Johnny's Lunch Plans Franchise Expansion with LI

Directions Magazine interviewed George Goulson, President and Chief Development Officer of Johnny's Lunch to learn how its location intelligence strategy would help the restaurant with its aggressive franchising plan.

Directions Magazine (DM): Johnny's Lunch has been in business since 1936, and you're developing the franchise expansion plan now. What was the driving force for making this decision now instead of a decade ago, or even 30 years ago?

Johnny's Lunch original location in Jamestown, NY.

George Goulson (GG): Although Johnny's Lunch had long entertained the notion of franchising and expanding nationally, only recently did plans for going national come together. Anthony (Tony) and John Calamunci, the grandsons of Johnny's Lunch founder, Tony Colera, are at an age and professional level in their careers where they are ready to take on the challenge of expanding the restaurant nationally. As a veteran franchise development expert, I recently joined the Johnny's Lunch team to help the business grow.

In addition, the technology available today, specifically the predictive analytics models and consultation services of Pitney Bowes MapInfo, gave us the confidence to embark upon a nationwide expansion program for our brand at this time. These models create a blueprint for expansion that can help minimize some of the uncertainty in strategic growth plans. It helps us prioritize critical capital expenditures and increases our ability to pick "home-run" locations and avoid the site mistakes that can cripple a budding franchise. The brand expansion blueprint we have from Pitney Bowes MapInfo also helps us demonstrate our chain's viability to investors - it provides third-party validation from a well-respected research firm that our concept has "legs."

Our long-term goal is to be the top dog among chain restaurants in our category throughout North America!

DM: How did you strike upon geospatial technology as something that could help in this process? Did you hire someone who knew about it, or did somebody within your organization learn about it at a business conference?

GG: Johnny's Lunch decided to implement the science and technology of geospatial technology because we knew these tools would give us an advantage in a competitive industry. Pitney Bowes MapInfo has a proven track record of helping start-up chains grow into successful national and global chains. They have the bench depth of research and consulting experts for us to rely on for advice in our crucial strategic planning. It is so much more than just "software" - the research and consultative process is really key. Having a partner with local "ground truth" market knowledge and experience in every market provides us with a great advantage.

DM: Is there a specific profile of a Johnny's Lunch buyer? How did you establish that profile?

GG: Johnny's Lunch Consumer Profile:

Families with children
16-24 youth
Over 60

As a first step toward franchising, Johnny's Lunch laid the strategic foundation by having the Predictive Analytics group from Pitney Bowes MapInfo conduct primary research to develop the restaurant's customer profile. Representatives spent 10 to 12 hours per day for a full week at the Jamestown, New York location, conducting in depth interviews with over 600 patrons.

This research helped us capture a clear picture of our target customer. We now know that most customers come from the lower-middle to upper-middle range of household incomes; about half of them are families and most fall in the 16-24 youth or over 60 age range. We also know the distribution of customers coming from home, work, shopping and elsewhere.

Johnny's Lunch's interior concept.

Using the PSYTE U.S. Advantage segmentation tool, the consultants determined which of 72 "clusters," or neighborhood types, best match the restaurant's concept from both the demographic and psychographic perspectives. Deploying this data within the Smart Site Solutions model helped identify approximately 4,500 trade areas across the country delivering the best opportunities for Johnny's Lunch franchises. These areas, by definition, have the greatest potential within their given markets, while allowing manageable levels of cannibalization from other targeted franchise locations.

DM: What is the demographic target for your store? The product appears to be quite reasonably priced, so would income demographics be a major driver?

GG: The Predictive Analytics group determined in its research that our customer demographic is upper-middle income to lower-middle income, which is 80 percent of the population. They also helped Johnny's Lunch identify about 4,500 trade areas delivering high concentrations of targeted customers. Interestingly, at the original Johnny's Lunch restaurant in Jamestown, NY, a relatively low share of the population now matches the customer profile.

DM: Are you looking at traffic patterns and daytime population?

GG: We typically look for "daytime populations" (e.g. offices) as well "rooftop populations" (e.g. houses). There are also three day-parts to Johnny's Lunch business: lunch, carryout and dinner.

DM: If you could list the three key demographic and site characteristics you are looking for, what would they be?

GG: The site characteristics we typically look for are at least 2,000 square feet to build on, inline, strip-malls and preferably an "end cap" location for drive-through.

DM: Why open the first store in Toledo, Ohio?

GG: Johnny's Lunch is currently focusing its initial franchise recruiting efforts in southeast Michigan and northwest Ohio - in and around Detroit and Toledo, where there are many high-potential trade areas. Tony Calamunci works as a corporate attorney and resides in Toledo, which is a "microcosm" of the United States. He expects to have anywhere from eight to 20 Johnny's Lunch franchises up and running in this region by the end of 2007.

Longer term, it will be tough to predict our growth with a high degree of precision. But having 500 to 1,000 franchises within five to seven years should be a reasonable target. Beyond that, Johnny's Lunch could have many, many more locations all around the country. And we haven't even begun to look at Canada and beyond yet!

The location intelligence solutions will continue to drive the Johnny's Lunch growth plan. Sometimes owners of just one or a few restaurants assume they can't afford location intelligence - that it's only a tool for the major chains. But our experience suggests otherwise. Small restaurant owners like us can use location intelligence to prevent mistakes that could cripple franchising plans right from the start. The truth may be that they can't afford not to invest in location intelligence.

DM: Why is the second target the state of Michigan? Is one franchisee opening all of those stores, or 75 franchisees?

GG: Since I used to work for Little Caesar's, I have a presence in Michigan and there has been a huge demand from area reps. Bringing Johnny's Lunch to Michigan will also help create more jobs in the state and expand the number of restaurants for residents and visitors to choose from.