From family to franchisor
By Keith ToppazziniFeatures Business and Operations Finance
President of Topper’s Pizza
My father Ron Toppazzini launched Topper’s Pizza more than a quarter of
a century ago based on the desire to be his own boss and leverage the
experience he gained from several years of working for others.
|Franchisor Keith Toppazzini with Collingwood franchisee Dean Ackerland.|
My father Ron Toppazzini launched Topper’s Pizza more than a quarter of a century ago based on the desire to be his own boss and leverage the experience he gained from several years of working for others. Perhaps most important of all was his conviction that he could make a better pizza than the next person.
Sound familiar? It was a worthy pursuit, but far from unique. Essentially, what my father was doing was following in the footsteps of tens of thousands of other small pizzeria operators and from a broader perspective, millions of small business entrepreneurs across the country.
Anyone who owns and operates a small business knows just how gutsy getting started is. It often means leaving the comfort and security of a full-time job to explore the excitement and the uncertainty of running your own business.
How many of us would consider starting a business if we had a better handle on our chances of survival? A sobering small business study conducted by Statistics Canada in 2005, showed that almost three quarters of small businesses endure in the first year, but less than a third of micro-companies (five employees or less) in Canada, are still in business after five years.
Of the 2,283,000 small businesses on record, the overwhelming majority (1.83 million or about 80 per cent) operate with less than five employees. From there, the number drops dramatically. Only 178,000 or just 7.8 per cent of small businesses have five to nine employees. Fast-forward to businesses with 500 employees or more, and you’re left with just over 3,000 or a mere 0.1 per cent of the total business in Canada. On a graph, this is what they call an inverted hockey stick; but that’s enough about math and graphs. More interesting than the numbers is the story behind what it takes for a small business to grow beyond the initial plateau that it achieves. How can it double in size? And in a best case scenario, how can it grow to a company with several million in sales and over 500 employees?
What follows is a snapshot of Topper’s transition from a family-run business to franchisor and some of the lessons learned along the way.
So you want to be a business owner?
Before Topper’s opened its first store in Sudbury, my father had already spent several years managing a bakery at a large grocery store. Prior to that, he had several years experience under his belt working for the Toppazzini bakery, where they sought to differentiate themselves by making a great loaf of Italian bread while using the same dough to make and serve pizza for lunchtime customers. Like millions of other entrepreneurs, my dad started out with a great deal of transferable experience. His strategy was to use a decades old family recipe for great Italian bread, as the foundation on which to build a great tasting pizza that would take market share away from the competition.
That strategy of win-your-customers-over-with-taste wasn’t exactly rocket science, but it worked well. Less than two years after his initial launch, he was ready to open another store.
The expansion motivation
Back in the 1980s, the desire to expand beyond this initial level of growth wasn’t all that common and still isn’t today. According to a 2006 CIBC study called Small Business in Canada – Trends and Prospects, “almost 60 per cent of all small business owners in Canada consider themselves as ‘lifestylers’ that use their business as a means of generating income, while balancing other commitments or lifestyle choices.”
While there’s nothing wrong with the lifestyler approach, what about the other 40 per cent of small business operators that want to keep expanding? What does it take to outgrow that small business mindset and take growth to the next level?
In Topper’s case, the motivation was straightforward. After my father saw how successful his first store was, he made a conscious decision to grow to the point of dominating the greater Sudbury market. This meant selling more pizzas than any other chain or business entity in the area.
Within three years, Topper’s expanded to five stores within greater Sudbury and achieved its objective of dominating the market. Obviously a number of factors affected this successful transition, not the least of which was maintaining quality and service control at all five stores. Making and distributing the dough from a single location and leveraging the experience and motivation of family members who could oversee the management of the other stores were also key factors. At this point, Topper’s reached a critical crossroad in the company’s evolution. On the one hand, it was still very much a family-run business and all of the growth was organic in that it was funded solely by family assets and managed only by family members. On the other, as a result of the success that had been achieved, a growing number of people from outside the family circle wanted to share in Topper’s accomplishments. It was at this juncture that we came to realize that the only way to facilitate the further growth of the Topper’s brand was to become a franchisor.
We made the psychological transition from family to franchisor, but the actual reality didn’t happen overnight. There was an initial period of expansion, where Topper’s went from five to 14 stores, then a contraction down to nine stores before we stayed on a path of growth to over 30 stores.
We came to appreciate some of the key differentiators between running a family business and a corporate franchise business. Among them was the need to properly screen franchisee candidates, establish formal systems for training franchisees and create franchise-wide standards for product quality and customer service. We also learned to leverage the expertise of outside resources ranging from industry consultants specializing in best practices, to business improvement consultants able to work directly with the franchisees at the store level.
Focusing on the success of the franchisee
By 2006 Topper’s had spread across the north in communities such as Timmins, North Bay, to the south, as far west as St. Thomas and as far east as Ottawa. Then we arrived at perhaps the most important decision we had made since deciding to transition from a family-run business to franchisor. We changed the metrics of our success from how many stores we had, to how profitable these stores were and how their revenues compared to industry standards.
We focused on ways to motivate and engage not only the franchisees, but staff members and their customers. We pushed the envelope with respect to product diversification, sometimes in the face of franchisee resistance but in response to consumer demands. We embraced new technologies such as online ordering and online surveys. Perhaps most importantly, we made a conscious effort to establish a better back and forth dialogue with our franchisees in order to make sure they understood where we were coming from and to be more mindful of their aspirations and concerns.
The number of Topper’s stores over the last two years still stands at 36, but our sales grew by nine per cent in 2007 and seven per cent in 2008. Revenues per store are now double the industry norm. The results have been good enough that we are ready to begin looking at new expansion opportunities, but not at the price of undermining the success of our stores.
It’s not easy to encapsulate everything we have learned in transitioning to a family business to franchisor with over 500 employees into a few words of wisdom, but it’s safe to say you have to begin with a desire to grow that is stronger than your fear of maintaining the status quo. Think in terms of dominating the markets where you do business, even if your market is just one community. While you don’t want to abandon the family values that made you successful, you need establish and embrace a corporate culture driven by the desire to help your newfound partners. Help the franchisee to be as successful as you were before you decided to become a franchisor in the first place. Then he or she can also join the privileged ranks of owning a small business that not only survives, but flourishes.
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