VOL. 109 | NO. 52 | Monday, December 18, 1995
12/18 jts franchises
Franchising Memphis-style: pioneers right here
By JAMES SNYDER
The Daily News
You know some of the basics: McDonalds, Wendys, Circle K. Theyre franchises with national exposure.
Memphis has its own franchises. A pioneering franchise had its start here with a single self-service grocery store downtown.
Piggly Wiggly got its start in 1916 as one of the first franchises in the country. Tycoon Clarence Saunders opened the first supermarket in Memphis.
The franchise has shifted owners and moved away from Memphis, but it returned in 1982. Now Piggly Wiggly has 800 stores in 20 states each independently owned.
"(Saunders) began a franchise because he wanted a consistent image, but he also wanted each store owner to be independent and individual," said Melinda Ingram, communications manager for Piggly Wiggly.
Thats been the general idea behind the franchise ever since.
Franchises differ from chain stores. Stores like Kroger are owned and run by a central corporation. The corporation makes all the profit as well.
But franchise agreements allow a local operator to own the store and share in its profits. The franchisee, as they are called, usually pays the franchiser a fee up front and then follows with a percentage of what the store makes.
Piggly Wiggly stores take a cut of weekly sales, based on a sliding scale that depends on each stores size, Ingram said.
The supermarkets are serviced by regional distribution centers. Each center holds an advertising department and a product warehouse, Ingram said. The company also provides promotional advertising for new stores.
The franchisee benefits from the name, the supplier, advertising and exposure.
"The independents...have a little more free reign than the chain. Chains have a little more control," Ingram said. "The independents have the freedom to be what they want to be in their community, and they can go as far as they want."
Back Yard Burgers franchises 37 of its 70 shops, which are concentrated in Tennessee but spread through the Southeast.
Back Yard Burgers franchisers pay a $25,000 fee and then shave off 4 percent per week of taxable income for the parent company. In addition, the stores take off another 1 percent for a national advertising fund.
"As a franchisee, the person is buying the system and the things that go along with the system," said Lattie Michael, Back Yard Burgers founder. "Youre buying your mark and a way of doing business."
Under regulations from the Federal Trade Commission, franchisers cannot dictate much in the way of business practice or project a certain level of volume, Michael said. But they can provide services, guidance and advice.
In addition, Back Yard Burgers owners are encouraged to belong to the companys franchise association to swap information and business tips. The company also encourages them to belong to the National Franchise Association for similar reasons.
As for the potential financial results of franchising, look no farther than the Pink Palace, built with the fortune amassed by Piggly Wiggly founder Clarence Saunders.