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WatchMeFranchise Reviews 4 Franchises that Expanded too Fast |
Written by Roni Deutch
Tuesday, 10 June 2008
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Expanding too rapidly can be a problem for any major franchisor. Many franchises have a built-in customer base that can support national expansion. However, some franchises do not have this and can suffer from over saturation. This leads to not only a halt in expansion, but also cause the decline of nationwide sales. Over expansion has become even more of a problem with modern franchising techniques that include multi-store owners and private investments in corporate offices. These investors can lead to forced expansion that does not take demographics and customer opportunities into consideration. Baja Fresh In the early 2000s, Baja Fresh became the victim of over-zealous expansion. The eatery was on a slow and steady path of success until they were bought out by Wendy's in 2002 for a reported $275 million. After the sale, Baja Fresh had a large and rapid push for national expansion. However, the corporation lost sight of the owner's original business model and focused too much on how to expand as fast as possible. A little over a year later, same store sales numbers began to drop. They suffered a 4.6% drop in 2003 followed by a 6.4% drop in 2004. Despite attempts from Wendy's to convert the restaurants into family friendly fast food locations, their sales continued to decline. Wendy's efforts were too little too late, and they eventually sold Baja Fresh to private investors for only $31 million in 2006. eBay Franchises With the massive success of eBay in the early 2000s, a few different eBay consignment drop-off store franchises began to pop up. These franchises offered simple business models with relatively low franchisee and start-up fees. In 2005, Entrepreneur magazine named eBay drop-off stores as one of the 13 hot businesses of 2005. But by 2008, these stores were no longer considered great business opportunities. People realized that they have low profit margins, high operating costs, and a weak inventory. In 2006, the owner of the first drop-off store went out of business due to high costs and low profits. Krispy Kreme Krispy Kreme Doughnuts used a blend of low-cost marketing and high quality products to create a cult like following. Their expansion began slow and saw stock prices skyrocket within only a few years. They were even given the title of hottest brand in America by fortune magazine in 2003. Unfortunately, once the company went public, they began to expand too much too soon. While trying to appeal to investors, the company diluted its cult status by opening dozens of locations and licensing donuts to grocery stores and gas stations. Within only a few years, many of the franchised units were forced to close as the company's profits drastically declined. Boston Market Whenever there is an article written about the dangers franchisors face with over expanding, Boston Market is always mentioned. In 1993 Boston Chicken - which later changed their name to Boston Market - went public and began to focus on a national expansion. However, the company lost sight of their goal to provide chicken in a casual setting and instead focused on maximizing profits. They changed their name to Boston Market and added numerous non-chicken items to their menu in an attempt to appeal to a wider audience. Eventually, in the late 90s, the company filed for Chapter 11 bankruptcy and was purchased by McDonalds. Article Source: http://www.ArticleBlast.com |
About The Author:
The Roni Deutch Tax Center is one of the nation's hottest income tax franchise. For more information on owning a franchise visit RDTCFranchise.com , or check out Watch Me Franchise to see what it is really like to run a franchise business.
The Roni Deutch Tax Center is one of the nation's hottest income tax franchise. For more information on owning a franchise visit RDTCFranchise.com , or check out Watch Me Franchise to see what it is really like to run a franchise business.
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