Strong market sends Quebec restaurant operations far and wide

Postmedia News
Published on September 6, 2011

MONTREAL — Quebec isn’t exactly renowned as a hotbed of entrepreneurship. It’s got to the point where politicians and business leaders have started decrying the collective lack of ambition.

But there are exceptions, of course, and in this province, many can be found in the restaurant and food-service industry, which accounts for about 40 per cent of all franchising activity in Canada.

Quebec already has produced several chains that expanded beyond its borders through franchising, with the 1,700-outlet,

26-banner MTY Group and 123-location Chez Cora breakfast restaurants as notable examples, and there are a host of others poised to launch, names like Sac Wich, Yeh! yogurt, Liquid Nutrition, Noobox and La Popessa.

“Quebecers have good tastebuds. You can’t fool them with a bad product,” said Carmine Di Fruscia, partner in the Sac Wich and Pasta Tutti Giorni chains, which by year’s end expect to be as far afield as Vancouver and Abu Dhabi.

“The Montreal marketplace is very competitive. The best practices and experience of successful Montreal operators can result in products recognized as some of the best franchise opportunities out there. The fact we’ve been in such a sophisticated food market has made us so much better,” said Glenn Young, president of smoothie and supplements chain Liquid Nutrition, which has seven Montreal locations.

Liquid Nutrition has recruited celebrity endorsers like basketball’s Steve Nash and baseball’s Russell Martin, in anticipation of a North American rollout due to start before the end of this year.

“Our plan and objective from Day One was to export the Liquid Nutrition brand into 35 markets in Canada and the U.S., and at some point, look at the international marketplace,” Young said.

La Popessa, a quick-service pasta chain that began with a single location on St. Denis St. in 2000, is up to 17 now throughout the province and negotiating with a master franchisor for Ontario.

“They came to me. They like the product and they think it’s a concept for the future,” said founder Michel Bourdages, who’s also had expressions of interest from Dubai, the U.S., “and even Italy.”

Bourdages said Quebecers eat well but are demanding, which is why it’s a good proving ground for restaurants.

“They know when they’re getting their money’s worth.”

Self-serve, single-price Yeh! yogurt also is branching out, with a franchise outlet in Laval opening next spring and U.S. locations in Albany and Boston due by Christmas.

“I’ve been all over, tasted them all, and ours is as good, or better, than anything out there,” said partner Marv Gurman, who figures the chain, which began with a single location on St. Laurent Blvd. in 2008 and has three now (with a fourth about to open), is poised to grow by eight to 10 stores a year.

Pierre Garceau, president of the Quebec Franchise Council, said that with its current total of 7,000 franchisees (representing 300 banners), the province actually is a bit of an underdeveloped market. Proportionately, there are fewer franchisees operating here than in the country as a whole, which has 60,000.

“We’ve got a ways to go still in entrepreneurial spirit,” Garceau said. “We need entrepreneurs.”

Many concepts developed in Quebec would be transferable if there was a will to expand and share the recipe, Garceau said.

“Other franchises are coming into our market to grow. Ours should do the same.”

Sac Wich founder Michael Geminari said a lot of business owners “don’t have the vision to go outside their comfort zone. It’s easier to manage a single location if you’re hands-on.”

The economics of many small operations have changed, however, in the wake of the provincial government’s clampdown on tax evasion in the restaurant industry. By the end of the year, all restaurants in Quebec will be required to employ electronic cash registers that record all sales for tax purposes.

Operations that were profitable when concealing significant amounts of revenue suddenly may find things a lot tighter. Without the buying power of a larger group, some may throw in the towel.

Franchises are less likely to be affected since their sales are monitored closely already.

The recent recession also has had a dampening effect on the industry, but it hasn’t slowed everyone.

Sac Wich, which started with a single location in Laval in 2008, now has 11, and expects to be up to 25 by year’s end, including locations in Ottawa and Vancouver.

Conceptually, it’s a higher-end version of a sandwich shop, featuring ciabatta bread, grilled vegetables, beer and wine and customer seating. Orders are specified by the patrons themselves on the bags in which they receive their food.

Geminari said the key to its rapid growth came two years ago, when he was introduced to Di Fruscia, a veteran of the Quebec franchising market who previously held jobs with Mike’s Restaurants and Les Aliments M & M.

The chain had struggled a bit early on as Geminari tried to wear all the hats, plotting expansion while overseeing the flagship store in Laval.

Di Fruscia’s management and franchise experience allowed Geminari to focus on his strengths, marketing and product development. And there are no longer any corporate stores; all 11 are franchises.

“The success of a franchise, any franchise, is the support they get from a franchisee, because you’re only as good as your weakest location,” Di Fruscia said.

To help their partners, Sac Wich will forgo royalties if a business isn’t reaching break-even sales through no fault of the operator.

“They don’t all start off gangbusters,” Di Fruscia said. “Some need help growing. We help them.”

While it’s important that franchises conform to a profile, they also need to be flexible, adapting to different clienteles and changes in the market.

“In the old days, the chain of command was ‘I’m the franchiser, you’re the franchisee, don’t do anything different or you’ll regret it’,” Garceau said. “Today, it’s an interrelationship. One depends on the other. One bad franchise can screw up the whole barrel.”

Franchises also must constantly tweak their operations to maintain customer loyalty. La Popessa is introducing pizza to the menu at one of its shops, on a test basis; it was a customer request. Yeh! yogurt offers custom cookies as well as frozen yogurt and is opening in a downtown mall, a departure after three stand-alone locations. Sac Wich is adding wraps, gelato and poutine. Pasta Tutti Giorni is opening a new Pasta Express store this month at the Universite de Montreal serving pasta-to-go in innovative, leak-proof boxes.

While it can be rewarding, those who think franchises are a shortcut to riches usually come down to earth very quickly.

It’s a journey that requires a lot of dedication and hard work, said Nicholas Tsouflidis, president of Chez Cora, which is now in every province but Saskatchewan and will add 10 more locations nationally by year’s end.

“Some seem to think ‘I’m the owner now, we’ll take it easy from now on’. It’s quite the contrary. There’ll be long hours to put in,” Tsouflidis said.

“You have to be passionate about it. You have a lot of staff, so you have to be the coach of a team. Food is a perishable item, so you’ve always got to be on top of things. Not everyone makes it. Not everyone gets accepted, either. For every 15 people who knock on our door (to be a franchisee), one will get through.”

Financing also has been an issue in recent years as banks tightened their lending practices in the wake of the 2008 recession. Setting up a franchise outlet can easily cost hundreds of thousands of dollars.

But at a time of economic uncertainty, when many have lost jobs or been shunted into situations where they see no future, franchises are an increasingly attractive option, Garceau said.

“In good times and bad, they’re a refuge. It’s entrepreneurial — you create your own job. And you’re supported and trained, in something that already has a track record. You’re not starting from scratch.”

Montreal Gazette