http://www.bizjournals.com/memphis/stories/2008/01/28/story4.html

Serve Holdings LLC, the largest franchisee of Captain D’s restaurants in the country with 26, has filed for Chapter 11 bankruptcy to, in part, avoid payment of $245,000 to the franchisor.

[note: post title amended on 2-1-2008 to more accurately identify the zee as filing….hat tip: FuwaFuwaUsagi and Michael Webster in the comments]

Getting permits and approvals from local boards can be tedious and overly political.  I used to work at a real estate development company that hired “expediters” to get local planning approvals pushed through. 

A Farmington, NY Dunkin Donuts franchisee is finding out the hard way what a pain this process can be.

By Billie Owens, staff writer at the Daily Messenger

Now that the old Pizza Hut building on Route 332 has been razed, it’s going to stay like that for awhile.

A Dunkin’ Donuts is planned for the site, but on Thursday code enforcement officer Floyd Kofahl put the brakes on the project.

He slapped a stop-work order on franchisee David Francisco of Canandaigua because the project differs vastly from what the permit allows. The property is owned by Farmington Realty LLC.

Francisco disputes the notion that the project differs a lot from what his permit allows. He said the only sticking point is a glass wall that he wants to put in instead of a regular one.

The permit allows renovation of the existing building to accommodate a bakery to make doughnuts and sell them. Not all Dunkin’ Donuts franchises have a bakery; most of them have the baked goods delivered from a Dunkin’ Donuts that does operate a bakery.

A bakery for doughnuts and one for pizza, as in the case of the building’s former occupant, is the same under state law. For that reason, Francisco’s plans did not require review by the Planning Board unless more than 1,000 feet were to be added to the building.

But last week, Kofahl said, Francisco informed him it would not have a bakery.
Francisco disputes this claim, too, saying he and corporate officials will make the bakery decision jointly over the next two weeks.

Clever. Pay for a survey about Super Bowl eating habits, get free publicity, get your brand associated with “healthy” and “Super Bowl”.

SUBWAY Restaurants, which has long been committed to promoting “better-for-you” meal options among both children and adults, conducted an Omnibus survey of more than 1,000 Americans regarding their Game Day snack consumption habits and learned they overeat the most during the Big Game (27%)–trailing only Thanksgiving (85%) and Christmas (61%). More than half surveyed (59%) admitted to overeating during the Big Game and reported gorging themselves on nachos, fried chicken, chicken wings, pizza and other generic “junk food.”

Methodology: An Omnibus survey conducted a telephone survey on behalf of SUBWAY(R) Restaurants of a nationally representative probability sample of households; 1,090 interviews were completed among adults ages 18+ (53 percent female, 47 percent male). Interviewing took place January 7-9, 2008.

Things will probably work out for Heartland Automotive Services Inc. of Omaha, Neb, a 438-unit Jiffy Lube franchisee filing Chapter 11 bankruptcy as it will probably sell/close underperforming and money-losing units.Chapter 11 bankruptcy, the business filing usually continues to operate while a bankruptcy court supervises the “reorganization” of the company’s contractual and debt obligations. The court can grant complete or partial relief from most of the company’s debts and its contracts, so that the company can make a fresh start. Often, if the company’s debts exceed its assets, then at the completion of bankruptcy the company’s owners (stockholders) all end up with nothing; all their rights and interests are terminated and the company’s creditors end up with ownership of the newly reorganized company. The other type of bankruptcy is chapter 7, whereby the business ceases operations and a court appointed trustee sells all of its assets and distributes the proceeds to its creditors in accordance with statutory defined priorities.The large franchisee most likely negotiated favorable terms when faced with closing or selling units, such as reduced transfer fees, low or no penalty for closing a certain number of units, delays in royalty payments when filing bankruptcy, etc.

According to a statement on Heartland’s Web site, the company filed for Chapter 11 because of what it calls a “breakdown of negotiations with Jiffy Lube International to resolve long-simmering disputes regarding the companies’ relationship” over advertising and marketing, and support from the franchisor, product pricing from JLI’s parent, Shell Oil Co., and expansion strategies.Economic pressures in the volatile gas and oil market were also cited as reasons for the filing.Heartland said it anticipates going back to the negotiating table with JLI after the initial stabilization phase of its reorganization, which was to go heard in court on Jan. 23. If settlements still can’t be reached on the issue, Heartland said it will seek a rejection of its franchise agreements and rebrand the business.Heartland said in the statement that it had $8 million in cash on hand at the time of the filing.

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.

USA Today, world reknowned for their franchise evaluation skills (note the sarcasm) as evidence by naming Quinoz #2 in 2006, has named 7-Eleven as their #1 franchise for 2008.

7-Eleven management is very systematic and generally organized.  With so many world-wide stores, it has invested heavily in automation and technology.   Marketing partnerships are big with 7-Eleven to get people in the stores, see the Simpsons movie promos and Citibank ATMs as examples.

7-Eleven does not allow absentee-ownership, and each location generally must be  a minimum of 1,400 square feet and must be at least 1/2 mile from another 7-Eleven franchise.  Franchise fees are at least $70,000 plus typical build out costs.

The article mentions a unique system that builds “equity” in their store, so if the franchisee wants to sell, the seller can ask for a premium “goodwill” payment representing built-up equity.

Single store ownership is a way to make a living, but not make a six-figure income.

If you have been to Europe, particular the U.K., you know what Tesco is. It is an omnipresent, progressive grocery chain. They are opening up their first US stores starting in California. I always enjoyed Tesco’s twist on the supermarket, and I am sure they will be making a very successful entrance into the US marketplace.

Labor unions don’t like Tesco’s non-union workforce, and are already starting trouble.

Store layouts, customer experience and ergonomics has always interested me, and it should interest you to if you plan to open a storefront.

Below is a slideshow of the store.

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.

{Cross-Posted at The Franchise King Blog}

Go Green! Well the franchise world is invading the green world, and it is starting in California.
{Big surprise} Continue reading….

Yep! The California Department of Corporations {Not The California Department of Corrections!} has approved a request by Solar Power Inc. to start selling franchises.

The retail store setup will be called Yes! Solar Solutions. There is already one up in Roseville, Ca.
Read in Sacramento Bee The retail store will provide design services for each home or business that wants solar power, and install the panels, also. In addition, solar powered coolers,backpacks etc. will be offered.

Here is something about solar energy solutions that you may not know:

The local energy utilities will actually buy back any extra solar power you are generating from your home or business! It comes in the form of a credit. They roll back your meter’s dials by the amount of extra energy you produce. That is fantastic!

Stay tuned..this is just the beginning….

QuikDrop is closing its eBay drop-off store franchise business at the end of the month, but franchise stores will be able to continue to use the QuikDrop name, logos, and signage. A conversation with the company’s cofounder Jack Reynolds on Wednesday netted a laundry list of complaints about the challenges of selling on eBay that contributed to his company’s demise, beginning in 2006 with the Stores search and fee changes.

QuikDrop storeowners did not seem surprised at the news of the closure, which arrived via email from QuikDrop headquarters on Friday night – and some actually seemed relieved.

The number of QuikDrop stores shrunk from a high of 95 in mid-2006 to under 30 stores today. Reynolds said the store closings, combined with a number of stores who were unable to pay franchise royalties, led to the decision to close the corporate franchise office.

In late 2005 and early 2006, Reynolds said eBay worked on joint marketing with QuikDrop and things were going well. eBay discovered that consumers who visited drop off stores became more active as buyers on eBay, so the auction site marketed to people who weren’t sellers to promote eBay Trading Assistants. But things took a downward turn in 2006, he said.

Read more in an article by Ina Steiner in Auctionbytes.com

Read an earlier article on Franchise Pundit about eBay Drop Off Franchises

Cross posted at Let’s Talk Franchising

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Local government regulations can be an expensive pain to comply with, as this Lamar’s Donut franchisee found out with its sink:

•When is the Lamar’s going to open on Johnson Drive? A sign has been up since this summer.

An area Lamar’s Donuts franchisee took over the spot at 5901 Johnson Drive in May but was slowed down dealing with city regulations, such as fitting in a three-compartment sink to a 600-square-foot spot, along with other plumbing issues.

The “satellite store” opened Friday. Doughnuts are made at the midtown store and then taken to Mission.

The franchisees, Alan and Kimberly Foster, own the Lamar’s at 3395 Main St., as well as locations in Lee’s Summit and Greenwood, Mo.

I’m not sure how I would react in this robbery situation.

McDonald’s is planning to pick up 40% of the $100k-$150k in remodeling costs for franchisees to accommodate the new high-end coffee drinks.  The franchisees are still responsible for the equipment costs.

Most franchisors are NOT so generous.

I would not let one semi-positive article influence my opinion of Quiznos, but here it is:

A year after some franchise owners sued Quiznos over business practices, the restaurant chain’s chief executive said Monday he expects franchisee profits to increase 60 percent overall in the wake of improvements to the system.

60% increase sounds fantastic, but it is relative from the starting profit level. Going from a $20,000 profit to a $32,000 helps but doesn’t save the day.

Danny Kessels, a Quiznos store owner in Boulder who said he was not invited to the meeting, said he knows of other Quiznos store owners who are struggling.

“Nothing’s really changed, in my opinion,” said Kessels, the head of an Quiznos independent franchise group called the Toasted Subs Franchisee Association. “The whole system is still on shaky ground.”

It looks like the new CEO-turnaround specialist is trying to make changes, but as I have personally learned in business – don’t try to catch a falling knife.

McDonald’s franchisees are being asked to invest at lease $100,000 per store to accommodate the new upscale variety in coffee drinks, creating the ability to sell caramel lattes and cappuccinos. While the franchisees generally do not doubt this new offering will increase sales, it’s still a big price to pay and dents the immediate cash flow.

The equipment alone will cost franchisees about $25,000 per restaurant. Plus, they are being asked to invest considerably more to retool their stores to better handle the specialty coffee and other new beverages, from sweet tea to smoothies to energy drinks.

Lesson

Can a franchisor require franchisees to investment capital to implement a new offering?  It all depends on the terms of the franchise agreement, but almost all franchise agreement require a franchise timely adaptation to reasonable requests to implement new services and products.  Worst case, you will be required to make the investment at time of renewal of your franchise agreement.  The renovation costs required for franchisees is often a reason for walking away from a franchise at renewal time.

As a franchisee, if you are able to pay yourself about $60,000/year, and your franchisor is requiring you to invest $50,000 at renewal for renovations that you forecast will take 5 years to recover, what do you do?  Do you have the equity or cash to borrow the funds?   A wise businessman will run the numbers, a foolish businessman will automatically pay up without figuring the impact.