I came across a few franchsies that I would not want to own: Snack-In-The-Box: UK based firm that delivers candy to the workplace (difficult to work and sell) Nick-N-Willy (founded by former Quiznos exec)/Take-and-Bake: this take-and-bake pizza idea where cusotmer get the raw dough with toppings didn’t catch on 10 years ago, and won’t catch on despite some short-term success driven by PR and unique gourmet toppings. Gourmet pizza that is already baked is where I’d make my bet if I had to enter the pizza business. The Dinner Station/Meal Assembly (check out the nice store pics): The industry is already seeing a high number of closures; I’d do this perhaps without a franchise MRI/recruiting franchise: I knew several smart people that tried to make the MRI recruiting franchise work, but had a very tough time generating any placements, and placements from MRI corporate contracts were nil (operating profits and same store sales were down from last year) It’s Just Lunch: Some locations have been turning over several times each year, with franchisees literally giving them away to escape the cash drain.

Yum! Brands (KFC, Taco Bell, Pizza Hut) U.S. blended system-same-store sales increased 5%. Colony-based Pizza Inn pizza chain reported a 1.1% increase in same-store sales, or sales at stores open at least a year, during the first quarter 2006. For the 13 weeks ended March 28, 2006, sales for Panera‘s franchised and company-owned stores rose 9.1% and 8.9%, respectively. Systemwide bakery-café sales increased 9 percent for the 13 weeks ended March 28. Aaron Rents reports 13.7% increase in same store revenues. Brooke Franchise ( distributes insurance, financial and funeral services through a network of more than 560 franchise locations) saw same-store sales decrease about 2.5% for the year that ended Feb. 28, 2006 compared with the prior year. March retails sales growth for the Jean Coutu Group (PJC) Inc. rose 3.5% in Canada, 1.7% in the USA. PJC is the fourth largest drugstore chain in North America and the second largest in both the eastern United States and Canada. The Company and its combined network of 2,173 corporate and franchised drugstores (under the banners of Brooks and Eckerd Pharmacy, PJC Jean Coutu, PJC Clinique and PJC Sante Beaute) employ more than 60,000 people. Tim Hortons first quarter same-store sales increased 8.7% at restaurants in Canada and 9.8% in the United States. Wendy’s same-store sales decreased 4.8% at U.S. company stores and 5.2% at U.S. franchised restaurants. Baja Fresh Mexican Grill’s system same-store sales declined 3.6% to 3.8%. Sonic‘s 1st Q 2006 same-store sales growth of 4.7%, slightly above Sonic’s annual target long-term target range of 2% to 4% growth Sales are climbing at Mr. Jim’s Pizza following the launch of Mr. Jim’s new product, Nacho Stix, and the debut of a new branding and advertising campaign. Same-store sales increased for the first two periods of 2006, including a same-store …

In the past week, three people have raved to me about various Brazilian churrascaria steakhouses, particularly Fogo de Chao in Chicago and Las Vegas. Unfortunately, the restaurant does not franchise. It’s a unique approach to dining, especially for the many low-carb carnivores, myself included. People always mention Fogo de Chao’s outstanding salad bar, and how they made the mistake of filling up on salad and couldn’t eat that much meat (beef, pork, lamb and chicken on skewers is carved at your tableside). The restaurants follow a centuries-old tradition in which “gauchos,” or Brazilian cowboys, put meat on a stick and cooked it over an open fire. The only franchised Brazilian steakhouse I’m aware of is Fire of Brazil ($50,000 franchise fee). This was interesting regarding Fire of Brazil: If Florida isn’t far enough, how about the Kingdom of Bahrain, Saudi Arabia, Kuwait, Lebanon or Algeria? Those are some of the Middle Eastern and North African locations that could soon see a Fire of Brazil restaurant. The company has sold the master franchise rights for the Middle East and North Africa to a company called the Living Concepts out of the Kingdom of Bahrain. Spokeswoman Mary Lou Rodgers said it also plans to sell franchises in this country. Right now, the company has four restaurants — two in the Atlanta area, one in Wellington, Fla., and one in Nashville. The concept is strong and proven popular. Fogo de Chao paved the way and proved the right formula, and soon I’m sure entrepreneurs will franchise nearly identical concepts in the coming years. Done right (see Fogo de Chao or El Gaucho), this concept in my opinion will be a winner over the next decade.

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 …

I have close friends in the pretzel and snack-food business (and worked in the snack food industry for a short time), so I think I can speak from an especially knowledgeable perspective on this. Stores like Auntie Anne’s, We’re Rolling Pretzel Company, Pretzel Time (by Mrs. Fields), and Wetzel’s Pretzels must have some of the highest margins in the QSR business. The dough is literally a few pennies per serving, if that. The seasoning and butter is another few pennies, and your selling the product for almost $2 each. I’m sure the franchisors significantly increase the cost of dough and supplies force margins more inline with the typical mall store. Fresh pretzel businesses need very little square footage, and can often be served from a kiosk. They have the added advantage of smell in a mall, drawing people in with the scent of fresh baked buttery bread (OK, can you tell I love soft pretzels?). Most malls already have at least two pretzel franchises, but some do not. Depending on the rent, storefronts along a busy downtown street can capture enough of the afternoon foot-traffic to possibly turn a profit. Let’s look at some fees charged by franchisors: Pretzel Time: Initial Franchise Fee: $25,000 Ongoing Royalties: 7% of Gross Sales Advertising Fee: 1-3% of Gross Sales Initial Training Fee: No charge for first two individuals Total Estimated Initial Investment: $107,000 – $238,500 Wetzel’s Pretzels: Initial Franchise Fee: $30,000 Ongoing Royalties: 6% of Gross Sales Advertising Fee: 1% of Gross Sales Initial Training Fee: No charge for first two individuals Total Estimated Initial Investment: $102,000 – $211,000 Auntie Anne’s: Initial Franchise Fee: $30,000 Ongoing Royalties: 7% of Gross Sales (paid weekly) Regional Advisory Council Dues: $300/year Audit Fee: All expenses unless if receipts were understated by more than 2% Advertising …

As you probably know, I’m positive on soup franchises. The Soup Box, an independent soup restaurant, supplements their summer months with Italian ice (gelato) made from scratch with natural fruits and juices. They coined the summer months storefront name as the “The Ice box” instead of “The Soup Box”. It provides a selecton of 12 hot homemade soups in the winter, and 6 in the summer when they make the Italian ice. Menus are posted daily on the Internet as well. It’s a small location, but I thought the idea was clever enough to mention as an example of maximizing the resources and opportunities. Does your restaurant franchise have a seasonal offering? I know the franchisee has little or no control over what they can sell, but it should be an evaluation point on hedging sales year-round.  When a customer wants to get into the Christmas spirit, why wouldn’t they (subconsciously) gravitate towards the fun, encouraging store that has their seasonal favorite flavors? Seasonal menus tend to do quite well. Ever have the Gingerbread Latte at Starbucks? Yum! The seasonal menu builds repeat customer business to predictably provide new selections that build on the goodwill and joy of the season. Good reviews for The Soup Box. The business also provides a good example of the flexibility a non-franchised store has over their business, compared to those locked in very strict franchise agreements that usually prevent any deviation from the standard offering.

Christmas Decor is a very interesting franchise, and one of the classic examples of making a business from providing a service people are willing to pay for that makes lives easier (like the weekly dog cleanup services). The franchisees are Christmas house and yard designers, with any kind of lighted scene you can imagine. The franchise is great to provide winter income for those who make most of their money in warm weather (lawn care, nurseries, fence or irrigation builders, etc.). The minimum project is about $3,000 for the customer, and that includes installation and removal of the lights and decoration. The web site claims: $200 million last year was spent on decorating services during the holidays. With over 800% growth in the past six years, now is the perfect time to begin your Christmas Decor franchise. It looks like a high margin rental and services business, especially business clients. The concept is a winner, I believe. The devil is the numbers, of course, and a franchisee would have to figure out how many homes can realistically be done and what contribution margins would be to make the personal income worth the time and aggrevation. Most home and business owners are unaware of the service so advertising and PR are important and expensive. But, word of mouth advertising is likely very high. Here is an article (and another and another) from Entrepreneur Mag. From Christmas Decor’s web site: Start up Costs/Working Capital? This is one of the least expensive businesses to get into because costly equipment is seldom required. For each full service installation crew we estimate ladders and tools at $750-$950, and a start up inventory of $3,000-$5,000. Each additional crew will have about the same cost in ladders and tools, but inventory should be increased about $2,000 …

When I first heard of a chili franchises 10 years ago, I thought it was a stupid idea.  How often are people really going to each chili?  Then I spent time in Cincinnati, OH, home of Skyline Chili and Goldstar Chili.  I soon became a loyal fan, endulging in 4-ways (spaghetti noodles, chili, mustard, onions and cheese) and Cheese Coneys (hot dog, chili, cheese) like I never imagined.  Apparently, the chili has a hint of chocolate and licorice that adds to the uniquely smooth flavor and addiction. Skyline Chili is the champion in Cincinnati and the surrounding markets.  It’s so popular that fans often try to duplicate the secret Skyline Chili recipe at home.  Of course, a small minority of people hate the chili with equal passion. Each restaurant has a drive through and inside seating resembling a 1960’s diner.  Skyline is open late for the night crowd coming home from the bars.  The business lunch crowd is big, and so is the early evening with families and college students. Fransmart’s Red Rock Chili Company looks similar, but I have no experience with it.  Skyline Chili, Inc. is currently franchising in the states of Ohio, Indiana, Kentucky, Michigan, Pennsylvania (western), West Virginia and Florida.  Residents of the following states may not purchase a franchise: California, Hawaii, Illinois, Maryland, Minnesota, New York, North Dakota, South Dakota, Oregon, Rhode Island, Virginia, Washington or Wisconsin. Background Skyline Chili Research: article 1 customer reviews customer review photo  Pros: Proven successful concept in Cincinnati Fast preparation times Fun food and atmosphere Reasonable franchise fee ($20,000), royalty (4%), and advertising (4%) Small space needs: 2,800 square feet; free standing, store front, strip center, end cap Cons: Chili must be purchased from franchisor Franchise popularity may take extra time to build if no other chili franchises …

Developing a high margin specialty niche in a stagnant industry is usually a formula for success (see Panera Bread’s twist on fast food, Sports Clips and Snip Its on hair cutting, Starbucks on coffee, Applebee’s on chain restaurants). Foot Solutions is a new shoe retailer looking to capitalize customers who require more comfortable foot wear, namely sufferers of diabetes, obesity and arthritis. Concerns Foot Solution’s web site details the anticipated $200,000 investment to open a store. The company expects the franchisee to sink $65,000 in shoe inventory before opening, yikes! Foot Solutions requires you use only their vendors and approved products. And you must use their supply division to order opening orders, construction materials, fixtures and equipment. Of course, you should now be asking yourself, “How much more will I be paying if I was permitted to source the products myself?” Be sure to benchmark the average vendor and supply mark-up by asking the franchisor or franchisees for the actual price sheets. Part of the reason to buy a franchise is the ability to buy into an already strong brand name. It is unlikely that customers are already familiar with the Foot Solutions brand (though it is a descriptive trademark, so intuitively people will generally understand the business’s purpose). There is also the dynamic of how many Foot Solutions can a local market support. Is it one, three, five? Niche franchises are much more susceptible to competition so the protected territory is an important issue. There is a heightened liability risk. Franchisees receive training in foot pathology and physiology along with understanding the feet and related problems and symptoms. What if your sales person recommends a shoe that worsens a customers foot problem, or a customer relies on what they believe is your superior medical advice? Make sure you …

The Wall Street Journal has an interesting article profiling an in-home elderly care franchisee. Home Instead and the other senior-care franchisees pay caregivers somewhere between $8 and $12 an hour and charge clients about twice that amount. In the highly competitive Chicago market, the Melingers charge clients $18 an hour, with a minimum of two or three hours a day, or $180 a day for 24-hour care. They also provide a “rise and shine” or “tuck in” service, for $200 to $280 a week. The Melingers declined to reveal just how lucrative their business is, but FranchiseHelp, a consulting firm in Elmsford, N.Y., provides some guidelines for similar businesses. In 2002, for example, a franchisee of Homewatch Caregivers in Denver, with 60 workers, took in gross revenues of $1,265,324 and paid out $1,141,578 in expenses that included royalties and the franchisee’s salary, leaving a profit of $123,746. Their isn’t inventory to deal with, which is very nice. But that time is otherwise spent on finding and hiring responsible people they trust enough to send into an elderly person’s home. The franchisee said almost 1/2 the people don’t even show up for the their interviews and many quit after a few days. Ugh! If you can maintain a steady staff, you can easily open a 2nd conierge style business, which we discussed perviously. I’m neutral on elderly care franchises right now because they are heavily commonditized business (the market controls the fee level, it’s hard to charge more than $18/hr with all the competition). I am also hesitant when so much depends on finding qualified low wage employees that must work independently (unlike a retail location where managers can monitor what you do).

I rarely deviate from franchise talk, because that is what people come here to read. But, I just watched this heart touching tribute to former President Ronald Reagan on the 1-year anniversary of his death. I recommend people watch it regardless of their own political affiliation. Sometimes we need step back from business and keep perspective about what is truly important in life. Reflecting on great Americans can sometimes help us in that personal journey.

It looks like the Quiznos franchisees are not standing by in the face of apparent fraud: The primary allegations of the complaint are that the franchisees were harmed by the company’s "deceptive recruitment practices" and "failure to deal in good faith" when it took franchise fees from the plaintiffs, but refused to approve locations to open Quizno’s stores. In addition, the complaint charged, Quizno’s has refused to return any portion of the franchise fees, even though the plaintiffs paid more than 18 months ago and are now being threatened with termination. and more general comments… Commenting on the lawsuit, Susan P. Kezios, President of the American Franchisee Association, said, "This lawsuit is a classic example of a popular franchise chain using its brand name recognition to deceive hard-working Americans into investing their dollars to grow a franchise. Bob-the talking baby in Quizno’s current media campaign-is definitely talking out of both sides of his mouth in this case." Added Klein: "It is unfortunate that not enough people are aware of the abuse that franchisees often endure at the hand of their franchisors. Too many entrepreneurs automatically assume that buying a franchise is a safe investment. We are confident that we will prevail in our lawsuit, and are eager to finally bring justice to the franchisees who were victimized while also alerting people who are interested in purchasing a Quizno’s franchise to make an educated decision. I don’t have a comment from Quiznos, but I’d assume they deny the allegations. Still, Quiznos claims to open a new franchise every 16 hours. Have those franchisees all done enough due diligence to uncover these allegations of fraud? I fear they are too eager to hand over the $25,000 franchise fee. Even if this lawsuit turns out to represents a relatively small percentage of …

Many people think of franchises as individually owned, mom-and-pop run businesses. On the contrary, many large corporate style operators with access to large quatities of capital have been in the business for a while. For example, I’ve heard a lot of about Lenny’s Sub Shop lately but haven’t been in one. The company started in 2001 and now has 63 franchises in the southeastern United States.

I’ve written a few articles on eBay drop offs. I was neutral on the franchise… Pros: it’s a service people will use eBay buzz and hype is still strong all franchisors are charging the same 35% fee (for now) Cons: the business is too simple to start, has no barriers to entry, new competitors will literally springing up overnight existing used and consignment stores will soon add eBay sales the service will have to compete based on fees (who wants a constant lowering on margins?) I’m sure I’ll be negative on the business within the next 5 years, but for now I’m staying neutral because the next 2-3 years will be strong. Want proof the eBay drop off store is easy to start and run without a franchise? Campus Easy Sales recently set up shop on the Washington University in St. Louis campus. A couple of fulltime students thought it’d be a good idea and just started it. They do nothing different than any other franchise out there (the hold the item, take pictures of it, post an ad on ebay, ships the item after the auction ends, and send the seller their cut). However, the total fees add up to ONLY 24% COMMISSION off the first $500. Compare to other eBay drop offs who charge 35%. You can bet your dog’s favorite toy this puppy will see their commissions slashed to 25% or less in a few years.

I don’t get Entrepreneur Magazine sometimes. According to an article in the Las Vegas Business Press, Entrepreneur Magazine named a personal concierge service called “My Girl Friday” as one of the “hottest new franchises” in 2005. The first franchise was launched in 2005! How can a personal franchise business with one franchise in the personal concierge industry (seems I’ve been hearing its the hottest thing for the past 10 years) be named the “hottest” with ONE franchise? The article’s author showcases her lack of business knowledge in this paragraph: Hagenmaier projects that the Las Vegas operation of My Girl Friday will grow from one person to having from five to ten employees in the next 18 months. The company hires independent contractors, which mostly appeals to people willing to work flexible hours. Brommenschenkel explains that college students and retired workers make ideal independent contractors, because of their flexible schedules. By definition independent contractors are not employees. It’s a small issue but that stood out to me. Here’s more of the business description: Services cost clients anywhere from $30 to $60 an hour, depending on the chore…My Girl Friday offers a full menu of services including traditional concierge services, personal chefs, errand running, pet care, party planning and assisting with business tasks. She sounds like a personal assistant. So people will hire this woman as both a personal chef or party planner in Las Vegas? I suppose it is possible. In my opinion, there are not many errands worth $60/hour. Most things for a minimal fee can be delivered and arranged quickly from a web site or one minute telephone call (travel, food delivery, dry cleaning, courier, pet sitter or walker). This business will be fighting technology and streamlined personal services offered directly from the service supplier (remember what happened …

Franchisor background checks are important! Shady characters loom in the corners as this article explains.