Franchising in New England

Professor and Chair of Boston University’s Marketing Department and renowned expert on Franchising

The DD Independent Franchise Owners Group, which represents the largest association of Dunkin’ Donuts franchise owners in the U.S., is pleased to announce the addition of Professor Patrick Kaufmann to its Board of Directors.

Kaufmann holds a BA in Economics from Georgetown University, a JD from Boston College Law School, an MBA from Wharton, and a Ph.D. in Marketing from Northwestern University. Prior to joining Boston University, he was on the faculty of the Harvard Business School and Georgia State University, and practiced law in Boston.

Professor Kaufmann is on the executive committee of the International Society of Franchising; he chaired the organization in 1992. He has also served as a member of the Education Committee of the International Franchise Association and is a member of the New England Franchise Network.

Kaufmann says, “I am delighted to be joining the DDIFO Board and to have the opportunity to work with the Dunkin’ Donuts franchisees.  I look forward to assisting the DDIFO Board in its efforts to help franchisees operate profitably in this difficult economic environment.”

Kevin McCarthy, the Chairman of the Board of the DDIFO, echoes Professor Kaufmann’s comments, “We are delighted to have Professor Kaufmann join our Board. Pat’s impressive professional background, combined with his collaborative and creative business style, makes for an excellent strategic fit with both the mission and franchisee membership of DDIFO”.

NEFA Member William (Bill) Buckley of Bangor, ME and President of Coffee News USA, Inc.  announced the purchase of the parent company and owner of intellectual property rights for the Coffee News franchise system, 2703203 Manitoba, Inc., located in Winnipeg, Manitoba.

Bill has operated the company under a Management Continuity Agreement since March 1, 2006, when founder, Jean Daum, became serious ill with cancer and died July 23, 2007.

Jean Daum founded Coffee News October 22, 1988 in Winnipeg, MB.  After placing her lunch order, Jean resorted to reading the information on a sugar packet out of sheer boredom. It dawned on her that restaurants were missing the boat by not providing patrons with something entertaining to read for a few minutes while waiting for their food.  After six months of research, Coffee News was born and has now risen to become the world’s largest restaurant publication and the world’s largest franchise publication with an estimated readership of over 8 million every week.

The purchase includes all stock of the corporation from the Estate of Jean Daum, the copyrights and trade dress of the publication and all existing franchise agreements in force in 32 countries.  Manitoba, Inc. will continue printing operations in Winnipeg, Manitoba where Coffee News has been publishing for 20 years.  In addition to Coffee News USA, Inc. in Bangor, ME, the newly acquired company maintains Head Offices in Brazil, Canada, Mexico, New Zealand, Spain and Venezuela.

Irene Tolman of Coffee News Worcester a franchisee since 2000, says, “Bill has been a strong force in the growth of Coffee News and having him at the helm will make people more comfortable by knowing he’ll keep Coffee News going and growing.” 

Irene goes on to say, “the people who oversee the franchise work long hours…Bill’s dedication is amazing! Whenever I call or e-mail Bill he replies within the day (mostly within the hour)…always in a pleasant way and always with an answer. Who can say that about their franchise owner?”

Created during an economic recession, Coffee News has grown in circulation dramatically in both good and bad economic times.  Coffee News contains fun filled, good news and positive information to entertain while waiting.  Community based-businesses are allowed to purchase exclusive ads, thereby targeting restaurant patrons while they dine.  The restaurants receive a weekly quantity of Coffee Newses free of charge.

Coffee News reported 1142 franchises in force as of July 31, 2008 in 32 countries.  Only about 2% of all franchise systems in the world have more than 1100 franchise units.

Dees Stribling, Contributing Editor for Commercial Property News states in an interesting article that:

“The sale-leaseback deal was mostly invented to provide an alternate source of capital for a company that dislikes too much debt, or simply wants more capital than its bank cares to lend it. These days, it seems, that alternative can be all the more useful for corporate finance, now that banks in general are hesitating to lend, regardless of the creditworthiness of the borrower.

One real estate owner tapping into the sale-leaseback source in a big way recently is DineEquity Inc., franchisor and operator of Applebee’s Neighborhood Grill & Bar and IHOP Restaurants, which just inked deals with an assortment of buyers to sell 66 Applebee’s company-owned restaurants in Houston, Dallas, Texas and Albuquerque.

These deals come immediate after the company completed the sale of 15 company-operated Applebee’s restaurants in Nevada, and earlier this year, DineEquity sold 29 company-operated restaurants in southern California and Delaware.

All together, these transactions represent 110 locations, and the company is looking to sell more. DineEquity expects to generate about $63 million in after-tax cash proceeds from the sale of the 110 Applebee’s restaurants. An additional benefit to the company is that the locations are mostly Applebee’s lowest profit-performing restaurants, the sale of which will remove their negative impact from DineEquity’s P&L statement.

“We’re actively negotiating with several interested buyers for each of Applebee’s remaining company-operated restaurants available for sale,” said Julia A. Stewart, DineEquity’s chairman and chief executive officer. “While the chill in the credit markets presents a challenge to our refranchising efforts, we believe it isn’t insurmountable.”

But where to find the buyers? DineEquity, for one, is fortunate in that a number of its new franchisees are interested in becoming owners. “The sale transfers the stewardship of these Applebee’s to the hands of experienced restaurant operators new to the system, who are capable of delivering a higher level of performance in these markets,” said Stewart. “They believe in and are committed to Applebee’s brand revitalization efforts under way.”

For example, in the sale of 22 company-operated restaurants in Houston, Wellington D. Yu, a franchisee new to the Applebee’s system, is the buyer. Yu is the president of the Peterson Group Inc., a real estate development and management firm, but has been involved in the restaurant industry for more than 25 years as a franchisee of various brands, including McDonald’s.

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Rhode Island, which in recent years has been lauded for its job and productivity growth, saw its unemployment numbers skyrocket last month. “In the 10 years that I have lived in Rhode Island, we have had an economic development policy that has been directed toward failure,” said Edward M. Mazze, a professor of business administration at the University of Rhode Island and a former dean of the business school.

In the Boston Globe Eric Moskowitz  writes:

“Even more than the gleaming new condos or the boom of restaurants and stores in the heart of this old mill city, the regular WaterFire festivities are held up as a signature of the rise from industrial decay, drawing jubilant crowds and their money. But as thousands thronged the bonfire spectacle this month, some noticed a troubling, if subtle, absence: shoppers.

We were slammed with people, but nobody had any bags in their hands,” said Eli Fernandez, who works at a cellphone kiosk in Providence Place, a vast mall that opened in 1999 as a centerpiece of Providence’s renewed prosperity.

There are other clues of something amiss. In residential neighborhoods around the city, a litter of “For Sale” signs. In nearby West Warwick, a young waitress pawns jewelry to make ends meet because tips are declining. To the south, in the mill village of Peace Dale, a food pantry for the needy sees a near quadrupling in the number of families enrolled in its emergency meals program - from 261 enrolled a year ago to 905 now. “Every day there’s new people,” said Susan Gustaitis, executive director of the Jonnycake Center. “It’s not slowing down.”

Rhode Island, just a few years ago celebrated for job and productivity growth, is suddenly reeling - with some indicators showing the worst economic climate in 17 years. According to figures released yesterday by the Bureau of Labor Statistics, unemployment ballooned in September to 8.8 percent, the highest rate in the nation, and the state’s annual job-loss rate was un equaled. Even Providence, the capital city that has drawn national headlines over the past decade for its downtown renaissance, is looking at a housing collapse and retail contraction.

“It’s real bad, man,” said Joel Diaz, who works at the Providence Place phone kiosk with Fernandez and who knows several people who have lost jobs, faced foreclosure, or both. “Some are just going crazy now because of it.”

It is a precipitous fall for a state that three years ago boasted the highest job and productivity growth in New England, and it has set off a flurry of blame. Public officials are scrambling to retool economic development policies and defend the state’s image, contending that Rhode Island has been pulled down by national and international currents; the sudden downturn reflects temporary growing pains, they say, as the state tries to move from manufacturing to an information- and innovation-based economy.

 

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New coalition advocates national nutrition standard for chain restaurants, detailed nutrition information for consumers.

A coalition of interested parties and foodservice establishments announced today that it will support federal legislation that provides consumers with detailed nutrition information in chain restaurants and other foodservice establishments using a uniform national standard.

Legislation has been introduced by Senator Tom Carper (D-Del.), Senator Lisa Murkowski (R-Alaska), and Congressman Jim Matheson (D-Utah), which provides consumers across the country with nutrition information in a uniform, predictable way.

The Coalition for Responsible Nutrition Information (CRNI) was formed to ensure that consumers across the country will have access to detailed nutrition information when they dine out. Americans are becoming more health conscious and have a growing interest in the nutritional value of the food they eat. The Coalition is launching with more than thirty companies and associations that represent restaurant owners and franchisees, food manufacturers, distributors, suppliers, business organizations and health organizations.

“We believe consumers who visit chain restaurants should have access to detailed written nutrition information in a consistent and convenient manner. The only way to make sure this happens is by creating a uniform, national standard,” said Dawn Sweeney, President and CEO of the National Restaurant Association. “When different rules exist in various parts of the country, it makes it difficult for consumers to compare options. Consumers deserve a federal standard that provides access to the same nutrition information no matter where they are or where they live.”

Recently, several cities, including New York and Seattle, passed menu labeling laws requiring restaurants to provide consumers with calories or a limited range of nutrition information. This approach will not provide all consumers with all of the detailed nutrition information they may want when they dine out. In addition, providing limited nutrition information on a city-by-city or state-by-state basis creates a patchwork quilt of confusing and contradictory local regulations.

In addition to numerous state restaurant associations and state retail associations, Coalition members include Auntie Anne’s Pretzels, Blue Cross Blue Shield of Florida, Brinker International, Burger King, Carlson Restaurants Worldwide, Darden Restaurants, Domino’s Pizza, Dunkin’ Brands, Grocery Manufacturers Association, International Dairy Queen, International Foodservice Distributors Association, International Franchise Association, McDonald’s, National Chicken Council, National Council of Chain Restaurants, National Fisheries Institute, National Franchisee Association, National Restaurant Association, National Turkey Foundation, OSI Restaurants LLC., Sonic, and White Castle.

For a complete list of members got to: CRNI Members

NEFA Member, Franchise Business Review announces a webinar for franchise seekers.

Wednesday October 22 - 1 PM ET (60 minutes). Register Now

What Makes a Franchise Great? How Do You Choose the Right Franchise for You? How Can You Be Successful in These Challenging Economic Times?

This webinar is designed to give franchise seekers information regarding business ownership. Hear from current franchisees of some of today’s top franchise systems and learn about the steps they took to successful franchise ownership. Included in the webinar will be information about how to choose opportunities that fit your needs, how to research a franchise company, how much money can you really make, pitfalls to avoid and the steps you have to take to be successful.

Hosted by Franchise Business Review’s Eric Stites and Michelle Rowan with a special guest franchisee panel including:

Lori Sitko, Budget Blinds          Steve Cox, i9 Sports
Clint Ehlers, FASTSIGNS         Sharon Boretsky, Adventures in Advertising

What will be discussed

• What are the top franchise opportunities in the marketplace today?
• Researching franchises successfully
• Which franchises are the best fit for you?
• How much capital do you really need and where can you get i?
• The most common mistakes and how to avoid them
• How much money can you really make as a franchise owner?
• Other tips and advice from our panel of franchisees

Register for this webinar.

NEFA Member, Uno Chicago Grill, opened its newest restaurant today at the Neshaminy Mall in Bensalem, PA. Franchise Partners Tom and Angella Bock of The Bock Group also own and operate seven other Uno restaurants in Pennsylvania and New Jersey and are Uno’s largest multi-unit franchisees. The Bock Group has also secured the real estate to open two more Uno restaurants: one in Newton Square, PA and the other in Oaks, PA.

The Neshaminy Uno is the first of six new Uno restaurants to open within the next 45 days all over the world. Included in this group is the greatly-anticipated launch of Uno’s newest fast-casual brand — Uno Due Go — which will open two units in DFW Airport in Dallas. Additionally, three more full-service Uno Chicago Grills will open in Dammam, Saudi Arabia; Kuwait City, Kuwait, and a premier location at the Mall of Dubai, soon to be the world’s largest mall. All of these restaurants will be open by mid-November.

Uno stands out as one of the few restaurant companies continuing to aggressively develop new locations despite constricted capital markets.

The Neshaminy Mall Uno restaurant in Bensalem, PA provides jobs for over 130 people and features a menu with over 100 items, including steaks, salads, burgers and, of course, its legendary deep dish pizza. The restaurant design and initial training features the newest “Uno Plus” enhancements first introduced at openings held earlier this year in Massachusetts, Florida and Virginia. Uno Plus enhancements include upgraded, experiential graphics and modern building design as their most notable features, as well as emphasis on staff training, hospitality and service refinements.

“We are big believers in the Uno Brand and offerings, and our restaurant teams look forward to continued growth in the Philadelphia area,” states Tom Bock.

Accounting Today has announced that NEFA Member, Padgett Business Services President Roger Harris has been named to its “2008 Top 100 Most Influential People in Accounting” list. Padgett Business Services, a leading franchisor of financial reporting and tax consulting services to small business owners.

This year’s list, entitled “New Frontiers”, focuses on the abounding changes in the accounting industry and details how the individuals featured in the Top 100 are impacting and advancing the field. The list includes not only accounting professionals but also government officials and regulators.

“The profession stands poised to cross the threshold into largely unexplored territories, such as the inevitable convergence of U.S. GAAP and International Financial Reporting Standards, new technologies, a potential revamp of the Tax Code and dizzying changes in workforce demographics,” said Accounting Today editor Bill Carlino. “This year’s Top 100 People roster includes many of those who are spearheading the profession’s journey into these brave new worlds.”

Padgett Business Services is at the forefront of this journey, educating policy-makers and shaping legislation in Washington. Through the efforts of the Padgett Foundation, Padgett Business Services® is actively participating to ensure that new regulations enhance the accounting profession; Harris recently testified on behalf of Padgett in the IRS hearings on one of the most pressing issues in the accounting industry today — preparer penalty rules.

However, the primary focus of Padgett’s work in Washington is to shape legislation so that it benefits America’s small business owners. Acting on behalf of Padgett’s small business clients throughout North America and associations of tax practitioners, Harris has testified several times on IRS reform and has testified before the Senate Small Business Committee and the House Ways and Means Committee. He has also been featured as an expert panelist on Tax Talk Today, the IRS monthly web-cast.

Accounting Today describes Harris as “a veteran tax policy advisor to the IRS and Congress, his influence and insight are welcomed in Washington as well as on Main Street.”

This is not the first time that Padgett Business Services has appeared on the “Top 100 Most Influential People in Accounting” list; Vice Chairman Dan Sautner has also been honored on the list and Accounting Today has recognized Padgett in the past with the following citations: Top 100 Firms, Top 10 Fastest Growing Firms in America (without merger for growth), Merit Award for Achievement in Client Service, Gold Medal Award for Achievement in Client Service.

Not only is Padgett recognized as a leader in the accounting industry, but they are also recognized as a leading international franchisor. Padgett has been ranked as a top franchise by Success, and Income Opportunities magazines, and was also ranked in Franchise Business Review’s Franchise 50 2008 Franchisee Satisfaction Awards.

Learn More about Padgett Business Services

Utilizing Retirement Savings as a Funding Source.

With small business loans and second mortgages scarce these days, some middle age entrepreneurs are starting companies using their retirement savings, a novel financing method that is helping people get into their own business.

Jon Wilson and Larry Blasier discovered the retirement financing option when together they decided they wanted to open a MAACO Franchise in San Luis Obispo, CA.

Jon and Larry shared a passion for restoring cars and were excited when they were approved to build a MAACO in their community. Jon has worked 21 years for the California Department of Corrections and Larry has worked 27 years for Long Beach Transit.

They both knew that this was what they wanted to do. The investment required to open a MAACO was approximately $296,500.00. That was more cash than they had available so they needed to assemble a financing plan. IRA Rollover Solutions of Kirkland, WA a NEFA Member set up a C Corporation for them, a designation which allows a company to issue private shares of stock. Then a profit-sharing retirement plan was created within the corporation, making it eligible to accept pretax retirement contributions, without penalty or tax consequences.

Both Jon and Larry rolled over $75,000 each from their retirement savings, into the profit-sharing plan. As a result, the C Corporation could then use the money to invest in a MAACO franchise. They were also able to secure an additional $350,000 thru a SBA Loan provided by Small Business Loan Source, of Houston TX. The SBA Loan came in at 2 ½ points over Prime for 10 years 6 months, with the first six months interest only.

Jon Wilson knew right away when he contacted IRA Rollover Solutions, “this company was the right one for us. Rick Cox and Tom McDonald knew exactly what we wanted to do and handled the whole process with ease. We were never in the dark about anything and they were very professional in all aspects of getting our corporation established and us getting the start up money we needed.”

Jon and Larry have worked hard other the last few months is getting their MAACO franchise off the ground they signed a lease in August at 770 Capitolio Way, San Luis Obispo, CA 93401. They are scheduled to open by December 1^st.

Darrell Johnson of FRANdata presented the 2009 Franchise Economic Forecast at the Franchise Updates September Leadership & Development Conference  (download your copy of the FRANdata report here). Darrell reports that the the economic downturn is clearly going to impact many aspects of franchising, none more so than access to capital. The capital markets are effectively shut down right now, forcing banks to put loans on their balance sheets. Even if that changes soon, banks will be slow to open up lending channels in the face of the downturn and after the unprecedented capital losses they have encountered in the mortgage markets.

Planning for next year is becoming more challenging than for any year in this decade, however, there are some trends and patterns to be seen as we head into the 4th quarter of 2008 that give an indication of where things are headed next year for the franchise community.

The exception is SBA lending, which still has a vibrant secondary market and should see a significant increase in activity as banks turn business customers towards their SBA lending units. In general, banks are becoming much more conservative in their lending programs, both with regard to underwriting criteria and with loan terms, assuming they are willing to lend at all.

While capital access is an ongoing issue, franchise development clearly is slowing for other reasons as well. Combined with flat or declining system-wide revenues for many brands, the emphasis in 2009 will naturally turn more to the cost side of the business. We are seeing an increase in interest in bench-marking many areas of franchise activity.

2009 will present some unique challenges to the franchise community. Having reliable information with which to base planning decisions is a primary role of FRANdata. The compensation survey came about as a result of inquires from franchisors. We listen, find ways to fill in the data gaps, convert data to information, and give you a better basis to make critical business decisions. Give me a call with your questions, issues and thoughts.

Download the 2009 Franchise Economic Forecast given at the September 2008 Leadership & Development Conference