Amid the deepening economic crisis, a growing number of franchisors are putting their money where their growth is.
SAN FRANCISCO"If you want to move forward, you are going to have to dig into your pocket," Stu Stolz, Trufoods' chief operating officer, said in an interview. "And thank God we are in a position to help."adrian.butler@sundaymirror.co.ukSHARE YOUR WEEKEND FINDS. Favorite new restaurant? Local hike? Email your suggestions to the weekend guide editor at wgeditor@sunset.comTrufoods plans to open three Arthur Treacher's stores over the next year, for a total of 37 locations of that chain, and six Wall Street Delis, half of which will be franchised, for a total of 28 units for that brand. An in-line store costs about $150,000 to $175,000.He added: "The night we slept together I was intoxicated by the fumes emanating from Rebecca. She was very heavily drunk. Nothing happened under the duvet but every heterosexual male would get aroused by someone like Rebecca. My hands might have touched her by accident but never intentionally. Her breasts were always flopping all over the place anyway.In a bid to boost average-unit volumes to $500,000 from the current $360,000, Beem is trying co-branding with Rocky Mountain Chocolate Factory and Tim Hortons, the large Canadian doughnut chain. Cold Stone will invest $30,000 to $50,000 per unit for a handful of tests at franchised branches, money that typically would have come from franchisees.GRASS VALLEYBut Stolz of Trufoods, which boasts 100 locations nationwide and systemwide sales of $40 million, insists that inexpensive concepts--even one whose very name, Wall Street Deli, is now synonymous with financial crisis-still merit expansion. In addition to the sandwich chain, Trufoods' other concepts include Arthur Treacher's Fish & Chips, Pudgie's Famous Chicken and Ritter's Frozen Custard.BISTRO 33 This mainstay has more to offer than wood-fired pizzas. Poets at the twice-monthly readings (9 p.m. on first and third Wed) include luminaries from the UC Davis faculty such as Joe Wenderoth and Sandra McPher-son. $$; 226 F st.; bistro33.com"I still feel the same about her as I did in the house, but you'd have to go on a date to find out if it was just the house. I wouldn't use the word love, that's a very strong word.""We are willing to take some chances on key franchisees we already know," Stolz said.Cold Stone Creamery, meanwhile, has redefined its growth plans, turning to co-branding efforts with Durango, Colo.-based Rocky Mountain Chocolate Factory Inc., a specialty gourmet-chocolate brand, to increase revenue. Cold Stone plans to pick up the tab to rehab test units--a check typically reserved for franchisees.Earlier this month, new Straw Hat Pizza franchisees Dana and Guy Wolsten obtained a $150,000 bank loan, backed by the SBA. Straw Hat put them in touch with the bank, and provided financial assistance, too, via deductions on items the Wolstens had to purchase through the franchisor."Then it really hit me the night she kissed Mohamed and I felt like somebody had taken a baseball bat to my chest.The eccentric 21-year-old said: "Rebecca's a cheap date, I'd imagine. I'll take her out to Pizza Hut or the cinema, give her some booze and you're sorted."I'd rate her kissing as a nine or maybe a 10. The morning after I realised I was attracted to her.With roughly $25 million in total capitalization, Straw Hat completed a $1 million private placement of a 20percent stake in the company in September. Fornaci undertook the offering for a cash infusion to offset the slowdown in Small Business Administration lending, equipment leasing loans and tenant improvement loans from landlords.Since the September transaction things have only worsened on the SBA front, with loan volume under the main 7(a) program plunging 50 percent in October from year-ago levels. At press time, Sens. John Kerry, D-Mass., and Chuck Schumer, D-N.Y., were trying to break the logjam, pushing the SBA to grant bridge loans to small businesses.Acting as a banker, however, poses two big challenges for franchisors. First, they are adding locations despite widespread consumer cutbacks on spending, rising unemployment and trillions of dollars erased from diners' financial portfolios. Most chains have decided to pull back on growth during these times. Second, they are making a dramatic break with their business model. For publicly owned restaurant companies, that could mean having to consolidate franchisees' results into corporate results, or guarantee loans, depending on interpretations of financial accounting regulations, such as the so-called Fin 46.A franchisee with one unit and $100,000 in cash would be a good candidate for a loan, Stolz noted. He added that Trufoods expects to finance the whole build-out, so the franchisee can maintain liquidity. The debt would be a percentage point or two above LIBOR, the rate at which banks lend to each other, and would carry a term of five years to 10 years.The teetotaller, of Wigan, Lancs, who never swears, said at first he was repulsed by the boozy nursery nurse from Coventry, West Midlands.These moves parallel broader industry trends. Last month, Domino's Pizza Inc. became the first major franchisor to say it would make small loans to strong franchisees that want to buy more units. Papa John's International Inc. recently followed suit, and even financed the acquisition of corporate locations by a franchisee. At the Restaurant Finance & Development Conference in Las Vegas this month, numerous franchisors, from Jimmy John's to Marco's Pizza, said they had to start thinking of various ways to help franchisees survive the current credit freeze.
"Franchisors need to take a step back and sit down with lenders and make it happen," Brown said. "Where there is a will, there is a way.... It's about a new mind-set."
Author: Catherine Curan
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