Here is a partial list of franchisors that have filed bankruptcy, or are reported near filing bankruptcy recently.

• Perkins
• Marie Callender’s
• Old Country Buffet
• Real Mex Restaurants
• Giordano’s
• Cork and Olive
• Dial-a-Mattress
• Bally Total Fitness
• Friendly’s
• Souper Salad
• Sbarro
• Dippin’ Dots
• The Little Gym
• Fatburger (A little controversial -Fatburger parent company not part of bankruptcy, but the two subsidiaries accounted for 72% its total revenue in 2008. The bankruptcy came under pressure from G.E. Capital Business Asset Funding, which Fatburger owed $3.9 million for defaulted loans.)
• Mrs. Fields / TCBY

A bit older bankruptcies.  It shows that some brands can recover quite well, especially Denny’s, Day’s Inn, 7-Eleven and Church’s Chicken:

• Bennigan’s – 2008
• Baker’s Square – 2008
• Roadhouse Grill – 2007
• Ground Round -2004
• Boston Market – 1998
• Denny’s – 1997
• Church’s Chicken – 1991
• Sizzler’s – 1996
• Krystal – 1995
• Day’s Inn – 1990
• 7-Eleven – 1990

I’m upgrading the forum software to deal with the recent influx of spam postings. Sorry for the inconvenience. Feel free to email me using the “contact” page to ask me any questions that you may want me to discuss, or open up for discussion, on the main blog here.

– Ryan Knoll
FranchisePundit.com

Larger fitness clubs are seeing a drop in membership, and former fast growth clubs are turning flat to negative.

This is not just happening in the USA, but also in Australia where giant Fitness First is seeing a decline in membership. Fitness First has turned flat to negative, with increased competition from Anytime Fitness, personal trainers and low cost rivals.

It’s a tough industry where you have franchises like Planet Fitness offering a no-frills membership for $10/month.

The discussion forums are back up for people to ask questions and get responses from me and the community. I had to restore with a copy from earlier in the year, so I apologize if I lost your post. Thanks for your patience!

I apologize for the forum being down for so long. I will install a backup and get it functioning again. There is a lot of great content in there.

On a similar note, I had a new son born a few months ago which has absorbed most of my spare time. I will resume regular posting in mid-August. Thank you for your patience and loyalty.

Dear Franchise Pundit readers,

Sorry for the sudden downtime for the past few weeks.  I had a problem with my web host and had to make a sudden switch, and I had a new baby boy born!  My head is back in the game and I’ll work to get things updated.   I had to use a backup of the web site to get things back up with my new web host, so I lost two months of blog and forum posts.  I’m sorry to all those who contributed and lost their content.

Thank you for you patience and I look forward to reading more of everyone’s contributions,

Ryan Knoll

Starbucks changed its iconic logo. The most noticeable change is removing the Starbucks name and making it a bit more simple.

It’s a bold move. I’m not sure how many people know that female image is actually the Starbuck’s logo. I’m sure it will work just fine and they have the research to back up this decision. What do you think?

Hopefully the promotion of Michael Roeper to COO of Quiznos will help the franchisee’s profitability. Roeper owned several Quiznos units in Chicago from 2000-2006.

SOURCE

An Indianapolis, IN area Dominos pizza franchisee had sales of $6 million across three units but kept the 7% sales tax for himself. Eventually the state of Indiana found out about it and shut him down. I know it’s tempting to keep the sales tax, but how could you expect not to get caught?

Leveraging people and assets across multiple operating businesses is what enables most companies to make money, including franchisees.    The leveraging action turns what would otherwise be an individual, high-overhead and high-risk investment into a portfolio of lower-overhead and risk-managed investments.

In a previous job I worked for a commercial real estate investment and management company.   The company made money because they were able to use the same employees to manage dozens of leased properties, and leveraging one employee across dozens of properties increased the profit margins.

In franchising, a multi-unit operator can leverage skilled managers across multiple units.  And, the $25,000 saved across 50 restaurants adds up quickly to a nice income.

A great example of leverage in franchising is Frank Heath and David Paradise of Mississippi-based Mid River Restaurants.   Between them they own:

• 12 Applebee’s in Louisiana,
• 26 Hardee’s in West Virginia, North Carolina and Kentucky,
• 10 Taco Bell restaurants in Louisiana and Mississippi, and
• 12 IHOP restaurants in Ohio, Indiana, and Kentucky.

And, they are in the process of acquiring 33 St. Louis area Applebee’s for the rock-bottom price of $25 million ($757k each, below build out cost).  The seller is DineEquity Inc., the parent company of Applebee’s Neighborhood Bar & Grill and IHOP restaurants.

Mid River Restaurants has several advantages over other small and individual franchisees:

• profit per restaurant is higher than most because of their controllable costs are lower with centralized management, accounting and service teams
• cash flow is large enough to finance large, well priced acquisitions
• the greater cash flow also enables them to hire and retain smarter employees who are likely to further enhance the profitability
• the whole enterprise learns from four very well developed franchise systems, exposing employees to “best of breed” methods

Individual franchisees as a group tend to be lower skilled, lower financed, micro-managers, unleveraged and over worked, which is why franchisors prefer experience multi-unit operators.

Nick Lanni, the founder of Great Steak & Potato Co. (founded in 1982, sold in 2004 with 260 locations), is starting a new sandwich concept at my alma mater, Miami University in Oxford, OH. The concept is called “SoHi Grilled Sandwiches” and is supposed to be a fresh grilled build-your-own cheese steak and burger place.

Coincidentally, his sons started the 25 locations Currito: Burritos Without Borders.

Average unit sales were $1.4 million per company-owned Jack in the Box location and $900,000 per Qdoba system location in fiscal 2009.

source: Morningstar

A stock research company called Trefis who is blogging at Forbes.com noted that McDonald’s company owned stores had a combined EBITDA margin of 24%, while franchised stores provide McDonald’s corporate with an 88% EBITDA margin.  Trefis doesn’t detail how they sourced information to arrive at these margin calculations, but there point was McDonald’s earns 4x as much by franchising a store rather than owning it directly.

McDonald’s owns about 6,200 (20%) of its 30,000 restaurants.

[chart removed---it wasn't displaying properly]

I love comparables.   The average unit sales were higher than I expected:

source: Chicago Business

Wingstop has 465 restaurants around the country, with most in Texas, California, Florida and Louisiana. The chain does about 80% of its business in takeout orders and averages $770,000 in annual sales per restaurant, Mr. Evans said.

The chain sells 10 wings for around $6.30 in the Chicago area. Popular flavors include original hot, lemon pepper and hickory barbecue.

There has been an uptick in self serve frozen yogurt, and I think that is a smart move.  Why pay employees to do a task that customers would get the pleasure of doing, and they’ll pay for whatever they use?  You can run a busy store with two employees, one at the cash register and another cleaning up and refilling toppings.

The self service works like this – the customer fills their cup with as much frozen yogurt as they like and put on their own topping, and then proceed to the checkout where the yogurt is weighed and priced at $.30/ounce.  I’ve seen cookie shops in London, UK sell cookies by weight, and it works as people typically will make things a little bigger and end up paying a little more.

One player that “looks” good is the almost 100 location Yogurt-land (and it should with a $350k build out cost – see pic ).  They like to move into former Cold Stone Creamery locations, another smart move.  Others are Fiji Yogurt (5 locations), Yogurtini (1 open, 8 about to open). They have a new location in Weston, FL which I saw and it looks great.

See my previous post about rolling your own frozen yogurt shop if this concept interests you.

This was satisfying to read:
Hardy’s Franchisee pitches menu item and wins.

I am always surprised that Franchisors do not leverage their franchisees more in soliciting innovations.

Forums were down for about a week. They are now back up!

In Boston, the area developer is not paying its bills.   If Qdoba was the only fast fresh Mexican game in town they’d be doing fine.   That segment is being flooded with new concepts and the industry is suffering.   But, over-staturation is the norm now with with every ‘hot’ franchise segment nowadays.   Things will eventually shake out with the strong surviving.

I don’t know about you, but I like the new Donatos store design.

It works.