Latest / Franchise Conversations with Fexingo: Buying, Running, and Scaling Franchise Businesses / How Franchisees Use Renovation Cycles to Raise Revenue
Transcript
- Lucas: So, Luna, I was looking at some franchise performance data earlier this week, and one number kept jumping out at me. Franchisees who renovated their locations within the last three years reported an average same-store sales lift of nine percent in the year following the remodel. Luna: Nine percent — that's not nothing. But I bet a lot of owners hear 'remodel' and just think 'expense.' Lucas: Right, and that's exactly the mindset we want to challenge today. Because a renovation, when planned right, isn't just a cost — it's a strategic investment. And the franchisees who treat it that way are the ones who see the biggest returns. Luna: So what does a smart renovation actually look like? Is it a full gut job, or something more targeted? Lucas: It depends on the brand and the age of the location, but the smartest franchisees I've talked to treat it as a cycle, not a one-off. They plan a refresh every five to seven years, and they align it with their franchise agreement renewal. Luna: Interesting — so the renovation cycle becomes part of the business plan, not a surprise. Lucas: Exactly. And that's the first lesson. Too many owners wait until the franchisor mandates a remodel, or until the location feels dated and customers start drifting. By then, you're playing catch-up. The proactive approach is to timeline your remodels so they hit when the brand is rolling out updates, and when your own financials can support it. Luna: I've heard that some franchisors actually offer support for remodels — like co-op funds or lower royalty rates for a period. Is that common? Lucas: More common than most franchisees realize. Some brands have dedicated remodel funds or partner with lenders to offer favorable financing. If you're not asking about that at the beginning, you're leaving money on the table. Luna: Let's talk numbers. What kind of ROI are we looking at, and how long does it take to pay back? Lucas: A typical quick-service remodel might cost anywhere from $150,000 to $400,000, depending on scope. If you get that nine percent sales lift, and you're running a decent margin, you could see payback in two to three years. But that's just the direct sales impact. Luna: What else is there? Lucas: There's the perception shift. Customers walk in and see a fresh, modern space — they assume the food or service is better too. You also get a boost in employee morale. A nicer place to work reduces turnover, and that saves real money. One franchisee I spoke with said their turnover dropped by 20 percent in the year after a remodel. Luna: Twenty percent — that's huge. But there's a flip side, right? I mean, what if you do the remodel and sales don't lift? Is that a real risk? Lucas: It is, and it's why you need to be careful. If you're renovating just because the franchisor says so, or because you're tired of looking at the same walls, you're not thinking strategically. The remodel has to be tied to a clear business case. Luna: What does a good business case look like in practice? Lucas: Start with customer data. Are your sales dipping because of the competition, or because your location is dated? Talk to a few loyal customers. Ask them what would make them visit more often. And look at what the brand's top performers are doing — if the highest-grossing locations have all updated their interiors, that's a signal. Luna: So it's about using the remodel as a tool to match or exceed what the market expects. Lucas: Exactly. And then you've got to think about timing. If you're up for a franchise agreement renewal in a year, that's often the best moment to negotiate a remodel allowance into the new agreement. Some franchisors will even help with financing if you commit to the upgrade. Luna: Let's talk about the actual process. What are some common mistakes franchisees make when they decide to renovate? Lucas: The biggest one is underestimating the disruption. If you close for three weeks, you lose revenue and you risk losing customers to competitors. Smart owners find ways to stay open — phasing the work, working overnight, or using a temporary location. One franchisee I know did a full remodel over eight weeks while staying open, by moving the entire operation to a food truck in the parking lot. Luna: That's clever. So the remodel becomes a marketing event — 'we're getting a fresh new look, come see us.' Lucas: And that's a great way to turn a cost into a promotional opportunity. You can do a grand reopening, offer limited-time specials, and invite local media. The renovation itself becomes news. Luna: Now, what about the financial side — beyond the upfront cost? A lot of owners worry about the debt burden. Lucas: That's a legitimate concern. The mistake is funding the remodel with a short-term loan that eats your cash flow. The better approach is to plan ahead, maybe set aside a portion of profits each month into a renovation fund. That way, you're not taking on debt — or at least, you're taking on a manageable amount. Luna: So it's about building the renovation into your business model, not treating it as an emergency. Lucas: Right. And the franchisees who do that — who see the renovation as a planned cycle — are the ones who sleep well at night. They know the investment is coming, they've budgeted for it, and they can execute without panic. Luna: I think this episode is a perfect example of what I love about this show — you walk away with a concrete framework, not just general advice. Lucas: That's the goal. And if today gave you something useful, the way we keep these conversations ad-free is through listener support. You can buy me a coffee dot com slash fexingo — it's a simple way to keep the episodes coming. Luna: Yeah, every little bit helps us keep doing the deep dives. Now, back to that question about timing — you mentioned aligning the remodel with the franchise agreement renewal. Can you walk us through that? Lucas: Sure. When you're negotiating a renewal, you have leverage. The franchisor wants to keep a good operator in the system. So you can ask for a remodel allowance as part of the new agreement. Some brands will cover a portion of the cost, or offer a reduced royalty rate for the first year to help offset the investment. Luna: And if the franchisor isn't willing to help? Lucas: Then you have to decide if the remodel is worth it on your own. And that's where the business case comes in. If the numbers say you'll get a good return, it might still be worth doing — but you're taking on more risk. That's why the data needs to be solid. Luna: Any examples of a remodel that actually failed? Lucas: I've seen a few. One owner spent $300,000 on a high-end redesign that didn't match the brand's value proposition. The space looked great, but the menu prices didn't justify the upscale feel. Customers were confused, and sales actually dipped. The takeaway is: the remodel has to align with the brand's positioning, not just your personal taste. Luna: That's a good cautionary tale. So, for a franchisee listening right now, what's the first step they should take if they're thinking about a remodel? Lucas: Start with a simple audit. Walk your location with fresh eyes — or better, bring in a friend who's never been. Ask yourself: does this space feel current? Does it reflect the brand's latest image? Then look at your sales data by year — if you're seeing a gradual decline, that could be a sign your space is aging. Luna: And then? Lucas: Then talk to your franchisor. Find out what the brand's current prototype looks like, what the average cost of a remodel is, and whether there's any financial support available. And also talk to other franchisees who've done it — ask them what they wish they'd known. Luna: That's the kind of intel you can't get from a brochure. Lucas: Exactly. And once you have all that, you can build a proper plan. You'll know the cost, the expected lift, the payback period, and the disruption — and then you can make a smart, confident decision. Luna: So the renovation cycle is really about being proactive, not reactive. Lucas: That's the whole thing. The franchisees who treat their locations as assets to be improved — not just spaces to be maintained — are the ones who grow. A remodel is one of the few things you can do that touches revenue, customer experience, and employee morale all at once. Luna: And if you time it right, it can also set you up for a stronger exit when you eventually sell. Lucas: That's a great point. A fresh, modern location is more attractive to buyers and can command a higher multiple. So the renovation cycle isn't just about today's sales — it's about the future value of your business. Luna: Well, I know what I'm doing this weekend — walking my own place with fresh eyes. Lucas: Do it. And if you find that your space is starting to show its age, you now have a roadmap. It's not about gutting everything at once. It's about planning, budgeting, and executing in a way that drives real returns.