Are Franchised Chains the Weak Link in Food Allergy Dining?
Since AllergyEats’ inception, I’ve been asked – and have seen others ask – the following questions: “Which are better when it comes to food allergies – chains or independent restaurants?” and “Which are better – large chains or small chains?” The list goes on, with the type of cuisine, type of restaurant, etc. Throughout the years, my answer has always been the same:
“There is no pattern to one type of restaurant being better than another, whether chains vs. independents, casual dining vs. fine dining vs. quick serve, etc. It all comes down to the commitment from the top– whether that be the owner of an independent restaurant or the senior management of a chain.”
I still believe that to be absolutely true.
Consider In-N-Out v. McDonalds, Longhorn v. Applebee’s, or, as we wrote up recently: Chipotle v. Subway. In each case, the former has made AllergyEats Top 10 List of the Most Allergy-Friendly Restaurants in America, while the latter – a comparable chain – is simply not food allergy-friendly. The same goes for independents, though there are too many to name. But why isn’t every independent a One Dish Cuisine (Ellicott City, MD), an Intentional Foods (Mesa, AZ), or an A La Mode Shoppe (New York City)?
It comes down to commitment.
At the risk of sounding like a hypocrite, I think we finally found a (generalized) differentiator here. Before I say it, let me reiterate that being allergy-friendly or not still comes down to the individual restaurant or chain, but in general, AllergyEats data strongly suggests that franchised restaurant chains are less allergy-friendly than their company-owned and operated competitors.
Here’s some data from a 3-year look back. Among 78 of the largest casual dining restaurant chains in America, the average AllergyEats allergy-friendliness rating for restaurant chains that own their own restaurants is a healthy 4.17. For franchised chains? A thud-worthy 3.77. Note too that the average franchise rating is helped dramatically by 2 of the biggest on the list – Red Robin (4.07 rating, partially franchised) and Outback Steakhouse (4.13). Take out these and the #’s are much worse, led by the other large franchisor, Applebee’s at a dreadful 3.13. To be fair, there are duds amongst the company-owned and operated restaurant chains as well, such as Cracker Barrel (3.09).
Overall, however, the data is the data. Even if I looked at AllergyEats’ ratings since inception nearly 10 years ago, the score would be 4.02 v. 3.70 in favor of the company-owned restaurant chains.
So who’s got the greater incentive to become allergy-friendly?
Here’s my theory. I still believe – as demonstrated by the outliers above – that generalities are just that, and that every restaurant chain and individual restaurant needs to be considered on its own merit (thus, the reason AllergyEats exists). I also still believe that the driving factor behind any restaurant being food allergy-friendly – as mentioned above – is commitment. Lastly, I strongly believe that what drives many restaurants to be food allergy-friendly is simple economics. And therein lies the rub.
A franchisor has less economic incentive to put the kind of strict rules and protocols in place that make a restaurant food allergy-friendly than a chain that owns and operates all of their restaurants.
Franchised restaurant chains make most of their money off royalties from the revenues of their franchisees (generally, they take 4% of sales). Chains that own their restaurants make their money off the profits of the restaurants. There’s an important difference between making money from revenues v. profits. A restaurant that becomes food allergy-friendly should see a nice boost to revenues – let’s say, for this example, they go up only 5%. However, because the cost of labor, rent, overhead, etc. are relatively fixed, that 5% increase in sales can translate into a 12% increase in profits. For a franchisor, a 5% increase in the sales of their chain’s restaurants equates to a similar (5%) increase in profits. So, the financial rewards and return on investment for taking the steps to be food allergy-friendly are greater for company-owned chains than for franchisors– and thus the motivation is greater too.
Further, while chains that own their restaurants are focused on maximizing the profits of their restaurants to maximize their company-level profits, franchised chains need to focus on selling new franchises in order to grow, taking away from a focus on maximizing restaurant profitability. Certainly, they want franchisee sales to grow, but the bigger long-term bang for their buck comes from increasing the number of franchises. Again, the motivation to increase profits by being allergy-friendly is strongly in favor of the chains that own and operate their restaurants.
Back in the day, I was a financial analyst and portfolio manager. I spent a stint as a restaurant analyst. I remember going to Oak Brook, IL to visit McDonald’s – one of the largest franchisors in the world. I’ll never forget staying on the campus of Hamburger U (yep, you can’t make that up) and turning on the TV at night, only to find that the “cable channels” consisted of how to make a Big Mac, how to make a double cheeseburger, etc. McDonald’s, due to their size and name recognition, could control virtually everything their franchisors did in their restaurants. However, they’re the exception rather than the rule. In general, it is a lot easier for Maggiano’s Little Italy (owned and operated), for example, to get mandates from the corporate level to the restaurant level than it is for Texas Roadhouse (franchised). Consistency matters, especially when food allergies are considered.
Again, I share this information for the sake of public interest. I strongly reiterate that every restaurant and every chain needs to be measured on its own merits (using AllergyEats, of course!). There are plenty of strong franchise chains – Outback, Red Robin, and Vitality Bowls to name a few – and plenty of weak company-owned chains that buck the norm presented above.
YOU can help us see if the trend continues over the coming years or help us find NEW trends! Just rate every one of your restaurant experiences on the AllergyEats website or app. Chains or independents, quick serve or fine dining, Chinese or Italian – they all matter. Every new rating makes AllergyEats a more valuable tool for the entire food allergy community, so please help us right now. We’re all in this together!