mrfranchiseman

JARED FOGLE, SUBWAY AND DR. SEUSS

So what do all these stories have in common?

There is going to be fallout from the recent Jared events so lets not deny the effects.
There have been three(or more) not so nice articles written by others (WSJ) in the past the summer of 2015 about the "rise and fall of Subway" and such. I am not going to debate them here, but there is a lot of truth to their contents.

Subway owners are nervous, cagey, unable to react and rather paralyzed as matters are not in their immediate control. Values have dropped. Profits have dipped. The mood has changed from the euphoria of the past to gloomy and how do we get out of this negative cycle. Some are just going to hold on for better days. Quite rightly: there should be no panic. This too shall pass, and positive changes are in the pipeline. But franchise sellers are going to have to adjust their thinking, their pricing (and/or their buying strategy) to reflect the new reality as the pool of buyers has withered to a trickle. So for those of you waiting on the sidelines, this is an amazing time to buy a store if you do proper due diligence, because some of the good stores are now available on the market mixed in with some not so good ones. (Yes, you need to know the difference, and that is one of my weekly functions, so send me your information).

In July 2014 I wrote the following story, related to me by a colleague. Very appropriate today as I see the similarities with Subway..... enjoy this brief read!

So what does Doctor's Associates and Dr Seuss have in common? Read this interesting story below written by a colleague of mine. He does not talk about Subway, but I see a thread of similarities......

......(My client) had operated his franchise successfully for 10 years, and had been consistently profitable. As a condition to renewal he was required to sign the then-current form of Agreement. Failure to renew would effectively give the franchisor the right to take over my client's business and lease, by purchase of its tangible assets at fair market value (in other words my client would lose the value of his investment) unless he could quickly find a third party purchaser at a higher price.

Among other new requirements of the renewal agreement, franchisor was requiring that the franchisee operate a new and significantly different home-based business in addition to its prior store-based business, spend an extra $150,000 on slightly different equipment (not refurbishing) that involved throwing away existing equipment that was functioning well, for at most slight improvements in revenue generation, pay monthly royalties that were higher by 40%, and spend an amount on marketing that was higher by 400%. The new agreement retained the previous language in the default clause indicating that a second default within 12 months was an event of default without cure opportunity, even if the first default had been timely cured. But it also added as a new event of default, the occurrence of an injury on the premises through the negligence of an employee. So if a visitor slipped because an employee failed to promptly mop up water on the floor, that was an event that would potentially give the franchisor the right to confiscate the franchise for a song.

I complained about this unreasonable franchisor to my wife, and she told me it reminded her of the Dr. Seuss book, "Yertle the Turtle". I was doubtful, but she produced the book, and reading it made me a believer...

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It seems there was this turtle named Yertle who was the king of his pond. He was happy until he decided his kingdom was too small.

"I'm ruler" said Yertle, "of all that I see. But I don't see enough. That's the trouble with me."

[So he commanded nine turtles to swim to him and he made them stand on each other's backs and climbed up. The view from on top was grand, but the turtle on the bottom started complaining about pains in his back and shoulders and knees. But Yertle was unmoved. He wanted to go higher and higher, and he commanded more turtles to stand on each other's backs.

But the turtle on the bottom ("Mack") was suffering...]

Then again, from below, in the great heavy stack,
Came a groan from that plain little turtle named Mack.
"Your Majesty, please...I don't like to complain,
But down here below, we are feeling great pain.
I know, up on top you are seeing great sights,
But down at the bottom, we, too, should have rights.
We turtles can't stand it. Our shells will all crack!
Besides, we need food. We are starving!" groaned Mack."

[Yertle, though, ignored the pain of his subjects and continued to climb higher on more and more backs. Until, finally, Mack sneezed and the whole pile came tumbling down.]

My take: when your inspiration, compassion, and humanness are compromised, and you act like a Benevolent Dictator, your value and image as a human are much diminished and you increase the likelihood of catching a cold and sneezing........Subway has signs of catching this cold whilst operating in an oversaturated field. Expect closures. Expect drops in values. Expect lots of trial and error on new products.

But if one of the issues is "too many stores" how is offering Hummus or feta cheese on your sandwich going to alleviate the problem? more on this in another blog!

Any thoughts anyone?