Archive for January, 2009

Is 2009 a good time to buy a franchise?

Franchoice believes 2009 is the time to venture out on your own and buy a franchise. From the articles posted on the front page of their website they feel that owning a franchise will let you take control of your future, that the timing is right to buy property at a discount price and since most corporations won’t be helped by the bailout money that you need to fend for yourself. Uncle Sam is going to take care of the big league players but leave the average Joe to fend for himself.

That’s somewhat hard to argue against, people do need to do more to be self-reliant, but is going it alone and jumping on board a franchise the right call? Franchise sellers believe that recession proof ideas such as personal grooming, medical/healthcare and other service related industries are where the money can be made. Basically you should invest in a service people can’t do for themselves and one that can’t be offshored to another country.

Its reasonable thinking, but is now the time to make the jump? I do agree that as unemployment goes up, franchising will see an increase as people try to find jobs for themselves.

My only real problem here is that people selling franchises will always say it’s the best time to buy one. You can spin any situation into a positive when you’re trying to sell something. A car that “sips gas” is a car that doesn’t run. A “unique fixer upper” is a house without a roof.

So, is now a good time to act to try and create your own future before Corporate America downsizes you or are franchise sellers just trying to drum up business in a bad economic time?

How to Buy a Franchise in a Down Economy
Jeff Elgin on franchising
Need a job, buy a franchise

The Little Independent That Could

The Smalls do have several good ideas about meal assembly. Hopefully it will keep working in their favor. They aren’t much on session based meal prep, but instead prefer to keep the cost and mess down by doing it themselves.

“We liked the idea of personalizing it, and having the chance to do our own recipes and ingredients,” said Alison. “Too many of the recipes from the franchise relied on good ol’ cream of mushroom soup. Lots of canned stuff. We wanted to use all fresh ingredients, and tailor it to our customers’ wants and needs. We change the menu every month.”

“So many of the franchises have gone under now,” said Stan. “There’s too much overhead, and they dictate your menu too much. We love to cook. And we love to eat. And we wanted to share that.”

The Meal Thing

The Downward Spiral

Although facts and figures regarding the meal assembly industry are suspect at best, it’s still possible to show a trend of what’s been going on over the past year. I’ve done some research and using old articles and other tidbits I’ve been able to pull together this interesting timeline. As you can see there has been a continual decline in the stores and companies offering meal prep.

There is little doubt that 2007 saw an explosion in the number of meal prep businesses with kitchens popping up on every street corner. It was a crazy time and franchisors couldn’t sell stores fast enough. All that cash coming in must have been dizzying. It’s no wonder no one was checking to see if the owners they were selling to and the locations the store would be placed in were suitable to the franchise. But the gold rush was on! So much so, that between September and December of 2007 there were approximately 450+ meal assembly companies operating, with some 1420+ outlets dishing out meals.

And then something happened.

Meal assembly was a hot movie starlet and everyone wanted their piece. But amid the glitz and glamour was the reality of the business and soon the star power began to fade and tarnish. The engagements were less frequent and this hot new trend was passed over for the next hot thing. As 2008 wore on, the store closings began to mount and owners ditched their store before they lost everyone or because they lost everything.

2009 presents us with approximately 320+ companies still doing business and just a few over 900 stores still operating. There is a lot of room for error in these figures but you can see that 130+ companies have disappeared and over 400 stores have shut down. Although I can’t find the exact figures I believe there was some speculation that over 2000 stores were actually in operation during the year. If that were true then over half the stores that used to be open are now closed and out of business.

Even if we just take the published numbers, you can see a steady decline.

And what of the big power houses of Super Suppers and Dream Dinners? They certainly lead the way in opening stores like it was going out of fashion. Gripped with the Starbucks mentality they figured opening more stores was as good as advertising, but they didn’t have to pay any money for it. So much the better!

The numbers fluctuate as to who is the true market leader, but there is no doubt both chains opened a tons of franchises. Each one claimed to be well over 200 with more bold statements that they hit 250 at some point. 225 stores sounds a little more reasonable and less prone to bragging so we will go with that number. Super Suppers has been dropping stores and currently sits at around 110 stores – a far cry from the 225 they inferred they had in the works.

Dream Dinners hasn’t done much better with less than 170 stores still operating. A pretty big gap between first and second. The stores were originally neck and neck and now a 60 store split separates them. But keep in mind it was just a few months ago SS was proud they had 140 stores. Darin claim righteously that he and his crew had a great relationship with their 180 owners. So, Super Suppers may have lost around 100 stores and Dream Dinners may have lost anywhere from 60-80 stores in the last 12-15 months. Basically we are seeing 30-40 stores close per month nationwide and out of those 4 are a Dream Dinners and 4 are Super Suppers. In essence each franchise is closing 1 store per week.

If you want to be even more depressed, think of it this way. If 500 stores have closed and each one of those owners was in debt by $100,000 (which many have stated they are) you’re looking at $50 million in debt because of this industry. And that’s were we stand now, not how it will be in a year from now.

Am I just picking on Dream Dinners and Super Suppers? I bring them up because they are the largest and most well known. Also, they should have larger capital assets to help guide them through these uncertain times. This just shows they aren’t impervious to the trend.

But there are of course other casualties. As an example, MealMakers went out of business, as did Dinner by Design. My Girlfriend’s Kitchen and Entrée Vous were sold before they collapsed.

The fact of the matter is that the total number of open stores has been reduced by half over the past year. And even at the store level you can see that franchises have lost a substantial percentage of their business. Is the trend over? I hardly think so. These store closings actually took place when the economy was still reasonably sound. People have tightened the budget all over to the point where other restaurants and food chains are taking a hit. Several of those have declared bankruptcy because of the heavy revenue loss. Meal assembly will be in the same boat. It’s possible the decline may slow, but more realistically, as layoffs continue, more retail businesses will feel the hit. There is no indicator that meal prep will pull out of this nosedive just in the nick of time.

There was once a claim of 3,000 stores and $1 billion in revenue for this industry. That seems even more ridiculous now than when I first read it.

Survey: Americans dining out less

Americans are still going out to eat during the recession, but they are spending less, according to a survey by Norcross, Ga.-based hospitality research firm A Closer Look.

The online survey in November and December 2008 included 1,190 consumers across the country. It revealed 98 percent of consumers eat out or order take-out at least once a week, but 43 percent are spending less than they did compared to a year ago.

Coupon use at restaurants is growing, and offering meal discounts or free items are two of the best ways to attract new customers, A Closer Look said.

Survey: Americans dining out less

More opt to prepare food themselves to save cash

Are there other owners out there who have seen an increase in customers as they try save money and eat out less?

“For the third year in a row, the number of main meals eaten away from home is down,” begins an annual consumer study done by the Food Marketing Institute, an organization devoted to promoting the grocery industry. “In 2008, Americans ate out only 1.2 times a week, down from 1.3 times in 2007 and 1.5 times in 2006.”

Sandra Luthringer, owner of Super Suppers meal-assembly shop on Peach Street, said the economy hasn’t hurt her business one bit.

“We’re seeing new customers and they all say ‘we eat out too much, we have to start cutting back,’ but they don’t have the time to prepare the meal,” Luthringer said.

Home Cookin’

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