When a Boomer Franchise Fails, Who’s to Blame?
A PizzaWorld franchise opened near us, so my husband and I started eating there. We found the owners friendly and the food excellent, if slightly overpriced. They were in a good location in a growing area of town, and we were thrilled to find a good pizza place, particulary at lunchtime. If you go to the PizzaWorld website, you’ll see the owners giving one of the tesimonials for the franchise (she is the lady in the blue sweater).
Sadly, yesterday my husband went there for lunch and found only the realtor sign and nothing else. They were gone. So, my question is, who is to blame? The franchisor or the franchisees?
Since I haven’t talked to them, I don’t know for sure, but this is what I observed:
1. Too many employees. On a Friday night they had at 7 high schoolers there. One went out on a delivery and came back. We were the only people in the place. Why they needed 7 kids to work on a slow night was beyond me. Was that number recommended by the franchisor or were the people just too kind to tell the kids to go home?
2. Huge portions. I ordered a salad one time that easily could have fed me for 3 meals, and it was loaded with all kinds of good stuff. The calzones were humungous. Did the franchisor set the size or did these people not know about portion control?
3. Prices high. Pizza is a highly competitive business. For a new pizza place to make it, they have to have fantastic pizza and low prices. People can pay less at one of the major franchises.
4. Extraordinary competition. In addition to the normal super-competitiveness of pizza places in general, just a couple of miles away was an old pizza place that has been in town for generations and makes unarguably the best pizzas in the world. People will stand in line for an hour at this place just to get a table. So the little PizzaWorld place had to convince people it was worth it to come down the road to them. Did the franchisor not check out the competition? Were these people new in town and didn’t realize that the local mecca was going to be impossible to overcome?
As I said, I don’t know the answers to these questions. I do know one thing:
Even if you are buying a franchise, do your homework. Learn about the area and the competition. Keep your expenses low. I’m not saying to skimp on sizes, but if something sounds like it’s not right, check it out. In other words, don’t rely on the fact that you are buying a franchise and not do the work.
If you have been in this situation, with a failed business, what advice would you give to others?
8 Comments
[...] her post (When a Boomer Franchise Fails, Who’s to Blame?), my fellow b5 Business Channel blogger Jean shares her enthusiasm for the Marion, IA PizzaWorld [...]
Great post. I cross-blogged it at:
http://www.franchisepick.com/pizzaworld-why-did-the-marion-ia-pizzaworld-franchise-close/
It’s sad to see a closure like this – especially when they were good people offering a good product. You raise some great points about why they may have failed. Successful pizza operators are fanatics on food costs and monitor the use of higher priced items – like cheese.
You also must have a clear pricing and brand positioning strategy. The quality, portions and price seemed to make this a special occasion place to go for you… they may have gotten higher per-ticket sales and rave reviews, but suffered when it came to frequency.
That’s where specials and some lower priced items can be effective, such as the Olive Garden breadstick & soup combo that appeals to those looking for a quick, cheap(er) lunch choice.
Actually, here’s another possible reason: low fees
The PizzaWorld website states:
“- Only 2.75% Net Royalty Fees
- 0% Marketing Fund
- 0% Cooperative Contribution
“We Allow
You To Buy directly from the approved food prover we do not mark up your food like most companies this keeps your food cost down and even puts more money in your pocket!”
The franchisor may have the best of intentions, but he can’t provide much assistance if he has no revenue. If he has 10 franchises doing $300,000 each, the revenue for his entire franchise company is $82,500. Plus, there’s no contribution for marketing, so no $$$ to get good photography, put together promotions, etc.
If you don’t charge, you can’t provide.
If you can’t provide, what’s the benefit of the franchise?
I’ve been in the advertising world for years and just entered the pizza world. Don’t know what other pizza companies are in your area, but the big boys spend tons and tons on marketing. It’s tough to compete with constant commercials, new and innovative products (pasta and subs), direct mail in your mailbox every other week, etc.
Reading this article saddens me, because this story is repeated daily throughout the country. It happened to my wife and me, too. We thought we did the research, we bought into an extremely popular franchise, and we followed the franchisor’s advice. And 4 years later, in our mid-50s, our investment was wiped out. I don’t entirely blame the franchisor, but the whole industry has created this unsubstantiated myth that buying a franchise is safer than “starting your own business.” It is not.
My heart goes out to the lady in the blue sweater.
[...] a franchise might help you avoid the problems I’ve seen with franchises (see the example of PizzaWorld from last [...]
Another potential issue for these folks is their willingness to “hustle.” Of course I don’t know them, but you’ve got to be willing to do whatever it takes (W.I.T.). Were they part of all the networking organizations (Chamber of Commerce, etc), did they develop catering relationships with local businesses, were they involved in other local area events sampling their product, etc.? I think many business owners just expect business to come their way when opening the doors. It takes tons and tons of hard work (and money) to market a business like this.
I wonder what the success rate is for franchises in general and pizza franchises specifically? Is it ever worth the time and money to get into a franchise? In other words, what are the odds?