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 …

In its first major overhaul of its franchising regulations in nearly 30 years, the Federal Trade Commission is finally calling for greater disclosure by franchisors. The FTC aims to insure that prospective franchisees “avoid harm” when considering a franchised business, the FTC said in publishing the revisions, which will become mandatory next year. Under the revised franchise rule, confidentiality agreements preventing current or former franchisees from talking about their experiences would have to be disclosed. Regulators often recommend that would-be franchisees contact former or current franchisees to get their take on a business. The FTC also wants franchisors to provide information about franchisee associations operating under a trademark, so prospective franchisees can learn more about the pros and cons of a system. Some examples of franchisee associations are: North American Association of Subway Franchisees NAASF, and Dunkin Donuts Independent Franchise Owners DDIFO. Franchisors will now have to reveal lawsuits they brought against their franchisees under the revisions; the FTC’s original rule only required that franchisors disclose litigation filed by franchisees. “The nature of the relations between the seller and the purchaser, as reflected in litigation, is of central importance” in assessing a major investment such as a franchise, the commission concluded. Other requirements include disclosure of exclusive territory. Often franchisees think they won’t have to worry about another franchise opening up down the street, only to find that they’re not protected. “Taken together, each of these amended disclosures … will enable prospective franchisees to better assess the quality of the franchise relationship, and their likely success as franchisees,” the FTC said. However, I am disappointed that the revised rule fails to require disclosure of a franchise’s financial performance. I think it’s very important to the future success of franchising that more franchisors make financial representations and I believe it …

BusinessWeek documented Bhupinder “Bob” Baber founding of the Quiznos Subs Franchise Assn and its litigation soap opera.  The independent franchisee associations of Diary Queen, Subway, and few others are also mentioned along with their individual legal battles with the franchisors.  For example, Dairy Queen franchisees litigated over the new DQ Grill ‘n’ Chill concept, and Subway franchisees litigated over a potential loss of influence over an advertising fund.   Toasted Subs Franchisee Assn members pay $50 per store per year for membership – well worth it in my opinion.

Imagine this – You are a Subway franchisee and you are believe that you are being cheated by the franchisor over payments relating to the transfer of leases and equipment costs. So you set up a web site, SubwayUncovered.com to vent your frustration and tell the world of your experience. Subway, of course, will will try to protect its brand through the legal system. In this case, Subway is claiming trademark infringement from using the Subway name in a domain name. Trademark infringement complaints in these cases usually involve the claim that there is a strong likelihood of confusion in the reader’s mind that this may indeed be an official Subway property, and that confusion will dilute the brand’s goodwill. The final arbiter of domain names is usually the World Intellectual Property Organisation (WIPO), and the organization hasbeen permitting the use of trademarks in domain names when the site comments on the company. This Subway dispute happens to be taking place in the UK but the concepts are relevant in the US. The operator of PayPalSucks.com has some great advice for those of you interested in this topic. It gives good advice on how to setup a protectable “complaint” site with the company’s name in the domain, and it illustrates the point with the actual letters from the attorneys on both sides of the PayPalSucks.com dispute (which he won).

1) Are You Franchisee Material? We asked franchisors what they want in franchisees, and 4 qualities rose to the top. 2) 2007 Franchise of the Year? (Entrepreneur Mag) #1: Subway #2: Dunkin’ Donuts #3: Jackson Hewitt Tax Service #4: 7-Eleven #5: The UPS Store/Mail Boxes Etc. #6: Domino’s Pizza #7: Jiffy Lube #8: Sonic Drive In Restaurants #9: McDonald’s #10: Papa John’s I’d personally choose in the following order: McDonald’s, 7-Eleven, Papa John’s, Dunkin’ Donuts, Domino’s Pizza. 3) Great comments from a few franchisees and people in the industry. You can listen to the segment with Real Player too. 4) Franchisee rebuffs new product offerings and promotions from Taco Bell. Some notable actions taken by Dalham since the opening of his franchise in 1990: • Refused to expand his menu beyond the basic, non-premium offerings such as the “Taco.” • Used plain white Styrofoam soda cups until the corporation forced him to use branded paper cups during an audit in 1999. • Furnished dining room with squeeze bottles of hot sauce to avoid purchasing branded sauce packets. • Failed to update logo – currently displays the red, green, yellow, and purple logo phased out in the 1990s. • Did not hang promotional posters featuring the talking Chihuahua when the campaign was introduced in 1997. • During the “Head for the Border” campaign, posted a banner that read “Americans Even Do Tacos Better.” Due to franchise regulations, Dalham was forced to adopt certain conformities, such as the display of the words “Taco Bell” on his backlit menu and identifying his restaurant as a Taco Bell in the local yellow pages.

Personally, I prefer the Pepperblue Steak Sandwich from Panera Bread. Several chains introduced new beef sandwiches: But it was the beef sandwiches that debuted in 2006 that seemed the most inventive. In February, Quiznos introduced its Prime Rib and Peppercorn Sub, followed by its Prime Rib Cheesesteak in September. Subway rolled out two premium steak sandwiches of its own, the Blackened Cajun Steak and the Steak and Cheese, in September. On a related note, here is an article discussing the strategy behind Quiznos’ new salad offerings.

Franchises (particularly restaurants) are slow in incorporating efficiencies and technology. We’re all aware of the new technology out there (gaming, wireless, Internet, flat-panel TVs, handheld devices), but now think of your typical Subway or Arby’s? High-tech and fresh? I haven’t noticed a change in 10 years! A few recent examples of streamling that should have caught on much fast are in the high-tech Alternative Payments, Ordering & Entertainment space: fast-food accepting credit cards offering “fast pass” or other radio transmitter payment options to speed payment (like gas stations). Centralized call center for drive thrus, touchscreen self-ordering ordering systems for customers (in both fast food/casual and sit-down restaurants (like movie theaters), gaming, internet, television and other entertaining activities while you eat, wireless handheld ordering systems for waiters/waitresses. automated/robotic fountain drink dispensers Small, but annual high-tech improvements that refreshes the customer experience with convenience and entertainment goes a long way in generating repeat customers and word-of-mouth buzz. While the menu and customer service must be at least average, the main differentiator in attracting customers is atmosphere and theme. Having a high-tech reputation will create a premium perception and enable the charging of corresponding premium prices. Herein lies a weakness in most franchise systems – Franchise Agreements do not require the speedy adoption of innovative improvements. Additional capital expenditures in most franchising systems beyond what is required to startup are typically only mandatory when the Agreement is up for renewal in 10+ years. Without uniformity in a product offering, customers will become frustrated and resentful when only 65% of the restaurants stay on the cutting edge. Advice? Can the franchise you are thinking of buying survive a store with similar quality food but top-notch systems like the ones described above? Look for franchise offerings that quickly adopt, incorporate and promote their focus …

Interesting article in the Dallas Morning News highlighting common “disagreement” points between franchisees/franchisors. This week, Pizza Inn Inc. said it is being sued by former franchisees who say the company, based in The Colony, “intentionally and negligently misrepresented development and operation costs.” Subway parent Doctor’s Associates Inc. faces two lawsuits filed this summer stemming in part from a fight for control of the brand’s advertising dollars…. Chris Bray, a franchisee of the Denver-based Quiznos brand, complained of what he views as a lack of communication between franchisees and headquarters…. Most [of Quiznos’ disclosed litigation in the UFOC] involve claims the franchisees say were made about exclusive territories or the inability to get their outlets open within the required time. Hat Tip: Paul Steinberg in the forum

Crain’s in Chicago published a great set of articles focusing on franchising. Here are the article titles: IT’S ONE WAY TO BE YOUR OWN BOSS . . . Want to be king? MAKING IT WORK: DUNKIN’ DONUTS The doughboy THINK NUMBERS DON’T LIE? THINK AGAIN. Is this franchise the real deal? MAKING IT WORK: SUBWAY Turning sandwiches into a bread maker MAKING IT WORK: HELP-U-SELL Keeping it real in real estate BEWARE THE FRANCHISE GHOULS AND GOBLINS Tales from the dark side WANTED: SALES SKILL AND RESPECT FOR ELDERS It’s good to be (franchise) queen RESOURCES FOR YOUR LONG JOURNEY TO THE THRONE Words to the wise Check it out!

A participant in the discussion forum brought up a good point whether a “delivery only” local restaurant business was an especially good business model. Steak-Out was the franchise mentioned, which delivers char-broiled steak and chicken dinners, salads, sandwiches….you get the idea. Why do you get the idea? Because the food is similar to the restaurants we all know – Applebee’s, TGI Friday’s, and Chili’s. The difference is Steak-Out is delivery or pickup only, and the others are sit-down AND are starting to contract out delivery to local entrepreneurs. Having a dinning room exposes your menu to more people. In turn, more people will be familiar with your menu and more likely to think about using you for delivering business lunches or family dinners. The more you are exposed to a product, the more likely your to think of it when the time for the service comes. It’s partly a numbers game, and I’d rather have my customers experience my product in person in my controlled atmosphere then exposing them to my product on a piece of paper, coupon or flyer. I’m not saying delivery only business are a bad idea, I just wouldn’t want to take the risk when my competitors out-of-the-box are going to be exposed to exponentially more customers. That raises my marketing costs. Pizza is the only food that has carved out room for delivery-only stores. Papa John’s is going from delivery only to delivery + sit down. A 75-unit Subway franchisee group in South Florida bought the telephone number 888-SUB-TO-GO. Orders are processed via the store’s POS system and then delivered by Subway employees. Can a delivery-only subshop startup and compete with that? I doubt it, and I wouldn’t want to risk my capital trying. If you are buying a restaurant, you should consider what …

Some franchisors allow their franchisees to conduct their own promotions. Be especially careful of "free" coupon giveaways in whatever form. Subway is ending their free sub card (you need to get a certain number of stamps and you get a free sub).

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 …

I pulled together some numbers of required royalty and advertising fees for sandwich franchises: Required Royalty and Advertising Fees for Sub & Sandwich Franchises Subway 12.5 % Quiznos 11 % Mr. Hero 10.5% Blimpies 10% Jersey Mike’s 10% Philly Connection 10% Togo’s Eatery 10% Zero’s Subs 10% Firehouse Subs 9% Jerry’s Subs and Pizza 9% Burger King 8.5% Charley’s Grilled Subs 8.25% Capt. Subs 8% Cousin Subs 8% Hungry Howie’s Pizza and SUbs 8% Subs Plus 8% Great Outdoors Subs 7% Lenny’s Sub Shops 7% Moe’s Italian Sandwiches 7% Nathan’s Famous 7% Pickerman’s Soup & Sandwiches 7% Port of Subs 6.5% Sub Station II 6% Baldinos Giant Jersey Subs 5% An 8% difference in the fees for a franchise with $500,000 in sales is $40,000. Many would die to have that extra $40,000 to hire a qualified manager, enabling the franchisee be more of an absetnee owner. Lower doesn’t necessarily mean better. I would want required pooling of local (maybe regional) funds for collective advertising and promotions.

Sames store sales growth during 2004 of quick service restaurant franchises are doing OK: