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Breaking stories for January 2010


New Franchisor in Town

First Watch Restaurants Inc., a daytime-only restaurant group based in Bradenton, Fla., has begun franchising. Founded in 1983, the chain has about 80 restaurants open with expectations for 110 by 2012. The restaurants are open 7 a.m. to 2:30 p.m., and store sales average about $1.2 million. Same-store sales were expected to be up 3 to 5 percent in 2009 and total sales up about $2 million to $85 million (the company reports 25 consecutive years of same-store growth). First Watch is looking for franchisees to develop areas near its existing markets, including Kansas City, St. Louis, Cincinnati-Dayton, and Orlando-Tampa.

70 California JIBs on the Block

Bids for the 70 Jack in the Box units in Northern and Central California will be accepted until noon on Jan. 21. In September, Abe Alizadeh, through various corporations (Food Service Management, Kobra Associates, Sierra Valley Restaurants, and Central Valley Food Services), filed for Chapter 11 bankruptcy protection in U.S. Bankruptcy Court for the Eastern District of California. Alizadeh, one of JIB's largest franchisees, reportedly owes millions of dollars to the state, insurance companies, utilities, and the Jack in the Box corporation. The auction will be conducted by National Franchise Sales, based in Newport Beach, Calif.

Japan Bids Sayonara to Wendy's

The first Wendy's arrived in Japan in 1980, opening its doors in Tokyo. On Dec. 31, 2009, the doors were shut for the last time at all Wendy's restaurants in Japan. The Wall Street Journal reported that Zensho Co., the Japanese operator of Japan's 71 Wendy's restaurants since 2002, opted to end its agreement with the Wendy's/Arby's Group Inc. to focus on its other interests.

IFA Releases 2010 Economic Outlook

In December, the IFA's 2010 forecast for franchising predicted 1) a slow recovery with small increases in jobs, units, and economic output; and 2) that the continuing credit crunch will limit growth as compared with prior recoveries. The IFA's Franchise Business Economic Outlook for 2010 predicts U.S. GDP to expand 3.8 percent and employment to grow 0.4 percent in 2010. Within franchising, the report predicts the number of business-format franchise units to increase by 2 percent in 2010, from 883,292 to 901,093. Following the loss of more than 400,000 jobs in franchising in 2009, the report predicts a small (0.4 percent) gain of 36,000 jobs in 2010. Overall economic output by franchised businesses (the gross value of goods and services produced) is forecast to increase 2.8 percent to $868.3 billion in 2010, up $23.6 billion from 2009.

Sectors expected to see an increase in total units in 2010 include QSR (3.1 percent), real estate (3 percent), retail food (2.4 percent), and retail products and services (2.3 percent); the only sector predicted to see a decline in number of units this year is lodging (-0.8 percent).

Marco's Pizza Funds Franchisees

Not content to let capital availability dictate the pace of expansion, Marco's Pizza has set up several programs to fund franchisees. To help with store down payments, Marco's has introduced a private equity fund that can invest $50,000 to $100,000 per store. Marco's is also developing a $50 million private equity fund to finance up to $250,000 of a new store's costs, depending on the franchisee's investment. Those eligible for these programs must either have proven experience in the franchised food service industry or be a current Marco's franchisee.

Also, through Marco's captive leasing company, franchisees can lease complete stores under a program that can provide up to $200,000 in financing for a new store. Marco's is also developing a new leasing program that can provide up to $125,000 of equipment-only financing per store. In addition, Marco's helps arrange loans for 60 to 80 percent of the new store cost. And to help reduce lender risk and make obtaining loans easier, Marco's has established a new loan loss guarantee subsidiary that will guarantee up to 20 percent of the loan amount. Founded in 1978, Marco's Pizza has more than 190 stores in 17 states and the Bahamas.

Sylvan Learning Ponders New Incentives

Sylvan Learning is considering new financial incentive programs for its franchisees after extending its 2009 Capital Renovation Program for an additional month through Dec. 31. The program provided a dollar-for-dollar matching promissory note for capital improvements up to $7,500 per center, to be paid off over 36 months at 4 percent interest. The program, which had a cap of $30,000, allowed multi-unit Sylvan owners to receive matching funds for improvements at up to four of their centers. Renovations and improvements that qualified included new carpet/flooring, paint, signage, etc. Sylvan operates about 1,100 centers worldwide in 49 U.S. states and 6 provinces in Canada, as well as 10 other countries.

Published: January 5th, 2010

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