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These 3 Food Franchises Are Perfect for Small Markets

Sep 14, 2021

Franchises are a great way to generate income, especially if you are unsure how to open a business.  Compared to setting up your own business, you won’t be needing to build your brand up. There’s less need for advertisements since franchises are usually from known food brands.

However, it can be challenging to set it up if the area you’re in has a population of fewer than 30,000 people. Most folks tend to move to highly urbanized areas since those places offer more opportunities. But even if more people are attracted to move into urban areas, there are still many communities with a small population.

Why should you give small markets a chance?

A lot of the franchises focus on serving the top 350 markets in the USA. That’s because a higher population means more customers. This also lowers the risk of opening the franchise.

However, there are outliers. There are times when market trends go against this preconceived notion that smaller markets are harder to pull off.

Small cities can be lucrative places for franchising. Some businesses have been able to achieve high returns even if their market is small. It’s often because of one reason: this market is underserved.

Since they have a smaller population, there aren’t many businesses that open up in the area. That means there are lesser variations and options for the people. Since that is the case, customers are more willing to pay for something new. In addition, these areas have lower operational costs. The land and other types of costing can be achieved at a fraction compared to when you operate in an urban area.

There’s also the tight-knit community. Having to set up a business in a small area means you can create job opportunities for many. Overall, the local government and the community can be more supportive because of this.

If you’re an entrepreneur from a small town, you know how important it is to get opportunities in your area. Setting up your business here not only helps you create profit, but it can also help your community.

One of the best ways to start is by opening a food franchise. It’s one of the easiest since everyone needs to eat every day. Moreover, you can be one of the firsts to bring a well-known franchise to your area.

There are so many franchises available that it can be tough to choose the right one. To help with your research, we compile the three best food franchises that can thrive in small markets. Each of these has shown good performance over the past years that they have operated in small markets.

1.    Captain D’s Seafood

Captain D’s is a unique but straightforward food concept that can cater to a variety of markets. It’s a casual restaurant with food that doesn’t take too long to serve. It’s like an in-between of fast food and a restaurant.

The best part about Captain D’s is that they don’t compete with other food chains like pizzas, burgers, and chicken. It focuses purely on serving seafood. This food group is often underserved in different markets.

Seafood fast restaurants are becoming popular since there aren’t that many that offer these. As for Captain D’s, they offer a casual dining experience complemented by silverware and plates. It’s perfect for family dinners or occasions. The food has high quality but the prices are just right.

What you need to know about this brand

Captain D’s started as Mr. D’s Seafood and Hamburgers on August 15, 1969, in Donelson, Tennessee. They’ve always aimed to provide high-quality seafood without being too pricey. Fast forward to today, they have over 500 restaurants across the country.

Seafood is becoming more popular since it’s healthier compared to pork, beef, or chicken. Apart from that, Captain D’s offers a restaurant feel without being too expensive. Americans can enjoy a restaurant experience. It’s a perfect balance between the appeal of a high-end restaurant while being accommodating and cozy. It’s one of their best selling points.

According to their CEO Philip Greifeld, Captain D’s is at the stage where chicken restaurants were 20 years ago. That means there’s plenty of room for growth.

Their sales have increased over 5 years; their grilled menu sales went up to 20% recently, even if it wasn’t trendy back then. Customers also love the store’s design since it feels like a cozy restaurant.

One of the reasons why seafood is an excellent investment is because it is still hugely underserved. It’s a huge opportunity to start investing in one since people have been looking for new alternatives.

Why it can thrive in small markets

Small markets usually mean fewer customer traction. However, there’s a way to work around this dynamic. S small markets thrive in being familiar and up close with the town’s dynamics. That means you need to figure out what areas these small towns lack and focus on filling that gap.

In most cases, small towns lack the variety of options you can have in more urbanized areas. However, just because it doesn’t exist yet, doesn’t mean there’s no demand.

According to franchisees Chris and Keith McBrayer, when they first opened in West Point, they were unsure what to expect. But their billboard advertisement that says “Coming Soon” was enough to create local interest.

There was so much anticipation that when they finally opened their restaurant, they could make their biggest first-week sale in their area. Even their local TV news mentioned that their opening was more prominent than when Walmart opened.

Now they are planning to increase their stores to other communities in Mississippi.

Apart from that, Captain D’s is very affordable, but their service and cozy atmosphere make it welcoming for diners. It is a restaurant that feels breezy and friendly, one of the key aspects that make it so special for customers.

2.    Huddle House

Family restaurants are one of the most prominent groups that make up franchises. One of those is Huddle House. The unique thing about this family restaurant is that they offer an all-day breakfast for 24 hours every day.

They have everything from the usual breakfast staples like waffles and eggs. But they also offer other dishes like steaks, meat-and-three dishes, as well as burgers. The brand is well known for its Southern hospitality and homey cuisine.

It has one of the highest customer frequency rates in the industry. 65% of the profits come from customers who frequent this place more than 5 times a month. Because they serve comfort food, you’ll notice that you’ll find the same faces on most days. It’s common to have the same customers come over to eat more than 4 times a week. There are even some who visit daily.

What drives the attraction to this franchise is how it feels like a local chain. Michael Abt, Huddle House’s CEO explains that the central selling point with this brand is how comfortable and familiar they feel to the customers.

Most franchisees are from the local community. Since customers can work and live close to them, they form this tight-knit community. That’s why whenever they dine, they often feel relaxed and at ease.

It remains true to its branding, where they focus on serving comfort, homestyle foods at an affordable price.

What you need to know about this brand

This 50-year-old brand has been experiencing positive growth over the past years. About four years ago, they launched their Evolution model. Since Michael Abt took over the leadership role, Huddle House has been expanding to different areas in the country. Their primary focus is on increasing profit margins while improving store sales for their franchise owners.

Moreover, House Huddle offers plenty of options for franchisees. You can opt for their inline or free-standing buildouts. That means you can franchise even if your capital isn’t that huge.

There’s also the appeal of homey breakfast. But the best part about it is that breakfast foods cost 4 to 5 percent lower than other food. And since Huddle House’s menu comprises 60% breakfast, you can expect lower costs. That means you can also have higher margins.

Why it can thrive in small markets

Huddle House’s motto is “Any Meal. Any Time”. That’s why any customer can order breakfast any time of the day. They also offer traditional and popular dishes that customers love. Even if the market for breakfast food establishments isn’t underserved, there aren’t many who offer breakfast 24 hours a day, 7 times a week.

It’s advantageous, especially if they are you’re serving closes up early for the night. People will come to you since you’re one of the few open all the time.

The main customers are customers from lower to middle income or customers with blue-collar jobs. The meals at Huddle House are affordable but fresh, one of the brand’s main selling points.

Apart from that, it also becomes the go-to comfort food in the local community. Because they serve home foods, people can drop in and have breakfast before work or eat to celebrate an occasion. It’s a place where the cozy atmosphere makes customers feel welcome.

3.    SONIC Drive-Ins

When it comes to drive-in franchises, SONIC is the largest in the country. You can find them in over 3,500 locations. Almost everyone knows them since they have one of the most aggressive advertising campaigns on TV.

They have over $180 million spendings per year just in advertising. The famous campaign has made their brand known almost everywhere.

But that’s not the only reason why they’re so successful. Their drive-in model and carhop services allowcustomers to have control over their customization and the whole buying process. It’s a huge advantage against other fast-food franchises and QSRs.

This also allows customers to create a more personal relationship with the brand. CEO Clifford Hudson stressed that drive-in allows customers to be more comfortable when ordering. Even if they have to wait for their turn, they won’t be needing to stand in a long line. With carhops, your food can be delivered without having to go through the line and wait.

Moreover, SONIC offers a variety of food from 5-hour parts – that means your customers can have options for whatever time they are eating. You can find breakfast foods as well as food catered for lunch, dinner, afternoon snacks, and even evening bites.  They have burgers, coneys, ice cream, and even slush drinks. You can find almost any type of fast food here.

They also open for 18 hours a day, making sure that franchisees get solid revenue options.

What you need to know about this brand

SONIC has always been a quiet franchise. But since Clifford Hudson took over as CEO, it has become one of the biggest investments with the QSR space. This regional brand has grown to become a national franchise over the years.

For the past 5 years, the store sales have increased every year thanks to their impressive team. It’s one of the most attractive franchises right now since its brand awareness and margins are up. They have even projected to reach double digits with their number of units.

They started 60 years ago in Shawnee, Oklahoma. For their first 30 years, they were only employing a thousand people for their whole franchise. Nowadays, they’re known nationwide. Even if they work with all kinds of markets, you can expect returns even if your market is small.

Being available in more than 3,500 locations, SONIC offers plenty of market opportunities. The best part about this fast-food drive-in brand is that it can cater to small markets as well. So in terms of advertising, you wouldn’t have to do much since their team has taken care of most of it. It’s also easy to gain customers since they are well-known throughout the country.

Why it can thrive in small markets

Drive-ins are an excellent fit for small markets. SONIC’s surprising is that 40% of their sales are from frozen drinks, desserts, and ice creams. About 16% of the sales come from burgers and hot dogs. It’s popular among kids and teenagers. After school, you can notice that most of them hang out around SONIC.

This is all due to their diverse menu. Your customers aren’t limited to one age group. Additionally, their aggressive campaigning has made the demand for their food higher. Queues for lines are also not very long since most customers already know the menu before they even line up.

It’s great for every type of market since it has so many food options that customers can choose from. And because of this, there’s always something new for your customers to try.

There’s also less initial capital needed since it is a drive-through. You only need to set up a small space to operate. That’s why you can also getter a faster return on your investment.

Final Thoughts

Small markets are often overlooked. Most businesses assume that smaller populations mean they will have fewer customers. However, you should always keep in mind that different markets have different systems. What works for larger markets may not work for smaller ones.

The three brands we included in this list have proved that you can still get a high customer retention rate even if you’re servicing a smaller population. You should always research not just the brands you want to franchise but also the demand in your area.

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