Staff Writer
Columbus CEO

c.2013 New York Times News Service

Faced with declining donations, some nonprofit organizations are getting into the fast-food business.

National chains like Blimpie (sandwiches), Papa Murphy’s (“take ’n’ bake” pizzas) and Auntie Anne’s (pretzels) now have franchises run by nonprofit groups that use revenue from the outlets to support their social missions.

For example, customers munching on their favorite sub or wrap at the Blimpie shop in downtown Weslaco, Texas, are also contributing to the construction of homes for low-income families. Opened this year, the franchise is owned by Affordable Homes of South Texas, which decided to go into the sandwich business when it was exploring how to offset a drop in federal housing grants, one of its primary funding sources.

Some charitable organizations also view it as an opportunity to train and employ people. The Dale Rogers Training Center does so with some 1,100 people with disabilities annually, and for this purpose it opened a new Papa Murphy’s carryout pizza franchise this year near its base in Oklahoma City. (Roy Rogers Restaurants, a chain in the Northeast, was not a viable option for the 60-year-old center, named for Dale Evans, wife and co-star of the western actor and singer Roy Rogers. The couple had a disabled daughter who died in infancy.)

National franchise brands customarily have contracted solely with individuals, but that is changing. More than a dozen national chains last May sent representatives to explore franchising opportunities with nonprofit groups in SourceAmerica, a network of 1,300 organizations serving the disabled, at its annual meeting in San Antonio.

Going into the franchise business is “not for everybody,” said W. Rhett Linke, SourceAmerica’s executive director of strategic business development. “It has to be the right match to further the nonprofit’s goals.”

Running a commercial enterprise, even one as friendly as sandwich-making, can be daunting, said Robert Calvillo, executive director of Affordable Homes, who got the idea of starting a fast-food outlet after he noticed how many students from a medical training institute near his office headed to lunch daily at nearby fast-food restaurants.

“I started thinking that, if we could build a house, we could run another kind of enterprise,” Calvillo said.

The organization owned a downtown building where an outlet could be located, so Calvillo approached several national chains and settled on Blimpie, in part because the $5,000 franchise fee was affordable. Blimpie also had a track record in the Southwest, having teamed with another community nonprofit organization, Chicanos Por La Causa in Phoenix, said Alan Crites of San Antonio, Blimpie’s developer for the area.

But persuading his board to approve the venture, which also required a $200,000 investment to build and equip the store and other smaller fees, was not easy, Calvillo said.

One stumbling block was the usual requirement that franchises be owned by individuals who could assume legal liability if things went wrong. To get around the issue, Affordable Homes created a limited liability company to serve as the legal corporate franchisee.

After the Blimpie outlet opened in June, its sales ran 15 percent less than budgeted in the first two months of operation, Calvillo said. But he expects the store to make $20,000 to $30,000 in net profit in its first year, then grow in future years — although, he said, it is not likely to produce enough revenue to cover the organization’s operating costs.

In Oklahoma City, the Dale Rogers Center had more experience with commercial ventures. It runs a frame shop, a trophy business and a gift shop on its downtown campus, said Connie McGoodwin, its executive director, so pursuing a food franchise was a logical fit.

For Papa Murphy’s, it was the “first partnership like this,” said Kevin King, the Vancouver, Wash., corporation’s chief development officer. “We offer a full training program and coaching, and we receive 5 percent of net sales weekly.”

The center paid a $25,000 franchise fee, and $170,000 to build and equip the store, not counting food. McGoodwin said the store, in a small strip mall, trained and hired people with disabilities to assemble the custom-ordered pizzas for people who pick them up and bake them at home.

“Making money is the icing on the cake,” she said. “We thought this was a loss leader but a great opportunity to train employees.”

So far, she said, the store has faced challenges typical of fast-food operations, such as training and customer service.

It is taking in about $7,000 a week, McGoodwin said, and the center estimates that the store will break even at the end of a year of operations next summer. In fact, the center is so pleased with its first store’s operations that it bought a second Papa Murphy’s franchise, also for Oklahoma City.