Great place to start

The line at Extreme Pita snakes into the aisle as Meadows mall shoppers swarm the second-level food court during lunchtime.

They may not have ever heard of the Canadian-based restaurant chain founded in 1997 as a healthy alternative to hamburgers. The company is growing at a double-digit rate with more than 200 North American locations.

Meadows mall is a perfect location for a first-time, fast-food franchise entering the Las Vegas market, Extreme Pita owner Suki Sodhi said.

"Even if people don't come in, they see us, so I felt it was better to get the visibility," Sodhi said. "We had the busiest first-week opening of any store in the United States."

Closing in on 2 million population, Las Vegas is on the radar for a number of national franchise expansions.

Spicy Pickle opened its first restaurant at 9985 S. Eastern Ave. in Henderson in May. The Denver-based chain, founded in 1999, has 24 restaurants in eight states, from California to Virginia.

Brent Robison, principal of CM Pickle Ventures, said the restaurant is at the forefront of today's fast casual dining trend, serving paninis, salads and submarine sandwiches with fresh, natural ingredients.

Tropical Smoothie Café has 18 locations in Las Vegas, with 17 more under development. Hurricane Grill and Wings has signed leases and started construction for five locations scheduled to open in August, the company's first venture outside of Florida.

Franchises operated 767,483 businesses in the United States, a 2004 economic impact report compiled by PricewaterhouseCoopers for the International Franchise Association shows. They provided 9.8 million jobs and $229 billion in payroll.

The economic impact of franchising goes beyond activities inside the businesses, extending to personal purchases by owners and workers at other businesses, the association report said. Total impact is estimated at more than 18 million jobs (13.7 percent of all private sector jobs) and $506 billion in payroll (11.1 percent of private sector payroll).

Sodhi, a former Quiznos franchisee in Fresno, Calif., began exploring other franchise opportunities when he founded the Strategic Franchise Development Group.

One of his partners, Joe Roth, was area developer for Extreme Pita in Arizona and held the rights to franchises in Nevada, New Mexico and Colorado. Sodhi said they're planning to open 25 to 30 stores in Las Vegas in the next five years.

The most dynamic segment to evolve in the quick-serve restaurant industry is the growth of sandwiches, subs and wraps.

The National Restaurant Association's 2007 Restaurant Industry Forecast projects quick-serve restaurants will register roughly $150 billion in sales this year, a 5.1 percent increase from 2006.

"Life is so busy now," Sodhi said. "Ten or 15 years ago, you didn't eat out as much. Now people are finding they're eating out and they want to eat quick and still eat healthy."

Entrepreneurs, large companies and venture capitalists are being drawn to franchising as a business expansion strategy. Nearly 900 new franchise concepts have been introduced in the past three years, according to research conducted by FRANdata Corp.

Franchise candidates are offered opportunities in more than 100 lines of business. Initial investment ranges from $10,000 to more than $1 million, depending on the type and size of business. Some franchises take a percentage of revenue.

The franchise fee for Extreme Pita is $20,000 and the initial investment to own and operate a store ranges from $180,000 to $225,000, Sodhi said.

Dennis Wengert, deputy district director for the Small Business Administration in Las Vegas, said most franchise owners use two types of loans. A stand-alone building with major equipment purchases would require a 504 loan, he said; the 7A loan is geared toward working capital.

Nearly all franchisors offer informal guidance to access capital and some even provide direct financial assistance to further enable franchisees.

Robison said the typical route for franchisees is to take out an SBA loan, though he went through his personal bank for the $100,000 franchise fee and $350,000 buildout cost for an existing 2,300-square-foot restaurant site.

"You might have to secure part of it with assets," he said. "Restaurants are not an attractive entity to loan to. They require more collateral, probably because of their failure rate."

A solid strategy, familiarity with new markets and a strong support team sets a brand up for success, El Pollo Loco Chief Executive Officer Steve Carley wrote in the May issue of Franchising World magazine.

"One of the greatest challenges franchise companies face is how to successfully open new locations in new markets, especially where brand recognition is low or even nonexistent," he said. "Treat national expansion into new markets like any other major project or investment. Have a plan. Know exactly where the company should go and when. Most importantly, choose markets carefully."

Robison said he looked at six or seven Spicy Pickle restaurants in Denver, Reno and Poway, Calif., to assess their operations. He selected the Eastern Avenue site because of business activity and traffic around the Lowes-anchored shopping center at Eastern and St. Rose Parkway.

"The other thing is you have to find a system or product you're comfortable with," he said. "The biggest draw for me is my experience, 15 years with the casual dining concept, and I was in a multi-unit management role. I believe in how these chain systems work. They give you a lot of corporate support. A lot of decisions on the design of the building and equipment are made for you."