‘The International Plan’
Meanwhile some other, more hopeful, curve balls were thrown at the management team. As traction in Central America was building, Wing Zone was approached by a private investment firm adept at taking American brands into the prized Japanese market, where they frequently experience significantly higher unit sales. Reacting to what they viewed as an opportunity they could not pass up, the management team hammered out a 50-store deal with San Francisco–based Pacific Rim Partners.
“Japan is a very difficult country to penetrate,” says Scott, who along with the rest of the team discussed the plans with QSR in October after Wing Zone had secured a signed letter of intent. “If you don’t have the right partner or the right people on the ground, it can be very difficult to get started. We’re optimistic we have a great partner.”
In contrast to the Central America model, Pacific Rim would become a master franchisee, giving it rights to run its own restaurants as well as sell off additional franchises in the market. They would split franchise and royalty fees 50-50. Because real estate in cities such as Tokyo is at a premium, smaller-scale stores were being planned in a bid to cash in on Japan’s preferences for take out and delivery.
About that same time, another deal with longer-term international potential was finalized. AAFES, the Army & Air Force Exchange Service, an agency of the Department of Defense that franchises concepts on behalf of the U.S. military, signed on with Wing Zone to develop 10 initial stores on domestic military bases.
“It secures us a place not only domestically but also internationally,” says McEwen, who was confident that AAFES would eventually bring Wing Zone to some of its overseas bases, giving the brand additional toeholds in foreign markets.
The new opportunities seemed like a lot to digest, but the team appeared willing to juggle multiple projects. In late November, they turned their attention squarely back to Panama after Wing Zone and the selected area developers inked the final contract, securing the chain’s first international deal.
“We think there’s a lot of potential in the market,” says Diqueos Tagaropulos, who heads the area-developer group and is its largest stakeholder. “It’s an amazing product.” His group will develop at least five stores in the Panama City area within the first five years. With some luck and additional financing, they’ll also move into El Salvador and Guatemala for a projected total of 25 stores. Both sides seemed hopeful that with shorter build-out cycles than in the U.S., the first restaurant would open its doors within the first three months of 2010.
By the time of QSR’s last interview with the brand, Friedman and Scott were busy running through final numbers, weighing time and investment against expectations for the region. Through November they had spent some $300,000 on the expansion efforts, including salary, travel, and legal costs, slightly above projections. The final tally would be even higher, as the Atlanta executives would make repeated visits throughout the year to check on Panama’s progress.
While they expected food costs to be roughly even with those in the U.S., the company would catch a significant break on labor in the new stores, allowing for margins that could double those of its domestic units. At the end of 2009, executives were betting the initial restaurants would exceed $900,000 in average unit volumes, far surpassing U.S. averages, which in 2008 tracked at $585,000. With the numbers looking good and the time frame on track, the team appeared satisfied with the progress of their new venture.
“It’s been a very well-thought-out plan,” Friedman says in the most-recent interview. “It’s takes capital. It takes planning. It takes good people. We believe we’ve got it completely covered.”
Deborah Cohen is QSR’s Corner Office reporter.
