Branching Out: Expansion-Minded New York Area Operator Adds Dunkin' Donuts

When we visited with Hank Huth last year, the franchising veteran was keeping busy overseeing his 23 Blockbuster Video locations and 7 Palm Beach Tan units. He had an eye on expanding his Palm Beach Tan portfolio and he did just that in 2007, adding 3 more and winning the company's 2007 Developer of the Year Award. But that's not all he's been busy developing.

But first, a quick look back at how Huth got to where he is today.

The one-time banker took "a leap of faith" in the 1980s as a result of a chance meeting with some executives at Blockbuster Video. Huth didn't have any franchising experience, but his friend (and soon to be partner) Tim Nolan did. The two teamed up and it turned out to be a perfect match, as the two have gone on to develop five different franchise concepts over the past two decades.

At its peak, New York New England Video was operating 60 Blockbuster Video franchises in Connecticut, New Jersey, and New York.

"All of our locations have always been within a 100-mile radius of downtown Manhattan," says Huth. In 1993, he became the very first Boston Chicken franchisee, eventually building up to 75 units before selling back to the franchisor in 1996. In 1997, he opened his first Einstein's Brothers Bagels, building up that group to 40 stores before selling. He tried his hand at Corners Custom Framing in 1999, again reaching 40 units before selling back in 2001. His company then concentrated on its Blockbuster stores until signing on with Palm Beach Tan in 2005. Today, the 50-year-old Huth continues to oversee 23 Blockbuster Videos and his 10 Palm Beach Tan stores—with an eye on further development.

But for the first time in the company's history, Huth is thinking outside his home turf. In early 2008, he inked a development deal with Dunkin' Donuts. Under the terms of the agreement, Huth and his team will develop the Milwaukee and Phoenix markets over the next six years, under the name Interocean Coffee Company.

"We're looking to open 20 to 30 units in the two markets this year and are targeting 50 units in Milwaukee and 75 units in Phoenix over the next six years," he says.

Branching out into another part of the country is a little outside of Huth's historical expansion strategy, but he says two factors have made it necessary.

First, he says, with the majority of Dunkin' Donuts locations mainly on the East Coast, the area is built out. And, he says, with only a handful of locations west of the Mississippi and Dunkin' Donuts aggressively seeking new growth, Huth says it is a perfect opportunity for him to step in.

"The other part of the equation that makes this a smart choice for us is our management team and back office strengths," says Huth. "We have a fantastic infrastructure and a chance to leverage our abilities by adding another brand." He says his current infrastructure can handle all the necessary accounting, payroll, marketing, and development-related needs from the main office back east. Of course, he says, there will be strategic operating partners on the ground in both Milwaukee and Phoenix.

Huth says he believes so strongly in his company's back-office abilities that he's looking to provide the service to other franchisees who might want to spend more of their time building their brands and less time with time-consuming paperwork. He's already doing this for one franchise operator developing a chain of Houlihan's restaurants.

And it helps his own franchisees, too. "We can collect and analyze data accurately and generate reports systematically that free up time for franchisees and give them the ability to focus their efforts and energies on store-level operations," says Huth. "Our service can give them a chance to come up for air."

As Huth mentioned last year, "Successful franchise development relies on a good brand and good people. That's what we try to emphasize inside our organization." Obviously, that policy is still a tool for future leverage.

Name: Hank Huth
Title: Managing Member
Company: NorthEast Tan, New York New England Video and INTEROCEAN Coffee Company
No. of units (by brand): 10 Palm Beach Tan; 23 Blockbuster Video; Dunkin' Donuts (just signed) 50 units in Milwaukee and 75 units in Phoenix over the next 6 years.

Age: 50
Family: Wife Boo; Kids: 3 girls and 1 boy

Years in current position: 21 years
Years in franchising: 21 years

Key accomplishments: Being able to consistently pick franchise concepts at the right moment in their growth cycle—just as they're really breaking onto the scene. Though with Dunkin' Donuts, it's such a great, established brand with a real push for growth. So I think it's still a timing issue.

Biggest mistake: Waiting so long to get into the tanning franchise segment. I "drug my feet" a little in the beginning, but this is a great concept to be in right now.

Smartest mistake: Getting into video franchising in 1986. I didn't know what I was getting into or how it would turn out. It eventually turned into 60 stores at the height of our operations.

How do you spend a typical work week? I usually spend some time visiting stores. Mondays I usually review financials from the previous week, Tuesdays generally are filled with various staff meetings. Once a month we have training meetings that are attended by all of our operators. We're all there and we all learn something from attending those meetings. It's a great tool.

Exercise: We have a gym in our main office. I begin every day there with a workout at 6 a.m. If I do that, the rest of the day always seems to go better.

What do you do for fun? Anything that gets me outdoors—skiing, golfing, hunting, fishing. That's where I like to be.

MANAGEMENT

Management method or style: For me, it's working with great people. That's really our greatest asset—that's how we do what we do. Our back office is so solid. We try to have continuity in what we do at all levels, and we concentrate on details.

Greatest challenge: Finding good sites in the Metropolitan New York area. Real estate is a real tough issue there. Obviously, building out these Dunkin' Donuts locations will be a challenge, but I look forward to it.

Personality (and management style): Straightforward, demanding—but fair.

How do you hire and fire? I always say we don't just hire shift managers at our stores, we hire store managers. We treat our GMs as the president of a business—we empower them by giving them the appropriate training, authority, and responsibility while holding them accountable for results.

Find good people? This is so tough, and it's why we work so hard to keep our people so we don't have to replace them.

Train them? We believe fundamentally in training and offer opportunities regularly.

Retain them? I've been fortunate enough to have worked with some great people who have been with us for 10 and 15 years. We try to provide opportunities and encourage growth in whatever ways we can. We try to motivate our people. One of our philosophies here is that this is not a job, it's a lifestyle. Each year, we take all of our GMs on a "fun trip" to spend time with them and say thanks for what they're doing.

How close are you to actual operations? I'm not responsible for day-to-day activity, but I see and review the reports daily. I tour stores on a regular basis—that's where the fun is.

How does size (of franchise) matter? The size of the franchise doesn't matter… the concept matters. We look at it from the standpoint of is it something we can build, is it something we can grow? What are the people like throughout the entire system from coast to coast? Those are the kinds of things that are important to us.

"Growth meter"—How do you measure your growth? By the number of stores and related revenue, but also by how our stores are doing year over year in terms of revenue. Obviously, as a private company we also keep an eye on cash flow.

2008 goals: Continue to grow our Palm Beach Tan chain through development and acquisition as well as looking to open 20 to 30 Dunkin' Donuts in our Milwaukee and Phoenix markets this year.