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Preliminary advice for the would-be franchisee in the country of South Africa is very similar to advice given to would-be US-based franchisee. Best point in the article:
Dairy Queen franchisee associations with members in Arizona, West Virginia, Ohio, Virginia, Maryland, Pennsylvania, Kentucky, Missouri and Illinois filed law suits to halt required remodeling:
Dairy Queen franchisees’ arguement:
The lawsuit contends Dairy Queen is trying to force franchise owners to spend between $275,000 and $450,000 to remodel stores to adhere to an unproven concept — one that will cost more to operate, double staffing requirements, and cut into profits.
“No one should have to make this conversion that is quite expensive unless they want to,” Caruso says. “If the DQ Grill & Chill concept was such a promising new concept, then the free market would solve this problem.”
That hasn’t happened, according to the lawsuit.
As of December 2006, the complaint says, just 105 Grill & Chill restaurants had opened in the United States. Some have performed poorly, and two have closed.
Dairy Queen franchisor’s argument:
Similar Posts:Moreover, Mooty maintains no one is being forced to do anything. Dairy Queen does require about 70 percent of franchises to modernize restaurants periodically. But Mooty says Dairy Queen has capped the required investment at $75,000 for 2008, $85,000 next year and $95,000 in 2010. The required modernization should be no surprise to franchise owners because it’s standard in most of their contracts, Mooty says.
“It is not making somebody spend hundreds of thousands,” he argues. “And it is not forcing somebody to go to another concept.”
Mooty said it is the franchise-owner associations, which compete with the corporation to supply the restaurants, that are stirring up trouble. Dairy Queen is cutting margins on its supply business, which is hurting the associations, he contends.
“They are losing membership, they are losing market share and they are having to take more drastic measures in creating fear and concern.”
It was announced in Convenience Store News that Dinner by Design, a meal assembly chain based in Grayslake, Ill., has unveiled a new package of convenience services that the company expects will change the easy meal prep industry.
Specifically, Dinner by Design’s new services include:
“This is the wave of the future,” president and CEO John Matthews said in a company statement. “This new business model has been very attractive to existing and potential franchise owners alike. We anticipate that the new meal assembly model will mean added growth for Dinner by Design owners and operators.”
It may be a move in the right direction, though I am always concerned when a franchisor introduces a whole new program before the program has received proper testing. I think the move is indicative of the fact that the industry is failing to provide an ROI to franchisees, and is scrambling to come up with a new business model that can deliver profits.
The challenge with this approach is that it may require additional investments by the franchisees to implement. You wonder if that is just like putting more “good money, after bad money”.
Cross Posted at: Let’s Talk Franchising
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This Plato’s Closet franchisee in Colorado found an often overlooked solution to a common problem - give outstanding employees equity ownership in stores (more precisely, stock in the franchisee entity or management company of the franchisee that owns the stores).
What if the franchisee is not willing to accept new owners?
Offering a “phantom stock” or “stock appreciation rights” may be an attractive alternative for franchisees in granting stock to employees. A corporate attorney with experience in this area should be able to set this up for you….I have set these compensation plans in my legal practice.
A “stock appreciation right” is granted to employees and enables the employees to profit from the appreciation in value of a set number of shares of company stock over a set period of time. The valuation of a stock appreciation right operates exactly like a stock option in that the employee benefits from any increases in stock price above the price set in the award. The stock price for private companies is determined by a set valuation formula or outside firm selected by the company’s management. However, unlike an option, the employee is not required to pay an exercise price to exercise them, but simply receives the net amount of the increase in the stock price in either cash or shares of company stock, depending on plan rules. If the employee’s employment is terminated, the stock appreciation rights are revoked.
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From the Phoenix Business Journal:
Fifteen of the fast-casual [Corner Bakery Cafe] restaurants are planned in the state under an agreement between franchisee Roland Spongberg and WKS Bakery Cafe Inc. The chain, which serves breakfast items, salads, sandwiches and desserts, has more than 100 locations in nine cities across the country.
Spongberg’s WKS Restaurant Group expects to open its first restaurant in late 2008 near Arrowhead Towne Center in Peoria. He also operates 50 El Pollo Loco and Denny’s restaurants in Southern California and Phoenix.
Corner Bakery is scattered throughout Chicago where I live and is a staple for many urban lunch-goers. It’s strategy of blanketing select cities and building local brand recognition and leveraging marketing dollars is an efficient brand-building strategy. A primary reason to become a franchisee is to leverage existing brand recognition and pool marketing resources with other franchisees, which Corner Bakery seems to have incorporated into their expansion strategy.
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