There’s no such thing. See opportunity cost.  

The true cost of something is what you give up to get it. This includes not only the money spent in buying (or doing) the something, but also the economic benefits (UTILITY) that you did without because you bought (or did) that particular something and thus can no longer buy (or do) something else. For example, the opportunity cost of choosing to train as a lawyer is not merely the tuition fees, PRICE of books, and so on, but also the fact that you are no longer able to spend your time holding down a salaried job or developing your skills as a footballer. These lost opportunities may represent a significant loss of utility. Going for a walk may appear to cost nothing, until you consider the opportunity forgone to use that time earning money. Everything you do has an opportunity cost (see SHADOW PRICE). ECONOMICS is primarily about the efficient use of scarce resources, and the notion of opportunity cost plays a crucial part in ensuring that resources are indeed being used efficiently. Credit: The Economist

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Below are noted the reasons for franchisor failure :
· Under capitalization of the franchisor
· Too rapid expansion of the franchise system
· Poor product or service
· Poor franchisee selection
· Franchisor greed
· External factors
· Devaluation of the Romanian currency
· An increase of import duties
· The withdrawal of an important source of products
· An aggressive and cheaper competitor
· Severe downturn in the economy

French Franchisors Want to Export, Americans to Import

Interest in Franchising a Business is Higher than Buying a Franchise

See here the full story provided by the IMO’s CEO Eugene Driga the Europe Reporter for BlueMauMau

On the boulevard where I live, 4,500 miles away from USA, there are 3 McDonald’s units that pay taxes to everyone, including USA government. From this reality I reason that Ray Kroc’s answer to the above question was pretty satisfying.

2. “a finding that people would rather own the casino than be the gambler? That people would rather be the CEO than the hourly worker?”

I find it normal that the simple worker dreams of becoming CEO, and the gambler to become the owner of the casino. In their own realities, their path to achieving this is blocked by either the stock holders committee or the banks refusing financing him/her if his/her plans aren’t viable.

For the dishonest franchiser, the franchisee has lawyers, consultants, regulators, newspapers  and the cousin that says “no” to the franchisees plans!

NB: the discussion described by me in the first part couldn’t have taken place, because Niel Fox, the first McDonald’s franchisee signed the agreement in 1953, one year before Ray Kroc met the two brothers.

I was very glad to encounter Papa John’s – #36th franchise system in the world – last Saturday at Rofrancize, the Romanian franchise fair that took place in Bucharest. Romania is the 7th country in European Union, size-wise, but Papa John’s attendance to this fair it was this company’s first presence in Romania.

In Romania the medium growth rate of any franchise is about 20% per year. But, due to the requirements upon their (future) franchisees, Papa John’s risks to chase away its potential franchisees.

Why is this? Unfortunately, these days, more and more US franchises, after many years of testing the grounds, want to break on international markets, without conducting any studies or research about the local market they want to enter. Also, the offer of these American franchises is not flexible, which can be a disadvantage.

I reached the conclusion that it is easier to become a Papa John’s franchisee in the US than in Romania!

I’m showing, as follows, the reasons of such affirmation.

1.

Unlike the US franchisees, Romanian franchisees are obliged by the franchise agreement to open up to 10 shops, as follows: at least 2 in the first year, at least 3 in the following year, etc. At this moment, though, 40% of Papa John’s franchisees own each only one shop.
2.

The entry fee is the same as the one for the US franchisees, but investing capital required, for one shop, is, in Romania, between $200,000 and $300,000, while in USA, it is of $250,000. Why $300,000 in Romania? Romania isn’t exactly a place where many people have such sums to risk and invest. I assume that through this, the franchiser wants to make sure that gets a serious franchisee, determined to work hard for the shop he/she invested so much in.
3.

If they would have had conducted a research and a financial analysis, Papa John’s would have been able to come with a more attractive offer for the Romanian investors. Thus, if conducting that study, those from Papa John’s would have found out that, for example, the furnishing for the restaurant can be manufactured in Romania, at prices 3 times smaller, at the same quality of the product. Also, the costs with the personnel wages are way lower in Romania, since the medium wage here is $500 per month.
4.

Express and kiosk options aren’t available for Romania. These options would make the offer a lot more attractive because for these options the investments are considerably lower than for a proper restaurant.

Entering international markets is not an easy thing for the franchiser. Research and proper analysis are needed, and this need is illustrated best by the following figures.

The inflexibility of their approach made the franchisers from their office in US to lose market share; if in 2004, in Romania, 50% of the international franchises were American franchises, in 2007 their market share decreased to 22%. The rest is of European and local franchises which, in this case are the winners because they are more flexible in their requirements to their franchisees and pay more attention to the situation on the market they try to enter.

In the 19th century when an affluent young lady reached proper age, a ball was organised for her, and thus she was introduced to society. Now consider this:

* At the International Franchise Expo in Washington DC (11-13 April 2008) no Top 10 Global Franchises for 2008 of Entrepreneur Magazine franchise announced its participation.
* At the Franchise Expo in Paris , France, there were some 350 exhibitors. But only 4 of those are from Top 10.

The “big players” avoid franchise fairs, which are largely useful for smaller players to create brand awareness. The big names from US participate more at international fairs, mostly through the local master franchisees.

* In Romania – the franchise twilight-zone – the situation is even more dramatic. This year, at Rofrancize, 50% of the local franchises participating at the fair, came there before having signed even a single franchise agreement.

As a common factor between the 3 fairs, McDonald’s is not among the exhibitors!

David B. Caruso, Associated Press reports:
The chef who inspired the Soup Nazi character on “Seinfeld” makes a heck of a crab bisque, but a group of stewed investors says he’s having problems expanding his popular stand into a franchise empire.
Soupmaker Al Yeganeh closed his original Manhattan shop, famous for its strict ordering rules, in 2004 to focus on franchising Original SoupMan stores across the country. The company launched around 40 stores in its first two years and introduced its frozen soups to groceries.

But disgruntled franchisees say many of the new shops didn’t make it through their first year: At least eight have closed for good. Two more have shut their doors for now, although the company said it has deals in the works to reopen them.
Other franchisees told The Associated Press they want out of their contracts because of poor profits or bad relationships with the company. Several have sent the company letters threatening to sue.
Kevin Long, whose Original SoupMan franchise in Scranton, Pa., lasted just one winter, accused the company of misrepresenting how much it would cost to open and run the business.
He and other franchisees said the company also had early problems with its bowl and cup sizes, which were larger than expected and inadvertently gave patrons more soup than they paid for, and never lived up to promises to provide a product line that would sell during the summers, when demand for hot soups is low.
“They are just trying to get as many stores open as possible, and they aren’t supporting them whatsoever,” Long said.
Prices of $7 to $11 per 12-ounce bowl also made it tough to attract repeat customers, he added.
At least three stores have closed, at least temporarily, in New York City. Shops also have shut in Myrtle Beach, S.C., Harrisburg, Pa., Boulder, Colo., Colorado Springs, Colo., and Ottawa, Canada.
Franchisees in locations including Stratton Mountain, Vt., and Ridgewood, N.J., have asked to be released from their contracts so they may try staying open as a different type of business.
Original SoupMan spokesman John Rarrick chalked up the store failures to the normal “growing pains” associated with any new restaurant franchise.
“This is very common,” Rarrick said.
Of the struggling stores, he said, “They were really pioneers, and certainly there are risks associated with being a pioneer.”
Rarrick said the company had fixed the problem with the bowl sizes, abandoned an early idea of having most of its franchises operate as inexpensive carts and kiosks and struck a deal with Cold Stone Creamery that will create hybrid stores that will sell soup and ice cream.
He added that the soup company had delayed a plan to open 50 franchises in Britain while the it refined its business model.
“There are some really happy, really successful franchisees,” he added.
Original SoupMan opened its first stores in 2005, simultaneously capitalizing on and distancing itself from the “Seinfeld” episode that made Yeganeh famous.
On the show, a steely eyed chef makes his patrons follow a strict set of instructions dictating how they must order their soup, and he barks “No soup for you!” at those who fail to comply.
In real life, Yeganeh’s Manhattan store had similar rules posted: “THE LINE MUST BE KEPT MOVING. Pick the soup you want! Have your money ready! Move to the extreme left after ordering!”
Yeganeh, though, chafed at the Nazi nickname, which he felt insulting, and has discouraged his franchise owners from mentioning “Seinfeld” or saying “No soup for you!” on the job.

In 1996, the bagel business was taking off, with several franchises expanding rapidly across the country. Franchises of Brueggers, Einstein Bros., Manhattan, Noah’s and Chesapeake were selling like hot cakes (bagels that is).

The prospects for the bagel business altered dramatically in June 1997 when Dunkin’ Donuts announced that its 2,000 stores would begin to sell bagels. This, in one stroke it became the largest bagel retailer in the nation.

At about the same time fresh bagels were being introduced in supermarkets across the country. In 1996 Modern Baking Magazine reported that Fresh bagels sales were up 50% in supermarkets and represented over $125 million in sales nationwide. By 2000 the total was over $400 million.

Bagels were now everywhere: big grocery stores, fast-food menus, middle-America cafeterias, even frozen-food sections. In 1988, Americans ate, on average, one bagel per month; in 1993, it was one every two weeks. According to Modern Baking (May 2007), fresh bagel sales are over $500 million dollars per year in supermarkets alone.

Some say even the Bagel itself changed, over the years bagels have undergone a transformation from small, dense, and satisfyingly chewy into large, puffy, and a mere platform for sandwiches.

Sales dropped, franchises stopped selling and the bagel franchises closed many stores.

Brueggers, Einstein Bros, aren’t just about bagels anymore. They all have re-branded themselves as bakery café’s.

Einstein Bros. Cafe is just one example of a bagel concept reaching beyond the bagel. Bruegger’s Enterprises Inc., based in Burlington, Vt., also has expanded menu offerings and started redesigns on its 250-unit Bruegger’s chain to place itself in the fast-casual segment.

Bruegger’s once famous for authentic boiled and baked bagels, now offer a variety of other stone-hearth baked breads, such as Ciabatta and the exclusive Softwich, a softer, square bagel ideal for sandwiches. The redesigned Bruegger stores now offer a warm, comfortable café setting for guests to enjoy breakfast, lunch and dinner.