Tony Packo's ripe to expand, franchise experts say

9/29/2011

With a bidder in the Tony Packo's Inc. case expressing an interest in opening more locations, franchising experts say the famed East Toledo restaurant could be ripe for expansion.

A successful franchising strategy would depend on the ability of Tony Packo's, which opened in 1932, to maintain the consistency of its food and service across multiple locations, said Udo Schlentrich, director of the Rosenberg International Center of Franchising at the University of New Hampshire.

"That brand equity has been established, which is great," Mr. Schlentrich said. "Now, how can you expand that brand strategically?"

The main benefit of franchising usually is that franchisees contribute their own money to help the company open new locations, which provides an automatic infusion of funding dedicated to the company's expansion, said Matt Haller, spokesman for the International Franchise Association in Washington.

"You're investing with other peoples' money and you have a partner," he said. "It's skin in the game to succeed."

Three potential buyers for the Toledo chain, known for its Hungarian hot dogs and hot dog sauce, will discuss their offers during a hearing today in Lucas County Common Pleas Court.

None of the bidders has directly expressed an interest in franchising, in which independent franchisees own and operate sites.

But the owners of Tony Packo's, which has five locations, have tried to open additional corporate-owned locations in the past, and an outside bidder has hinted at possible expansion if his offer is accepted.

The bids include separate offers from Tony Packo III and Robin Horvath, current owners of the company, and businessman Bob Bennett, who owns several local Burger King restaurants. One of the three bids is expected to be approved by Judge Gene Zmuda.

Mr. Horvath last year sued to wrest control of the firm from Mr. Packo and his father, co-owner and President Tony Packo, Jr.

The litigation has led to a sale of the company's assets to collect on more than $2.6 million in loans it owes to Fifth Third Bank.

The Packos and Mr. Horvath could not be reached for comment.

In a statement this month, Mr. Bennett, owner of Bennett Management Corp., said he would like to "keep the Packo's brand anchored in Toledo and eventually open casual-style restaurants throughout this region."

He has declined to provide details of any possible expansion plans and declined comment for this story.

Mr. Schlentrich said Mr. Bennett's restaurant experience, which includes 26 Burger Kings in Ohio, Michigan, and Indiana, could provide him with the know-how needed to grow Tony Packo's beyond its current locations.

"He would be very aware what the pitfalls are, and how he can create a new structure of this company," Mr. Schlentrich said.

It's unclear whether Mr. Horvath or the Packos are interested in opening new Tony Packo's restaurants.

The chain came close to opening a store in Dundee, Mich., adjacent to Cabela's, in 2001, but did not proceed.

The company opened a Findlay restaurant in 2006 and closed it about a year later.

Mr. Horvath has accused the Packos in court of secretly trying to open more Tony Packo's locations in Florida, which the Packos have denied. The company opened a restaurant about three years ago inside The Villages bowling center in Lady Lake, Fla.

Mr. Haller of the franchise association said the strength of franchises such as McDonald's is that customers can expect nearly identical food and customer experiences at locations worldwide.

Restaurants such as Tony Packo's need to strive for that same consistency in order to expand successfully, Mr. Haller said.

If Tony Packo's undergoes an expansion, Mr. Schlentrich said, the company will need to maintain the "personality behind the brand" -- namely the food and brand awareness that put Tony Packo's on the map.

"What is important is not to lose what made your system unique," Mr. Schlentrich said.

Contact Sheena Harrison at: sharrison@theblade.com or 419-724-6103.