Franchise Article, 1988

Your Money; Franchises Offer Profits and Risks
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new_york_times:http://query.nytimes.com/gst/fullpage.html?res=940DE3D91339F935A25752C0A96E948260&sec=&spon=
By LEONARD SLOANE
Published: January 16, 1988
LEAD: JAMES Goodman, executive vice president of the Morehouse School of Medicine in Atlanta, recently decided to leave his position and go into franchising. So he bought the Seattle-area rights to open franchises of Jiffy Lube International Inc., a fast oil-change and lubrication system for automobiles.
JAMES Goodman, executive vice president of the Morehouse School of Medicine in Atlanta, recently decided to leave his position and go into franchising. So he bought the Seattle-area rights to open franchises of Jiffy Lube International Inc., a fast oil-change and lubrication system for automobiles.
''I've put in a lot of effort and energy for other people,'' Mr. Goodman said. ''I'm at a stage now where I want control over my own destiny.''
Rocky Paolini bought a franchise three years ago and now has a thriving printing and copying center under the Sir Speedy name in Wakefield, Mass. Before going into business on his own, he had worked at the Monsanto Company in sales and marketing for 14 years.
''I love it,'' he said. ''You'll never see me going back to corporate life.''
Mr. Goodman and Mr. Paolini are among the hundreds of thousands of Americans who have started their own businesses through franchising. Government statistics indicate that franchises stand a better chance of success than other independently owned small businesses. Nevertheless, prospective franchisees should understand the many pitfalls - indeed, some people have lost their entire investment rather quickly. Before opening an establishment and paying $1,000 to $500,000 for the franchise, investors should carefully study the business.
''Treat this as an extremely serious business investment,'' said Stanley L. Williams, director of education at the International Franchise Association. He urged investors to examine the entire situation carefully before they put up any money.
Franchising is a method of distributing brand-name products or services under license. A franchiser provides the business system and trademark and a franchisee operates the business under the franchiser's name.
There are two major franchising arrangements. In the business format, the franchiser establishes a fully integrated, continuing relationship with the franchise owner. In a product trade-name arrangement, the supplier and dealer establish an independent sales relationship, like those found in such industries as automobiles, soft drinks and petroleum products.
The business format has been responsible for much of the franchising growth in the last three decades.
Total sales of franchising companies amounted to approximately $591 billion in 1987, up about 6 percent over the previous year and representing one-third of all retail sales in the United States. Approximately a half-million franchised establishments exist, with business-format arrangements proliferating in such industries as real estate, rental service, cleaning and maintenance and, of course, the ubiquitous fast-food restaurant.
''You're buying someone else's experience,'' said Ray Bard, an Austin, Tex., management consultant and co-author of the book ''Own Your Own Franchise.'' ''You're getting their systems, their product development, their image in the marketplace and their supportive services.''
In addition to having the opportunity to participate in a tried-and-true business model and to receive both start-up assistance and follow-up support, franchisees may obtain other benefits. These potential advantages include sharing in the good will built up by other outlets bearing the same name, obtaining location analysis, getting continuing advice and training from the franchiser and receiving counsel in organizing, leasing, merchandising and advertising.
But franchising does have its drawbacks. A franchisee must comply with the franchiser's controls, standards and procedures or risk losing a valuable franchise. Also, a franchisee must usually spend more money to go into business than would be required without the trade name.
''The relationship between franchiser and franchisee is the key element to the present and future success,'' said Andrew Kostecka, a franchise specialist for the Commerce Department. ''A franchiser can develop superior procedures and programs, but they are meaningless unless franchisees put them into operation in the marketplace.''

www.francorp.com

Dunkin Donuts

By LAUREN SHEPHERD, AP Business Writer Wed Jul 30, 7:48 AM ET

NEW YORK - Looking to entice those hungry for a healthier option, Dunkin' Donuts will begin offering a new slate of better-for-you offerings in August.The menu, which will debut in stores Aug. 6, will feature two new flatbread sandwiches made with egg whites. Customers will be able to choose either a turkey sausage egg-white sandwich or a vegetable one. Both will be under 300 calories with 9 grams of fat or less, the company said."We just felt it was important to provide some choice in our menu," said Will Kussell, president and chief brand officer.The new menu will be called DDSmart and will include all current and new items that either have 25 percent few calories, sugar, fat or sodium than comparable products or contain ingredients that are "nutritionally beneficial," the company said.Current products that will join the new sandwiches on the menu include a multigrain bagel and a reduced-fat blueberry muffin.Kussell said Dunkin' will continue to add products to the menu and is currently developing several new offerings, but would not disclose any details.Kussell said Canton, Mass.-based Dunkin' Brands Inc. will spend several million dollars marketing the new menu.A number of restaurants have added better-for-you options to their menus in the past few years to take advantage of a trend toward healthier eating."We're staying very true to our brand and very true to our heritage," said the company's executive chef Stan Frankenphaler. "We're just growing and evolving."

Fast Food

Government at various levels already says buckle your seatbelt, don't smoke and be sure to recycle, so it shouldn't be any surprise that the Los Angeles City Council is preparing to tell people to eat their peas. Council members, concerned about the proliferation of fast food restaurants in a low-income area of South Los Angeles, are considering an area ban on additional fast food joints such as McDonalds (MCD), Burger King (BKC) and Wendy's (WEN).

Libertarians and other cranks might ask: Is this a legitimate role for government and, by the way, where's the legal authority for such action? So far, government's answer is: Never mind - we know what's best for you. Hush, now. The Los Angeles City Council says fast food restaurants lead to obesity and seeks to encourage sit-down eateries that serve salads and other healthy food to set up shop in the area. But how likely is it that Darden Restaurants (DRI) would open a moderately expensive Olive Garden in a low income area - especially when the eatey's Italian-themed menu offers ample opportunity to be naughty with pasta while skipping the vegetables? What would the City Council say about Chipotle (CMG)? You can eat smart with chicken, vegetables, rice and salsa or, if you're feeling wicked, you can gunk up your meal with guacamole and sour cream. Perhaps the answer is a city monitor, tape measure in hand, stationed at each restaurant to quickly assess the girth of each customer and say yay or nay to piling on the guac. Cynics would say the monitors could be unionized and become a reliable voting block for council members seeking life-time tenure in city government, but you know cynics. Few would argue that fast food restaurants serve health food. But some states require restaurants to post the nutritional value of meals in plain sight, including calories, grams of fat and salt content. Isn't providing the information needed to make an informed decision enough? Don't citizens make their own decisions in a free society?

Probably not. Some bright, concerned member of the City Council is bound to ask: What if people make the wrong decision? Fast food restaurants provide jobs and appear to be the only industry that wants to be in the low-income area of Los Angeles. How does limiting employment, especially for young people who are learning how to balance outside responsibilities with school, benefit low-income residents? Don't ask. The all-knowing City Council probably has a ten-point program for that, too. Those same philosopher kings also appear ready to take on the weighty problem of plastic shopping bags. A ban appears likely, which is sure to upset environmentalists because someone has to cut down trees to make eco-friendly paper bags. Anyone who takes out the trash will be certain to curse the council, because paper bags get soggy and the bottom falls out. Perhaps this unfortunate circumstance requires community classes teaching folks how to mop the kitchen floor - and be happy about it.

The possibilities for "good for you" government intervention are endless. There's always chatter somewhere about banning cigarettes and other merchants of coffin nails, never mind the legality of tobacco products or the unhappy experience with Prohibition in the 1920s. But maybe it's simpler than that. If you're a Los Angeles City Council member, why worry about inadequate public transportation, building in canyons prone to wildfires and mudslides or even potholes when you can preen and bellow about fast food?