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Earnings Claims of Top Franchises Revealed

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Must-Read Q&A: Our Strong Unit-Level Economics is Something That Sets Us Apart From Competitors, Says Mike Hislop, CEO of Corner Bakery Cafe

by Franchise Chatter on April 8, 2012

in Franchise Chatter Exclusive, Q & A Interview, Restaurant Franchise

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(Ambrosio’s note:  This exclusive interview with Corner Bakery Cafe’s CEO Mike Hislop is a major coup for Franchise Chatter. Corner Bakery Cafe is on my list of franchises with exceptional profit potential, and I’ve been trying to land this Q&A for months.  I’m delighted to say the final outcome is well worth the wait. Enjoy!)

As chairman and chief executive officer of Il Fornaio (America) Corp., Mike Hislop leads three industry-recognized brands under the Il Fornaio corporate umbrella: Il Fornaio, Corner Bakery Cafe and the Panificio wholesale bakery division.

In 2006, in partnership with Bruckmann, Rosser, Sherrill & Co., Hislop led the acquisition of Corner Bakery Cafe from Brinker International. Hislop recognized the potential of Corner Bakery Cafe’s strong culinary culture, neighborhood positioning, segment-leading catering sales and strong unit-level economics.

Under Hislop’s leadership as chief executive officer, Corner Bakery Cafe has built strong franchise partnerships and is successfully introducing the brand to new markets throughout the country. With more than 150 committed new franchise locations and continued company growth, the current 116-unit Corner Bakery Cafe system will more than double within the next four years.

Mike Hislop, CEO of Corner Bakery Cafe

Mike Hislop, CEO of Corner Bakery Cafe

Franchise Chatter (FC):  Can you tell us about the history of Corner Bakery Cafe?

Mike Hislop (MH):  In 1991, the first Corner Bakery opened on the corner of Clark and Grand in downtown Chicago to bake bread for Maggiano’s Little Italy. The original menu featured only fresh baked breads, great coffee and espresso.

Quickly, the bakery found an audience who wanted to buy whole loaves over the counter and a few who wanted sandwiches made on the freshly baked bread.  Over time, guest feedback inspired the Corner Bakery team to build a menu of handcrafted panini, sandwiches, salads, soups and specialty desserts. With new menu options, demand for the innovative dishes grew and by 1995, Corner Bakery had expanded to five locations in Chicago. In 2007, we started our franchising program. Since then, we’ve grown to more than 130 locations around the country through a combination of corporate store openings and franchising.

FC:  What are some unique aspects of your concept and menu that set you apart from other bakery cafes?

MH:  We’re a neighborhood gathering place.  We have real kitchens and at any time when a guest walks in, we will be baking, grilling, sautéing, roasting or scrambling — over an open flame — all day long. We bring in over 40 different types of fresh produce and everything is made to order.

Something else that makes us stand out is our continual food innovation. We offer consumers a broad variety of prepared — not assembled — customizable options. Health-conscious consumers are literally eating up the recently introduced “100 Under 600” menu with an expansive selection of calorie-wise Corner Combos. New menu additions this year include the recent introduction of three new Power Panini Thins, a healthful, calorie-wise breakfast option.

Scrambled Eggs at Corner Bakery CafeFC:  Which day part is typically the strongest for Corner Bakery Cafe? What are you doing to drive more business during the rest of the day?

MH: Lunch is by far our largest day part. Increasingly, we see breakfast and dinner as very important to our business model. At Corner Bakery Cafe, we own the breakfast meal, especially with our made-to-order scramblers, where we offer a full, plated breakfast that is unmatched. Dinner is increasingly growing for us, especially in new markets where we’re introducing our brand for the first time. We’re seeing people trade out meals at a family dining restaurant and come to Corner Bakery Cafe instead. Part of this is our selection of made-to-order, handcrafted pastas, which really sets us apart.

FC:  How big of a role does catering play in each store’s success? What is your strategy for increasing catering sales?

MH: Catering is not just what we do, it’s who we are.  It makes up 20 percent of our business and there’s no sign of it slowing down. The entire restaurant industry is chasing catering right now, and we’ve been doing it successfully for a long time. Catering has continued to grow through the years not only because of corporate orders, but “social catering” as well.

About a year ago, we introduced online ordering for catering, which has continued to fuel its growth. Our ongoing product evolution — especially introducing healthier menu options — and our fleet of over 300 fully-refrigerated catering vans — makes our best-in-class catering a fit for a variety of occasions.

Corner Bakery Cafe's Exterior PhotoFC:  What has Roark Capital done in support of the Corner Bakery Cafe business after the private equity group acquired the company last year?

MH:  Roark is a valuable partner in the franchise space, with over $8 billion in holdings and significant franchise experience. We’re expecting their resources and knowledge to help us as we expand through franchising. Along with continued commitment to company cafe growth, Roark brings a lot of understanding to the franchise arena as we seek to double our brand presence.

FC:  What is the estimated initial investment to open a single Corner Bakery Cafe? Do you offer any assistance to your franchisees to help them secure the financing they need?

MH:  An average Corner Bakery Cafe costs approximately $1 million to open, and most of our partners have previous restaurant experience. There’s a development fee of $10,000 per location and also a $25,000 per unit franchise fee.

Our average unit volume is more than $2.2 million and our cafe-level EBITDA exceeds 18 percent. Our strong unit-level economics — with a goal of 2:1 sales to investment ratio — is something that sets us apart from competitors.

We offer additional funding resources to franchisees through a partnership with Franchise America Finance.

Corner Bakery Cafe's Cinnamon Cream CakeFC:  How many employees are typically needed to run a single location? What are some of your best practices for recruiting and training the right staff?

MH:  Typically, a single restaurant will have about 40 employees. Corner Bakery has a strong culture and we’ve had that since the day we were born in 1991. It’s imperative that we find people who share the same love of hospitality that we do, so we’re always looking for those who embrace it when we hire.

Corner Bakery Cafe has some of the highest retention rates due to our close-knit culture. We have an extensive 10-week management training program we put our franchise operators through. We also have highly-trained passionate teams that go out into new markets when restaurants first open. Additionally, as we’re going into new markets, we will also work with franchisees to team up with existing company operators to help get them off the ground running.

FC:  What are you doing to increase brand awareness for Corner Bakery Cafe throughout the country? What are you doing in terms of traditional advertising and social media?

MH:  Because we are a neighborhood cafe, one of our greatest marketing tools is our community involvement.  With catering representing 20 percent of our business, our signature catering vans and deliveries are one of the prime ways people get to know who we are. We also use a variety of traditional marketing strategies, such as print and outdoor advertising, direct mail and e-mail marketing.

Social Media is a big part of what we do and how we interact with guests. For example, at the start of 2012, we introduced a Facebook program inviting fans to kick off the New Year by committing to a healthier lifestyle and pledging to “Turn the Corner” in 2012. The first 10,000 people to “like” our page and take this pledge received a free meal. That was a huge success.

Corner Bakery Cafe's LogoFC:  How many locations do you ultimately see for Corner Bakery Cafe? In what regions of the country do you see the strongest demand for your cafes? Any plans for international expansion?

MH:  We will have 148 cafes open by the end of 2012. Of those cafes, 109 will be company owned and 39 will be franchised. We are committed to expanding both through franchising and through the opening of company-owned restaurants. Franchisees like this because they see we have skin in the game. There’s a tremendous amount of “white space” across the country for growth, including many highly desirable, multi-unit territories.  We have a very flexible footprint with proven success in both urban and suburban environments and in large and small markets.

Over the next 3-4 years, we will double the size of the brand. Some of our key markets still available for expansion include the New York Metro area, Northern California, Central and Northern Florida, St. Louis, Indianapolis, Milwaukee, Louisville, Columbus, Charlotte and Nashville, to name a few.

FC:  Can you name a few franchise companies (either inside or outside your category) that you admire, and why?

MH:  I have such admiration for so many companies; it’s really hard to name just a few. I will say that I learn every single day from brands within the franchise industry. As we are relatively new to franchising, I greatly appreciate all the expertise and advice I’ve received from many of the Roark Capital Group portfolio brands.

To learn more about Corner Bakery Cafe, visit their website, follow them on Twitter, and connect with them on Facebook.

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