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May 7, 2018

Commentary: Why Atlanta Should Be The Global Hub For Franchising

Atlanta Franchises

By Ben Lawrence

Much has been made of Atlanta’s rise as a hub for technology, logistics and cybersecurity, but there’s an equally important sector for which the city already boasts all the ingredients to become a global leader.

All it needs is the same kind of promotional momentum and industry swagger that have helped spur names such as “Transaction Alley” in the payments arena.  

I’m talking about franchising, where Atlanta is already a national capital due to its reputation as a distribution hub, its vibrant and diverse universities, key investors, recognition as a fast-growing tech hub and business-friendly legislation.

More Than Restaurants

Quick-service restaurants like Chick-fil-A might first come to mind, but franchising spans many industries, from pest control (Rollins Inc.) to hotels (Intercontinental Hotels Group) and furniture and electronics (Aaron’s) to education (Primrose Schools).  

Franchising sits at the nexus of branding, logistics and business services — all areas where the city is already a formidable player.

It’s no wonder that Atlanta is home to more restaurant franchise headquarters than any other U.S. city, including established brands such as Krystal, Chick-fil-A, Waffle House, Church’s Chicken and Arby’s.

Atlanta is also home to over 70 business-format franchise concepts, as well as several Fortune 500 companies that distribute their products utilizing franchising, including Coca-Cola Co., United Parcel Service Inc. (think UPS stores) and Mercedes-Benz (dealerships)

The short answer: jobs. According to the International Franchise Association, franchised businesses directly provide 9 million jobs and produce over $860 billion of output, adding over $550 billion to the U.S. economy annually.

Franchising remains a vital form of distribution for all types of services and is particularly prevalent in the hospitality segment, especially restaurants and hotels. Franchising’s unique yet ubiquitous business model generates 11.6 percent of Georgia’s workforce and is responsible for approximately $39 billion of its gross state product (source: PwC, 2016). Georgia based franchisors are also growing their brands globally and bringing those profits back to Atlanta to invest in their local operations.  

The Intersection of Tech and Logistics

Franchise-based chains consist of a fragmented workforce of independent but interconnected operators. Such systems benefit from headquarters and distribution centers that are centrally located and easily accessible. That helps franchisors accelerate unit expansion and monitor new outlets. Atlanta’s globally recognized airport, its supply-chain infrastructure and its support for entrepreneurial activity are key to retain and attract franchisors.  

“Atlanta was recently ranked by Deloitte as the nation’s #2 metro area in digital supply chain,” said Hala Moddelmog, president and CEO of the Metro Atlanta Chamber (also a former president of both Church’s Chicken and of Arby’s). “Our region’s reputation in digital supply chain capacity and innovation coupled with our commitment to entrepreneurial support establishes an ecosystem that is perfect for franchise-based companies.”

These companies are also leading the way in terms of innovation and applications of new technology. Take, for example, Orangetheory Fitness, where customers use wearable heart-rate monitors during workouts, or Domino’s Pizza, which is piloting the use of autonomous vehicles to deliver its products.

A Critical Mass of Owners and Capital  

In order to grow, franchise-based businesses also require capital, often in the form of private-equity investment: Atlanta has no shortage here, serving as the home of Roark Capital, NRD Capital, Global Franchise Group, Argonne Capital Group, Noble Investment Group and BIP Capital to name only a few.

Roark Capital invests heavily in franchise-based businesses, owning and operating over 35 national franchise brands, including iconic brands Carl’s Jr. and Hardees and hot new concepts like Orangetheory and Naf Naf Grill.

Focus Brands, owned by Roark Capital, is the franchisor and operator of over 5,000 ice cream shops, bakeries, restaurants and cafes in 54 foreign countries and U.S. territories under the brand names Carvel, Cinnabon, Schlotzsky’s, Moe’s Southwest Grill, Auntie Anne’s, McAlister’s Deli and Seattle’s Best Coffee. Its group president, Kat Cole, received her MBA in 2010 from Georgia State University.

Atlanta also has a strong foothold in the hotel franchising business. It is the U.S. headquarters for U.K.-based InterContinental Hotels Group (IHG), the franchisor of well-known brands, including InterContinental, Holiday Inn, Kimpton and Crowne Plaza. Atlanta is also the home of the Asian American Hotel Owners Association (AAHOA), one of the largest hotel franchisee groups in the world, whose members claim to own almost one of every two hotels in the nation.

Education: Putting the Pieces Together

With all these disparate ingredients, the Atlanta franchise scene now needs something to bring it all together.

At Georgia State University, we believe that coalescing agent is higher education, and we plan to help the industry marry cutting-edge research and innovation with practice while also preparing future leaders in this field.

GSU’s Robinson College of Business with its new major in entrepreneurship, its Entrepreneurship & Innovation Institute and its Institute for Insight provide significant resources to help build a core competency in franchising entrepreneurship and analytics in the future.

We count on the support of individuals like Aziz Hashim, founder of NRD Capital, who endowed a professorship in franchising entrepreneurship, which I currently hold.

With efforts like this, Atlanta can be not only a hub for franchise-based business, but an exporter of knowledge that will drive the industry forward well in the future. I have no doubt we can make both happen.

Ben Lawrence is the Aziz Hashim Professor of Franchise Entrepreneurship at Georgia State University’s Robinson College of Business. He holds a Ph.D. in marketing from Boston University’s Questrom School of Business and was formerly on the faculty of Cornell University. For questions about franchising or how to get involved with GSU’s franchising initiatives, contact him at blawrence@gsu.edu.

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