail Growth

Consumers Value Experience, Retailers and Malls that Invest to Improve Shopping Experiences Will Thrive


How Do Retirees Shop?

Shopping Habits of Retirees

• Fred’s • Dollar General• Bealls• Belk• Family Dollar

• Chico’s• Talbots• Lord & Taylor• Sak’s Fifth Avenue• Williams-Sonoma

• Bealls• Chico’s• Military Exchange• Naturalizer• Talbots

• Neiman Marcus• Bloomingdales• Lord & Taylor• Chico’s• Saks Fifth Avenue

Low Income (Less than $50,000)

High Income ($100,00 - $200,000)

Moderate Income ($50,00 - $100,000)

Elite Income (More than $200,000)

Source: Equifax for age 65+ based on likelihood to shop at locations above the national average index

Disposable Income for Baby BoomersChallenges Reduced Spending

• Education Costs• Medical Expense• Children

• Entertainment • Food• Furniture • Clothing

Where Do Boomers Shop? • Health & Wellness• Pet Supplies• Grandchildren

• E-Commerce Savvy• Value Oriented • Here & Now Experience

RetireeWorkforce?

22% of boomers have less than

$100,000 of retirement savings -- and half of those have less than $50,000.

It’s no wonder that 62% of

younger boomers (ages 51 to 65) expect employment to be a source of income in their retirement years.

https://www.entrepreneur.com/article/252220

Not Ready to Stop Working?

Build your own business

Buy an Existing Business

Buy a Franchise

29

Personal Business Model

Types of Customers

Service or Product

New or Established Industry

Room for Growth

Other Items?

Employees

BudgetBusiness Environment

Full or Part-timeHours

Number of Units

Business Preferences

30https://www.thebalancesmb.com/best-business-opportunities-for-retirees-2948607

1. Chauffeur2. Tour Guide – Local or Traveling3. Child Care or Baby Sitter4. Translation Services or Language Lessons5. Tutoring 6. Pet Services 7. Security Services

Jobs for Retirees to Consider

Franchise is…

A license to use:•Name and trademarks•Products•Business Systems

In exchange for:•Initial franchise fee•Ongoing royalties

Buying into a successful franchise is often a lower-risk of starting a business. True or False?

TRUE

34

Buying a Franchise - Disadvantages

Disadvantages• Structured operating system in some franchises• Territory restrictions• Can only sell their products• Little initial cash flow• Franchise Fee and Royalties

35

Buying a Franchise - Advantages

Advantages• Name recognition• Licensed trademark• Proven business system to start and operate• Training and support (initially and ongoing)• Marketing expertise / Purchasing power• Lower failure rate • Financing options• Hours • Franchise family

Fast food chains are the overwhelmingly majority type of franchises. True or False?

FALSE

37

Franchising Myth :

�Only french fries and retail�

38

Franchising Fact :FACT: • Over 3,100

different franchise companies

• In more than 80 industries

• With over 900,000 operating units

Popular Categories

• Education• Retail• Pet Care• Cleaning• Real Estate• Senior Care• Home Repair• IT Services

Why do franchisees often find it easier to raise finances from a bank?

A. Venture Capitalists will not invest in a franchiseB. Franchisees tend to be better entrepreneurs C. Banks understand the risks in lending to franchises D. A franchise comes with a ready-made business plan

A. Banks understand the risks in lending to franchises

Use 401(k) to buy franchise!Flexible

With a business financing 401k plan (ROBS) you fund your business

with 401k, IRA or other retirement funds; therefore, your business

has the necessary funding to grow and your retirement account has

the potential to earn sizeable returns and grow tax deferred.

Earn Salary

The business financing 401k plan (ROBS) allows you to draw a

reasonable salary from the business.

Make tax deferred contributions

Since the business financing 401k plan (ROBS) includes a retirement

account, you can continue saving for retirement by making annual

tax-deductible contributions. For example, for tax year 2016 each plan

participant can contribute up to $53,000 plus an additional $6,000 for

those age 50 years of age-and older.

https://www.mysolo401k.net/

41

Franchising Myth :

�Franchises are expensive�

42

Franchising Fact :

Total Investment Range PercentageUnder $50,000 13%

$50,001 to $100,000 17%$100,001 to $250,000 28%$250,001 to $500,000 23%

Over $500,000 18%

FACT:

Source December 2010 FranData

43

Franchising Fact :

FACT:

There is no automatic correlation between the cost of the franchise and the potential return.

44

Franchising Fact :

FACT:Service businesses require far less capital investments and frequently yield higher returns.

A franchisor will usually provide all of the following to a franchisee except…

A. Staff to Run the Franchise B. TrainingC. IT and Management SystemsD. Marketing Support

A. Staff to Run the Franchise

46

What is Franchising?

The creation of a distribution channel to build brand identity and attain market dominance…

QUICKLY!

Franchise Headquarters

Franchise Operators

Customers

47

Why Franchising Works

Proven, systematic approach to starting and staying in business

– Experience– Simplicity– Initial Training & Ongoing Support– Name Recognition– Sales, Marketing & Operational Systems– Culture of Teamwork

Franchisors are generally looking for franchise candidates who have specific skills and experience in their industry.

True or False?

False

49

Franchising Myth :

�Industry experience is required�

50

Franchising Fact :

FACT:• Franchisors want a person that can use their system.

• They want someone who will focus on being an owner

– business and management skills

– people and communication skills

• Proven Process

– Franchisor trains on how to use their system

51

How Franchisors Select Franchisees

• GOOD Franchisors are VERY selective about bringing on Franchisees.

– It’s a marriage – sticking together for 10+ years

– They match the skill set, budget, income needs, etc. to the candidate.

– It is a mutual approval process

Total initial investment: $159,224 to $434,521*Minimum liquid asset required: $60,000 – $100,000**

Home based franchises have attracted a great deal of attention as both start up and operating costs are comparatively small and barriers to entry are low. Cleaning services, travel concepts, food distribution like coffee machine services, hospitality services, etc. all can be run out of a home office or small inexpensive office location.

54

FranNet – Free Consulting

55

https://www.retailstrategies.com/resources/

56

Sources

https://www.entrepreneur.com/franchise500/2018

https://www.franconnect.com/

RESEARCH

CONSULTANTS

https://www.frannet.com/

https://www.ifranchisegroup.com/

https://www.franchoice.com/

https://www.franchise.org/

TOP 9 FRANCHISES2018

[email protected] (205) 314-0386 retailstrategies.com

mailto:[email protected]

2018

Arby’sU.S. UNITS: 3,237U.S. FRANCHISED UNITS: 2,193 SYSTEM-WIDE SALES: $3,600,000,000 FRANCHISE FEE: $6,250–$37,500TOTAL STARTUP COSTS: $271,950–$1,773,000ROYALTY: 4% of net salesRENEWAL FEE: 10% of then-current license fee MARKETING FEE: 4.2%

Arby’s remarkable resurgence continues. The 53-year-old chain has, at press time, racked up 25 consecutive quarters of same-store sales growth, 16 consecutive quarters of outperformingindustry norms, and 11 consecutive quarters of transaction growth. Compared with 2012, AUV is up more than 25 percent and is above $1.1 million.

Arby’s franchisees, meanwhile, are singing a happy, hopeful tune. Ninety-seven percent say they believe in the company’s long-term growth potential, according to FBR data. That’s a striking turn from 2013, when only 67 percent saw brighter days ahead.

From a bold marketing approach unapologetically focused on the chain’s meat-focused menu(including options like venison and pork belly) to its modern Inspire restaurant design that hashelped drive a 15–20 percent spurt in sales, Arby’s continues its ascent from the doldrums.

“The level of healthy growth we’re experiencing—sales growth from existing restaurants and sales growth from new restaurants—is paying huge dividends for our brand and our franchisees,” says Greg Vojnovic, chief development officer.

The results are propelling expansion beyond Arby’s base in middle America, including abroad, where Arby’s has signed international development agreements for the first time since 2010 and looks to expand into four new countries in thecoming years.

[email protected]

(205) 314-0386 retailstrategies.com


2018

Captain D’sU.S. UNITS: 516U.S. FRANCHISED UNITS: 226

SYSTEM-WIDE SALES: $544,428,000

FRANCHISE FEE: $35,000

TOTAL STARTUP COSTS: $781,000–$1,013,000

ROYALTY: 4.5%

RENEWAL FEE: $17,500MARKETING FEE: 1.1% of gross sales (subject to increase up to

a maximum of 2% of gross sales)

It’s been a steady run of success at Captain D’s. The Nashville, Tennessee–based chain has recorded six consecutive years of same-store sales increases, as well as four successive years of record-high AUV. In fact, AUV is nearing $1.1 million, a figure above the top level of Captain D’sreported startup costs and a main reason why the company has enjoyed a 225 percent jump in new store openings since 2015.

As the nation’s leading fast-casual seafood restaurant, Captain D’s represents an alternative to burgers, pizza, and sandwiches, leaning instead on mindfully sourced seafood—specifically Alaskan pollock—and fresh vegetables.

“We’re seeing the health trend continue to rise, and it’s become increasingly important to providea set of options for consumers that are satisfying in taste and in line with a low-calorie diet,” saysCaptain D’s chief development officer, Michael Arrowsmith.

And with about 60 percent of the company’s 516 units being corporate-owned stores, Captain D’s leadership has a substantial stake in getting things right.

“We don’t ask franchisees to do anything we’re not willing to do,” Arrowsmith says, noting that about two-thirds of the company’s units have been reimaged in recent years to carry Captain D’s vibrant coastal design theme.

[email protected]



2018

Checkers/Rally’sU.S. UNITS: 840U.S. FRANCHISED UNITS: 537 SYSTEM-WIDE SALES: $837,355,456 FRANCHISE FEE: $20,000–$30,000TOTAL STARTUP COSTS: $96,414–$1,501,265 ROYALTY: 4%RENEWAL FEE: $15,000MARKETING FEE: 4.5% of net salesBolstered by six consecutive years of same-store sales gains and AUV topping $1.2 million, Check-ers/Rally’s makes a repeat appearance on the Best Franchise Deals list.

The Tampa, Florida–based enterprise has 840 total units between its sister concepts—about two-thirds of them run by franchisees—and aims to have 1,200 units running by 2020. It’s an ambitious plan, company leaders acknowledge, but one supported by some 250 restaurants in the company’s development pipeline.

FBR’s Stites says Checkers/Rally’s particularly impresses with its deep focus on securing franchi-see buy-in and stimulating improved performance.

“They try to engage franchisees at every level of the company, and that seems to work well for them,” Stites says, adding that the company’s many large multiunit owners reflect a strong system.

In March, Oak Hill Capital Partners purchased the sister brands for a reported $525 million. Check-ers/Rally’s CEO Rick Silva described the deal as “throwing gasoline on a fire.”

“Our growth as a brand will be strengthened by the depth of Oak Hill Capital,” says Checkers/Ral-ly’s chief development officer Jennifer Durham, adding that franchisees overwhelmingly applaudedthe transaction.

[email protected]



2018

Donatos PizzaU.S. UNITS: 155U.S. FRANCHISED UNITS: 100 SYSTEM-WIDE SALES: $186,000,000 FRANCHISE FEE: $30,000TOTAL STARTUP COSTS: $361,360–$697,400 ROYALTY: 5%RENEWAL FEE: N/A MARKETING FEE: 5%With a loyal following for its famous Edge-to-Edge pizza, Columbus, Ohio–based Donatos continues its winning ways with delivery, catering, and an enhanced dine-in experience that provides its fran-chisees various paths to profitability.

Vice president of development and franchising Jeff Baldwin says the company’s net annual same-store sales grew more than 14 percent from 2013 to 2016, while AUV is now nearing $1.1 million.Those metrics continue to drive the 155-unit chain’s development with both internal and external partners.

“In addition to organic restaurant growth from current franchise partners, we have 10-plus new multiunit franchise groups building restaurants in our growth territories, with several other prospects lined up in the franchise pipeline,” Baldwin says.

And though Donatos has been around since 1963, leaders continue to modernize the restaurant to secure relevancy with today’s consumers. Donatos, for instance, has upgraded its dine-in experi-ence by pairing reclaimed wood, black brick, and red glass with live entertainment, local beers on tap, and a semi-open kitchen that injects transparency and flair into its eateries.

“All of our new restaurants have the new image, and we are now beginning to refresh some of our more mature locations,” Baldwin says.

[email protected]



2018

Kona IceU.S. UNITS: 818U.S. FRANCHISED UNITS: 798 SYSTEM-WIDE SALES: $144,000,000 FRANCHISE FEE: $15,000TOTAL STARTUP COSTS: $120,225–$143,025 ROYALTY: $3,000RENEWAL FEE: $5,000 MARKETING FEE: $500Kona Ice founder and CEO Tony Lamb anticipates having more than 1,000 Kona Ice trucks on the road within the next year, impressive growth for a brand that’s only 10 years old.

The tropical shaved-ice concept, a modern spin on the ice cream truck of yesteryear, offers patrons more than 500 flavor combinations alongside new flavor lineups. Those lineups include Fruit First, which meets FDA Smart Snack guidelines, and Kona Krafted, which appeals to a more sophisticat-ed crowd with innovative flavors like Lavender Lemonade and Bourbon Black Cherry Vanilla.

In addition to its standard trucks, Kona offers a trailer, a kiosk, and a mini format, options that afford operators flexibility to exist in different venues, including indoor spaces. Franchisees also have the ability to set their own schedule, choosing to take off certain months or to hustle from one location to the next seven days a week.

The company’s philanthropic slant, meanwhile, further boosts its neighborly appeal. Since its de-but in 2007, Kona Ice has returned more than $40 million to the communities it serves, including schools, youth sports, and local nonprofits.

“Kona Ice is more than just a business; it’s a way to take ownership and find value in your career while improving your local community at the same time,” Lamb says.

[email protected]



2018

Penn Station East Coast SubsU.S. UNITS: 310U.S. FRANCHISED UNITS: 309

SYSTEM-WIDE SALES: $195,426,000

TOTAL STARTUP COSTS: $313,725–$588,911ROYALTY: 4–8% of net sales

RENEWAL FEE: $2,500

MARKETING FEE: 1% of net sales

Known for its grilled sandwiches, fresh-cut fries, and fresh-squeezed lemonade, Penn Station has more than 300 units in operation, and president Craig Dunaway calls each shop’s success the most important thing to the company.

“With only one company-owned location … we’re investing our resources in helping franchisees maximize their profitability,” Dunaway says, noting that 20 of the 30 corporate employees at Penn Station’s Milford, Ohio, headquarters are focused on operations.

The company, which has scored seven consecutive years of same-store sales growth, offers vast corporate support to its franchisees. Area representatives, for instance, visit stores six to eight times each year to conduct a 1,000-point performance evaluation, while Penn Station also invested about $400,000 last year to create a regional franchise consultant program. This new level of field-based management helps franchisees assess their business—P&L, balance sheets, and more—and makes specific recommendations for improvement.

Last year, the chain released its first-ever loyalty program and mobile app, while continuing its long-running legacy of minimizing controllable costs like food and paper and boosting revenues. AUV now hovers near $645,000.

“Penn Station is a quiet giant, and they make it go year after year with good unit-level economics,” Stites says.

[email protected]



2018

Smoothie KingU.S. UNITS: 743U.S. FRANCHISED UNITS: 717 SYSTEM-WIDE SALES: $350,000,000 FRANCHISE FEE: $30,000TOTAL STARTUP COSTS: $188,200–$414,050 ROYALTY: 6%RENEWAL FEE: $5,000 MARKETING FEE: $5,000From 2011 to 2016, Smoothie King’s average annual sales per store increased 51 percent, aneye-catching run that has fueled franchising interest in the New Orleans–based concept. Last year, in fact, the company inked 111 franchise and development agreements that will add 172 stores to its system and push total unit count toward 1,000.

Just as important, chief development officer Kevin King says, is the fact that Smoothie King has a core product that is increasingly in demand year-round.

“We have a simple business model with a low initial investment, labor, and food costs, and we make great-tasting smoothies for people who want to live a healthy and active lifestyle,” says King, who bucks the idea that smoothies are a seasonal product.

“The consumption of our smoothies isn’t based on weather; it’s about lifestyle,” he says. “Our prod-ucts help our guests fulfill their health and fitness goals, [and] this strategy drives our growth.”

Smoothie King’s recent success, including AUV approaching $500,000, hasn’t produced compla-cency. The company recently launched a new loyalty program, Smoothie King Healthy Rewards, as well as its first national TV campaign, which aims to drive new guest traffic and trials of innovative new products launching throughout 2017.

[email protected]



2018

Wingstop

U.S. UNITS: 998U.S. FRANCHISED UNITS: 977 SYSTEM-WIDE SALES:$972,270,000FRANCHISE FEE: $30,000 ($10,000 development fee, $20,000 franchise fee)TOTAL STARTUP COSTS: $370,000 (excluding real estate pur- chase or lease costs and pre-opening expenses)ROYALTY: 6% of gross salesRENEWAL FEE: 25% of sum of then-current development fee and franchise fee at time of renewalMARKETING FEE: 4% of gross salesWith another appearance on the Best Franchise Deals list, its third since 2011, Wingstop continues to prove its mettle as a franchising powerhouse.The Dallas-based concept, which is 98 percent franchised, has posted 13 years of same-store sales growth. Even more, Wingstop boasts some of the highest sales-per-square-foot figures around alongside a three-to-one sales-to-investment ratio and 35–40 percent cash-on-cash return for the average 1,700-square-foot unit. AUV, meanwhile, sits around $1.1 million.From menu to operations, Wingstop CEO Charlie Morrison says, keeping things simple feeds the chain’s ongoing success—though don’t mistake simplicity for apathy.To wit, Wingstop’s advanced mobile, social, and online e-commerce operations have helped franchisees stay competitive in the increasingly tech-driven restaurant space. Digital sales now com- prise nearly 20 percent of total sales, and Morrison says the brand will continue to develop its digital and social ordering capabilities. That includes voice-activated ordering with menu-item customiza- tion through Amazon Alexa and social ordering on Facebook Messenger and Twitter, as well as on the Wingstop app and website.Building toward 2,500 U.S. stores, Morrison says, Wingstop is “constantly evaluating ways to grow and evolve so that we can best serve our fans and our franchisees alike.”

[email protected]



2018

Zoup! Fresh Soup Co.U.S. UNITS: 77U.S. FRANCHISED UNITS: 74 SYSTEM-WIDE SALES: $54,700,000 FRANCHISE FEE: $39,900TOTAL STARTUP COSTS: $372,650–$568,750 ROYALTY: 6%RENEWAL FEE: $7,500MARKETING FEE: 1.5% of gross sales to national brand fund, 0.5% gross sales to training and customer service fundBolstered by AUV just under $630,000 and startup costs topping out at $568,750, Zoup! has itself

well positioned to attract franchisee investment.

The nearly 20-year-old fast casual attracts prospective franchisees with a simplified menu, its lead-

ership in a niche category, and “lifestyle hours” of operation.

Stites says he expects big things from Zoup! after years of relatively slow, organic growth.

“It’s taken them a long time to get where they’re at, but they seem poised to grow with their existing

franchisees and new partners,” he says, noting that Zoup! has earned top marks from its franchi-

sees in areas such as financial opportunity, training and support, and core values.

In the near future, the 77-unit chain headquartered in Southfield, Michigan, will be rolling out a new POS system to give franchisees real-time data, as well as a proprietary labor management system and a new inventory management system designed to help franchisees better manage costs and

more easily identify bottom-line-boosting efforts.

Zoup! founder and CEO Eric Ersher also touts a new store design, as well as formats that will allow for smaller footprints, lower real estate costs, and reduced start-up costs.

[email protected]



Debunking the Retail Apocalypse


What We KnowRetailers Close Store Every Year• Rebalancing Store Portfolio’s is Normal• “Fail Quickly” – Mantra from the Great Recession• Macro Events, like Anchor Closures, Effect Everyone

Bad News Sells

Amazon is the Villain• Amazon is a Threat but Not the Cause for Struggling Segments

Overstored

Since 1970, Retail Mall Space Expanded at 4x the Rate of the Population Growth

Low Interest Rates Allowed Retailers to Grow Quickly

Many Retailers Expanded Beyond Their Ability to Service Customers

Retail Competition is so High that Any Hiccup Causes Problems

Source – Cowan Research


Fast Fashion & BeautyDepartment Stores Were Lazy and Relied on the Strength of Their Brands

Fast Fashion Brands (Zara / H&M) Bringing Clothes to Stores in 3 weeks Versus 6 Months

Fast Fashion & Over Expansion Have Had a Higher Impact than Online Competitors

TJ Maxx & Ross Stores have Equally Impacted the Market as Consumers Hunt for Bargains

Cosmetics, a High-Margin Staple of Department Stores, have Broken Out to Standalone Categories


Income & Price ChangesFrom 1996 – 2016 Core Consumer Goods have been Inflated by 55%Significantly Higher Cost:• +200% - College Tuition and Textbooks• +125% - Childcare• +120% - Healthcare• +65% - Food and Beverage• +60% - Housing CostsMore Affordable:• -45% - Cellphone Service• -70% - Software• -72% - Toys• -95% - TVs

40% of the US Population Incomes have not Kept Up with Inflation

Result: Consumers Cannot Keep Up with Inflation and are Shopping at Lower Cost Retailers and Less at Higher Image/Brand Stores

Necessities

Luxury Items


Shrinking Middle ClassOver the last 40 Years the Middle Class has Shrunk from 61% to 50%

Upper Class has Grown by 50% in Numbers

Lower Class has Grown from 25% to 29%

Over the last 30 Years Malls were Built in Areas thought to be Middle Class

Source: Pew Research Center


Other IssuesStudent Loan Debt• Over the Last 9 Years Student Loan Debt has Increased by 105%• Student Loan Debt has Become a Major Concern over the last 10 Years

Rise of Online Retail• Before, Consumers HAD to Shop in Store• Now, Retailers Must Make Consumers WANT to Shop In Store• 70% of US Households now have Amazon Prime

Retailers Look in the Mirror• Retailers Prioritized Store Growth Over Customer Experience• Lack of Associates Training Yielded 25% of Customers Leaving Their Store Without

Buying at Least One Item They Intended to Buy


The Real Story

The Real Story2017 Year End

• Retail sales +$232b in 2017 > +4.5% growth

ü C-stores, Mass Merchants, DIY, Furniture, Men’s Clothing and Toys all doing well

• Online sales were up 18% over the holidays

ü 75% of growth was traditional retailers

ü 10.2% of total retail is pure play

• Amazon’s Online Sales contribute to about $29b of the overall growth


The Real Story2018 Year so far – Through July

• Retail sales +$5.5%

ü US Economy grew extra $190.6b in first 7 months

ü Retail Growth Projected +4.4 to 4.6% in 2018

The equivalent annual sales of these retailers combined has been added to

the US retail Economy


Retail Sales UpRetail Sales are Up $190.6b through the First 7 Months of 2018• That is the Annual Retail Trade for The Netherlands. This is just US Growth in 7

Months

Fastest Growing Retail Segments• +29.0% - Mass Merchants, Supercenters, Off-Price• +14.8% - Convenience/Gas• +5.5% - Restaurants• +5.5% - Specialty Softgoods• +4.3% - Drug Stores, Cosmetics, Vitamins• +3.9% - Food and Beverage Stores• +2.9% - Specialty Hardgoods

Declining Retail Segments• -0.3% - Department Stores

The struggle is in the malls. They must focus on discount and off-price retailers to replace the department store anchors that are closing. Malls must focus on churches, medical facilities and other retail formats to be the traffic drivers for their centers to succeed.


Online SalesOnline Sales Represents 10% of Total Retail but 18.7% of Total Retail Growth

• Critical to note that in 2017, E-Commerce sales growth represented 25% of total retail sales growth, but only 18.7% in 2018. So traditional retailers grew their businesses off and online, faster than online retailers.

Amazon’s Online Business is Estimated to be 13.9% of US Retail Growth YTD• This Does not Take in to Account the Whole Foods Acquisition

Conclusion: This is all Still Retail and Retailers who Focus on the Consumer Will Succeed


Retail is Growing2017• 2,354 New Openings• 558 New “Core Retail” Stores (Core Retail is chains with > 50 Stores)• 1,787 New Restaurants Opening in 2017

2018• 3,835 New Openings• 2,012 New “Core Retail” Stores• 1,823 New Restaurants



Retail is Growing


Bar / Restaurants

Convenience Stores

Specialty Softgoods

Specialty Hardgoods

Fast Food

Mass Merchandisers

Drug Stores

Department Stores

Food / Grocery

% Net Opening Stores vs NetClosing

% Banners Closing Stores % Banners Gaining Stores

For each companyclosing stores

2.7are opening stores


83%17%

3% 85%

44%

40%36%49%23%

34%

34%14%

54%16%

68%

26%

21%

24%

30%36%


Retail is Growing

1.0 is breakeven number of opening vsclosing



Convenience Stores


Fast Food

Bar / Restaurants

Food / Grocery

Specialty Hardgoods

Mass Merchandisers

Drug Stores

Specialty Softgoods

Department Stores

Retail Growth

• Fastest Growing Retailers: Dollar, C-Stores, Beauty, and Specialty Hardgoods

• What’s Growing Mirrors the Incomes of Consumers:• More Discounters• Less Mid-Range Luxury



Walgreens

7-Eleven

Dollar General

Couche-Tard

Dollar Tree

O’ Reilly

Great Clips

Autozone

Fantastic Sam’s

Five Below

Ulta Beauty

Sherwin Williams

MINISO

Marathon Oil

Harbor Freight

Tractor Supply

Plans for 2018 Retail Store Count Growth

Retail Decline

• Many of these Retailers Have been Shrinking for a Decade• Outdated Business Models or Market Issues?



Rite Aid

Stripes C-Stores

Toys R Us

Mattress Firm

Best Buy

Radio Shack

The Bon Ton

Sears/Kmart

Signet Jewelers

Ascena Retail

Charming Charlie

Gymboree

Payless Shoesource

The Children’s Place

Orchard Supply

Perfumania

Plans for 2018 Retail Stores Decline

Restaurant Growth

• Coffee, Chicken & Pizza Driving Growth• Fast Food is the Fastest Growing



Plans for 2018 Restaurant Count Growth

Starbucks

Freshii

Jersey Mike’s

Wendy’s

Domino’s

Chick-Fil-A

MOD Pizza

Taco Bell

Tim Horton’s

Noble Romans

Dunkin’ Donuts

Culver’s

Zaxby’s

Fuzzy’s Taco Shop

Popeye’s

WingStop

Restaurant Decline

• 500 Closings for Subway Represents Less than 3% of Their Store Total• Franchise Concepts Lends Itself to Faster Growth, Sometimes These Don’t

Work Out• Table Service Chains are Struggling• 1,358 restaurants closing doors out of a total of 192,150 or 0.7%

Source: IHL Group, CompanyReportsSource: IHL Group, CompanyReports


Subway

Teavana

Chipotle

McDonald’s

Pizza Hut

Quizno’s

Simple Simon’s Pizza

Coffee Beanery

Ben & Jerry’s

Burger King

Au Bon Pain

Macaroni Grill

TGIFridays

Church’s Chicken

Dairy Queen

Orange Leaf

Plans for 2018 Restaurant Count Decline

FDCM Segments

• Drug Stores Shrinking Due to Walgreens & Rite Aid Merger• Cosmetics & Vitamins Driving Growth (Sephora, Lush, Ulta, and Sally Beauty)

Sources: US Census on Retail Trade, IHL Group, Company Reports


General Merchandise

• Growth in Dollar & Off-Price Retailers• Mirrors Economic Challenges of Consumers• Department Stores Struggling with Rise of Fast Fashion and Breakout of

Cosmetics



HardgoodsHardgoods encompass a broad range of products, including furniture, appliances, tools, electronics, jewelry and sporting goods.

SoftgoodsSoftgoods include apparel and bedding.

Hardgoods Versus SoftgoodsHardgoods and Softgoods refer to the two major classifications of retail inventory. "Softgoods" generally refers to goods that are literally soft, such as clothing and bedding. "Hardgoods" commonly refers to less personal items, such as appliances or sports equipment. Hardgoods are essentially synonymous with consumer durables.


Restaurants

American’s Eating OutAmerican’s are more “Time Starved” then EverIncome & Time Have Significant Negative Impact on Bar and Table Service Restaurants



Restaurants

Restaurants

Source: Nations Restaurant News

retail is not dying

it’s changing

Improve The ExperienceRetailers Have to Attract Consumers to Their Stores

Invest in Experience at the Store Level (Apple / Chick Fil A)

Investing in Their People Yielding Better Customer Service

Retailers are losing 3.4% of Same Store Sales due to Out-of-Stocks


Address Out of StocksRetailers Must Have Inventory

Amazon is Almost Always In Stock

“Right Size” Inventory

Prime v. Non-Prime member when encountering Out of Stock


In ConclusionRetail in the US is Right-Sizing and Retailers Need to Up Their Game

Retail is Constantly Changing• In 1990 we had 4 Wal-Mart Superstores, in 2000 we had 1,500+• Many People Thought This Would Have a Negative Effect but Retail not Only

Survived, It Grew

US Population is Continues to Increase Building in Retail Growth

Consumers Value Experience, Retailers and Malls that Invest to Improve Shopping Experiences Will Thrive


Retail’s Impact1 in 4 jobs are retail

Source:National Retail Federation

sales tax revenueaverage fast food restaurant annual sales exceed $1M

Top 10 Retail States by Impact

Per National Retail FederationRetail is 15% of GDP

retail IS economic

development

invest time &

resources in

retail

new retirement workforce - the aarcsuperstores/whclubs bar/restaurants convenience stores specialty...

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