Archive for November, 2007

How do Businesses Like Contours Express Survive?

Any resemblance to the meal assembly industry is purely coincidental and is just a figment of your imagination. 

How do Businesses Like Contours Express Survive?

Imagine that you purchase a franchise location for $16,000. Then you purchase the software to manage your computer systems for an additional $500. You then go to negotiate rents in your area and find that the market research given to you by the parent company was VERY inaccurate and you are not able to open. So, you feel like you are up sh*ts creek without a paddle. Then one day you find a great location, great rent and the address falls within the market that you purchased. So, you call your parent company to take the next steps, and the parent company tells you that you did not open your location in the time frame laid out in the contract and they let you know that you lost that location because you are a few months late in opening.

On top of all of that, the market is still open, nobody else owns it and there is real market potential.

Well, this is what happened to my mom. She is a charismatic, outgoing, compassionate woman in her 50’s who has a heart for seeing people grow and develop. Having been a single mom for nearly 15 years, she especially has passion for encouraging other women to discover themselves and summon their inner-strengths. Opening a gym for women seemed to be right up her alley.

She sought out locations, found a decent rent and then purchased her market from Contours Express. When my mother went to sign the lease, the rent had gone up…significantly. Apparently the landlords felt that that my mother and husband’s household income could handle a bit more than the initial rent quote. Well, the new quote did not allow for the business to ever be viably profitable.

So, my mom hunted and hunted. And in Fairfield County, CT you have to hunt a VERY long time to find a good rent. Afterall, it is the richest county in America.

My mother was about to call her investment lost, when she encountered a new development that offered her a location and rent that would allow her to run a profitable business. She contacted Contours Express and they told her that they would not allow her to open the location unless she re-purchased the market!! Folks, that is another $16,000!!

Now, to be fair, I understand contracts. Contracts are protection mechanisms. They protect consumer AND seller. They have there place and are necessary. However, contracts should never keep us from doing what is right. What is morally right. The market is still open, you see a person who has already given you $16,500 (not chump change) trying hard and making headway in establishing their business, and then…you dump them and take their money!!

This is the sort of crap that gives Americans a bum wrap. This is the kind of behavior that chips away at the source of strength of free-market business: INTEGRITY! When you chip away at integrity long enough, you get ugly business. You get companies that end up in the news for all of the wrong reasons. i.e Enron, Wal-Mart and their hiring practices, McDonald’s and their hot coffee incident. OK, strike McDonald’s from the list; that was a joke. But you get the point: businesses that compromise their integrity turn “crappy”.

Just to further my argument against Contours Express (so you know that this post is not prompted solely by the fact that the victim is my mother), take a look at these stats.

Contours Express has just about 300 US locations. Last year there were 520 markets purchased (let’s say that they each cost $16,000) and only 6 opened. 6 out of 520! And Contours Express is the #2 most profitable women’s fitness company behind Curves. However, Curves seems to be doing just fine with regards to location growth. They have well over 10,000 locations world-wide. Oh, and based on inquires made directly to Curves, they will turn down potential franchise owners if their research tells them that the franchisee will not be successful in a particular market.

So, I wonder where all of the profit comes from for Contours Express! Maybe it comes from the simple collection of franchise fees and not from an investment in what should be their greatest asset: their franchise owners!

What goes around, comes around. And I hope that when it comes around it lands right on top of Bill Helton’s fat head (now I am writing purely on emotion)!! Maybe the new CEO, Jose I. Perez, Jr., can knock some sense into this company.
09/14/2007

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Ben & Jerry’s Bitter Crunch

This does not remind me of the meal assembly industry in any way, shape or form. Any resemblance would just be complete coincidence.

Some ailing franchisees say the ice-cream maker isn’t nearly as sweet as its image.

Rainforest Crunch. Cherry Garcia. Peace Pops. Perhaps no other consumer brand’s image is so entwined with hippie-inspired idealism and social causes as Ben & Jerry’s. Among the ice-cream maker’s crusades: saving the endangered family farm by supporting farmers’ cooperatives and fair-trade initiatives. The message is unmistakable: by buying pints and cones, consumers are helping Ben & Jerry’s stick up for the little guy.

But when it comes to its own “little guy,” Ben & Jerry’s may not be quite so generous, to hear an increasingly embittered group of the company’s shop owners tell it. In interviews with two dozen current and former franchisees, some of these mom-and-pop entrepreneurs say the company misled them into investing their life savings in stores that were doomed to failure, and did little to help them stay afloat. They tell of ice-cream shipments weighing less than what they paid for and delays in restocking popular flavors. They say big buyers like Costco and Wal-Mart were given comparable wholesale prices by Ben & Jerry’s, undercutting individual scoop shops. They claim headquarters didn’t market their stores adequately or provide business advice, as a national franchise is typically expected to do. Ben & Jerry’s says the complaints are either exaggerated or just plain wrong, and don’t represent the experience of most of its franchisees.

Opening your own business—even a branch of a well-established brand—is always risky. That’s something many would-be owners forget as they imagine the gilded pot at the end of the golden arches. “We want success for all of our franchisees,” says Debra Heintz, director of retail operations for Ben & Jerry’s. “Unfortunately, not all will succeed.”

Alan Sherman and his wife, Shannon, are among the unsuccessful ones. The couple opened their shop in Blacksburg, Va., in 2004. They say they built their business plan based on information in a 2004 Ben & Jerry’s franchising circular, a disclosure document sent to prospective new owners. The circular stated that the average Ben & Jerry’s store would bring in $364,892 in gross sales. But the Shermans soon realized their shop wouldn’t ring up nearly that amount. They say they’ve already lost a half-million dollars, and will likely lose thousands more as they continue pumping cash into the business to avoid defaulting on loans. “We feel we’ve been abandoned,” he says. They say they plan to sue.

Ben & Jerry’s is already fighting a suit filed by one California franchisee, Mehrdad Porghavami, who alleges the company’s financial projections were false and misleading (Ben & Jerry’s has sued him for allegedly breaching his franchising agreements). Bekki Ramsey and her husband, Aaron Richardson, who shuttered their shop outside Phoenix this year, blame Ben & Jerry’s for not differentiating in the circular between average sales for neighborhood stores like theirs, and for higher-volume locations such as casinos and airports. “We opened the worst type of store in the worst region Ben & Jerry’s had,” says Ramsey, noting that she’s lost $220,000 of her elderly parents’ retirement savings. Company officials say they stand by the average-sales claims they’ve published in the past. But they also acknowledge removing the figure from their most recent franchising notice, a decision Heintz says she made after talking to franchisees and realizing they were confused by it.

Leaving shop owners with a sour taste in their mouths hardly jibes with the peace-and-love vibe the company’s founders created. Ex-hippies Ben Cohen and Jerry Greenfield opened their first shop in Burlington, Vt., in 1978, making a point of using milk and cream from local farmers. By 1988, their company had committed to donating 7.5 percent of its pretax profits to philanthropic causes like protecting the environment, fighting AIDS and battling sweatshops. But in 2000, the pair, who declined to comment for this story, cashed in, selling to consumer-products giant Unilever.

Disgruntled franchisees say not long after, the trouble started as Unilever began rapidly expanding its newly acquired brand. Chief executive Walt Freese says that when the expansion started in 2003, the market for ice-cream shops looked strong. Between 2003 and 2006, the number of stores Ben & Jerry’s competes with tripled. Other brands, including Cold Stone Creamery and Marble Slab, flooded the marketplace. But overall ice-cream sales remained relatively flat. Last year 38 of Ben & Jerry’s 456 North American shops, or about 8 percent, closed their doors. That compares with 71 Cold Stone Creamery shops that shut down, or about 5 percent of the total.

Many Ben & Jerry’s franchisees have no complaints, and say that a vocal minority of unsuccessful owners are attacking the company for their own failures.

Meantime, Ben & Jerry’s officials say they are taking measures to help struggling shop owners stay in business by waiving royalty fees, helping to renegotiate store leases and increasing marketing support. “It is Ben & Jerry’s ethic,” CEO Freese says, “how we believe in treating each other.” Lesson to “socially conscious” companies: charity begins at home.

Read about Ben & Jerry’s Bitter Crunch

Judge Dismisses Federal Lawsuit against Quiznos

The moral of the story? Make sure you carefully read the UFOC for the franchise. It gives them a great deal of power and you may not be able to dispute their actions. They may not seem fair, but the franchiser is protected, not the owner. What you think may be “wrong” could be perfectly allowable/legal/acceptable under your agreement and you will be the one in trouble if you don’t follow the rules.

MILWAUKEE (Blue MauMau) – Federal Judge William Griesbach of the U.S. Eastern District Court of Wisconsin announced today the dismissal of a banner lawsuit against Quiznos. Twelve franchisees, represented by attorney Justin M. Klein of Marks & Klein, allege that Quizno’s Franchise Company, LLC defrauded them. The sandwich shop owners accuse Quiznos of gouging franchisees to require them to purchase food, supplies and services at exorbitant prices from approved vendors, who in turn provide hidden kick-backs to Quiznos. It is alleged that the company then set artificially low retail prices that dug into store profitability.

Allegations of the franchisor having exorbitant mark-ups and kick-backs were ruled as vague. There was another more critical issue. Whether such price gouging exists or not, the judge specifically cited that the Uniform Franchise Offering Circular (UFOC) in which all franchise owners must sign was quite clear. The franchisor could charge mark-ups and kick-backs without restriction; specifically:

ITEM 8 of UFOC: We (Quiznos) and our affiliates have the right to receive payments from suppliers on account of their dealings with you and other Franchisees and to use the amounts we receive without restriction for any purpose we or our affiliates deem appropriate…

The claims of the franchise owners were undone by the franchise agreements that each signed (see attached memorandum and order, pdf – 28 pgs). Summarizes the judge, “Having chosen to become Quiznos franchisees, plaintiffs are bound by the terms of the franchise agreements they signed. If Quiznos has breached its agreement with them by charging them exorbitant prices for the goods and services needed to operate their franchises, their remedy lies in contract, not under the antitrust laws.”

Federal racketeering, Sherman anti-trust and fraud charges were all dismissed. In regards to these charges, the court observed, “claims of fraud on which plaintiffs’ civil RICO claims rest are fatally undermined by the exhaustive disclosures and specific disclaimers and non-reliance clauses set forth in the franchise agreements they signed. I also conclude that the complaint fails to state a claim under the Sherman Act and its Wisconsin equivalent.”

Franchise owners claimed that area developers gave them false expectations of what their store would earn when they were investigating to buy a franchise. The court dismissed the allegation saying that such false earnings claims were not relevent because the UFOC expressly stated this warning in all capitals and bold letters (see below):

“OTHER THAN THE ABOVE INFORMATION, WE DO NOT FURNISH OR AUTHORIZE OUR SALESPERSONS TO FURNISH ANY ORAL OR WRITTEN INFORMATION CONCERNING THE ACTUAL OR POTENTIAL SALES, INCOME OR PROFITS OF A QUIZNO’S RESTAURANT.”

The court also ruled that the jurisdiction of the lawsuit was not entirely appropriate. State claims should be tried at the state level, not in federal court. Comments the judge, “With plaintiffs’ federal claims gone, I then dismiss the remaining state law claims without prejudice to allow plaintiffs to pursue them in state court under whose law they arise.”

With the franchisee lawsuit having failed, Richard Emmett, Executive Vice President and Chief Legal Officer for Quiznos, spoke with Blue MauMau about how the ruling could help the network focus on important issues.

“Now hopefully this distraction is behind us. We do not want to spend our time in court”, says Mr. Emmett. “We want to spend our time improving the system and franchisee profitability. So we are pleased with the decision, not only because we think the decision is right but also because it will allow us to direct more resources to the benefit of our franchisees.”

Franchisee attorney Justin Klein is currently evaluating whether to file the suit in state court and / or appeal in federal court.

Read the article here:

Meal preparation business has mushroomed in recent years

Oh goody, more completely fabricated and unsubstantiated numbers about the growth of meal assembly! There’s nothing like pulling numbers out of your @#$ to get people excited about investing in this industry! I guess the idea of citing sources or checking facts is cliche…

Easy meal preparation business has mushroomed in recent years

4

Easy meal prep stores open nationwide in 2002

1,371

Easy meal prep stores open in the U.S. last month

2,235

Projected easy meal prep stores in U.S. by 2010

112 million

Estimated portions served, 2007

188 million

Projected portions served, 2010

$7.2 million

Industry revenues, 2003

$370 million

Estimated industry revenues, 2007

$620 million

Projected industry revenues, 2010

By the numbers

Super Suppers Lincoln Leads Rhode Island In Meal Assembly

I have to admit, I would LOVE to know what kind of numbers we’re talking about here! But none-the-less, it’s quite an achievement!

Super Suppers Lincoln Leads Rhode Island In Meal Assembly

Super Suppers Lincoln, Rhode Island’s Original Take-n-Bake Kitchen has announced that for the 15th straight month it has been the top Super Suppers in the Country.

There are more than 200 Super Suppers in 45 states and the Lincoln, RI location continues to lead the pack.

“There are a lot of copy cats, but we are the original and continue to provide higher quality ingredients than the others”, says Mark Economou, the local owner of Super Suppers Lincoln.

“Most other Take-n-Bake kitchen buy the ingredients they are required to buy, or the cheapest product possible, we buy only premium quality ingredients and a lot of the time upgrade our ingredients to make our meals that much better”, says Economou.

Super Supper Lincoln is located at the Lincoln Mall at 622 George Washington Highway. They can be reached at 401.334.1400 or at www.sslincolnri.com

Read the article here:

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