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I’d buy it

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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KFC Has the Right Idea

KFC is shifting its design strategy to more upscale. Here is the experience from one franchisee: The restaurateur has spent more than $3 million renovating all the restaurants, but only a location in Claremore and now the southeast Tulsa store boast the new image. “The idea was to bring KFC up to casual dining,” Schoenhofer said. “We’ve gotten away from the fast-food look.” KFC and its parent company, Louisville, Ky.-based Yum! Brands Inc., are in step with an evolution inside the quick-casual food industry — new images for many longtime chains, including fast-food giant McDonald’s. “It’s a trend and, obviously, it’s working,” Schoenhofer said. At KFC, hard plastic seating, bright primary colors,and old menu boards and lighting have been replaced with high, open ceilings, glazed tile floors, padded booth seating, upscale tables and chairs, and improved restrooms and lighting — all in a Tuscan color scheme of gold, rust, blue and brick red. The restaurant also features a colorful, revamped menu board above the service counter. With inflation, “We’re asking people to spend more money on food, and we want to give them the environment they want,” Schoenhofer said. “We want it to be a nice experience for them.” KFC is also making its menu healthier. …And after the renovations, business soared, he added. “Since we took the stores over, our sales went up 150 percent.” Most of the fast-food chicken brands such as Popeye’s, Church’s, Boston Market, El Pollo Loco, Pollo Tropical, Bojangle’s Chicken, Chick-Fil-A, and Chicken Kitchen, have relatively common cheap chair/booth style look. Improving the quality of the food and restaurant design is a smart, and very likely to be successful strategy. One strategy to capitalize on this new initiative is to buy an existing KFC franchise from an owner who does not have the cash …

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Pet Waste Pickup: No Franchise Necessary

The Crain’s Chicago publication profiled several pet “waste management” businesses, where the business owner will visit yards and scoop up the pet waste. It’s generally a profitable, flexible services business, and can grow rapidly by word of mouth. The $25,000 franchisee fee and 6-8% in total royalty and fees each year most often do not seem worth the payoff. Spending the $25,000 on smart, targeted advertising is more than enough to build a client base, and spending 10% of sales on advertising ongoing should be more than enough to grow the business each year by twice the investment. If there was a franchise brand that most dog owners recognized, than the franchise fees would be a fair exchange. But that is just not the case. Here is a glimpse from the article: To start, the couple spent $20 on two scoopers and $1,500 on an ad in Save on Everything — a coupon book mailed to 150,000 people in Chicago. Within two weeks, they had their first 25 customers. Now they have 120 weekly clients and are expecting to bring in around $80,000 this year. Another article in the same issues touches on the broader pet services industry.

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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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Fresh Fruit Bouquets

I heard of the Fresh Fruit Bouquet Co. (article) and Edible Arrangements (article) franchise a few years ago. It seems like a fun alternative to traditional flower arrangements and gift baskets.  I don’t imagine it would be too difficult to create a steady stream of sales from partnerships with traditional flower and gift shops.

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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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Million Air

I didn’t realize the Million Air fixed-base operator (FBO) was a franchise. With the small jet sales and small airport demand rising, servicing that industry seems like sensible option. Million Air is indeed a clever name.

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American Male

“Target and dominate increasing segments” is one of the Goal Tenets of the outstanding Return Driven Strategy developed by Professor Frigo and Joel Litman (a director at Credit Suisse First Boston and Clinical Professor of Business Strategy) at the Center for Strategy, Execution, and Valuation @ DePaul University. I often use the RDS to evaluate and filter franchisors’ strategies. The RDS framework is a means for designing, developing, and evaluating business strategy that will lead to maximized financial value creation. The American Male franchise understands this Goal Tenet, and is going after the U.S. men’s grooming market, which is expected to reach $10 billion by 2008, up 25 percent from last year. Why try to forge a customer base in a stagnant market when you can much more easily capture a portion of a new, growing market? For a brief overview of franchises focusing on men’s grooming, check out this article.

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Quick-Service Barbecue

Raging Brands, the company and franchisor of the successful Moe’s, P.J.’s Coffee, and Planet Smoothie, seems to have found another interesting niche – quick-service barbecue. What I like about Shane’s Rib Shack is that it boasts a very authentic, down-home “look” that is timeless and fun. The building literally looks like a rough shack. In the franchise business, the ability to enable customers to step through the front doors and enter another time in history, or another distant locale, is the type of dining experience that will last and benefit from tremendous word of mouth. Assuming the food is above average, I’d consider buy this BBQ franchise. Growth plans may be a bit excessive though: Shane’s has some bone-breaking long-term growth plans to boast 1000 deals in development by 2010…just five years away. To date, this new-to-franchising concept has about 75 deals in development across nine states. Investors from Phoenix to Cincinnati to Tampa have put money on the national appeal and financial success of Shane’s On a side note – BBQ joint Famous Dave’s sales increased this past quarter by 5%.

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Brazilian Churrascaria Steakhouses

In the past week, three people have raved to me about various Brazilian churrascaria steakhouses, particularly Fogo de Chao in Chicago and Las Vegas. Unfortunately, the restaurant does not franchise. It’s a unique approach to dining, especially for the many low-carb carnivores, myself included. People always mention Fogo de Chao’s outstanding salad bar, and how they made the mistake of filling up on salad and couldn’t eat that much meat (beef, pork, lamb and chicken on skewers is carved at your tableside). The restaurants follow a centuries-old tradition in which “gauchos,” or Brazilian cowboys, put meat on a stick and cooked it over an open fire. The only franchised Brazilian steakhouse I’m aware of is Fire of Brazil ($50,000 franchise fee). This was interesting regarding Fire of Brazil: If Florida isn’t far enough, how about the Kingdom of Bahrain, Saudi Arabia, Kuwait, Lebanon or Algeria? Those are some of the Middle Eastern and North African locations that could soon see a Fire of Brazil restaurant. The company has sold the master franchise rights for the Middle East and North Africa to a company called the Living Concepts out of the Kingdom of Bahrain. Spokeswoman Mary Lou Rodgers said it also plans to sell franchises in this country. Right now, the company has four restaurants — two in the Atlanta area, one in Wellington, Fla., and one in Nashville. The concept is strong and proven popular. Fogo de Chao paved the way and proved the right formula, and soon I’m sure entrepreneurs will franchise nearly identical concepts in the coming years. Done right (see Fogo de Chao or El Gaucho), this concept in my opinion will be a winner over the next decade.

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Mobile Oil Changes

One concept I heard about several years back that I still think is a good idea are mobile oil changes franchises.  Specifically, those franchises that contract with large businesses to service their employees’ cars in the parking lot while they’re working. Providing businesses and office buildings (especially in the suburbs where everyone parks in the same lot) with on-site routine services such as dry cleaning, child care, oil changes, and other concierge type is tremendously convenient. Often, in the case for oil changes, there is only a time saving benefit and no extra cost to the employer unless they want to subsidize it. The oil change “van” is customized to hold the equipment to rapidly suck out the old oil and pump in the fresh oil (I’m sure companies use different methods, but that is how I understand one method). While the employees are working, the oil changer collects the keys and car descriptions. In a few hours and $25 later, the employee has a freshly oil auto. The employer has probably gained a half-hour of work from the employee. Maybe the franchisee offers other services, like windshield repair, minor maintanence, car detailing, tire changes, or inspections…maybe even a mobile mechanic. I would feel comfortable selling and coordinating this type of service with corporate customers. You have a very compelling story with real cost and time savings for the employees. A quick search on my favorite search engine turned up these companies: Oil Butler Lube N’ Go On Site Lube …readers can post more in the comments If you want to start this business on your own, the equipment per truck costs about $10,000. I haven’t heard of the big guys (Penzoil, Jiffy Lube, you know who they are) getting into this, but don’t be surprised if the do. …

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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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Comfort Keepers a keeper?

As a follow up to the previous post Is caring for the elderly a profitable business?, I’ve been looking at a few other elderly care franchises.  My preliminary favorite is Comfort Keepers. All the non-medical elderly care franchises have roughly a $25K franchise fee and 5% royalties. But, Comfort Keepers sets itself apart with its strong brand recognition, blanket coverage of the United States and internationally, and smart online marketing. Why not buy into a system with the largest network of referrals and strongest brand recognition?  With social and demographic trending in a favorable direction, and heavy referrals from its web site, and barring any show stoppers from their franchise agreement, I’d lean towards buying it.

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Everybody has feet…

Developing a high margin specialty niche in a stagnant industry is usually a formula for success (see Panera Bread’s twist on fast food, Sports Clips and Snip Its on hair cutting, Starbucks on coffee, Applebee’s on chain restaurants). Foot Solutions is a new shoe retailer looking to capitalize customers who require more comfortable foot wear, namely sufferers of diabetes, obesity and arthritis. Concerns Foot Solution’s web site details the anticipated $200,000 investment to open a store. The company expects the franchisee to sink $65,000 in shoe inventory before opening, yikes! Foot Solutions requires you use only their vendors and approved products. And you must use their supply division to order opening orders, construction materials, fixtures and equipment. Of course, you should now be asking yourself, “How much more will I be paying if I was permitted to source the products myself?” Be sure to benchmark the average vendor and supply mark-up by asking the franchisor or franchisees for the actual price sheets. Part of the reason to buy a franchise is the ability to buy into an already strong brand name. It is unlikely that customers are already familiar with the Foot Solutions brand (though it is a descriptive trademark, so intuitively people will generally understand the business’s purpose). There is also the dynamic of how many Foot Solutions can a local market support. Is it one, three, five? Niche franchises are much more susceptible to competition so the protected territory is an important issue. There is a heightened liability risk. Franchisees receive training in foot pathology and physiology along with understanding the feet and related problems and symptoms. What if your sales person recommends a shoe that worsens a customers foot problem, or a customer relies on what they believe is your superior medical advice? Make sure you …

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