April 2014

New York Law Makers’ Push to Raise Minimum Wage Could Affect Franchises

A group of New York City Democratic lawmakers is pushing to raise the minimum wage for the state’s largest employers. This move would likely impact many major franchises, including McDonald’s and 7-Eleven, along with any other businesses with yearly sales over $50 million or more than 11 franchise locations.

State Senator Daniel L. Squadron argues that the state’s biggest employers, including franchises, aren’t passing down their profits to their works. “We shouldn’t have the largest, most profitable companies be the ones that most squeeze their workers,” he explained at a news conference on the steps of City Hall. Manufacturing jobs would be excluded from the legislation but Squadron is attempting to target fast food franchise chains, in addition to big box retailers and transportation-related business. Many fast-food workers make under $9 an hour, which leaves them dependent on food stamps and other public assistance programs. While a hike in wages might require price increases many contend that it would be well worth it.

Kathryn S. Wylde, the president and chief executive officer of the Partnership for New York City, sharply opposes Squardon’s proposal and has stood up in defense of franchises. “I think there may be a lack of understanding of how narrow the margins are in these franchise businesses, and I would like to see a study and analysis with industry input, before the legislators go off kind of half-cocked to legislate in an area where I doubt they have the information they need to write a sound bill,” she recently explained.

The minimum wage recently moved into the national spotlight, especially after last year’s strike by NYC fast food industry workers. It doesn’t look like the issue is going anywhere anytime soon. Still, however, in spite of increased national attention Squadron’s proposal will likely never pass in the New York senate. The state just recently approved a broad minimum wage increase and powerful state Senator Dean Skelos has already indicated that he is opposed to the idea.

 

References:

http://www.bizjournals.com/newyork/news/2014/04/17/ny-senator-pushes-new-15-hr-minimum-wage-aimed-at.html

http://www.nytimes.com/2014/04/17/nyregion/new-york-lawmakers-push-to-raise-wages-at-biggest-chains.html?hpw&rref=nyregion

Article by Jason Duncan, CEO/Founder of ManagerComplete.com. ManagerComplete is an online software application that helps multi-unit franchises manage operations effectively. Follow him on Twitter for latest updates.

Taco Bell Now Serving Breakfast

Last Thursday Taco Bell inaugurated a breakfast menu, diversifying its offerings of Tex-Mex fast food. The centerpiece of Taco Bell’s new and innovative breakfast menu? The waffle taco, a syrup-drenched, meat filled kind of breakfast sandwich. You see Taco Bell isn’t just trying to sell breakfast. The franchise is also trying to tap into millennial culture. “There’s no reason why you can’t take what I believe has been marketed as a pretty boring part of the day and turn it into a part of culture and a part of the way people want to live today,” Taco Bell President Brian Niccol explained in regards to the chain’s new breakfast menu. “And I think that’s part of the alternative lifestyle of breakfast.”

Taco Bell is a new contender in the world of fast food breakfast and they have some tough competition. McDonald’s has historically dominated the breakfast terrain of the fast food franchise industry. The company has doubled its McCafe menu in recent years and in 2012 breakfast accounted for roughly $10 million in sales. That figure accounts for roughly one-third of all $37 million in breakfast sales in the entire fast food industry.

A number of other fast-food franchises are now positioning to get in on the breakfast action with Taco Bell, of course, being the most recent addition to the word of fast-food breakfast. Why the sudden interest in breakfast? According to data from Techmonic the breakfast market is still growing, meaning there is more market left to tap into. From 2007 to 2012, breakfast sales in the U.S. rose by an average of 4.8 percent a year while other restaurant sales remained essentially static.

It looks as if the fast food breakfast wars will rage on for sometime to come.  In addition to Taco Bell, Burger King, Starbucks and Jack in the Box have all introduced new breakfast items over the last few months. While fast food franchises might dream of usurping McDonald’s from its breakfast throne, McDonald’s is fighting to keep its supremacy. The franchise is now offering free coffee in attempt to garner more consumer attention to its early morning food offerings.

While McDonald’s probably won’t be relinquishing the breakfast crown anytime soon Taco Bell could give the franchise a run for its money. The waffle taco has already spawned a small-scale social media frenzy and no one has responded as enthusiastically to the latest addition to the menu then millennials, which suggest that the company’s efforts to create a culture of “coolness” that appeals to this demographic has been largely successful. “The way I believe our brand is positioned is it’s a brand that drives culture,” Niccol recently explained. “And there’s a couple things that drive culture: food, fashion, music, art.” There is no doubt that Taco Bell is certainly at the cutting-edge when it comes to the unique breakfast foods department. Only time will tell, however, whether or not the brand can compete against industry giant McDonalds.

References:

http://www.slate.com/blogs/moneybox/2014/04/02/breakfast_wars_mcdonald_s_taco_bell_dunkin_donuts_and_fast_food_sellers.html

http://www.entrepreneur.com/article/232650

Article by Jason Duncan, CEO/Founder of ManagerComplete.com. ManagerComplete is an online software application that helps multi-unit franchises manage operations effectively. Follow him on Twitter for latest updates.

Dairy Queen Announces Manhattan Expansion

Fast food franchise Dairy Queen has decided to tackle the heart of New York City. The company has announced that it will be opening up thirty-five to fifty additional locations throughout Long Island, Queens, Brooklyn, and, of course, Manhattan. Manhattan’s first-ever Dairy Queen is set to open in May just before Memorial Day in the bustling Union Square. Word on the street is that Manhattan residents have long been craving an infamous Dairy Queen Blizzard. So what took the company so long to expand into the heart of the Big Apple?

Dairy Queen’s vice president of franchise development Jim Kerr says that demographics are what drew the chain to the big city, explaining, “There’s a wide range of income levels and diversity.” The chain also has a history of success in the Long Island and greater-NYC area.

However, making the transition from suburban to urban does come with a unique set of challenges. Typically Dairy Queen strives to situate franchises within a five to seven minute driving radius of a high number of customers, typically around 250,000. With the move into the city, Dairy Queen shifted this crucial metric from drive time to walk time. In addition because of space constraints Dairy Queen’s new Union Square location will also be spread out over two floors, as opposed to the classic one floor layout. This extra space ensures sufficient seating for customers.

Of course, there are also operational challenges for the franchise. Dairy Queen franchises typically rely heavy on drive-thru traffic. In Union Square, however, there is no possibility of a drive-thru which means that over the counter speed is absolutely crucial. “In urban areas, we definitely have to be on top of our game operationally,” says Kerr. “We do not want to have lines out the door, not being handled properly.”

All in all, the move to Manhattan is a mark of Dairy Queen’s enduring franchise success. In 2001, Dairy Queen rolled out the DQ Grill & Chill concept, providing customers with a greater variety of lunch and dinner options, in addition to icy Blizzard and Orange Julius drinks, and sales soared. “One of the reasons why we’re going to [Manhattan] is we’ve been breaking sales records multiple times in the last five years,” says Kerr. Furthermore, several sources indicate that the record breaking opening of a Chill & Grill in Massapequa, Long Island convinced the chain that a move to Manhattan could be incredibly lucrative, bringing bigger profits.

The new ambitious Manhattan franchise, which occupies roughly 2,500 square feet, will follow Dairy Queen’s successful grill and chill format and is reportedly being run by a New York native with significant franchise expertise.

 

References:

http://www.grubstreet.com/2014/03/dairy-queen-manhattan.html

http://www.entrepreneur.com/article/232778

Article by Jason Duncan, CEO/Founder of ManagerComplete.com. ManagerComplete is an online software application that helps multi-unit franchises manage operations effectively. Follow him onTwitter for latest updates.

New FBR Report Provides Insight into Franchisees Who Buy Multiple Locations

A fascinating new study released by the Franchise Business Review (FBR), a national franchise market research firm that performs independent surveys of franchisee satisfaction and franchise buyer experiences, provides insight into the practice of buying multiple franchise locations. Increasingly franchise owners are buying up multiple stores and territories, sometimes even within multiple brands. The report looks at franchisee satisfaction of more than 6,600 multi-unit franchisees from more than 300 franchise companies to determine the best brands for owning multiple locations.

“In the past couple of years, we’ve really seen an uptick in the number of people researching franchises for multi-unit ownership or looking to own franchises at multiple brands.” Franchise Business Review president Michelle Rowan recently explained. “It may cost a little more in the beginning, but, ultimately, these franchisees can make more money and be more satisfied than single-unit owners.”

While the practice of multi-unit franchising has long been popular in the food industry it is rapidly gaining traction in other sectors. It seems that larger profit margins are the big point of attraction for multi-unit franchising. The study shows that there is significant revenue potential in owning three or more units. Furthermore, franchisors usually find it is easier to manage relationships with franchisees that own multiple units, in part because research suggests that multi-unit owners tend to be more invested in their brands.

So, what are the best franchises for franchisees seeking to purchase multiple locations? The FBR report names Sotheby’s International Realty, Budget Blinds, Snap-on Tools, Sport Clips, and Liberty Tax Service as among the ideal options. You can check out the full report and take an in-depth look at the list of Top 50 Multi-Unit Franchises at http://www.FranchiseBusinessReview.com.

Article by Jason Duncan, CEO/Founder of ManagerComplete.com. ManagerComplete is an online software application that helps multi-unit franchises manage operations effectively. Follow him on Twitter for latest updates.

The 10 Terms That Every Prospective Franchisee Needs to Know

If you are considering opening up a franchise the fist step is to understand all of the specific franchise terminology being used. With so much industry specific terminology it can sometimes feel like a different language is being spoken all together. To clear things up take a look at this essential terminology guide, covering the ten essential terms that every prospective franchisee should know.

Franchise Disclosure Document: The Franchise Disclosure Document (often referred to as the FDD) is the legal document that the franchisor must to provide to a prospective franchisee. In the United State all franchisors are required by the U.S. Federal Trade Commission to provide this document. Updated annually the document is comprised of twenty-three distinct sections, which are called items. These items provide a comprehensive overview of the company and its franchise system, including company history, fees and costs, contractual obligations, unit data, etc. If you are considering purchasing a franchise the first step is always an extensive and thorough review of this document. If you are having trouble understanding everything it never hurts to contact a lawyer.

Franchise Fee: This is the initial fee paid to a franchisor to become a franchisee. This fee is outlined in Item 5 of the Franchise Disclosure Document. It is important to note that while some franchises have a standard fee for all prospective franchisees other franchises will vary the fee based on franchisee factors such as experience or location. Many franchisors also offer discounts on the franchise fee for veterans, minorities, or franchisees looking to open up a second unit.

Startup Cost: Sometimes also known as the initial investment, start-up cost refers to the total amount required to open up a franchise. This total amount is outlined in Item 7 of the Franchise Disclosure Document. This cost includes the franchisee fee as well as startup expenses such as real estate, equipment, supplies, business licenses and working capital.

Royalty Fee: In exchange for being a part of a franchise each franchisee must pay a royalty fee to the franchisor.  This fee is always paid on a regular, pre-determined interval (typically annually, monthly, or weekly). While the royalty fee is typically a percentage of the franchisee’s sales some companies mandate a flat royalty fee.

Franchisee Agreement: Once you have decided to open a franchise you will need to sign a franchise agreement with the franchisor. This agreement can be found in the Franchise Disclosure Document and outlines the specific responsibilities of both the franchisor and the franchisee. This franchise agreement will also typically specify the term of agreement, or the length of time the franchisee agreement is valid. This term is typically somewhere between five and twenty years. However, if you are in good standing with your franchisor at the end of your term you will typically be allowed to renew the agreement.

Company-owned Units: Company-owned units are locations that are owned and run by the parent company (the franchisor), rather than by franchisees.

Conversion: When a franchisor allows an entrepreneur to convert his or her existing independent business into a franchise this is known as conversion. In the conversion process the franchisee still needs to sign a franchise agreement and agree to the payment of both franchisee fees and royalty fees. However very often the conversion process in less costly in terms of start-up costs as the business is essentially already up and running.

In-house Financing: In-house financing is essentially a loan offered by the franchisor to help the franchisee with start-up costs. If in-house financing is not offered the franchisee will need to seek out third party financing. In this case many franchisors have connections with banks who can provide you with loans.

Absentee Ownership: When an owner is an absentee he or she owns the franchise but is not directly involved with its day-to-day management.

Master Franchise: A master franchisee serves as a sub franchisor for a certain territory (a specific geographical area as defined by the franchise). Master franchisees can issue FDDs, sign up new franchisees, provide logistical support and also typically receive a cut of the territory’s royalties.

Reference: http://www.entrepreneur.com/article/224571

Article by Jason Duncan, CEO/Founder of ManagerComplete.com. ManagerComplete is an online software application that helps multi-unit franchises manage operations effectively. Follow him on Twitter for latest updates.

Why Did Burger King Shut Down 89 German Franchises?

A staggering 13 percent of Burger King franchises in Germany will be forced to shut their doors. The reason for the massive closure? Poor treatment of staff. The “difficult but necessary decision was taken after Yi-Ko repeatedly failed to observe contractually fixed working conditions for its 3,000 restaurant staff,” Burger King said.

The move took effect immediately, according to executives at Burger King Europe’s headquarters in Munich. That means that contracts of the 89 franchises, all of which were run by Yi-Ko, the country’s largest franchisee, were essentially canceled overnight. According to reports, the German franchisee will continue to operate the franchises temporarily, at least until food stocks run out.

While the move was sudden, it certainly didn’t come out of nowhere. Last May, undercover reports revealed that the restaurants were not only violating hygiene and sanitation standards but were also serving expired food. Reports indicate that old, expired food was frequently relabeled as fresh, while burgers were kept warm for hours using heat lights and were not grilled fresh as Burger King advertisements proudly proclaim. The allegations were especially serious as they came in the wake of major fast food safety scandals, including the KFC, McDonald’s, Pizza Hut, and Burger King scandal in China in which suppliers were revealed to be selling already expired meat.

While the original concerns were addressed, new concerns surfaced regarding employee treatment. Burger King alleges that the franchisee was withholding employees’ bonuses and holiday and sick pay. “After the hygiene scandal in May, there were many improvements, but since the summer there were fresh breaches of existing agreements,” said the head of Burger King’s German operations, Andreas Bork.

Though the remaining 559 restaurants in Germany will continue to operate normally, the closure will affect up to 3,000 employees. It has been reported that Burger King will try to mitigate job loss in every way possible.

 

Quote Sources:

http://www.thelocal.de/20141120/burger-king-axes-89-franchises-after-scandals-hygiene

Article by Jason Duncan, CEO/Founder of ManagerComplete.com. ManagerComplete is an online software application that helps multi-unit franchises manage operations effectively. Follow him onTwitter for latest updates.