After 22 years of slow growth, a chain of ‘50s-style themed restaurants has developed an appetite for expansion. The Massachusetts-based 5 & Diner is seeking a local franchisee to open a store in the Greater Hartford region in 2012 and establish a foothold in the market.
The fast-casual chain, which started in 1989 as a one-concept eatery in Arizona, has 12 locations in five states, down from 15 units in 2007.
The 5 & Diner restaurant chain features jukeboxes with music from the by-gone era, soda fountains, hula hoop contests and hostesses in poodle skirts who serve hamburgers, sandwiches, fries, flavored sodas and shakes.
“The authenticity and unique nature of the business means that competition in Hartford is nearly nonexistent, allowing for plenty of room to grow,” said CEO Bob Watson.
Typical development costs range from $450,000 to $750,000 and the average unit sales volume is more than $1.1 million.
Each 5 & Diner location runs about 2,800 to 3,000 square feet, employs between 25 and 30 people and takes about seven months to open a store, according to Tim Sheehan, vice president and CFO.
The company plans to open at least five units in Connecticut over the next few years, said Watson.
“We look for potential owners who have a passion for the ‘50’s and ‘60’s, old car culture, owning their own diner or all of the above and then some,” said Watson.
Before 5 & Diner, Watson led the hospitality management firm LPM Holding Co. In 2006, he got involved in the diner business when he opened a franchise in Worcester with his wife Laurie.
In 2008, the original franchisor decided to sell 5 & Diner and Watson bought it.
“When we bought it three years ago, we decided to park the business during the worst years of the economic recession and rather than begin expanding right away, sat down and redesigned everything from the business model to the website to the menu,” said Watson.
“We’re looking to add six to eight franchises over the next two years, or one about every five months. In Hartford specifically, we’re looking at having two to three deals signed by June 2012, with openings in the following six to nine months. We think this is a very realistic and achievable goal.”
To help propel franchise growth, he launched a new prototype designed to lower development costs, introduced a non-freestanding option to attract more investors, revamped the menu and updated the company’s marketing strategy.
As part of revamping the retro restaurant, Watson hired large retail research consulting firm Buxton to help 5 & Diner identify strong markets for potential franchisees. The customer analytics firm said the U.S. could accommodate 495 units.
“I’m pretty sure the Buxton system holds around 10 times more information than the Library of Congress,” said Watson.
“Hartford and New Haven were identified early on as great territories for expansion.”
Although seven of the 12 existing units are in the Phoenix area, Watson is focused on expanding the chain on the East Coast, particularly Connecticut, Pennsylvania, New Jersey and New York.
Watson said a key difference in how 5 & Diner operates has to do with where it locates its restaurants. The company is aiming for inline space where construction, plumbing, electricity and tenant improvements are included, rather than freestanding units.
“If you can spend $400,000 to $500,000 and locate in a shopping center, that can be a decent living for a family,” said Watson.
Watson is not worried about competition in the nostalgic diner space.
“We don’t consider Johnny Rockets and Sonic to be our competition. Johnny Rockets is cool,” he said of the 23-unit diner-themed family-dining chain, “but it has a very limited menu. Sonic is a fast food restaurant. We’re a real diner.”
5 & Diner Address: 24 Main St., Maynard, Mass., 01754 Phone: 877-951-1951 Website: www.5anddiner.com CEO: Bob Watson Franchise Fee: $35,000, reduced for vets Financing: Not available Liquid Assets Required: $250,000 Net Worth Required: $750,000 Royalty Fee: 5% Terms: 15-20 years Renewal Fee: 25% of current franchise fee
