HoneyBaked Ham Company and Café Case Study

Case Study first published in
The Franchise Valuations Reporter
Volume 7 – Issue 3
March 2015

HoneyBaked Ham Company and Café Case Study:
Incorporating Multiple Possible Revenue Streams for Franchisee Growth

By Mark Siebert, CEO, iFranchise Group

The key to success in franchising has always been the success of the franchisees. Without successful franchisees, any franchise system is doomed for eventual failure. So, what can a franchisor do to help improve franchisees’ revenues and profitability? The HoneyBaked Ham story provides an interesting example of how one franchisor did it. I recently had a chance to sit down with members of the HoneyBaked Ham franchise development team to discuss their unique model and why it continues to expand nearly 60 years after its first location opened.

Background

Shortly after HoneyBaked Ham opened its first shop in Detroit in 1957, it became known for its slow-smoked, spiral-sliced hams perfect for celebrating family meal occasions. It’s one of those iconic brands that has withstood the test of time and growing competition in the premium food retailer space.

Over the course of nearly 60 years in operation, including a generation of franchising, the concept has incorporated multiple revenue streams beyond the cornerstone hams that originally built the brand. In large part, HoneyBaked Ham’s flexibility and willingness to adapt is a big reason why the brand remains relevant today.

A change in attitude at HoneyBaked – More than just a carryout concept

Perhaps it’s easiest to boil down the HoneyBaked revenue stream into three categories – let’s call these the “three Cs” that help maximize HoneyBaked’s revenue: carryout, café and catering.

A few decades ago, HoneyBaked realized there was a demand in the market for the growing lunch category. An expansion into the “café” concept started in 1998 with the acquisition and reflagging of a smaller brand. Prior to that, HoneyBaked was largely a food retailer offering premium meats. The newly acquired brand was having success with the “three Cs” and it was a natural progression for HoneyBaked to start implementing and improving on much of what that brand had started.

There were many benefits with the acquired brand’s café model. Plus, there was a platform in place with the acquired existing stores that facilitated the start of franchising the HoneyBaked Ham Company & Café.

In less than two decades, HoneyBaked has truly embraced the multiple revenue streams model. Since broadening to include café/lunch and catering in 1998, nearly one-third of sales at franchise locations come from lunch and catering. Factoring in the corporate side of sales – HoneyBaked has around 200 franchise units and more than 200 corporate stores nationwide – catering and lunch/café account for nearly 25 percent of system-wide sales, a substantial amount of income for each individual location and the system as whole.

Why multiple revenue streams work for HoneyBaked Ham

With more than 400 retail outlets across the nation, HoneyBaked Ham locations today are much more than places to buy a to-go ham. Shops have entered the lunch/sandwich space, vying for market share in that space and leveraging decades of brand recognition to attract customers looking for a high quality sandwich made with HoneyBaked’s signature meats.

And, HoneyBaked Ham is increasing its catering capabilities, providing extended catering services for community business events and social and family functions.

The franchise is a great example of a food brand in an unrivaled position: one that straddles the line between carry out and restaurant. With a customer loyalty program that shares exclusive coupons with regulars and a line of food products that includes ham, turkey and beef, plus side dishes and desserts to create a full meal, as well as sandwich and other lunch options for dine-in or carry-out, HoneyBaked Ham has managed to adapt and expand its offerings to remain relevant. Much of its stability and longevity comes as a result of incorporating multiple revenue streams into the mix. Yes, the brand is still primarily a premium retail food operation, but the three Cs have become an increasingly important part of the direction of the franchise, allowing it to expand into both new markets and existing ones.

As an example, lunch and catering revenue streams have allowed HoneyBaked to further penetrate existing markets like Atlanta. The additional streams allow the brand to have some 30 locations in the Atlanta market, which would probably not be possible with a solely carryout concept. Furthermore, the expanded streams provide HoneyBaked opportunities to expand into previously inaccessible secondary markets like Pinehurst, North Carolina, or Erie, Pennsylvania – where a new franchise location will be opening later this year.

Franchisee reaction to the evolving HoneyBaked concept

When HoneyBaked makes a marketing and promotional shift that expands the offerings (i.e. adding menu items), full training and marketing support is provided to franchisees. According to HoneyBaked, these operation tools, marketing materials and support programs increase chances of success and the ultimate goal of improving revenue.

Franchisees have largely embraced new procedural rollouts, primarily because they know they have been researched and tested rigorously prior to system-wide implementation. And because the programs HoneyBaked is providing have noticeably increased streams of income, it makes for satisfied franchisees.

Three tips for evaluating your franchise system’s streams of revenue

Based on my conversations with HoneyBaked, the company’s franchise team has identified three questions for franchise systems to ask themselves when evaluating revenue streams.

1. Are all current programs being embraced and maximized by the franchise system?

This is important to ask because, before introducing additional products or services, it’s crucial to make sure franchisees have a deep understanding and embrace the current mode of operation. If the system as a whole isn’t maximizing the current products and programs in place, it may not make sense to introduce something new. The focus may instead need to be on adjusting and improving the current model.

2. Does your franchise witness successful unit and annualized unit volume (AUV) growth?

It’s critical to analyze whether stores are consistently growing and if they’re profitable year over year. A healthy system adds units through new franchisees and existing owners opening additional locations.

3. Do you have a system of satisfied franchisees?

It’s imperative to continuously survey, meet with and determine the satisfaction level of franchisees. In HoneyBaked Ham’s experience, the franchisee community has always been its best source for feedback. No additional revenue stream will take off without the collaboration and blessing of your dedicated franchisees.