Franchises That Went Boom or Bust
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We know you've seen them, the shops that sell nothing but pretzels--salty pretzels, sweet pretzels, pretzels wrapped around hot dogs.
Or maybe you've puzzled over all the new day-care services for dogs, with names like Camp Bow Wow and Central Bark, and the other services that do nothing but cleanup duty, from Pet Butler to Wholly Crap.
Or perhaps it was the strong growth figures for those fleets of semitrailers fitted out with honking, blaring video games like so many rollup arcades.
In any case--all of these franchise concepts, crazy as they might seem, are actually growing in the midst of this horrible economy. Sometimes at an impressive clip.
"The latest idea always seems to have lots of sex appeal," says Jeff Elgin, founder of Minnesota franchise consulting company FranChoice. "That draws in otherwise intelligent buyers with the illusion that they are getting a strong business."
As we put together this year's Franchise 500®, we got to thinking about the franchises that hit on such a weird niche, their popularity defies rational explanation. And so we decided to look back at some other wacky ideas that went boom and bust in an instant. Are there lessons to be learned? Certainly. Do they help predict if, in the long run, the new ideas will be brilliant or harebrained? Sorry, only time will tell.
Do I Hear $1?
Remember the eBay store? The place where you'd lug your junk and let someone else auction it off for a percentage?
By mid-2005, it was a full-blown craze: There were reportedly 7,000 eBay drop-off stores across the country. The concept even had a starring role in the film The 40 Year Old Virgin. Of course, we quickly learned how to use eBay all by ourselves, and the concept suddenly seemed ridiculous.
By May 2007, iSold It, one of the leading eBay drop-off stores, stopped selling franchises. CEO Ken Sully issued a statement to franchisees: "We are concerned about financial losses incurred by many early franchisees. We cannot and do not guarantee that your store will be profitable either under the present system or under the system as it evolves."
Well, no. By then, you couldn't sell an iSold It franchise . on eBay.
Too Many Cooks
Another fad that soon fizzled? Meal prep kitchen franchises. When the economy was fit, busy families indulged in the luxury of assemble-your-own-dinner services at franchises such as Dinner by Design and Super Suppers. The idea--which, truth be told, never quite made sense to us--is that Mom visits one of these commercial prep kitchens, puts together dinner for the week with conveniences such as pre-chopped ingredients, packs it up and takes home. We're exhausted just thinking about it.
But in 2005 and 2006, the concept gained a big following. Super Suppers grew steadily during those years, jumping from 40 locations to 206, according to Investopedia, an online financial reference site. Its competitor, Dinner by Design, had 55 outlets. Needless to say, when the economy started to fail, so did Super Suppers and Dinner by Design. People went back to making homemade meals . at home. Now there's a concept.
No new Super Suppers opened in 2008, and existing owners with SBA loans began failing at a quick pace--42 percent last year alone. Dinner by Design has also stopped selling franchises and has 23 remaining locations.
Way back in the mid-'90s, dating franchises were one of the hottest things going. But like so many bad relationships, they followed the same sad trajectory:
Together Dating grew to 145 franchises in 1996, dropped to 22 in 2004 and threw in the towel on franchising in 2007.
The Right One began franchising in 1999, got up to 28 franchises in 2002, called it quits in 2007.
It's Just Lunch began late in the game, franchising in 2000, hitting 96 locations in 2006, but pulling the plug on the whole affair in 2008.
There were others, of course. Eight at Eight--which arranged group dinner dates for singles with hopes of pairing up--grew to a few units, then gave up on franchising after a few years. And there were all those video dating franchises too, but, you know, we're too young to remember them anyway.
With hot competition from Match.com, eHarmony and craigslist, personal matchmaking franchises didn't stand a chance.
Frozen yogurt--in or out? In the late '80s and '90s, companies such as TCBY led the phenomenon, peaking in 1999 with 3,033 locations. But by 2000, only 2,540 franchises remained. TCBY shops continued to melt away, and the company quit submitting numbers to our Franchise 500® in 2002.
Then, in 2007, a crazy thing happened: Fro-yo became hot again. Led by Pink-berry and Red Mango, the second-generation shops repositioned fro-yo as a "premium" treat sold in stylish shops. So far, Pinkberry has 73 locations and Red Mango has 48; both have more planned.
Is there another meltdown ahead? Hard to say. But in the meantime, we'll have a green tea swirl with mochi sprinkles.