Most restaurants have or would live to have a thriving catering business to augment sales.  A restaurant with a successful catering business typically increases sales sales by10% to 20%.  Here is a great article with advice from experienced caters on equipment, deposits, and marketing.  

“Our biggest catering customers are schools, offices and churches,” says Preston. “We market our service on our menus, on the Web, in the paper, and in schools and offices. We also hand out catering information at functions, feature it in our EClub newsletter, visit local businesses and leave info (then follow up with a phone call), and get involved in local charity events.” If you’re worried about spending too much money on advertising in the beginning, Skvorecz says, “Start slow and advertise to your existing customers by printing out your offerings and placing an easily visible sign on your countertop. Get through a holiday period and see how it goes; then consider expanding your ads into the Sunday paper or other media.” The possibilities for game days alone are amazing, according to Skvorecz. You can free up a lot of your time on days such as Super Bowl Sunday if customers have called ahead to cater their parties and already have their food before the game even starts.

“I can’t stress enough how important it is to have the proper equipment,” says Preston. “Keep your hot food hot and your cold food cold with a stackable Cambro (hot box); invest in midto high-quality chafing dishes; and don’t forget your canned heat! Make sure all catering platters, plates, flatware and serving utensils are kept in storage, and never (unless you want to buy more) put them into restaurant/pizzeria circulation.” Preston also advises being a stickler for details: “Be sure to qualify special requests and leave no loose ends,” he says. “The devil is in the details; I use email, which gives me a written record, which wins all discussions.” Get a deposit, too: “I shoot for 50% and will accept no less than 25%,” he says. “Of course, that can change with repeat customers.”

U.S. News & World Reports takes a stab at listing the healthiest fast food restaurants.

1.  Panera Bread
2. Jason’s Deli
3. Au Bon Pain
4. Noodles & Company
5. Corner Bakery
6. Chipotle
7. Atlanta Bread Company
8. McDonald’s
9. Einstein Bagel Bros.
10. Taco Del Mar

 Implyign that everything on the menu is “healthy” is decieving.  For example, a single burrito at Chipotle is likely to have 1,500 calories. 

Panera to experiment in Chicago with a greatly expanded catering strategy.

He said Panera has long provided catering, but “it’s always been an afterthought” to its restaurant business. He wouldn’t disclose financial numbers except to say that catering accounts for a very small percent of sales. The chain has more than 1,200 U.S. locations.Mr. Tristano said any new packaging that keeps the food fresh is a key to successful catering as well as competitive prices and timely service.Panera’s catering costs about $5 per person for breakfast; lunch ranges from about $8 to $12 per person. Mr. Rand said the chain will analyze the success of the new catering efforts in the next year and decide weather to expand the ideas nationally.

The pizza industry is in a larger downturn than I would have predicted.  Papa John’s is even delaying scheduled increases in their royalty: 

Papa John’s, meanwhile, is extending sweeping financial assistance to its franchisees. The company is delaying for at least six months an increase in its royalty rate on sales to 4.5% from 4%. It also is rolling back the royalty it collects on Internet-generated sales, a fast-growing part of its business, to 2% from 3%, and markedly cutting the price of cheese it sells to franchisees. Finally, those franchisees suffering the most will get special marketing support.  

While hamburger chain McDonald’s Corp. has posted consistent gains in its domestic same-store sales, with 4% growth in 2008, U.S. franchised same-store sales at Domino’s fell 1.7% in 2007 and 5.6% in the first nine months of 2008. Papa John’s is predicting its same-store sales will be flat to down 2% this year, and Pizza Hut, whose same-store sales slipped 1% in the fourth quarter of 2008, is off to a slower start than expected this year, according to Yum, which has called the division its biggest challenge.Pizza’s woes started before the current recession gripped the nation. Figures compiled by Chicago-based restaurant-consulting firm Technomic Inc. show that while the overall U.S. fast-food category experienced compounded annual growth of 6.4% from 2002 to 2007, pizza sales rose only 2.5% during that period.

Day’s Inn paid $600,000 for a shooting that occurred in a franchisees parking. Details and arguments below:

The national chain argued that it was a separate entity and that it did not maintain sufficient control over the local franchisee such as to establish an agency relationship.

….

The one area not specifically dealt with in the manual was guest safety. The victim’s lawyer argued that the chain’s failure to address security did not relieve it of liability for the negligence of the franchisee. The Trial Court agreed.

Both the local motel and the franchisee were liable to the victim because the area of Exit 97 off Interstate 95 where the Selma Days Inn was located had a long history of criminal activity including a pair of armed robberies at a hotel next door just two weeks before the victim was shot. Evidence would have been that the motel franchisee and the chain failed to take adequate precautions to protect their guest, including the victim.

After the Judge refused to release the national chain, the defendants agreed to $600,000 to settle the case.

The actual photo of the Selma Day’s Inn is to the right.

A 26-year-old woman became the youngest franchisee in the Schlotzky’s system. Is she too young? You may think, until you read this:

Jessica Johnson worked at the Schlotzky’s in Teays Valley for nine years – working her way from cashier to manager.Then in October, even though some people thought it was a little crazy, Johnson got a Small Business loan and bought her very own store.That made her the youngest franchisee in the Schlotzky’s chain.”I was not scared to do this because I believed 100 percent” Johnson said. “I knew it was something I wanted to do and if for whatever reason it didn’t work out I knew there was someone looking out for me and it wasn’t meant to be.”Johnson says she has been focusing on catering, delivery and customer service to keep profits up despite the economy.

She is probably more experienced and ready than 90% of Schlotzky’s independent franchisees.

You would think that if a retail business closes, those lost sales would be reallocated to other stores in the area. Brownsville, Texas is finding that not to be the case when stores such as Mervyns, Hooters, Taco Cabana, Circuit City, Starbucks, Petco, Kay-Bee Toys and Linens-N-Things closed.

During less tumultuous circumstances when one store or restaurant closes its sales shift to another business. But these are extraordinary times. As stores have closed it appears they are taking a portion of their sales receipts.According to Pete Gonzalez, deputy city manager and chief financial officer for the city of Brownsville, sales tax allocations are down more than 1 percent through the first four months of the fiscal year starting in October.And the trend could be accelerating. Total collections for January and February of 2009 are down 7.1 percent compared to the same period in 2008, according to the office of the Texas Comptroller of Public Accounts.

Other city’s sales tax “revenues” are down compared to the same month last year, too:

• Denver, CO down 8.4%
• Nassau County, NY down .9%
• Chandler, AZ down 16.8%
• Montgomery, AL down 10%

Longview, TX was up 6.5%, Norman and El Reno Oklahoma were both up about 17% while War Acres, Oklahoma was up 38%.

The very popular Potbelly’s in Chicago appears to be getting ready to franchise after opening 200+ company owned units.  Even though their web site still denies franchising is in the works, this job description has the following requirement:  

Must have franchisee expereince and knowledge of how to manage a mix company franchise system         

Photos and some random YouTube video of Potbelly’s are below the fold for you Chicago virgins. Read More »

Too funny….

The Sizzler restaurant in Antioch will stop serving students during school hours. It’s a way to stop them from cutting class.

Call me crazy, but I would rather kids hang out at Sizzler than hang out totally unsupervised somewhere else!

Australian franchisees have similar gripes to U.S.A. franchisees – disclosure issues and the renewal rights in agreements for franchisees.

It has not always been so crystal clear when a franchise chain collapses and there is an urgent need to clarify the legal rights, obligations and ranking of franchisees in a liquidation or sale of the business by receivers.           

The article brings up an interesting ethical question:  Is it legal or ethical for Franchisors that are at the brink of collapse to recruit new franchisees to their stricken businesses even as they face the very real prospect of bankruptcy?   

In my opinion, the legal and ethical answers are similar.  The franchisor must not lie or mislead in the sales process and it must disclose risks accurately, but within those boundaries it should do what is necessary to survive. 

Does a cash starved franchisor have tell a prospective franchisee – “We need to sell 10 more franchises this year or we will go bankrupt and you will lose your license” ? No, I do not believe that is or should be a requirement because many businesses live on the edge of financial survival.  But, if the franchisor knows that bankruptcy or winding down the business is a 100% certainty, I do believe the franchisor should ethically stop selling franchises, inform the franchisees of the situation, and work out a sale of the assets in the best interests of all stakeholders.  Franchisors who sell a few more franchises just to pay off some bills or salaries as they wind down the business are indeed unethical.

Being a franchisee in a larger system does have advantages if the franchisor goes bankrupt.  The likelihood is very high that some group will acquire the assets and enable the franchisees to continue operating.  Or, worst case, the franchisees themselves could come together and buy the franchisor’s assets out of bankruptcy.   Small bankrupt franchisors have such little book and IP value that there typically scant interest from investors.

How is a franchisee to know if the franchisor is near its end? The only sure way to know is to analyze at the franchisor’s financial statements such as it’s cash flow and balance sheet. If you don’t know how to do that, HIRE AN ATTORNEY OR ACCOUNTANT/FINANCIAL ANALYST TO GUIDE YOU!

Ontario attorney Michael Webster blogged on this franchisor bankruptcy issue last year. 

Rick Romell from the Sentinel Journal in Milwaukee called me to discuss the Meal Prep industry a few weeks ago.  He produced an informative article which can be read here.

Imagine if you were a franchisee and a mystery shopper from the franchisor anonymously visited your store and ordered a sandwich.  The meat in the sandwich you served happened to be 1/2 an ounce smaller that the standard 4.5 ounces.  Would it be fair to lose your franchise because of default?  You did break the rules, eh?  But what if was really a charade to encourage compliance?This was the situation a Denver court had to deal with.    The final judgment was that Quiznos had in fact breached the contract by wrongfully terminating the defendants, and awarded them $349,797.http://blogs.westword.com/cafesociety/2009/01/quiznos_gets_grilled_in_a_new.php

I would hate to be a franchisor in the meal assembly business right now.  They have been getting hammered in the press almost weekly across the United States. 

Here are articles JUST IN THE PAST WEEK!

• Losing Their Appetite, The Columbus Dispatch (I am quoted in the article)
• Investor Sues Failed Suzanne Somers’ Meal Prep Business, Lexington Hearld Leader

The only bright spot is that pre-assembled carry-out meals seems to be working, which ironically is opposite of the initial premise of the business.   Can this pre-assembled model save the industry?  Probably not, because most people know that business model simply as a “carry-out restaurant”.

The meal assembly business concept sounds enticing – a fun business with an obvious benefit where professional women socialize as they prepare healthy meals for their households, leaving the mess behind.  If you were thinking of getting into this business and asked your friends their opinion, most would say “Yeah, that sounds like a cool business.  I’d use it!”  But, your friends would be leading you estray.  Unfortunately, “good ideas” alone won’t make you money or ensure a sustainable business. 

The primary problem with this industry is getting customers in the door and keeping customers coming regularly (like most businesses).  Franchisees had everything going against them and stood little chance of succeeding –

• higher rents in high-trafficed streets,
• no initial brand recognition,
• requires change in customer habits,
• requires times and hours on the customers part,
• most need to be educated on the concept and its benefits
• easy concept for franchisors to develop and launch, so competitors came fast
• customers’ brand loyalty is negligible
• most ingredients more expensive “all natural” and “organic”;  higher rate of perishables

I hope this industry can work things out, primarily because it does offer a convenient service that can help families be healthy.  And healthy, less stressed families are generally happy families. 

If I was CEO of one of these companies, I would scale back and only roll out cities with a minimal number of units to leverage advertising.   I would hire great PR and advertising firms to get attention and help develop partnerships.  I would focus on margins and only offer lower-cost meals that met a certain profit margin.

Burger King complained to the National Advertising Division (NAD) of the Council of the Better Business Bureau regarding “Wendy’s, Always Fresh, Never Frozen” burger claim. Long story short, Wendy’s substantiated their assertion. Fresh is possible, Burger King.

Former Petland Inc. franchisees are suing the Chillicothe chain for fraud, alleging the stores are doomed from the start – and the company knows it….Melick estimates the average investment per franchisee totals up to $250,000, and the firms have been in contact with more than 40 franchisees.

The lead plaintiffs claim Petland fraudulently induced them to start a pet store when it knew, or should have known, the shops couldn’t succeed. A major allegation from franchisees, Melick said, is that pets supplied to the stores through Petland’s vendors were sick or dying.

Melick compared the franchisees’ problem to a restaurateur opening a new business and sending dozens of people to the hospital for food poisoning in its first weekend.

“For a large group of these franchisees, sick puppies is a problem when they open,” he said. “You just can never recover.”

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