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Great Idea

McDonald’s to Expand Kid Gym Concept

McDonald’s plans to replace more of its kids’ Playlands next year with R Gyms (R = Ronald). R Gyms are mini-fitness areas within the seating area of McDonald’s and feature stationary bikes, monkey bars, obstacle course, and various dancing and jumping activities. There are only 7 in the US right now. I hope this doesn’t turn into a liability magnate for McDonald’s and their franchisees, because it is worthwhile endeavor and will help teach kids to equate fun with exercise. update Dec 8: McDonald’s Corp. said Friday that same-store sales rose 6.2% in November, as more U.S. customers came in for breakfast and late-night meals.

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Automation and Technology in Franchise Operations

Franchises (particularly restaurants) are slow in incorporating efficiencies and technology. We’re all aware of the new technology out there (gaming, wireless, Internet, flat-panel TVs, handheld devices), but now think of your typical Subway or Arby’s? High-tech and fresh? I haven’t noticed a change in 10 years! A few recent examples of streamling that should have caught on much fast are in the high-tech Alternative Payments, Ordering & Entertainment space: fast-food accepting credit cards offering “fast pass” or other radio transmitter payment options to speed payment (like gas stations). Centralized call center for drive thrus, touchscreen self-ordering ordering systems for customers (in both fast food/casual and sit-down restaurants (like movie theaters), gaming, internet, television and other entertaining activities while you eat, wireless handheld ordering systems for waiters/waitresses. automated/robotic fountain drink dispensers Small, but annual high-tech improvements that refreshes the customer experience with convenience and entertainment goes a long way in generating repeat customers and word-of-mouth buzz. While the menu and customer service must be at least average, the main differentiator in attracting customers is atmosphere and theme. Having a high-tech reputation will create a premium perception and enable the charging of corresponding premium prices. Herein lies a weakness in most franchise systems – Franchise Agreements do not require the speedy adoption of innovative improvements. Additional capital expenditures in most franchising systems beyond what is required to startup are typically only mandatory when the Agreement is up for renewal in 10+ years. Without uniformity in a product offering, customers will become frustrated and resentful when only 65% of the restaurants stay on the cutting edge. Advice? Can the franchise you are thinking of buying survive a store with similar quality food but top-notch systems like the ones described above? Look for franchise offerings that quickly adopt, incorporate and promote their focus …

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Employee Management – constant, gentle pressure

Another good article in Inc. describing one restaurateur journey to discovering how to successfully manage his ever-changing restuarant staff.  The startegy is illustrated by the conversation of two restaurant owners.  One restaurant owner is teaching the other about human behavior and tendancies, and he does this by asking the other owner to place the salt shaker in the exact center of the table…it takes several tries before he even comes close to the center.  The point? Until you understand that [people’s perception of the where the center of the table is located is different], you’re going to get pissed off every time someone moves the saltshaker off center. It is not your job to get upset. You just need to understand: That’s what they do. Your job is just to move the shaker back each time and let them know exactly what you stand for. Let them know what excellence looks like. And if you’re ever willing to let them decide where the center is, then I want you to give them the keys to the store. Just give away the f—in’ restaurant!”  …Leave any one element out-constant, gentle, or pressure-and you are far less effective… It’s my job, and consequently the job of every other leader in my company, to teach everyone who works for us to distinguish center from off center and always to set things right. I send my managers an unequivocal message: I’m going to be extremely specific as to where every component on that tabletop belongs. I anticipate that outside forces, including you, will conspire to change the table setting. Every time that happens, I’m going to move everything back to the way it should be. That’s the constant aspect. I’ll never recenter the saltshaker in a way that denies you your dignity. That’s the …

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The Moving Industry is Moving

The past decade has seen substantial innovation and entrepreneurship in the moving industry. As a general observation, there seems to be ample opportunity for franchise success in the trades and laborer market. The public typically responds to recognizable franchise names in an otherwise disorganized industry (see Roto-Rooter, MerryMaids, Handyman Network, Two Men and a Truck, Prospection, CertaPro Painters, Geeks on Call, Mac Tools, 1-800 Waterdamage). Low-margin, labor-intensive businesses in industries such as landscaping, painting, plumbing, moving, repair and installation, can earn premiums if professionally branded with the attempt (or illusion) of standardized, ethical business practices. Here are a few examples: Two Men and a Truck (and copy cat strategy Little Guys Movers): A simple yet successful branding strategy that made local moves less intimidating with the image of a trustworthy, hard-working team of guys. PODS franchise (plus copy cats UNITS and SmartBox) and ABF’s U-Pack: Most moves are local, yet people fear the scams, delayed deliveries, your stuff unloaded in a warehouse to make room for another move, etc. The selling point of large metal-box storage is that your stuff is always locked up, eschewing the chance of damage or loss from frequent unloading. I don’t like the fact that PODS charges a non-refundable $50 to even learn more about their franchise offering, but for a $2+ million startup cost, $50 is nothing to and it filters the inquiries to serious ones only? eMove.com, part of Amerco’s U-Haul, has cornered the market for laborers to help you move with an ebay-like service for hiring those needed strong bodies to load the truck. I have personally used this services and its become one of those “How did I ever do without it?” reliances.

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Strategic Locations

Finding complimentary businesses and locating next door is an obviously smart move for a budding franchisee. For example, if you are starting a coffee franchise, locating next to an Ace Hardware (caffeine hungry contractors) or CVS (heavy foot traffic) can double your sales over a generic strip mall. In this instance, an Advance Realty locates next to a Daily Grind coffee house in an old firehouse. In case you are curious….Daily Grind: $300K estimated initial investment, 5% royalty fee, 1% advertising fee, $30K franchise fee…about average

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Unique Strategy to Franchising

I enjoyed reading about Unique Pizza & Subs’ franchising strategy of converting a local mom-and-pop pizza shop in each town within 100 miles of a company-owned store. In theory, I imagine this can work quite well for the franchisor with the right sales team.

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The Pretzel Business

I have close friends in the pretzel and snack-food business (and worked in the snack food industry for a short time), so I think I can speak from an especially knowledgeable perspective on this. Stores like Auntie Anne’s, We’re Rolling Pretzel Company, Pretzel Time (by Mrs. Fields), and Wetzel’s Pretzels must have some of the highest margins in the QSR business. The dough is literally a few pennies per serving, if that. The seasoning and butter is another few pennies, and your selling the product for almost $2 each. I’m sure the franchisors significantly increase the cost of dough and supplies force margins more inline with the typical mall store. Fresh pretzel businesses need very little square footage, and can often be served from a kiosk. They have the added advantage of smell in a mall, drawing people in with the scent of fresh baked buttery bread (OK, can you tell I love soft pretzels?). Most malls already have at least two pretzel franchises, but some do not. Depending on the rent, storefronts along a busy downtown street can capture enough of the afternoon foot-traffic to possibly turn a profit. Let’s look at some fees charged by franchisors: Pretzel Time: Initial Franchise Fee: $25,000 Ongoing Royalties: 7% of Gross Sales Advertising Fee: 1-3% of Gross Sales Initial Training Fee: No charge for first two individuals Total Estimated Initial Investment: $107,000 – $238,500 Wetzel’s Pretzels: Initial Franchise Fee: $30,000 Ongoing Royalties: 6% of Gross Sales Advertising Fee: 1% of Gross Sales Initial Training Fee: No charge for first two individuals Total Estimated Initial Investment: $102,000 – $211,000 Auntie Anne’s: Initial Franchise Fee: $30,000 Ongoing Royalties: 7% of Gross Sales (paid weekly) Regional Advisory Council Dues: $300/year Audit Fee: All expenses unless if receipts were understated by more than 2% Advertising …

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Example of a Clever Seasonal Menu

As you probably know, I’m positive on soup franchises. The Soup Box, an independent soup restaurant, supplements their summer months with Italian ice (gelato) made from scratch with natural fruits and juices. They coined the summer months storefront name as the “The Ice box” instead of “The Soup Box”. It provides a selecton of 12 hot homemade soups in the winter, and 6 in the summer when they make the Italian ice. Menus are posted daily on the Internet as well. It’s a small location, but I thought the idea was clever enough to mention as an example of maximizing the resources and opportunities. Does your restaurant franchise have a seasonal offering? I know the franchisee has little or no control over what they can sell, but it should be an evaluation point on hedging sales year-round.  When a customer wants to get into the Christmas spirit, why wouldn’t they (subconsciously) gravitate towards the fun, encouraging store that has their seasonal favorite flavors? Seasonal menus tend to do quite well. Ever have the Gingerbread Latte at Starbucks? Yum! The seasonal menu builds repeat customer business to predictably provide new selections that build on the goodwill and joy of the season. Good reviews for The Soup Box. The business also provides a good example of the flexibility a non-franchised store has over their business, compared to those locked in very strict franchise agreements that usually prevent any deviation from the standard offering.

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Christmas Franchise

Christmas Decor is a very interesting franchise, and one of the classic examples of making a business from providing a service people are willing to pay for that makes lives easier (like the weekly dog cleanup services). The franchisees are Christmas house and yard designers, with any kind of lighted scene you can imagine. The franchise is great to provide winter income for those who make most of their money in warm weather (lawn care, nurseries, fence or irrigation builders, etc.). The minimum project is about $3,000 for the customer, and that includes installation and removal of the lights and decoration. The web site claims: $200 million last year was spent on decorating services during the holidays. With over 800% growth in the past six years, now is the perfect time to begin your Christmas Decor franchise. It looks like a high margin rental and services business, especially business clients. The concept is a winner, I believe. The devil is the numbers, of course, and a franchisee would have to figure out how many homes can realistically be done and what contribution margins would be to make the personal income worth the time and aggrevation. Most home and business owners are unaware of the service so advertising and PR are important and expensive. But, word of mouth advertising is likely very high. Here is an article (and another and another) from Entrepreneur Mag. From Christmas Decor’s web site: Start up Costs/Working Capital? This is one of the least expensive businesses to get into because costly equipment is seldom required. For each full service installation crew we estimate ladders and tools at $750-$950, and a start up inventory of $3,000-$5,000. Each additional crew will have about the same cost in ladders and tools, but inventory should be increased about $2,000 …

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Soup franchises

I’m sticking with my prediction and reasoning that soup focused franchises such as Simply Soup Co., Zoup, and San Francisco Soup Co. will be one of the fastest growing QSR segments. My favorite soup is Butternut Squash, by the way 😉 Related:  soup posts at Franchise Pundit Insightful articles about Zoup:  article 1, article 2

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Chili, really?

When I first heard of a chili franchises 10 years ago, I thought it was a stupid idea.  How often are people really going to each chili?  Then I spent time in Cincinnati, OH, home of Skyline Chili and Goldstar Chili.  I soon became a loyal fan, endulging in 4-ways (spaghetti noodles, chili, mustard, onions and cheese) and Cheese Coneys (hot dog, chili, cheese) like I never imagined.  Apparently, the chili has a hint of chocolate and licorice that adds to the uniquely smooth flavor and addiction. Skyline Chili is the champion in Cincinnati and the surrounding markets.  It’s so popular that fans often try to duplicate the secret Skyline Chili recipe at home.  Of course, a small minority of people hate the chili with equal passion. Each restaurant has a drive through and inside seating resembling a 1960’s diner.  Skyline is open late for the night crowd coming home from the bars.  The business lunch crowd is big, and so is the early evening with families and college students. Fransmart’s Red Rock Chili Company looks similar, but I have no experience with it.  Skyline Chili, Inc. is currently franchising in the states of Ohio, Indiana, Kentucky, Michigan, Pennsylvania (western), West Virginia and Florida.  Residents of the following states may not purchase a franchise: California, Hawaii, Illinois, Maryland, Minnesota, New York, North Dakota, South Dakota, Oregon, Rhode Island, Virginia, Washington or Wisconsin. Background Skyline Chili Research: article 1 customer reviews customer review photo  Pros: Proven successful concept in Cincinnati Fast preparation times Fun food and atmosphere Reasonable franchise fee ($20,000), royalty (4%), and advertising (4%) Small space needs: 2,800 square feet; free standing, store front, strip center, end cap Cons: Chili must be purchased from franchisor Franchise popularity may take extra time to build if no other chili franchises …

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Unique pet franchises

Do you love animals?  Sometimes the best franchise opportunities are the ones you’ve never thought of and are a labor of love.  Here are some I found unique and interesting: Camp Bow Wow: canine day care center (article) Doody Calls: scheduled yard clean ups of your dog poo The Pet Pantry: scheduled local delivery of pet food Wag My Tail:  pet grooming (free pickup & delivery  ) Interquest Detection Canines:  trains dogs for contraband and drug detection Pets Are Inn:  pet hotel

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A must-see Reagan tribute

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.

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Today matters

Have you been putting off the decisions that are important? Are you spending your short time on earth the way you want? What if you knew you were gong to die in 2 years, what would you do different? Attorney Carolyn Elefant from MyShingle.com legal blog wrote a touching reminder that life is sometimes unexpectedly short no matter how healthy our lifestyle, and the decisions you make TODAY are important and long lasting. How you lead your life is your decision, and maybe the risk of buying a franchise is a risk worth taking.

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Follow up to the soup franchise idea

I’ve been thinking about the soup franchise idea more after the Soup Nazi article I posted. While I don’t think the Soup Nazi franchise is the one to buy (store size and look is bad, management is poor), I think the soup franchise concept does have real potential. The only soup franchise I know of that almost entirely focused on soup is ZOUP! Fresh Soup Company with a $25K franchise fee. The carryout business seems extra compelling too. Soup franchises can serve fast (how fast can you laddle soup?) and the changing menu of soups recipes can be infinite. Zoup, for example, has 12 soups daily. I think a soup focused franchise with a Panera Bread look and feel will be the next QSR boom.

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