This is one of the better articles I’ve read recently giving readers an “inside look” at the franchising experience – what can go wrong, the competing dynamics and interests in the franchising business model, and financial and legal realities. And that was just the beginning of Ross’s troubles. It seemed like her email account logged a new message almost every day, welcoming another Super Suppers franchisee to her region of the state while she was still struggling to attract new business. With neither the money nor the energy to advertise locally, she again turned to Super Suppers corporate headquarters for help. While I’m sure the new franchises weren’t technically encroaching on her protected territory, it still has significant impact on sales. Even if no more new Texas franchises were sold, she would still see many new locations pop up in the near future. Not to mention the “other guys” — Dream Dinners and Dinners Ready!, among others, were beginning to make multiple appearances around town. Unlike franchises that can thrive in heavily saturated markets (Starbucks, McDonald’s), a meal-assembly center needs a large number of households in any given territory to be successful. According to Bill Byrd, it takes 500-700 households to support a Super Suppers, but he concedes the divvying up of territories is “not an exact science.” Whenever there is a “hot” segment, copycats franchisors are only months behind. Success breeds competition, and the competition can ride your wave and simultaneously learn from your mistakes without experiencing the costs. Potential franchisess must evaluate whether their soon-to-be franchisor will constantly innovate and improve to stay ahead of the competition. For example, a less-experienced franchise owner wouldn’t know that regional and national advertising in a franchise-based business plan is usually rolled out well after a significant number of stores have …

Dream Dinners is an example of good idea but profit challenged business model.   It’s just too expensive to attract and retain customers. A Forbes article looked through the Dream Dinners FDD from the state of Washington, and focused on the required audited financial statements. As of Dec. 31, the company boasted $2.9 million in assets, against which it carried $3.4 million in liabilities. (Such negative book value implies that if Dream Dinners were unwound today, shareholders wouldn’t get much.) That’s a snapshot, but here’s a trend: Last year, the company lost $628,000 on $7.5 million in sales; compare that to 2005, when it earned $928,000 on sales of $4.5 million. …. Typically, new business concepts need up to five years to season before they can be franchised successfully. Dream Dinners–along with its next largest competitor Super Suppers, now with 165 stores–both began franchising in less than two years. Franchisees accused the franchisor of false promises and unsubstantiated financial projections. A major point of contention has to do with rosy promises Dream Dinners seemed to have made to its franchisees. Under the Federal Trade Commission’s franchise law, franchisers are not permitted to make “predictions” about franchisees’ financial success–unless they do it in the Uniform Franchise Offering Document, which typically contains a host of disclaimers. Dream Dinners “totally disregarded these regulations,” says Garner. It not only posted financial projections on its company Web site, he says, it also put them in a Power Point presentation given to potential franchisees. Jennifer Hemann, a former Dream Dinners franchisee in Maryland and one of the plaintiffs in the suit, alleges that she was shown that Power Point presentation–which included estimated profit margins for a given volume of customers–when interviewing with the founders. “They told us, ‘Our lawyers said not to show this to …

Dream Dinners is an example of good idea but unprofitable business model. It’s just too expensive to attract and retain customers. A Forbes article looked through the Dream Dinners FDD from the state of Washington, and focused on the required audited financial statements. As of Dec. 31, the company boasted $2.9 million in assets, against which it carried $3.4 million in liabilities. (Such negative book value implies that if Dream Dinners were unwound today, shareholders wouldn’t get much.) That’s a snapshot, but here’s a trend: Last year, the company lost $628,000 on $7.5 million in sales; compare that to 2005, when it earned $928,000 on sales of $4.5 million. …. Typically, new business concepts need up to five years to season before they can be franchised successfully. Dream Dinners–along with its next largest competitor Super Suppers, now with 165 stores–both began franchising in less than two years. Many of my law firm’s clients are small franchisors, and frankly most do not have experienced managers or have enough invested capital. The new managers often spend way too much time on franchise sales and not enough resources on marketing programs for their franchisees and brand/product development. The franchise sales process is always longer and more expensive than anticipated, and that focus ends up monopolizing the franchisor’s time and money. These franchise programs have an extremely high management risk, meaning that not only is the franchisor’s management unproven in this specific strategy, but they are underfunded which keeps the focus on franchise unit sales. I used to be extremely skeptical of consultants, and still am to large extent, but I have come to greatly appreciate the need and effectiveness of professional research and design teams to innovate and set the program up for success. The distinction is night and day between franchisors …

Entrepreneur’s Franchise 500’s Best Franchise Businesses — Franchise 500 Top 10 Entrepreneur managezine’s best of the best. Subway Dunkin’ Donuts Jackson Hewitt Tax Service 7-Eleven (the recently bought out the White Hen chain in Illinois) UPS Store Domino’s Jiffy Lube Sonic Drive In Restaurants McDonald’s Papa John’s Pizza link to the the remaining 500. Here are a few I noticed in particular (some for good, some for bad reasons): 384. Nature’s Way Cafe: Healthy foods, salads, wraps, soups, smoothies 325. Cash Plus Inc. : Check cashing & related services 312. Rent-A-Wreck: Auto rentals & leasing 298. Steak n Shake: Steakburgers, fries, milkshakes 273. Nestle Toll House Cafe by Chip: Cookies, baked goods, coffee, ice cream 252. HomeVestors of America Inc. : Home buying, repair & selling system 225. It’s Just Lunch Int’l. LLC: Dating service 212. Pita Pit Inc.: Pita sandwiches 151. Super Suppers: Do-it-yourself home meal preparation 105. Bark Busters Home Dog Training: In-home dog training 87. Qdoba Mexican Grill :Fast-casual Mexican food 75. CiCi’s Pizza : All-you-can-eat pizza buffet 72. Sport Clips: Men’s sports-themed hair salon 58. Jimmy John’s Gourmet Sandwich Shops: Gourmet sandwiches 56. Edible Arrangements: Floral-like designs from sculpted fresh fruit Franchise 500 Criteria (important): All companies, regardless of size, are judged by the same criteria: objective, quantifiable measures of a franchise operation. The most important factors include financial strength and stability, growth rate and size of the system. We also consider the number of years in business and length of time franchising, startup costs, litigation, percentage of terminations and whether the company provides financing. Financial data is audited by an independent CPA. We do not measure subjective elements such as franchisee satisfaction or management style, since these are judgments only you can make based on your own needs and experiences. The objective factors are …

Entrée Vous franchisee signed his franchise agreement in May 2006 and will open with eight workers this week in Dayton, Ohio. The shop helps time-pressed consumers get dinner on the table. The shopper chooses entrees from an online menu and sets a time to come to the kitchen to prepare them or picks up pre-made dishes. Staff prepares the ingredients for the entrees. It doesn’t provide side dishes. The entrees serve between four and six and cost $21 each, about $3.50 per diner. Martin said customers must buy at least six entrees per month, which costs about $115. While the menu changes, the 14 entrees available this month include Chicken Wellington, Seafood Paella and Sesame Pork Stir Fry. A location of 1,400 to 1,600 square feet in a neighborhood strip center would be typical for an Entrée Vous kitchen The linked article above is confusing because it says the chef-founder formed Entrée Vous in 2006, but I saw advertisement that claims Entrée Vous was formed in 2003. My guess is the entity doing the franchsising was formed in 2006, but the chef operated a similar concept during the previous 3 years. To be honest, the picture above looks like a Chinese take-out, but I guess you can only dress up a 1,500 square feet strip-mall location so much. There is a lengthy discussion and debate in the forum regarding Meal Assembly franchises, Super Suppers in particular. Check it out for more perspective.

In the forum, we batted around the new meal preparation and assembly kitchens concept such as Super Suppers and Dream Dinners. There are lot of non-franchised startups, and they already have their own trade association called the Easy Meal Preparation Association. The general sentiment from the forum is that this concept is a “maybe”, with the big questions being how much you can charge customers (and margins) before customers will just order restaurant takeout? is the change of behavior and lifestyle too much to create a solid base of loyal customers? how many competitors, if any, can enter the market and you still survive?  what if they have slightly lower prices and a nicer, larger facility and more creative menu? A surprising celebrity newcomer is jumping in this arena – Suzanne Somers. Inc. magazine did a feature article and mentioned this tidbit. And next? Suzanne’s Kitchen, an entry in the red-hot meal prep category, in which customers move from station to station inside retail stores, assembling family-size dishes from chopped meats, vegetables, and sauces. The first two outposts of Suzanne’s Kitchen, which Somers and her husband and business partner, Alan Hamel, expect to franchise, will open later this year. Why is she getting in this business? I think it has more to do with an attempt to leverage her brand name to command higher franchise fees rather than this being an inherently superior and profitable business model. Certainly Somers will draw media attention to the industry, which currently suffers badly from low recognition amongst its target audience.

VERY OUT OF DATE.  Do a search instead.  This was manually updated March 21, 2006 Companies Mentioned in Posts (likely incomplete):Automotive 1-800 RADIATORS Oil Butler Lube N’ Go On-Site-Lube Business & Home Services 1-800-WATER-DAMAGE Bartercard Garagetek Help-U-Sell Home Instead Homewatch Caregivers My Girl Friday PropertyGuys.com Sears Carpet & Upholstery Tax Centers of America Cleaning & Maintenance none Computer & Internet (some are listed in “Retail”) Screenz Food and Restaurant Arby’s Auntie Anne’s Blimpies Cheeburger Cheeburger Chipotle Dippin’ Dots Dream Dinners Doc Green’s Gourmet Salad Dominic’s of New York The Dugout Durango Grill Fazoli’s Fire of Brazil Fogo de Chao Goldstar Chili Jamba Juice Jerq’zine Krispy Kream Lenny’s Sub Shops Mauwi Wauwi Original Hamburger Stand Panaderia Taza Papa John’s Pizza Factory Pizza Patron Pretzel Time Quiznos Red Rock Chili San Francisco Soup Co Shane’s Rib Shack Skyline Chili Smoothie King Smotthie Planet Soup Nazi Steak-out Subway Submarina Sub Station II Super Suppers The Soup Box Supercuts Suzanne’s Kitchen We’re Rolling Pretzel Company Wetzel’s Pretzels Z Pizza Zoup! Fresh Soup Co (List all sub franchises) Health & Fitness Curves Liberty Fitness Home Building & Repair Services See “Business and Home Services” above Personnel & Staffing none Pet Retail and Services Camp Bow Wow Doody Calls The Pet Pantry Wag My Tail Interquest Detection Canines Pets Are Inn Retail Franchises Ace Hardware AuctionDrop Battery Plus Best Cuts GNC Educational Outfitters Fantastic Sams Fastframe Foot Solutions Friendly Computers Geeks on Call GNC Hair Cuttery Herman’s World of Sports Imagine This Sold Orbit Drop Play It Again Sports QuikDrop Roosters Men’s Grooming Centers Screenz Snips Its Sports Clips Stone Mountain Carpet Mill Tom’s Foods We the People Categories: eBay drop offs (generally) Hair Travel & Hotel none Industry Lists & Research 2004 Same Store Sales Growth of QSRs (quick service restaurants) Royalty and Advertising …