Buffalo Wild Wing’s own restaurants in the second quarter rose 8.3%, and franchises rose 4.5%.  Again, the corporate owned restaurant see double the same-store gains as the franchise.Same-store sales alone can be deceiving because it doesn’t tell the whole picture. Were higher same-store sales a result of additional customers, expensive marketing blitz or promotions, new menu items or new pricing?

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Denny’s performance has been mediocre for the 2nd Quarter of 2008. Same-store sales decreased 0.7% at company units and decreased 3.7% at franchised units. Company restaurant operating margin increased by 0.9 percentage points to 12.5% of sales 

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Do you live in Cincinnati? If so, Baskin-Robbins wants to open 30 stores in the surrounding counties. 

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The Bennigan’s bankruptcy came as no surprise. There are about 150 company-owned Bennigan’s restaurants, compared with 138 franchise locations.Bennigan’s franchisees are unaffected, only the corporate-owned locations are shutting down today. The bankrupcty filings also do not include the Metromedia-owned Ponderosa Steakhouse and Bonanza Steakhouse restaurants. 

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One of the best deals in franchising was made when Jim Grote sold Donato’s to McDonald’s and then bought it back for a rumored $50 million, a 1/3 of what he sold it to McDonald’s for just four years prior. Now, Donato’s has remade itself with a new look and expanded menu. [I love their pizza, bias alert] However, I am skeptical of management now that his daughter has taken over running the company. Is the best person to manage this company just happen to the be the daughter of the owner?   

I’m sure they have research to support this effort, but the Better Home & Garden is expanding its brand to include real estate brokerages.I found this comment humorous considering he is the very first operating unit:

Better Homes and Gardens Real Estate unveiled its new Web site, www.bhgrealestate.com.Wilkins hopes to benefit from Better Homes and Gardens’ technology, business systems and advanced tools to help support the growth and operation of their brokerage. Those tools include business planning and strategic services; sales associate talent attraction and retention; training and career development programs; and Web tools and resources.  

From the Better Homes & Garden web site:

Key differentiators of the Better Homes and Gardens® Real Estate brand include:

• Financially oriented service platform
• National agent recruiting program
• Targeted direct-to-consumer marketing programs
• Web 2.0 principles to engage today’s consumer, along with best-in-class systems and tools
• A focus on the environment through our green initiatives
• A developing international real estate network to enhance global networking opportunities

At least their CEO is the former Chief Operating Officer for Coldwell Banker Real Estate LLC.

The modern atmosphere and different taste driving the growth of the tart frozen yogurt industry will almost certainly continue for several more years.  But a crash similar to the previous frozen yogurt industry is likely to occur.

Here are a few new entrants:

• Yagoot Yogurt (Cincinnati, OH)
• Tartini Frozen Yogurt Bar (Cupertino, CA)
  
• Ufood Grill is even serving them at their restaurant as a dessert
• Jubilee Frozen Yogurt (Chandler, AZ)
• Zoneberry serviced at Coffee & Tea Zones in Colorado Springs, CO.
• Sorbetto @ Starbucks
• Berrygood (Central Arizona)

Source: Daily Courier (Pittsburgh)A law suit was filed on July 3, 2008 by a few dozen franchisees in Western Pennsylvania.  

The allegations are:

The lawsuit alleges that Quiznos engages in a “pattern of racketeering” and generates “grossly inflated profits” at the expense of franchises that usually fail. It also accuses the company of saturating geographic areas with more franchises that can be supported.

Quiznos is accused of allowing customers to redeem coupons for free or discounted sandwiches, a practice that allegedly benefits the company but not the franchise holders, who are not compensated for the loss of revenue, according to the lawsuit. Quiznos, according to the filing, requires its franchise owners to buy products they do not need and work only with suppliers connected to Quiznos who charge high prices.  

The financial strain on the franchisees causes the business to fail, the suit maintains. When the franchise fails, Quiznos threatens the owners with lawsuits to enforce the agreement, which requires them to pay royalties for 15 years even if the business has been forced to close, according to the lawsuit.    

Quiznos Response:

Richard Emmett, general counsel for Quiznos, said the allegations in the lawsuit are similar to those in an action filed two years ago in Illinois that was dismissed recently by a federal judge.”This is a copycat of that lawsuit,” Emmett said. “We’re confident the claims have no merit and this lawsuit, like the other one, will be dismissed.”  

He added that the allegations contained in the action arose several years ago.”

They have nothing to do with the way we’re operating now. It’s historical rather than present day,” Emmett added.

 

Below is the Small Business Administration’s annual compilation of performance data on thousands of franchisee loans it has guaranteed covering loans made from October 1, 2000, to September 30, 2007. A “failed loan” below is when the SBA must step in and pay back a loan that it has guaranteed. However, does failure rate of a loan equal the number of failed franchises? No, because the chart below only captures the worst of the worst, when someone completely abandons their debt obligations. Definitions are tricky and can mask the true data. Franchisees who sell their units and pay off or transfer their loan or franchisees losing money are not caputred. But, the value in the report card can be a vague checklist for avoiding high-failing franchises.
Hat Tip: WSJ

REPORT CARD

Class Leaders

Franchiser	Failure Rate	Failed loans	Total loans
Comfort Inn	0%	0	158
Primrose	0	0	110
Edible Arrangements	0	0	104
Massage Envy	0	0	61
Holiday Inn Express	1	1	157
Culver’s Frozen Custard	1	1	150
Hampton Inn	1	1	88
Bruster’s Real Ice Cream	1	1	84
Little Caesars Pizza	1	1	72
Fastsigns	1	1	71
Super 8 Motel	2	8	363
Best Western	2	3	156
Choice Hotels International	2	3	144
Rita’s Water Ice	2	2	103
Arco	2	2	85
Zaxby’s	2	2	81
Anytime Fitness	2	1	65
Econo Lodge	3	4	119
Goddard	3	3	109
Subway	4	84	1,974
Dunkin’ Donuts	4	17	410
Sport Clips	4	8	191
Cartridge World Stores	4	5	112
Travelodge	4	4	91
IHOP	4	3	67

Class Trailers

Franchiser	Failure Rate	Failed loans	Total loans
All Tune and Lube	48%	37	77
Philly Connection	48	30	63
Cottman Transmission	46	75	163
Blimpie Subs & Salads	37	58	158
Golf Etc.	36	24	67
Cornwell Quality Tool	36	19	53
Matco Tools	30	95	316
Atlanta Bread Co. Bakery	30	18	61
Carvel Ice Cream	26	20	76

Note: Listed by percent of SBA-backed loans that failed between Oct. 1, 2000, and Sept. 30, 2007, starting with the highest rate. When percent is the same, companies are listed from highest to lowest number of total loans.

Source: Coleman Report

Julie Moran Aletrio from New York’s LowHud.com did a great job in her article on the meal prep trend in New York’s Lower Hudson Valley. Thanks for quoting me in the article. Here are a few highlights:

From a Let’s Dish franchisee:

“This concept is meant to help a busy person, but people found themselves so busy that they didn’t know how to incorporate this into their lives,” Hunerson said.

Closings nationwide:

By the end of last year, there were 1,353 meal-prep stores in the United States, according to the Easy Meal Prep Association.

Although the idea spread quickly, the failures followed with 264 meal-prep stores closing last year and another 200 expected to fail this year.

Industry consultant Bert Vermeulen, who founded the association in 2005, said the idea was too new to support the number of stores that opened.

“This is a concept where the stores got ahead of the market. The majority of the target market is not aware of this concept and why it works,” he said.

New concepts:

Rolling out a new concept requires a deep commitment in marketing from the franchiser, Vermeulen said, something that Let’s Dish and others didn’t provide.

“Many of the franchisers thought it was easier than it was. They sold franchises without thinking through the marketing program they were going to run,” he said.

Vermeulen pointed to Pappa Murphy’s Pizza, which has more than 1,000 stores, as a franchiser that did it right.

“If you remember 10 years ago, there was something militarily called the Powell Doctrine, which meant going in with overwhelming force. Pappa Murphy’s wouldn’t go into a particular metro area unless they went in big so they could establish awareness of their concept. Their concept is pizzas you pick up uncooked that you cook at home. It’s not that different from meal prep, but the rollout was very different,” he said.
….
And those outlets will be very different from the original stores that struggled to find customers. In 2004, 90 percent of meals were assembled by the customer. Vermeulen said more store owners are adopting a “grab-and-go” model where they assemble meals for time-pressed consumers reluctant to spend up to two hours crafting a pack of meals themselves.

He predicts that by 2010, 80 percent of the meal-prep industry’s revenue will come from grab-and-go meals.