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May 2014

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In this issue

The Pipeline

Item 19 in the J.D. Byrider’s franchise disclosure document says the average interest rate charged by franchised and company stores was 21.3 percent in 2012. Not surprisingly, the company's website defends the rate.

Testing the Waters

A couple of intriguing questions were posed during two of the many programs focusing on international franchising at the recent International Franchise Association Convention.

Pay Up

What does the $9 million salary of McDonald’s CEO have to do with the 9 bucks an hour earned by the guy flipping the burgers? A fiery legislator in Connecticut, Frank Tercyak, is trying to make the connection.

1+1=?

How many employees do you have? It seems like a simple question, but when it comes to the Affordable Care Act, not so much.

Review

Let me start this piece with a confession: I have never read something by Greg Nathan that I did not find interesting and helpful. “The Franchise Relationship Book of Tips,” his newest publication, is no exception.

Executive Ladder

Franchise executives move up the corporate ladder.

Marketing Moves

Digital signage is a hot trend in restaurants, offering more control to tout daily specials, a better return on investment, and in some cases even a chance to go online while in line. Pudgie’s is set to test that last idea.

Royal Treatment

Pinkberry began expanding internationally early in the brand’s life. “We were in our third U.S. city when we entered the Middle East,” CEO Ron Graves said. Now they have 60 stores there.

Canada

We may share a border with Canada and a language, but there are some subtle differences that wise franchisors should note. Here’s the 411 to consider.

Oh, Canada

Expanding to Canada first makes sense. But there’s more to our neighbor to the north than many franchisors take into account. Here are some of the rewards and red flags about international expansion there.

What goes up must come down, after peaking

What a difference a few months can make. Franchises on the public markets could seemingly do no wrong last year. That shine is definitely off.

Off Trend

Five franchised restaurant chains have filed for bankruptcy protection since December, most recently Sbarro. Our veteran restaurant reporter takes a look at the reasons behind the trend.

Now & Then

FRANdata is 25 years old this month, prompting our conversation with its founder back then and its CEO today. The state of franchising over a quarter century—not to mention the change in fashion—gets a review.

Plan A

Wyndham and Target are just two of many companies victimized by hackers, and they won’t be the last.

Higher Rents

The window for flat and even discounted rental rates is starting to close, experts say. That means franchisees looking for new locations should move sooner rather than later, to beat the increase.

Launching Pads

‘We’re all growing, and we are all competing for that same parcel,’ explains a Checkers/Rally’s exec when describing the fierce competition for sites in front of shopping centers and grocery stores.

Price Check

Some are finding ways to manage the increases, such as modifying designs ‘on the fly’ and switching to lower-cost suppliers for wall decor or murals. But they’re bracing for more hikes as demand rises.

Apping Up

You have to give customers a reason to pass another restaurant and come to yours. So intones Panera’s CEO, and his chain and others believe that reason lies in technology, at long last.

Clean Plates

Larger players, too, aim to profit from mandates to make school meals healthier. From Domino’s to Jamba Juice, the challenge is to offer nutritious food that kids will actually eat.

Marlu’s CEO seeks American dream

Sent to America at age 16 to avoid fighting his own countrymen, Tony Lutfi landed a job at a Jack in the Box. “I loved the speed and the movement,” the son of Palestinian refugees recalls.

Clipped Wings

Tutor Doctor is suing a franchise attorney who calls himself the affordable alternative, claiming fraud. But others defend Harold Kestenbaum, suggesting his rock-bottom rates attract jealousy from other lawyers.

Hostile Duel

Aaron’s, the 58-year old rent-to-own company in Atlanta, is fighting a hostile takeover battle and its franchisees are caught in the crossfire.

Family Business

The Myers siblings draw from military backgrounds for both management style and site selection—all their Smoothie King locations are on bases. Communicating ‘early and often’ is one key, as brother Fred says.

Finance pros reveal how to attract capital, with ‘leverage’ the deal-killer

Leverage. Leverage. Leverage. Three panelists said that word at once when asked to name the biggest deal-killer when they consider making loans.

Enjoy this year, economist tells franchise finance audience

The good news, according to the economist Paul Kasriel, is U.S. consumers should have a burst of activity the rest of the year, once the weather improves. They’ll spend on food, hotels and retailers because of heavy demand.

Operator Q&A

Health officials denounce them. Regulators are circling. Sounds perfect to Chip Paul, who’s started Palm Beach Vapors to sell e-cigarettes and wants to one day test sales of marijuana, which he calls ‘the next gold rush.’

Party On

Can Voodoo BBQ break through the barrier that keeps most barbecue chains regional? They’re going to try, with a seasoned exec at the helm. The founders vow never to abandon their party-hearty roots.

Jimmy John’s founder shares more than snappy quotes

The founder of Jimmy John’s delivered plenty of colorful quotes—his trademark—during his keynote address at the Franchise Finance & Growth Conference.

Counterpoint

Regarding your March article, “Warning Shots: Tax court takes aim at retirement rollovers as funding tools,” we believe the article unfairly categorizes Rollover Business Startups.

Meet Market

“New and improved” is usually the marketing hype attached to sandwich cookies or shampoo. But it’s also an apt description of the changes in this year’s Franchise Finance & Growth Conference.

A calibrated test for drinking drivers

For the most part, breathalyzers in bars and restaurants have been viewed as novelty items for customers, and a false sense of security for bar owners. But Russ Smith plans to change that.

It’s a drink, it’s a meal...it’s $15

The bloody Mary at Bar 145, a gastropub franchise in Toledo, Ohio, turns patrons’ heads and makes women swear, according to Chef Robby Lucas.

Volleyball pro gets a raw deal

Effective April 1, Erin Gray became the Juice It Up franchisee for the Rancho Santa Margarita, California, location.
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From the Magazine

Publisher's Column

All in a day’s work

I love our cover story this month: the saga of franchisee Tony Lutfi’s journey from the son of Palestinian refugees to the owner of one of the largest franchisee companies in the nation.

Loose Ends

How to groom your replacement

Nancy Weingartner discusses being stopped by TSA, signs in bathrooms, and eyelash extensions.
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