Great advice to aspiring restaurant operators from veteran Larry Ross who was there from the founding of Darden Restaurants and has been in the industry in various capacities for decades.

Q. Someone comes to you for advice on starting a restaurant. What do you say?

A. Do your homework, do your homework, do your homework. I’ve done a lot of business plans and I’m very good at putting together a 15-page assignment that’ll look like a home run, but it’s packaging. Don’t do that. It’s your life, it’s your money, it’s your dream … do your homework. What’s it really going to cost?

Worst-case it: How many restaurants are there, and how much business are they really doing? What’s the national trend? My advice has been for years and will continue to be, ‘Why don’t you not open a restaurant?’ It is a brutal business, the odds are against you.  Really, if you want to invest in a restaurant, go buy a meal once a week and invest as you go. If you really want to get it out of your system, go work in somebody else’s restaurant. But if I can’t talk you out of it, then do you homework, in every way.

Another piece of advice: Do not underestimate the importance of the location. And things like size, keep it small. You have to make one hugely successful before you can even talk about two. There are no real success stories of marginally successful single units that become multiunit chains. It doesn’t work like that.

Here are a few other insightful nuggets:

Q. We recently wrote about Sam Seltzer’s Steakhouse, Roadhouse Grill and some other restaurants’ closing in Lakeland and interviewed James Bronkhorst (owner of Reececliff Restaurant in Lakeland and Christy’s Sundown Restaurant in Winter Haven), who said, “I’ve been running restaurants on my own for 18 years now, and this is the worst I’ve ever seen it.” What are your thoughts on that?

A. He’s probably right. That stuff that started in the late 1960s where everybody was trying to buy restaurants and become restaurant chains started slowing down in the 1990s, but it was still growing. Today, the food-service industry is mature, so you don’t have millions of customers coming on line each day. If you’re going to grow, you pretty much have to take it out of somebody else. You can either generate it organically by getting new customers to your current business or you can generate it by buying another restaurant or opening another restaurant.

But what you see is same-store sales, as a better benchmark, start to go down or flatten out, and then your growth is really kind of artificial. That’s what we’ve been seeing the last couple of years. Growth has begun to slow down, so you see a lot of agglomeration, where this chain buys that chain. Same thing we’re seeing in the airline industry right now and we saw in the banking industry years ago. Well, the big news in the airline industry today is they’re canceling flights. Guess what restaurants have to do? They have to start canceling restaurants.

Q. Who’s in the best position to survive?

A. It’s supply and demand, capacity and demand. In Lakeland right now, we probably have too much capacity for the amount of customers and the amount of money those customers have to spend on their food away from home. The lower end of the spectrum, the Bob Evans, Denny’s, the sit-down restaurants that aren’t dinner houses, they’ll probably do fine. Their average ticket is lower, and again, I don’t stop eating out. When my gas goes up, and my credit card bills cost more, I don’t stop eating, I just trade down on the food chain. Someone like a Bob Evans or Denny’s, they get you - $6.95 is dinner. Carrabba’s at $12.95, maybe they’re losing some cover counts (customers), or Bonefish at $18.95, they’re losing some cover counts. The guys in the middle get squeezed.

• Secrets to Arby’s $3.5 million/year Store
• Self-Service Kiosks
• Recent Same-Store Sales Rundown
• Ground Round on Rebound
• Online Ordering Systems

Article (India)

Amid stiff competition from Chinese shoemakers, Bata India (BIL) is exploring a brand new franchisee model to launch its upcoming retail stores. It has decided to give older members of its workforce who are close to retirement an option to quit their jobs and run the new Bata outlets as franchisees.

Interesting approach to finding qualified franchisees. Most franchisors do not have this type of large operating company to leverage before they choose a franchise model, but those who do may want to try this route.

• When Your Corporate Employer Offers the Buyout
• Franchisees: Give Your Stock to the Best Employees
• You Must Source Goods From Our Country [India]!
• The Franchisor’s Owner Matters
• Financial Performance Representations

This article provides a good primer on employment issues in the United States, and franchisee/franchisor liability.

The franchisor does expose themselves to employment risks even if it tries to protect themselves in the franchise agreement:

As employment law has evolved, the risk of potential liability to the franchisor under this type of arrangement has increased. In particular, a number of state anti-discrimination laws (such as those of New York, New Jersey, and California) impose liability upon third parties for aiding and abetting discrimination. Even where a franchisor takes a completely hands-off approach with respect to the franchisee’s employees, it may still face potential liability where it knowingly tolerates or condones discriminating practices. In practice, this type of aider and abettor liability now places franchisors in a Catch 22 position. If a franchisor knows of discrimination by the franchisee but fails to act, liability as an aider/abettor may result. Conversely, if the franchisor does take action, that action itself may lead to the imposition of liability as an agent and/or joint employer. This is further compounded by the fact that the size of jury awards and the willingness of juries to give large awards has also increased over the last few years.

Here is how franchisor, Jackson Hewitt, gives employment advice:

For example, Jackson Hewitt, the nation’s second largest individual tax preparation company, periodically surveys its franchisees to determine what issues are of most concern to them. It then retains independent employment counsel to provide seminars on those topics at its annual franchisee convention. The company also follows up with the franchisees by way of a post-seminar survey to ensure the training is effective and responsive to their concerns. Training on such things as how to properly interview and hire employees, what to watch for in dealing with discipline/discharge issues, and how to conduct investigations of employee complaints are particularly helpful to franchisees.

Employee training and posting requirements also should be addressed by both parties. Federal law, as well as most states, requires that employers post information summarizing the applicable employment laws on such issues as harassment/discrimination, wage and hour regulations, whistleblowing, and workplace safety. A recent visit to a franchise to interview witnesses with respect to a race discrimination charge revealed that there was not a single required posting on the employee bulletin board. When questioned, the franchise owner simply said “they (the franchisor) never told me anything about that.” Nor had the lawyer who represented him on the purchase of the franchise. As a result, the franchisee’s simple failure to make the required posting was used against it as evidence of its alleged discriminatory intent. This could have been easily avoided. Providing general guidance as to where the franchise may find the information for the state in which it is operating is a good way for the franchisor to do its part in promoting compliance.

• Franchisor sues Franchisee for Hiring Illegal Aliens
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• Banning employees from speaking foreign languages
• I love the product should I invest in the franchise?
• Employee Management - constant, gentle pressure

A good primer article on FRP (Financial Performance Representations) was posted by attorney Gary Duvall from the law firm Dorsey & Whitney LLP. He believes that two trends may increase the percentage of franchisors who will be using financial performance representations in the FDD:

1. the general availability of cost-effective financial reporting software that communicates easily between franchisee and franchisor
2. the new FTC Rule allows more information to be given to prospective franchisees outside Item 19 of the FDD.

Why, in Duvall’s opinion, don’t more than 25% of franchisors provide earnings claims? He gives three reasons:

1. Lack of reliable financial data
2. Variability of financial results due to each unit’s local business environment
3. “Sell the Sizzle”, meaning unit results are likely lower than potential franchisees’ expectations

On a side note, one representative I spoke from an Arizona-based BBQ franchisor stated that he did not believe earnings claims were good for franchisees because they discouraged the franchisee from doing research.  I believe he was right in that providing an abundance of information and financial results may lessen the overall research done by a franchisee.  I don’t believe that is the primary reason these executives decided not to disclosure FRP.

Back to the article…Duvall adds:

if a franchisor has reason to know that franchisee profitability is extremely low, for example, that few if any franchisees are profitable, or that most franchisees will probably close in the near future, non-disclosure of these problems as a risk factor arguably violates the duty to disclose all material facts, although this is a grey area of the law.

• More Franchise Disclosure is a Good Thing, but Waiting another 30 years is Not.
• Entire Agreement
• Is that UFOC Updated?
• We the People, continued
• 10 Common Mistakes of Prospective Franchisees

I found this article interesting about a group of Boston Pizza franchsiees and their fundraising goals. Even if the franchisees do not have the funds to make significant contributions to charities, organizing or participating in charity events by providing products and services is usually an efficient deductible expense that can be more effective that advertising.

The Enrights’ restaurants have raised more than $600,000 for the Boston Pizza Foundation since 1999 through various fundraising initiatives and partnerships with local businesses.

In the past two years alone, their 10 restaurants across Winnipeg have raised more than $300,000 for the BP Foundation through its Valentine’s Day promotion.

…

Richard and Kim Enright and their franchisee partners have also developed a $100,000 scholarship endowment fund for the University of Manitoba’s Faculty of Education.

Their Garden City location’s “Celebrity Server Night” featuring the Winnipeg Blue Bombers, Winnipeg Goldeyes, Team Canada athletes and entertainers, raised more than $5,000 for the Seven Oaks General Hospital Foundation.

• Pizza Styles
• Family ditches perfect life for pizza franchise, togetherness
• McDonald’s chickens out on Boston Market
• ActionCOACH Franchise Wins 2007 Stevie Award
• New Englands own Papa Ginos wants a bigger slice of the national pie!

Scott Pooler, a former official eBay Trading Assistant, and a master franchise representative for an eBay drop store franchise chain weighs in on the subject of franchising and stand alone eBay drop stores in Trading Assistant Journal, a weblog that provides news and commentary for eBay consignment specialists.

Scott’s experience on both sides of the fence reveals certain truths, and since he was at one time a proponent of the franchise model, his views are helpful to anyone considering the purchase of a new franchise eBay drop store or opening one on their own. These views are Scott’s opinion and do not reflect upon eBay any eBay franchise drop store chain in particular or upon eBay consignment as an addition to any other type of business.

His views regarding the stand alone drop store franchise model and why it has failed are worth reading.

Read the whole story

Cross Posted at Let’s Talk Franchising

• QuikDrop Closes eBay Drop-off Store Franchise
• If students can do it without a franchise…
• Need to buy a license from your state to sell on eBay?
• eBay drop offs
• eBay Drop-offs

Performance differences between corporate-owned and franchised hotels are slim to none, according to new research.

Leah Sipher-Mann h Sipher-Mann writes in Michigan in the News that, for a company pondering the question, “To franchise or not to franchise?” new research from Michigan’s Ross School of Business suggests that performance differences between corporate-owned and franchised outlets, when chosen right, could be slim to none.

Ross Professor of Business Economics and Public Policy Francine Lafontaine and colleagues Renáta Kosová of Cornell University and Rozenn Perrigot of University of Rennes, studied the effect of vertical integration on the performance of individual hotels. They found that a company’s decision whether to franchise or own a particular hotel has little effect on yield (average price) or performance.

Lafontaine and her team studied an unnamed multi-chain hotel company that has both franchised and corporate-owned hotels under each of its several brands, running the gamut from budget to luxury. They collected data to determine whether organizational form for each hotel has an effect on any of three outcomes: monthly revenues per available room (i.e., what the industry calls “RevPar”), price or yield (average room rate per month), and monthly occupancy rate. Across all three variables, Lafontaine and her colleagues found that franchising per se does not have a statistically significant effect.

“We conclude that the firm chooses which outlets to franchise and which to own in a way that yields no differences in pricing or performance, in the end, between the two sets of hotels,” the authors state. “This result is important as it suggests that when firms can choose, they indeed adjust organizational form in such a way that there are no real differences in outcomes.”

“This does not mean that franchising and company operations do not have different incentive effects, because they do,” says Lafontaine, “but simply that firms are smart about how or where they choose to rely on these differences.”

In the past, empirical evidence had suggested there were persistent performance differences between corporate-owned and franchised businesses. However, the authors note that much of that evidence comes from studying firms that have been forced into a particular organizational structure by legislative intervention. For their research, Lafontaine and her colleagues instead studied a situation in which the decision-maker (here the hotel company) was not forced by legislation into its particular structure.

The authors also ruled out that their findings might be driven by other potential influences on the hotels’ performance such as the presence of air conditioning, swimming pools, or restaurants, as well as proximity to an airport or train station.

“We view the results as suggesting that multi-unit firms can choose organizational form in a way that is responsive to the differences in market conditions across outlets, such that when all is said and done, organizational form itself has no direct effect on outlet-level performance or pricing,” says Lafontaine.

Lafontaine and her team recognize that while their findings are conclusive, the evidence is limited to data from a single company. Future research might strive to include data from multiple firms and different industries.

Cross Posted on Let’s Talk Franchising

• Financial Performance Representations
• Structuring the New Franchisor
• UPS Store Numbers
• Recent Same-Store Sales Rundown
• Performance of Franchisees’ Loans

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:

• “Thus every franchisee will be expected to operate a carbon copy of the franchisor’s original business, and individuals who thrive on ‘doing things their way’ are unlikely to be happy as franchisees.”

• Domain Names that include Franchisor’s Name - OK?
• ‘Homework’ Key to Restaurants
• Advice for Entrepreneurs
• Remodeling Required
• Brazilian Churrascaria Steakhouses

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.

• Celebrity Competition in Meal Prep & Assembly Franchises
• Another Entree into the Meal Assembly
• Will this evolution save the Meal Assembly business?
• Tough Competition: Just Fresh Kitchen Café
• The Original SoupMan and Cold Stone Creamery Franchises Team Up

{Cross-Posted at The Franchise King Blog}

Go Green! Well the franchise world is invading the green world, and it is starting in California.
{Big surprise} Continue reading….

Yep! The California Department of Corporations {Not The California Department of Corrections!} has approved a request by Solar Power Inc. to start selling franchises.

The retail store setup will be called Yes! Solar Solutions. There is already one up in Roseville, Ca.
Read in Sacramento Bee The retail store will provide design services for each home or business that wants solar power, and install the panels, also. In addition, solar powered coolers,backpacks etc. will be offered.

Here is something about solar energy solutions that you may not know:

The local energy utilities will actually buy back any extra solar power you are generating from your home or business! It comes in the form of a credit. They roll back your meter’s dials by the amount of extra energy you produce. That is fantastic!

Stay tuned..this is just the beginning….

• Employee Management - constant, gentle pressure
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• Opportunity in School Uniforms?

• 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.

• Structuring the New Franchisor
• Hotel Franchise Agreements: Opportunities And Pitfalls
• O’Charley’s Franchisee Settles
• Franchisor Reality Show
• Common Areas of Dispute

Franchising your business offers you some intriguing benefits:

• Attracting franchisees to invest their capital into your brand.
• Franchisees are manpower to work the business as stakeholders.
• Increased number of franchises contribute to the establishment of the brand.
• Gain royalty income without capital investment or an increase in contingent lialbility.
• Retain control of the trademark and the business format.

Before you consider franchising your business:

• Make sure the first units economics are strong and profitable.
• Then open a second unit to see if you can replicate the success of the first.
• If the second unit succeeds, try opening a unit at least an hour away. This will show you if your processes work without your being around all of the time.

If your experiment succeeds, you will be in a good position to consider franchising your business.

Cross Posted at: Let’s Talk Franchising

• Comfort Keepers Franchise Purchased by a Boston Private Equity Firm
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• The AAFD Awards Cuppy’s Coffee Franchise with Contract Accreditation

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

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• More Franchise Disclosure is a Good Thing, but Waiting another 30 years is Not.
• Promises of Business Leads
• What if franchisor is slow supplying inventory?
• Finding Franchise Disclosure Documents

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

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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

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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

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Potential buyout offer has support of family of founder Dave Thomas

COLUMBUS, Ohio - It was reported in the Mansfield News Journal 6 that the owner of 134 Wendy’s franchises wants to make a bid for the nation’s No. 3 hamburger chain with two private-equity firms.

David Karam, president of Cedar Enterprises Inc., said Wednesday that he and his partners have been invited by Wendy’s International Inc. to a second round of talks. He is backed by Kelso & Co. and Oak Hill Capital Partners.

“I’ve been involved in the brand,” he said. “I see the great potential of it.”

Cedar Enterprises, based outside Columbus, owns Wendy’sfranchises across the country that have a combined annual revenue of $200 million.

Karam’s first-round proposal was enough to garner entry into a second round next month, where bids are expected. He would not disclose how much he is willing to pay for Wendy’s, but said the company’s current stock price is rich.

Wendy’s shares rose 20 cents to $33.26 Wednesday.

“Fundamentally, there’s great upside with the brand, but the reality is no one wants to overpay,” he said.

Billionaire investor Nelson Peltz has said his company, Triarc Cos., is prepared to offer $37 to $41 per share for Wendy’s in a deal that would peg Wendy’s total value between $3.2 billion and $3.6 billion. Triarc owns the fast-food chain Arby’s and is also a major Wendy’s shareholder.

Peltz said in July that he and his allies had increased their Wendy’s stake to 9.8 percent of all outstanding shares.

Wendy’s formed a committee in April to determine how best to boost its stock price, including a possible sale. Wendy’s spokesman Denny Lynch and Peltz’s spokeswoman Carrie Bloom declined to comment Wednesday.

In the past year, Wendy’s has spun off its Tim Hortons coffee-and-doughnut chain and sold its money-losing Baja Fresh Mexican Grill following pressure from Peltz and other investors to boost the value of Wendy’s stock.

As a franchisee, Karam said he fears Wendy’s sales and product development would continue to stagnate under owners who do not know the chain as well as he does.

Karam’s father, Joseph, was one of Wendy’s original investors and became a franchisee in 1975. David Karam has run Cedar Enterprises for 22 years.

Karam has the backing of the family of Wendy’s founder Dave Thomas, said Pam Thomas Farber, Thomas’ daughter. The family would like to see the company turned over to someone involved in the company, she told The Columbus Dispatch, which first reported Cedar Enterprises’ bid.

“We don’t want the company to leave,” she said. “It’s been very hard on the family.”

Wendy’s, based in suburban Dublin, operates about 6,600 restaurants in the United States and abroad.

It trails rivals McDonald’s and Burger King.

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In 1996, the bagel business was taking off, with several franchises expanding rapidly across the country. Franchises of Brueggers, Einstein Bros., Manhattan, Noah’s and Chesapeake were selling like hot cakes (bagels that is).

The prospects for the bagel business altered dramatically in June 1997 when Dunkin’ Donuts announced that its 2,000 stores would begin to sell bagels. This, in one stroke it became the largest bagel retailer in the nation.

At about the same time fresh bagels were being introduced in supermarkets across the country. In 1996 Modern Baking Magazine reported that Fresh bagels sales were up 50% in supermarkets and represented over $125 million in sales nationwide. By 2000 the total was over $400 million.

Bagels were now everywhere: big grocery stores, fast-food menus, middle-America cafeterias, even frozen-food sections. In 1988, Americans ate, on average, one bagel per month; in 1993, it was one every two weeks. According to Modern Baking (May 2007), fresh bagel sales are over $500 million dollars per year in supermarkets alone.

Some say even the Bagel itself changed, over the years bagels have undergone a transformation from small, dense, and satisfyingly chewy into large, puffy, and a mere platform for sandwiches.

Sales dropped, franchises stopped selling and the bagel franchises closed many stores.

Brueggers, Einstein Bros, aren’t just about bagels anymore. They all have re-branded themselves as bakery café’s.

Einstein Bros. Cafe is just one example of a bagel concept reaching beyond the bagel. Bruegger’s Enterprises Inc., based in Burlington, Vt., also has expanded menu offerings and started redesigns on its 250-unit Bruegger’s chain to place itself in the fast-casual segment.

Bruegger’s once famous for authentic boiled and baked bagels, now offer a variety of other stone-hearth baked breads, such as Ciabatta and the exclusive Softwich, a softer, square bagel ideal for sandwiches. The redesigned Bruegger stores now offer a warm, comfortable café setting for guests to enjoy breakfast, lunch and dinner.

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SoupMan Bid to Turn ‘Seinfeld’ Fame Into Empire Goes Off the Boil

David B. Caruso, Associated Press reports:

The chef who inspired the Soup Nazi character on “Seinfeld” makes a heck of a crab bisque, but a group of stewed investors says he’s having problems expanding his popular stand into a franchise empire.

Soupmaker Al Yeganeh closed his original Manhattan shop, famous for its strict ordering rules, in 2004 to focus on franchising Original SoupMan stores across the country. The company launched around 40 stores in its first two years and introduced its frozen soups to groceries.

But disgruntled franchisees say many of the new shops 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.

Other franchisees told The Associated Press they want out of their contracts because of poor profits or bad relationships with the company. Several have sent the company letters threatening to sue.

Kevin Long, whose Original SoupMan franchise in Scranton, Pa., lasted just one winter, accused the company of misrepresenting how much it would cost to open and run the business.

He and other franchisees said the company also had early problems with its bowl and cup sizes, which were larger than expected and inadvertently gave patrons more soup than they paid for, and never lived up to promises to provide a product line that would sell during the summers, when demand for hot soups is low.

“They are just trying to get as many stores open as possible, and they aren’t supporting them whatsoever,” Long said.

Prices of $7 to $11 per 12-ounce bowl also made it tough to attract repeat customers, he added.

At least three stores have closed, at least temporarily, in New York City. Shops also have shut in Myrtle Beach, S.C., Harrisburg, Pa., Boulder, Colo., Colorado Springs, Colo., and Ottawa, Canada.

Franchisees in locations including Stratton Mountain, Vt., and Ridgewood, N.J., have asked to be released from their contracts so they may try staying open as a different type of business.

Original SoupMan spokesman John Rarrick chalked up the store failures to the normal “growing pains” associated with any new restaurant franchise.

“This is very common,” Rarrick said.

Of the struggling stores, he said, “They were really pioneers, and certainly there are risks associated with being a pioneer.”

Rarrick said the company had fixed the problem with the bowl sizes, abandoned an early idea of having most of its franchises operate as inexpensive carts and kiosks and struck a deal with Cold Stone Creamery that will create hybrid stores that will sell soup and ice cream.

He added that the soup company had delayed a plan to open 50 franchises in Britain while the it refined its business model.

“There are some really happy, really successful franchisees,” he added.

Original SoupMan opened its first stores in 2005, simultaneously capitalizing on and distancing itself from the “Seinfeld” episode that made Yeganeh famous.

On the show, a steely eyed chef makes his patrons follow a strict set of instructions dictating how they must order their soup, and he barks “No soup for you!” at those who fail to comply.

In real life, Yeganeh’s Manhattan store had similar rules posted: “THE LINE MUST BE KEPT MOVING. Pick the soup you want! Have your money ready! Move to the extreme left after ordering!”

Yeganeh, though, chafed at the Nazi nickname, which he felt insulting, and has discouraged his franchise owners from mentioning “Seinfeld” or saying “No soup for you!” on the job.

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