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BANGOR, Maine – Franchisor Coffee News has imploded in franchise units by a whopping 31 percent from 2008 to 2012.
Its U.S. franchise count has plunged from 790 units at the end of 2008 to 546 by 2012, according to its latest Franchise Disclosure Document. A related problem for the franchisor is its abnormally high termination rate of 131 percent of Coffee News franchise owners during the same period.
Those numbers are a problem. "I would neither recommend nor purchase a franchise from this company," stresses franchise researcher, industry veteran and author Robert Bond of WorldFranchising.com to franchise buyers.
Coffee News franchise owners work out of their homes to sell advertising and distribute their newsletter of horoscopes, jokes and interesting facts to local businesses for their customers to enjoy as they eat or wait.
Blue MauMau contacted Coffee News' president Bill Buckley, who bought the company in 2008 right before its precipitous fall. These are the questions asked of him and his full response.
What is your take on why the number of your franchise units has declined so much since 2008?
Buckley: In 2008, we sold a franchise a day for the first eight months of the year or over 240 franchises during that period. In September of 2008, we did not sell a franchise for the entire month. As you know, that was the start of the great recession. Banks stopped lending, credit cards were curtailed, home equity disappeared as home values declined.
We continue to sell a fair amount of new franchises every year and interest continues to pick up and consumer confidence is starting to get back to normal again. We saw applications come back to pre-recession levels last summer and so far this year applications are setting records. The problem has been mostly confined to the USA. Canada has over 200 franchises and has grown from about 150 in 2008. We are in 16 countries now and our foreign operations are leading the way back for us.
As you might imagine, being one of the best low cost and one of the best home-based businesses, the middle income to lower middle income families find us attractive, but that is the group in America who have struggled the most.
We are able to find buyers for our franchisees who wish to sell about 65 percent of the time, but if sales are not large enough to make up for the balance, our numbers will fall. But as a caution, this is a USA problem, not a worldwide one. We have sold about 30 new franchises in the USA and have added one or two in each of our head offices around the world since the first of the year, one of our best starts in the last five years. We are optimistic and continue to advertise quite heavily.
New countries added in 2014 so far are Mozambique, Bahrain, Panama, Russia and Ecuador.
Offers are out to the Philippines, Congo, Tunisia and a couple more. Frankly, until after the mid-term elections, we see more growth in foreign countries.
Why are your franchisee termination numbers that are published in Item 20 of your Franchise Disclosure Document so high?
Buckley: Our turnover has been higher than normal, to say the least, but it is declining. One good trend in this regard is that existing strong publishers have been buying up other weak franchises near their areas to become larger. We have one publisher in Texas with 17 and one in Alberta with 38 franchises. Except for Quebec, most areas in Canada have been sold.
Hope this helps to understand what is going on. Quiznos, Radio Shack, Staples, and Red Lobster have suffered far more.
Read the original article, Franchisees Leave Coffee News in Mass Exodus
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