Entrepreneur Mag has an article on the top franchisee mistakes.

• Lease terms.
• Construction and fixture costs.
• Business equipment
• Inventory and supplies.
• Marketing costs.
• Labor costs.

I vote for construction costs and labor costs as the biggest mistakes – that’s is where most of the surprises and mishaps occur.

There are many popular and unique franchisees outside of the United States. I love reading foreign journals and learning about innovative brands developing overseas. If you are travelling overseas, keep an eye out for business that would work well in the United States. That is what this gentlemen did with a falafel restaurant. I am very skeptical whether this type of restaurant can work even with good branding…I have seen so many of them fail already. Venture, a radically innovative photography and portrait company, is one my favorite United Kingdom concepts…it is supposedly coming to the United States (Boston) soon.

Fantastic Sams, a full service hair salon brand with nearly 1,400 salons in the US and Canada, was recently ranked as one of the “50 Top Franchises for Minorities” and the “Top 25 Franchises for Hispanics” by the National Minority Franchising Initiative and Hispanic Enterprise Magazine. Fantastic Sams was the only hair salon franchise system selected by both surveys.

As published in the September 28 edition of the USA Today newspaper, The “50 Top Franchises for Minorities” award recognizes Fantastic Sams as one of the exceptional systems that has demonstrated a focus on recruiting and supporting minority franchisees into its system. Selection was based on many factors, including historical performance, brand identification, market dynamics, franchisee satisfaction the level of initial training, on-going support and financial stability.

The “Top 25 Franchises for Hispanics” was featured in the June/July issue of Hispanic Enterprise Magazine. Fantastic Sams was recognized as a franchise that has made a corporate commitment to recruit prospective franchisees from the Hispanic community over the past several years. According to Hispanic Enterprise Magazine, “This commitment is not based on altruism; it is based on sound economics. The companies noted here represent exceptional opportunities for prospective franchisees and have demonstrated a commitment to properly training and supporting you once you become a franchisee.”

Fantastic Sams is also a charter member of Minority Fran, a program that was recently launched by the International Franchise Association’s Diversity institute. Minority Fran was created to build awareness of franchising within minority communities and to increase the number of minority franchise owners.

“We are thrilled about our recent recognition by the minority business community,” said Scott Colabuono, CEO of Fantastic Sams. “We want to recruit franchisees who are interested in running a business and who also understand the culture of the clients they serve.”

Fantastic Sams is currently concentrating its efforts on attracting quality franchise partners who want to invest in a leading hair salon brand with a solid operating system and a strong corporate support structure. The average initial investment to open a Fantastic Sams Hair Salon (ranging between $100,000 to $225,000) and the company’s fixed fee royalties make it one of the most competitive opportunities in the industry. “With Fantastic Sams’ attractive economic model, experienced franchise partners find our brand a worthwhile investment,” added Colabuono.

“Prospective franchise owners for Fantastic Sams should have well developed people skills to be successful. Our best salon owners set a standard for guest service that translates into highly trained and motivated hair stylists. Our guests recognize the difference when they step into our salons,” according to Jeff Sturgis, VP Franchise Development. “We have become the leading full service hair salon brand by offering the best in salon services and products, and by creating a customer loyalty that sets us apart from our competition, “he added.

Cross Posted at: Let’s Talk Franchising 

Homevestors garnered a positive article in the Washington Post yesterday.

HomeVestor franchisees pay a $49,000 fee upfront and must have net assets of $200,000 in cash or cash equivalents. They also pay the parent company $775 for every house they acquire, plus interest on credit lines the company extends to enable them to buy multiple properties. Some HomeVestor franchisees buy, fix, rent or resell 100 or more houses a year, thanks in part to high volumes of potential sellers — more than 200,000 this year, Hayes said — who are driven to them by the company’s advertising campaigns.

Subprime mortgage delinquencies and foreclosures are swelling those numbers significantly, he said, along with plunging prices in some local areas. Softening markets also are driving down the expected discounts on troubled houses. Whereas in past years, “we might offer 65 percent of a property’s expected value after repair, now in some places we’re looking at 50 percent,” Hayes said.

A $100,000 starter home with a seriously delinquent mortgage and in need of renovation, for instance, might draw an offer of $50,000 to $55,000 cash from a HomeVestor franchisee.

I was with a real estate broker the other day when he received a buy offer for his client’s residence that was 50% below asking. The broker scoffed and refused to take the offer to the seller (which is unethical unless the owner gave instructions not to accept anything below a certain price; I think part of it too was the broker wanted his commission to be higher). Nevertheless, companies like Homevestors provide liquidity to distressed properties. It’s hard to believe that a perfectly good property would drop in value 50% in a few years in popular part of the country (Miami in this article), but at the end of the day the condo’s fair maket value is only what someone else is willing to pay for it.

For those of you interested in the legal aspects of residential real estate, I recommend checking out Chicago attorney Pete Olson’s blog.

From the FTC:

Twenty-six states have business opportunity laws. Most of these laws prohibit sales of business opportunities unless the seller gives potential purchasers a pre-sale disclosure document that has first been filed with a designated state agency.

State business opportunity laws typically cover every imaginable type of business opportunity that might be offered. If a business opportunity seller is not required to provide pre-sale disclosures by the Franchise Rule, these disclosures will almost always be required by the laws of the states listed below.

The disclosures required by state business opportunity laws differ, and usually provide more abbreviated information than the FTC’s Franchise and Business Opportunity Rule requires. However, most of these laws provide important rights and remedies for business opportunity investors, including required security bonds to cover investor losses.

If you are considering purchasing a work-at-home or other business opportunity, and reside in a state with a business opportunity law, we encourage you to find out more about the protection provided by your state statute before you invest.

Alaska, California,Connecticut, Florida, Georgia, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maine, Maryland, Michigan, Minnesota, Nebraska, New Hampshire, North Carolina, Ohio, Oklahoma, South Carolina, South Dakota, Texas, Utah, Virginia, Washington, Wisconsin

Accusations of franchisor misconduct and fraud occurs in every country. Australia, for example, franchise churn is a big issue:

At the centre of these 30-plus claims is what is known as franchise churn. This is where a franchisor sells a site or territory that cannot turn a profit then sits back and waits for the business to fold.

The franchisor reclaims the site for a nominal price and resells it to another franchisee who inevitably fails a year or two down the track.

Each time the franchisee spends up to $450,000 buying what he or she believes is a viable business and ends up paying another agreed amount (usually about $50,000) to the franchisor for marketing fees.

Royalties and annual franchise fees, which range from 5-20 per cent of revenue, are owed on top of this.
Business failures are easily pinned on the franchisee.

…

“All you’ve got to do is follow the money trail. In the robbery stream, the franchisor virtually drives the franchisee to the wall to the point where they throw up their arms, leave behind them assets worth 10 times [what they are sold for in a fire sale] and so it goes on,” Farrell says.

From the Columbus Dispatch:

DavCo Restaurants Inc., a Maryland company that owns 160 Wendy’s restaurants, contends that Wendy’s required franchisees to buy only Coca-Cola products, set a price higher than market value for those products and used the funds for advertising.

Dave Norman, DavCo’s chief financial officer, said his company believes its agreement with Wendy’s allows DavCo to suggest alternate suppliers.

Further, Norman said, Wendy’s didn’t give DavCo a credit against its required contribution to the national advertising campaign. Both constituted breaches of the franchise agreement, he said.

Franchisors will claim that the mandatory vendors are passing on savings to franchisees through volume discounts it can achieve through negotiations. Franchisees will claim that the vendors prices still are inflated partly because of the rebate paid to the franchisor.

There’s a “very significant difference” between the cost of products in Wendy’s contract with Coke and the price an open bidding process would bring, Norman said.

Competition and competitive bids almost always produce lower prices and better service. Franchisees should look for franchisors that are flexible with their vendor requirements, permitting the franchisee to select their own suppliers and vendors so long as the quality is the same as the required vendor. If this is important to you, there MUST be language iinserted into the franchise agreement stating that such supplier substitutions are permitted and permission will not be unreasoably withheld.

The Mail Box Etc. conversion to UPS Stores continues to generate bad PR for UPS. Mail Box Etc. stores were generating a living for most franchisees, but the UPS Stores emphasize UPS shipping services where the margins are very low.   This was not a ruling on whether UPS misled the franchisees, but just a procedural ruling permitting the case to go to forward with a hearing on the merits.

United Parcel Service Inc. franchisees have won the right to sue the world’s largest package shipping firm as
a group over claims it misled them by saying that converting their Mail Boxes Etc. stores into UPS Stores would be more profitable.

“This is a huge win,” said Howard Spanier, a Malibu, Calif., franchisee who said he converted his store last year, according to a statement Friday. The class action was certified Wednesday by a California appeals court, overturning a trial court ruling rejecting the franchisees’ request.

UPS, based in Sandy Springs, is accused of withholding critical documents about tests of the UPS Store business model it conducted in several U.S. cities. The franchisees claim the conversion was “disastrous” for some of the stores.

Uniform Franchise Offering Circulars, known as UFOCs, was a response to some unethical behavior in the 1960’s and 1970’s. Today franchises are regulated by federal and some state laws. The Federal Trade Commission (FTC) requires that certain information be disclosed to potential franchisees before a contract can be signed or any payment made. The information is presented to the prospective franchisee in the form of a document — the UFOC.The UFOC, contains information franchisors must provide to franchisees by law. UFOCs are deemed to be reliable and if the information provided is false, franchisors are subject to civil penalties. However, the FTC does not require filings. There are 13 states that do keep UFOCs on file, and 23 states that require business opportunity disclosure filings.

The UFOC is designed to give prospective franchisees all the information relevant to a franchise offering. It is made up of three basic parts: 23 sections (called Items) describing various aspects of the franchise program; a set of the franchisor’s audited financial statements; and a copy of each form or contract a franchisee is expected to sign if he/she intends to buy the franchise.

The UFOC is similar to a securities prospectus. It can provide the information you need to evaluate a company. An accredited franchise company, whether publicly traded or privately owned, must provide this disclosure document.

The UFOC is most valuable for potential franchisees, potential franchisors, franchisors, investors, financial companies and suppliers to franchisees.

You can obtain UFOC’s directly from the franchisor usually for free, from the California state franchise document portal, and from several online sources such as FreeFranchiseDocs.com which downloads and scans the documents from the California database.

Cross Posted at: Let’s Talk Franchising

[edited by Ryan on on Oct 20, 2007 @ 10:15PM]

I received an email from Source Book Publications regarding Earnings Claim in Item #19 of the UFOC, I agree with Sourcebook that all franchisors should be required to submit an earnings claim statement (Item 19) in their UFOC. Given that submission of an Item 19 is entirely voluntary, only 20% of franchisors choose to do so. The reasons for non-submission range from the ludicrous to vaguely plausible.

To myself and Sourcebook, it seems entirely one-sided to ask a prospective franchisee to invest in excess of $200,000 (on average) to “buy” a franchise without providing him or her with a clear understanding what he or she might earn from the investment. Although there are numerous variables that preclude franchisors from coming up with an exact projection of future Net Operating Income, the franchisors clearly have the ability to determine the historical sales and related expenses for operating units currently within their system.

At a minimum, they can work backwards from royalty payments to come up with a gross sales figure. To the extent that they closely monitor and support their franchisees, they should have a good sense of average operating costs as well. Given this information and the latitude they have to provide as much detail as they see fit, they can break out summary operating data for those franchisees or company-owned units that have been around for say 5 years, 10 years, etc.

My sense is that the FTC will ultimately acknowledge the need for a mandatory Item 19. Given the difficulty from industry to industry to provide a workable template for the submission of information, the FTC will continue to allow franchisors to provide as much or as little information as they deem necessary. Those franchisors that do in fact provide real, in-depth information will clearly enjoy a competitive advantage over those that do not. At any rate, those franchisors that go to the trouble of including an Item 19, even if only cursory, should be acknowledged and applauded.

As an on-going feature of future newsletters, World Franchising will publish an exemplary Item 19 each month. This month, they honor Papa Gino’s for the exceptional detail that they provide in their Item 19. My guess is that the rapid growth and success of their system has a great deal to do with the forthrightness with which they celebrate the success of their existing franchisees. To view their Item 19, please click here.

Those companies who feel they provide exceptional disclosure in their Item 19s are free to submit their Item 19 electronically for consideration in subsequent newsletters.

Cross Posted: Let’s Talk Franchising

This is an inspirational story of a couple of guys who followed their passion and started small store, and slowly added stores:

The customized white vehicle, emblazoned with smiling humans and healthy-looking dogs and the words ZoominGroomin in blue and Mobile Pet Spa in red, leaves little doubt about the reason for the visit.

In fact, it was because Carey Takach spotted the van on the road one day that she signed on with the mobile pet groomer. That and the coupon her sister had passed along to her.

…

Toback said he has 700 regular customers just nine months after starting the venture, along with two vans and five groomers and 100 appointments a week.

The former retail executive, who at one point was a vice president for menswear, became a mobile pet groomer at age 56.

“I was sick of looking at polos,” he said. “My cocker spaniel is my business adviser and was the catalyst to the whole thing.”

Toback said the idea to become a mobile groomer franchisee struck when he considered the amount of time involved in taking his dog to the groomer’s. He would drop him off at 8 a.m. and pick him up at 5 p.m.

“He was waiting in a cage for six hours, waiting his turn,” Toback said.

It occurred to Toback that many pet owners treat their pets “like children,” noting that a parent would not drop their child off at a barber for eight hours. The average mobile groom session is an hour and fifteen minutes, he said.

Is there something you do in your daily life that just takes too long? Perhaps it can “delivered” directly to the customer, such as pet services, home vet or medical care, 20 minutes dry cleaning while-you-wait, high-end group child care. Maybe you can be the franchisor.

Rush Nivet posted on his blog Rush on Business that last week he had the opportunity to attend the ABA’s Forum on Franchising.

He writes: What a great event! First and foremost, it was an opportunity to network with some of the best franchise lawyers in America. Second, I really enjoyed hanging out with fellow Iowa franchise lawyers, Matt Krigbaum of Cedar Rapids and David Bright of Iowa City. These guys are excellent lawyers and terrific individuals. If you are Eastern Iowa I recommend you talk with them regarding your franchising questions.

The initial seminar session I attended was the Fundamentals on Franchising. Some top-notch franchise lawyers spoke during this 4 1/2 hour session but of particular interest to me was the talk by Ron Gardner of the Dady and Garner Law Firm in Minneapolis. The law firm is regarded as one of the best firms in the country representing franchisees in disputes with franchisors. In my franchise law work I counsel and negotiate on behalf of franchisees so the talk was very informative.

Some highlights of Gardner’s talk:

1. If a franchisor is making certain promises you should attempt to have those promises included in the franchise agreement. Often a franchisor will say certain things to entice a franchisee to enter into the franchise agreement. But when you read the agreement these promises are no where to be found. Get those promises in writing. If not, you should have no expectation the franchisor will follow through on its promises.
2. Franchisees and their lawyers must communicate together on much more than just the franchise disclosure document or the franchise agreement. In order to advise you properly it is important to know your background, your needs and your expectations. Without this information it is often difficult to know what it important for you in a negotiation and what is not.
3. Run Away from Franchisors that Won’t Negotiate. Some franchisors will tell you that they won’t negotiate their agreements, or worse, tell you the laws and regulations do not allow them to negotiate their agreements. Tell them to take a long walk off a short dock! Ask youself whether you want to be in business with a franchisor that will not consider your busines goals and needs. Fortunately, my experience has been that many franchisors will negotiate at least certain key terms and conditions.
4. Key Disclosure Issues. Key disclosure issues generally include litigation, initial investment, vendor rebates, earnings, outlets and financial statements. It is important to closely review the information regarding outlets. Carefully study the number of transfers and not just the number of closures. A high number of transfers may be an indication that franchisees in the system are struggling but bad stores have not been shut down. As I have preached franchise due diligence must include interviews of franchisees, including those that have left the system, in order to get a full picture of the franchise system.
5. Be Willing to Walk Away. I have touched on this before. This is the paradox of negotiation. You should not fall in love with the deal. Prospective franchisees who are willing to walk away usually get much more from those who have decided to sign at all costs.

Cross posted at Let’s Talk Franchising

Visiting a franchise trade show is a great way to gather a lot of preliminary information and survey what’s out there in the franchise world in a short period of time, and you can find them in most cities. The National Franchise and Business Opportunities show will be in Boston on Saturday and Sunday October 13th and 14th. The show will be open from 11:00 am – 5:00 pm.

The National Franchise and Business Opportunities Expo is great for those who are considering owning their own business.

When attending a franchise trade show, keep a few things in mind. The companies exhibiting at the show do not make up all the franchise opportunities available. A franchise trade show showcases only a limited selection of the 2500 franchise programs out there.

You should take the opportunity to hear why the franchise representatives feel their opportunity is worth investigating. Ask questions about the business model, and the outlook of the industry.

Use these guidelines to help you make the best of your franchise trade show visit.

Before you attend the franchise trade show:

1. Identify what your “must have priorities” are!
2. Identify your financial situation. What is liquid, what can you borrowed from family and friends, and how much do you need to live on? What are your financial requirements?
3. Be serious. Dress conservatively, leave the kids at home, and take business cards if you have them. Show the representatives you meet that you’re a serious prospect.

At the franchise trade shows:

1. Look at the floor plan of the exhibitors listed. Check off the businesses you recognize or that look interesting to you.
2. Don’t waste time. Pass by the franchisors who are out of your price range or don’t meet your “must have priorities”. Prepare a short list of questions: 1. what is the total investment required? 2. Tell me about a franchisee’s typical day. 3. What are the prospects for the industry future? 4. Is financing available from the franchisor?
3. Collect printed information from all the companies that interest you.

After the franchise trade show:

1. Organize the materials you collected.
2. Follow up. Visit the websites and call the franchises to gather more information.

A franchise trade show is a great way for you to introduce yourself to some of the many franchise opportunities available.

Cross Posted at: Let’s Talk Franchising

Soup Kitchen International, the creators of the Zagat-rated soups of Al Yeganeh, the legendary soup man who inspired the “Soup Episode” on Seinfeld, and Cold Stone Creamery, today announced the grand opening of the first The Original SoupMan/Cold Stone Creamery at 2 Astor Place in New York, NY in early November. Recent Penn State graduate Daniel Petryszyn is opening the first hybrid, co-branded franchise that will feature both The Original SoupMan’s world-renowned soups and Cold Stone Creamery’s super-premium ice cream.

Petryszyn’s Original SoupMan/Cold Stone Creamery, in addition to ice cream, will showcase Yeganeh’s 50 varieties of soup as the “centerpiece of the meal.” Each meal will be presented with a piece of fresh, crusty baguette, fresh fruit and a piece of imported chocolate — just like Al Yeganeh served it at his original shop. As Yeganeh explains it, this is simply “the way to eat.” Alongside Yeganeh’s 50 varieties of soup there will also be an extensive line of gourmet salads and sandwiches.

“Customers demand choice and innovation,” said Dan Beem, Cold Stone Creamery President. “We’re pleased and excited to explore these opportunities with the Original SoupMan to introduce both the highest quality, most creative ice cream experience alongside premium, gourmet soups, all under one roof.”

It was reported on Let’s Talk Franchising that  “Seinfeld’ Soup Nazi Franchises Troubled”  that disgruntled franchisees say many of the franchises didn’t make it through their first year: At least eight have closed for good. Two more have shut their doors for now, although the company said it has deals in the works to reopen them.

Cross Posted at Let’s Talk Franchising

Joel Libava, blogger at FranchiseKing and owner of Franchise Selection Specialists Inc. in Cleveland (and invited blogger at this web site), was quoted in a Wall Street Journal article about franchisee funding sources:

• Think About Franchising. These days, franchisers are actively targeting boomers because of their deep pockets. Entrepreneurs are generally expected to put up some of their own money to start a franchise, and boomers have lots of it on hand.

But you don’t have to bet the farm. “We recommend that you use the smallest portion you can of your own money and leverage the rest,” says Joel Libava, president of Franchise Selection Specialists Inc., a franchise consulting and marketing business in Cleveland. Generally, entrepreneurs should expect to pay about 15% to 30% of the total cost of starting the franchise out of their own pocket, including the franchise fee and working capital, Mr. Libava says.

For instance, Louis H. “Gig” Runge of Houston has put up about $80,000 of his savings to open a Martinizing Dry Cleaning franchise. The money has gone toward franchise and legal fees and other necessities. He plans to fund the rest of the business with a $350,000 loan guaranteed by the Small Business Administration. The loan requires him to provide an equity injection of $82,000.

“It was a challenge for me to work through the tax benefits of borrowing versus just funding it myself,” says the 47-year-old Mr. Runge, a certified public accountant who has done a variety of financial jobs at JP Morgan Chase for the past 18 years. Mr. Runge decided that the SBA financing would help him protect his personal savings and use it as collateral to invest in other stores down the road.

Here are my initial thoughts….

Leveraging (borrowing money) is a good idea so long as the business ultimately works out, or you’ll end up losing the same as if you funded the whole enterprise with your cash savings. Leveraging does buy you some time if things don’t work out by leaving you some personal cash in the bank to invest in the business should it be necessary. But, all lenders to small startup businesses will require a personal guarantee, so if the business fails you will need to cough up the money to pay back the loan even if the loan is to a business.

Before getting a loan, you should set up your personal estate plan to protect/preserve the asset you already have from bankruptcy or lawsuits – which in small part entails moving assets out of your personal name to irrevocable trusts and business entities that have special control features and tax provisions so that you will still have these assets available for your use even if you get sued for a $10 million dollars or file bankruptcy.

Funding your franchise by transferring your 401(k) savings without penalty is possible, but it comes with debt restrictions. One route without tax or penalty (but will include fees imposed by the new custodian) is to convert your 401(k) to a traditional IRA held by a custodian that permits you to invest the money in “alternative investments” (some companies, like Charles Schwab, permit alternative investments but require pre-approval and offering documents from the business offering the investment). This is exactly how we accepted investments of retirement plan money where I used to work at the private equity and specialty finance company. Also, most 401k plans allow you to borrow up to $50,000, or 50 percent of the value of the account, whichever is less. This is penalty-free, unless of course you don’t pay the money back.

It was reported today that Byron Ashbridge and Joe Pitt, who operate five Sona MedSpa franchises in Charlotte, Greensboro and Raleigh North Carolina, have purchased the controlling interest in S0na MedSpa International, previously based in Franklin, TN. Since 2002, Ashbridge and Pitt have run some of the most successful locations in the company and will build upon their accomplishments in North Carolina to fortify, grow and improve the operation. This includes developing and implementing extensive staff training and marketing programs, and providing franchisees with proven systems and best practices to ensure optimal performance, customer satisfaction and profitability. The existing franchise locations will now be company-owned training centers and be the models for “best practices” in the medical spa industry. Franchisees will now have access to these company-owned centers in order to assist in the training and development of their respective staff, as well as determining marketing and operational tactics to use in their centers.

It was reported at Let’s Talk Franchising on May 26th, 2007 that Sona MedSpa Was Guilty of Fraud, Investors Liable! In that case an arbitrator in Atlanta, Georgia awarded nearly $400,000 to a franchisee who was duped into buying a Sona MedSpa franchise on the basis of “faulty” information about Sona’s hair-removal services. The arbitrator not only held liable the Nashville-based franchisor, Sona MedSpas, and its founder, Dennis Jones, but also a group of prominent investors that acquired the franchisor, but then failed to correct the misleading information. The investors included Carousel Capital of Charlotte, N.C., its Chairman, Nelson Schwab II, Jim Amos, former President of Mail Boxes, Etc., and his daughter, Heather Rose. As a result of the investors’ failure to act on the information, the franchisee not only proceeded with his investment, but also repeated the faulty information to its own clients.

Subesequently Sona MedSpa wrote a letter to Let’s Talk Franchising claiming the results of the arbitration were misrepresented, that letter was published Sona MedSpa claims the results of the arbitration were misrepresented on May 31st 2007.

The new owners of the franchisor; franchisees Ashbridge and Pitt offer the following five positioning statements, to summarize their approach to operating as the franchisor of Sona Med Spa, this is the platform upon which they will build the company:

• “We have been S0na MedSpa franchisees for the last five years and have managed highly successful, customer-centric centers. We understand our franchisees’ challenges and the enormous potential the Sona franchise possesses. We clearly understand our success as a company is completely dependent upon the success of our franchisees.”
• “We are dedicated to growing the business and committed to the financial stability and performance of the company and its franchisees.”
• “Before actively selling any new franchises, our primary focus will be on helping existing franchisees grow and become more profitable.”
• “We will provide the supplementary marketing and operational support to assist our franchisees in taking full advantage of their market potential.”
• “In addition to eventually growing the number of Sona MedSpa centers, we are equally committed to growing the number of company-owned locations.”

“Sona MedSpa is a proven concept, leader in the aesthetic industry, and is positioned for long-term success. We will bring the company to the next level using the experience we’ve gained from our accomplishments in North Carolina,” says Sona MedSpa International’s new President and Co-CEO Byron Ashbridge. “We have been franchisees, and strongly believe in the Sona MedSpa concept and brand. This positive experience will serve as the operational blueprint for the future. We also know the concept is a sound one and that the demand for personal aesthetic and wellness services will continue to grow.”

The new Sona MedSpa International will be based in Charlotte, North Carolina, where the company’s Business Development Center is located and the new training center will be established.

Founded in 1997, Sona MedSpa International, Inc. is one of the world’s largest medical spa companies, specializing in medically supervised aesthetic services in a luxury spa environment. Sona MedSpa’s offerings include the latest in laser hair removal, skin rejuvenation, botox and dermal filler injections, meso therapy and other fat and cellulite reduction services, medical-grade microdermabrasion, acne treatments, spider vein removal, and smoking cessation. Sona MedSpa centers are currently located in San Jose, San Mateo, Costa Mesa, Sacramento, Chicago, Grand Rapids, Raleigh, Charlotte, Greensboro, Las Vegas, Harrisburg, Memphis, Nashville, Richmond, Little Rock, Dallas/Ft. Worth, Virginia Beach, Newport News, Houston and Miami.

Cross Posted at Let’s Talk Franchising

Download the Quiznos Profit Spreadsheet

Based on the 115 comments, the most popular post on FranchisePundit.com has been What a Quizos Franchisee Makes, posted on April 10, 2005. The purported author of the financial projects also founded the web site QuiznosSucks.com (don’t bother going there, it now defunt and replaced with a domain aggregator’s advertising search engine). More of his experience is posted in this forum thread (pdf) on ToastedSubs.info. Here is the main snippet:

QuiznosSucks
08-10-2005, 11:35 AM
Yeah, Corporate is aware of Quiznossucks.com. Richard Sauls, the fellow who is responsible for the site, is himself a former Quiznos franchisee. Corporate actually sued to force him to kill the site and lost. My own feeling is that Quiznossucks makes them a bit nervous. It was developed on a shoestring and to little fanfare, but now averages in the neighborhood of 30k hits per day. I know that ever franchisor has its share of unhappy franchisees, but the situation with Quizno’s has reached a fever-pitch. From my research, the only
comparable situation I have found is UPS Store franchisees.

Ultimately, the Quizno’s business model doesn’t work. particulars vary from region to region, and depend heavily upon the franchisee’s rent and debt load, but break-even for a Quizno’s store is astronomical for this type of operation. The only thing keeping this house of cards aloft are second and third owners, who buy existing stores based on cash flow, at a fraction of the cost of a new store. I actually had a Q owner in my area approach me to see if i was interested in buying his store. The store was 3 years old, and he was running at break-even for the first year-and-a-half, with sales around 6700 per week. The Q opened a store near him (you have no radius protection with Q. technically speaking, if they wanted to open another store across the street from you, and could find someone fool enough to do it, they’re within their rights), and his sales dropped off 5%, which put him in the red to the tune of about $1100 per week. he offered the store to me at 80k, and i wasn’t interested. I am one of the “lucky” ones, in that I’ve very little debt, and an excellent location. For the time being, my store is making money. Unfortuantely, though, there is a lot of new development around me, and I am waiting for the day when Q decides that I am doing too well and opens stores closer to me. My store is for sale, along with his, and I am hoping i can sell the thing while it is still making money. The short of it is that Q is in the business of selling franchises, and they do this extremely well. Too well, if you ask any current franchisee. In the grand scheme of things, they would prefer that we make money than not, but it doesn’t much matter to them. Corporate makes more money from its supply chain. We’re forced to use their Q-approved vendors, each at a rate consdierably higher than we could find ourselves: accounting firm; CINTAS, a company which takes care of the rugs and towels; Vistar for food, chemicals and paper; Muzak…it goes on and on. The real shame of it is that Q doesn’t have to do business this way. It is ultimately self-defeating, in that no franchisor can alienate its franchisees to the degree Q has alienated us without serious repercussions. Quiznossucks.com is a natural by-product of the contempt with which Q treats its franchisees. If anyone is still interested in acquiring a Quizno’s store after all of my ramblings, and visiting quiznossucks.com, i would suggest that you go to bizbuysell.com, find an existing store in your area and save someone who is losing money, or someone like me, who has a store that is making money…for now. really! I am too young and nice looking for the headaches and stress!

This web site posted his projected monthly expenses based on $40,000/month in sales:

I think quiznossucks may have made a mistake in his numbers and the cash left over at the end of the month is actually a little less than he projected. He projected 9.4% or $45,120 left at the end of the year for the franchisee, but plugging the numbers into a spreadsheet nets 7.15% or $34,320 (perhaps he paid himself a small salary included in labor). Regardless of the $9K discrepency, the debt load and returns are not worth the risk for nearly anyone looking at this deal. I’ve uploaded a spreadsheet for you to play with the numbers for yourself. It makes for a simple planning tool/reality check for any franchise.

Download the Quiznos Profit Spreadsheet

McDonald’s is planning to offer lattes, cappuccinos and other specialty drinks in all 14,000 by 2009. Internal projections estimate a $1 billion boost in sales.

What is the cost to franchisees to upgrade?

Costs will vary, depending on the size and configuration of each restaurant. Franchisees must buy equipment to make specialty coffees, and, eventually, smoothies, as well as wall-mounted refrigerators for bottled sodas and energy drinks, and would have to remodel the counter and drive-thru service areas to make room for the equipment.

A franchisee who installed the new beverage equipment as part of a company test pegged the cost at $100,000 per restaurant, according to notes from a meeting of restaurant owners in August.

McDonald’s hopes to equip 1,500 restaurants to sell the new drinks by the yearend, with the rest on board by late 2008, the planning documents indicate. It’s the biggest change for McDonald’s since it overhauled its cooking procedures in the late 1990s to make sandwiches to order, says Dennis Lombardi, a restaurant consultant with WD Partners in Ohio.

As it rolled out that plan — the Made for You campaign — McDonald’s agreed to pay half of the estimated $25,000 per restaurant in equipment expenses for franchisees. But when the costs for the program exceeded the estimates in some restaurants, it caused hard feelings among some franchisees.

The test market numbers looked good:

In test markets including California, Georgia, Michigan and Texas, specialty coffee has increased customer traffic by 44% a week, an August memo from a franchisee group shows. The initial tests show the new plan doesn’t require more employees or slow down service.

Specialty beverages such as lattes have much higher profit margins than sandwiches. Sales in this new beverage category could rise by 90% in the next five years, generating $125,000 in annual revenue per store, according to company documents. McDonald’s estimates that those sales could mean additional annual profit of between $15,000 and $60,000 per restaurant, the documents show.