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MARCH 2025
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I have been around the fast-food industry longer than I care to admit. Years ago, I was talking to another lawyer who said, “You sure know a lot about the fast food industry. Why don’t you get into it yourself?” And I do know a lot about it — not just the law but how the business works. As John Hamburger at Restaurant Finance Monitor says, investing in or financing a restaurant business is for thrill seekers. As a franchisee, you take a big leap of faith when you attach yourself to a brand. I have seen franchisees borrow as much as they can based on a brand’s cash valuation at the time. The more risk they take, the more opportunity they have! And they make it work at the top end of the brand’s value. But then the brand plummets for some reason beyond their control. Can they still make it work? Whether I am this risk-averse because I’m a lawyer or a lawyer because I am this risk-averse, it is hard to imagine placing that much trust in a franchisor. For me, it comes down to how you want to live your life. Thrill-Seekers Wanted: The High-Stakes World of Fast- Food Franchising
a big franchisee at the time.) We sat in a conference room with the president when he asked me a question: “Have you ever eaten at our restaurants?” An expletive crossed my mind as I considered what to say. Then I decided, I’ll just say it. “I used to go to eat at your restaurants all the time,” I said. “But about a year ago, I ordered a Whopper and got handed a sandwich that was so disgusting that I threw it away and went somewhere else. The bun was all shriveled and soaked. It looked so unappetizing. I went back a month later and got the same thing. I’ve never been back since.” Instead of being offended, he said, “God! I can’t tell you how many times I have heard that story!” Then, he gave me the backstory: The brand was trying to cut costs by switching to cheaper, lower- quality buns that didn’t taste as good. Franchisees could do nothing about it.
delivery sales manager. He made his initial cash in a bet with several customers who ran convenience stores that he could increase their gasoline sales if they gave him control. After multiple rounds of beer, Mike’s customers called his bluff, saying, “Show us how it’s done.” Mike’s game-changing move was to slash the price of cigarettes to the lowest in the state. Smokers flocked to his stores — and gassed up their vehicles before they left. Mike’s gasoline sales surpassed even his own targets. Never one to shy away from risk, Mike took that money, became a Burger King franchisee, and took on debt to grow. But even Mike couldn’t manage his way out of bad decisions at corporate. However, for those of you who, like Mike, are far braver than I am, the fast-food industry can still be a rewarding venture. Success often comes down to choosing
the right brand, understanding the risks, and adapting when corporate decisions don’t align with what works on the ground. My advice? Do your research before you choose your brand, stay informed, negotiate wisely, and build
Then, somebody at corporate also decided they had to remake Burger King’s image. From headquarters came the order: “You must all put new blue roofs on your stores.”
So, everybody had to spend $150,000– $200,000, money they absolutely did not have, to put a blue roof on their stores. It was one of those dumb corporate moves. Between the low-quality supplies and the ridiculous capital expenditure requirements, corporate drove a lot of franchisees down. I knew the owner of those 98 stores. His name was Mike, and he was a savvy, talented guy — a former regional gasoline
strong relationships with your teams and communities. Investing in a brand means trusting the system, but the most successful owners don’t rely on blind faith — they take control where they can, innovate within the framework, and always keep an eye on the numbers.
And me? I’ll stick to the law.
In the early 2000s, I was handling a workout for a huge Burger King
– Nate Riordan
franchisee with 98 stores. (That wouldn’t be considered huge anymore, but it was
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Beef Briefs Bizarre Fast-Food Legal Battles Is seeing always believing? Well, plaintiffs in two of the oddest legal cases in recent years set out to show the world that what ends up on our trays or in our drive-thru bags may not be as scrumptious as fast-food joints promise in their ads. A CLASH WITH BURGER KING Readers of a certain age may remember Wendy’s’ famous “Where’s the Beef?” campaign that brilliantly marketed the quantity of meat in its burgers compared to those other popular fast-food restaurants sold. Decades later, a New York resident launched a one-man mission to prove that one of Burger King’s modern-day competitors, Taco Bell, failed to heed the burger giant’s lead. In the summer of 2023, Frank Siragusa filed a class action suit against Taco Bell, alleging the company had “materially overstate[d] the amount of beef and/or ingredients” in its advertising for its Mexican Pizza and Crunchwrap menu items. Siragusa’s suit includes photographic evidence comparing the robust size of the advertised products versus the actual ones he purchased. While the case was ongoing as of this writing, Siragusa’s love for fast-food beef cannot be disputed. A VEGAN VENDETTA VANQUISHED Although only 3% of the adult population in the U.S. identified as vegan, according to research presented by the Vegetarian Resource Group in 2022, people who refuse to eat any animal-derived products remain a passionate and vocal minority. In 2019, a vegan named Philip Williams took Burger King to court after learning that the patty in his Impossible Whopper — marketed as a meat-free alternative to the popular burger — had been cooked on the same grill as beef products. In his suit, Williams argued that because Burger King had added a plant-based meal option to its menu, consumers were led to believe the meal would be prepared separately from the animal- based items in the kitchen. The judge disagreed, later dismissing the case and noting that Burger King’s marketing of the Impossible Burger promised only a meatless patty and nothing more. The lesson learned? Sometimes, even in the world of fast food, what you see is what you get.
Beef-A-Roo Franchisee Off to a Fast Start Former Flight Attendant Finds a New Crew
One fact often overlooked about teenage jobs at burger chains is that many kids actually like them — a lot.
Amanda Brown of Rose City, Michigan, says she had a great experience working at McDonald’s for 1 1/2 years as a teenager before launching a 12-year professional career as a flight attendant. While she loved working for airlines, she decided before giving birth to her first child at age 35 that she needed a more down-to-earth occupation. Brown puzzled over her next steps, wondering, “Which road am I going to take, now that I’m not into flying?” she told Nation’s Restaurant News. Her small hometown offered few jobs. Recalling how much she enjoyed working at a McDonald’s store in a nearby town as a teenager, Brown returned to the same restaurant. Although her family questioned her decision at first, Brown says she liked being busy. As it turned out, that fast-food job was “the start of me really winning in this business.” To reduce her commute, Brown applied to train at a Beef-A-Roo location in Rose City. Beef-A-Roo operates both brick-and- mortar restaurants and 800-square-foot drive-thru-only shipping container models, and Brown liked the novelty and economy of the container space. She started training at Beef-A-Roo and quickly rose to assistant general manager, then general manager. Her customer and manager reviews were so positive that she soon became a franchise owner. Industry sources have recognized Beef-A-Roo, founded in 1967 in Rockford, Illinois, as a promising brand. Next Brands acquired the franchising rights for Beef-A-Roo in 2021 and is actively seeking other franchise partners. Brown has created grassroots promotions, such as giving out free shakes at a local charter high school fundraiser. She is excited by the opportunities she sees in franchising. During a meeting with a Beef-A-Roo owner, he asked if she’d like to open one new restaurant a year for the next five years. Her response? “Heck yeah!” Brown plans to stay with the chain, adding, “I think we make a great team.”
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“You have to be willing to constantly innovate and adapt, because the market never stays the same.”
— Ray Kroc, McDonald’s Founder
Hungry for Hospitality?
“We are focused on creating the authentic human connections consumers are hungry for,” Schulman told analysts recently. He sees “a void growing in that lack of human connection ... [and] people crave it.” Cava has shielded its fans from the worst sticker shock by holding price increases to 12% between 2019 and 2023, compared to 30% industrywide. Also, the chain’s fresh, colorful roasted vegetables, hummus, and sauces make Cava’s DIY bowls and wraps highly photogenic for Instagram. Founded in 2006 in Rockville, Maryland, by three first-generation Greek-American owners, the chain’s recent hot streak has led some industry observers to call it “the next Chipotle.” Cava’s build- your-own menu items and savvy use of social media have driven some noteworthy successes. Hefty profit margins of 25.6% at the restaurant level have helped make Cava a Wall Street hit, despite its relatively small footprint of 352 restaurants. Since its initial public offering at $22 per share in June 2023, the chain’s stock price has risen more than fourfold. Management credits its most recent gains to a new loyalty program and a new flavor of a customer favorite, Garlic Ranch Pita Chips. The chain also has been quick to fill gaps in its menu, adding Mediterranean-spiced steak last year to fill a perceived protein gap.
The Secret Sauce: Why Customers Love Cava
As more restaurant chains expand drive-thru service and turn order-taking over to kiosks and bots, some customers yearn for a little old-school hospitality. The nation’s hottest restaurant chain has moved smoothly into that gap. Benefiting from the healthy image of Mediterranean food in general, Cava has grown into the biggest Mediterranean-style operator in the country. While other chains struggle to hold onto customers, Cava is posting double-digit percentage gains in year- over-year customer traffic. CEO Brett Schulman attributes the brand’s popularity to its emphasis on hospitality. As most chains move toward stark, tech- influenced store designs, Cava has begun a program called Project Soul to add plants and pillows to its restaurant decor. Each store has a “Love Button” on cash registers, which enables employees to reduce customers’ bills if they notice they’re having a bad day or see them being kind to others.
Visit our blog for helpful franchise law insights and industry trends: westcoastfranchiselaw.com/insights
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In This Issue 1
Why Fast Food Is a High-Stakes Game From Flight Attendant to Franchisee: One Working Mom’s Story
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Food-Based Courtroom Follies
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Cava Thrives on Hospitality and Comfort Flexible Scheduling Builds Employee Loyalty
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Faced with a shortage of job applicants and damaging quit rates among shift workers, fast-food restaurants are embracing flexible scheduling to motivate employees to stay. In an industry survey, approximately 70% of over 900 restaurant managers reported adopting flexible scheduling to improve employee retention in a competitive labor market. This was followed by 53% raising wages and 36% adopting employee recognition programs. According to the survey by 7shifts, more than 1 in 4 offered new career development opportunities. Flexible scheduling used to be a nightmare for managers, requiring hours of planning to assemble a workable schedule and near-constant availability for shift changes and absences. Now, however, technology has made both processes far more efficient. Here are a few tips on adopting flexible schedules. USE SCHEDULING SOFTWARE. This technology sharply reduces the time managers must spend building shift schedules. It also helps supervisors manage time off and allows employees to see their schedule online from anywhere as soon as it is complete, How Flexible Scheduling Cuts Fast-Food Turnover Flip the Script
helping them better manage their lives off work. The most common tech tools shiftwork managers use are Connecteam, Deputy, When I Work, and 7shifts. ALLOW EMPLOYEES FLEXIBILITY. Some managers build a schedule based on labor demand and let employees choose the shifts they prefer. This enables workers to manage their off-work responsibilities more smoothly, reducing conflicts and increasing retention. One employee in the 7shifts survey said she loved being notified when her schedule was set, seeing whom she would be working with, and dropping or picking up shifts easily. AVOID SHORT-NOTICE SCHEDULING. While a just-in-time approach may work fine when ordering paper towels or fresh fish, it is a non-starter when scheduling today’s workforce. Unpredictable shift schedules make managing other responsibilities nearly impossible, including child care, commuting, and school and family schedules. Giving employees advance notice of their shifts and avoiding creating on-call shifts can sharply improve employee satisfaction. According to one study, turnover dropped by nearly 40% when managers stopped scheduling employees with less than 72 hours’ notice.
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