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When It’s Time to Walk Away From the Franchise?

Baskin-Robbins losing two shops Most franchise agreements have a term of about 10 years with options to renew. If the franchisee wants to renew, they must sign the then current franchise agreement, which may require upgrades to the building, menu, operations, adherrence to the new operations manual, etc. Sometimes those required upgrades just don’t make economic sense for the franchisee because the economic realities show that you won’t make that money back over the next few years. If you are already netting less money than you hoped (say $40,000/year), do you invest the $70,000 to keep the franchise? Or, do you walk away from your entire investment, all the machinery, investment in the fixtures and local brand, the relationships? One longtime Baskin-Robbins franchisee in Champaign, Illinois faced such a decision, and decided to not continue. Panchal has operated the store since 1991, but said Baskin-Robbins wants him to spend $70,000 renovating the shop. He said if he were making $300,000 a year, he might do that, but the revenues and location haven’t been that strong. … Stover figures he sells about 3,000 gallons of ice cream a year. The ice cream, made by Dean Foods for Baskin-Robbins, comes in 3-gallon tubs that yield about 72 scoops each. About 60 percent of his revenues come from ice cream sold by the cone or the dish. Desserts, such as ice cream cakes and pies, account for another 20 percent. The remainder comes from miscellaneous products, such as prepackaged ice cream.

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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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The AAFD Awards Cuppy’s Coffee Franchise with Contract Accreditation

The American Association of Franchisees and Dealers (AAFD) announced today that Cuppy’s Coffee & More, Inc. (Cuppy’s) has been added to the AAFD’s roster of companies earning AAFD Accredited Contract status. This special distinction is available to recognize new franchise systems, or new ownership and management teams, whose franchise agreements substantially conform to the AAFD Fair Franchising Standards, but that lack operating history to evaluate franchise relationships. Cuppy’s is a specialty coffee drive thru franchise business that offers coffee, lattes, espresso and smoothie drinks. Cuppy’s is a new brand that is arising from the ashes of a much troubled brand known as Java Jo’z. As part of its response to rebuff suggestions that its new ownership is still connected to Java Jo’z problems, Cuppy’s management has committed itself to a collaborative franchise culture that adopts high standards of mutual respect between franchisor and franchisees. Cuppy’s franchise agreement earned nearly perfect score of 99.5% conformity with the AAFD Fair Franchising Standards, the highest grade ever achieved. Cuppy’s Coffee & More, Inc. is a Texas corporation wholly owned by Mr. Doug Hibbing and is headquartered in Fort Walton Beach, Florida. Medina Enterprises, Inc., an affiliated company which is owned by Mr. Robert Morgan, is the contractor for the system’s restaurants and other units, as well as a provider of office and staffing services to Cuppy’s. In May 2006, Medina acquired some of the Java Jo’z assets, including the Java Jo’z brand, which was later assigned to Cuppy’s. The Java Jo’z brand was confronted with major issues regarding Trademark ownership, allegations of unfulfilled contracts and personal problems of its prior owner. Cuppy’s new management team assessed that the myriad of inherited problems required a radical approach to change. That approach involved re-branding, a fresh start on training and support, and most importantly …

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Motivating Employees

Domino’s slices off precious pizza time Interesting observation in the pizza business: No matter how big your global brand or your advertising budget, survival depends to a great degree on the speed of your deliveries. … The screens show employees what percentage of their pizzas are leaving the store within 15 minutes of the order having been received, what percentage are leaving within 15 minutes across the country, and what percentage within the specific franchise of which the store is a part. The results, according to Domino’s deputy chief executive, Chris Moore, have been remarkable. “When we first thought of the idea, the average out-the-door time for the system was about 17 minutes,” he says. “We thought we would build a programme to reduce that to 14 minutes by the end of 2010. … “But the key thing is that the out-the-door time for that period was 14 minutes. We had already reached our 2010 objective, and the only difference we had made was getting those screens in.” He believes that simply being given the challenge of increasing their team’s speed compared with other stores was enough to motivate employees to move that crucial bit faster, particularly in the hectic periods between 5pm and 9pm on Friday and Saturday, which account for a third of turnover in the takeaway pizza game. … The delivery side now accounts for 51 per cent of the pizza market, having overtaken sit-down consumption within the past two years, and as its share increases, ways of getting the edge become increasingly precious.

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The Dagwood Sandwich comes to life!

Dagwood’s sandwich-making skills are legendary and have made his name synonymous with outrageous sandwiches. Wikipedia defines “the Dagwood sandwich” thick multi-layered sandwich made up of a wide variety of meats, cheeses, and condiments. It was named after Dagwood Bumstead, a character in the comic strip Blondie who frequently made enormous sandwiches.  The comic strip was written by Chic Young. Chic Young died in 1973, and his son, Dean, took over the strip, making every thought of Dagwood’s one of his own. And, over the past 30 years, Dean Young couldn’t stop thinking about opening a sandwich shop for Dagwood. He’s collected and created thousands of recipes over the years. Now Dagwood’s Sandwich Shoppes have become a reality, the result of a partnership between Dean Young, who brings his creative genius to the arrangement, and International Marketing Systems (IMS), which has 17 years’ experience creating communications and franchisee-support programs for large retail companies and restaurant chains. Read More

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Why Franchising is Not Necessarily a Good Fit for Entrepreneurs

Choose franchises with care …But for others a franchise proves far too restrictive. They have thought long and hard about their own ideas to improve the business and don’t want someone saying “no” when they want to implement them. One example that comes to mind is someone who bought a franchise in a sandwich shop chain and wanted to install a coffee machine. No one else in the chain had a machine, and the franchisor had a definite view that the status quo should prevail. So you had this fight between the franchisee and franchisor over a cappuccino machine with the latter having to spend time and effort convincing the franchisee that it wasn’t commercially smart. What this means is that people have to be “culturally comfortable” with the franchise. You will live and breathe this business so you had better like it. Don’t buy a McDonald’s franchise if you hate hamburgers!

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Can a Full Time Mom Effectively Run a Franchise?

This one apparently can: Party after party This mom and Picture This Party franchisee brings her twins to the parties see organizes. Her business is just party after party — children’s parties, to be exact. The Zion woman is owner of Picture This Party Inc. and a franchisee of Noah’s Ark Animal Workshop, which teaches children how to stuff their favorite animals at parties. …. “I don’t have to leave the house unless I’ve a party, and then I can take the twins with me,” she said. As owner of Picture This Party, she hosts birthday parties and other happy occasions for children. The parties usually have a theme, such as a dragon, a mermaid, Batman or a pirate, for which she furnishes costumes, balloons and cakes. She also snaps pictures at parties.

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Jackson Hewitt PR Problem

Jackson Hewitt Launches Internal Review of Allegations Against Franchisee Jackson Hewitt Tax Service Inc., a leader in the tax preparation industry, today announced it has launched an internal review of allegations made against a franchisee of the company. The review is being led by Fred Goldberg, a partner at the law firm Skadden, Arps, Slate, Meagher & Flom LLP. Here is background on the IRS allegations The government filed lawsuits against several corporations that operate 125 Jackson Hewitt offices. These offices in four states — including Michigan — are owned by one franchisee. The Justice Department says they were cheated out of more than $70 million after franchise managers and employees took kickbacks for filing fraudulent returns. another article: Feds sue Atlanta franchisee of tax prep firm S&P Downgrades Jackson Hewitt to Hold

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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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How to Analyze An Earnings Claims

Michael Webster at his spectacular blog Misleading Advertising Law has an interesting post in his Due Diligence Archives on Arbonne – How Much Money Can You Make? He walks through the income and statistical analysis of whether this opportunity is worth giving up your current job from a financial perspective. Kudos to Arbonne for providing a seemingly honest earnings claim, despite the chances of earning an acceptable rate per hour being low.

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Unpacking Franchise

Boston’s ”Simply Done” Unpacking Service Now Franchising The slogan of Simply Done is “Unpacking Made Easy” — and it is made easy for relocating executives, upsizing families, and downsizing seniors — even vacation homebuyers. Sounds like an interesting niche if you have prior relationships or can secure large contracts. But, emove.com, started by U-haul, is a popular eBay-style web site to find movers and strong guys to help you unload a moving truck, move furniture, etc. emove and Simply Done target different customers, and Simply Done may want to take a page form the emove strategy book and create a similar auction and peer-review web site for high-end unpacking and decorating service.

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Turnover

StartupJournal | Small Talk But not all turnover is necessarily due to failure, they say. Sometimes franchises buy back stores and terminate franchise agreements for strategic reasons or the franchisee wants out for reasons besides failure. Mario Herman, an Adamstown, Md., lawyer who represents franchisees, says franchisers might be tempted to underreport turnover rates. “They don’t want to put a number that looks too bad,” since turnover is often a deciding factor to would-be franchisees. He says he’s seen many franchisees fail because the franchise fees and royalties are too high for the franchises to sustain profitability or the franchiser isn’t providing enough assistance.

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10 Common Mistakes of Prospective Franchisees

Another oldie but goodie article for franchisees from Inc in 2000, abbreviated below: 1. Not reading, understanding or asking questions about the disclosure document. As you read the document [UFOC], keep notes on those areas that are confusing and unclear. While you may want your attorney’s opinion, give the franchisor the benefit of the doubt and first ask its representatives to explain their understanding. Then check the remainder of your concerns with your attorney…. One of the most common problems between new franchisees and the franchisor is a misunderstanding as to responsibilities. Among other things, this can cause problems in meeting the schedule for Grand Opening dates. 2. Not understanding or having an inaccurate or incomplete interpretation of the franchise agreement and other legal documents to be signed. You and your attorney should carefully review the franchise agreement, the lease or real estate agreements, and any other contracts. First, make a list of questions to go over with your attorney, then present your concerns to the franchisor. Get the franchisor’s clarifications in writing. 3. Not seeking sound legal advice. Locate and retain an attorney, preferably one experienced in franchising. 4. Not verifying oral representations of the franchisor. You may want to tape-record all your meetings with the franchisor. If you ask permission to do so, it is generally admissible in court if the need arises later. It also lets the company representatives know that you are tracking their words…Send a registered letter to the franchisor and a copy to the representatives memorializing your notes with a request for their response to any items you want clarified. 5. Not contacting enough current franchisees. …find out whether the franchisor has introduced you to specific franchisees compensated for their help to solicit new franchisees. Ask them….has the franchisor held up its end …

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The Hooters of Coffee

Move over Dunn Bros, Beaners, It’s A Grind, and Saxby’s Coffee, there’s a new theme in town. If it works to sell chicken wings, will it work for coffee? Sexpresso coffee shops are, for obvious reasons, gaining much free PR and repeat business due to the employee fashion, or lack there of. The coffee menu is reworded with suggestive coffee drinks served by girls in bikinis and provocative outfits, with one coffee house theming days – Tube Top Tuesdays, Wet T-Shirt Wednesdays and Fantasy Fridays…you get the point. For those who would prefer to supplement their green & tan decor with bikinis, Cowgirls Espresso (pictured at the right) has decided to begin offering franchises.Is it good for business? Ms Araujo and others say it has given an unmistakable boost to their businesses. Their staff may only receive minimum wage, but the tips can be terrific.”Our customers may be half-asleep when they get here, but we do what it takes to wake them up,” said Ms Araujo. “They always say: ‘Thanks for the great cup of coffee and the smile; it made my day’.” I’m not writing about this to imply or promote these gutter strategies, but to highlight that you never know what you’ll have to compete against in the future. While these wild ideas won’t put an ordinary coffee franchise out of business, it will chip away at sales, and sometimes a 10% drop in sales can be catastrophic. Constant improvements and innovation in the menu, systems, preparation, marketing, and operations will keep the impact from trendy and oddball competitors to a minimum by keeping your brand fresh.

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Quiznos Franchisee Grumblings

A Quiznos franchisee discusses why he is dumping his 3-year old franchise in favor of opening his own restaurant at the same location: “Over the years, the cost of operating has gone up to the point where it’s not profitable, and it actually has never been profitable,” he said. “The business model is just too expensive and advertising fees have gone up recently.” The risk that the franchisor will increases the mandated advertising fee or cost of inventory is risk born solely by the franchisee. Tully said advertising rates and product costs hindered the Quiznos operation. He said he was only allowed to buy products pre-approved by Quiznos, which led to higher prices. “I understand Quiznos has a system and brand, and they want to promote the brand in every way, but the model is such that a lot of us are having trouble,” he said. What’s the attraction to running his own restaurant? “The nice part about running it myself is I’ll have control of it, and if something doesn’t work, I can throw it out right away. It also gives a closer relationship to the customer,” Tully said. ” “The nice part about running it myself is I’ll have control of it, and if something doesn’t work, I can throw it out right away. It also gives a closer relationship to the customer,” Tully said. “We hope to create the atmosphere of a neighborhood place.” Needless to say, I would’t buy it!

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Making Money as a Franchisee

Entrepreneur magazine seems to always figure out new ways to publish the same “tips” on starting a business or buying a franchise. Nevertheless, the most recent “How to make a lot of money as a franchisee” is worth a quick scan. This item is most important in my opinion if you are looking at franchising primarily to increase your net worth (as compared to a ‘lifestyle’ business): 4. Reinvesting to achieve your absolute goal. If you find an opportunity that fits well for you and has a great return on investment, and you’ve got your first unit up and making a lot of money, you can reach your absolute number goal by acquiring additional units. This can either be done through further out-of-pocket investment or through the reinvestment of the profits you’re making into growing the business. I have a good friend who owns more than 40 haircutting franchises. The return on investment in each unit is great, but the absolute dollars in any one unit don’t meet his overall total income goal. He found that by adding additional units over time through the reinvestment of profits, he could realize a total income far in excess of what his absolute goals were when he started the business. In the example mentioned in the first point, if you want to make $100,000 per year, make four of the $5,000 investments and you’re there.

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