Clever. Pay for a survey about Super Bowl eating habits, get free publicity, get your brand associated with “healthy” and “Super Bowl”.

SUBWAY Restaurants, which has long been committed to promoting “better-for-you” meal options among both children and adults, conducted an Omnibus survey of more than 1,000 Americans regarding their Game Day snack consumption habits and learned they overeat the most during the Big Game (27%)–trailing only Thanksgiving (85%) and Christmas (61%). More than half surveyed (59%) admitted to overeating during the Big Game and reported gorging themselves on nachos, fried chicken, chicken wings, pizza and other generic “junk food.”

Methodology: An Omnibus survey conducted a telephone survey on behalf of SUBWAY(R) Restaurants of a nationally representative probability sample of households; 1,090 interviews were completed among adults ages 18+ (53 percent female, 47 percent male). Interviewing took place January 7-9, 2008.

Things will probably work out for Heartland Automotive Services Inc. of Omaha, Neb, a 438-unit Jiffy Lube franchisee filing Chapter 11 bankruptcy as it will probably sell/close underperforming and money-losing units.Chapter 11 bankruptcy, the business filing usually continues to operate while a bankruptcy court supervises the “reorganization” of the company’s contractual and debt obligations. The court can grant complete or partial relief from most of the company’s debts and its contracts, so that the company can make a fresh start. Often, if the company’s debts exceed its assets, then at the completion of bankruptcy the company’s owners (stockholders) all end up with nothing; all their rights and interests are terminated and the company’s creditors end up with ownership of the newly reorganized company. The other type of bankruptcy is chapter 7, whereby the business ceases operations and a court appointed trustee sells all of its assets and distributes the proceeds to its creditors in accordance with statutory defined priorities.The large franchisee most likely negotiated favorable terms when faced with closing or selling units, such as reduced transfer fees, low or no penalty for closing a certain number of units, delays in royalty payments when filing bankruptcy, etc.

According to a statement on Heartland’s Web site, the company filed for Chapter 11 because of what it calls a “breakdown of negotiations with Jiffy Lube International to resolve long-simmering disputes regarding the companies’ relationship” over advertising and marketing, and support from the franchisor, product pricing from JLI’s parent, Shell Oil Co., and expansion strategies.Economic pressures in the volatile gas and oil market were also cited as reasons for the filing.Heartland said it anticipates going back to the negotiating table with JLI after the initial stabilization phase of its reorganization, which was to go heard in court on Jan. 23. If settlements still can’t be reached on the issue, Heartland said it will seek a rejection of its franchise agreements and rebrand the business.Heartland said in the statement that it had $8 million in cash on hand at the time of the filing.

This is somewhat old news, but I missed it. We previously wrote about Suzanne Somer’s meal assembly business venture called “Suzanne’s Kitchen”. Well, it closed last April and was only open for a few months.

From the abbreviated archive of Lexington, KY Herald-Leader:

Apr. 19–Five months after opening, Suzanne’s Kitchen, a do-it-yourself meal preparation business represented by actress Suzanne Somers, has closed its flagship store in Tates Creek Centre. Former Gov. John Y. Brown Jr., mastermind behind the Suzanne’s Kitchen idea, said yesterday that the store closed last weekend because he wanted his business team to “revamp the whole format to get something even more convenient.”

The second Suzanne’s Kitchen store, in New Jersey, has also closed.

Brown said both would reopen, though he did not estimate when.

Culinary ability wasn’t required at Suzanne’s Kitchen. Ingredients were diced, …

Hat Tip: mysterymiss in the comments.

USA Today, world reknowned for their franchise evaluation skills (note the sarcasm) as evidence by naming Quinoz #2 in 2006, has named 7-Eleven as their #1 franchise for 2008.

7-Eleven management is very systematic and generally organized.  With so many world-wide stores, it has invested heavily in automation and technology.   Marketing partnerships are big with 7-Eleven to get people in the stores, see the Simpsons movie promos and Citibank ATMs as examples.

7-Eleven does not allow absentee-ownership, and each location generally must be  a minimum of 1,400 square feet and must be at least 1/2 mile from another 7-Eleven franchise.  Franchise fees are at least $70,000 plus typical build out costs.

The article mentions a unique system that builds “equity” in their store, so if the franchisee wants to sell, the seller can ask for a premium “goodwill” payment representing built-up equity.

Single store ownership is a way to make a living, but not make a six-figure income.

If you have been to Europe, particular the U.K., you know what Tesco is. It is an omnipresent, progressive grocery chain. They are opening up their first US stores starting in California. I always enjoyed Tesco’s twist on the supermarket, and I am sure they will be making a very successful entrance into the US marketplace.

Labor unions don’t like Tesco’s non-union workforce, and are already starting trouble.

Store layouts, customer experience and ergonomics has always interested me, and it should interest you to if you plan to open a storefront.

Below is a slideshow of the store.

I know a few people who have attended BNI meetings in Chicago, and have had a positive experience.  There is a lot of niche competition in this arena, but it could make a mildly profitable side business if you are passionate about networking, like calling and staying on top of people, and love socializing.

Local government regulations can be an expensive pain to comply with, as this Lamar’s Donut franchisee found out with its sink:

•When is the Lamar’s going to open on Johnson Drive? A sign has been up since this summer.

An area Lamar’s Donuts franchisee took over the spot at 5901 Johnson Drive in May but was slowed down dealing with city regulations, such as fitting in a three-compartment sink to a 600-square-foot spot, along with other plumbing issues.

The “satellite store” opened Friday. Doughnuts are made at the midtown store and then taken to Mission.

The franchisees, Alan and Kimberly Foster, own the Lamar’s at 3395 Main St., as well as locations in Lee’s Summit and Greenwood, Mo.

I’m not sure how I would react in this robbery situation.

McDonald’s is planning to pick up 40% of the $100k-$150k in remodeling costs for franchisees to accommodate the new high-end coffee drinks.  The franchisees are still responsible for the equipment costs.

Most franchisors are NOT so generous.

I would not let one semi-positive article influence my opinion of Quiznos, but here it is:

A year after some franchise owners sued Quiznos over business practices, the restaurant chain’s chief executive said Monday he expects franchisee profits to increase 60 percent overall in the wake of improvements to the system.

60% increase sounds fantastic, but it is relative from the starting profit level. Going from a $20,000 profit to a $32,000 helps but doesn’t save the day.

Danny Kessels, a Quiznos store owner in Boulder who said he was not invited to the meeting, said he knows of other Quiznos store owners who are struggling.

“Nothing’s really changed, in my opinion,” said Kessels, the head of an Quiznos independent franchise group called the Toasted Subs Franchisee Association. “The whole system is still on shaky ground.”

It looks like the new CEO-turnaround specialist is trying to make changes, but as I have personally learned in business – don’t try to catch a falling knife.

McDonald’s franchisees are being asked to invest at lease $100,000 per store to accommodate the new upscale variety in coffee drinks, creating the ability to sell caramel lattes and cappuccinos. While the franchisees generally do not doubt this new offering will increase sales, it’s still a big price to pay and dents the immediate cash flow.

The equipment alone will cost franchisees about $25,000 per restaurant. Plus, they are being asked to invest considerably more to retool their stores to better handle the specialty coffee and other new beverages, from sweet tea to smoothies to energy drinks.

Lesson

Can a franchisor require franchisees to investment capital to implement a new offering?  It all depends on the terms of the franchise agreement, but almost all franchise agreement require a franchise timely adaptation to reasonable requests to implement new services and products.  Worst case, you will be required to make the investment at time of renewal of your franchise agreement.  The renovation costs required for franchisees is often a reason for walking away from a franchise at renewal time.

As a franchisee, if you are able to pay yourself about $60,000/year, and your franchisor is requiring you to invest $50,000 at renewal for renovations that you forecast will take 5 years to recover, what do you do?  Do you have the equity or cash to borrow the funds?   A wise businessman will run the numbers, a foolish businessman will automatically pay up without figuring the impact.

• Gas prices hurting delivery drivers.
• New owner of Shoney’s hopes to fix the brand by improving the food freshness, more upscale menu items, and upgrade the buildings.
  • Quote: Franchisee Glenn Wood rum, who owns 21 Shoney’s in South Carolina, Georgia and Florida, said he sometimes disregarded corporate norms in the past in an attempt to boost his own profits, but now he’s looking forward to more continuity from headquarters. “Any change in the right direction is what we want,” he said.
• You will be seeing a lot more co-branded Noble Roman’s Pizza and Tuscano’s Italian Style Subs.  ….The Area Development agreements entered into thus far provide for the sale of a total of 868 units over multi-year periods as defined in the various individual agreements. The company will continue to market its traditional co-brand business by offering additional development territories. Additionally, the company has also sold 53 traditional co-brand franchises directly to individual franchisees…
  • The company’s traditional co-brand franchise program would be strengthened by several operational enhancements. These enhancements include: more rigorous franchisee selection criteria; a longer, more robust training period for new franchisees; more direct franchisee involvement in the construction and marketing processes; and intensified monitoring and enforcement of operating standards and unit performance. Recognizing that these steps could slow the speed of franchise development within territories covered by existing Area Development agreements, the company intends to offer reasonable accommodations to the exclusive development time frames specified in those agreements so as to align the interests of Area Developers and the company in sustainable growth of the traditional franchise program.
• In Taiwan, franchisee are mostly between 30 and 40 years old.

I unfortunately need to board my 2-year-old beagle while I leave on trip. I shopped around thinking I would find franchise dog hotels everywhere considering I’m in downtown Chicago. I’ve discussed pet franchises like Camp Bow Wow here and here. To my surprise, in Chicago all I found were all privately owned business started by practical entrepreneurs , some being very innovative such as Stay started by dog-lover architect who said, “Why do pet boarding facilities need to be small locations with chain-link cages. He charges between $45 and $75 for one night of dog boarding, and he easily get’s that fee.

Mobile pet grooming seems to be a franchise getting attention lately. I found this Chicago-based entrepreneur that could have purchased a pet service franchise, but decided to build it herself. After a few years she added a mobile pet grooming service to her existing two Chicago pet service (grooming, boarding, walking, training) locations.

She could have paid a $25,000 franchise fee plus 6% royalties and other mandatory marketing fees to a franchisor, which may have been worth it if the business had a strong competitive advantage and high brand recognition with the target market. But, that just wasn’t the case here in Chicago.

The moral of the story is - demand a lot from franchisors. As a franchisee, you are literally making a multi-million dollar bet, while the franchisor is not at much financial risk.  You are taking on the risk that could result in bankruptcy if the franchise business projections don’t pan out or competitors can copy your poorly branded business, so require that as a franchisee you license a business model with a proven and sustainable business model, a business with high barriers to entry and difficult to duplicate business, and can provide a much higher return than your money in the market and your time working for an employer. Just being “new” or “unique” or “better looking” in a new or mature market is NOT enough. See the meal assembly industry for a perfect example of a good idea but bad business with no real protectable competitive advantage.  You should choose your business and build out your projects with the assumption that competitors with a fresher twist or lower prices will move in next door.  In the franchising industry, if a concept makes money, rest assured there will be improved copycats out within a year or two.  Can you still be certain that you’ll earn a sufficient return on your investment?  If not, keep looking for another franchise or start your own business…even if it’s a copycat.

Restaurants seem to have had a good year.

The largest Pizza Hut Franchisee in the U.S., NPC International, Inc., owned 874 Pizza Hut locations during the 3rd quarter of 2007. With $173.3 million in total 3rd quarter sales, the annualized sales per store was about $793k, which translates to a monthly revenue of just over $66k, and daily sales for a 30 day month of about $2,200.

Comparable sales, or sales in stores that have been open at least a year, increased 4.9 percent in the third quarter. That makes five consecutive quarters of comparable sales growth, pushing NPC’s positive comparable sales record to 35 of the last 37 quarters, Schwartz said in the release.

CKE Restaurants reported Wednesday that Hardee’s same-store sales rose 3.6 percent for the four-week period ended Nov. 5, and increased 2.7 percent for the third quarter ended on the same date.

In the U.S., McDonald’s same-store sales rose 5.4 percent in October, boosted by the ongoing popularity of the Monopoly game promotion, the company said.

RETAIL UP:

• Target +4.1%
• Wal-Mart +0.4%
• TJX (TJ Maxx, Marshall’s) +3%

RETAIL DOWN:

• Anne Taylor – 4.2%
• Chico’s -10.6%,
• Bon Ton, Cato -8%,
• Fred’s -0.6%,
• J.C. Penny -1.8%,
• DSW – 3%,
• Cache -3%,
• Pacific Sunwear -.08%
• Sharper Image -8%,
• Gap -8%,
• Nordstrom -2.4%,
• Macy’s -1.5%,
• Kohl’s -1.5%,
• Talbot’s -7.9%
• Shoe Carnival -5%,

A benefit mentioned on this blog before (see similar posts below and this McDonald’s post) of paying fees to a franchisor is their investment in research and development in the product or services offering. Wendy’s seems to be following McDonald’s lead in rolling out its own high-end coffee bistro called Javaccino. While McDonald’s seems to going the standalone route, Wendy’s is looking to carve out space in existing restaurants to offer gourmet coffee.

McDonald’s is the largest supplier of free wireless internet in England. I imagine a similar plan is in the works for the USA.

I’m a fan of free wifi or near free wifi (pay an extra $5 and you can have unlimited internet for the day) if you have the seaing capactiy.  I am a frequent user of free wifi in stores and think it usually makes economic sense. I go to Panera Bread and other local restaurants just for the free wifi.  In fact, many visitors will buy a coffee and snack, then in a few hours buy lunch. The idea that people will sit there all day and not spend any money is rare because people simply cannot sit and not eat for 10 hours, especially when they are in a restaurant. You will always have people who pay you $2 for a coffee and use your wifi for several hours, but most don’t.  The $20-$30 per month spent on wifi will certain pay for itself in higher net sales.

Panera Bread limits free wifi to 30 minutes during lunch times (noon – 2pm).

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.

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