CEREALITY: Do Some Franchisees DESERVE Unhappiness?

cereality-santa-cruz-2 I love this.  This is genius. said Donny Deutsch, host of CNBC’s “The Big Idea”

The latest fast-food concept is so simple… how can it fail?  said Jerry Shriver of USA Today

…the silliest, most self-indulgently bad idea to have ever graced the Franchise Graveyard… Even college kids who’ve spent the last five years in a haze of beer, smoke and liberal arts could see what a truly stupid idea Cereality is. said Sean Kelly, author of FranchisePick.com

Cereality franchise owner Laila Fields went with the first two experts in this one. 

According to the San Jose Mercury News,

Laila Valdez Fields is so sure her quirky new cereal cafe will be a hit, she bet the house on it.  Literally.  A real estate agent, she persuaded her husband, a chiropractor, to sell their home to invest in the restaurant business.

FranchisePick.com, which has warned potential franchisees about the unviability of the Cereality concept, started a Cereality Franchise Dead Pool to bet on how quickly Fields would close… and lose her and her husband’s life savings.  The winner was Rob, who bet six months.

Cereality: Doomed idea sold to a clueless franchisee by an unscrupulous franchisor?

FranchisePick.com has steadily reported on the closings of Cereality cafe franchises and company stores since mid-2007.  The Evanston, IL Cereality flagship closed in less than 6 months.  A South Carolina franchise beat that with a record-setting failure in less than 3-months.  From locations on the PA Turnpike to JFK and Newark Airports to college locations at Penn State, University of Pennsylvania and Arizona to the Chicago Loop, every stand-alone Cereality location has failed and closed prematurely.

Yet multi-concept franchisor Kahala Cold Stone (also the franchisor of Cold Stone Creamery and others) seemingly had no problem collecting a franchise fee from Laila Valdez Fields and encouraging her to gamble her future on a losing bet.

And some franchise broker or sales person had no problem collecting a commission on what they must have known was going to be a tragic outcome for Fields.

And yet, can you really feel sorry for this franchisee?  Was it laziness that kept her from finding out about these earlier failures?  Was it self-delusion, or arrogance, that made her sure she would succeed where others (including the franchisor) had repeatedly failed?

Let’s face it, in the capitalist society of America, franchisors have the freedom to sell doomed, ill-conceived franchise concepts.

Clueless franchisees like Laila Valdez Fields have the freedom to buy them.

When you consider that bad decisions like this are often backed by taxpayer-funded SBA loans, it’s tough to have sympathy for either side.

WHAT DO YOU THINK?  SHARE A COMMENT BELOW.

Photo credit:  More Madonna, Less Jesus blog.  Used by permission

7 thoughts on “CEREALITY: Do Some Franchisees DESERVE Unhappiness?

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  • July 3, 2009 at 12:36 pm
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    You are spot on. At this time of year, we’re reminded of the rights and privileges we enjoy. We have available to us countless opportunities to succeed wildly… or fail miserably.

    It is a favor to franchising that you call out these cases and help encourage a consistently sober approach to the field.

    Ego, groupthink, (and laiziness, as you point out) all have a part to play. Too bad human nature is so flawed! Sometimes the mechanisms that are set up to enable and protect smart ventures, also help to accelerate the growth and subsequent implosion of the bad ones.

  • July 3, 2009 at 1:03 pm
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    Financial Performance Representations (aka Earnings Claims) ….a prospective franchisee should use them to create a start-up business plan. Did Ms. Fields?

  • July 3, 2009 at 2:11 pm
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    Cereality and Ms. Fields aside, SBA loans are government backed, money is from bank and non-bank lenders and there is a guaranty fee of 1% – 3.75% to cover bad loans after the lender has relieved the borrower of their collateral/assets.

  • July 3, 2009 at 9:39 pm
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    My just-published book, “FRANCHISE: FREEDOM OR FANTASY” explains how people wind up making mistakes like the woman cited above. If you know someone considering buying a franchise, it may be worth a look.

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