FRIENDLY’S Fires 1260 Employees With No Warning

The bankrupt Friendly’s Ice Cream Corp. abruptly, and with no warning, laid off 1,260 employees Tuesday night.

That’s not a very Friendly thing to do, is it? Some companies use the economy and bankruptcy to justify all kinds of crappy behavior, don’t they?

According to a Fox Business report:

“Friendly’s Ice Cream Corp. laid off 1,260 employees with almost no notice on Tuesday night. And there’s little that employees can do about it.

“Though workers have been mostly mute, one Dedham, Mass., waitress who had been with Friendly’s for 27 years spoke to Dedham Patch about her restaurant’s closing. “This is my heart,” Helen Smolak said of her job. “Nobody knows more about Friendly’s than I do.”

“Federal law does prohibit companies from laying off workers en masse, through something called the WARN (Worker Adjustment and Retraining Notification) Act, but only if those workers — a minimum of 50 — are located on one specific site. The rationale: Communities aren’t devastated when a franchise closes in same way that they are when a large factory does, like the recently bankrupt Solyndra plant in Silicon Valley.

“Yet more states are looking to close this loophole to cover outfits like Friendly’s that employee large numbers of people spread across multiple workplaces.

“Friendly’s filed for bankruptcy on Wednesday and shuttered 63 restaurants, effective immediately. The layoffs represented more than more than 12% of the company’s 10,300 person workforce, a Friendly’s spokesman told DailyFinance….”

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QUIZNOS: Biggest Collapse in Restaurant History?

Just three years ago, [Quiznos] topped $2 billion in sales. Now, industry observers say the Quiznos sandwich chain, led by Denver investors Rick and Richard Schaden — is $875 million in debt, with sales down 14 percent and 600 stores closed last year. “It’s one of the biggest restaurant collapses in American history,” says restaurant analyst – John Gordon.

(UnhappyFranchisee.com)  The Denver Post reports that the Quiznos chain faces tough finance issues, and may earn the distinction of becoming one of the biggest financial collapses in restaurant chain history.

UnhappyFranchisee.com has been reporting on the rancor between Quiznos corporate and its Quiznos franchise owners for years now.  The Denver Post article cites a report that lists Quiznos adversarial relationship with its franchisees as a major factor in its current dire financial situation:

The problems stem from a highly leveraged investment in 2006, competition from other sandwich purveyors and a protracted battle with the company’s franchisees over operating costs and profitability.

The result is an estimated 14 percent drop in sales last year and the loss of 600 restaurants — the steepest decline of any major fast-food chain, according to restaurant consulting firm Technomic Inc.

Sales in 2010 were about $1.55 billion, down from the 2008 peak of $2.02 billion, Technomic estimated. During the same period, stores declined from about 5,000 to 3,500 and likely are fewer than 3,000 this year.

Quiznos took a big hit when rival Subway introduced toasted subs in 2005, effectively stripping Quiznos of its key differentiator.

Subway delivered another blow with its highly successful $5 foot-long campaign in 2008.  Quiznos’ attempted counter-punch, the $4 “torpedo,” failed to bring back its lost customers.

Instead of working in a unified fashion to beat the competition, Quiznos has also been at war with its franchisees over price gouging and poor marketing strategies, especially in terms of discount promotions:

As Quiznos has fought to maintain market share, it has suffered lingering animosity from some franchisees who say profit margins are lean or nonexistent — due in part to a requirement that franchisees buy food at allegedly above-market prices from a Quiznos-mandated supplier network.

In 2009 Quiznos settled a franchisee class-action lawsuit by agreeing to pay up to $95 million.

The corporate debt problems are troubling to remaining franchise operators, said Justin Klein, a New Jersey attorney who represented franchisees in the lawsuit.

If Quiznos were to default on its debt and file for bankruptcy reorganization, “it would have a negative impact on the investment these franchisees have made in the company. It pretty much puts that investment into the toilet,” Klein said.

Quiznos seems destined to become a franchise restaurant chain cautionary tale, with the moral being that franchisor indifference to franchisee profitability and a callous disregard for the welfare of those who financed your growth will result in a catastrophic failure for all involved.

Quiznos had a great product, strong, enthusiastic franchisees and a golden opportunity to be a leader in the fast casual segment.  What a shame it had to come to this.

ARE YOU FAMILIAR WITH QUIZNOS?  SHARE A COMMENT BELOW.

Email Unhappy Franchisee at UnhappyFranchisee[at]gmail.com.

 

QUIZNOS Franchise Failure Blamed on Corporate Policies

Quiznos franchise failure in Elgin, Illinois is being blamed on Quiznos corporate policy decisions, the recession and prolonged street construction according to a story in the Courier News.

After eight years in business, Quiznos franchise owners Joe Follrath and Suzanne Pfaff said they’ll shut their doors for good next week “unless someone makes us a last-minute offer to buy the place.”

The Douglas Avenue sandwich shop, which has been in business downtown for eight years, will stay open until it runs out of stock, which probably will be by the end of next week, they said. The owners plan to hold an auction sometime thereafter.

The Quiznos franchise owners have been looking at options for about six months but the business is no longer financially viable.  They plan to hold an auction once they run out of stock.

In addition to the tight economy and downtown construction, Quiznos onerous company policies helped cause shrinking margins tight and dwindling profits.  According to the article:

“We originally chose to open a Quiznos franchise because of the company’s growth potential and the quality of its products,” said Follrath. “We did great business for the first few years, but sales have been swiftly declining since we hit our peak in 2007.”

According to information provided by Elgin’s Downtown Neighborhood Association, with the recession on the horizon, between 2007 and 2009, more than 1,000 franchisee-owned Quiznos closed.

“Franchisees cite rising Quiznos-distributor food costs, drastic coupon discounts such as buy-one, get-one-free sandwiches, and other corporate policy decisions,” the release stated. “Currently, Quiznos is requiring its franchisees to undergo a complete interior renovation and point-of-sale system upgrade.”

Tonya Hudson, executive director of the Downtown Neighborhood Association, said she is amazed that the Quiznos franchise owners persevered as long as they did, calling it “a testament to the loyal customer base they built in downtown over the past eight years.”

ARE YOU FAMILIAR WITH THE QUIZNOS FRANCHISE?  SHARE YOUR THOUGHTS WITH A COMMENT BELOW.

Also Read:

QUIZNOS OVERVIEW & DISCUSSION

Failure Rates of the 10 Most Popular Franchises

Franchise Owner Claims It’s “Impossible to Make Money” With Quiznos

QUIZNOS Franchisee Blasts HQ’s Coupons and Discounts

QUIZNOS: Franchisees Lost $2.25 per Sub on Giveaway

FRANCHISE GRAVEYARD: Trendy Franchise Concept Gets Cereality Check, Closes Store(s)

FRANCHISE GRAVEYARD: Trendy Franchise Concept Gets Cereality Check, Closes Store(s) By: Sean Kelly

Originally published Wednesday, June 27, 2007 – 5:19 pm ET

March 28, 2006 the Northwestern University newspaper had exciting news:  The much heralded all-cereal cafe Cereality was expected to open by summer, 2006.  They interviewed Cereality co-founder David Roth about the opening of their second Chicago-area cereal cafe:

“We love Evanston because it has such a different type of cross section of people… It offers us that sort of urban pulse, but also a suburban marketplace as well…. We have an extraordinary amount of demand…. We’re constantly inventing new ways to get cereal to people.”

The suburban Chicago cafe would play a pivotal role in the chain’s expansion:

The Evanston store will also be used to fulfill online orders and train new franchisees.

“It’s not rocket science to instruct people to put cereal in a bowl,” said Roth. “But it’s an art to (successfully run a Cereality cafe). You bring people to your training facility and you instruct them on how to manage and operate a unit. Ours is going to be in Evanston. Evanston is going to play a very key role for us.”

May 23, 2007 the Daily Northwestern story wasn’t so Cheerio:

Just six months after it opened in downtown Evanston’s Sherman Plaza, Cereality Cereal Bar and Cafe has closed its doors and moved out…. The store’s contents were packed up after closing Monday night, according to Jonathan Perman, executive director of the Evanston Chamber of Commerce. On Tuesday afternoon, all food and equipment had been removed from the store’s interior.

For a company that’s been all over the media since the concept was launched in 2003, there seems to be scant information about what’s going on with the company.  According to The Daily Northwestern:

Multiple calls to the company’s downtown Chicago headquarters went unanswered Tuesday. Jim and Marc Klutznick, two of Sherman Plaza’s developers, also did not return phone messages.

When the Evanston location opened in November, Cereality’s president and CEO at the time, David Roth, expressed high hopes for the restaurant.

The company had planned to use the location as a training facility for employees at the company’s other locations.

“We’re very much looking forward to this store,” Roth told The Daily in November. “This is just pregnant with possibilities.”

Both Roth and fellow co-founder Rick Bacher resigned from the company at the end of April. Roth declined to comment Tuesday on the Evanston store’s closing. The new CEO, John Fiorello, did not return multiple calls Tuesday night.

Unanswered Questions:

Why’d Roth & Bacher resign from their brainchild?  Who’s Fiorello? 

Has the public rejected Cereality’s “home away from home” where “every day is Saturday morning” in favor of their real homes where cereal doesn’t cost $4 a bowl?

Is the rumor circulating on the Internet (ok, it’s a single comment on one blog) true that the downtown Chicago location is also closing?

Was The Big Idea’s Donny Deutsch’s pronouncement that he LOVES the concept the kiss of death?

Is it a bad sign that in a ”bazillion” news stories and interviews, the founders expound on the concept’s cleverness and the brand resonance but never about store sales or unit economics?

Comments
By Mike
1143 days ago I’m thinking their Franchise requirements of: at least $212K total commitment, 25K$ franchise fee, $1 million assests requirement and 12-20 employeee requirement might be some of the reason.

c’mon – all THAT just to run a cereal cafe??

By Sean Kelly
Mike:
It’s not like you can buy this stuff in a grocery store… Plus, they have a hollow plastic spoon that you can such the milk through. That must be worth $100K or so.

By Sean Kelly
Laila Fields bet her house that a Cereality cereal cafe franchise would be a hit in Santa Cruz.  FranchisePick.com readers are invited to bet on how soon she’ll realize what a bad, bad bet she made. 

Place your vote on how long you think the Santa Cruz Cereality franchise will survive.

WHAT DO YOU THINK?  SHARE A COMMENT BELOW.

ALAN FEIFER, Franchise Con-sultant, Convicted of Fraud

Alan Feifer, using company names Robert Ames Business Development Co. and Innovative Franchise Systems, sold phony franchise dreams to dozens of trusting restaurant owners.

According to the restaurant owners, he offered to franchise their restaurants and even, in some cases, provide their first franchise buyer… all for only $2500. If they didn’t have $2500, he’d take $1250 upfront and collect the other $1250 "after the first franchise was sold."

Once the checks cleared, Alan Feifer got harder and harder to reach. In the end, the restaurant owners ended up with no franchise program and no franchise buyers. According to the Journal Star:

U.S. Attorney Deborah Gilg’s office says Alan Feifer, 61, pleaded guilty Monday to one count of mail fraud as part of a deal with prosecutors.

Feifer, who is from Airmont, N.Y., ran Robert Ames Business Development Co. and Innovative Franchise Systems.

Prosecutors say Feifer created documents with false statements in them and mailed them to business owners between 2003 and 2006. As part of the misrepresentation, Feifer would tell business owners he could find buyers of the franchises.

He remains free on bond and is scheduled to be sentenced on Jan. 10.

Sean Kelly warned about franchise con-sultant Alan Feifer in the post He Put the Con in Franchise CONsultant on the Franchise Pick blog back in October, 2007.  A number of commenters recounted their experiences with Alan Feifer and Robert Ames Business Development Co.

Norleen wrote:

After receiving the letter from Alan Feifer saying my candy store had been visited and would make a good franchise, I spoke with Mr. Feifer, and he said one of his representatives had been in the store. I spoke with him several times and asked if he couldn’t take the $2500.00 when the first franchise was sold. He said they would have to have $1250.00 now and the rest would be added to their fee after the first franchise was sold.

I received all the papers (very professional looking), and talked with him several times. The time between my calls and his returning them seemed to take longer and longer. He then told me he had had a serious medical problem and would be back to his office two days later. I tried and tried to contact him and then found that both the New York and Ramsey, N.J. phones had been disconnected. That was in 2007. I’ve even checked the Social Security Death Index to see if he had died. After reading these forums, I guess I was lucky to only have lost $1,250.00!

I am so disappointed, as he seemed to be a very nice, professional person, and a caring human being, as I was going through a very difficult time due to the loss of a son, half way through our negotiations.

Lynne H. wrote:

I have been biten by the Alan Feifer con man bug. I have my own business, and I was one of the suckers that paid the $1250 and the rest would be out of the first franchise. I to found where the phone calls that I was receiving were few and far between. I would call his Florida number and it would be weeks before he would call me back. I just recently received a call from Mr. F and like today, he told me that business is bad and with the economy and all. It is either one story or another, he is either in the hospital with some kind of problems, or on vacation or some lame excuse. I have asked for my money back, but he avoids answering the question. I don’t know what to do. Am I going to see my $1250 back??

Pat wrote:

Yeah he got me for $2500 also! He told me he had a heart attack and his employees had left him thinking he was closing the business?
Who knows maybe he will have a heart attack, Karmas a bitch!

Kudos to CBS Channel 6 WOWT for breaking the story and the United States Attorney, District of Nebraska for pursuing fraud charges against Alan Feifer and Robert Ames Business Development Co..

Author and site admin contact:  unhappyfranchisee[at]gmail.com.

ARE YOU FAMILIAR WITH ALAN FEIFER OR ROBERT AMES BUSINESS DEVELOPMENT?  SHARE A COMMENT BELOW.

TACO DEL MAR Franchise Co. Sold at Bankruptcy Auction

Bankrupt Taco Del Mar was sold at auction last week, and Connecticut-based Franchise Brands had the winning bid of $3.25 million.

The sale of the Mexican food chain operator and franchisor must still be approved by a bankruptcy judge.  Taco Del Mar has lost money for several years, and now has debt in excess of $3 million.

Taco del Mar is an example of an aggressively promoted franchise concept that grew fast and crashed hard.  The Seattle-based quickservice restaurant chain grew from 74 locations in 2003 to 270 locations in 2008.  More than 200 shops closed between 2005 and 2009.

According to a filing in U.S. Bankruptcy Court, Taco Del Mar owns roughly 22 corporate stores in the U.S., Canada and Guam.  According to a recent company press release, “Taco Del Mar can be found in more than 200 locations.”

According to its website, Franchise Brands was founded “To acquire an interest in a diverse portfolio of businesses and expand them
through franchising.”

According to FranchiseBrandsLLC.Com:

Based in Milford, CT, Franchise Brands, LLC was created in 2005 with the support and guidance of the founders of SUBWAY^® restaurants. It was founded on a basic principle: to invest in small and mid-market companies with experienced management. Companies may currently be franchising or demonstrate the potential to do so.

ARE YOU FAMILIAR WITH THE TACO DEL MAR FRANCHISE?  WHAT DO YOU THINK?  SHARE A COMMENT BELOW.

Sources:  Seattle Times, FranchiseBrandsLLC.Com

Contact UnhappyFranchisee.com:  UnhappyFranchisee[at]gmail.com

When Bad Things Happen to Good Franchises

When Bad Things Happen to Good Franchises
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Ex-Con Gary Growden to Franchise Pasta Bars

Gary Growden went to prison for selling investment deals that were, literally, too good to be true.  So what’s the next logical step in his entrepreneurial development? 

Why selling franchises, of course. 

Just a year after his release from federal prison, one of the irons in Gary Growden’ entrepreneurial fire is plans to develop a pasta bar franchise opportunity.

Yes, Gary dreams of once again being behind bars once again… pasta bars this time around.  And while Gary hasn’t disclosed a name for his franchise, may we suggest Ponzi’s Pasta Bar?

According to a story by Dan Browning in the Star-Tribune:

Growden, 59, has reinvented himself many times over the years. He’s been a singer-songwriter, an Amway salesman, the owner of an equipment-leasing company and a finance broker, which led to his 27-month prison sentence in 2007.

Court records show that Growden pleaded guilty to two counts of wire fraud. One related to an investment scheme he ran between 2002 and 2005 in which he promised to invest money in "midterm notes" issued by Couthars, a Luxembourg-based company he ran. The other had to do with his promise to invest money in a collateralized note.

In both cases, Growden admitted to spending the money for his own purposes.

Amway Salesman?  Cloud merchant? Investment schemer? Gary Growden sounds like he has the credentials to be a featured franchisor on UnhappyFranchisee.com!

But for those of you who might be hesitant investing your life savings with an ex-con, don’t worry. 

Gary Growden has given his word.

"I’m not a crook.” Gary Growden promises. “And I am not a con man," he said.

I, for one, am relieved to hear that.  And I’m eagerly awaiting the launch of the Ponzi’s Pasta Bar franchise.

ARE YOU FAMILIAR WITH GARY GROWDEN?  WHAT DO YOU THINK?

Failure Rates of the 10 Most Popular Franchises

Failure Rates of the 10 Most Popular Franchises What are the failure rates of the 10 most popular franchise opportunities?  Read more

TACO DEL MAR: Ex Franchise Owner Blasts Franchisor, Master Developer

Is the Taco Del Mar franchise a great opportunity to gain the support of a franchisor dedicated to franchise owner profitability… or is it an unmitigated disaster?

It depends on whom you ask.

Taco Del Mar: “great franchise partnerships create great successes.”

The Taco Del Mar franchise website states:

“Taco Del Mar believes that great franchise partnerships create great successes. We have built our organization in order to develop positive and profitable relationships with our franchisees… We begin each day focused on franchise profitability… We developed our system to return the highest ROI to the franchisee in the shortest time… We believe in you.”

Taco Del Mar:  A franchise “disaster.”

Former Maryland Taco Del Mar franchise owner Suzanne Todd has a different opinion, calling her experience with the company a “disaster.”

According to a Wall Street Journal story, Todd claims she was recruited as a franchise owner by Master Developer and franchisee Thomas Murphy, who told her Taco Del Mar was the “next Subway.”  She claims Taco Del Mar executives “lured her to join the team by predicting future positive financial returns,” and “‘placed a great deal of pressure” on her to sign a franchise agreement before the prices increased.”

She signed in April 2007, paid a $20,000 franchise fee and opened her Frostburg, MD restaurant in December 2007.

Claims her Master Developer “doomed her… restaurant to failure.”

Todd claims her own Master Developer Murphy doomed her restaurant to failure by his alleged “ineptitude” and non-compliance with the system he was representing:

She blamed Murphy’s “ineptitude” as a master developer, deeming his flagship restaurant a failure that then doomed her own restaurant to failure. Why’s that? Well, Todd said Murphy’s branch had food that “was not up to standard” because it didn’t rely on the chain’s recipes. The branch used supplies from the wrong brands, handing out Cinnabon cups, Subway paper products, and – gasp – Wal-Mart-brand tortilla chips. And customers had even filed health safety complaints regarding food poisoning alleged to have resulted from eating there.

Franchisee Todd contends that the franchisor provided inadequate sources for food and supplies, and poor support especially in advertising.  The Maryland Attorney General’s office accused Taco Del Mar of violating Maryland law with regard to the offer and sale of the franchises.  The state and the franchisor struck a deal in February 2009 that gave Todd the option of rescinding her franchise agreement.  She jumped at the chance and her branch closed that same month.

Taco Del Mar bankruptcy halts arbitration proceeding.

Suzanne Todd initiated an arbitration proceeding against Taco Del Mar for $500,000.  The proceeding was halted, along with all other “creditor actions,” when Taco Del Mar Franchising Corp. sought Chapter 11 protection in January, 2010.

According to the WSJ article, Taco Del Mar blamed its bankruptcy on “ several years of financial losses it experienced on poor expense management, lawsuit expenses and its selection of ‘poor franchisees and poor sites’ for its new restaurants.”

Despite its troubled past, Taco Del Mar and its Master Developers continue to promote the Taco Del Mar franchise opportunity on its franchise website.

WHAT DO YOU THINK?  IS TACO DEL MAR A GREAT FRANCHISE OPPORTUNITY DESIGNED FOR FRANCHISEE PROFITABILITY?  OR IT A FRANCHISE “DISASTER”?

logo:  Taco Del Mar

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