Franchising Article
Rasha Mourtada
From Report on Small Business magazine
Published on Thursday, Nov. 19, 2009 12:00AM EST
Last updated on Wednesday, Dec. 09, 2009 3:12PM EST
When Mike and Linda Fujita visited Edmonton in the fall of 2007 for a family reunion, they happened to see a line of people extending out the door of a local business. "We thought we should stop and see what all the hoopla was about," says Mike Fujita. "It turned out to be a bread store."
To be exact, it was a COBS Bread store. Curious about the commotion, the couple got in line. "We thought we'd take some to the reunion and see what everyone thought," says the 49-year-old. "And, well, we just fell in love with it. That was our first inclination that this might be what we wanted to do."
While the Fujitas had never heard of the COBS bakery franchise until that moment, the first Canadian location opened back in 2003. The chain is an offshoot of Bakers Delight, an Australian company launched in 1980 that has 650 stores in Australia and New Zealand. Since the Bakers Delight brand had already been claimed in Canada by a muffin-mix producer, the Canuck division was renamed COBS, which stands for "celebration of breads." COBS now has about 60 corporate and franchisee locations in Ontario, Alberta and British Columbia, and plans to open as many as 100 stores per year in Canada over the next five years.
The franchise has staked its reputation on being every neighbourhood's "local baker." Most stores are located in residential districts and endeavour to become a household name in the community by regularly handing out product samples, taking part in civic events and supporting local charities. And each store makes its own baked goods on site every morning, starting in the wee hours, so the product hits the shelves hot from the oven.
When the Fujitas fell in love with the COBS concept, they were operating a Chevron gas station attached to a Triple O's fast-food restaurant in Kamloops, B.C. "It taught us a lot about how to run a successful business, but we were at the point where it wasn't challenging any more," says Fujita. Chevron's business model is more a leasing arrangement than a franchise; after 13 years, "we wanted something of our own," he says.
Fujita contacted COBS's Canadian head office in Burnaby, B.C., and forwarded his resumé. He learned that the average cost of a franchise, including construction and equipment, was $450,000. This would be a significant investment for the couple, who would need to obtain a small business loan.
As a first step in acquainting aspiring franchisees with its bakery business, COBS requests that they attend a two-day orientation session conducted by the company's manager of training and development. Fujita was asked to show up at a company-owned location in Vernon, B.C., at 3 o'clock in the morning on both days. (He stayed overnight in Vernon, on his own dime-the rule rather than the exception throughout the training program.)
Looking back on those early days, Fujita doesn't hesitate to admit that he had his doubts. "I never had any inclination to be a baker," he says. "I was definitely scared. But that's the great thing. They can teach just about anyone to bake." The first morning, he was put on "the bowl," where the ingredients are mixed. From the bowl, he moved to processing-where the bread is shaped-then to the oven, and finally to customer service.
COBS's screening regimen includes financial and criminal checks on all candidates, and an interview with the company's vice-president of franchising. "I came out of the interview feeling really confident," says Fujita. He knew that a handful of other applicants were vying to get a COBS location in his hometown of Kamloops, but thinks his track record with Chevron pushed the decision in his favour. (COBS's acceptance rate for potential franchisees is relatively low: Only about 20% of those who express interest qualify, and only about half of those who qualify actually go on to become franchisees.)
After an additional three weeks of orientation-this time, in Port Coquitlam, B.C.-COBS gave Fujita a week-long "cooling-off period" to consider whether he wanted to take the final steps toward becoming a franchisee. He took the timeout, but he didn't change his mind.
Before beginning his next 13-week training marathon, he gave up his Chevron job so he could focus his energies on the business of baking bread. "I kept telling my trainers, 'I'm never going to get this,'" says Fujita. "They kept telling me that the learning curve is steep. About the fourth week in, it started clicking."
The 1,600-square foot location that COBS selected for Fujita is on the main road in Kamloops, close to downtown. The franchisor supervised the gutting of the space, from start to finish, and sourced the equipment, including six ovens, a commercial mixer, a fridge and freezer, racks and tills. "You walk into the bakery," says Fujita, "and it's set up."
Fujita hired his own employees-a dozen people, including several from his Chevron days. None of them had any baking experience, but with the amount of training he'd received, Fujita wasn't worried, even though he had 300 recipes to perfect. As the days ticked by, he ordered his baking supplies from the franchisor's suppliers, cleared a health inspection and secured his licence.
Finally, in September, 2008, Fujita was ready to open his doors to the public. Two trainers showed up from the company's headquarters, ready to help. As a test run, they baked countless loaves of bread, cinnamon buns, Danishes and scones. (COBS bakeries whip up about 70 different varieties of baked goods each day.) On day one, Fujita and his staff dished out bread and pastries to patrons in exchange for donations to Big Brothers and Big Sisters, raising more than $3,500. When he officially opened on day two, the line of people waiting to get inside the shop stretched out the door. Two hundred cinnamon buns disappeared from the shelves. "It was insane," says Fujita.
Head office personnel have continued to stop by his bakery every couple of weeks to do audits. "Their role is to make sure I succeed," he says. In exchange for COBS's recipes, marketing support and guidance, Fujita gives the company 10% of his revenues.
Like other store owners in the franchise, Fujita gives away balloons to kids, encourages customers to sample his wares, and donates baked goods to local organizations such as sports teams and seniors' homes. "Being part of the community is the best form of advertising," he says. For that reason, too, all of his unsold products go to charity at the end of the day.
Owning and operating a bakery has its challenges-the early mornings, for one thing; malfunctioning equipment, another. One of his priorities is to keep up staff morale. "I treat the bakery staff like a big family," he says. "It makes coming to work that much more fun for all of us." And as for his own morale? Fujita has found that a cinnamon bun or two is a great pick-me-up-something he's learned from his own experience, not from the company's training manual.
***
Where the money is
Bread rolls: "They're easy to make," says Fujita. Loaves of bread offer the next-highest profit margin. "They're also not difficult to make and we sell a lot of them."
Why do it
In exchange for a percentage of revenues, Fujita gets the backing of a franchisor who wants him to succeed. And the icing on the cake: "It's satisfying," he says, "making things from scratch."
Pitfalls"You really need to be part of the team. You have to be hands-on and know how to do everything." The business will fall apart, he says, if a franchisee delegates the work to others.
Don't
Open a bakery unless you feel a passion for this line of work. If you don't have an appetite for breadmaking, you won't make it through all those 3 a.m. days. "And if you don't have passion," says Fujita, "then the end product won't be good."
***
WHAT IT COST
Start-up
Franchise fee $25,000
Training $6,500
Construction and fit-out $314,000
Equipment $186,000
Local marketing $4,500
TOTAL $536,000
Monthly costs
Baking ingredients $19,000
Staff $20,000
Rent $5,000
Miscellaneous (utilities, insurance, office supplies, etc.) $5,650
Bank interest $1,800
Franchise royalties $5,100
Advertising royalties $2,200
TOTAL $58,750
Number of $3.85 Country Grain loaves Mike Fujita needs to sell each day to break even: 508
From Report on Small Business magazine
Published on Thursday, Nov. 19, 2009 12:00AM EST
Last updated on Wednesday, Dec. 09, 2009 3:12PM EST
When Mike and Linda Fujita visited Edmonton in the fall of 2007 for a family reunion, they happened to see a line of people extending out the door of a local business. "We thought we should stop and see what all the hoopla was about," says Mike Fujita. "It turned out to be a bread store."
To be exact, it was a COBS Bread store. Curious about the commotion, the couple got in line. "We thought we'd take some to the reunion and see what everyone thought," says the 49-year-old. "And, well, we just fell in love with it. That was our first inclination that this might be what we wanted to do."
While the Fujitas had never heard of the COBS bakery franchise until that moment, the first Canadian location opened back in 2003. The chain is an offshoot of Bakers Delight, an Australian company launched in 1980 that has 650 stores in Australia and New Zealand. Since the Bakers Delight brand had already been claimed in Canada by a muffin-mix producer, the Canuck division was renamed COBS, which stands for "celebration of breads." COBS now has about 60 corporate and franchisee locations in Ontario, Alberta and British Columbia, and plans to open as many as 100 stores per year in Canada over the next five years.
The franchise has staked its reputation on being every neighbourhood's "local baker." Most stores are located in residential districts and endeavour to become a household name in the community by regularly handing out product samples, taking part in civic events and supporting local charities. And each store makes its own baked goods on site every morning, starting in the wee hours, so the product hits the shelves hot from the oven.
When the Fujitas fell in love with the COBS concept, they were operating a Chevron gas station attached to a Triple O's fast-food restaurant in Kamloops, B.C. "It taught us a lot about how to run a successful business, but we were at the point where it wasn't challenging any more," says Fujita. Chevron's business model is more a leasing arrangement than a franchise; after 13 years, "we wanted something of our own," he says.
Fujita contacted COBS's Canadian head office in Burnaby, B.C., and forwarded his resumé. He learned that the average cost of a franchise, including construction and equipment, was $450,000. This would be a significant investment for the couple, who would need to obtain a small business loan.
As a first step in acquainting aspiring franchisees with its bakery business, COBS requests that they attend a two-day orientation session conducted by the company's manager of training and development. Fujita was asked to show up at a company-owned location in Vernon, B.C., at 3 o'clock in the morning on both days. (He stayed overnight in Vernon, on his own dime-the rule rather than the exception throughout the training program.)
Looking back on those early days, Fujita doesn't hesitate to admit that he had his doubts. "I never had any inclination to be a baker," he says. "I was definitely scared. But that's the great thing. They can teach just about anyone to bake." The first morning, he was put on "the bowl," where the ingredients are mixed. From the bowl, he moved to processing-where the bread is shaped-then to the oven, and finally to customer service.
COBS's screening regimen includes financial and criminal checks on all candidates, and an interview with the company's vice-president of franchising. "I came out of the interview feeling really confident," says Fujita. He knew that a handful of other applicants were vying to get a COBS location in his hometown of Kamloops, but thinks his track record with Chevron pushed the decision in his favour. (COBS's acceptance rate for potential franchisees is relatively low: Only about 20% of those who express interest qualify, and only about half of those who qualify actually go on to become franchisees.)
After an additional three weeks of orientation-this time, in Port Coquitlam, B.C.-COBS gave Fujita a week-long "cooling-off period" to consider whether he wanted to take the final steps toward becoming a franchisee. He took the timeout, but he didn't change his mind.
Before beginning his next 13-week training marathon, he gave up his Chevron job so he could focus his energies on the business of baking bread. "I kept telling my trainers, 'I'm never going to get this,'" says Fujita. "They kept telling me that the learning curve is steep. About the fourth week in, it started clicking."
The 1,600-square foot location that COBS selected for Fujita is on the main road in Kamloops, close to downtown. The franchisor supervised the gutting of the space, from start to finish, and sourced the equipment, including six ovens, a commercial mixer, a fridge and freezer, racks and tills. "You walk into the bakery," says Fujita, "and it's set up."
Fujita hired his own employees-a dozen people, including several from his Chevron days. None of them had any baking experience, but with the amount of training he'd received, Fujita wasn't worried, even though he had 300 recipes to perfect. As the days ticked by, he ordered his baking supplies from the franchisor's suppliers, cleared a health inspection and secured his licence.
Finally, in September, 2008, Fujita was ready to open his doors to the public. Two trainers showed up from the company's headquarters, ready to help. As a test run, they baked countless loaves of bread, cinnamon buns, Danishes and scones. (COBS bakeries whip up about 70 different varieties of baked goods each day.) On day one, Fujita and his staff dished out bread and pastries to patrons in exchange for donations to Big Brothers and Big Sisters, raising more than $3,500. When he officially opened on day two, the line of people waiting to get inside the shop stretched out the door. Two hundred cinnamon buns disappeared from the shelves. "It was insane," says Fujita.
Head office personnel have continued to stop by his bakery every couple of weeks to do audits. "Their role is to make sure I succeed," he says. In exchange for COBS's recipes, marketing support and guidance, Fujita gives the company 10% of his revenues.
Like other store owners in the franchise, Fujita gives away balloons to kids, encourages customers to sample his wares, and donates baked goods to local organizations such as sports teams and seniors' homes. "Being part of the community is the best form of advertising," he says. For that reason, too, all of his unsold products go to charity at the end of the day.
Owning and operating a bakery has its challenges-the early mornings, for one thing; malfunctioning equipment, another. One of his priorities is to keep up staff morale. "I treat the bakery staff like a big family," he says. "It makes coming to work that much more fun for all of us." And as for his own morale? Fujita has found that a cinnamon bun or two is a great pick-me-up-something he's learned from his own experience, not from the company's training manual.
***
Where the money is
Bread rolls: "They're easy to make," says Fujita. Loaves of bread offer the next-highest profit margin. "They're also not difficult to make and we sell a lot of them."
Why do it
In exchange for a percentage of revenues, Fujita gets the backing of a franchisor who wants him to succeed. And the icing on the cake: "It's satisfying," he says, "making things from scratch."
Pitfalls"You really need to be part of the team. You have to be hands-on and know how to do everything." The business will fall apart, he says, if a franchisee delegates the work to others.
Don't
Open a bakery unless you feel a passion for this line of work. If you don't have an appetite for breadmaking, you won't make it through all those 3 a.m. days. "And if you don't have passion," says Fujita, "then the end product won't be good."
***
WHAT IT COST
Start-up
Franchise fee $25,000
Training $6,500
Construction and fit-out $314,000
Equipment $186,000
Local marketing $4,500
TOTAL $536,000
Monthly costs
Baking ingredients $19,000
Staff $20,000
Rent $5,000
Miscellaneous (utilities, insurance, office supplies, etc.) $5,650
Bank interest $1,800
Franchise royalties $5,100
Advertising royalties $2,200
TOTAL $58,750
Number of $3.85 Country Grain loaves Mike Fujita needs to sell each day to break even: 508
