I would hate to be a franchisor in the meal assembly business right now.  They have been getting hammered in the press almost weekly across the United States. 

Here are articles JUST IN THE PAST WEEK!

• Losing Their Appetite, The Columbus Dispatch (I am quoted in the article)
• Investor Sues Failed Suzanne Somers’ Meal Prep Business, Lexington Hearld Leader

The only bright spot is that pre-assembled carry-out meals seems to be working, which ironically is opposite of the initial premise of the business.   Can this pre-assembled model save the industry?  Probably not, because most people know that business model simply as a “carry-out restaurant”.

The meal assembly business concept sounds enticing – a fun business with an obvious benefit where professional women socialize as they prepare healthy meals for their households, leaving the mess behind.  If you were thinking of getting into this business and asked your friends their opinion, most would say “Yeah, that sounds like a cool business.  I’d use it!”  But, your friends would be leading you estray.  Unfortunately, “good ideas” alone won’t make you money or ensure a sustainable business. 

The primary problem with this industry is getting customers in the door and keeping customers coming regularly (like most businesses).  Franchisees had everything going against them and stood little chance of succeeding -

• higher rents in high-trafficed streets,
• no initial brand recognition,
• requires change in customer habits,
• requires times and hours on the customers part,
• most need to be educated on the concept and its benefits
• easy concept for franchisors to develop and launch, so competitors came fast
• customers’ brand loyalty is negligible
• most ingredients more expensive “all natural” and “organic”;  higher rate of perishables

I hope this industry can work things out, primarily because it does offer a convenient service that can help families be healthy.  And healthy, less stressed families are generally happy families. 

If I was CEO of one of these companies, I would scale back and only roll out cities with a minimal number of units to leverage advertising.   I would hire great PR and advertising firms to get attention and help develop partnerships.  I would focus on margins and only offer lower-cost meals that met a certain profit margin.

Burger King complained to the National Advertising Division (NAD) of the Council of the Better Business Bureau regarding “Wendy’s, Always Fresh, Never Frozen” burger claim. Long story short, Wendy’s substantiated their assertion. Fresh is possible, Burger King.

Former Petland Inc. franchisees are suing the Chillicothe chain for fraud, alleging the stores are doomed from the start – and the company knows it….Melick estimates the average investment per franchisee totals up to $250,000, and the firms have been in contact with more than 40 franchisees.

The lead plaintiffs claim Petland fraudulently induced them to start a pet store when it knew, or should have known, the shops couldn’t succeed. A major allegation from franchisees, Melick said, is that pets supplied to the stores through Petland’s vendors were sick or dying.

Melick compared the franchisees’ problem to a restaurateur opening a new business and sending dozens of people to the hospital for food poisoning in its first weekend.

“For a large group of these franchisees, sick puppies is a problem when they open,” he said. “You just can never recover.”

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You’ve probably heard that a couple of teenage female KFC employees took a bath in the big kitchen sink and took pictures.  I’m sure the franchisee was outraged to wake up and deal with this PR disaster (not to mention the parents of the kids).  A news crew was outside showing the pictures to customers who unanimously said “GROSS!”  Ditto…see image to the right.   The article mentioned that zee fired the employees. 

A group of Geeks on Call franchisees are suing their franchisor for essential competing against with an telephone/online service.   I’m sure the FDD permits this.source

All of the suits were filed by the counsel for a recently formed franchise association. The suits, all substantially identical, claim that Geeks on Call is responsible for a financial downturn allegedly experienced by the Plaintiffs. The suits point to the recent introduction of CalltheGeeks.com as a cause of diminished revenue.

CalltheGeeks.com, remote technical support, is not offered in areas currently served by franchises. Company records show that many of the franchisees who filed suit are, in fact, showing year to date revenue exceeding prior year revenue.  Current economic data indicates that the small business community is choosing to repair rather than replace computers, a trend that bodes well for our franchisees within the IT sector. Unfortunately, rather than working with the Company to seek out and capitalize on this opportunity, these franchisees chose to file suit.

Mark Baumgartner, General Counsel for Geeks On Call Holdings, Inc. stated “the allegations in the Complaint are without merit. Numerous Plaintiffs had previously been notified that they were in breach of their franchise agreements. We know that many of these Plaintiffs have been more focused on disparaging the Company than on building their business. Unfortunately, their disparagement harms the Company and the Geeks on Call franchise community as a whole.”

It’s always hard franchisees to imagine the nice salesman’s boss would ever dilute your sales by competing against you, but it happens all the time. If you see a clause permitting the franchisor to compete with you even though they won’t open a location within your territory, negotiate that point before signing!!   Insist on restrictions on how they sell in your territory, even when the zor claims their lawyers require that language.  Ask for a percentage of sales generated within your territory at the very least.I’m not surprised the franchisor chose to not own a single store. For a different perspective, here is an apparently happy franchisee. 

The franchisee that owns all 90 Waffle House restaurants in Central Florida has filed Chapter 11 bankruptcy largely to stop the parent company from kicking it out of the 1,600-store system. Northlake Foods Inc., which is controlled by W.B. Johnson, an Atlanta entrepreneur, filed for the bankruptcy court protection in September.  By then, Johnson and his partners in the franchisee group had been fighting one another in court for more than a year.

Waffle House Inc., the Norcross, Ga., company that owns the chain and the rest of the Florida Waffle Houses from Tallahassee across the Panhandle, argues that Northlake’s franchised stores would be profitable had it not been for the way Johnson and his partners split up their personal ownership of assets to settle their own differences.

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