Don Sniegowski at Blue MauMau reports that Coffee News of Bangor, Maine is experiencing a free fall in the number of its franchise owners. The chain has declined in franchise units by 31 percent from 2008 to 2012, according to its latest Franchise Disclosure Document.
Located in 40 states, franchise owners pay $8,500 in upfront franchise fees for an average total investment of $10,000. The $8,500 gives them the privilege of selling advertising in a Coffee News single-page double-sided newsletter of jokes, horoscopes and amazing facts. The company is even ranked #93 this year out of the top 500 franchise opportunities picked by Entrepreneur magazine. Typically working out of their home, franchise owners also distribute their publication to local businesses for customers to enjoy as they eat or wait.
Coffee News franchise units in the U.S. plunged from 790 units at the beginning of 2008 to 546 at the end of 2012. Its 2013 figures will be released later this year. That is a disappearance of nearly a third of its chain since Mr. Bill Buckley bought it from a Canadian firm in 2008.
The brand’s president Bill Buckley has seen worse things happening around him. “Quiznos, Radio Shack, Staples, and Red Lobster have suffered far more,” says the president. Quiznos recently filed bankruptcy Radio Shack announced shedding 1,100 company-owned outlets, Staples announced plans to close 225 company stores, and parent company Darden may jettison 705 Red Lobster restaurants.
Buckley explains his brand’s misfortune. “In September of 2008, we did not sell a franchise for the entire month. As you know, that was the start of the great recession. Banks stopped lending, credit cards were curtailed, home equity disappeared as home values declined,” elaborates Buckley on the difficulty of getting franchisees to replace the high number of outgoing owners. He thinks the international markets look attractive for the moment. “Until after the midterm elections, we see more growth in foreign countries.”
Source: Franchisor disclosure in FDD Item 20, 2008 – 2012
Another problem for the brand is the abnormally high termination rate of 131 percent of Coffee News franchise owners during the five-year period of 2008 to 2012.