My Library and Courses
Last Update: Thursday September 21, 2017

Key Idea: Chapter 11. Franchising with Takeout Taxi

The growth of a business depends upon the systems it can put in place.  Home...

Key Question:

A: 

Students studying, Enterprise, will discuss this and other questions in class.

Return to the video homepage

Think about it

Dr. Gartner's questions are:

a. Using the five criteria in “When to Franchise” in section 11.6, evaluate the suitability of the Takeout Taxi concept for growth through franchising. Was takeout taxi a good candidate for this method of growth, and why or why not?

b. Kevin Abt has hired you as his director of franchisee recruitment. Develop a list of criteria you would look for in prospective franchisees. Include personal characteristics as well as business background.

c. What should the training program for Takeout Taxi franchisees cover? Prepare the outline for the one-week curriculum for new franchisees and one for a one-day refresher course for experienced franchisees.

d. As a prospective franchisee, what would you want to know about takeout taxi before buying a franchise? Describe your due diligence plan in detail.

e. Meal delivery services have become a popular service business. However, Takeout Taxi was unable to survive as a large-scale franchisor. What factors might have contributed to its demise? Suggest some steps Abt and his management team could have taken to avoid filing for bankruptcy.

f. If you were considering starting an independent business, based on the Takeout Taxi concept, estimate the costs and the time to develop a system similar to the Takeout Taxi franchise system. How much do you estimate it would cost you in resources and time to develop your own system versus purchasing the franchise system from Takeout Taxi?

Return to the video homepage

Clip from: Enterprise

Business people who follow their dreams

Enterprise

Prof. Dr. William B. Gartner, Arthur M. Spiro Professor for Entrepreneurial Leadership

Business Classification:
business education

Year Founded:

Chapter 11. Franchising with Takeout Taxi

HATTIE: (Voiceover) In 1987, when this little girl was born, this business was born.

It was her birth that changed everything for Kevin Abt and his wife. They were used to going out for dinner often, after both had put in a long day at their respective jobs. But with a baby, that was no longer practical. Here's a business owner who acted on his instincts and now is the leader in his industry.

KEVIN ABT: When I left my corporate career, I was on the fast track, and my peer network looked at me and said, `Kevin, you know, have you fallen on the ice? What are you doing? You're gonna leave to go schlepp pizzas in Herndon, Virginia?' And I said, `No, no, no, no, no, no.'

America is in the midst of a huge-time famine. And there are way too many nights across America today where people have to run their life around their meal schedule, rather than having a way to fit their meal into their life schedule. And so I thought the concept of Takeout Taxi--we bring the restaurants to you--was national in scope.

HATTIE: (Voiceover) Here's how Takeout Taxi works. In many cities in America--and the number is growing every day--Takeout Taxi franchisees mail and distribute menus to homes and offices. The menus may list from 20 to 50 local restaurants, including some of your favorites like Bennigan's, Fuddruckers and Steak and Ale.

Unidentified Operator: Takeout Taxi.

HATTIE: (Voiceover) When you're hungry, you call Takeout Taxi, not the restaurant.

Operator: And which restaurant tonight?

HATTIE: (Voiceover) The orders are entered into Takeout Taxi's computers and faxed to the restaurant. Takeout Taxi drivers are alerted and quickly pick up and deliver the order to your doorstep. When you add it all up, nationwide, Takeout Taxi is responsible for generating sales of $250 million. Of course, most of those dollars end up in the pockets of the restaurant owners.

RONNIE FOX: Well, we've been using Takeout Taxi now for about seven years, and during that time, we have seen an increase in sales about 5 percent to 6 percent consistently during all periods of time. And it's been a wonderful way for us to keep in contact with our regular customers who are unable to come out and share a dinner with us when they're unable to make it.

HATTIE: (Voiceover) Off-premise dining is one of the biggest segments of the $160 billion-a-year food-service industry. While customer counts have dipped for the on-premise market, off-premise traffic grew 40 percent between 1982 and 1990. John Tortorella is the director of marketing, and he explained to me how Takeout Taxi targets its customers and prospects.

JOHN TORTORELLA: One of the best ways we have is through our association with the restaurants we do business with. So if you go to most of our restaurants, you'll see a menu stand prominently displayed or a menu man, which is a cut out which holds the menus in a box. Once people make that association and they've decided they don't want to order out, we become a great alternative for them.

Another major means that we use to get customers, which was really what built the business up from eight years ago to where it is today, is direct mail and canvasing. When we're training new franchisees and when we're training our people in-house, one of the things that we always try to stress to them is you're not just getting somebody's address to deliver food to, you're creating a mailing label.

HATTIE: You know, we've been talking about food and it's 12:30, and I'm thinking I'm hungry and the crew's hungry. What do you think, Tony? You guys hungry?

OK, John, can I use this phone?

JOHN TORTORELLA: Absolutely.

JEFF: Takeout Taxi. This is Jeff. Can I help you?

HATTIE: I need to place an order for the Tortilla Factory.

JEFF: OK.

HATTIE: On those nights when you're too tired to cook and don't want to go to a restaurant, in the past, you have called in for a pizza. Now you have choices.

Make sure everything's OK with you.

Oh good, the food. Are we starving or what?

KEVIN: You have to have a product or a concept or a service that has broad market appeal. Concepts are cheap. It's really the execution of the details And in new concepts and new ventures, there is a mine field of details between the concept and the bottom line of profits. And we spent four long, hard years in the debugging of the concept before we started franchising.

HATTIE: (Voiceover) One of the reasons Takeout Taxi is enjoying such strong growth is Kevin bought his number-one competitor.

STEVEN BEAGELMAN: They had just received a tremendous amount of venture capital from NationsBank Capital Corporation of over $3 million to expand the company operations. And we could have continued to compete, but it just didn't make sense for me, after meeting with Kevin Abt and the team that he had surrounded him, and with my team, which we had in New York, we figured it just made a lot more sense for us to team up and become one and take the country by storm and not give anybody a chance to compete with us.

HATTIE: Your first point is your idea must have broad market appeal. Is it OK to use yourself as the judge: I'm the customer, I want this, therefore, other people would want it?

KEVIN: I think that's a good, quick acid test. I think it's a good first shot, but I took it a step further, where I then said to myself, `Let me go back into my corporate arena and go into that network and talk to my friends and affiliates about, is this me or is this us? This time famine--is this me or is this us? Is everybody else having home-cooked meals at 5:30, seven days a week or not?' And lo and behold, I heard a resounding mimic of my own life from my entire network. Everybody was saying, you know, `Look, the only thing we can get delivered to our house is a pizza.' And the joke half the time was that when the pizza arrived, they'd throw away the pizza and eat the box.

HATTIE: There you go, tastes the same.

KEVIN: And I listened to that and I said there's something profound in what they're telling me. They're telling me there's massive demand for real food delivered to the home and the str...

HATTIE: OK. But now are you telling me that it's OK not to hire some big, fancy marketing company to do analysis for me before I jump off a...

KEVIN: Well, let's be realists. What entrepreneurs have that degree of capital to be able to go hire the fancy market researcher?

HATTIE: OK.

KEVIN: If they do, they'll probably never get the business off the ground 'cause they'll blow all their initial seed money on the research study.

Ultimately, most important, you've gotta have the right human capital in the team. Now--and that's a very broad statement because the type of human capital that concept needs in its earliest days is very different than the type of human capital it needs in its midsize, or let alone, its large size. In the opening volley of the concept, you need a maniacally driven entrepreneur who is gonna take no prisoners and do everything that's required to get the business going. I mean, that was my role at Takeout Taxi. As we move into a larger-size operation--I mean, I can see it inside my own infrastructure. I'm looking more carefully at bringing in several additional players to the management team that have very specific skills at running the day-to-day operations.

The last ingredient is the concept must be financially sound. Entrepreneurs are, it seems, constantly in the process of raising capital. And I think it just grows to a higher level all the way down. I mean, we started the company, basically, by my Charles Schwab savings account. And then...

HATTIE: Did you spend all of that?

KEVIN: Oh--and then some. So we went through about a two-year window, where I wound up having to personally fund several hundred thousand dollars of additional investment into the company.

HATTIE: What did you do, sell your house?

KEVIN: Yeah. Yeah.

HATTIE: You did?

KEVIN: Yeah, I did. If you really want to build your own business, do it. However, before you do it, think through very carefully how hard you really want to work. Because if you're gonna be successful as an independent businessperson, I guarantee you, you're gonna work harder than you'll ever work in a job for somebody else. And you better be willing to make that personal commitment and, again, your network of family and friends better be willing to let you make that commitment.

Not a member yet? Learn!  Be empowered! Join us!