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RadioShack Shacked in a House of Problems

RadioShackRadioShack Corp. reported a sweeping restructure of its chain, after a 62 percent decline in quarterly profit Friday. It announced it will close 400 to 700 company-operated stores as it tries to get its business back on track. That could mean shrinkage of roughly 10% of its nationwide chain, which includes both corporate and franchise stores. It will also close two distribution centers in Charleston, S.C., and Southhaven, Miss.

RadioShack's huge drop in earnings last quarter is further exacerbated by disclosures this week that its CEO has not been truthful about his background. That, and a third drunk driving charge.

Fourth-quarter earnings fell to $49.5 million compared to earnings of $130.9 million a year ago. CNN Money reports that this drop in earnings was largely due to a failure to handle the complexities of its operational transition to the new cell phone service provider.

Online DVD Wars: Blockbuster Follows Netflix, Again

Enthusiastic online  DVD renterMotley Fool, the fun-loving investment hounds, have been following the online rental wars of Blockbuster and Netflix, with a recommendation for Netflix and a raspberry cheer for Blockbuster. Users of Netflix's online DVD rentals were upset to discover that Netflix throttles renters who turn around DVDs quickly to save on postal costs. The Fool showed its profound investing wisdom and wit as it stated:

"If you're blazing through 20 flicks a month on Netflix, you'll do it a favor by going to Blockbuster and knocking that company one step closer to bankruptcy."
Today Blockbuster has announced it is following Netflix's lead. It also will slow down users who return their DVDs quickly.  Motley Fool once again elabarorates:

Because of postage costs, revenue-sharing deals, and the costs to acquire DVDs, Netflix is more than likely losing money on you if your monthly disc-viewing habits go into the double digits.

Well, it turns out that Blockbuster doesn't want to keep the busy beavers, either. It is now proclaiming its throttling ways as well on its terms and conditions page. Blockbuster is revealing that it takes the rental volume of its subscribers into account during the allocation process.

It would seem that Blockbuster does have a thing about losing money after all. Now if they could just catch a little more of that profit-maximizing spirit and focus it on their stores.

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Franchisers Create Stronger Brands Through Corporate Ownership

My franchiser does not believe in corporate owned franchises. I suppose that's nice since they never have conflicts with us franchisees over unfair corporate competition. But, my franchisor is at a disadvantage in matters of branding and we franchisees pay the price of their weaker brand if they don't have corporate stores (I'm not with 7-Eleven. In my case our network has very little branding although we like to kid ourselves that we do.). What I find particularly fascinating about the Stanford Study is how few franchisers review their corporate / franchise mix once it is set, probably by default, in the beginning years.

Companies that spend heavily on advertising to build their brand's reputation own a higher percentage of franchise outlets for that brand as a way to protect its reputation, say Stanford researchers.

"Franchisers with aggressively advertised brands-such as Hertz or Pizza Hut-tend to have much higher rates of company ownership. For example, among car rental agencies, Hertz is 66 percent company owned, compared with Dollar, which is only 2 percent company owned. Pizza Hut is 50 percent company owned, compared with Shakey's Pizza Restaurant, which is only 7 percent company owned.

News of Cheerful Holiday Retail Sales

Retail sales rebounded on Monday with consumers taking advantage of discounts. Internet retail sales continue to boom. The after-Christmas week is still young, with retailers hoping to gather momentum with discounts, gift card usage and Hanukah just now gathering steam.

Here’s Tuesday morning’s cheery news according to the WSJ (subscription needed).

"Holiday spending climbed ($$) 8.7% ahead of last year, according to SpendingPulse, a retail-sales data service from MasterCard International's MasterCard Advisors unit. Sales of home furnishings, such as linens and picture frames, were up 15% and consumer-electronic sales, including flat-screen TVs and digital cameras, rose 11%, the data showed."

Japan 7-Eleven selling iPods. Coming to US?

According to Engadget, 7-Eleven has picked up a deal to resell iPods in Japan. The iPods arrive in the store a couple days after a customer places an order. Japan is a country that has taken convenience stores to the next level -- with copy centers, grocery vending machines outside the front doors, just-in-time inventory and much more. I guess when one thinks of the neighborhood 7-Eleven , one soon will think of a drink, sushi and i-pod music. It is true that Japan's market dynamics are different than ours but 7-Eleven is a Japanese firm. So, we wonder if this experiment in Japan succeeds, if one day the U.S. operations will follow. Go to your neighborhood 7-Eleven convenience store to purchase a Big Gulp, eat a hot dog and buy an i-pod. --- Naaah.


Fight Retail Crime With Plastic

The Motley Fool argues for fighting retail crime by using more credit cards and not cash -- an interesting theory. They quote a Palm Beach Times article stating that,

"Based on past numbers from the Bureau of Labor Statistics, it's estimated that over 700 convenience store workers, particularly cashiers, will be murdered during robberies this year in the United States.... A convenience-store cashier job is the 10th-most dangerous occupation in the United States according to the U.S. Labor Department, which classifies being a convenience-store cashier job as more dangerous than being a firefighter."