Franchise News

News shorts
By StaffAs published in: Franchise Times - August 2008
CORRECTIONA news brief in the April edition of Franchise Times contained an error. Precision Tune did not go private. It ceased filing financial reports with the SEC. The public can still purchase its shares through Pink Sheets. Mrs. Fields in danger of crumbling
Mrs. Fields Brands will file for bankruptcy this month if it can't reach a restructuring deal with its creditors. The Utah-based company has stopped selling new franchises and won't release a new franchise disclosure document until it can fix its problems.
Mrs. Fields, which franchises Mrs. Field's Cookies and TCBY Frozen Yogurt, is deep in debt in the midst of a slowing economy. The company's problems have been exacerbated by a growing number of store closures - it lost 51 stores to closure in just the first three months of the year, according to a company financial filing. The system overall has 1,279 units.
The franchisor has said it's working to identify troubled franchisees and help fix their problems. It also released a new store design to help freshen its brands.
But Mrs. Fields has to fix its own problems first. Same-store sales fell for both of the company's brands and, despite an increase in revenues in the first quarter its operating income was deep in the red due to a faster increase in expenses.
The company is weighed down by nearly $200 million in long-term debt. In May Mrs. Fields warned that it was in danger of being unable to make a semi-annual interest payment on the debt. It also noted that there was "substantial doubt" about its "ability to continue as a going concern." In simpler terms that means the company is in danger of folding.
The company later announced, however, that it might have dodged that bullet. It announced a deal to reduce its debt to $50 million in exchange for a combination of cash and company stock. But Mrs. Fields must convince 98 percent of its debt holders to agree to the deal for it to be finalized.
If successful, the company would be able to focus on its plans to grow. If not, Mrs. Fields would declare bankruptcy by mid-August.
Franchise Brands acquires HomeVestors
Connecticut-based Franchise Brands LLC is now the majority owner of HomeVestors of America, Inc. - a company that buys, remodels and resells houses. Despite the change in ownership, HomeVestor's expects no change to its management team.
HomeVestors CEO John P. Hayes acknowledged that the past year has been tough on his company, but he said those issues were not the factors that prompted the sale.
"In order for us to continue to develop our model, we needed to have additional capital," said Hayes. "We had several options available to us, and the Franchise Brands acquisition was the best and the most timely."Hayes is confident in Franchise Brands' ability to help the company grow and play an active role in the real estate business. "When the real estate market completes its correction and begins to expand again, HomeVestors will be perfectly situated to continue expanding, too."
Hayes said Franchise Brands' continued investment would also allow HomeVestors to better support and train its franchisees through the creation of new services. "It gives them that peace of mind that their investment as a franchisee is protected."
Franchising since 1996, the Dallas-based HomeVestors has more than 230 franchised offices in 35 states, with the company's franchisees selling most of the refurbished houses to other investors and first-time homebuyers. Franchise Brands had been investing money into the company since 2007.
Macaluso to retire from MFV Expositions
After 15 years, Richard Macaluso will wave goodbye to MFV Expositions, a company that produces trade shows for the franchise industry. He last worked as the show director for the International Franchise Expo, held this past April.
"I felt I covered as much of the bases of the franchise-side of the business," said Macaluso. "I am very happy that it's worked so well." Macaluso said he was pleased by the abilities of groups like franchisors and franchisees to work towards common goals for the betterment of the business. "Everybody wants to come forward and do the right thing."
After leaving CBS Radio, where he spent the first half of his career working as that organization's vice president of sales, Macaluso met Tom Portesy - president of MFV Expositions.
"We were in the process of trying to launch an advertising expo in New York City and though that particular event was shelved, we realized what a find we had in Richard," said Portesy. "He was way too valuable to leave us, so we offered him a place at our company."
Portesy said Macaluso was instrumental in helping the company transition into the digital age. "New Media and the Internet were just emerging, and franchising was handled very differently. You can see Richard's fingerprints all over our events."
He hopes that future MFV projects will entice Macaluso enough to make him come back to work with the company from time to time. "We miss him already."
NexCen Brands stumbles
NexCen Brands may have bought one cookie too many.
The burgeoning player in the franchise world is suddenly struggling and so, too, is its complex business structure. The New York-based company announced in May that it failed to disclose a required $21 million payment on debt from its January purchase of Great American Cookie Co., and that its business was teetering on the edge of bankruptcy.
The situation forced CEO Bob D'Loren to utter the infamous phrase, "there is substantial doubt about the company's ability to continue as a going concern." Not surprisingly, numerous law firms have announced plans to file class-action shareholder suits against the company, which has seen its stock plummet to 35 cents a share at one point - far off its 52-week high of $11.50 a share.
The company also delayed filing its quarterly report and since then has cut 10 percent of its work force, including 25 percent of its headquarters staff. It also was able to restructure its debt to provide some short-term financial relief. But any long-term solution would seemingly derail NexCen's grand vision of a vertically integrated company that combined product and retail brand management.
The company will likely sell its two consumer brands: Bill Blass, the line of clothing, and the home fabric brand Waverly. NexCen disclosed that it had several offers for the brands and reports said the company was close to a sale of Waverly for more than $30 million.
NexCen was created when D'Loren merged his UCC Capital Corp. with a defunct wireless company, Aether Holdings, and began buying up brands, including several franchises such as The Athlete's Foot, Marble Slab Creamery, Maggie Moo's, Pretzeltime and Pretzel Maker. The idea was to leverage the different brands' assets to improve the others.
For instance, it might sell Bill Blass-branded clothes in The Athlete's Foot stores. Or it might use the Bill Blass name with Waverly products, or franchise stores under the Bill Blass or Waverly names. Losing those two brands threatens that vertical structure, making it seem likely that NexCen will concentrate largely on franchising.
NexCen last year reported $34.3 million in revenues but a $4.6 million loss.
Snap Fitness to work alongside Summit Partners
Minnesota-based Snap Fitness Inc., a franchisor of compact, 24-hour fitness clubs, received a minority equity investment from Summit Partners, a private equity and venture capital firm. Terms of the deal were not disclosed.
"Our relationship with Summit Partners will allow us to fuel our international expansion operations, fortify our brand and lay the ground-work for long-term growth," said Peter Taunton, Snap Fitness' founder and CEO.
Likewise, Summit Partners expressed their confidence in Snap Fitness. "The company provides a platform, a brand and a support infrastructure that enables franchisees to offer a product and service second-to-none in their market space," said Sonya Brown, a principal with Summit Partners. Brown and Summit Partners Vice President Peter Rottier will join Snap Fitness' board of directors.
Snap Fitness has more than 1,500 units.
Moran Industries launches SmartView brand
Moran Industries, a franchisor in the automotive aftermarket industry, is revving up for the home improvement industry with its new concept, SmartView Window Solutions. The new brand is a mobile and home-based franchise specializing in residential and commercial flat-glass window tinting.
The franchisor plans to promote the "economical and environmental benefits" window filming might have in residential and commercial buildings; thus putting an end to what Moran CEO Barb Moran called the "dark ages" of window tinting.
SmartView will demonstrate the industry's new technological advances and provide an assortment of hues and advantages to consumers, Moran said.
Moran Industries franchises six brands, including Transmission USA service centers, Alta Mere Window Tinting & Auto Alarms, and Milex Complete Auto Care.
IHOP gets a name change
Now that it's the franchisor of two large restaurant brands, IHOP has decided to go with a new corporate moniker - DineEquity Inc. The California-based company, which recently purchased the much larger Applebee's chain, changed the name in June.
Julia Stewart, DineEquity's chief executive, said the name change was necessary to reflect the company's ownership of multiple brands. DineEquity also has a tagline, "Great franchisees, great brands." The company has promised to refranchise many of the corporate-owned Applebee's units.
IHOP bought the much larger Applebee's last year for $1.9 billion.
MMI buys Inner Circle
MMI Peer Advisory Services, a subsidiary of Cleveland-based franchise development firm Merrymeeting, has acquired the assets of the 10-unit Inner Circle International.
Inner Circle was founded in 1985 and began franchising in 1997. The company is a peer advisory franchise in which small and mid-sized business owners meet monthly to exchange ideas and solve problems on a variety of topics. The company has "circles" in Maryland, Tennessee, California, Minnesota, Wisconsin and Maine. MMI's even brands have more than 1,700 franchise locations worldwide.