Penn Station Offers Zero-Royalty Incentive for New Owners in Developing Markets

The Development Incentive Program is not Penn Station’s only financial incentive for owners. The franchise also continued their variable-royalty, which adjusts royalty fees for individual restaurants on a sliding scale based on unit sales volume for Penn Station owners in their first five years of ownership. The fees range from zero to eight percent.

After five years, that scale adjusts to just two to eight percent. That means that franchisees with lower-volume stores may not pay any royalties at all during their first five years of ownership. With the new zero-royalty incentive, franchisees who sign a lease in 2018 in developing markets are guaranteed waived royalties in their first year, regardless of volume.

• The variable-royalty program adjusts royalty fees for individual restaurants on a sliding scale based on unit sales volume.
• The fees range from zero to eight percent for the first five years of ownership.
• After five years, the scale adjusts to just two to eight percent.

Greg Goddard, Penn Station’s Director of Development and Franchising, said they are also natural extensions of the brand’s overall prioritization of unit-level growth. “Our strategy has always been to allow unit-level economics to drive growth,” said Goddard. “One successful store leads to another. These programs are designed to assist newer locations in lesser established markets get and stay on their feet so they can invest in their own growth, thereby contributing to the growth of the franchise as a whole.”

According to Goddard, by reducing or eliminating the royalty fees owed by new franchisees, Penn Station encourages owners to invest their profits back into their businesses. “The idea is, by putting extra cash back into the pocket of our owners, they can invest in marketing programs, in the best employees, and scale up to their next unit faster,” Goddard said. “We’re long-term thinkers. We don’t want to hit growth numbers and move on, we want to ensure every new restaurant is equipped for long-term success.”

As a franchisor, Penn Station leads by example when it comes to reinvesting savings, contributing the entirety of its vendor rebates into a national ad fund rather than corporate profits.

Craig Dunaway, Penn Station’s minority owner and president, said, “Rather than taking vendor rebates into corporate level profits, we contribute 100 percent of our rebates to an ad fund that benefits our entire system.”

Goddard said the development incentive and enhanced variable royalty program went a long way toward attracting new franchisees in 2017, and he expects both programs to continue paying off this year.

• The development incentive and enhanced variable royalty program attracted highly qualified and experienced new owners in 2017.
• Goddard expects both programs to continue paying off in 2018.

“We brought on highly qualified and experienced new owners last year, people who have been in the business for a long time and saw just how lucrative our incentives are,” Goddard said. “We have no doubt that the incentives will continue to attract smart, capable and qualified franchisees to represent our brand in new and growing markets.”