Home | Gossip (page 2)

Gossip

Graeter’s To Reopen Two Closed Franchise Locations

When a franchisee fails, you don’t often see the franchisor swoop in and take over the lease and operate failed location, but Graeter’s is doing just that in Kentucky. Graeter’s corporate is acquiring several stores like it did for another franchisee back in late 2010. Sales were reported in a broker’s sheet to be in excess of $3 million for the past three years. The asking price is $2.75 million plus a transfer fee. Read more: Graeter’s Northern Kentucky franchisee puts stores on the block | Business Courier For you non-Cincinnatians, Graeter’s ice cream is a local marquee brand in the Ohio Valley.

Read More »

10 Strongest Retail Markets

source: National Restaurant News 1. Washington, D.C. 2. San Francisco 3. New York City 4. Boston 5. San Diego 6. San Jose/South Bay 7. Baltimore 8. Philadelphia 9. Seattle 10. Pittsburgh I would agree with Washington, D.C. being number 1. I’ve spoken to several small operators, that are expanding to Washington, D.C. One take and bake pizza concept expanded there and within a year it was their best performing store in the system of about 20. As a rule, franchisees should try to keep their rent 5-9% of gross sales except indoor malls where you’ll be at about 15%. Recently I was evaluating lease rates in the Chicago downtown loop area, and for a nice spot between 1,200-2,000sf you’ll be paying around $50+sf NNN. Compare that to suburbs of Orlando where you’ll easily grab prime shopping center space for $20-25sf with lots of incentives.

Read More »

Urban Flats – How to Fix this Failing Restaurant

last edited: December 7, 2011, 9pm [added recommendation on beer & wine]; also edited on December 13, 2010, 1:05am [improved a few poorly worded sentences] I’ve noticed several franchised “Urban Flats Flatbread & Wine Co.” closing this year in the southeast, such as Orlando FL, Winter Park FL, Lawrenceville GA,  and Atlanta GA (pictured to the right).  Something clearly isn’t resonating with potential and repeat customers.   Many franchises suffer from this ‘surprise’ problem leaving execs scratching their heads about what is going wrong.    I’ll put on my pundit hat and give you my opinion and recommendations. HOW RESTAURANTS ARE JUDGED BY CUSTOMERS: People will instinctively judge a restaurant on three elements, and to draw repeat business you need to excel in at least two of these (and be at least average in the third) in the eyes of your local customer base: FOOD:  Is the food memorable and superb all around? PRICING: Is the pricing at or below the competition; does it provide value? AMBIANCE/EXPERIENCE:  Is the customer experience superb with a unique and comfortable interior design? A restaurant could succeed by satisfying only two of three criteria.  For example, you could provide an excellent customer experience and have great food, but prices are too high.   Cheesecake Factory and J. Alexanders are examples of this but both still generate excellent sales. HOW URBAN FLATS RATES: According to most of the reviews I’ve read online, Urban Flats rates as follows: FOOD: Average food, flats are minimalistic…not bad but not excellent either PRICING: A bit high – $10 cheeseburger, $8.50 Loaded Potato appetizer, $10 “flats” pizza AMBIANCE/EXPERIENCE: Average, some described it as trying too hard to be cool.   Music is too loud to talk.  If you have to describe your restaurant as hip in advertising, you probably are not. Other …

Read More »

Applebees Bucking the Discount of Chain Restaurants

DineEquity, owner of Applebees and IHOP brands, is trying smartly trying to avoid discounting their menu like the rest of industry. Their strategy to get customers in the door focus on appealing healthy “skillets” price at $9+ which currently make up about 10% of sales. The “2 for $20” deal of an appetizer and two entrees now makes up 18% of Applebee’s sales mix, down from around 20% in previous quarters, Stewart said. Applebee’s promoted that offer through most of last year but has since made it a mainstay on the menu that’s not supported prominently by ads.Applebee’s margins rose slightly last quarter, to 14.1% to 14%, helped by lower food costs, although that was offset partly by more marketing to try to bring in guests. Same-store sales were down 1.6% at Applebee’s systemwide, an improvement from prior quarters, while guest counts continued to decline on year.

Read More »

News: Quiznos, Chipotle, Fuddruckers, Pizza Fushion

Quiznos Quiznos renegotiated it’s debt load and took in an infusion of equity capital from JP Morgan and other existing shareholders.   You can read both good and bad into this.  The good being the investors saw enough upside to invest more, the bad being Quiznos desperately needed this to happen so their financial soundness probably isn’t strong. Chipotle Chipotle still showing a growing customer base with 1st quarter same-store sales up 4.3%.  They plan to open a new store every three days in 2010. Fuddruckers Fuddruckers filed for bankruptcy a few weeks ago.   It received approval to sell 62 Fuddruckers and a dozen Koo Koo Roo (similar to Boston Market) for $65 million.  It also plans to close 20 restaurants with “lease issues or low-foot traffic” stores.  Sales were down 10% in 2009. I woudn’t consider Fuddruckers part of the “better burger” craze of Five Guys and Counter, the brand is simply too old and retail square footage is way too large.  Red Robin’s are large in size too, but it invested plenty of capital in marketing and bradning to keep its brand appealing to the next generation of customers…much more so than Fuddruckers. Pizza Fusion Plans to offset its entire “carbon footprint” by paying a percentage of sales to a company to construct renewable energy facilities.

Read More »

My Take on Papa Murphy’s Acquisition (updated April 7, 2010 @ 8pm EST)

As you’ve probably heard, Papa Murphy’s was acquired by a private investment firm for $180 million, about $150,000 per store.  I think it will turn out to be a good acquisition even with the steep price.  Papa Murphy’s has a combination of economic advantages that no other pizza chain has – 1)  it doesn’t have the overhead and capital costs of in-store baking, AND 2)  it is gaining strong penetration in grocery stores. I admit, from the consumer’s stand point, a take and bake concept is a little confusing at first. “You mean I have to bake my own pizza?”   But that impression soon fades.   The pizza in its raw form looks fresh and the final product cooked in the home oven is as good as pizza delivery.   One hurdle overcome by the industry was the difficulty of using a home oven to cook a pizza because it doesn’t brown up well with the ordinary pizza dough recipe.   To solve this, chains like Papa Murphy’s increase browning by increasing the sugar percentage and providing a disposable reflective baking tray. Another potential acquisition target is Homemade Pizza, a regional 25 unit chain in IL, MN and DC of classy take-and-bake stores where the average price of an “unbaked” large pizza is almost $20.   It seems to be doing well and has great branding.  Homemade Pizza pizzas are still priced on the high end because it is made with fresh and local ingredients.  The dough is prepared in a commissary to simplify store operations and reduce size requirements. _______________________________________________________ Update:  Below is more interesting history on Papa Murphy’s from a November 2009 article in Portland Business Journal.  Average store sales are about $535k. Papa Murphy’s is a holding of Charlesbank’s Equity Fund V, a $590 million private equity fund that …

Read More »

March 2010 – Same store sales update

Quick service segment 4th quarter average same store sales: -4.7% Arby’s: -11% (only down 7.4% in January) Wendy’s: -3% Sonic:  -13% (blames the heavy snow) Carl’s Jr.: -2.6% Hardees: -6.2% McDonald’s: +.6% Casual dining segment 4th quarter average same store sales: -4.2% Buffalo Wild Wings:  +2.0% fun facts—-Buffalo Wild Wings essentially sells a neighborhood sports bar concept. It features Buffalo style chicken wings, burgers, and other “bar” foods. Takeout represents about 13% of sales. Another 22% of total sales are derived, not surprisingly, from traditional chicken wings. Boneless wings, which have better margins than the regular kind, were 19% of Q4 sales, up from 17% in Q4 2008. Famous Daves:  -6.3% for company-owned restaurants and -8.5% for franchise-operated restaurants. Morton’s: -11.6% Fast Casual segment 4th quarter average same store sales: -.08% Panera Bread: +7.4% Cosi: -11.9% Pizza segment 4th quarter average same store sales: +1.8% Domino’s: +1.8% Papa  Murphy’s +2.0% Family dining segment 4th quarter average same store sales: -2.7% Steak n Shake: +14.4% Frisch’s Big Boy: -.4% Cracker Barrel: -.2% Denny’s: -6.1% at corporate owned units, -7.2% at franchised units iHOP: -3.1%

Read More »

Former Franchisor Execs Becoming Franchisees

Staying on the pizza topic for a moment…..Little Caesar’s and Donatos (both pizza) have a large number of former company executives that have transitioned to franchisees. That is a good sign and both are adding units faster than their counterparts in the industry, each for different reasons (LC for price, D for uniqueness). Little’s Caesars hot-and-ready pizza deals have been a hit with a simultaneous improvement in quality from high speed impingement ovens. Donatos’ pizza is a very unique thin pizza similar to a St. Louis style or Chicago thin style, and it has operations and pizza assembly down quicker than anyone I’ve seen. Surprisingly, Little Caesars makes their own dough while Donatos uses preformed frozen dough that arrives ready to bake on a disc. Asking a franchisor salesman how many executives or former executives are franchisees is a great question.

Read More »

Obika – Mozzarella Bar – Needs Work

I thought Obika, a Fresh Mozzarella Bar concept from Europe, would do fine in the big cities and may ultimately make a good franchise, succeeding by shadowing the locations of Au bon Pain. I assumed their dozen overseas locations would have been prepared a powerful USA launch. But, the NYC location is not earning universal fondness from New Yorkers. The look is modern and euro, and it has the right formula of escalating a familiar food to a higher level of passion. However, it fails in execution – service is too slow and the sandwiches are simply average. When people are paying a premium ($10 a sandwich), your niche is smaller and there is more pressure to earn repeat business from the local workers. I would imagine they have to do at least 350 transactions per day to break even. Eventually the number of potential new customers will dwindle to unsustainable levels and survival will depend on repeat business. I still think Obika will make it, but the chances of it being a 10+ unit chain in the USA are very slim.

Read More »

Pizza chain sales down across the board

Pizza chain sales are down: Pappa Johns: -5.7% Pizza Hut: -12.9% Dominos: -6.5% Sbarro: -6% domestic, -13% internationally (taking into account increase in US dollar) Sbarro’s attributes a drop in sales to a drop in mall traffic. What is up?  Frozen pizza sales. Frozen pizza sales rocketed to $4.4 billion in America last year from $3.1 billion in 2000, the Minneapolis Star Tribune reported this week, citing market research by Datamonitor Inc.  Sales of private-label brands (produced by chains such as Walmart, Jewel, Dominick’s and Target) have risen more than 20 percent in the past year.  Clearly, cost and an acceptable level of quality is at play here. In related news, Kraft Foods Inc., maker of DiGiorno, Tombstone and Jack’s, said it selling their brands to Nestle so it can fund an acquisition of Cadbury.

Read More »

Potbelly’s Sandwich Works in Chicago Begins Franchising

I’m a local Chicagoan so Potbelly’s Sandwich Works news is interesting to me.  As you’ve probably heard, Potbelly is now franchising their potbelly stove themed restaurant.  Their web site lists the total cost to open between $500k-$750k with a heavy $40k franchise fee. I predicted this early in 2009 after I noticed job posting listing franchising experience and a little snooping. A previous insider comment to a blog post on Potbelly has always stuck in my head which makes me pause about the opportunity.  I’m pretty sure I know the person who wrote the comment: Potbelly is another stab in the dark venture that suffers from ridiculous logistical design, high labor costs, exorbitant pricey locations, and excessive buildout costs.  Is there any wonder thay GREw so much.  did you expect them to just sit on the 100,000,000 raised by Starbuck’s Maveron Group.  funny, potbelly has turned one quarterly profit in about 6 years and had three presidents in three years.  The lines which everyone seems to think are the sign of success are a sign of basic incompetency and presume people will continue to buy into hype for a three day old bun baked by Turano (same as the other great success story Quizno’s ) and generic low quality meat that’s run through a conveyor oven which can’t be delivered or catered without serious degradation in quality.  other than the expensive logo vanity packaging someone and the illusion of quality based on 500,000 of faux antiques, please explain what is original or significant quality.  the sandwiches are the smallest, the most expensive per ounce, and the worst produced in terms of speed and efficiency than any I have ever seen and the lines aren’t looking too long these days.  Nothing angers me more than a hot concept  and has …

Read More »

Some Sales are Up – Panera, Buffalo Wild Wings

Panera Bread (I appreciate their free Wifi) reported company-owned same-store sales increase of 3.3% for its third quarter ended Sept. 29, 2009.  Franchise-operated same-store sales increased 2.5%, marking a systemwide increase of 2.8% compared to the same period last year. The company-owned comps increase showcased transaction growth of 1.8% for the quarter, and average check growth of 1.5%. Average check growth was comprised of retail price increases of approximately 2.25% and negative mix impact of approximately -0.75%. Buffalo Wild Wings company-owned restaurant sales increased 26% for the quarter versus the same period in 2008. The growth was driven by a company-owned same-store sales increase of 0.8% and 33 additional company-owned restaurants in operation at the end of the 2009 third quarter. Franchise-owned same-store sales increased 1.9% for the quarter and 52 additional franchised restaurants were in operation during that time.

Read More »

Does Discounting Work?

Discounting hasn’t worked so far for Chili’s and  Applebee’s who began offering 2 for $20 meal deals.  The problem is total customer traffic is off and these discounts tend to amplify the problem because profit margins are reduced on the customers that do come in.  Even P.F. Changs, and Benihana are seeing 10%+ slowdowns in sales just from a quarter ago.

Read More »

Franchisee loses his pizza franchise

A former franchisee of Pizza Pizza in Ontario lost his franchise for allegedly falling behind on payments to the franchisor.  This whole relationships seems to have gone mismanaged by both sides.  The franchisee wasn’t keeping good sales records and delivery drivers were impatient with customers, and the franchisor let bad practices continue for too long. http://news.guelphmercury.com/News/Local/article/524725

Read More »

Tanning Beds As Deadly as Arsenic & Mustard Gas?

A recent study lumps tanning in tanning beds in the same caustic category as arsenic and mustard gas. The tanning industry is simply a rental business, and the rental business can be very lucrative.  Just ask my hero Wayne Huizenga who made billions from starting integrated rental businesses Waste Management, Blockbuster Video, and partly Autonation. The franchise tanning industry has been positioning itself for a reduction in the ultraviolet tanning beds with the spray tan alternative.   Most have purchase Mystic tanning beds (see video below) that can be rented in the same manner as bulb beds, plus some locations are offering spray-on artists to spray on manually that perfect tan with a high-end spraying device.  Spray tanning has been booming most evidently in the celebrity ranks, with many celebrities even hiring their own full time spra-on tan artists.  Lindsey Lohan is even being sued for allegedly stealing the formula for her new spray tan retail line.  All this points to tan growing trend (remember, the trend is your friend) of spray tanning consumers.  Can traditional tanning franchises offering spray tans grab a sustainable piece of this emerging spray tan market?   In the short term, probably yes. But it will take five-figures of investment and marketing for each location.  Customers previously visited tanning salons to rent 20-minute increments on tanning beds because tanning beds were too expensive to purchase for the home.  But, consumers can now buy spray tan bottles at Walgreens for $5.  The key for the tanning salons is offering customers 1) the “spray on artists” and 2) machines that spray the perfect tan.  Self application of tanning lotions can leave a person looking laughably orange if applied to heavily or unevenly, or left on too long.  So the edge for tanning salons is to have machines and people …

Read More »