Credit crunch, declining profits make it harder for businesses to change hands
Skittish investors and a rapidly declining economy have stymied the once brisk buying and selling of small businesses in the region.
The small entrepreneur has been squeezed by Wall Street’s financial crisis, making it difficult for business owners to retire or simply swap businesses.
Business owners have found their companies are worth less because of slack sales due to the recession. And, since September, buyers have discovered it’s difficult to secure financing. Business brokers and industry watchers report that fewer deals are being done, they’re taking nearly twice as long to close and many are falling through.
Locally, the median asking price for a business in the Boston area was $199,000 during the fourth quarter of 2008, down about 9 percent from $219,000 during the same period in 2007, according to BizBuySell, an online small business marketplace in San Francisco.
DDIFO Names Acting President
The DD Independent Franchise Owners Group, (DDIFO)which represents the largest association of Dunkin’ Donuts franchise owners in the U.S., has named Jim Coen, a member of the DDIFO Board of Directors, as its acting President and Chief Operating Officer. He takes over December 1, 2008 from Mark Dubinsky who has tendered his resignation after two yeas as DDIFO President.
Mr. Coen is Executive Director of the New England Franchise Association and founder of Franchise Perfection. He has been a director of and the Clerk for the DDIFO board since May, 2008.
In his interim role as acting president Coen will continue DDIFO efforts to support all franchisees. "I thank the board for the confidence they have placed in me, I look forward to working with the Board and the members. DDIFO has incredible opportunities to support existing members, implement it’s mission, grow membership and improve the organization’s capabilities,” said Coen.
“We are pleased to have Jim Coen assume the role of President of our organization,” says Kevin McCarthy, Chairman of the DDIFO board. “This is a critical time for franchisees because of the economic uncertainty. The DDIFO board is confident that Jim’s experience and skills will serve members well during this transitional period. We are also grateful to Mark Dubinsky for all he did on behalf of the DDIFO and wish him continued success in his business endeavors.”
Dubinsky says, "I have been honored to serve as DDIFO president and am gratified by the many successes we enjoyed over the past two years, including the passing of the Rhode Island Fair Dealership Act and the addition of new, valuable business services for our members.”
USA Today ranks Red Sox as the No. 1 franchise in baseball
Seth Livingstone of USA Today writes that the Boston Red Sox combine resilience in the field and a vision for excellence in the front office, have brought unbridled joy to the ever-growing population of Red Sox Nation in the past five seasons.
In 2004, there was literally dancing in the streets of Boston when the franchise stunned the New York Yankees by rallying from a 3-0 deficit in the American League Championship Series on the way to its first World Series title in 86 years. Three years later, a second generation of champions, led by high-stepping closer Jonathan Papelbon, danced in celebration on the Fenway green.
This year, after the Red Sox disposed of the Los Angeles Angels in the AL Division Series and the crowd had gone home, team owners John Henry and Tom Werner took a celebratory run around the basepaths.
The Red Sox have become winners on the field and in the community, and they’ve had a measure of fun doing it.
And when USA TODAY Sports Weekly ranked the performance of 30 Major League Baseball franchises in nine categories during the past five years, the Red Sox, who reached Game 7 of the ALCS this year, came out No. 1 overall.
Coffee News Announces New Ownership
Franchising in New England announced that NEFA Member William (Bill) Buckley of Bangor, ME and President of Coffee News USA, Inc. announced the purchase of the parent company and owner of intellectual property rights for the Coffee News franchise system, 2703203 Manitoba, Inc., located in Winnipeg, Manitoba.
Bill has operated the company under a Management Continuity Agreement since March 1, 2006, when founder, Jean Daum, became serious ill with cancer and died July 23, 2007.
Jean Daum founded Coffee News October 22, 1988 in Winnipeg, MB. After placing her lunch order, Jean resorted to reading the information on a sugar packet out of sheer boredom. It dawned on her that restaurants were missing the boat by not providing patrons with something entertaining to read for a few minutes while waiting for their food. After six months of research, Coffee News was born and has now risen to become the world’s largest restaurant publication and the world’s largest franchise publication with an estimated readership of over 8 million every week.
The purchase includes all stock of the corporation from the Estate of Jean Daum, the copyrights and trade dress of the publication and all existing franchise agreements in force in 32 countries. Manitoba, Inc. will continue printing operations in Winnipeg, Manitoba where Coffee News has been publishing for 20 years. In addition to Coffee News USA, Inc. in Bangor, ME, the newly acquired company maintains Head Offices in Brazil, Canada, Mexico, New Zealand, Spain and Venezuela.
Irene Tolman of Coffee News Worcester a franchisee since 2000, says, "Bill has been a strong force in the growth of Coffee News and having him at the helm will make people more comfortable by knowing he’ll keep Coffee News going and growing."
Irene goes on to say, "the people who oversee the franchise work long hours…Bill’s dedication is amazing! Whenever I call or e-mail Bill he replies within the day (mostly within the hour)…always in a pleasant way and always with an answer. Who can say that about their franchise owner?"
Created during an economic recession, Coffee News has grown in circulation dramatically in both good and bad economic times. Coffee News contains fun filled, good news and positive information to entertain while waiting. Community based-businesses are allowed to purchase exclusive ads, thereby targeting restaurant patrons while they dine. The restaurants receive a weekly quantity of Coffee Newses free of charge.
Coffee News reported 1142 franchises in force as of July 31, 2008 in 32 countries. Only about 2% of all franchise systems in the world have more than 1100 franchise units.
Nutrition Information Standard Urged By New Coalition
New coalition advocates national nutrition standard for chain restaurants, detailed nutrition information for consumers.
A coalition of interested parties and foodservice establishments announced today that it will support federal legislation that provides consumers with detailed nutrition information in chain restaurants and other foodservice establishments using a uniform national standard.
Legislation has been introduced by Senator Tom Carper (D-Del.), Senator Lisa Murkowski (R-Alaska), and Congressman Jim Matheson (D-Utah), which provides consumers across the country with nutrition information in a uniform, predictable way.
The Coalition for Responsible Nutrition Information (CRNI) was formed to ensure that consumers across the country will have access to detailed nutrition information when they dine out. Americans are becoming more health conscious and have a growing interest in the nutritional value of the food they eat. The Coalition is launching with more than thirty companies and associations that represent restaurant owners and franchisees, food manufacturers, distributors, suppliers, business organizations and health organizations.
"We believe consumers who visit chain restaurants should have access to detailed written nutrition information in a consistent and convenient manner. The only way to make sure this happens is by creating a uniform, national standard," said Dawn Sweeney, President and CEO of the National Restaurant Association. "When different rules exist in various parts of the country, it makes it difficult for consumers to compare options. Consumers deserve a federal standard that provides access to the same nutrition information no matter where they are or where they live."
Recently, several cities, including New York and Seattle, passed menu labeling laws requiring restaurants to provide consumers with calories or a limited range of nutrition information. This approach will not provide all consumers with all of the detailed nutrition information they may want when they dine out. In addition, providing limited nutrition information on a city-by-city or state-by-state basis creates a patchwork quilt of confusing and contradictory local regulations.
In addition to numerous state restaurant associations and state retail associations, Coalition members include Auntie Anne’s Pretzels, Blue Cross Blue Shield of Florida, Brinker International, Burger King, Carlson Restaurants Worldwide, Darden Restaurants, Domino’s Pizza, Dunkin’ Brands, Grocery Manufacturers Association, International Dairy Queen, International Foodservice Distributors Association, International Franchise Association, McDonald’s, National Chicken Council, National Council of Chain Restaurants, National Fisheries Institute, National Franchisee Association, National Restaurant Association, National Turkey Foundation, OSI Restaurants LLC., Sonic, and White Castle.
For a complete list of members got to: CRNI Members
Quiznos Franchisees Walloped by Recession
Franchisees claim High Costs, Lawsuits and Rivalry With Subway are contributing to woes caused by the economy.
While the recession and banking crisis have taken a toll on the entire restaurant industry, Emily Bryson York writes in Advertising Age that a number of Quiznos franchisees claim to have been disproportionately affected. Beset by higher-than-average commodity costs, lackluster marketing, a bruising promotional war with Subway and a premium-pricing structure incompatible with a tight economy, the chain has shuttered 150 stores this year.
It’s also embroiled in three separate class-action lawsuits in which franchisees allege, among other things, that the chain overcharges franchisees for food and other supplies. The suits are pending in Colorado, Illinois and Wisconsin.
"We can’t make money," said Quiznos franchisee Marty Tate, who said his Erie, Pa., store leads the region in sales. Mr. Tate, who is not part of the lawsuit, said 40% of his sales go directly into advertising, royalties and food for the next week. He added that three of seven locations in his county have closed in the past year. Mr. Tate said that when his contract expires next spring, he will open his own independent store.
Quiznos admits there are problems but said they are common to the restaurant industry as a whole. "Anybody who hasn’t noticed a change has their head in the sand," said Quiznos Exec VP Rich Emmitt. "Consumers are reticent to open their pocketbooks, and the consumers have become much more keen on making sure that what they are purchasing is a value purchase."
McDonalds Franchisees Honored at the White House
President George Bush welcomed four McDonald’s restaurant managers and franchise owner/operators to the White House for an invitation-only reception on Oct. 9, in celebration of Hispanic Heritage Month. This exclusive event brought together select Hispanic business and community leaders from across the nation.
McDonald’s U.S. restaurateurs were chosen to attend for their demonstrated leadership within their communities. Widely known as one of the leading companies for Hispanics, McDonald’s Hispanic Owners Association is the largest Hispanic franchisee organization in the country.
The following McDonald’s restaurateurs are among the 2008 Hispanic Heritage Month honorees:
Franchise owner/operator Tony Castillo of Holland, Mich.; franchise owner/operator Anthony Herques of Houma, La.; Franchise owner/operator Mark Ruiz of Newcastle, Calif. and restaurant manager Luis Cruz of Yonkers, N.Y.
National Hispanic Heritage Month is celebrated each year from Sept. 15 to Oct. 15.
Uno Chicago Grill Franchisee Opens 8th Unit in Pennsylvania
NEFA Member, Uno Chicago Grill, opened its newest restaurant today at the Neshaminy Mall in Bensalem, PA. Franchise Partners Tom and Angella Bock of The Bock Group also own and operate seven other Uno restaurants in Pennsylvania and New Jersey and are Uno’s largest multi-unit franchisees. The Bock Group has also secured the real estate to open two more Uno restaurants: one in Newton Square, PA and the other in Oaks, PA.
The Neshaminy Uno is the first of six new Uno restaurants to open within the next 45 days all over the world. Included in this group is the greatly-anticipated launch of Uno’s newest fast-casual brand — Uno Due Go — which will open two units in DFW Airport in Dallas. Additionally, three more full-service Uno Chicago Grills will open in Dammam, Saudi Arabia; Kuwait City, Kuwait, and a premier location at the Mall of Dubai, soon to be the world’s largest mall. All of these restaurants will be open by mid-November.
Uno stands out as one of the few restaurant companies continuing to aggressively develop new locations despite constricted capital markets.
The Neshaminy Mall Uno restaurant in Bensalem, PA provides jobs for over 130 people and features a menu with over 100 items, including steaks, salads, burgers and, of course, its legendary deep dish pizza. The restaurant design and initial training features the newest "Uno Plus" enhancements first introduced at openings held earlier this year in Massachusetts, Florida and Virginia. Uno Plus enhancements include upgraded, experiential graphics and modern building design as their most notable features, as well as emphasis on staff training, hospitality and service refinements.
"We are big believers in the Uno Brand and offerings, and our restaurant teams look forward to continued growth in the Philadelphia area," states Tom Bock.
Cross Posted at Franchising in New England
Franchise Finance
Franchising in New England a blog of the New England Franchise Association (NEFA) is publishing a series on Franchise Finance, Series 1 is entitled: Utilizing Retirement Savings as a Funding Source.
With small business loans and second mortgages scarce these days, some middle age entrepreneurs are starting companies using their retirement savings, a novel financing method that is helping people get into their own business.
Jon Wilson and Larry Blasier discovered the retirement financing option when together they decided they wanted to open a MAACO Franchise in San Luis Obispo, CA.
Jon and Larry shared a passion for restoring cars and were excited when they were approved to build a MAACO in their community. Jon has worked 21 years for the California Department of Corrections and Larry has worked 27 years for Long Beach Transit.
They both knew that this was what they wanted to do. The investment required to open a MAACO was approximately $296,500.00. That was more cash than they had available so they needed to assemble a financing plan. IRA Rollover Solutions of Kirkland, WA a NEFA Member set up a C Corporation for them, a designation which allows a company to issue private shares of stock. Then a profit-sharing retirement plan was created within the corporation, making it eligible to accept pretax retirement contributions, without penalty or tax consequences.
Both Jon and Larry rolled over $75,000 each from their retirement savings, into the profit-sharing plan. As a result, the C Corporation could then use the money to invest in a MAACO franchise. They were also able to secure an additional $350,000 thru a SBA Loan provided by Small Business Loan Source, of Houston TX. The SBA Loan came in at 2 ½ points over Prime for 10 years 6 months, with the first six months interest only.
Jon Wilson knew right away when he contacted IRA Rollover Solutions, “this company was the right one for us. Rick Cox and Tom McDonald knew exactly what we wanted to do and handled the whole process with ease. We were never in the dark about anything and they were very professional in all aspects of getting our corporation established and us getting the start up money we needed.”
Jon and Larry have worked hard other the last few months is getting their MAACO franchise off the ground they signed a lease in August at 770 Capitolio Way, San Luis Obispo, CA 93401. They are scheduled to open by December 1st.
US Treasury Issues New Dollar Bill
The United States Treasury has issued a new $1.00 Bill. They are calling it the “Oy Vey”
Jim Coen, Mr. Franchise
I have learned franchising from the ground up. I’ve been a franchisee for a bad franchisor. I’ve worked for good franchisors and I’ve worked for marginal franchisors. I’ve helped many franchisees succeed.
I provide a consulting process that saves you time and money in your franchise search and provides you with the tools to make the right choice for you and your family.
Call: 617-469-3002
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