When it comes to franchising in the current economy, it can be a buyer’s market … especially when taking over a struggling franchise location.
A failed franchise location can be devastating for the franchise owner, but is also a significant loss for the franchisor as well. In addition to lost royalty and other revenue, the franchisor has the market and location open to potential competitors as well as suffering a sullied reputation in that market.
So, if you’re an experienced operator with the capital and the savvy to turn around a struggling franchise before it goes under, you can often get it for an extremely attractive price. In many cases, the previous owner’s main concern is having someone to take over their lease and franchise agreement obligations.
The franchisor of 640-unit CiCi’s Pizza recently sweetened the deal for their would-be turnaround artists. A new incentive program aimed at keeping up to 25 CiCi’s Pizza units from closing next year offers franchisees and managers willing to take ownership of a struggling unit a pass on the usual $25,000 franchise fee.
Craig Moore, president and chief executive of CiCi Enterprises LP contends that many of the stores are still viable, but the operators found profitability elusive for any of a number of reasons.
According to Moore, CiCi’s Pizza units average gross sales of $940,000 a year. Moore believes that the struggling stores, which have sales substantially below this average, can be saved by the right operators.
A story in the Dallas Morning News outlined the new incentive program, but didn’t explain what other investment was being required or what terms the previous owners would be receiving.
Sean Kelly is a 20-year veteran of the franchise industry, and founder of the award-winning marketing firm IdeaFarm. In 2006, he founded the FranBest franchise network, best franchise opportunities, the top new franchises, franchise marketing, franchise public relations and small business marketing. Contact him at seankelly[at]ideafarm.net.