Pinkberry Craze Frozen yogurt is hot again? Well, sort of. Given the implosion of the last frozen yogurt phase, you are wise to be cautious. The last frozen yogurt craze in the 1980’s and early-1990’s was lead by TCBY. According to the International Council of Shopping Centers, TCBY’s same store sales fell 10%-15% annually between 1997 and 2004, particularly when the low-cal and low-fat versions were introduced. The International Dairy Foods Association reported frozen yogurt production in the U.S. went from 118 million gallons in 1990 to 65 million gallons in 2005, a 45 percent drop.This time Pinkberry sure seems to be all the buzz lately, even being features in a recent American Express ad and having their hip tart frozen yogurt dubbed “Crackberry” playfully implying an addiction is possible. Here are photos of a Pinkberry in Manhattan. Founded by Shelly Hwang (coming off several failed small restaurant ventures) and Young Lee (a solo designer), they effectively brought to Los Angeles the tart frozen yogurt now famous in South Korea.Pinkberry has apparently been stretching the healthiness of its yogurt, and in early April 2008 settled a law suit where it was accused of misrepresenting its product as “frozen yogurt” and making bogus health claims, including that the dessert was “all-natural.” Pinkberry admitted no wrongdoing but is paying $750,000 to a local food bank and $5,000 to the “victim”. The article implies that the recipe is not all natural and has higher calories than the founder claims.Nevertheless, sales of the tart frozen yogurt are impressive. Pinkberry has put forth in the media unit sales of $250,000/month and has generated a plethera of copycats across the country, including Berrie Good, Yogurberry, BerrySweet, Red Mango, and recently Berry Chill here in Chicago. Pinkberry has supposedly ceased selling franchises for now. The Concept …

Jan Dennis, Business & Law Editor of News Bureau, reports that a new study co-written by Steve Michael a professor of business administration in the University of Illinois at Urbana-Champaign reveals that fast-food restaurants and other chain outlets are less likely to fail when super-sized training programs prepare fledgling owners for the challenges ahead.Advance, in-depth training on everything from bookkeeping to dealing with customers and suppliers is a key to survival for franchise outlets, said Steve Michael, a professor of business administration in the U. of I. College of Business. But while some chains put aspiring entrepreneurs through months of schooling, others turn them loose in as little as two weeks, increasing the odds of failure, said Michael, whose study was published in January’s Journal of Small Business Management. “The notion of just watching while somebody else does the job for a while is a mistake,” Michael said. “People need to realize these are sophisticated businesses that require extensive training. The more time you spend at Hamburger University or Dunkin’ Donuts University, the lower the failure rates.” Michael and Florida State University business professor James Combs studied nearly 90 national restaurant chains to gauge whether franchisors contribute to the success or failure of franchisees, which number about 700,000 worldwide in industries ranging from lodging and office supplies to tax-preparation and cleaning services. Along with training, franchisors can help keep franchisees afloat by pumping money into advertising that promotes the company brand, according to the study, “Entrepreneurial Failure: The Case of Franchises.” “Chains that are out there promoting themselves create value and drive up demand. When they don’t, franchisees are more likely to fail,” said Michael, who says the study is the most extensive look to date at how chains influence the fate of franchises. The study also found that …

Here’s your self-test with questions and insightful examples. Hat Tip: Pete Olson’s “Solo in Chicago” blog

Dairy Queen franchisee associations with members in Arizona, West Virginia, Ohio, Virginia, Maryland, Pennsylvania, Kentucky, Missouri and Illinois filed law suits to halt required remodeling: Dairy Queen franchisees’ arguement: The lawsuit contends Dairy Queen is trying to force franchise owners to spend between $275,000 and $450,000 to remodel stores to adhere to an unproven concept — one that will cost more to operate, double staffing requirements, and cut into profits. “No one should have to make this conversion that is quite expensive unless they want to,” Caruso says. “If the DQ Grill & Chill concept was such a promising new concept, then the free market would solve this problem.” That hasn’t happened, according to the lawsuit. As of December 2006, the complaint says, just 105 Grill & Chill restaurants had opened in the United States. Some have performed poorly, and two have closed. Dairy Queen franchisor’s argument: Moreover, Mooty maintains no one is being forced to do anything. Dairy Queen does require about 70 percent of franchises to modernize restaurants periodically. But Mooty says Dairy Queen has capped the required investment at $75,000 for 2008, $85,000 next year and $95,000 in 2010. The required modernization should be no surprise to franchise owners because it’s standard in most of their contracts, Mooty says. “It is not making somebody spend hundreds of thousands,” he argues. “And it is not forcing somebody to go to another concept.” Mooty said it is the franchise-owner associations, which compete with the corporation to supply the restaurants, that are stirring up trouble. Dairy Queen is cutting margins on its supply business, which is hurting the associations, he contends. “They are losing membership, they are losing market share and they are having to take more drastic measures in creating fear and concern.”

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.

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.

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 …

Fantastic Sams, a full service hair salon brand with nearly 1,400 salons in the US and Canada, was recently ranked as one of the “50 Top Franchises for Minorities” and the “Top 25 Franchises for Hispanics” by the National Minority Franchising Initiative and Hispanic Enterprise Magazine. Fantastic Sams was the only hair salon franchise system selected by both surveys. As published in the September 28 edition of the USA Today newspaper, The “50 Top Franchises for Minorities” award recognizes Fantastic Sams as one of the exceptional systems that has demonstrated a focus on recruiting and supporting minority franchisees into its system. Selection was based on many factors, including historical performance, brand identification, market dynamics, franchisee satisfaction the level of initial training, on-going support and financial stability. The “Top 25 Franchises for Hispanics” was featured in the June/July issue of Hispanic Enterprise Magazine. Fantastic Sams was recognized as a franchise that has made a corporate commitment to recruit prospective franchisees from the Hispanic community over the past several years. According to Hispanic Enterprise Magazine, “This commitment is not based on altruism; it is based on sound economics. The companies noted here represent exceptional opportunities for prospective franchisees and have demonstrated a commitment to properly training and supporting you once you become a franchisee.” Fantastic Sams is also a charter member of Minority Fran, a program that was recently launched by the International Franchise Association’s Diversity institute. Minority Fran was created to build awareness of franchising within minority communities and to increase the number of minority franchise owners. “We are thrilled about our recent recognition by the minority business community,” said Scott Colabuono, CEO of Fantastic Sams. “We want to recruit franchisees who are interested in running a business and who also understand the culture of the clients they serve.” Fantastic …

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 …

From the Columbus Dispatch: DavCo Restaurants Inc., a Maryland company that owns 160 Wendy’s restaurants, contends that Wendy’s required franchisees to buy only Coca-Cola products, set a price higher than market value for those products and used the funds for advertising. Dave Norman, DavCo’s chief financial officer, said his company believes its agreement with Wendy’s allows DavCo to suggest alternate suppliers. Further, Norman said, Wendy’s didn’t give DavCo a credit against its required contribution to the national advertising campaign. Both constituted breaches of the franchise agreement, he said. Franchisors will claim that the mandatory vendors are passing on savings to franchisees through volume discounts it can achieve through negotiations. Franchisees will claim that the vendors prices still are inflated partly because of the rebate paid to the franchisor. There’s a “very significant difference” between the cost of products in Wendy’s contract with Coke and the price an open bidding process would bring, Norman said. Competition and competitive bids almost always produce lower prices and better service. Franchisees should look for franchisors that are flexible with their vendor requirements, permitting the franchisee to select their own suppliers and vendors so long as the quality is the same as the required vendor. If this is important to you, there MUST be language iinserted into the franchise agreement stating that such supplier substitutions are permitted and permission will not be unreasoably withheld.

I received an email from Source Book Publications regarding Earnings Claim in Item #19 of the UFOC, I agree with Sourcebook that all franchisors should be required to submit an earnings claim statement (Item 19) in their UFOC. Given that submission of an Item 19 is entirely voluntary, only 20% of franchisors choose to do so. The reasons for non-submission range from the ludicrous to vaguely plausible. To myself and Sourcebook, it seems entirely one-sided to ask a prospective franchisee to invest in excess of $200,000 (on average) to “buy” a franchise without providing him or her with a clear understanding what he or she might earn from the investment. Although there are numerous variables that preclude franchisors from coming up with an exact projection of future Net Operating Income, the franchisors clearly have the ability to determine the historical sales and related expenses for operating units currently within their system. At a minimum, they can work backwards from royalty payments to come up with a gross sales figure. To the extent that they closely monitor and support their franchisees, they should have a good sense of average operating costs as well. Given this information and the latitude they have to provide as much detail as they see fit, they can break out summary operating data for those franchisees or company-owned units that have been around for say 5 years, 10 years, etc. My sense is that the FTC will ultimately acknowledge the need for a mandatory Item 19. Given the difficulty from industry to industry to provide a workable template for the submission of information, the FTC will continue to allow franchisors to provide as much or as little information as they deem necessary. Those franchisors that do in fact provide real, in-depth information will clearly enjoy a competitive …

This is an inspirational story of a couple of guys who followed their passion and started small store, and slowly added stores: The customized white vehicle, emblazoned with smiling humans and healthy-looking dogs and the words ZoominGroomin in blue and Mobile Pet Spa in red, leaves little doubt about the reason for the visit. In fact, it was because Carey Takach spotted the van on the road one day that she signed on with the mobile pet groomer. That and the coupon her sister had passed along to her. … Toback said he has 700 regular customers just nine months after starting the venture, along with two vans and five groomers and 100 appointments a week. The former retail executive, who at one point was a vice president for menswear, became a mobile pet groomer at age 56. “I was sick of looking at polos,” he said. “My cocker spaniel is my business adviser and was the catalyst to the whole thing.” Toback said the idea to become a mobile groomer franchisee struck when he considered the amount of time involved in taking his dog to the groomer’s. He would drop him off at 8 a.m. and pick him up at 5 p.m. “He was waiting in a cage for six hours, waiting his turn,” Toback said. It occurred to Toback that many pet owners treat their pets “like children,” noting that a parent would not drop their child off at a barber for eight hours. The average mobile groom session is an hour and fifteen minutes, he said. Is there something you do in your daily life that just takes too long? Perhaps it can “delivered” directly to the customer, such as pet services, home vet or medical care, 20 minutes dry cleaning while-you-wait, high-end group child care. …

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

Download the Quiznos Profit Spreadsheet Based on the 115 comments, the most popular post on FranchisePundit.com has been What a Quizos Franchisee Makes, posted on April 10, 2005. The purported author of the financial projects also founded the web site QuiznosSucks.com (don’t bother going there, it now defunt and replaced with a domain aggregator’s advertising search engine). More of his experience is posted in this forum thread (pdf) on ToastedSubs.info. Here is the main snippet: QuiznosSucks 08-10-2005, 11:35 AM Yeah, Corporate is aware of Quiznossucks.com. Richard Sauls, the fellow who is responsible for the site, is himself a former Quiznos franchisee. Corporate actually sued to force him to kill the site and lost. My own feeling is that Quiznossucks makes them a bit nervous. It was developed on a shoestring and to little fanfare, but now averages in the neighborhood of 30k hits per day. I know that ever franchisor has its share of unhappy franchisees, but the situation with Quizno’s has reached a fever-pitch. From my research, the only comparable situation I have found is UPS Store franchisees. Ultimately, the Quizno’s business model doesn’t work. particulars vary from region to region, and depend heavily upon the franchisee’s rent and debt load, but break-even for a Quizno’s store is astronomical for this type of operation. The only thing keeping this house of cards aloft are second and third owners, who buy existing stores based on cash flow, at a fraction of the cost of a new store. I actually had a Q owner in my area approach me to see if i was interested in buying his store. The store was 3 years old, and he was running at break-even for the first year-and-a-half, with sales around 6700 per week. The Q opened a store near him (you have …

Are the number of Franchise Consultants, and Brokers going to continue to grow? Or, as I predict, will this part of the Franchise industry start consolidating?……. In the last 3 articles I have written about the phenomenon that is taking place..Too many consultant/brokers in the franchise world, and the  plethora of  new ones just entering an already crowded field. Here are links to Parts 1, 2, and  Part 3, just in case you wish to refresh your memory. Am I writing about this just because I am a franchise consultant? Am I writing about this  because I do not want more competition? Am I writing about this because I just left a Franchise brokerage group that I really am not feeling the love for? I am writing this to open up a discussion. I want to know how consumers feel about us. I want to know how franchise company execs feel about us. I am also writing this so that some prospective franchise brokers that are being courted by the franchise brokerage groups to buy their franchises that sell franchises to others, can take a breath..and find out before they buy, just what  it is that they are buying. Janet Sparks, a veteran franchise industry writer, just wrote about one such wonderful franchise company, “The Entrepreneur’s Source” that once again is  is the position of defending itself against a class action lawsuit brought on by former franchisees. Article They have a large number of franchisees, and at one time in little old Cleveland,Ohio, had 3-4 franchisees at the same time. {As of this post, I only know of one franchisee in Cleveland who remains in business} So, if “The Entrepreneur’s Source” as an example, has no problem selling 3 or 4 franchises in a shrinking metropolis like Cleveland, Ohio, …

Acquisition monster GameStop (they have merged with Software Etc., Babbages, Gamesworld, Funcoland, EB Games) looks like it is planning to begin franchising next year. Our forum mavens have heard the confirmed rumors and preparations at GameStop’s annual gobal manager’s conference in Vegas this weekend. From the forum: Quote from: brem on August 27, 2007, 05:07:11 PM GameStop Offering Franchises? I’ve been in the video game industry a while and thinking about a franchise and just heard from a well connected distributor contact of mine in the business that GameStop’s looking at starting to sell franchises for their stores in the near future. As the dominant game retailer, I wonder what that will do to other video game franchisors that have to deal with all GameStop’s aggressive competitive marketing and their volume cost advantages with game manufacturers. Need more info on pricing, etc, but this might be my way in — seems smart to join forces with the giant instead of trying to compete against it. Well, here we go. I’m out at GameStop’s annual gobal manager’s conference in Vegas this weekend with several of the other distributors / industry players and heard other sources rumbling about GameStop’s plans to start franchising (prepresents new income opportunities for many in the business to set up franchise service networks to work with them). After the second source discussed it, I’m trying to find out where the sign-up list is. The industry players are apparently a little dissapointed because it requires dealing with “onesie / twosies” versus one stop shopping for consolidated groups, but apparently GameStop’s not doing what a lot of the more sophisticated franchisors like Pizza Hut do and only sell franshises to massive, deep pocket franchise groups that can afford to buy up a whole cities worth of stores (although …