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I’m neutral on it

Two for One Ice Cream Franchise Consolidation

NexCen Brands announced that it has entered into definitive agreements to acquire two ice cream franchise systems; MaggieMoo’s and Marble Slab, two well known and established brands within the hand-mixed premium ice cream category. NexCen, a brand management company, is acquiring the companies for a combined initial purchase price of $37 million, plus a potential earn-out of up to $2 million upon the MaggiMoo’s acquisition. These two transactions are expected to be completed before the end of the first quarter and will mark the first acquisitions for NexCen in the quick service restaurant (QSR) sector. Robert D’Loren, NexCen’s president and CEO, noted: “These acquisitions will provide NexCen with two well positioned brands in the hand-mixed premium ice cream franchise category. With 520 existing franchises stores and 225 stores in the pipeline on a combined basis, these two brands will place us solidly as the number one player in quality and the number two player in the number of franchise units in the hand-mixed premium ice cream sector. “There is a tremendous growth opportunity with these brands through organic growth and franchise licensing opportunities. We intend to grow these brands outside of the US through our international franchise network currently operating in over 40 countries worldwide,” Mr D’Loren concluded. The initial purchase price for MaggieMoo’s is $16.1 million. The Marble Slab acquisition is costing NexCen $16 million in cash, and seller notes in aggregate principal amount of $5 million that earn interest at 6% per annum and are payable one year from closing. Read more about the 2fer Ice Cream Special: Let’s Talk Franchising

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House Flipping Franchise

You have probably seen their big orange ads screaming “We buy UGLY homes!”. HomeVestors purchases homes at below market value, targeting homeowners that need to sell quickly, rehabilitates the properties and sells at a higher price. . This interview with the CEO walks through a few aspects of the franchise. This was an interesting Q&A: What do you think of TV shows like “Flip This House”? In one episode of one of those shows, an investor goes up to a house, and the house is locked, but he wants to look at it. He says, “We’ll have to take matters into our own hands,” and kicks in the door and smiles at the camera. He just violated the law—that’s trespassing, and our franchisees aren’t able to do that. That’s the wrong image to give lawmakers, consumers and consumer lobbying groups about this business. I get agitated about what I see on these shows. People get the wrong idea—that you can buy a house, flip it and make $50,000 on it. So I don’t watch those programs too often. A disciplined, systematized, ethical approach to flipping homes is the way to go in this business, whether that be on your own or with a franchise.  Homevestors’ system does things in a legitimate manner, unlike some home flippers. The erratic real estate market of late makes profits unpredictable, and sometimes finding homes 30% below market value difficult.  New government regulations could blind-sided franchisees as politicians try to buffer the profits from aggressive flippers.

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Soup Nazi – a first look at Soupman

About 25 Original SoupMan Cafés have opened (plus a wholesale business) since Yeganeh began to franchise his restaurants last year based on his original Soup Kitchen International in New York. One blogger feels that $7.95 for a bowl of soup from the Soupman (Soup Nazi from Seinfeld) is too pricey. He posted some pictures too. Considering I paid about $5 for a grande, sugar-free Cinnamon Dolcé Latte at Starbucks today, 3 more dollars for hearty veggies and/or meat seems with the reasonable range. Previous mentions of Soup Nazi

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Pizza Inn Soap Opera

Pizza Inn is ~400-unit buffet, delivery, carryout, sometimes-drive thru pizza chain in the soutwestern United States with a drama filled past few years that would make some soap opera’s jealous. In 2002, the then-CEO Rogers of Pizza Inn borrowed about $2 million from the company to buy company stock. The stock sank and Rogers couldn’t pay back the company’s cash loan. Rogers was fired as CEO and Pizza Inn wrote off the debt and moved Parker, then President, to CEO. Shortly thereafter, ex-CEO Rogers sold his 27% stake in Pizza Inn to a private investment firm escaping with a tidy profit. With the private investment firm holding a controlling interest, the current executives sought to protect their jobs by writing employment agreements with Pizza Inn. The employment agreements provide that if the four executives left for “good reason” or were removed from their posts, they would receive payouts totaling $7.4 million (Parker would have pocketed $5.4 million, Olgreen $630,000, Clark $605,000 and Preator $597,000), more than twice Pizza Inn’s 2003 profit of $3.1 million, which would have surely bankrupted the company. Eventually the private investment firm got their wish and the shareholders elected new candidates to the board of directors. Parker, the CEO with the parachute employment agreement, resigned and claimed this trigger the parachute and the company owed $5.4 million (he sold 98,000 shares a few days before). He eventually won a settlement of $2.8 million. Pizza Inn even sued its former legal counsel for its role in advising the company on the huge severance packages (the lawyers were supposed to work for the best interest of the company, not the executives). In the meantime, revenues of the franchisor fell due to lower franchisee sales which resulted in the franchisor suffering less royalties and less revenue from the …

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New Curves Franchisee Association

A new Curves franchisee association organized at the most recent Curves annual meeting. The group will represent all 10,000 Curves franchisees. The association held its first annual meeting in late October during the Curves International annual convention in Las Vegas. At the convention the association’s executive board members elected officers for the organization, and the executive board and officers were presented to the franchisees.

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Boutique Birthing Centers

…it never ceases to amaze me…this one from India: Apollo Health and Lifestyle limited Ltd. (AAHL), the wholly owned subsidiary of Apollo Hospitals, has launched boutique maternity centers. To be called the “The Cradle”, these state-of-the-art specialized maternity care centers will cater to the needs of expectant mothers and newborns. The Cradle is targeted at parents who do not compromise on quality. It will bring to Indian mothers the best birthing facilities all under one roof in line with global trends like private birthing suites for normal deliveries as well as fully equipped OTs, entral foetal monitoring. On an unrelated note, if you like to take pictures, here is a sports and school photography franchise (no franchise fees – so higher royalties): Today, Future Stars Sports Photography is one of North America’s premier, franchised sports photography services, providing youth sports organizations with high-quality, innovative photo products and unparalleled service. It is complemented by Pegasus School Images, launched by Bruno in 1999. Recognized for its superior product line and comprehensive school program, Pegasus has become one of the fastest-growing school picture companies in North America.

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Golf Club Cleaning

This British franchisor developed a vending style golf club cleaning machine. My initial reaction was that it was terrible concept for myriad of reasons, but I can see it possibly working as long as competitive pricing pressure is nearly nonexistent. It could provide low-end golf courses with a small but riskless alternative revenue stream. The Sonic Golf Club Cleaning Machine cleans a full set of golf clubs in just two minutes. The Sonic can clean both the heads and grips of the club to an original condition. The grips are restored to a tacky finish and the grooves on the clubs face are clean thus improving the amount of ball control.

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Is This How You Want to Workout?

Maybe it’s a guy thing, but I wouldn’t want to stare at someone for 30 minutes while working out.  (Curves) (Ladies Workout Express)            

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Buy a franchise to get into the leasing business?

Winmark Corp (formerly Grow Biz), franchisor of the retail stores Play It Again Sports, Once Upon a Child, Plato’s Closet and Music Go Round, has a new franchise concept called Wirth Business Credit. It’s mission is to help small businesses lease equipment. Leasing can have many advantages for a small business owner: preservation of capital and credit for other expenses and investment in growth, simpler bookkeeping and tax reporting, tax advantages, improves financial ratios, etc. Why would someone choose to lease from Wirth Business Credit over any of the other many leasing companies? I don’t know, unless their rates are cheaper and terms are more attractive. However, I doubt whether the tight structural constaints of a franchise is the best means to compete in a business where most sales comes down to price and, to a somewhat lesser extent, customer service. Wirth charges around 9 percent to 14 percent today compared to a bank prime-lending rate of 8.25 percent, Morgan said. Winmark and its franchise owners earn a profit by building fees into the interest rate, much like points that are added to a home mortgage loan….. Wirth President Mark Hooley said the company stands out from rivals because of its local presence, its automated leasing system that provides approvals in four hours or less, and the ability to finance up to 100 percent of equipment value….. Wirth franchise owners pay an average of $60,000 to do business in a certain geographic area, including franchise, computer and marketing fees. In exchange, the company provides the brand, the business model, cash for leases, training, marketing and the collection of overdue leases. I especially agree with the final comment in the article: “Financing can be complicated and challenging,” Faras said. “But my part of the business is really about sales. You …

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Discount Real Estate Broker Franchises

There seems to be a constant flow of articles on discount broker franchises lately. Having recently gone through process of purchasing property using a friend who happens to be an excellent broker, I can recognize the value of paying 5-6% commission for that diamond-in-the-rough selling broker (or using a buyer’s broker who will split their commission with the seller’s broker) who is unconditionally looking out for your interests and not their personal wallet. Without that exteme level of certain dedication and loyalty, I would balk at paying the full commission to a selling broker and I would likely seek the services of a discount broker. As competition from discount brokers increase, more buyers and sellers will be able to command a commission rebate from their broker as well. 1 2 (comments on the article by Redfin, a Seattle and San Francisco real estate services website) 3 4 5 6 (newgroup discussion thread)

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Radiators

I stopped to read this press release because I’ve never heard of a retail radiator franchise before…1-800 Radiators looks interesting for those who enjoy autos and cold-calling sales. But, is it too narrow of a niche?

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Tim Hortons is Going Public in Canada

Tim Horton’s, a 2,885 upscale coffee and donut outlet, is entering the public capital markets of Canada. The reporter characterized the IPO as “destined to go down as the most popular IPO this country has seen to date” and “The frenzy around this doughnut deal is putting Google to shame”. Is the author over embellishing? Tim Horton’s IPO buzz seems to be more in line with fellow Chipotle’s enthusiastic IPO, not the crazed delirium over Google’s IPO. Is going public good for franchisees? I haven’t explored arguments on both sides, but my initial impression is no. The pressure to increase margins, meet analyst expectations, and pay for the increasing regulatory costs is going to increase the pressure for franchisors to squeeze more money and profit from their relationships with franchisees.

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Celebrity Competition in Meal Prep & Assembly Franchises

In the forum, we batted around the new meal preparation and assembly kitchens concept such as Super Suppers and Dream Dinners. There are lot of non-franchised startups, and they already have their own trade association called the Easy Meal Preparation Association. The general sentiment from the forum is that this concept is a “maybe”, with the big questions being how much you can charge customers (and margins) before customers will just order restaurant takeout? is the change of behavior and lifestyle too much to create a solid base of loyal customers? how many competitors, if any, can enter the market and you still survive?  what if they have slightly lower prices and a nicer, larger facility and more creative menu? A surprising celebrity newcomer is jumping in this arena – Suzanne Somers. Inc. magazine did a feature article and mentioned this tidbit. And next? Suzanne’s Kitchen, an entry in the red-hot meal prep category, in which customers move from station to station inside retail stores, assembling family-size dishes from chopped meats, vegetables, and sauces. The first two outposts of Suzanne’s Kitchen, which Somers and her husband and business partner, Alan Hamel, expect to franchise, will open later this year. Why is she getting in this business? I think it has more to do with an attempt to leverage her brand name to command higher franchise fees rather than this being an inherently superior and profitable business model. Certainly Somers will draw media attention to the industry, which currently suffers badly from low recognition amongst its target audience.

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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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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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