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Great Idea

PR Through Surveys

Clever. Pay for a survey about Super Bowl eating habits, get free publicity, get your brand associated with “healthy” and “Super Bowl”. SUBWAY Restaurants, which has long been committed to promoting “better-for-you” meal options among both children and adults, conducted an Omnibus survey of more than 1,000 Americans regarding their Game Day snack consumption habits and learned they overeat the most during the Big Game (27%)–trailing only Thanksgiving (85%) and Christmas (61%). More than half surveyed (59%) admitted to overeating during the Big Game and reported gorging themselves on nachos, fried chicken, chicken wings, pizza and other generic “junk food.” Methodology: An Omnibus survey conducted a telephone survey on behalf of SUBWAY(R) Restaurants of a nationally representative probability sample of households; 1,090 interviews were completed among adults ages 18+ (53 percent female, 47 percent male). Interviewing took place January 7-9, 2008.

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Tesco in California

If you have been to Europe, particular the U.K., you know what Tesco is. It is an omnipresent, progressive grocery chain. They are opening up their first US stores starting in California. I always enjoyed Tesco’s twist on the supermarket, and I am sure they will be making a very successful entrance into the US marketplace. Labor unions don’t like Tesco’s non-union workforce, and are already starting trouble. Store layouts, customer experience and ergonomics has always interested me, and it should interest you to if you plan to open a storefront. Below is a slideshow of the store. Below is what the store looks like:

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She Did It Without Franchising

I unfortunately need to board my 2-year-old beagle while I leave on trip. I shopped around thinking I would find franchise dog hotels everywhere considering I’m in downtown Chicago. I’ve discussed pet franchises like Camp Bow Wow here and here. To my surprise, in Chicago all I found were all privately owned business started by practical entrepreneurs , some being very innovative such as Stay started by dog-lover architect who said, “Why do pet boarding facilities need to be small locations with chain-link cages. He charges between $45 and $75 for one night of dog boarding, and he easily get’s that fee. Mobile pet grooming seems to be a franchise getting attention lately. I found this Chicago-based entrepreneur that could have purchased a pet service franchise, but decided to build it herself. After a few years she added a mobile pet grooming service to her existing two Chicago pet service (grooming, boarding, walking, training) locations. She could have paid a $25,000 franchise fee plus 6% royalties and other mandatory marketing fees to a franchisor, which may have been worth it if the business had a strong competitive advantage and high brand recognition with the target market. But, that just wasn’t the case here in Chicago. The moral of the story is – demand a lot from franchisors. As a franchisee, you are literally making a multi-million dollar bet, while the franchisor is not at much financial risk.  You are taking on the risk that could result in bankruptcy if the franchise business projections don’t pan out or competitors can copy your poorly branded business, so require that as a franchisee you license a business model with a proven and sustainable business model, a business with high barriers to entry and difficult to duplicate business, and can provide a much …

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Free Wifi in Your Store?

McDonald’s is the largest supplier of free wireless internet in England. I imagine a similar plan is in the works for the USA. I’m a fan of free wifi or near free wifi (pay an extra $5 and you can have unlimited internet for the day) if you have the seaing capactiy.  I am a frequent user of free wifi in stores and think it usually makes economic sense. I go to Panera Bread and other local restaurants just for the free wifi.  In fact, many visitors will buy a coffee and snack, then in a few hours buy lunch. The idea that people will sit there all day and not spend any money is rare because people simply cannot sit and not eat for 10 hours, especially when they are in a restaurant. You will always have people who pay you $2 for a coffee and use your wifi for several hours, but most don’t.  The $20-$30 per month spent on wifi will certain pay for itself in higher net sales. Panera Bread limits free wifi to 30 minutes during lunch times (noon – 2pm).

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It’s Official: McDonald’s to offer Specialty Coffee in all Stores

McDonald’s is planning to offer lattes, cappuccinos and other specialty drinks in all 14,000 by 2009. Internal projections estimate a $1 billion boost in sales. What is the cost to franchisees to upgrade? Costs will vary, depending on the size and configuration of each restaurant. Franchisees must buy equipment to make specialty coffees, and, eventually, smoothies, as well as wall-mounted refrigerators for bottled sodas and energy drinks, and would have to remodel the counter and drive-thru service areas to make room for the equipment. A franchisee who installed the new beverage equipment as part of a company test pegged the cost at $100,000 per restaurant, according to notes from a meeting of restaurant owners in August. McDonald’s hopes to equip 1,500 restaurants to sell the new drinks by the yearend, with the rest on board by late 2008, the planning documents indicate. It’s the biggest change for McDonald’s since it overhauled its cooking procedures in the late 1990s to make sandwiches to order, says Dennis Lombardi, a restaurant consultant with WD Partners in Ohio. As it rolled out that plan — the Made for You campaign — McDonald’s agreed to pay half of the estimated $25,000 per restaurant in equipment expenses for franchisees. But when the costs for the program exceeded the estimates in some restaurants, it caused hard feelings among some franchisees. The test market numbers looked good: In test markets including California, Georgia, Michigan and Texas, specialty coffee has increased customer traffic by 44% a week, an August memo from a franchisee group shows. The initial tests show the new plan doesn’t require more employees or slow down service. Specialty beverages such as lattes have much higher profit margins than sandwiches. Sales in this new beverage category could rise by 90% in the next five years, generating …

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Dunkin’ Donuts going free of trans fat

Looks like the R&D team (or their consultants) at Dunkin’ Brands (Dunkin’ Donuts, Baskin Robins, Togo’s) have been hard at work reworking their ingredients. Hopefully this won’t be too much of a burden on the franchisees and no new equipment or costlier ingredients will be required. About 400 locations nationwide that took part in a four-month test already have made the switch to a new blend of palm, soybean and cottonseed oils. That includes all restaurants in New York City and Philadelphia, which are forcing restaurants to phase out their use of artery-clogging trans fat. The ice cream chain Baskin-Robbins, another unit of Dunkin’ Brands Inc., plans to be zero grams trans fat by Jan. 1. … Dunkin’ isn’t positioning its namesake product as health food – a shift that would involve more disbelief suspension than might be possible for a treat synonymous with portly, doughnut-gobbling Homer from television’s “The Simpsons.” “The goal was not to make a healthy doughnut, it was really to create a doughnut that was better,” said Joe Scafido, Dunkin’s chief creative and innovation officer. “Certainly, we did not create a healthy doughnut.” … This past spring, hundreds of restaurants began taking part in a test to gauge customer reaction to the blend that Dunkin’ ultimately selected. Managers at participating stores were split into two groups, with one receiving conventional cooking oil, the other receiving the experimental oil, and neither group knowing which type they received. Dunkin’ closely watched sales and customer response at restaurants with the experimental oil. “We got no negative consumer feedback, and we sold 50 million doughnuts in that time,” Scafido said. What are Dunkin’ Donuts’ competitors up to with the fat? Dunkin’ is ahead of Krispy Kreme Doughnuts Inc., which has yet to roll out a zero gram trans fat …

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Franchise Valuations, an Auntie Anne example

What is one way to gather sample financial results for franchises when the franchisor refuses to make optional financial disclosures in their UFOC? Check out the classified ads of businesses for sale. While the classified ads will generally disclose very basic and very vague financial information, such as annual sales and net income or cash flow, you will start to get a picture of the going valuations and metrics used (such as a multiple of earnings before income, taxes, depreciation and amortization; or a multiple of free cash flow), all of which will help you understand the financial models and drivers for the business. The financial disclosures in classified ads should be taken with a grain of salt. Why? You need to understand accounting and finance, or hire someone to help you with the valuation and explain the tax and valuation factors used in determining what type of free cash flow and return on your invested capital and time you can expect to reap. You also need to understand finance to know if you are comparing apples to apples. For example, all of these will make a huge difference in what the valuation means to you: Seller’s Loan payments and interest rates Lease payments Upcoming or postponed capital improvements Wages per employee, total wages per day Wages and distributions paid to the owner, if any Competition near location (knowing that there are several competitors in the mall is better, because if there are no competitors you know that sales will mostly drop when a competitors moves in) Your(buyer’s) financing options and interest rates Expenditures for accounting/legal (did they owner do their own accounting, or pay an accountant, what will you do?) Cash/theft rates Franchise renewals – how soon before the franchise agreement expires, and will there be required remodeling …

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McDonald’s Snack Wraps a hit during off-peak hours

McDonald’s introduces another Snack Wrap The product, introduced Tuesday, is the third chicken snack wrap offered in the past year. The wraps have helped McDonald’s bring more customers in during the usually slow afternoon hours and may give it a leg up over rivals like Burger King and Wendy’s, analysts say. “It’s probably one of the better products we have seen in the last several years,” says Larry Miller, an analyst in Atlanta with RBC Capital Markets. “They have really attacked the mid-afternoon as an area of opportunity.” Along with expanded Opinion: Being part of a larger, publicly traded franchisor has its benefits, particular in innovation.  The CEO must respond to negative publicity such as law suits or poor quality control, and it must be able to “tell a story” why the stock price is undervalued.  The CEO’s story is usually that investors are not fully valuing the upcoming improvements in the product or service offerings, such as a new menu item, a new promotional campaign, a faster system of delivering to the customer, etc.  This dance with stock analysts help franchisees by ensuring that there is some R&D and brainpower behind executing better strategies and more profits. Furthermore, being a franchisee where the frachisor is a publicly traded company has other often-overlooked benefits. Disclosure rules and various SEC compliance regulations place a heavy burden on the franchisor to honestly disclose information. For example, most publicly traded franchisors (see McDonald’s, Buffalo Wild Wings, Jack in the Box, Gymboree, Choice Hotel, H&R Block, Regis Corp, to name a few) disclose monthly or quarterly same-store sales results, and disclose some transaction involve the sale or purchase of stores. A potential franchisee can likely reap sales data from these SEC filings and press releases. The franchisor’s executive team must sign-off on these …

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Interesting Idea – Auto Relocator

I came across this franchise and thought it was interesting, particularly because of the strong potential for commercial contracts with repeat business. Vehicle relocator opens Columbus office Auto Driveaway provides personal and fleet relocation services for cars and light-duty trucks, and arranges certified drivers for trucks and heavy equipment. “We’ll be a full-service office, able to move any type of vehicle that can be driven on the highway,” Schultz said in a statement.

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Clever Way to Get Free PR

Perry business offers free flags to replace worn ones If the flag you unfurled today looked a little more pink, beige and lavender than red, white and blue, Goin’ Postal wants to help. Throughout July the Perry packing and shipping business is offering a free American flag to anyone who brings in a faded or tattered flag. It’s a companywide effort by the chain, which has 250 locations. Hopefully your franchisor can come up with clever ways to get free PR and get people in the doors.  Free in-store give aways, promos with local radio stations, big donations of products/services – are a few commonly used techniques that will get you noticed.  However, many franchise agreements forbid franchisees from endeavoring on their own public relations efforts, so I would be sure to choose a franchise that gives the franchisee the flexibility to promote oneself in clever ways.

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Secrets to Arby’s $3.5 million/year Store

Arby’s franchisee finds formula for success The keys to their success can be summed up as: Hiring reliable employees, and nurturing them so they stay consistency of product quality (linked to employees) flexibility of franchisor to permit altenative and innovative store layout Below are direct quotes for the article: Lowe attributes much of the company’s success to hiring standards almost unheard of in the restaurant industry. The company has a turnover rate of slightly above 50 percent, unusually low for the industry. Before an employee goes to work for The Restaurant Co., they undergo a psychological profile, a drug test and a criminal background check, and that’s after having gone through several interviews. … Once the company hires someone, Lowe said, the processes in the restaurant are designed to help them be successful. The company conducts employee satisfaction surveys twice a year to help spot problems. Restaurant employees also have the authority to solve a customer problem, up to $100. … “We are full-service guys running fast-food restaurants, so we look at things differently,” he said. “We focused on dinner, where a lot of quick-service restaurants focus on breakfast.” The company supported that effort with innovative restaurant designs including carpet on the floors, softer lighting, granite countertops and wooden chairs. The Short Pump restaurant even serves beer and wine, although it’s a small part of the business, Lowe said. “If you are really trying to analyze why our average unit volume is so high, dinner has a lot to do with it,” Lowe said. “Our lunch/dinner mix is about 50/50.”

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Fun business moderate investment Fun Bus

One of the franchise opportunities that I thought was interesting at the IFE last week was the Fun Bus. The cornerstone of the Fun Bus franchise is a full-sized and fully operational school bus whose seats have been removed and replaced with a padded playground ideal for children ages 2 to 7. The bus features a trampoline, a rope swing, a punching bag, a parallel bar, a basketball net and a big slide that is attached out the back. The bright green school bus brings fitness and fun directly to children at daycare, nursery schools and birthday parties. The Fun Bus visits daycares and nursery schools once a week for a 10-week session, giving the children 30 minutes of learning and fitness taught in a fun way. What I find appealing about the opportunity is there is no real estate involved, it’s an easy business to operate and it acts as its own billboard as it drives around town. The investment is moderate: franchise fee is $25,000 fee, franchisees get the Fun Bus name in a secure territory, training, manuals, after-sale support and a list of potential customers (day care centers), a customized bus and equipment runs another $25,000. Add additional $15,000 for some advertising, working capital and misc. expenses, and the total investment is approximately $65,000. Although they are fairly new to market, they do have some track record, they started franchising in 2003 and have 16 operating units. I have yet to see the UFOC (I requested a copy), but I think the concept could be a good match for moms, or 20 something year olds looking to get into business. For more information visit: Fun Bus Franchise

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How to Make Money as a Franchisee

Value Place franchisee signs deal for 100 hotels – Wichita Business Journal: The scale and efficiencies of being a large area developer is a highly-successful strategy to making money as a franchisee. Value Place is an extended-stay hotel concept based in Wichita and founded by Wichita entrepreneur Jack DeBoer. Liberty Lodging announced Wednesday that it closed a debt financing facility of up to $360 million with Goldman, which will allow Liberty to build properties in Boston, central Florida, Denver, Indianapolis, Montgomery, Ala., Providence, R.I., Salt Lake City and Springfield, Mass.

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Satisfaction Guaranteed for Franchisees?

Here is a unique selling idea from Cex, a retail technology franchisors in the UK – Get some of your investment capital back if not satisfied within 12 months. It’s probably difficult to meet the “conditions” for this partial reimbursement and cancellation of the franchise agreement, but at least the idea of giving a franchisee an ability cancel with a small percentage of your money back within 12 months is a step in the right direction. The devil is always in the details, but by the time you get approval on your location, build out and are ready to operate, I would imagine most of your 12 months from signing the franchise agreement are over. CeX Franchise UK – ‘Satisfaction Guaranteed’ source: The Franchise Magazine So confident is CeX of its franchise opportunity that, for a limited period, the company is offering a ‘Buy Back Guarantee’ for new franchisees. Subject to conditions, CeX will refund stock, shop build and fit costs and take over the store management and running costs should the franchise not meet the franchisees’ expectations. In the fast and ever developing world of high-end electronic entertainment, CeX provides a valuable service to technology enthusiasts wishing to stay ahead of the game. The ongoing advancements of mobile phones, MP3 players, digital cameras, computers and games consoles means models are quickly updated and replaced. The CeX business model allows customers to buy-and-sell part-exchange quality second-hand technology and entertainment products at attractive prices and with a 12-month warranty – CeX is the one-stop-shop for gadget lovers.

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Dunkin’ Donuts Makeover

“Flatbread Sandwiches” and “Grab-N-Go Pizza” is on the new prototype menu being tested in Sarasota, FL. Meanwhile, every detail of this breezy-feeling building is designed to reinforce the brand. Customers waiting for their food at the drive-up window gaze through glass walls at the interior, and they also have a good view of the coffee-by-the-pound, shelved up high and directly opposite the glass wall. the Flatbread Sandwich is a key item at the new Dunkin’ at Stickney and Gateway Avenue. Priced at $2.99, the sandwichof the future comes in three versions: turkey, bacon and cheddar; ham and swiss; and three-cheese…Delivered frozen and crisped up in expensive new ovens that combine convection with microwave, the Flatbread is a cross between a Cuban and a pita sandwich…These convection-plus microwave ovens, which are all the rage in the fast food industry, give the bread a toasty, fresh-baked finish while getting the innards nice and hot, and they do it all in a minute. Same for the next item down under the heading “Anytime Snacks” — the “Grab-N-Go Pizza” — and for another new hand-held meal, the “Chicken Biscuit.” I like what I’m hearing… Right now, Kaplan is doing at least 60 percent of his business between opening and noon. I’m a bit surprised. I thought they’d do 75%+ before noon. The average Dunkin’ Donuts store churned out $915,000 worth of coffee, donuts, cappuccino and Coolattas during 2005, a figure that was 8.3 percent ahead of 2004. The $915k sales number is strong, and the margins have progressively increased, helped by nearly matching Starbucks’ coffee prices.

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Paychecks via Debit Cards

How can you electronically pay employees who do not have bank accounts? Payroll companies are offering debit cards filled with the employees cash that can be used to make purchases or withdraw cash from an ATM. It’s a kin to a virtual temporary bank account. Good idea! It’s payday at a Wendy’s in Wichita, but the teens who flip the burgers aren’t lining up to get their checks from the manager’s office. In fact, they aren’t getting checks at all. Instead, sometime in the next few days they’ll simply visit a bank machine and withdraw part or all of their pay using a debit card. It looks and works just like a standard debit card, but there’s a twist. Most of the employees using it don’t have bank accounts. The card draws on the payroll account of their employer, Wichita-based LDF Cos. By offering this option to employees at its 44 franchise restaurants and five beer distributorships in three states, LDF has become one of the first small businesses to adopt the payroll system. “We have a lot of employees who are young and ‘unbanked,’ and thus can’t get direct deposit,” explains Bill Goodlatte, LDF’s senior vice president of human resources. “This is a way for them to get their pay without paying exorbitant check-cashing fees, while allowing us to move toward a paperless office.”

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