Franchising in New England

It was reported today in Convenience Store News that New England Pantry Inc., a NEFA Member, and franchisor of White Hen Pantry convenience store franchise brand, launched a new upscale concept called Pantry Gourmet, a 3,200-square-foot store that crosses several retail channels, the company stated.

New England Pantry, the master franchisor of the White Hen Pantry brand in Massachusetts and New Hampshire, operates 56 locations, none of which were involved in the 2006 sale to 7-Eleven, the company stated.

The Pantry Gourmet store, located in Northborough, Mass., features a full-service Chock Full o Nuts Cafe, complete with dark roast coffees, lattes, cappuccinos and smoothies, along with store-baked pastries, desserts and Cheesecake Factory cheesecakes, the company stated.

The store also boasts a 12-foot expanded produce section, an organic coffee bean kiosk from Hogan Brothers of Framingham, Mass., and a small housewares department featuring Village Candles, according to the company. The store’s dedicated, full-service foodservice section is the largest in the company’s history, and its grocery section offers a mix of traditional, specialty, natural and organic items, which was created to offer Whole Foods shoppers an alternative to their “fill-in” shopping, the company stated.

In addition, the store’s deli offers Dietz & Watson premium deli meats and cheeses to make a variety of sandwiches, wraps, ciabattas and personal pizzas. Soups are also available through the Pantry Gourmet kitchen stove, while a three-tier octagonal display case features an assortment of cut cheeses, specialty breads and crackers, natural beef and chicken selections, the company stated.

While a number of these changes were incorporated into New England Pantry’s White Hen stores during the past several years, “We found that consumers already had a strong, preconceived notion of what a White Hen is and does,” Christopher Brosco, director of marketing and merchandising, said in a statement. “Ultimately, this became a limiting factor in trying to advance the brand and make it more contemporary. Customers were uneasy when we took the stores too far left or right of center.”

As a result, the White Hen name was minimally referenced, and a new logo was created in an effort to move forward with the least resistance, the company stated.

It is never easy to make a well-established brand, like White Hen, take a back seat,” said Brosco. “But, facts and research led us to believe that consumers would not let us make this big leap forward if the White Hen name was over the front door. We needed consumers to enter this prototype with a clean slate — no preconceived notion of what takes place within the four walls.”

In addition, the store does not offer lottery and has scaled down a tobacco set to less than 30 nonvisible facings, according to the company. The store’s design features a Southwestern color palette, an open ceiling, accent lighting, bistro tables and chairs and a floral department, the company stated.

To develop the new concept, company executives researched retailers, delis and grocers in New York.

“Here, we were able to understand how to incorporate many different fresh food concepts into a single, small format location,” Andrew Brothers, president of New England Pantry, said in a statement. “We also learned a great many ways to merchandise a wide array of products within a limited space.”

On January 23, 2007, the Federal Trade Commission (FTC) issued amendments to its Franchise Rule, which had been in place since 1978.  The Amended Franchise Rule is mandatory as of July 1, 2008. One of the provisions of the Amended Franchise Rule is the requirement to disclose independent franchisee associations and organizations.

Many franchisee advocates including the American Association of Franchisees and Dealers (AAFD) a NEFA Member, submitted comments to the FTC as the FTC went through its rule-making process.

The AAFD participated in round table conferences regarding franchisee associations, and filed lengthy commentary on a number of occasions (copy of comments). The AAFD was instrumental in securing the new obligation for franchisors to disclose independent franchisee associations in the Franchise Disclosure Document (FDD).

The FTC report makes specific reference in a footnote confirming that AAFD chapters qualify as independent franchise associations that are entitled to disclosure under the FTC Rule.

The Amended Franchise Rule should result in prospective franchisees receiving more useful information than they had been receiving under the previous UFOC guidelines.

Further, the Amended Franchise Rule’s requirement to disclose associations will give associations more power to play a positive role in working with the franchisor.  Since prospective franchisees will learn about the association in the FDD, and will be given contact information, prospective franchisees are very likely to call the franchisee association for comments.

For an independent franchisee association to qualify, it must meet two requirements.  First, it must be “incorporated or otherwise organized under state law.”  Second, on an annual basis, associations must, request the franchisor to include the independent franchisee association in the franchise disclosure document by submitting a request no later than 60 days after the close of the franchisor’s fiscal year.

For more information on how create a franchisee association visit the website of the AAFD

UFood Restaurant Group, Inc., NEFA Member and a franchisor of fast-casual food service restaurants and nutritional product retail stores, recently announced that George Foreman, the well renowned, former World Heavyweight Boxing Champion, has recently agreed to become the spokesperson for the UFood brand.

Through UFood’s exclusive agreement with George Foreman Enterprises, Inc., Mr. Foreman will initially work to create publicity aimed at selling franchisee licenses and will provide advertising and marketing support through public appearances and public relations campaigns.

George Foreman Enterprises, Inc. focuses on marketing and selling various products principally related to wellness, vitamins, and nutritional supplements using its George Foreman brand name in the United States. George Foreman has a successful track record as a spokesperson for various brands, including Meineke, Casual Male and the George Foreman Grill, which has sold more than 80 million grills worldwide. Through his ubiquitous grill, Mr. Foreman’s name is already associated with healthy eating which complements UFood’s concept of “feel great…eat smart.”

George Foreman is a worldwide icon, and regularly appears on nationally syndicated shows; recently appearing in a major television series, American Inventor, and appearing as a guest on The Tonight Show with Jay Leno and on Jimmy Kimmel Live. UFood intends to capitalize on Mr. Foreman’s global marketability.

“It is a great honor that UFood has attracted a well-known celebrity such as George Foreman,” said George Naddaff, Chairman and CEO of UFood. “There’s no one better for the job. His endorsement will create publicity and reinforce the message of a healthy lifestyle that follows UFood’s concept feel great…eat smart.”

Vapiano, named the “Future of Fresh Casual” by Foodservice Europe, secured its first franchisee in Massachusetts this month. The new franchisee will develop three Vapiano restaurants in the greater Boston area and expects to open his first restaurant by early 2009.“Vapiano has been very successful around the world and continues to gain momentum here in the US,” says Kent Hahne, Vapiano President. “I am pleased to announce that our concept will be opening in Boston as soon as next year.”

Vapiano has grown from a single unit to 31 locations open in only three years. Many of their restaurants can be found throughout Germany, in key European markets such as Zurich, Vienna, Istanbul, Budapest and now the United States. Vapiano has already opened three corporately owned restaurants in the greater Washington, D.C. area and plans to open three additional corporately owned restaurants in the same area over the next few years to serve as the launching pad for an aggressive U.S. expansion.

In addition to D.C., Vapiano has franchised units in development across the United States in cities such as Dallas, Naples and Boston and continues to target key markets such as Las Vegas, Miami, Chicago and New York for corporate expansion.

Vapiano’s unmistakably modern image was created by Milan’s star architect and designer, Matteo Thun. The restaurant radiates an energetic, cosmopolitan lifestyle with a Mediterranean flair. Contemporary fine oak furnishings, natural stone, and soft earth-toned leather compliment sophisticated Villeroy & Boch dinnerware and hip pop-lounge music.

With an average check of $10.00 for lunch and $13.50 for dinner, Vapiano’s a-la-carte, all day menu is both delicious and accessible to a variety of diners. The menu features classic Italian antipasti like fresh chopped Bruschetta and Beef Carpaccio served with cipriani sauce and arugula. Entrees of pasta or pizza are arranged in price groups, ranging

from $6.75 to $9.75, based on desired cheeses, meats, seafoods and vegetables. Finish with a delicate dolci such as Tiramisu or Crema di Fragola – fresh strawberries with mascarpone and as your stomach satisfyingly fills, your wallet doesn’t empty.

In a new report released today by Franchise Business Review, a NEFA member, owner satisfaction among business services franchisees was found to be strong relative to other franchise sectors. In an industry that is growing rapidly, franchisees are very satisfied with significant components of franchise ownership – training and support, franchise system, franchisee/franchisor relations and financial opportunity.Franchise Business Review surveys thousands of franchisees each year to determine their levels of satisfaction with their business. The firm publishes a Franchisee Satisfaction Index (FSI) to measure, track and compare franchisee satisfaction for individual companies and industry sectors. The Business Services sector had an overall FSI of 69.7%.The average FSI across all industry sectors in franchising is 68.9%.

“Small businesses represent a huge market opportunity for anyone considering going into business, states Franchise Business Review President Eric Stites. “These small businesses need support services to be successful. Even medium-sized businesses are outsourcing services previously done in-house.”

“Many of the top business services franchises are well-known across the country. In any town or city in the United States, you see companies like Padgett Business Services, FASTSIGNS, FocalPoint and Unishippers providing services to the business community. Their status in the franchise industry is further proven by great satisfaction among their franchisees.”

Stephen Thompson, President of FocalPoint International, The World’s Premiere Business Coaching franchise company headquartered in Nevada firmly believes franchisees that have a high satisfaction level make better coaches. Thompson says “The survey results from Franchise Business Review indicate that our franchise buyers are extremely satisfied with their choice to invest in FocalPoint and 93% would do it again today. We’re looking for people who have a passion for helping business owners. This survey helps franchise buyers and franchisors in streamlining the information process. Franchise Business Review helps us connect with people who fit with the FocalPoint culture.”

The 2007 Business Services Franchise Report as well as many other company and sector reports are available for free download on the Franchise Business Review company website.

View Company Website: http://www.franchisebusinessreview.com

Michael Radin of Tarlow Breed Hart & Rodgers, P.C. provides a Legal and Legislative update at each of NEFA’s Dinner Meetings.

The Legal and Legislative update is a digest of legal and legislative tidbits that are pertinent to franchising and running a franchise.

Open a copy of the 1-15-08 NEFA Legal & Legislative Update presented by Michael Radin.

New York private-equity firm LNK Partners will buy a majority stake in Au Bon Pain in a recapitalization deal that will inject $100 million into the Boston bakery cafe franchise chain to aid its expansion.

A PNC Mezzanine Capital-led investor group, which partnered with Au Bon Pain management in 2005 to buy a 75 percent stake in the company from Compass Group Plc, is cashing out. Management will retain a “substantial” stake, Au Bon Pain president and CEO Sue Morelli said, while Compass will remain a minority owner.

LNK is led by Henry Nasella, the former Star Markets chairman and CEO from 1994 to 1998 who negotiated its sale to Sainsbury Plc. He also was president and chief operating officer of Framingham-based Staples Inc. for six years.

Au Bon Pain has 121 company-owned stores concentrated in Boston, Chicago, New York, Philadelphia, Pittsburgh and Washington, D.C., and 105 franchise locations in the United States, Thailand, South Korea and Taiwan. The company has posted 33 quarters of positive same-store sales, with revenue of almost $300 million last year.

“They have good quality, reasonably good operations, and they have some consumer equity,” said Bob Goldin, executive vice president of Technomic Inc., a Chicago restaurant consulting firm. “I think they have to expand and excite the consumer a little bit more. There is some opportunity for them.”

Au Bon Pain will continue to open locations in urban office buildings, hospitals, universities, transportation centers and malls in its current markets. It also will open its second suburban prototype, the Bistro, in West Hartford in April. In all, 20 new cafes are planned for 2008, with franchises debuting in Tokyo, Kuwait and Dubai this summer.

Morelli declined to detail future growth plans. “It will be accelerated, but still remain controlled and appropriate depending on the real estate being available,” she said. “The real estate we have landed is very, very blue chip, and that takes longer to get done.”

United Franchise Group , NEFA Member and developer of award-winning business-to-business brands and franchise programs announces the creation of a new franchise services division to extend the benefit of the Company’s 30 years of successful franchising experience to other business owners.

The division includes three branches designed to help entrepreneurs grow their businesses into successful domestic and/or global brands: Accurate Franchising, where a franchise is born; Franchise Greenhouse, where a franchise grows; and World Franchisors where a franchise “gets a passport.” UFG’s services division provides a logical ‘continuum’ of services designed to support franchisee success, whether domestically or internationally, using proven concepts.

“In my years of helping U.S. franchises expand internationally, I was frequently asked how domestic businesses could turn a successful concept into a national franchise as well,” says Tony Foley, president of United Franchise Group Services. “We realized there was a great unmet need and that our years of successful franchising made us the logical resource to meet that need.”

Accurate Franchising: Launched in June 2007, Accurate Franchising (www.accuratefranchise.com), is the first step in the continuum, helping business owners go from concept to franchise. The process begins by analyzing the business concept to ensure it will translate into a successful franchise.

“Not every good idea can be a franchise,” says Foley. “The business concept must have a unique element, it must be easily replicated and the business owner must be profitable. With these elements in place, Accurate Franchising can help transform a business into a brand.”

Drawing upon their 30 years of experience successfully franchising UFG brands like SIGNARAMA and EmbroidMe, Accurate Franchising consultants provide strategic planning, sales support/training, marketing, operations, legal, financing and real estate assistance – all designed to help business owners grow. To provide the personalized and time-intensive consultation required, Accurate Franchising currently limits the program to five clients at a time.

Franchise Greenhouse: Once a franchise has been successfully established, it can be considered for Franchise Greenhouse (www.franchisegreenhouse.com) to expand throughout the United States quickly and cost effectively. The experienced sales force at Franchise Greenhouse functions like an in-house franchise sales department that identifies and cultivates the most qualified leads – both financially and temperamentally – with a high rate of closure.

“Building on our own experience, we do what it takes to sell clients’ franchises in the United States – from screening and working leads to offering marketing and discovery day consultation,” says Foley. “Owners gain a faster-growing brand that can become a national category leader.”

Like the other UFG services, Franchise Greenhouse is selective and will only represent a maximum of eight clients at any given time to ensure that each client’s franchising efforts will be successful. Clients may come from any industry and must either be graduates of Accurate Franchising or meet certain criteria for the number of franchises and level of working capital available.

“Unlike business brokers who get a lead, post it and just facilitate the sale, we actually assume the role of franchise development, seeking out and qualifying prospects,” adds Foley. “We’re in this for the long-term relationship. We help fine-tune the business model and even advise clients if they’re growing too fast.”

World Franchisors: The last in the continuum of UFG services, World Franchisors (www.worldfranchisors.com), was actually the first established, having begun in 2004 to help SIGNARAMA expand internationally.

Now 21 years, 50 countries and hundreds of international locations later, SIGNARAMA is the world’s largest sign franchise. Leveraging this success, Foley developed World Franchisors to help other franchise organizations expand internationally, reach more customers, enhance profitability and be first to a particular market. World Franchisors can target specific countries clients have selected or analyze and identify those countries that pose the best potential.

“The nature of franchising is aggressive yet careful expansion,” says Foley. “International growth is the future of franchising – but it’s one that requires a very specialized set of skills and experience.”

World Franchisors acts as each client’s representative to sell master licenses and establish a strong international presence – in a resource- and cost-effective manner. The group also develops an implementation plan to map out the expansion, attends key trade shows, creates exhibit materials, qualifies in-person and online leads and negotiates the legalities of the master franchise agreement to ensure that each client’s interests and core values are reflected and protected in all documentation.

“We’ve ‘been there and done that’ in more than 50 countries, so we understand the opportunities and challenges,” adds Foley. “We’re well acquainted with the nuances of individual cultures, as well as the regulations that may hinder a new entry into each market.”

New Structure to Enable Accelerated Global Expansion of Dunkin’ Donuts and Baskin-Robbins Brands.

Dunkin’ Brands, Inc. announced a realignment of its organizational structure by combining the U.S. and international teams for its Dunkin’ Donuts and Baskin-Robbins brands. Previously, U.S. and international operations were under separate leadership. The company named two of its long-time executives to lead each brand.

Jon Luther, Dunkin’ Brands Chairman & Chief Executive Officer, commented, “As part of our new and enhanced focus to build on our past and current success within both Dunkin’ Donuts and Baskin-Robbins, we are strengthening alignment across our global brands. This new alignment will result in a flatter and more streamlined organizational structure, while enhancing our ability to share innovations and best practices around the world. I am delighted to name two of our top and most respected executives to these critical new roles.”

Will Kussell, 49, was named President & Chief Brand Officer for Dunkin’ Donuts Worldwide, the largest brand in terms of sales, units and growth potential for Dunkin’ Brands. He formerly was Dunkin’ Brands Chief Operating Officer, a position that has been eliminated due to the realignment. In his new role, he will have complete responsibility for all domestic and international components of the Dunkin’ Donuts brand. Kussell has been with Dunkin’ Brands since 1994 in roles of increasing responsibility.

I am extremely confident that Will’s brand expertise, leadership ability and strong relationship with franchisees and licensees will lead Dunkin’ Donuts to unprecedented worldwide growth in 2008 and beyond. He will continue to report to me and also remain a member of the Dunkin’ Brands Board of Directors,” said Mr. Luther.

Robert Rodriguez, President of Dunkin’ Donuts U.S., was offered an opportunity to stay with the company, but he chose to leave to pursue other interests. “Robert is a person of unquestioned character and integrity, and he has truly exemplified the core values for which our company stands and he will be missed. I am very appreciative of Robert’s leadership and numerous contributions as President of Dunkin’ Donuts U.S. and prior to that, as Brand Officer of Togo’s,” said Mr. Luther.

Srinivas Kumar, 45, previously Vice President of International (Americas, Canada, Middle East & Europe) for Dunkin’ Brands, will now assume the position of Chief Brand Officer, Baskin-Robbins Worldwide. Similar to Kussell, he will have complete responsibility for the Baskin-Robbins brand globally. Kumar, a nine-year veteran of Dunkin’ Brands, has played a key role in successfully revitalizing and expanding the company’s international business during his tenure.

“Under Srinivas’s passionate and results-driven leadership, Baskin-Robbins is now positioned for continued worldwide growth. Srinivas will report to me,” continued Mr. Luther.

Luther concluded, “Our company has been on quite an exciting and rewarding journey these past five years. We have achieved strong growth by creating high-performance teams, and I am confident this realignment further positions Dunkin’ Donuts and Baskin-Robbins for accelerated worldwide expansion.”

About Dunkin’ Brands

With more than 13,000 franchises in 50 countries worldwide, Dunkin’ Brands, Inc. is renowned for its leadership in the quick quality category. At the end of 2006, there were 7,293 Dunkin’ Donuts franchised restaurants and 5,838 Baskin-Robbins franchised restaurants and the company had system-wide sales of approximately $6.4 billion. Dunkin’ Brands, Inc. is headquartered in Canton, Massachusetts. For more information, visit www.dunkinbrands.com.

Submitted by Eric Karp, and David J. Meretta, of Witmer Karp Warner & Ryan, LLP, NEFA Members.

One of the most exciting aspects of the new Franchise Disclosure Rule (which took effect on an optional basis as of July 1, 2007 and will become mandatory as of July 1, 2008) is the wholly new requirement that the franchisor include in its Disclosure Document the name, address, telephone number, e-mail address and web address of any trademark-specific franchisee association within the franchise system that is either (a) created, sponsored or endorsed by the franchisor, or (b) incorporated and asks to be included in the disclosure document for the next fiscal year.

In the latter case, the request must be renewed in writing each year and made within 60 days following the end of the franchisor’s fiscal year. For our franchisee association clients, we prepare the notice to the franchisor requesting inclusion of the association in the Disclosure Document free of charge.

This component of the Rule is an important and emphatic statement of the Federal Trade Commission’s view of the vital role that franchisee associations can and do play in franchise systems. As observed by one federal district court nearly 30 years ago: One of the traditional control mechanisms of a franchisor has been to keep its franchisees disorganized.

Franchisees, by necessity, must have access to the franchise group in order to act together to deal with common problems, whether those problems be the oppressiveness of the franchisor or some less momentous concern.

McAlpine v. AAMCO Automatic Transmissions, Inc., 461 F. Supp. 1232, 1273-74 (E.D. Mich. 1978).

The access to a franchisee trade association that the McAlpine court sought to protect is currently secured by statute in eleven states: Arkansas, California, Hawaii, Illinois, Iowa, Michigan, Minnesota, Nebraska, New Jersey, Rhode Island, and Washington.

Having followed the case law in this field for nearly three decades, we observe that judges and juries tend to work hard to find a path to sanction the franchisor when it is alleged to have treated a member or a leader of the franchisee association differently than other franchisees, particularly when that disparate treatment is seen as a retaliatory response to the relationship between that franchisee and the association. These cases often have egregious facts, which seem to drive the results.

Beyond a statement of the legitimacy and constructive nature of franchisee associations, this new required disclosure will give prospective franchisees access to a crucial source of information about the franchise system that will enhance their ability to fully investigate the franchise opportunity. We were privileged to play a role in supporting the inclusion of this requirement in the new Rule.