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

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 are in the market
• High Average net worth and total investment is $650,000
• High Average Number of Employees: 15 FT, 20 PT

From a concept standpoint, this niche QSR play is a winner.  From a profitability standpoint, I do not have enough data to comment.

"Speaking a language other than English is not only disrespectful, it’s also prohibited" allegedly read the sign posted at a Supercuts on Michigan Avenue in Chicago.

The stylists claim Supercuts managers prohibited foreign languages (Spanish) from being spoken by employees anywhere on the business property, including break rooms. 

Is this prohibition of speaking foreign languages even in private conversations where customers can’t hear (in break rooms) a violation of the of the 1964 Civil Rights Act that prohibits employment discrimination based on national origin?   Probably yes.  But, the Suprecuts franchisee (owner of 20 Supercuts) denies such a policy existed as alleged.

The Equal Employment Opportunity Commission ("EEOC") joined the stylist in a civil law suit against the Supercuts franchisee. 

The EEOC has already given direct guidance on this issue.

…an employer’s rule which require employees to speak English at all times, including during their work break and lunch time, is one example of an employment practice which discriminates against persons whose primary language is not English.

However, an employer may require employees to speak only English at certain times and this would not be discriminatory, if the employer shows that the rule is justified by business necessity. The employer must clearly inform its employees of the general circumstances under which they are required to speak only English and the consequences of violating the rule.

If the reported facts are accurate, the EEOC will probably win this one.

Whether the EEOC’s regulations goes too far in interferring with employer-employee relationships is a debate worth having.

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

So, you bought a franchise and it’s been successful for a few years and now you want to sell it.  The franchisor reserves some influence and financial discouragement.  The two biggest considerations given to the franchisor are:

1. Right of first refusal – the franchisor can match your highest legitimate offer and buy your franchise
2. Transfer fee – a fee you must pay to the franchisor for the privilege of transferring your licensing rights and obligations to another party

Sample Transfer fees:

FOOD:

• Pizza Factory: $12,000
• Quizno’s: $5,000
• Dominic’s of New York: $1,000 + 6% of sales price
• Submarina: $1,000
• Cheeburger Cheeburger: $12,250
• Pizza Patron: $5,000
• The Dugout: $5,000
• Arby’s: $13,500
• Doc Green’s Gourmet Salad: negotiated at time of sale
• Jerq’zine:  $10,000
• Original Hamburger Stand: $250
• Sub Station II: $5,000
• Steak-Out: $18,750
• Fazoli’s: Reaonable attorney, accounting, training and other related costs

OTHER:

• Bartercard: 10% of sales price
• Herman’s World of Sports: $12,500
• Sears Carpet and Upholstery: $3,000 – $6,000 (depends on market size)
• Stone Mountain Carpet Mill Outlet: $2,500
• Screenz:  $5,000
• Tax Centers of America: $1,000
• Sports Clips: $25,000
• Fantastic Sams: $20,000 or 10% of sales price (whichever is greater)
• Hair Cuttery: $5,000 ($0 if franchisee for 5+ years)
• Fastframe: 5-10% of purchase price

We the People is a paralegal document preparation service.  People typically use their service for simple legal documents and court filings (name change, non-contested divorce, wills, incorporation).  The company provides customers with forms to fill out with a pen, and the franchisee then sends the form off to a processing center located in the state.  One to seven days later (14 days max), the forms are sent back to the franchisee to give to the customer.  The franchisee may also offer to file the forms with the appropriate court for an additional fee.  The processing center takes a 25% cut of the document charge.  

No legal training is required.  Franchisees are basically a sales and marketing arm for the processing centers.  Franchisees are not allowed to alter any document or provide any service not performed exclusively by the processing center.  

Franchisees are free to set their prices above the mandatory minimum.  For example, restraining orders will run customers $100, a noncontested divorce run $400. (article listing more services and fees)

The company was founded in 1996, purchased by a couple in California, and recently sold to Dollar Financial Corp. (NASDAQ: DLLR) in March, 2005.  Dollar plans to also open the store in conjunction with the Dollar Financial stores (like H&R Blocks).

The experience for customers is somewhat odd if you have previous experience speaking with a lawyer.  We the People employees can’t recommend a form, can’t point you in the right direction, and can’t discuss specific facts about your problem.  All the employees can do is generally describe a form and offer a form booklet to fill out.  Recommending a form or solution is considered engaging in the practice of law, and it can subject the franchisee to fines, jail, or liability for damages resulting from the legal "advice".  When you walk into a We the People, you are simply asked, "What form would you like to fill out?"  

I visited one.  There was one man on the phone trying to explain three different types of divorces.   I was promptly greeted by the other employee asking me which form I wanted to fill out.  I said incorporation and will, and she lept into her sales pitch with a brochure, eager to hand me a paper form to fill out.

The franchisor’s disclosed litigation in the UFOC is staggering.  The company has 13 cases pending and 12 concluded cases that range from unauthorized practice of law to fraud.  Several franchisees have sued the company for fraud and unfair business practices.

From their UFOC…

Franchise Fee: $89,500 (ouch!)
Total Investment: $116,000 – $152,000
Exclusive Territory: usually 2 miles (at discretion of Company)
You must be Notary before opening
Supervising Attorney fee (mandatory): $200/month
"We the People" Do it yourself legal books: 50% off retail price
Time to locate a site after signing Agreement: 90 days (if no site selected, franchise fee may be refunded less $10,000)
Time to Commence Business after signing the Agreement:   120 days
Document Processing Fee:  25% of total customer charge
Royalty on any other products or services: 25% of gross sales
Advertising Co-op:  4-6% of gross revenue
Promotional Fund: 2-4% of gross revenue
Independent Advertising:  $2,000 or 8% of gross revenue (whichever is greater)
Franchise renewal fee: $2,500
Current transfer fee (charge to sell the business):  $7,500
Advice from company fee:  $250/day
Square feet (usually in strip mall):  about 1,000 square feet
Included Training:  5 days in Santa Barbara, California
Phonebook ad requirements:  Must maintain a bold listing
Internet sales from your territory:  15% of company’s net profit is paid to franchisee
Personal Guarantees: Franchisees must personally guarantee the entire Franchise Agreement and all payments due to franchisor
Time to cure default under agreement: 10 days or franchise can be terminated
Litigation:  All disputes must be arbitrated in Pennsylvania

If this franchise can throw off about $20,000 in extra cash flow AFTER paying all expenses and salaries (including the franchisee), then this can be worthwhile investment.  Mandatory royalty, advertising, promotional fees total over 18%, plus the 25% commission earned by We the People to process each document.  So there goes 43% off the gross before paying any operating expenses. 

Let’s make this simple.  If the business is open 300 days per year, and sales total $1,600 per day (that’s about 8 $200 sales each day, which to me seems very high), that will generate $320,000 in sales, minus 43% is fees is $137,600 to pay all rent, salaries, other operating expenses, and still earn a return on your $150,000 investment.  No thanks!

Here is an existing franchise for sale in New York, asking price is less than $250,000.  Gross revenue is also $250,000 and they claim $75,000 in profit (sellers discretionary cash), so that is before taking a salary.  Remeber that beside your fair salary, you should be earning a return on your investment of at least 10% ($15,000/year). 

Pros:

• little competition
• easy business to run
• virtually no inventory to manage
• seems to be relaxed on granting franchisee’s site preferences

Cons:

• nasty past litigation by franchisees
• assistance after your intial 5 days of training is charged at $250/day plus expenses
• high fees
• no brand recognition

I’m especially attracted to non-food franchises, but this one I wouldn’t buy!