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Beth and Carl Biondo spent around $300,000 to open their fourth Little Caesars store in the area in June. Upgrades to the company's other three locations are expected over the next eight years.
Beth and Carl Biondo spent around $300,000 to open their fourth Little Caesars store in the area in June. Upgrades to the company's other three locations are expected over the next eight years.


Franchisees keep pace with corporate requirements

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As the saying goes, it takes money to make money. And no one ever said becoming state of the art would be cheap.

Those who run franchises know the score, said Janis Prewitt, an employment law attorney and associate professor of management at Drury University.

“If McDonald’s changes its golden arches, you have to change your golden arches,” she said.

For Carl and Beth Biondo, the cost to open their fourth Little Caesars store in June – which features a custom design, LCD menu screens and a register that prints bar codes for orders – came with a $300,000 price tag. The high-tech register alone costs $35,000.

It’s all part of Detroit-based Little Caesar Enterprises Inc.’s requirements for new and remodeled stores – the latest sweeping interior and equipment rules since 2000.

“Every 10 or 15 years most companies will do a freshening of their stores,” Carl Biondo said. “Ours is, I think, the seventh upgrade corporate has done. It’s called the i7 store.”

The Biondos are among the Springfield area franchisees routinely facing tens or hundreds of thousands of dollars in new store or upgrade costs associated with franchise agreement requirements.

“I know a few of the McDonald’s and Burger Kings have upgraded as well. I saw that they are switching to the LCD TVs and the high-tech (point-of-sale) systems,” Biondo said.

In the past two years, several area McDonald’s have been renovated, and a Wendy’s at 2125 E. Independence Road has been completely remodeled.

According to a 2013 Bloomberg report, upgrades can cost around $300,000 at Burger King, an average of $375,000 for Wendy’s Co. (Nasdaq: WEN) franchisees and around $600,000 for franchisees of McDonald’s Corp. (NYSE: MCD).

Building permit records show a recent remodel at the McDonald’s at 501 W. Sunshine St. cost $220,000. According to a McDonald’s spokesman, over half of the 500 stores in the Heartland region have been remodeled in the past decade.

Joe Diozzi, director of development for the McDonald’s Heartland region, said remodel costs vary widely.

“First and foremost, it’s about the customer, and delivering what they want and expect from McDonald’s,” Diozzi said. “The Springfield market has done a great job with that.”

Springfield-area franchise co-op McDonald’s of the Ozarks represents 63 restaurants in the region owned by 20 franchisees, according to spokeswoman Kristen Bergman.

Local McDonald’s that have remodeled to what Diozzi refers to as the “arcade or stone arcade” layout in recent years include the Cherry, Battlefield and Sunshine stores.

“We work with our franchisees to plan out their reinvestment, and we do our best to stick to that plan,” Diozzi said. “Every restaurant is at a different point in its life cycle.”

Typically, Diozzi said McDonald’s sets a five-year investment plan with its franchisees that range from a dining room upgrade to a brand new store.

According to Bloomberg, new McDonald’s stores can cost around $1 million to build.

Getzlow said he expects around 75 percent of McDonald’s restaurants in the region to be upgraded within two years based on the current pace of local reinvestment.

Drury’s Prewitt said ongoing renovation and equipment expenses are costs of doing business for most franchisees.

“In most franchise agreements there are provisions so the franchisor can demand improvements when they deem necessary,” Prewitt said. “It is pretty common for the franchisor to go out and inspect and then require certain improvements.”

With Springfield-based franchise group Wendy’s of Missouri Inc., the Independence site transformation completed late last year was part of a remodeling effort dubbed an “image activation,” said Eve Metheny, director of brand marketing for parent company Hamra Enterprises.   

Wendy’s of Missouri operates 35 Wendy’s stores, and Metheny said locations in Branson, Lebanon and Columbia also have been renovated to incorporate the latest technology and corporate design standards.

“It is a very big investment,” Metheny said, declining to disclose the estimated costs involved in rolling out upgrades or the possible return on investment. “We expect to see a great benefit.”

Exterior features include large windows to “bring the outside in,” according to material descriptions Metheny provided, inviting patios and the “Quality is our recipe,” slogan visible from the street. Interior upgrades under the plan include a Wi-Fi bar, a TV and fireplace, a Coca-Cola Freestyle touchscreen beverage machine and menu boards.

Biondo said through the first four months of operation, sales at his fourth Little Caesars have been flat compared to his other store openings. Organized under Heavy B LLC and other legal entities, the Biondos also operate Little Caesars in Nixa, Ozark and Republic.

Carl Biondo believes flat sales are due to ongoing construction outside the store at National Avenue and Republic Road.

“People are dodging us right now,” he said. “I know we will do a lot better when this is over.”

Upgrades are required for his other stores in 2018, 2020 and 2022, and based on cash flow, the Biondos might work ahead and complete remodels at a clip of one per year.
 
“We’re considering that now,” Beth Biondo said.

Based on the current pace of local reinvestment, around 75 percent of McDonald's restaurants in the region are expected to be upgraded within two years.

Photo provided by MCDONALD'S CORP.[[In-content Ad]]

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