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Ground Round pays down debt, eyes growth

Now that the Ground Round franchisee cooperative has paid off its loans from the 2004 bankruptcy-court acquisition of the brand, the debt-free group is turning its attention to growth and nontraditional development.

The 24-unit Ground Round Independent Owners Cooperative, based in Freeport, Maine, plans to open a second unit of its smaller Ground Round Sports Grille concept and is seeking other development opportunities.

“The franchise owners are now in a better position to move forward with the brand, and we see growth in our future with letters of intent in place to open three to four stores this year,” said Jack Crawford, president and chief executive of the Ground Round IOC. Ground Round currently has stores in 10 states, primarily in the Upper Midwest and Northeast.

Gary Serino, Ground Round’s treasurer and chief financial officer, said the cooperative’s 20 individual franchise owners are in position now to grow the concept.

“Our last payment in April will free up some $360,000 a year in debt payments that we have to further develop the brand and put together a campaign to promote growth,” Serino said. “These franchisees came together when the parent company went bankrupt and bought the brand. They were able to pay off all the acquisition debt in a relatively short timeframe.”

The Ground Round franchise owners in 2004 raised nearly $5 million in cash and financing to acquire the brand and franchise rights.

Crawford added that the loan payoff “really puts us in a more financially stable position, not only to support the growth and marketing plans but the staff and support functions.”

Ground Round’s business plan includes expanding its new Sports Grille concept, which Crawford said is designed “for nontraditional development in smaller spaces such as airports and entertainment centers.”

A current franchise owner in December opened the first Sports Grille in his Sparetime Recreation Bowling Alley in Augusta, Maine, and plans to open a second in a bowling center in Lewiston, Maine, this fall, Crawford said, adding, “This gave us a head start on developing the Grille.”

Traditional full-service Ground Round covers about 4,700 square feet, and a typical Sports Grille will be 1,500 square feet to 2,500 square feet, he said. The concept would be considered for airport and casino locations as well, Crawford said.

The menu has been altered to accommodate more on-the-go foods, Ground Round executives said. “The menu features many Ground Round favorites, but with fewer entrées and a greater focus on sandwiches, salads, appetizers, burgers, pizza, kids meals and full liquor and beer service,” Crawford said.

Dan Damerow, Ground Round’s director of menu planning, said the top-selling categories at the traditional Bar & Grill are burgers at 35.2 percent of the mix, appetizers at 12.1 percent, and steak as 8.5 percent vs. at the Sports Grill which has best sellers of appetizers at 39.4 percent, sandwiches at 18.6 percent, and burgers at 14.5 percent.

Ground Round’s franchisee-owned cooperative over the past seven years has provided advantages, such as royalty rates lower than the industry norm, Serino said.

While all franchisees are members of the cooperative, Ground Round offers a tiered system. Currently, all franchisees have a $20,000 membership share in the cooperative and pay a $30,000 franchise fee. “With that share, they get the preferred terms of voting rights, 2.5 percent royalty rate and an investment.”

A standard plan, without the $20,000 cooperative membership share, also is available, but it carries a 3.5-percent royalty rate, the executives said. Ground Round has no advertising fund, so that budgetary expense is left with the local franchisee.

Contact Ron Ruggless at [email protected].

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