Taco Bell franchisee loses gender bias lawsuit

Katrina Hillis and Diana Pepper, who were store managers at Taco Bell restaurants in McMinnville and Sparta, were awarded $93,000 in damages
….

The lawsuit claimed that a “glass ceiling” at Management Resources (franchisee) kept most women from rising above store manager into upper management. The suit said 60% of Management Resources store managers were women but only 15% of its higher-ranking executives were women.

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Domino’s Must Give Franchisees Choice

A federal district judge ruled that Domino’s Pizza Inc. franchisees have a choice of vendors for a computer system the company developed.

In his ruling Wednesday, Judge Richard H. Kyle, sitting in Minneapolis, said the chain’s franchise agreement allows franchisees to buy the hardware and software that would meet Domino’s specifications from any source.

After developing a computer system in-house, Domino’s mandated that the hardware be purchased from International Business Machines Corp. and the software from itself, the judge’s ruling said.

Some franchisees balked, contending that the only reason the company had imposed that requirement was to generate more franchisee revenue. The plaintiffs argued that they should be able to buy the system from any source as long as it met specifications.

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• I love the product should I invest in the franchise?

Talking to existing franchisees is one of the most important things you can do to investigate a franchise opportunity. Franchisees know the business. They can help you decide if this opportunity is right for you.

Being well informed at the start will improve your odds of success, of course, just as it does in any new job experience. The franchisees are the ones who can tell you the real deal; how well sales strategies hatched by the franchisor really work, what your day will be like, and when you might expect to break even, for example.

You will want to speak with a number of franchisees, preferably some of whom are very successful and also some who are struggling. By reviewing the responses and comparing your own management style to those currently operating stores, you will have a better idea of where you might end up if you purchase this franchise.

Before calling any franchisee you should have read the franchisor’s Uniform Franchise Offering Circular (UFOC), which will give you a wide range of information about the franchise. But getting in touch with franchisees and getting them to tell you what they really think isn’t easy. The UFOC contains a list of current and past franchisees.

Here are some suggestions:

Have a clear idea what you want to discuss. Create a list of questions.

The most common questions to ask revolve around these subjects: Initial Investment, Training, Opening Support, Ongoing Support, Marketing Programs, Purchasing Requirements, Purchasing Power, Earnings, ROI.

First ask yourself, “What do I want to know?”

Here are some suggested questions to ask franchisees choose the questions that help you answer the question “What do I want to know?” 

• How has the franchisor responded to your calls for support about business operations or any other general questions you may have had?
• Do you feel the franchisor cares about your success and is willing to help you as needed?
• How would you describe your overall franchisor/franchisee relationship?
• Did you receive assistance in site selection, lease negotiations, build-out and permit processes, or any other areas unique to the opening of the business?
• What happens in a typical day?
• What will go wrong?
• How long did it take for you to realize a return on investment?
• What are your approximate earnings and are they in line with your expectations?
• Did the franchisor adequately estimate the amount of operating cash that you needed?
• Was the training the franchisor provided thorough and did it sufficiently prepare you to run this business?
• Were there any hidden fees or unexpected costs?
• Is your territory big enough to hit your goals?
• Are there restrictions on the products you sell and use in your business?
• Are you required to use designated vendors?
• Does the franchisor advertise as much as it said it would?
• What type of business experience, education and skills did you possess before buying this franchise?
• Why did you select this particular franchise system over others in the same type of business?
• Did the training only cover the operating system or did the training prepare you to compete with other businesses providing similar products or services?
• Did you encounter any problems with the franchisor, the site, or establishing your business and how did the franchisor respond to problems?
• What are your sales patterns like? Are they seasonal? If so, what do you do to make ends meet in the off-season?
• Are there expansion opportunities for additional franchise ownership in this system?
• Knowing what you know now, would you make this investment again?
• What are your thoughts on this industry, the products and/or services available, and what trends do you see happening for the future?
• Do you have any issues or concerns with the franchise agreement? Were there any clauses that stuck out over others that may impact your relationship with the franchisor?
• Has the franchisor responded to any of your own ideas about improving the franchise system?
• Are there any other franchisees or former franchisees you recommend I contact?

Questions to ask former franchisees: 

• Why did you leave the franchise system?
• Did the franchisor cooperate in helping you sell your franchise?
• If there was a termination or non-renewal, did the franchisor explain why and provide a reasonable opportunity for you to cure the problem?
• Would you consider buying a franchise from a different franchisor?

Franchisees’ view of the franchisor and the value of the franchise system will be enlightening. Make sure you interview a reasonable sampling of franchisees; I would suggest no less than 5.

Some will have good experiences to report; others may preach doom and gloom.

Remember, no one can predict how you will fare or whether you’ll enjoy the business, but you need to know the mood and understand the mindset of the existing owners before you join their club.

Cross Posted at Let’s Talk Franchising

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Spicy Pickle plots growth curve

The above article lays out the revenue for this relative startup franchisor.  $221,643 in franchise fees and royalty in the 1st quarter, but still recognizing a quarterly loss of $538,229.  The loss is mostly likely due to higher marketing, commission, and administrative expenses. 

Franchisors make the most money on the front end with the franchise fee - a one-time windfall of $30,000 for the franchisor from which their variable costs involve commission to the sales person and some executive time - with related expenses of manuals/documents, site selection assistance, and training delivered over the next year.

A small franchisee may produce $350,000 in gross sales, meaning the 6% royalty will generate $21,000 over a 12 month period plus a few thousand in vendor commissions and other revenue.  With the average franchisor selling 12 franchises during the life of their business, it is easy to see why many franchisors struggle despite the illusion of rolling in the money dough.  The profitable franchisors sell new franchises at a fast and consistent clip.

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Pizza Hut franchisee’s earnings fall, revenue rises

Comparable sales rose 0.7 percent.

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Death of a toasted sandwich salesman

Quiznos had sought to strip eight franchisees of their franchises after a franchisee gripe site posted the suicide note of a Quiznos franchisee on its website. The note blamed the Quiznos Corporation for ruining his business and his life. The franchisee, Bhupinder “Bob” Baber, was found dead last November in the bathroom of a Quiznos restaurant in Whittier, California, after pumping three rounds from a .380 caliber handgun into his own chest.

….

Another group of angry franchisees, the Toasted Subs Franchisee
Association (TSFA), took up his cause, and posted his suicide note on
its website to raise money for the Baber family. Quiznos quickly
responded by yanking the franchises of the eight directors of the TSFA,
and the TSFA responded by filing for an injunction in federal court in
Denver seeking to hold onto their franchises until the defamation
allegations filed by Quiznos could be litigated.

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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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UPS Store franchisee files suit against UPS - The Business Journal of Milwaukee:

The suit, which was filed in U.S. District Court in San Francisco, accuses Atlanta-based UPS (NYSE: UPS) of wrongly profiting off of UPS Store and Mail Boxes Etc. franchisees by billing them for differences in shipping rates.

According to the complaint, franchisees weigh and measure customer packages in their stores, and charge customers accordingly. They then ship the package to UPS, where the company re-measures the package and charges the store owners for the difference.

The lawsuit argues that franchisees have no ability to contest the revised measurements and can’t reassess customers for the additional charges. It also claims that UPS uses “inaccurate” methods of measuring the packages.

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