Should I Franchise?

Should I Franchise?
Whether you have a totally new concept or an established business in need of faster growth that is lacking the capital, time and people to expand the question is, “Should I franchise?”
Today more Businesses and greater variety of businesses are implementing franchising to distribute their products and services. Virtually any business can be expanded through franchising. Franchising a business is often the only viable source of capital available for expansion especially in today’s tight credit markets. In most instances, the cost of franchising is often a smaller investment that the cost of establishing just one new location.

After paying the initial cost of developing your franchise program, the remaining cost of expansion along with most of the business risk is assumed by the franchisees. Because the franchisee pays an upfront franchisee fee the franchisor is often able to recoup the total cost of franchise program development rather quickly while establishing a monthly revenue stream from royalties paid by the franchisees.

Franchising can provide the capital for rapid growth when your business doesn’t have the capital, the people, or even the time to establish a company owned growth program. Franchising solves the problems of slow growth, the problems of finding outside capital and the problems of finding the right employees associated with company owned units. Franchising a business is the solution for the problems of money, time and people.

Money

Franchising transfers almost the entire cost of expansion to the franchisees. Franchisees build the building or pay the rent, buy the inventory, pay the employees, do the marketing and provide the working capital until sales make the business profitable. In reality, the growth of a franchise system is limited only by the number of people willing to buy the franchise and the number of locations that can be sold.

Time

If you’re anxious to move quickly before the competition catches on with a hot new concept franchising provides solution. Franchising is the one growth system that allows businesses to expand exponentially. A franchise can grow rapidly simply by selling individual units. Some franchises can grow even faster by selling multiple units or territories to sub franchises. Either way, it is almost always faster to open franchises than company-owned units.

People
Franchisees make excellent employees and managers. They have a vested interested in making the business successful. They own it. A franchisor not only gets a dedicated manager they are relieved from the daily problems associated with hiring, firing and managing employees.

In summary, if you are looking to expand your business and lack capital, time or people, franchising is a viable solution to all three problems. If this scenario applies to you and your business the answer to the question, “Should I franchise?” is definitely yes.

How to Franchise?

Can You Franchise Your Business?
Whether or not to franchise isn't an easy decision. You'll need to consider the business issues and weigh the pros and cons from an informed perspective.
Franchising as a rapid expansion tactic is one of several options you should consider for it's tremendous potential to grow your business quickly.
How does franchising work? The key is in the creation of systems which can be duplicated through training and support.
Other characteristics attractive to potential franchisees include businesses:
with a good track record of profitability.
built around a unique or unusual concept.
with broad geographic appeal.
which are relatively easy to operate.
which are relatively inexpensive to operate.
which are easily duplicated.
A good place to start is our overview of franchising. You may also access comprehensive information on how to franchise.
Despite the impressive merits, franchising is not for every business.
There is high risk in franchising any new, unproven business.
Established companies that should probably not franchise include businesses:
difficult to monitor from long distances.
requiring large numbers of employees.
with complex operations.
with low profit margins.
And being franchisable doesn't guarantee your success. Franchising the right way will help you to avoid a number of costly mistakes.
How to tell if your small business (or large business) is a prime franchise candidate.
You can quickly assess whether you are ready to franchise by taking our basic online quiz. Or, you can download our comprehensive worksheet and determine your company's franchisability for yourself at your convenience.
If you're ready to franchise, our checklist will guide you through the process.
If you're still not sure, a Francorp Franchise Analyst will discuss with you the franchisability of your business.
Other frequently asked questions about how to franchise a business:
How much time should you reasonably expect to spend in order to successfully build your franchise?
How much should you expect to pay to build a successful franchise?
What other resources are available to educate yourself about franchising?
Why Francorp? Our track record is solid. We've consulted with and provided franchising information to over 10,000 companies. We’ve helped more than 2,000 companies to successfully franchise their businesses.

Don Boroian - Franchising and The Economy

In November, Francorp's Chairman, Don Boroian, did a presentation on the economy and its effect on franchising. Here is the transcript from that presentation and what was said about how franchising would be affected by our current economic downturn.

Hi, I am Don Boroian, Chairman of Francorp. I’d like to talk to you today about a couple of things that are very important to us as we meet this challenging economy right now that is raising havoc with a lot of the financial markets. It will definitely have an effect on franchising as well. However, contrary to what you might think, it is going to have a positive effect. For example, the biggest growth of franchising has occurred during these downturns in the economy. And we are going to look at it in two ways. First of all, why it makes sense, for you as a franchisor to expand during this particular time. And secondly, why you need to change your message to prospective franchise buyers to meet the economic perceptions that people have about whether or not it is a good time for them to buy a franchise.

First of all, as a franchisor, there’s a lot of uncertainty in the market. Many companies, right now, as they hear all of the economic woes and credit issues and so on are pulling in their horns. They’re not expanding, particularly companies who are looking to expand with borrowed money or looking for investors to open operating units. First of all, we all know that investors don’t invest in companies to open ten stores. The return on investment to venture capitalists is not sufficient to justify that kind of investment. They don’t want to be in a situation where their money is tied up for three or four years before they begin to turn a profit. By the time you open operating units and put managers in them and the amount of return on invested capital at the unit level, which generally, is about fifteen percent, has to be split between the investor and you. It’s just not a sufficient amount of money. In addition, during times like this, investors are investing their money in distressed merchandise. Depleted value of stocks are a bargain for investors. And the money from the venture capital people is not going into start ups or development into relatively new companies. However, there’s a silver lining to all of this. And that is, that as a franchisor, your ability to move out into the marketplace is going to be enhanced by the availability of opportunity for you. For example, if you are in retailing or in restaurants or any business that needs to go into a shopping center or into inline stores, there are going to be more vacancies in areas now that you might not be able to get into when times are good and business is booming. Those stores were already filled. Right now, some of those stores will become available. Even though you may not have the capital to go into those stores personally, this is where franchisees come in. And while we hear all the talk about credit and difficulty in getting credit, remember, we’re dealing with a different buyer. For example, if you have a retail store or if you have a restaurant, you need hundreds of customers to come into your store, every day, every week.

But in franchising, we don’t have to sell hundreds of franchises every week or every day or every month. We only need to sell one or two, certainly, in a time like this, if you’re a new emerging franchisor. And the people that you’re going to be selling franchises to are more abundant now in quality. These are people that are being laid off, downsized, reengineered in companies that are laying off people or are going out of business. And these are the people that have been working in these companies for a number of years. They have good credit. They have a high credit score. They have equity in their homes; that can get refinanced at their local bank because they have longevity in their community and they are very good credit risks. In addition, these are people that have excellent job skills. Many of them are middle managers. These are people that always really would’ve liked to own their own business; were afraid to leave the job and risk their fortunes on starting a business. But now that, that decision has been made for them, they’re on the market. And many of these people have gone to job interviews only to find that companies in their same industry, that have just laid them off, are also laying off people. That’s when we get their interest in buying a franchise.

So that from your standpoint, as a franchisor, there are going to be a lot of opportunities because your competitors that are not franchising, are not going to be occupying more stores, borrowing money, opening more branches, opening more markets for their businesses. A good case in point right now is Starbucks. They’re closing 700 of their stores. Now for Starbucks, to put a manager in an outlet and to make the entire investment in the store and to be able to make a profit over and above the manager’s salary, is quite different than for a franchisee who is to buy a franchise and go into a business and work 60 hours a week. In many cases just making their salary, without even a profit over and above that, meets their needs. They just want to own their own business, be their own boss, be the captain of their own ship, master of their own destiny. And so many of these kinds of situations or companies that have corporate owned locations; those locations are going to be available. In retailing, in the food service industry, in anything that occupies a store, where someone has already done the leasehold improvements, in the restaurant business they have the walk in coolers, freezers, 3-compartment sinks, and grills and so on. And many of the landlords are bending over backwards giving free rents to get tenants in there to occupy these spaces. And in the service business as well, many of your competitors, those of you in service businesses; these companies are going to be cutting back on their expansion because it takes capital and not only just the start up capital but the burn rate. When we sell a franchise, a franchisee doesn’t expect to make money for the first two years. If they just barely take out a salary initially, to get the business going, that’s pretty much expected. They don’t expect to walk in on day one to be turning a salary and a profit.

But companies today can’t afford to do that if they’re borrowing a lot of money at their banks because, first of all, the bank financing isn’t available to that extent. And certainly, as the credit markets and standards tighten, it makes it more difficult for companies to expand with company owned units, where typically it takes two years to get to a breakeven point. And so those of us that are franchising our businesses have a great opportunity here because our competition is pulling in their horns.

You have three choices right now in this current challenging market. Number one, pulling your horns, hunker down, climb in a fox hole, wait until the storm blows over. If you do that, you’re going to miss a lot of opportunities. But companies that need capital in order to expand their own company owned units are going to have to do that because they don’t have the available capital.

A second strategy is to do what you’re doing right now. Just keep on going and keep on your current expansion strategy. But again, companies that are doing this with their own company units are inhibited by the inability to get capital and by their inability to move out into other markets and support these kinds of expansions.

A third option and this is an option great for franchisors, because this is an opportunity to look around and capture markets that are being abandoned or not expanded into by your competitors. And by franchising, you’re allowing yourself to go into these markets with the capital resources and the human resources of others. So from your standpoint, as a franchisor, this is the time to move out. And as we talk to prospective franchisors whether it’s through our regional director program, whether it’s through the people who contact us, whether it’s the seminars that we do, or the advertising that we do, and we talk to companies who are considering franchising. And looking at this as an optional strategy, we’re quick to point out to them that now is the time to expand your business into a market that’s weakened.

The time to attack the fort is when the walls are crumbling. And the walls in many of these companies today, which were well fortified, are crumbling because they are reliant totally upon bank financing that isn’t going to be there to the extent it has been in the past. And as franchising affords you the opportunity to expand, it does so by you finding those one or two or three people each month who do have good credit, high credit scores, who are looking to own their own business, who will make that investment, who will be the human resource solution for you as well as a capital solution, as they invest in buying the land, building the business or developing their markets. And it gives you the opportunity to move into a market that is weakened. This is the time. The lions in the Serengeti always attack the weakest of the prey. And this is the time for us to move into the marketplace by franchising into these markets while the companies that are reliant totally on expansion capital in either internally generated, borrowing money, bringing in investors or through other means. And we have an added opportunity here to raise funds through the investment of individuals. And we don’t have to get 300 of them a month or a hundred a day.

We only need to get 2 or 3 or 4 people to buy a franchise each month. These are people with good credit. These are people with equity. These are people with 401(k)s. These are people with savings. These are people with family and friends that will help them get started. So, take advantage of this opportunity now. And from the franchise buyer’s point of view, let’s take a look also at why we need to adjust our message. In the past our message was be your own boss, be master of your own destiny, captain of your own ship. Now is the time to get into this expanding world of whatever your concept is. But that message is changing now because now people have a perception that this may not be a good time to go into their own business. Because you know already how to run that business, they’re getting a jump start. And so this is an opportune time for you to look over the marketplace at a much better qualified group of people, who are desperately seeking either a job, which is very difficult to replace, similar to the one they’ve had or to start their own business. And because these are not people that are high risk, they’re not as likely to start their own business from scratch because they know the rate of business failures is about 95 percent of all new businesses that start. According to the Department of Commerce 95 businesses, 95 percent of all start ups from scratch fail within the first 5 years. And so with a franchise, the odds are in their favor and these are people who are more conservative, who are comfortable following the plan. And now that decision has been made for them, that they’re out in the marketplace without a job, they’re taking a look at you, as a franchisor, and what you offer. So what we can tell the prospective buyers today is that we have a system, we have it worked out. We have a complete business model. We have the opportunity for you to learn. We will teach you everything you need to learn. You don’t have to know anything about our business. We’ll teach you, we’ll help you. There are available stores now. There are landlords that are giving free rent and doing leasehold improvements and tenant improvement allowances.

There are competitors that are on the ropes, some of them going under. Now is the time to buy a franchise, to get yourself established, to get yourself started with our assistance as franchisors helping you. Now is the time. So don’t hunker down, don’t crawl in the fox hole. Now is the time to move out. Take advantage of the weakened economy, the weakened market, your weakened competitors. Sell these franchises and help people get started. And show the prospective buyer why now is a good time for them to capitalize on this opportunity that this challenging economy has presented.

Don Boroian
Chairman
Francorp, Inc.
www.francorp.com

Don Boroian / Francorp Clients - Amazing Spaces

Amazing Spaces Storage Centers Expands and Restructures for 2009 Despite a Down Economy

Amazing Spaces, a leading provider of upscale self storage solutions, began 2009 with several newly developed positions, including Director of Operations, despite the struggling economy.
On January 5, the company welcomed Mike Gately as its new Director of Operations. Mike will be in charge of overseeing all property management, preparing budgets, reviewing property expenses and performing numerous other duties. In his former position at Hendry Investments, Inc., located in San Antonio, Mike served as Vice President of Property Management. He joins Amazing Spaces with over 25 years of property management experience.
The company has also named Nathan Curtess as its new head of Franchise Sales and Development. Nathan has been with Amazing Spaces for five years and previously held the position of Property Manager. The company began offering franchise opportunities in late 2008 with a higher than predicted response and expects to close on several franchise agreements within the first six months of 2009.
In addition, Doug Gardow, who served as Amazing Spaces' Area Manager for the past nine years, has been appointed the company's new Director of IT Operations. Jennifer Byrne will take the position of Executive Office Administrator.
Scott Tautenhan, who co-founded Amazing Spaces with his wife Kathy, is excited about the direction the company is headed. "We are planning to expand by adding two properties in 2009, and franchising companies typically grow exponentially both during and after a down economy," he said. "So the future is looking bright for Amazing Spaces!"
Amazing Spaces aproached Francorp two years ago to assist in a full development franchise program. TheHouston-based business is a leading provider of storage services for discriminating individuals and businesses. Its award winning storage properties offer solutions for self-storage, RV and boat storage, wine storage and more. Amazing Spaces Franchising, LLC also offers franchise opportunities to qualified applicants.

www.francorp.com

Francorp Opens Office in India

PRESS RELEASE


FOR IMMEDIATE RELEASE FOR INFORMATION CONTACT:
Francorp
(800) 372-6244

Francorp Expanding Into India


(Olympia Fields, IL) – Francorp Chairman Don Boroian announced today that Francorp has awarded Franchise India Holdings Limited the Francorp India franchise.

The contract was signed between Don Boroian, Francorp India U.S.A. Representative Atul Bhatara, and President of Franchise India Holdings Limited Guarav Marya.

“Franchise India Holdings Limited has already paved the way with franchise expos, franchise and business publications, and franchise consulting in India,” shares Boroian. “We are honored to have them as part of our team.”

Franchise India Holdings Limited has been Asia’s leading integrated franchise consulting company since 1999, with an authority on franchising, licensing, retailing, real estate, and marketing. With its strategically formed divisions, Franchise India Holdings Limited has created its own niche as the pioneers of the franchise industry and a small business authority in India.

According to Marya, “Francorp India will help boost investor confidence by providing professionally managed franchise consulting and development support, all under a common one-step gateway to facilitate entry into India and vice-versa.”

India is home to over a billion people, with a flourishing class of urban consumers possessing considerable amount of disposable income. With the continued growth of the economy, India has strengthened its claim to be a viable and beneficial destination for a foreign franchisor.

Since its beginning in the early 90s, the franchise industry has grown in leaps and bounds in the Indian sub-continent, and there is still much to explore. Based on the successful growth of many franchise brands in India, the future of franchising in India is highly promising.[1]

This promising future of the Indian franchising industry is backed up by an equally powerful market report that shows statistics of this thriving sector.
According to reports, for the past five years the Indian franchise market has recorded a steady growth of 30 to 35% per annum. Also, the annual turnover of the Indian franchise industry soared to 3.3 billion USD and is projected to soar higher in the coming years.[2] “We are very excited about the opportunity to enter the Indian market at a time when the concept of franchising is experiencing tremendous growth and acceptance,” noted Boroian.

For over 30 years, Francorp has been the leader in the franchise consulting industry. They have assembled a team of experts whose talents are coordinated seamlessly to create customized materials that fit the specific needs of their clients. As an international company, Francorp has the global reach to help clients expand their business, with a local presence to adjust their business to fit each country’s unique culture and laws. Headquartered in Chicago, IL, Francorp has assisted more than 10,000 companies for expansion, and has developed more than 2,000 franchise programs throughout the U.S., Japan, South Africa, Middle East, Central America, Malaysia, Philippines, Argentina, Chile, and Mexico.

For more information, visit www.francorp.com or call (800) 372-6244.

# # #
[1] Franchiseek, Indian Franchise Statistics and Information. November 17, 2008, available at www.franchiseek.com.
[2] Franchiseek, Indian Franchise Statistics and Information. November 17, 2008, available at www.franchiseek.com.

Don Boroian - Francorp at the Midwest Franchise Exposition

Francorp is the world leader in franchise development and franchise consulting. Don Boroian founded the firm over 32 years ago with the express goal of helping business owners build and grow their company's throughout the U.S. and abroad. Francorp has 15 offices including the corporate headquarters based out of Chicago, IL. Francorp is the only in-house fully staffed franchise development firm and has worked with over 2,000 successful franchise systems.
Francorp works very closely with each of the franchise exibitions across the country and around the world. Francorp clients benefit by having a presence and a sales team at these shows advertising for them. For more information on Francorp and the development work that the firm has done please visit the corporate site, http://www.francorp.com/.
Seize The Opportunity! Become Your Own Bossat the Midwest Franchise & Business Opportunities Expo
CHICAGO, Illinois (May 21, 2008) – North America’s largest Franchise and Business Opportunities Expo returns to Chicago – November 22nd & 23rd, 2008 at the Schaumburg Convention Center. Over 1,800 potentialentrepreneurs - looking to become their own boss or who are in search of the perfect business partner - will explore the most opportunities ever showcased in the Midwest.
“In a recent survey, conducted by careerbuilder.com, over 84% of Americans are dissatisfied with their jobs”, states Fred Cox, President of National Event Management. “We wanted to produce an event that gave Americansand business owners the chance to meet face-to-face and explore how to make their dreams of becoming their own boss a reality.”
Showcasing over 100 proven, successful franchise and business opportunity concepts in Chicago – “The Heart of the Midwest”, the event also provides valuable educational resources and a wide range of advisors and suppliersfor future business owners. Free daily seminars from reputable and insightful professionals have information that entrepreneurs need to know. Topics include: “How to Find the Business That’s Right For You”, “Legal Aspectsof Buying a Franchise”, and “IRS Requirements When Starting a Small Business.”
The Midwest Franchise and Business Opportunities Expo takes place Saturday, November 22nd & Sunday, November 23rd at the Schaumburg Convention Center. Hours of operation are Saturday 10am-4pm and Sunday11am-4pm. For more information, visit http://www.chicagofranchiseshow.com/.The Franchise & Business Opportunities Expo is produced by National Event Management. National Event Management is the largest producer of business ownership events across North America with 27 annual FranchiseExpos showcasing over 1,700 businesses to 65,000 prospective business owners annually. For more information on National Event Management visit http://www.nationalevent.com/.
# # #

Blockbuster to Stick to the Bricks

Blockbuster sticks to the bricks
06:29 PM PT, Sep 23 2008
The instant gratification of video-on-demand and the novelty of movies by snail mail may get many a consumer more excited than an old-fashioned trip to the corner store, but for Blockbuster Inc., the store is still the thing.
The Dallas-based video rental and retail chain, which closed hundreds of stores over the last year, plans to revamp many of its remaining outlets, expand its movie and game offerings, and add more rental and download kiosks.
But it’s still keeping an eye toward increasing Internet-based downloads through Movielink, the digital movie site it acquired last year, and attracting more movie-thru-mail subscribers. Critics say stores are passé, but Blockbuster notes that its mail customers also have the convenience of returning or trading-in their mail-ordered movie at stores — something which Netflix can't do because it doesn't have brick-and-morter outlets (just in case an Ingmar Bergman flick showed up in the mail when you were more in the mood for "Sex and the City").
“Most people read a lot of interesting headlines, and we enjoy the headlines, about Netflix, Amazon, Apple, so forth,” says Tom Casey, Blockbuster’s chief financial officer, during a presentation at Thomas Weisel Partners’ Annual Consumer Conference on Tuesday. “But what you need to understand is we really have a market that we address that’s nearly $36 billion in size. Video-on-demand is actually pretty small.”
That $36-billion figure is the total market for DVD's and game sales — where Blockbuster has been expanding — and movie rentals. Blockbuster has a 40% share of the $9.6 billion movie rental business, of which in-store rentals account for more than half the total revenue, followed by mail subscription and video-on-demand, according to the company.
Blockbuster reported a loss of $44.7 million, or 23 cents a share, in the second quarter, ended June 30, compared to a $34.2 million loss in the same period last year. But same-store revenue rose 9%, and the company reaffirmed that it expects a profit for the year.
“Traffic tends to transfer to a nearby Blockbuster whenever they close a store,” says Arvind Bhatia, an analyst at Sterne Agee & Leach, Inc., adding that he estimates a “normal attrition” of about 150 store closures in the U.s. this year and next. Blockbuster now has about 8,000 stores worldwide.
"Financially, they're doing well," he adds.
Blockbuster plans to increase its stock of rental and retail movies and games at each store as well as pay for store refurbishing, from paint and carpeting to adding Blu-ray kiosks. Some stores have already undergone a broader remodeling, complete with gaming stations and cafes.
“Too many of the stores still look like the old blue-and-yellow 90s VHS stores,” Casey says.
And analysts think Blockbuster still has life left in its stores — particularly on the retail market — before the Internet or video-on-demand becomes the dominant delivery system.
“We all have the idiot friends who have collections of hundreds of DVDs. Nobody is going to collect 100s of DVDs on their hard drives,” said Wedbush analyst Michael Pachter. “And the movie studios don’t make as much" on rentals or on-demand services, where the profit margins are smaller.
Pachter notes that as long as Blockbuster gets customers in stores and studios release movies on DVD before they allow video-on-demand and streaming online, the company will thrive.
“Blockbuster says, why not buy a movie while you’re in here? What else can they sell? Popcorn, video games, maybe a TV or an iPod,” Pachter said. “They’re merchandising better, and that’s absolutely working.”
— Swati Pandey

Sonic Franchise Units Outperform Company Owned Units

Sonic says comps fell for co. units, rose for franchisees

OKLAHOMA CITY (Sept. 24, 2008) Sonic Corp. said late Tuesday that systemwide same-store sales were “slightly negative” for its fourth quarter ended August 31, as franchised restaurants posted gains but corporate or joint-venture locations recorded “significantly negative” results.
Analysts that follow Sonic, the operator or franchisor of more than 3,400 drive-thru restaurants, 20 percent of which are Sonic owned, pegged the corporate same-store sales decrease between 5 percent and 7 percent. The latest result was a deceleration from third-quarter trends when corporate same-store sales dipped 3.9 percent. For the full fiscal year, also ended Aug. 31, Sonic’s systemwide same-store sales were positive, the company reported, led by franchised locations.
In addition to weaker sales, Sonic reported that increased commodity and labor costs led to “unfavorable” restaurant margins for the quarter and year. Yet, with franchisees new unit openings, rebuilding, and remodeling the company expects to post a small increase in annual per-share earnings, Sonic said.
Full fourth-quarter and fiscal 2008 results are expected Oct. 16.
Sonic also said it would refine its current growth and operating strategy by starting a refranchising initiative to reduce the number of corporate locations to between 12 percent and 14 percent of the system. The company will seek to sell underperforming locations to franchisees.
“The performance of our partner drive-ins has lagged well behind that of our franchisees,” said Sonic’s chairman and chief executive, Cliff Hudson. “Reducing the number of partner drive-ins we operate will allow us to improve sales and operations for remaining partner drive-ins while we continue to emphasize new store development, promotions and other initiatives to drive sales for the entire system.”
For the current fiscal year 2009, Sonic said it expected the opening of between 155 and 165 franchised locations, between 20 and 25 corporate restaurants and positive same-store sales growth for the system, even with flat same-store sales at corporate locations. Earnings per share are expected to increase between 12 percent and 14 percent in 2009, the company said.

Don Boroian - Franchise Sales Strategies

Franchise Sales Strategies:
Christopher James Conner
Vice President
Francorp Consulting

As the Franchise World continues to move towards technology like all other industries, more and more sales processes become automated, it becomes easier and easier to forget and lose the most critical ingredient of what has made salespeople successful for centuries, "Building Relationships."

People still buy from people they like and that they can relate to. Technology can't create this, it can only enhance what we as salespeople do during the process. To most potential customers, all the "fluff" becomes white noise and people don't read or listen to mass emails and bombardment of marketing materials.

It is up to the franchise sales professional to create a feeling of caring for the potential franchisees future. The sales process should evoke a sense of "mutual exploration" for both the candidate and the sales person.

Initial contact for a franchise sales person needs to be through the phone. I have never awarded a franchise solely through email contact. This is an enormous decision for most franchise buyers, a cold email and information requests don't convey very much sincerity to a prospective franchisee. Most franchise buyers are refinancing homes or closing out 401k's to make this possible, they must feel very confident in the franchise sales person to pull the trigger on a decision as big as this.

It is important for the franchise sales person to combine emails with phone calls, the prospect should know your voice as well as personal background about the franchise sales person....after all, isn't that what "building a relationship" is all about!?! The franchise sales person should think of themselves as a consultant, work with the franchisee by taking a personal interest in their success.

The initial phone call should be to set an appointment, don't jump into the sale! A franchise sale sis very different from most sales where you are providing a traditional good or service. This is a partnership we are selling now. The first call should be an explanation as to what the next call will cover.

The first phone appointment is about the customer! Remember you should be doing no more than 25% of the talking! If you find that you are doing most of the talking during the call....it probably isn't going very well. Key points to cover during this appointment, timing, why should they be looking at franchising now? Background, what is your level of interest in franchising and why? Goals, what would you like to achieve through franchising? Where, what locations would you like to consider opening the franchise? When it comes down to it, people really don't care about how smart you are until you show concern for their well being and interests.

Here is an acronym we use at Francorp when describing franchise sales. The franchise sales person should strive to be a "Star".

S - Support - Family, Friends and Peers
T - Timing - Now is the right time for Franchising
A - Assets - Building wealth through owning your own business.
R - Recreation - It's fun and exciting!

Building a relationship with a potential franchisee unlocks unbiased information from a franchise candidate, this allows the franchise sales person to make legitimate recommendations. Typically the most guarded area of information will be in regards to financial well being - franchise buyers will not be up front about financial facts until they fell comfortable with a franchise sales person. It is impossible for you as the sales person to provide valuable assistance for them without accurate information! Build the relationship first, then the information will be unbiased and your recommendations will be authentic.

Franchise buyers, much like any other buyer want to feel that they are getting involved with people who are like them. A big part of the franchise sale is drawing connections with the buyer and making examples of existing franchisees who are similar to the prospective buyer. Throughout the sales process, it is important for franchise sales people to remember that the franchise opportunity they are selling is just that....an opportunity. People who are awarded the right to operate as a franchisee will unlock their financial future, this should be about helping people!

www.francorp.com

www.francorpconnect.com

SBA Franchise Program for Buying a Franchise

Buy a Franchise

SBA Program Office SBA Programs 8(a) Business Dev.

Advocacy Banking CFO CIO Disaster Assistance Entrepreneurial Dev. Faith Based Comm. Init Financial Assistance Freedom of Information GCBD Goaling Program Government Contracting Hearings and Appeals HUBZone Inspector General International Trade Investment (SBIC) Lender Oversight Native American Affairs NAC Ombudsman Press Office SBDCs SCORE Size Standards SDB Surety Guarantees Technology (SBIR/STTR) Veterans Womens Bus.
Franchising Overview

Buying a Franchise

An important step in the small business startup process is deciding whether or not to go into business at all. Each year, thousands of potential entrepreneurs are faced with this difficult decision; because of the risk and work involved in starting a new business, many new entrepreneurs choose franchising as an alternative to starting a new, independent business from scratch.

One of the biggest mistakes you can make is to hurry into business, so it's important to understand your reasons for going into business, and determine if owning a business is right for you.

If you are concerned about the risk involved in a new independent business venture, then franchising may be the best business option for you. But remember that hard work, dedication, and sacrifice are essential to the success of any business venture, including franchising.

What is Franchising?

A franchise is a legal and commercial relationship between the owner of a trademark, service mark, trade name, or advertising symbol and an individual or group wishing to use that identification in a business. The franchise governs the method of conducting business between the two parties. Generally, a franchisee sells goods or services supplied by the franchiser or that meet the franchiser's quality standards.

Franchising is based on mutual trust between the franchiser and franchisee. The franchiser provides the business expertise (marketing plans, management guidance, financing assistance, site location, training, etc.) that otherwise would not be available to the franchisee. The franchisee brings the

entrepreneurial spirit and drive necessary to make the franchise a success.

There are primarily two forms of franchising:

Product/trade name franchising and
Business format franchising.
In the simplest form, a franchiser owns the right to the name or trademark and sells that right to a franchisee. This is known as product/trade name franchising. The more complex form, business format franchising, involves a broader ongoing relationship between the two parties. Business format franchises often provide a full range of services, including site selection, training, product supply, marketing plans, and even assistance in obtaining financing.

To learn more about:

The advantages and disadvantages of franchising
The franchiser's responsibilities
What is contained in a franchise packet
Understanding the franchise contract
Read:

SBA's "Is Franchising for Me?" Workbook (.pdf file)
Franchise Registry
Franchise Directories & Evaluation
For additional information

Consumer Guide to Buying a Franchise

Seven Ways to Fail Big

Seven Ways to Fail Big
Lessons from the most inexcusable business failures of the past 25 years.by Paul B. Carroll and Chunka Mui♦ Download an audio slideshow about how to avoid failure.

Businesses rack up losses for lots of reasons—reasons not always under their control. The U.S. airlines can’t be faulted for their grounding following the 9/11 attacks, to be sure. But in our recent study of 750 of the most significant U.S. business failures of the past quarter century, we found that nearly half could have been avoided. In most instances, the avoidable fiascoes resulted from flawed strategies—not inept execution, which is where most business literature plants the blame. These flameouts—involving significant investment write-offs, the shuttering of unprofitable lines of business, or bankruptcies—accounted for many hundreds of billions of dollars in losses. Moreover, had the executives in charge taken a look at history, they could have saved themselves and their investors a great deal of trouble. Again and again in our study, seven strategies accounted for failure, and evidence of their inadvisability was there for the asking.About the ResearchTake adjacency moves. Frequently what appears to be an adjacent market turns out to be a different business altogether. Laidlaw, the largest school-bus operator in North America, bought heavily into the ambulance business in the 1990s, figuring its logistics expertise would carry over to that kind of enterprise. It turned out that operating ambulances isn’t really a transportation business—it’s part of the intricate and highly regulated medical business. Laidlaw struggled with negotiating contracts and collecting payments for its services, before selling off its ambulance units at a considerable loss.The underlying business moves we discuss here aren’t always bad ideas; they’ve generated a tremendous amount of wealth for some companies. But they are alluring in ways that can tempt executives to disregard danger signals. In this article we’ll describe the seven risky strategies and offer advice on how to resist their charms.The Synergy MirageOften a company seeks growth by joining forces with another firm that has complementary strengths. The whole isn’t always greater than the sum of its parts, however. Look at the 1999 merger of disability insurers Unum and Provident, which operated in the group and individual markets, respectively. Executives thought that each company’s salespeople would be able to sell the other’s products, but the two businesses served entirely different customers through different models. Unum’s sales reps called on corporations to sell group policies; Provident’s crafted sales pitches for individuals. They had different skills and no particular desire to collaborate on cross-selling. Joining the two companies proved costly and complicated. The merger just ended up producing higher prices for everyone and an aggressive posture toward denying claims, which provoked a series of lawsuits that imperiled UnumProvident’s reputation and finances. Unum eventually undid the merger, dropping the Provident name and exiting the individual market in 2007. Its stock price plummeted and is still less than half what it was in 1999, and the company continues to cope with class action suits from claimants.Even when synergies do exist, excitement over them can lead a company astray. Quaker Oats overpaid horribly for Snapple, which it acquired to freshen up a dowdy brand and gain access to Snapple’s direct-store-delivery system and network of independent distributors. At the time, analysts warned that the $1.7 billion price might be as much as $1 billion too high. Quaker never dug deep enough to understand Snapple’s distributors, who fought efforts to push Gatorade and other Quaker products. Just three years after the acquisition, Quaker sold Snapple for $300 million. Synergies can prove problematic in more subtle ways, too, as when executives focus so much management time and energy on capturing them that they lose out on other, more fruitful opportunities. And clashes of culture, skills, or systems can make it impossible to achieve even synergies that seem easy and obvious.Faulty Financial EngineeringAggressive financial practices don’t necessarily lead to fraud, but they can be dicey. The stakes are high—brands and reputations and even entire businesses can crumble as a consequence, and corporate officers may be exposed to massive fines and even prison.If subprime mortgage lenders and the banks that supported them had paid attention to the story of Green Tree Financial, they might have realized how dangerous lending to unqualified buyers was. A darling of both Main Street and Wall Street in the 1990s, Green Tree made its fortunes by offering 30-year mortgages on trailer homes—which depreciate rapidly and can have a life span as short as 10 years. Three years after a $50,000 purchase, a home owner might be stuck with an asset worth $25,000 while owing more than $49,000 in principal. At that point, defaulting starts to look pretty attractive. All the while, Green Tree followed aggressive “gain on sale” accounting methods to record profits, basing its calculations on unrealistic assumptions about defaults and prepayments. With profits based on loan origination, there was also little incentive to qualify buyers.Attracted by Green Tree’s rapid growth, Conseco, an Indiana-based life and health insurer, bought the firm for $6.5 billion in 1998 in the hope of creating a broader financial services company, only to find itself stuck with a house of cards. Conseco ultimately took almost $3 billion in write-offs and special charges related to Green Tree, essentially erasing all profits earned by the unit between 1994 and 2001. CEO Steve Hilbert resigned in April 2000, and Conseco filed for Chapter 11 bankruptcy protection in 2002—reportedly the third-largest bankruptcy in U.S. history at the time.Avoiding Disasters: The Devil’s AdvocateThe rise and fall of Green Tree and its ensnarling of Conseco illuminate two problems with financial engineering strategies: First, they can produce flawed products, such as easy-credit mortgages, that attract customers in the short term but expose both buyer and seller to excessive risk over time. Second, they encourage further hopelessly optimistic borrowing to finance more investment. Green Tree’s model was elegant in that the firm could borrow short-term funds at low rates and lend at much higher rates—but at the same time preposterous, because the machine seized up as soon as the flaws in the underlying mortgage product became apparent.Questions Every Company Should AskOverly clever financial reporting is also risky, especially when it involves cutting corners to increase profits and deliver better bonuses. Such techniques tend to veer toward fraud, even when outside auditors have blessed them. Like other aggressive practices, they’re powerfully addictive: Investors reward increased profits, which leads the company to scramble for even greater creativity.Stubbornly Staying the CourseRedoubling your investment in your current strategy in response to market signals is a strategy in itself, and it can lead to disaster. Executives too often kid themselves into thinking that a problem isn’t so severe or delay any reaction until it is too late. Eastman Kodak stuck to its core in the face of a blatant danger: digital photography. Company executives had made a detailed analysis of the threats posed by digital technology as far back as 1981 (when Sony introduced the first commercial electronic camera, the Mavica) but couldn’t shake their attachment to prints and traditional processing. The margins were hard to pass up as well—60% on film, chemicals, and processing, versus 15% on digital products. Digital technology also eliminated the huge recurring revenue stream that came from film and reprints (though some companies—HP and Epson—now profit from recurring revenues from ink cartridges for printers).This is a common reason companies don’t change course: The economics of the new model don’t measure up to the economics of the old. Companies also falter because they don’t consider all the options. Kodak’s executives couldn’t fathom a world in which images were evanescent and never printed. The company fought only a rear-guard action against digital cameras and didn’t make a big move into the space until the early 2000s. It now has a share of the online photo-posting market, but its hesitation was costly: Over the past decade, Kodak has lost 75% of its stock market value. As of 2007, the company had fewer than a third of the number of employees it had 10 years earlier.Pager company Mobile Media had even less of an excuse to stand by its strategy, because pagers were essentially a fad that lasted only several years. They were a status symbol in the mid-1990s, when cell phones were still bulky and calls expensive. But even as cellular technology followed Moore’s law, Mobile Media acquired other pager companies and focused on designing new-generation technologies that nobody wanted. Following a purge of senior executives, Mobile Media filed for bankruptcy in January 1997. But the brunt of the decline in paging was borne by Arch Communications, which bought Mobile Media in 1999.It isn’t just fast-moving technology companies that fatally ignore new threats. Pillowtex was an old-line company that manufactured pillows, comforters, and towels. It grew steadily for decades—largely through acquisition—and by 1995 reached annual sales of almost half a billion dollars. In 1994, however, the United States began to phase out quotas on imports. Other companies immediately began outsourcing production to developing countries so they could compete with low-price imports, but Pillowtex redoubled its acquisition efforts, hoping that efficiencies from scale would give it an edge. The company’s SEC filings from the late 1990s barely mention outsourcing as an option, instead highlighting the $240 million that Pillowtex spent on new, efficient machinery for its U.S. plants in 1998 alone. Two bankruptcies later, the company shut down in 2003 and was liquidated. Although part of the company’s rationale for keeping manufacturing in the United States was to protect American workers, 6,450 lost their jobs. The layoff was the largest in the history of the U.S. textile industry.Pseudo-AdjacenciesAdjacent-market strategies attempt to build on core organizational strengths to expand into a related business—by, say, selling new products to existing customers, or existing products to new customers or through new channels. Such strategies are often sensible; they fueled much of General Electric’s growth under Jack Welch. But in our research we found many cases where ill-conceived adjacencies brought down even storied firms. Oglebay Norton, a regional steel provider, is just one example. After 143 years the Cleveland-based company was looking to diversify because steel was in decline. Limestone seemed like a logical choice because Oglebay’s shipping business was already hauling it for its steel mills. Limestone is used in steel production to separate impurities, which are removed before molten iron is turned into steel. It has many other industrial uses, especially in production.Oglebay began buying up limestone quarries, but it lacked a fundamental understanding of the limestone business. For one thing, iron ore was shipped on the Great Lakes, mostly on 1,000-footers, but limestone often needed to be transported on rivers to get closer to customers. That required much smaller vessels, which Oglebay didn’t have in its fleet. The company filed for bankruptcy on February 23, 2004, with $440 million of debt, most of which was incurred as part of the push into limestone. It would emerge from bankruptcy but never recover its footing. After selling off its fleet piecemeal to retire its debt, it was acquired by Carmeuse North America.Four patterns emerged among the failed adjacency moves in our research. The first was that a change in the company’s core business, rather than some great opportunity in the adjacent market, drove the move—witness Oglebay Norton’s desperation to reduce its reliance on steel. A second was that the company lacked expertise in the adjacent markets, leading it to misjudge acquisitions and mismanage competitive challenges. Avon made this mistake with a move into health care in the early 1980s, including the acquisition of medical-equipment-rental businesses and substance-abuse centers—a strategy justified by its “culture of caring.” But these acquisitions did nothing to build on Avon’s core asset, its door-to-door sales force, and overlooked the regulatory realities, in which it had no expertise. Avon took a bath. After significant losses, it took a total charge of $545 million for dismantling its health care business in 1988.The third recipe for disaster was overestimating the strength or importance of the capabilities in a core business. Successful companies are particularly prone to this; their ability to achieve in their own market makes them overly optimistic about their prospects in others. Laidlaw, the school-bus operator, fell victim to this type of thinking when it figured it could leverage its considerable expertise in logistics in the ambulance services business and went on a buying spree. The company suffered big losses in the ambulance business, taking a $1.8 billion write-down on it in 2000.Finally, adjacency strategies tended to flop when a company overestimated its hold on customers. Just because people buy one service from you doesn’t mean they’ll buy others. Several utilities seeking to expand in the mid-1980s fell prey to this kind of thinking. When regulators began threatening to cut rates, utilities looked for opportunities in other industries. Some made a classic mistake: They jumped into high-growth markets without having any idea about whether they were qualified to operate in them. They thought they could simply leverage their customer bases and sell them products like life insurance, but they found few buyers.Bets on the Wrong TechnologyThe huge rewards for breakthrough products and services understandably inspire many companies to search relentlessly for the next Google or eBay or iPod. Still, in our research we discovered that many technology-dependent strategies were ill-conceived from the get-go. No amount of luck or sophisticated execution could have saved them. To keep pursuing the strategies that produced these failures—some quite spectacular—companies had to go to great lengths to deceive themselves.Motorola’s Iridium satellite-telephone unit—a $5 billion venture that filed for Chapter 11 less than a year after the phone system went live—is widely cited as a failure of execution or marketing. In fact, the failure stemmed from a misguided captivation with technology. The project began in the 1980s to solve a legitimate problem: Cell phones were expensive and lacked global connectivity, and existing satellite alternatives were cumbersome and unreliable. But as Motorola pursued its development plans, it ignored its own engineers’ warnings that the ultimate product would share the limitations of early 1980s cellular technology even as cell phones got better and cheaper with every passing year. Motorola was so enamored with its technology that its market research amounted to little more than marketing. For instance, when it asked if customers would like a global portable phone for a “reasonable price,” it didn’t define “reasonable” as an initial outlay of about $3,000, plus monthly charges and pricey minutes; and its description of a phone that would “fit in your pocket” assumed that your pocket would hold a brick.Federal Express made a similar mistake in the mid-1980s with Zapmail, a service whereby couriers would pick up paper documents and deliver them to a nearby processing center, where they would be faxed to another processing center, close to the destination, and delivered by courier to the recipient, all within two hours. The price was $35 for up to five pages, with a discount and faster delivery if the customer brought the documents into a FedEx office. At the time, few companies owned fax machines, because they were expensive and transmission quality was often poor. As prices fell and the technology improved rapidly, fax machines proliferated; soon it seemed silly to use FedEx as an intermediary. In 1986, FedEx shut Zapmail down, taking a $340 million pretax write-off after losing $317 million during its two years of service.Rushing to ConsolidateAs industries mature, the number of companies in them diminishes. Holdouts have an incentive to combine and reduce capacity and overhead and gain purchasing and pricing power. Our research shows that it is sometimes better to sit back and let others fumble through consolidation. Though there’s more glory in being the buyer, it may be wiser to sell and pocket the cash before industry conditions deteriorate.Take the demise of Ames Department Stores. The company pioneered the concept of discount retailing in rural areas four years before Sam Walton got into the game. But it got reckless in its attempts to build a national presence. In its zeal to compete with Wal-Mart, Ames made a series of acquisitions, without adequately considering what it would take to win that battle. The moves didn’t build on its core strength—merchandising—and exacerbated its greatest weaknesses: back-office systems like accounting. For instance, after Ames acquired discount chain G.C. Murphy in 1985, it suffered an enormous amount of shrinkage (industry speak for theft) because it had no system for checking inventory. Disgruntled Murphy’s employees were reportedly stealing goods off delivery trucks and then logging complete shipments into stores. In 1987, Ames lost $20 million worth of merchandise and couldn’t tell why. Even as the company struggled to integrate G.C. Murphy, Ames’s managers went for another, bigger, takeover—Zayre, for which it paid $800 million, a glaring overpayment. The company filed for bankruptcy in 1990 but recovered, only to make the same mistake again. After struggling with the disastrous acquisition of Hills Department Stores, Ames again filed for bankruptcy in 2000 and was liquidated in 2002.Consolidation plays are subject to several kinds of errors. For one thing, you may be buying problems along with assets. Ames repeatedly overlooked the fact that many of the stores it bought were damaged goods. For another, increased complexity may lead to diseconomies of scale. Systems that work well for a business of a certain size may break as a company grows. USAir bought Pacific Southwest Air for $385 million in 1987 to expand into the West and then bought archrival Piedmont for $1.6 billion. The company almost tripled in size in a bit more than a year, and its information systems couldn’t handle the load. Service suffered, computers repeatedly broke down on payday, and crews were taxed to the limit by their new schedules. Before the merger, USAir and Piedmont had operating profits six to seven percentage points higher than the industry average; after the merger operating profits were 2.6 points below the industry average.Furthermore, companies may not be able to hold on to customers of a company they buy, especially if they change the value proposition. And last, other options may be preferable to being the industry’s consolidator. Ames didn’t have to go toe-to-toe with Wal-Mart. It was doing nicely as a regional retailer with a far more limited product line. As far as we can tell, Ames never considered holding on to its position and potentially selling out to Wal-Mart down the line.Roll-Ups of Almost Any KindThe notion behind roll-ups is to take dozens, hundreds, or even thousands of small businesses and combine them into a large one with increased purchasing power, greater brand recognition, lower capital costs, and more effective advertising. But research shows that more than two-thirds of roll-ups have failed to create any value for investors.We were interested to find that many roll-ups were afflicted by fraud—among them, MCI WorldCom, Philip Services, Westar Energy, and Tyco—but we won’t focus on those in this article because for the most part the lesson is simply, “Don’t do it.” Instead, let’s look at the fortunes of Loewen Group. Based in Canada, it grew quickly by buying up funeral homes in the U.S. and Canada in the 1970s and 1980s. By 1989, Loewen owned 131 funeral homes; it acquired 135 more the next year. Earnings mounted, and analysts were enthusiastic about the company’s prospects given the coming “golden era of death”—the demise of baby boomers.Yet there wasn’t much to be gained from achieving scale. Loewen could realize some efficiencies in areas like embalming, hearses, and receptionists, but only within fairly small geographic proximities. The heavy regulation of the funeral industry also limited economies of scale: Knowing how to comply with the rules in Biloxi doesn’t help much in Butte. A national brand has little value, because bereaved customers make choices based on referrals or previous experience, and being perceived as a local neighborhood business is actually an advantage. In fact, Loewen often hid its ownership. And it damaged whatever reputation it did have with its methods of shaming the bereaved into buying more expensive products and services (such as naming its low-end casket the “Welfare Casket”).Nor did increased size improve the company’s cost of capital. Funeral homes are steady, low-risk businesses, so they already borrow at low rates. The cost of acquiring and integrating the homes far outweighed the slight scale gains. What’s more, the increase in the death rate that Loewen had banked on when buying up companies never happened. Fast-forward several years and the company filed for bankruptcy, after rejecting an attractive bid. (Relaunched under the name Alderwoods, Loewen was sold to the same suitor for about a quarter of the previous offer.)Often roll-ups cannot sustain their fast rate of acquisition. In the beginning, all that matters is growth—buying a company or two or four a month, with all the cultural and operational issues that accompany a takeover. Investors know that profitability is hard to decipher at this point, so they focus on revenue, and executives know that they don’t have to worry about consistent profitability until the roll-up reaches a relatively steady state. Operating costs frequently balloon as a result. Worse, knowing that the company is in buying mode, sellers demand steeper prices. Loewen overpaid for many of its properties. In another case, as Gillett Holdings and others tried to roll up the market for local television stations in the 1980s, the stations began demanding prices equal to 15 times their cash flow. Gillett, which bought 12 stations in 12 months and then acquired a company that owned six more, filed for bankruptcy protection in 1991.Finally, roll-up strategies often fail to account for tough times, which are inevitable. A roll-up is a financial high-wire act. If companies are purchased with stock, the share price must stay up to keep the acquisitions going. If they’re purchased with cash, debt piles up. All it took to finish off Loewen was a small decline in the death rate. For Gillett, it was an unexpected TV ad slump. When you go into a roll-up, you need to know exactly how big a hit you can withstand. If you’re financing with debt, what will happen if you have a 10%—or 20% or 50%—decline in cash flow for two years? If you’re buying with stock, what if the stock price drops by 50%?

• • •The vast majority of business research focuses on successful companies, in an effort to generalize from their traits, tactics, or strategies. Executives scrutinize healthy businesses for best practices they might be able to imitate. Our research looks at the data that others tend to ignore: companies that tried to do the same thing as the winners and failed. We know that companies are capable of learning from failure, given the right incentives. Airlines have a better-than-average record on preventing disaster because their own personnel go down with customers. Perhaps that’s an overly dramatic example, but we do believe that enormous value lies in learning from companies that have lost millions, if not billions, in pursuit of fundamentally flawed strategies.

Move Aside, Frozen Custard, and Make Room for Gelato

Move Aside, Frozen Custard, and Make Room for Gelato
By GLENN RIFKIN

Published: September 3, 2008
Though gelato, that smooth and flavorful Italian ice cream, is not a novelty in the United States, it has struggled to gain a foothold. Many consumers were turned off by too many bad Americanized versions and that, in turn, turned off many would-be entrepreneurs.

Daniel Rosenbaum for The New York Times
Dolcezza, a four-year-old shop in the Georgetown section of Washington, uses produce from area farmers in its handmade gelato.

Andy Manis for The New York Times
With less than half the butterfat of regular ice cream, gelato is less fattening and healthier, and its dense, rich flavor and smooth texture can be highly addictive.
Lately, however, gelato seems to be catching on, joining artisanal coffee, cheese and wine in catching the fancy of food lovers. With less than half the butterfat of regular ice cream, gelato is less fattening and healthier, and its dense, rich flavor and smooth texture can be highly addictive.
Stand-alone gelato shops may still be a risky bet, but it is one that an increasing number of small-business owners are willing to take.
In downtown Waukesha, Wis., for example, Joe and Lori Lester said they loved the Divino Gelato Cafe so much they bought it from the original owners a year and a half ago. Focusing on a high-quality product with a variety of flavors, they have expanded the business 35 percent since taking over, they said, and have already opened a second location.
Robb Duncan and his wife, Violetta, run Dolcezza, a small gelateria in the Georgetown section of Washington that features handmade gelato. They said that in the four years since they opened their shop, their business had grown 700 percent. In response, they have just opened a second location in nearby Bethesda, Md., and also sell pints at local farmers’ markets. “The D.C. market has really responded and was clearly ready for artisanal gelato,” Mr. Duncan said.
Albert Lattanzi, who owns a pizzeria and an upscale Italian restaurant in Edgartown on Martha’s Vineyard, opened a small gelato shop, Caffe di Lattanzi, in 2001, after he learned that the island’s transit service was putting a new bus stop near his property. Figuring that 3,000 visitors a day would pass through the area, he surmised that his gelato would be a lure for new customers as they waited for the bus. His gelato business has quadrupled since he opened.
Franchise operators, too, have noticed the nascent market. San Gelato Café, which franchises its gelato shops, is making a big push. The chain, based in Fort Walton Beach, Fla., recently announced that it would open 300 new gelato stores nationally by 2011. While modest by Starbucks standards, such growth is impressive for the gelato market.
PreGel America, the wholly owned subsidiary of one of Italy’s largest suppliers of gelato ingredients, opened up a sales and distribution center near Charlotte, N.C., in 2002. According to Marco Casol, the 37-year-old chief executive, the number of outlets supplied by PreGel has grown 30 to 35 percent annually since 2002 — more than 1,000 gelato shops, groceries, cafes and restaurants that sell gelato. Sales in 2008 are expected to top $15 million. The company offers free three-day courses in making gelato and running a shop and will send its chefs to customers’ locations to offer advice.
“I felt the U.S. was the last important market in the world that had remained untouched,” Mr. Casol said. “The market had finally changed. People travel much more, they are much more informed, and they are looking for healthy and nutritional food that is still tasty, something decadent that doesn’t leave a feeling of guilt.”
Though exact numbers are hard to find, Mr. Casol estimates there are now about 800 stand-alone gelato shops in the United States, a far cry from the 37,000 in Italy. For gelato-loving entrepreneurs, such a wide-open market means opportunity.
“In Europe, gelato is part of the culture, part of people’s daily routine,” Mr. Casol said. “You can’t change a culture overnight.”
Most major cities in the United States, especially New York and Los Angeles, are home to a growing number of gelato shops. But it would be misleading to call gelato the newest rage. In a 2008 ice cream consumption survey from Mintel, a Chicago-based market research firm, 89 percent of consumers said they ate ice cream but just 14 percent ate gelato.
David Morris, a senior research analyst at Mintel, said gelato was still “very much a niche product” that was not yet widely available. But Mr. Morris added: “There’s definitely momentum there.” In a 2007 “What’s Hot?” survey of 1,200 chefs by the National Restaurant Association, 51 percent called gelato a “hot trend.”

But experts note that there are costs and potential pitfalls in opening a gelato shop. The cost to outfit and run a new gelato cafe can range from $150,000 to $300,000 depending on its scale. Adding gelato to an existing restaurant or cafe can be done for a more modest $50,000.

Andy Manis for The New York Times
The Divino Gelato Cafe in Waukesha, Wis., top, owned by Joe and Lori Lester, bottom, has flavors like wildberry and mango.
Dominic Seminara, who runs the Specialty Restaurant Equipment Corporation in Arlington, Tex., warned that a stand-alone gelato shop was not a sure bet in most locations. “Gelato has a place but only in a setting in which it is part of the operation, not the entire operation,” he said. Adding gelato to a successful pizza parlor or coffee shop is a better way to go, he suggested.
Successful owners like Mr. Duncan and Mr. Lester disagree. Finding the right location, they say, is the first step. Mr. Duncan, who lived in Argentina and studied under the local gelato masters for a year, said he thought Washington had enough of an international flavor to support a gelato shop. He makes his gelato fresh every day, as it is done in successful Italian shops, and he uses only fresh, local produce from area farmers.
“The first month we opened in August 2004, we sold $25,000 worth of gelato,” Mr. Duncan says. “For July 2008, we sold $165,000 worth of gelato. Our challenge is to maintain the quality of the product.” He began to offer espresso as an adjunct to the gelato but said that coffee represented just 5 percent of sales. “Even if you have really good coffee, people go to a gelateria to buy gelato,” he said.
Jon Snyder, who opened what many believe to be the first gelato shop in America, in the SoHo neighborhood of New York in 1983, agreed with Mr. Duncan. “This is part of a food revolution in this country,” said Mr. Snyder, who owns Il Laboratorio del Gelato, a gelato wholesaler in New York that supplies more than 200 local restaurants.
“There’s a lot of bad gelato out there, but more and more, some really good product is being made,” Mr. Snyder said. “If you take pride in what you do and put out a great product, people will find you.”
Certainly that is the case in Waukesha. Mr. Lester said the previous owners of Divino had a tough time educating consumers about a product most had never heard of. But now, “this has become a destination, like a trip to Italy for people,” Mr. Lester said. “We’ve never advertised and it’s all word of mouth.”
In the long run, Mr. Lester acknowledges it is a challenging business. “At $3 a scoop, you need to sell a lot of gelato,” he said.

Starbucks to Introduce Smoothie Line

By Jennifer Martinez
LOS ANGELES,, July 11 (Reuters) - Starbucks Corp (SBUX.O: Quote, Profile, Research, Stock Buzz) is preparing to launch a line of smoothies next week, according to advertising at stores in several U.S. cities.
Signs in at least four coffee shops in Los Angeles and Chicago said the smoothies, called "Vivanno Nourishing Blends," will hit stores on July 15. Employees at stores in New York, Washington and San Francisco also confirmed the launch of new smoothies next week.
Starbucks would not comment on it.
A Washington, D.C. store gave out samples, saying the drink will have 250 calories. The new smoothies come in two flavors, Orange Mango Banana and Chocolate Banana, according to a sign in a Los Angeles store.
"Starbucks hasn't had real meaningful innovation in its stores in the past couple of years," said John Owens, a restaurant industry analyst with Morningstar Inc. "(The smoothies) are one of several initiatives Starbucks has in place to breathe life into their new brands."
The new drinks will mean increased competition for smoothie chains such as Jamba Inc (JMBA.O: Quote, Profile, Research, Stock Buzz), Owens said.
The smoothies are being rolled out as Starbucks is scrambling to increase sales at its U.S. coffee shops. Demand for the company's premium-priced coffee drinks has softened as consumers deal with a housing downturn and higher prices for food and energy.
Competitors like Dunkin' Donuts and McDonald's Corp (MCD.N: Quote, Profile, Research, Stock Buzz) are also chipping away at Starbucks' business with cheaper espresso drinks and iced coffee.
To help revive profits, Starbucks said on July 1 it planned to close 600 poorly performing U.S. stores and cut up to 12,000 jobs. On a conference call that day, Chief Financial Officer Pete Bocian said Starbucks would be rolling out a line of smoothies nationwide in mid-July. (Additional reporting by Erin Zureick in Chicago, Lisa Baertlein in San Francisco, Martin Howell in New York and Diane Bartz in Washington) (Reporting by Jennifer Martinez in Los Angeles; editing by Nichola Groom)

Francorp - Expert Witness Work

Franchisee Battles Quiznos Over Location PolicyBy: Daniel Del'RePublished September 2, 2005September 2, 2005

--Franchisees of sandwich chain Quiznos are fighting what they say are policies that allow the Denver, Colorado company to open too many franchises in a single market, leading to cannibalization of revenues.On Aug. 26, a Los Angeles County judge told Quiznos it could not shut down a Long Beach, Calif. chain and ordered Quiznos into arbitration with Bhupineer "Bob" Baber and his wife Ratty Baber, who claimed that new stores in their area siphoned customers from their two Long Beach franchises.

If the Babers win that round, Quiznos may not be able to open new stores in cases where sales are likely to cut into the business of existing franchises."There is an implied covenant of good faith and fair dealing that says you don't dump competition on top of your existing franchisees," said Fred Pardes, attorney for the Babers.Quiznos' franchise agreements do not restrict the company from opening franchises within the proximity of existing locations.But Don Boroian, a franchise consultant with Francorp, said franchisers like Quiznos have an obligation to prevent locations from encroaching on each other's territory.Boroian is serving as an expert witness in a separate lawsuit against Quiznos in which the plaintiff, Royce Gwin, is arguing that he was denied commissions for selling franchises.

In 2004, Quiznos opened two franchises less than two miles from the Babers' Quiznos. Pardes said that within months, the Babers' revenue fell by one third and blamed it on the new competition.The Babers founded a not-for-profit last December to organize Quiznos franchisees with similar grievances. One month later, Quiznos revoked the Babers' franchise on the grounds of health code violations. The City of Long Beach said the chain passed all health code inspections.But the closure prompted the Babers to sue Quiznos.Quiznos would not comment on the allegations or the suit."We are moving forward with arbitration in California," wrote a Quiznos spokesperson in an e-mail. " We're not going to comment further regarding ongoing litigation."