100-unit Potbelly’s, who recruited DeLuca from Starbucks as an investor and board member, is planning to raise money in the public capital markets with an IPO in the 3rd quarter of 2007.

Chicagoans have been enjoying Potbelly’s toasty-warm sandwiches, fresh homemade desserts, and old-fashioned milkshakes at the original Lincoln Avenue store since 1977. The original stand was in an antique shop, formed to feed and attract hungry locals to browse the atiques.

Current owner Bryant Keil purchased the business in 1996, and has since expanded its presence to Washington DC, Virginia, Maryland, Wisconsin, Michigan, Minneapolis, Ohio, and Texas. Potbelly has over 100 company owned-locations and the growth continues, albeit at an intentionally steady, controlled pace.

Background article.

Jimmy John’s (“JJ”) franchisees are happy because they make money and get decent support from the franchisor. The failure rate is very low, particulary in the past 5 years, if you follow the sytem. It is rumored that a single unit, on average, achieves $850,000 in annual sales, with breakeven reached usually with annual sales of $400,000-$420,000 (depending mainly on the lease). The latest numbers are over 500 restaurants in operation (20 company owned) with 1016 franchise agreements signed. A new JJ is opened every 36 hours as of January.

Most of the franchisees now are area developers, but sometimes single-units are sold. JJ has a well tuned but quirky fun system to make it ‘happen’. The operation manual is specific to every last detail, to how you put on your apron. The headquarters has rock music playing, Plasma TVs with Fox News on full time, and very casual but go-getter attitude. The founder recently sold a third of his business to a Weston Presidio, a famous private equity fund who funded Starbucks, Jet Blue, Wild Oats and Guitar Center, but founder Jimmy John Liautaud still has a 4-to-2 vote lead on the board.  Liautaud’s 29-year-old President is the 3rd largest shareholder.

On of JJ quirky but effective marketing approaches is an in-your-face attitude in the store and in their infrequent advertising.

A second unique aspect is JJ’s Franchise Consultants, who visit stores with supplies (tile glue, cleaners, mits, pans, etc.) to clean up and fix up shops, all while encouraging the owner. A third unique aspect is its use of more than a dozen guerilla marketkers who will visit one location and spend 4 days there. The first day is planning for the massive 3,000 sample distribution strategy over the next few days, the second day is giving out samples, the next two days is giving out more samples if possible and then helping the franchisee make sandwhiches. Orders usually increase by 60+% and strongly stay above pervious levels therafter.

Because JJ has strong roots in the college markets, delivery is a distinguishing factor of the franchise. Hey, if delivery works for pizza…

This isn’t a commercial, no one is paying or asking me to write this – it’s my unbiased opinion. I’d buy it!

I lived in South Florida for about a year at regularly ate at the Chicken Kitchen (background article). The restaurant flame roasts chicken on a very large open grille for all guests to see, and then chops up the whole chickens for plates, bowls or burritos. The bowls were quite healthy, filling and reasonably priced.

Chicken Kitchen was recently involved in a nail-biter law suit. One of its franchisees caused a serious auto accident. Who was liable? Only the driver and franchisee, or also the franchisor?

Let’s do this law school style (all you lawyers know what I mean):

Plaintiff (P): Joshua Szentpaly, motorcycle rider hit; represented by lead attorney Ervin A. Gonzalez with assistance from Deborah Gander.

Defendant (D): Chicken Kitchen USA LLC; represented by Frank Alloca and Bill Davis of the law firm Buchanan Ingersoll & Rooney in Miami.

Facts: An employee of D’s franchisee was driving to make food deliveries for its restaurant. P was driving down the street in his motorcycle with friends. The franchisee’s driver hit P, causing severe neurological damage and the loss of his right arm.

P’s Claim: The Miami franchisee was an independent contractor, and it was therefore not responsible for any of the franchisee’s actions and omissions.

D’s Claim: Its franchisee was an independent contractor and therefore was not responsible for their acts and omissions

Issue: Is a franchisor legally responsible for the actions of its franchisee’s employee when the employee crashes a stop sign and causes bodily injury?

Holding: Yes.

Reasoning: Chicken Kitchen USA is legally responsible for the acts and omissions of its franchisee because it controlled or had the right to control the day to day business activities of its franchisee pursuant to its franchise agreement and operating manual.

The jury subsequently award Szentpaly $2 million. I’m not sure whether insurance covered Chicken Kitchen USA LLC for its liability.

Here is the Plaintiff Szentpaly’s web site with pictures and his description of the incident.

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.

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!