Here’s a shocker: franchising is not immune to the economic downturn. In fact, franchise owners are getting hammered like never before. A new report by Coleman Publishing found that franchise failure among people who took out an SBA loan rose by 43 percent last year. Overall, SBA loan losses to franchises reached $93.3 million in 2008, a 167 percent increase year over year. Leading the pack was fitness chain Curves for Women, with at least 11 franchisees defaulting on loans last year. Other big names experiencing defaults include Domino’s Pizza, Subway and Carvel Ice Cream, according to the Coleman report. You can purchase the report online for $149, if you can still afford it.
Pay no attention to the previous item. Franchising in trouble? Nonsense, say the good people at Outdoor Living Brands, a franchise company focused on outdoor living products and services. They’re convinced that laid off workers who can’t find new jobs will naturally turn to franchising as a way to seize control of their destinies. “These individuals are ready to gain greater control of their professional and personal lives by running their own businesses,” says Outdoor Living CEO Chris Grandpre in a company press release. Exactly who will lend these folks money to purchase their dream franchise is another question entirely.
Cuddle up with your favorite flavor. The newest kid on the franchise block is Spoon Me, which bill itself as a “fun, high energy, tongue-in-cheek, frozen yogurt experience.” Hmm, sounds kinda fishy to us. What exactly are they putting in their fro-yo, anyway? The company is now offering franchise opportunities throughout North America. Actually, Spoon Me seems like a pretty cool operation. Here are three reasons why: Everything customers use in Spoon Me stores is biodegradable. Spoon Me’s delectables are made from all natural ingredients. And, instead of tips, Spoon Me stores accept donations to a new local charity each month.
Pizza crumbs. Franchisees are in full revolt against Noble Roman’s Pizza and Tuscano’s Subs. Fourteen franchise owners are suing the chain for about $8 million, saying they were misled about the costs and potential profits of running the restaurants. If Noble Roman’s loses the lawsuit, notes this newspaper report, the public company will likely go out of business, since its entire market value stands at just $7.3 million. One franchisee, Mike Ellis in Missouri, says he lost $200,000 in life savings and remains $219,000 in debt from his short-lived venture. Noble Roman’s isn’t taking the lawsuit lying down. It has launched a counterclaim that says the franchisees owe the company between $84,000 and $447,000 each. Frankly, the whole debacle turns our stomach. And we’ve never even eaten at Noble Roman’s.