The Mail Box Etc. conversion to UPS Stores continues to generate bad PR for UPS. Mail Box Etc. stores were generating a living for most franchisees, but the UPS Stores emphasize UPS shipping services where the margins are very low.   This was not a ruling on whether UPS misled the franchisees, but just a procedural ruling permitting the case to go to forward with a hearing on the merits.

United Parcel Service Inc. franchisees have won the right to sue the world’s largest package shipping firm as
a group over claims it misled them by saying that converting their Mail Boxes Etc. stores into UPS Stores would be more profitable.

“This is a huge win,” said Howard Spanier, a Malibu, Calif., franchisee who said he converted his store last year, according to a statement Friday. The class action was certified Wednesday by a California appeals court, overturning a trial court ruling rejecting the franchisees’ request.

UPS, based in Sandy Springs, is accused of withholding critical documents about tests of the UPS Store business model it conducted in several U.S. cities. The franchisees claim the conversion was “disastrous” for some of the stores.

Uniform Franchise Offering Circulars, known as UFOCs, was a response to some unethical behavior in the 1960’s and 1970’s. Today franchises are regulated by federal and some state laws. The Federal Trade Commission (FTC) requires that certain information be disclosed to potential franchisees before a contract can be signed or any payment made. The information is presented to the prospective franchisee in the form of a document — the UFOC.The UFOC, contains information franchisors must provide to franchisees by law. UFOCs are deemed to be reliable and if the information provided is false, franchisors are subject to civil penalties. However, the FTC does not require filings. There are 13 states that do keep UFOCs on file, and 23 states that require business opportunity disclosure filings.

The UFOC is designed to give prospective franchisees all the information relevant to a franchise offering. It is made up of three basic parts: 23 sections (called Items) describing various aspects of the franchise program; a set of the franchisor’s audited financial statements; and a copy of each form or contract a franchisee is expected to sign if he/she intends to buy the franchise.

The UFOC is similar to a securities prospectus. It can provide the information you need to evaluate a company. An accredited franchise company, whether publicly traded or privately owned, must provide this disclosure document.

The UFOC is most valuable for potential franchisees, potential franchisors, franchisors, investors, financial companies and suppliers to franchisees.

You can obtain UFOC’s directly from the franchisor usually for free, from the California state franchise document portal, and from several online sources such as FreeFranchiseDocs.com which downloads and scans the documents from the California database.

Cross Posted at: Let’s Talk Franchising

[edited by Ryan on on Oct 20, 2007 @ 10:15PM]

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 advantage over those that do not. At any rate, those franchisors that go to the trouble of including an Item 19, even if only cursory, should be acknowledged and applauded.

As an on-going feature of future newsletters, World Franchising will publish an exemplary Item 19 each month. This month, they honor Papa Gino’s for the exceptional detail that they provide in their Item 19. My guess is that the rapid growth and success of their system has a great deal to do with the forthrightness with which they celebrate the success of their existing franchisees. To view their Item 19, please click here.

Those companies who feel they provide exceptional disclosure in their Item 19s are free to submit their Item 19 electronically for consideration in subsequent newsletters.

Cross Posted: Let’s Talk Franchising

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. Maybe you can be the franchisor.

Rush Nivet posted on his blog Rush on Business that last week he had the opportunity to attend the ABA’s Forum on Franchising.

He writes: What a great event! First and foremost, it was an opportunity to network with some of the best franchise lawyers in America. Second, I really enjoyed hanging out with fellow Iowa franchise lawyers, Matt Krigbaum of Cedar Rapids and David Bright of Iowa City. These guys are excellent lawyers and terrific individuals. If you are Eastern Iowa I recommend you talk with them regarding your franchising questions.

The initial seminar session I attended was the Fundamentals on Franchising. Some top-notch franchise lawyers spoke during this 4 1/2 hour session but of particular interest to me was the talk by Ron Gardner of the Dady and Garner Law Firm in Minneapolis. The law firm is regarded as one of the best firms in the country representing franchisees in disputes with franchisors. In my franchise law work I counsel and negotiate on behalf of franchisees so the talk was very informative.

Some highlights of Gardner’s talk:

1. If a franchisor is making certain promises you should attempt to have those promises included in the franchise agreement. Often a franchisor will say certain things to entice a franchisee to enter into the franchise agreement. But when you read the agreement these promises are no where to be found. Get those promises in writing. If not, you should have no expectation the franchisor will follow through on its promises.
2. Franchisees and their lawyers must communicate together on much more than just the franchise disclosure document or the franchise agreement. In order to advise you properly it is important to know your background, your needs and your expectations. Without this information it is often difficult to know what it important for you in a negotiation and what is not.
3. Run Away from Franchisors that Won’t Negotiate. Some franchisors will tell you that they won’t negotiate their agreements, or worse, tell you the laws and regulations do not allow them to negotiate their agreements. Tell them to take a long walk off a short dock! Ask youself whether you want to be in business with a franchisor that will not consider your busines goals and needs. Fortunately, my experience has been that many franchisors will negotiate at least certain key terms and conditions.
4. Key Disclosure Issues. Key disclosure issues generally include litigation, initial investment, vendor rebates, earnings, outlets and financial statements. It is important to closely review the information regarding outlets. Carefully study the number of transfers and not just the number of closures. A high number of transfers may be an indication that franchisees in the system are struggling but bad stores have not been shut down. As I have preached franchise due diligence must include interviews of franchisees, including those that have left the system, in order to get a full picture of the franchise system.
5. Be Willing to Walk Away. I have touched on this before. This is the paradox of negotiation. You should not fall in love with the deal. Prospective franchisees who are willing to walk away usually get much more from those who have decided to sign at all costs.

Cross posted at Let’s Talk Franchising

Visiting a franchise trade show is a great way to gather a lot of preliminary information and survey what’s out there in the franchise world in a short period of time, and you can find them in most cities. The National Franchise and Business Opportunities show will be in Boston on Saturday and Sunday October 13th and 14th. The show will be open from 11:00 am – 5:00 pm.

The National Franchise and Business Opportunities Expo is great for those who are considering owning their own business.

When attending a franchise trade show, keep a few things in mind. The companies exhibiting at the show do not make up all the franchise opportunities available. A franchise trade show showcases only a limited selection of the 2500 franchise programs out there.

You should take the opportunity to hear why the franchise representatives feel their opportunity is worth investigating. Ask questions about the business model, and the outlook of the industry.

Use these guidelines to help you make the best of your franchise trade show visit.

Before you attend the franchise trade show:

1. Identify what your “must have priorities” are!
2. Identify your financial situation. What is liquid, what can you borrowed from family and friends, and how much do you need to live on? What are your financial requirements?
3. Be serious. Dress conservatively, leave the kids at home, and take business cards if you have them. Show the representatives you meet that you’re a serious prospect.

At the franchise trade shows:

1. Look at the floor plan of the exhibitors listed. Check off the businesses you recognize or that look interesting to you.
2. Don’t waste time. Pass by the franchisors who are out of your price range or don’t meet your “must have priorities”. Prepare a short list of questions: 1. what is the total investment required? 2. Tell me about a franchisee’s typical day. 3. What are the prospects for the industry future? 4. Is financing available from the franchisor?
3. Collect printed information from all the companies that interest you.

After the franchise trade show:

1. Organize the materials you collected.
2. Follow up. Visit the websites and call the franchises to gather more information.

A franchise trade show is a great way for you to introduce yourself to some of the many franchise opportunities available.

Cross Posted at: Let’s Talk Franchising

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

Joel Libava, blogger at FranchiseKing and owner of Franchise Selection Specialists Inc. in Cleveland (and invited blogger at this web site), was quoted in a Wall Street Journal article about franchisee funding sources:

• Think About Franchising. These days, franchisers are actively targeting boomers because of their deep pockets. Entrepreneurs are generally expected to put up some of their own money to start a franchise, and boomers have lots of it on hand.

But you don’t have to bet the farm. “We recommend that you use the smallest portion you can of your own money and leverage the rest,” says Joel Libava, president of Franchise Selection Specialists Inc., a franchise consulting and marketing business in Cleveland. Generally, entrepreneurs should expect to pay about 15% to 30% of the total cost of starting the franchise out of their own pocket, including the franchise fee and working capital, Mr. Libava says.

For instance, Louis H. “Gig” Runge of Houston has put up about $80,000 of his savings to open a Martinizing Dry Cleaning franchise. The money has gone toward franchise and legal fees and other necessities. He plans to fund the rest of the business with a $350,000 loan guaranteed by the Small Business Administration. The loan requires him to provide an equity injection of $82,000.

“It was a challenge for me to work through the tax benefits of borrowing versus just funding it myself,” says the 47-year-old Mr. Runge, a certified public accountant who has done a variety of financial jobs at JP Morgan Chase for the past 18 years. Mr. Runge decided that the SBA financing would help him protect his personal savings and use it as collateral to invest in other stores down the road.

Here are my initial thoughts….

Leveraging (borrowing money) is a good idea so long as the business ultimately works out, or you’ll end up losing the same as if you funded the whole enterprise with your cash savings. Leveraging does buy you some time if things don’t work out by leaving you some personal cash in the bank to invest in the business should it be necessary. But, all lenders to small startup businesses will require a personal guarantee, so if the business fails you will need to cough up the money to pay back the loan even if the loan is to a business.

Before getting a loan, you should set up your personal estate plan to protect/preserve the asset you already have from bankruptcy or lawsuits – which in small part entails moving assets out of your personal name to irrevocable trusts and business entities that have special control features and tax provisions so that you will still have these assets available for your use even if you get sued for a $10 million dollars or file bankruptcy.

Funding your franchise by transferring your 401(k) savings without penalty is possible, but it comes with debt restrictions. One route without tax or penalty (but will include fees imposed by the new custodian) is to convert your 401(k) to a traditional IRA held by a custodian that permits you to invest the money in “alternative investments” (some companies, like Charles Schwab, permit alternative investments but require pre-approval and offering documents from the business offering the investment). This is exactly how we accepted investments of retirement plan money where I used to work at the private equity and specialty finance company. Also, most 401k plans allow you to borrow up to $50,000, or 50 percent of the value of the account, whichever is less. This is penalty-free, unless of course you don’t pay the money back.

It was reported today that Byron Ashbridge and Joe Pitt, who operate five Sona MedSpa franchises in Charlotte, Greensboro and Raleigh North Carolina, have purchased the controlling interest in S0na MedSpa International, previously based in Franklin, TN. Since 2002, Ashbridge and Pitt have run some of the most successful locations in the company and will build upon their accomplishments in North Carolina to fortify, grow and improve the operation. This includes developing and implementing extensive staff training and marketing programs, and providing franchisees with proven systems and best practices to ensure optimal performance, customer satisfaction and profitability. The existing franchise locations will now be company-owned training centers and be the models for “best practices” in the medical spa industry. Franchisees will now have access to these company-owned centers in order to assist in the training and development of their respective staff, as well as determining marketing and operational tactics to use in their centers.

It was reported at Let’s Talk Franchising on May 26th, 2007 that Sona MedSpa Was Guilty of Fraud, Investors Liable! In that case an arbitrator in Atlanta, Georgia awarded nearly $400,000 to a franchisee who was duped into buying a Sona MedSpa franchise on the basis of “faulty” information about Sona’s hair-removal services. The arbitrator not only held liable the Nashville-based franchisor, Sona MedSpas, and its founder, Dennis Jones, but also a group of prominent investors that acquired the franchisor, but then failed to correct the misleading information. The investors included Carousel Capital of Charlotte, N.C., its Chairman, Nelson Schwab II, Jim Amos, former President of Mail Boxes, Etc., and his daughter, Heather Rose. As a result of the investors’ failure to act on the information, the franchisee not only proceeded with his investment, but also repeated the faulty information to its own clients.

Subesequently Sona MedSpa wrote a letter to Let’s Talk Franchising claiming the results of the arbitration were misrepresented, that letter was published Sona MedSpa claims the results of the arbitration were misrepresented on May 31st 2007.

The new owners of the franchisor; franchisees Ashbridge and Pitt offer the following five positioning statements, to summarize their approach to operating as the franchisor of Sona Med Spa, this is the platform upon which they will build the company:

• “We have been S0na MedSpa franchisees for the last five years and have managed highly successful, customer-centric centers. We understand our franchisees’ challenges and the enormous potential the Sona franchise possesses. We clearly understand our success as a company is completely dependent upon the success of our franchisees.”
• “We are dedicated to growing the business and committed to the financial stability and performance of the company and its franchisees.”
• “Before actively selling any new franchises, our primary focus will be on helping existing franchisees grow and become more profitable.”
• “We will provide the supplementary marketing and operational support to assist our franchisees in taking full advantage of their market potential.”
• “In addition to eventually growing the number of Sona MedSpa centers, we are equally committed to growing the number of company-owned locations.”

“Sona MedSpa is a proven concept, leader in the aesthetic industry, and is positioned for long-term success. We will bring the company to the next level using the experience we’ve gained from our accomplishments in North Carolina,” says Sona MedSpa International’s new President and Co-CEO Byron Ashbridge. “We have been franchisees, and strongly believe in the Sona MedSpa concept and brand. This positive experience will serve as the operational blueprint for the future. We also know the concept is a sound one and that the demand for personal aesthetic and wellness services will continue to grow.”

The new Sona MedSpa International will be based in Charlotte, North Carolina, where the company’s Business Development Center is located and the new training center will be established.

Founded in 1997, Sona MedSpa International, Inc. is one of the world’s largest medical spa companies, specializing in medically supervised aesthetic services in a luxury spa environment. Sona MedSpa’s offerings include the latest in laser hair removal, skin rejuvenation, botox and dermal filler injections, meso therapy and other fat and cellulite reduction services, medical-grade microdermabrasion, acne treatments, spider vein removal, and smoking cessation. Sona MedSpa centers are currently located in San Jose, San Mateo, Costa Mesa, Sacramento, Chicago, Grand Rapids, Raleigh, Charlotte, Greensboro, Las Vegas, Harrisburg, Memphis, Nashville, Richmond, Little Rock, Dallas/Ft. Worth, Virginia Beach, Newport News, Houston and Miami.

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 no radius protection with Q. technically speaking, if they wanted to open another store across the street from you, and could find someone fool enough to do it, they’re within their rights), and his sales dropped off 5%, which put him in the red to the tune of about $1100 per week. he offered the store to me at 80k, and i wasn’t interested. I am one of the “lucky” ones, in that I’ve very little debt, and an excellent location. For the time being, my store is making money. Unfortuantely, though, there is a lot of new development around me, and I am waiting for the day when Q decides that I am doing too well and opens stores closer to me. My store is for sale, along with his, and I am hoping i can sell the thing while it is still making money. The short of it is that Q is in the business of selling franchises, and they do this extremely well. Too well, if you ask any current franchisee. In the grand scheme of things, they would prefer that we make money than not, but it doesn’t much matter to them. Corporate makes more money from its supply chain. We’re forced to use their Q-approved vendors, each at a rate consdierably higher than we could find ourselves: accounting firm; CINTAS, a company which takes care of the rugs and towels; Vistar for food, chemicals and paper; Muzak…it goes on and on. The real shame of it is that Q doesn’t have to do business this way. It is ultimately self-defeating, in that no franchisor can alienate its franchisees to the degree Q has alienated us without serious repercussions. Quiznossucks.com is a natural by-product of the contempt with which Q treats its franchisees. If anyone is still interested in acquiring a Quizno’s store after all of my ramblings, and visiting quiznossucks.com, i would suggest that you go to bizbuysell.com, find an existing store in your area and save someone who is losing money, or someone like me, who has a store that is making money…for now. really! I am too young and nice looking for the headaches and stress!

This web site posted his projected monthly expenses based on $40,000/month in sales:

I think quiznossucks may have made a mistake in his numbers and the cash left over at the end of the month is actually a little less than he projected. He projected 9.4% or $45,120 left at the end of the year for the franchisee, but plugging the numbers into a spreadsheet nets 7.15% or $34,320 (perhaps he paid himself a small salary included in labor). Regardless of the $9K discrepency, the debt load and returns are not worth the risk for nearly anyone looking at this deal. I’ve uploaded a spreadsheet for you to play with the numbers for yourself. It makes for a simple planning tool/reality check for any franchise.

Download the Quiznos Profit Spreadsheet

McDonald’s is planning to offer lattes, cappuccinos and other specialty drinks in all 14,000 by 2009. Internal projections estimate a $1 billion boost in sales.

What is the cost to franchisees to upgrade?

Costs will vary, depending on the size and configuration of each restaurant. Franchisees must buy equipment to make specialty coffees, and, eventually, smoothies, as well as wall-mounted refrigerators for bottled sodas and energy drinks, and would have to remodel the counter and drive-thru service areas to make room for the equipment.

A franchisee who installed the new beverage equipment as part of a company test pegged the cost at $100,000 per restaurant, according to notes from a meeting of restaurant owners in August.

McDonald’s hopes to equip 1,500 restaurants to sell the new drinks by the yearend, with the rest on board by late 2008, the planning documents indicate. It’s the biggest change for McDonald’s since it overhauled its cooking procedures in the late 1990s to make sandwiches to order, says Dennis Lombardi, a restaurant consultant with WD Partners in Ohio.

As it rolled out that plan — the Made for You campaign — McDonald’s agreed to pay half of the estimated $25,000 per restaurant in equipment expenses for franchisees. But when the costs for the program exceeded the estimates in some restaurants, it caused hard feelings among some franchisees.

The test market numbers looked good:

In test markets including California, Georgia, Michigan and Texas, specialty coffee has increased customer traffic by 44% a week, an August memo from a franchisee group shows. The initial tests show the new plan doesn’t require more employees or slow down service.

Specialty beverages such as lattes have much higher profit margins than sandwiches. Sales in this new beverage category could rise by 90% in the next five years, generating $125,000 in annual revenue per store, according to company documents. McDonald’s estimates that those sales could mean additional annual profit of between $15,000 and $60,000 per restaurant, the documents show.

Potential buyout offer has support of family of founder Dave Thomas

COLUMBUS, Ohio – It was reported in the Mansfield News Journal 6 that the owner of 134 Wendy’s franchises wants to make a bid for the nation’s No. 3 hamburger chain with two private-equity firms.

David Karam, president of Cedar Enterprises Inc., said Wednesday that he and his partners have been invited by Wendy’s International Inc. to a second round of talks. He is backed by Kelso & Co. and Oak Hill Capital Partners.

“I’ve been involved in the brand,” he said. “I see the great potential of it.”

Cedar Enterprises, based outside Columbus, owns Wendy’sfranchises across the country that have a combined annual revenue of $200 million.

Karam’s first-round proposal was enough to garner entry into a second round next month, where bids are expected. He would not disclose how much he is willing to pay for Wendy’s, but said the company’s current stock price is rich.

Wendy’s shares rose 20 cents to $33.26 Wednesday.

“Fundamentally, there’s great upside with the brand, but the reality is no one wants to overpay,” he said.

Billionaire investor Nelson Peltz has said his company, Triarc Cos., is prepared to offer $37 to $41 per share for Wendy’s in a deal that would peg Wendy’s total value between $3.2 billion and $3.6 billion. Triarc owns the fast-food chain Arby’s and is also a major Wendy’s shareholder.

Peltz said in July that he and his allies had increased their Wendy’s stake to 9.8 percent of all outstanding shares.

Wendy’s formed a committee in April to determine how best to boost its stock price, including a possible sale. Wendy’s spokesman Denny Lynch and Peltz’s spokeswoman Carrie Bloom declined to comment Wednesday.

In the past year, Wendy’s has spun off its Tim Hortons coffee-and-doughnut chain and sold its money-losing Baja Fresh Mexican Grill following pressure from Peltz and other investors to boost the value of Wendy’s stock.

As a franchisee, Karam said he fears Wendy’s sales and product development would continue to stagnate under owners who do not know the chain as well as he does.

Karam’s father, Joseph, was one of Wendy’s original investors and became a franchisee in 1975. David Karam has run Cedar Enterprises for 22 years.

Karam has the backing of the family of Wendy’s founder Dave Thomas, said Pam Thomas Farber, Thomas’ daughter. The family would like to see the company turned over to someone involved in the company, she told The Columbus Dispatch, which first reported Cedar Enterprises’ bid.

“We don’t want the company to leave,” she said. “It’s been very hard on the family.”

Wendy’s, based in suburban Dublin, operates about 6,600 restaurants in the United States and abroad.

It trails rivals McDonald’s and Burger King.

Cross Posted at: Let’s Talk Franchising

In 1996, the bagel business was taking off, with several franchises expanding rapidly across the country. Franchises of Brueggers, Einstein Bros., Manhattan, Noah’s and Chesapeake were selling like hot cakes (bagels that is).

The prospects for the bagel business altered dramatically in June 1997 when Dunkin’ Donuts announced that its 2,000 stores would begin to sell bagels. This, in one stroke it became the largest bagel retailer in the nation.

At about the same time fresh bagels were being introduced in supermarkets across the country. In 1996 Modern Baking Magazine reported that Fresh bagels sales were up 50% in supermarkets and represented over $125 million in sales nationwide. By 2000 the total was over $400 million.

Bagels were now everywhere: big grocery stores, fast-food menus, middle-America cafeterias, even frozen-food sections. In 1988, Americans ate, on average, one bagel per month; in 1993, it was one every two weeks. According to Modern Baking (May 2007), fresh bagel sales are over $500 million dollars per year in supermarkets alone.

Some say even the Bagel itself changed, over the years bagels have undergone a transformation from small, dense, and satisfyingly chewy into large, puffy, and a mere platform for sandwiches.

Sales dropped, franchises stopped selling and the bagel franchises closed many stores.

Brueggers, Einstein Bros, aren’t just about bagels anymore. They all have re-branded themselves as bakery café’s.

Einstein Bros. Cafe is just one example of a bagel concept reaching beyond the bagel. Bruegger’s Enterprises Inc., based in Burlington, Vt., also has expanded menu offerings and started redesigns on its 250-unit Bruegger’s chain to place itself in the fast-casual segment.

Bruegger’s once famous for authentic boiled and baked bagels, now offer a variety of other stone-hearth baked breads, such as Ciabatta and the exclusive Softwich, a softer, square bagel ideal for sandwiches. The redesigned Bruegger stores now offer a warm, comfortable café setting for guests to enjoy breakfast, lunch and dinner.

Cross Posted at: Let’s Talk Franchising

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, multiply that by another 6-7 franchise brokerage groups that are trying to sell franchises of their own franchise brokering franchise, and you have some future headaches.

If you are reading this blog because you are thinking one day of investing in your own franchise as a way to “get where you want to go”, getting some advice and help makes sense. After all,there are over 3,500 different choices out there currently in franchising, and it does get quite confusing.
Here is the $100,000 question.  Would you want to work with:
A. A franchise consultant/ broker who like you, just lost his or her job, and is now a “franchise specialist” after a 2 week training program/
Or
B. A franchise consultant/broker who possibly either owned his or her own business before, or one that came from the franchise industry, and is now in another part of the industry?

If you chose A, are you really going to be comfortable working with someone who is new, and who is really learning about franchising at the same time you are? Are you really going to be comfortable with
their suggestions on how you should invest your $150+  in this new business venture?

If you chose B, at least you have access to a large number of folks who have already worked with this experienced franchise consultant/broker, and can share their personal  experiences with them.
However, working with an experienced  franchise consultant broker won’t guarantee success. Just like in any industry in which consultants get paid for a sale is the model, stuff can happen.

The bottom line is that if you are thinking about getting into franchise ownership, and you don’t want to do it on your own, using the right person can be very productive. Get references.

If you are thinking about buying a franchise brokerage franchise, make sure you know what you may be up against. {An industry that is getting ready to consolidate}

I really enjoy what I do. I get to help others with their dreams of business ownership. I get to do a lot of public speaking. {I was graced with good pipes..Here is a radio interview }
I get to meet some really smart people! All in all, my life is pretty darn good……

SoupMan Bid to Turn ‘Seinfeld’ Fame Into Empire Goes Off the Boil

David B. Caruso, Associated Press reports:

The chef who inspired the Soup Nazi character on “Seinfeld” makes a heck of a crab bisque, but a group of stewed investors says he’s having problems expanding his popular stand into a franchise empire.

Soupmaker Al Yeganeh closed his original Manhattan shop, famous for its strict ordering rules, in 2004 to focus on franchising Original SoupMan stores across the country. The company launched around 40 stores in its first two years and introduced its frozen soups to groceries.

But disgruntled franchisees say many of the new shops 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.

Other franchisees told The Associated Press they want out of their contracts because of poor profits or bad relationships with the company. Several have sent the company letters threatening to sue.

Kevin Long, whose Original SoupMan franchise in Scranton, Pa., lasted just one winter, accused the company of misrepresenting how much it would cost to open and run the business.

He and other franchisees said the company also had early problems with its bowl and cup sizes, which were larger than expected and inadvertently gave patrons more soup than they paid for, and never lived up to promises to provide a product line that would sell during the summers, when demand for hot soups is low.

“They are just trying to get as many stores open as possible, and they aren’t supporting them whatsoever,” Long said.

Prices of $7 to $11 per 12-ounce bowl also made it tough to attract repeat customers, he added.

At least three stores have closed, at least temporarily, in New York City. Shops also have shut in Myrtle Beach, S.C., Harrisburg, Pa., Boulder, Colo., Colorado Springs, Colo., and Ottawa, Canada.

Franchisees in locations including Stratton Mountain, Vt., and Ridgewood, N.J., have asked to be released from their contracts so they may try staying open as a different type of business.

Original SoupMan spokesman John Rarrick chalked up the store failures to the normal “growing pains” associated with any new restaurant franchise.

“This is very common,” Rarrick said.

Of the struggling stores, he said, “They were really pioneers, and certainly there are risks associated with being a pioneer.”

Rarrick said the company had fixed the problem with the bowl sizes, abandoned an early idea of having most of its franchises operate as inexpensive carts and kiosks and struck a deal with Cold Stone Creamery that will create hybrid stores that will sell soup and ice cream.

He added that the soup company had delayed a plan to open 50 franchises in Britain while the it refined its business model.

“There are some really happy, really successful franchisees,” he added.

Original SoupMan opened its first stores in 2005, simultaneously capitalizing on and distancing itself from the “Seinfeld” episode that made Yeganeh famous.

On the show, a steely eyed chef makes his patrons follow a strict set of instructions dictating how they must order their soup, and he barks “No soup for you!” at those who fail to comply.

In real life, Yeganeh’s Manhattan store had similar rules posted: “THE LINE MUST BE KEPT MOVING. Pick the soup you want! Have your money ready! Move to the extreme left after ordering!”

Yeganeh, though, chafed at the Nazi nickname, which he felt insulting, and has discouraged his franchise owners from mentioning “Seinfeld” or saying “No soup for you!” on the job.

Crosds Posted at: Let’s Talk Franchising