In the latest sign of renewed interest in franchising, Winchell’s Donut House said Tuesday that it will once again franchise its doughnut store format after 14 years of operating all company-owned outlets.
The La Mirada-based company, a unit of Denny’s Inc., said it will add 50 new franchise locations this fiscal year. They will be located primarily in the metropolitan areas of Portland, Ore., Phoenix and Seattle.
“The market for franchise offerings is booming,” explained Jeffrey F. Hitz, Winchell’s vice president of development. “People are interested in owning their own business.”
Franchisees Bear Most Costs
In addition, franchising will provide Winchell’s an opportunity to improve the quality of operations by “bringing back entrepreneurial operators,” Hitz said. The move also will allow the chain to grow faster because most start-up costs are borne by franchisees.
Other companies ranging from A&W; Root Beer to Greyhound are recognizing the big potential of franchising. The International Franchising Assn. in Washington reports that franchise outlets with a widely known name and format are the fastest-growing type of franchises.
The association said the Commerce Department estimates that the number of franchise outlets will rise to 322,000 this year from 294,000 in 1984. In 1980, they numbered 252,000.
This year, franchise outlets are expected to account for $500 billion, or one-third, of the nation’s annual retail sales.
Winchell’s, which was founded in 1946 in Temple City, operated only franchised units until 1971, when Denny’s--the firm’s new owner--decided to convert them to company-owned outlets. Denny’s has since been converted to private ownership through a leveraged buy-out.
The doughnut chain went through a period of retrenchment, closing about 100 units in 1981 and focusing instead on operations in key markets. Its growth in the early 1980s was limited to 10 to 12 new outlets a year.
“Now we feel we are ready to accelerate that growth,” Hitz said, adding that Winchell’s plans to add 50 new franchise units annually over the next five years.
80 Stores in 16 States
The chain selected Phoenix, Portland and Seattle for its initial expansion because Winchell’s has high consumer awareness and room for more units in those markets.
Winchell’s has 18 stores in the Phoenix area, 18 in Portland and 21 in Seattle. It operates a total of 800 stores in 16 states, including 477 in California.
Hitz says the initial fee for a Winchell’s franchisee is $30,000. In addition, the franchisee must secure and develop the store site.
The company says outlets in prime locations can run as high as $350,000.