Since 1869, YWCA Greater Pittsburgh has worked to improve the community by empowering women, eliminating racism, and and promoting peace, justice, freedom, and dignity for all. One way that they’re supporting that mission is by launching a for-profit business franchise.
In March, the YWCA will be launching a Nathan’s franchise. How did this project come about?
The Nathan’s franchise project came about as a result of the YWCA’s journey to find another way to generate income. . . . [About] four years ago, I believe, Social Franchise Ventures approached us through Community Wealth Partners (as an umbrella) about the possibility of looking at an entrepreneurial opportunity, particularly a franchise. . . . I think they had secured some foundation funding to pay for some of the costs, so it wasn’t costly for us to do so on our own. So we started our exploration and looked at various opportunities, from a school opportunity, Sylvan Learning, to the restaurant concept. We looked at it four years ago for about a year, then that got put on the shelf for a couple of years.
Two years ago, we took it off the shelf. We started working with Social Franchise Ventures again and decided that we wanted to do a franchise. At that point, we thought about a restaurant franchise with fast food, given the corner that we had here is in close proximity to the university. We continued to explore; there were various options. We knew that cost was critical, because it would be the students for the most part who would be paying. Some concepts came off, because kids aren’t going to pay $13 to eat every day. And we wanted something that was unique, not your typical Wendy’s or McDonald’s that were around, but what’s different? What’s unique? What will work in Pittsburgh as something different if we market it right? We determined that it would be Nathan’s. The rest is history. . . . We’ve incorporated two businesses—YWCA Business Ventures Inc. and under that is YWCA Restaurant Franchise Corporation.
This partnership with a nonprofit represents a first for Nathan’s.
Definitely a first for them, this opportunity. They’re thinking that if this works, they may do others. With the franchises, the restaurant concept is not how they make their money. They’re more into commercial retail and distribution of the hot dogs themselves, from QVC and Wal-Mart and your major retailers. They’re in seven countries. They only have about 250 franchises across the country—they’re very selective.
Was it really challenging to go from concept to reality because it was a first-time thing?
No. We got to a point where there was Nathan’s, along with two others we were thinking about. Operations individuals from those companies came to visit us and they saw the corner where we were thinking about putting the restaurant and said, “Oh, this is golden.” Then we did what they call discovery days, where you go in and you meet, but usually you go as part of a group. They were so interested in us, knowing that we were different, knowing that we wouldn’t benefit from a discovery day with the individual coming in—someone that’s doing it solely from a different perspective. So we had a special day set up for us to go to Long Island and visit the corporate office of Nathan’s Famous, meeting with the vice president of operations, the president and CEO, and the COO of Nathan’s. They realized that we were weren’t trying to run it like a program—that’s the critical point. We did not embark upon this to be a program. It was solely to be profitable and competitive with the others in the industry to generate an income with the dividends to go back to the YWCA of Greater Pittsburgh.
Do you anticipate any direct mission impact from the partnership?
Well, we will give our clients and our customers a preference for an interview, but it won’t necessarily be a preference for employment. So if someone comes through one of our workforce training programs wanting to interview for a job, they by all means can, but it’s a separate corporation that’s a private for-profit and that’s the purpose of it—to make money. Our mission is critical—that’s our bottom line. We’re doing it to be able to generate income to do our mission.
What we did do with Nathan’s was to make sure that we put some language in the agreement for the franchise that if they do anything that is detrimental—or perceived as detrimental—to what we stand for, which is the empowerment of women and girls and the elimination of racism, that we have an out. Everything is both ways. It really didn’t take that long to hammer out an agreement. Our attorneys talked to Nathan’s and everything got worked out.
Were there any special requirements from Nathan’s?
No. We actually had very little that we wanted to change, other than those things that really would jeopardize who we are. [Looking at] the business model, we knew we were getting into something that was a business for profit and that the model was different. Pretty much the tenets in those kind of agreements are the same across the board, it’s just the things that allow you to walk away usually have such long terms that you can’t walk away. They’ve allowed us to be able to walk away.
How much revenue do you expect the franchise to generate for the Y’s programs?
We anticipate at least to be profitable the first year. It’s new to us, but from everything we did with our pro forma and an independent accounting firm review of our numbers, it looks like we should be making money if that model and all of those assumptions hold true. We’re concentrating on core hours of business between 11 a.m. and 2 p.m. to be the profitable piece. We’re going to do breakfast and we’re going to do early dinner hours as well, but the lunch hour is when we anticipate making the bulk of our money. There are not many places in our area to eat and not anything that’s really unique like that. The Coney Island Nathan’s, where they started, makes $250,000 a week—profit—in the summer. They have 53 registers at Coney Island and it’s like a cult. That was another attraction for us, they have a legacy and a history that’s committed to caring about the common man. You work hard, you get a good hot dog. That whole match with the people and their history was another thing that attracted us to them.
If the franchise performs as you project it to, how long will it take the YWCA to recoup the costs of building it?
About five years.
Do you have any concerns about the partnership?
No. I don’t have any. It’s an exciting thing. It’s new, we’ve never done anything like this. But we’ve done our homework, so we’re feeling confident about it. . . . Working with Social Franchise Ventures and the consultants there, when we went through the journey we felt like we had a good team. Our attorneys were with us when we started, making sure from a tax perspective that we structured everything properly. So we’re feeling good about all the due diligence that was done. Now we are asking, “Will they eat a hot dog?”
Now you’re in the stage of, “If you build it, will they come?”
The good thing about it is that the menu goes well beyond just hot dogs. Their menu is pretty comparable to a Wendy’s or a McDonald’s, but their brand item is the hot dog. We’re trying to create a little amusement feel to it. We’re going to have a Wi-Fi room connected to it, so students can come in and hang out—I use the term hang out loosely. We’re trying to create a fun atmosphere, keeping it safe and comfortable for all.
You’re in a location where you get lot of foot traffic, I understand.
Yes. And right outside is the pickup point where they bring the students in from Park Point off-campus housing. It’s perfect. We’re right behind PPG, and I think that houses at least 500 or more people. We have another tenant in our building on the other corner which is a Mandarin Chinese restaurant and they do extensive business and have been in our facility for a long time. We’ll be anchored by one we own and one that’s a tenant, because the entire structure is ours.
Anything else you want to share about this? It’s a new area and people are very interested in how people are doing it.
I would say, the lessons learned so far are do your homework and take your time. The other thing is, as you go on, usually it’s staff work, but it’s a journey you take with your board. They are most concerned about image and mission, they are the keepers, the investors, as far as representing the community. It is critically important: “Will it send a message that we are forgetting who we are?” No, this is to ensure that we find a way to continue to do what we do and fund it. We were doing that before the economic downturn, but now it even seems more true.
Finding an ongoing source of revenue . . . building something that will be generating is a wonderful thing.
We have the potential, later, to look to expand, to talk to others about it. I think nonprofits are going to have to think that way—being more entrepreneurial about sustainability and making sure they structure it right, so that what they’re doing doesn’t have an adverse effect on who they are. We were fortunate in terms of having the ability to leverage some resources to get this financed in the way that we did. If you don’t, you’ve really got to make sure that whatever way you leverage the capital to do it that you are aware of why and how you are doing it.
How were you able to do that?
We have an endowment, so the board made a commitment . . . we also are getting some financing done as well.
Anything else you want to share?
We would not have been on this journey without Community Wealth Partners. We could not have done this without them. You think about it and you don’t know where to start. We could not have done this taking my time to do this as CFO. Don’t try to do the journey by yourself.