The Wall Street Journal has an interesting article profiling an in-home elderly care franchisee.

Home Instead and the other senior-care franchisees pay caregivers somewhere between $8 and $12 an hour and charge clients about twice that amount. In the highly competitive Chicago market, the Melingers charge clients $18 an hour, with a minimum of two or three hours a day, or $180 a day for 24-hour care. They also provide a “rise and shine” or “tuck in” service, for $200 to $280 a week.

The Melingers declined to reveal just how lucrative their business is, but FranchiseHelp, a consulting firm in Elmsford, N.Y., provides some guidelines for similar businesses. In 2002, for example, a franchisee of Homewatch Caregivers in Denver, with 60 workers, took in gross revenues of $1,265,324 and paid out $1,141,578 in expenses that included royalties and the franchisee’s salary, leaving a profit of $123,746.

Their isn’t inventory to deal with, which is very nice. But that time is otherwise spent on finding and hiring responsible people they trust enough to send into an elderly person’s home. The franchisee said almost 1/2 the people don’t even show up for the their interviews and many quit after a few days. Ugh!

If you can maintain a steady staff, you can easily open a 2nd conierge style business, which we discussed perviously.

I’m neutral on elderly care franchises right now because they are heavily commonditized business (the market controls the fee level, it’s hard to charge more than $18/hr with all the competition). I am also hesitant when so much depends on finding qualified low wage employees that must work independently (unlike a retail location where managers can monitor what you do).

A few months ago we reported that Lenny’s signed a deal to open 125 Lenny’s Sub Shops in South Florida. Now the company is working on 80 franchise restaurantsin Texas.

The 80 new stores will be developed in Texas’ Fort Bend, Harris and Montgomery counties.

Len Moore (the “Lenny’s” in “Lenny’s Subs”) and his wife Sheila opened the first Lenny’s Sub Shop in Bartlett in 1998. Since then the company has spread like wildfire, making the move to franchising in 2001. The company currently has 63 franchise restaurants, with more than 300 franchises in nine states on the way, hoping for 500 by 2008.

What were you doing in 1998? Going from 0 to 300 franchises in 4 years is quite an accomplishment. How many more sub franchises can the market handle? The founder has extensive franchise restaurant industry experience. He held management positions with a number of companies including Chick-Fil-A, TGI Friday’s, Olive Garden and Ruby Tuesday’s.

We’ve mentioned Lenny’s on Franchise Pundit a few times before.

According to this 10-Q filed with the SEC by Papa John’s, average franchised store sales are 705k annually.

Papa John’s franchisees did increase sales 3.9% last quarter (Jan-March) compared to the same quarter last year.

Average weekly sales of franchised units: $13,563 ($705,276 annually)
Average weekly sales of company-owned: $15,075 ($783,900 annually)
* Why are the company owned stores outperforming franchisees by 11.15%?

The 10-Q speaks of one franchisee who sold his 19 restaurants with total annual revenues approximating $12.0 million ($631,578 per store) to a 3rd party. The restaurant sales were lower than the average by 11% or $70K, enough to obtain a loan writeoff from Papa John’s.

This isn’t good:

Domestic commissary sales increased 6.7% to $100.9 million for the first quarter of 2005, from $94.5 million in the comparable period, primarily due to higher cheese prices that were partially offset by lower volumes resulting from decreased restaurant transactions.

and this:

the first quarter 2004 operating margin was negatively impacted by the increased sales of lower margin promotional products

and this:

One group of 4 franchisees owning 33 franchises generated a $25,000 loss on $5.2 million of revenue, $4.6 million in operating expenses and other expenses (including G&A, depreciation and interest) totaling $600,000. Papa John’s also provided them with a large loan.

I do love their garlic dipping sauce for the crust that is included with each pizza!

Update 6-18-2005: Thanks to “Accountant” who in the comments pointed out my miscalculations. The post has been updated, including the title.

Update 6-19-2005: Thanks to “Ken King” who in the comments pointed out another miscalculation on my part. The post has been updated.

Should you buy a franchise, or start your own business? After reading this you may not be so scared to start your own.

Let’s assume you have decided to start your own "coffee and sandwich cafe" instead of buying a franchise. The franchise fee would have carried a $30,000 and a 7% royalty on gross sales. Here is one way to proceed with your business and fee savings:

1. Take the $30,000 franchise fee and invest $25,000 in the market or real estate. With compound interest of 11% over 20 years, you’ll have over $201,000 nestegg to retire on. Take the other $5,000 and hire a franchise or business consultant to help you build out and set up operations.
2. Let’s assume you’ll spend the equal amount on advertising as you would have with the franchise, say 4% of sales. Assuming your sales are $400,000, that is $1,333 a month on advertising. How about you spend that plus an additional $2,333 ($3,666 total) on local promotions and media buys to build your own brand awareness? You can with 7% or $2,333 royalty you’ll be saving. That can go a long way considering radio spots and many TV spots can be had for less than $100 per spot. Many small businesses would salivate to have a $3,600 advertising budget each month.
3. By cutting out the premiums you pay to the franchisor for supplies and food, you can spend that money on an extra employee to help during high traffic hours or on creative consultants to help with advertising and promotions. In other words, you can invest that money in building a customer base.
4. Take the franchise fee you must pay to renew your franchise every 10 years (some are only 5 years) and invest it in a consultant to help build your business further. Or, if you have been obtaining feedback and outside and you are certain there is nothing left to improve, use the money to pay yourself a bonus.
5. Altenatively, if the business is stable and advertising has proven not to pay off, you can pocket some of the royalty money. But, I’d wait a few years until the business is well established.

What you are giving up by not buying a franchise:

• a method to operating a business and buying inventory that has been shown to work
• existing brand awareness
• pooling advertising dollars with other franchisees
• knowledgable resources (though they are obligated to maximize their profits, not yours)

What you gain:

• Freedom in all aspects of operating your business, from site selection to operations
• Easily sell the asset (your business)
• Lower cost inventory (no franchisor markup or required suppliers)
• Higher rate of reinvestment of gross sales into business
• Investing the franchise fee can provide a nice retirement safety net

One big reason franchises succeed more often than startups is the franchisor requires discipline — discpline in capital requirements, discipline in advertising and operations. If you have the discipline, you can succeed on your own.

We report, you decide 😉

We already talked about Manly haircuts, now lets look at Kids haircuts. You already know that we like salon franchises because they are simple to operate, it’s fairly recession proof, labor costs are low and supplemented with tips, no perishable supplies, brand loyalty has been low in the past with Fantastic Sams and Best Cuts types being identical, and kids "experience" business are here to stay. Getting your haircut is usually not an experience one normally looks forward to, that why we believe themed salons are a great hook.

This is especially true for kids haircuts. Kids are all about the "experience" and have undeserved power in deciding where to go. Here steps in Snip Its. Check out their web site for a sense of how creative the place is designed. They cater to children of course, but also accomodate parents so the whole family can get their haircut simultaneously.

What are some special and creative attractions at this kids salon?

Glamour Parties
Snip-its Glamour Parties make girls gorgeous! A glamour party allows girls to act like divas for a day by offering hair braiding, curling and styling as well as nail polish and make-up application. Dressy clothes are provided to complete the look. The culmination of the party is a stroll on the catwalk followed by cake and favors provided by Snip-its. Snip-its even provides a camera to capture all of the fun.

Style-a-Doll Parties (Launching at Snip-its this summer!)
At Snip-its’ Style-a-Doll Parties, attendees each receive a doll inspired by Snip-its’ trademark characters, the Clipette sisters – Marlene and Charlene. The dolls have been specially created so that birthday guests can style their hair with hair clips and accessories and apply Snip-its’ cosmetics that are designed for use on the doll. Stylists are on hand to help the girls with the styles and teach them about their own grooming and styling. The girls get to bring home the doll as well as the makeup goodie bag as part of their birthday party package.

Upon entering the Snip-its salon, parents and children step into a magical, engaging, cartoon world of adventure characterized by floor-to-ceiling cartoon murals, splashy vibrant colors, music from the Snip-its soundtrack and larger than life animated cartoon characters, including Flyer Joe Dryer, Maranga Mirror, Curly Comb and Snips.

Sounds like a fun place, eh? I cannot vouche for the operations or profitability of a franchise like this, but salon-haircut franchises are typically relatively easy to operate profitably, and this one has an especially timeless and engaging theme that gives Snipits a sustainable competitive advantage. The idea is fun enough to take to local schools and charity events for extra promotions and profits. I think this is easily one of the top franchise I have reviewed so far. I’d buy it!

I rarely deviate from franchise talk, because that is what people come here to read. But, I just watched this heart touching tribute to former President Ronald Reagan on the 1-year anniversary of his death. I recommend people watch it regardless of their own political affiliation. Sometimes we need step back from business and keep perspective about what is truly important in life. Reflecting on great Americans can sometimes help us in that personal journey.

Some franchisors allow their franchisees to conduct their own promotions. Be especially careful of "free" coupon giveaways in whatever form. Subway is ending their free sub card (you need to get a certain number of stamps and you get a free sub).

There are some good Quiznos comments and debate about what are appropriate expenses.

CLICK HERE to see it.

read more Franchise Pundit posts on Quiznos…

Discount hair cutting businesses such as Best Cuts and Fantastic Sams have always been remarkably profitable ventures. Two years ago a lawyer I knew purchased a Sports Clips franchise for his wife to run. He’s a smart and guy and did a lot of due diligence before hand. I can see how a themed hair salon for men featuring sports, large T.V.s, news, and manly decor can attract a steady flow of men willing to pay an extra $5 for a haircut. There’s even one called Roosters Men’s Grooming Centers that describes their business as the following:

Stocked with leather chairs, men’s magazines and TVs tuned only to news or sports…Customers at Roosters get a free beverage of their choice (including beer) and a free shoeshine. For many services such as hair coloring and waxing, separate rooms are used for privacy.

Is a guy more likely to go to a place with big screen TVs blasting sports and news, and specially catered mens attributes? Of course. Is it more fun for a dad to take his kids there for a cut? Yes. I’d strongly consider buying a franchise in this mass appeal niche, especially over the traditionals – Fantastic Sams/Best Cuts/Hair Cuttery/etc.

With the housing market booming, bypassing and undercutting real estate commission is becoming increasingly popular. It’s even catching on in Canada with PropertyGuys.com. In the USA, the leading franchise is probably Help-U-Sell.com with 750 independently owned and operated Help-U-Sell Real Estate offices. Help-U-Sell is a fee-for-services agency that can provide all of the services of a real estate firm, or just select a basic service package for a flat $3,000. The company provides all signage, advertising and negotiations. Sellers are encouraged to show their own properties and hold open houses. There are both fans and critics of the a-la-carte real estate helpers where you pay a flat fee.

Paying a 6% commission to a real estate broker on a $500,000 home is $30,000. Alternatively, for under $5,000, you can hire a real estate attorney to represent you for a $600 flat-fee and pay Help-U-Sell $4,000 for signage, MLM listing and price negotiations. Heck, you can also post a small ad in the local newspaper and on eBay for another $100.

Here are 2 more good articles: One, Two.

I think Help-U-Sell is hot and deserves your attention, especially those interested in real estate. I’d buy it!

According to this press release, Educational Outfitters is opening 6 new stores. We reviewed this franchise before on FranchisePundit.com, and we concluded it was one of the better franchise ideas, focusing on an often ignored and segmented market. We gave it an “I’d buy it” positive rating.