Wiggin and Dana's Franchise Law Blog

Mac the Cop Digs the Jessica Simpson/Queen/Beyoncé Vibe

The Wall Street Journal’s Weekend Edition reported on Dunkin’ Donuts plans to expand, “... into a national powerhouse that’s as synonymous with coffee as Starbucks Corp.” Dunkin’ has plenty of money left over from last year’s buyout and plans to redesign its almost 5,000 US stores and to eventually triple the number of stores.

Apparently, the trick will be to keep the Dunkin’ “Tribe” happy while luring some of the Starbucks tribe and maybe some unaffiliated customers who have not yet undergone the elaborate initiation rituals of either tribe. The Dunkin’ tribespersons don’t want Dunkin’ to become as “pretentious” as Starbucks. In an effort to appeal to their sensibilities, therefore, paninis aren’t paninis anymore – they’re “stuffed melts.” And no couches, laptops or Italian names for coffee cup sizes.

But don’t expect the recherché Starbucks tribespersons to appear in a Dunkin’ Donuts, even the new model, any time soon...

Separation of Church and Burger

A McDonald’s restaurant in Raleigh, North Carolina has added its opinion to the “Merry Christmas” v. “Happy Holidays” debate. The sign in front of the McDonald’s reads: “Merry Christmas, Jesus is the Reason for the Season.” According to this article, at least one person called the McDonald’s corporate office in Atlanta and requested that the sign be changed to “Happy Holidays,” although a random survey of drivers elicited no protest. According to the restaurant's managers, the sign has been good for business as church groups have stopped in for a bite to eat and some people who usually don’t patronize McDonald’s have also stopped by because of the sign.

Co-Branding Is Like A Happy Marriage

As discussed in a recent New York Times article, the positive effects of co-branding reach beyond the brands themselves and can, for some couples, eliminate frequent disagreements on where to dine. Many franchise companies, such as Yum! Brands, Inc. and CKE Restaurants, Inc., have created multi-brand restaurants to increase consumer traffic and to build lesser-known brands. According to the article, because of the resulting increase in sales and positive consumer response, multi-branding has become a major initiative for companies like Yum! Brands, which owns KFC, Taco Bell, Pizza Hut, Long John Silver's and A&W All-American Food.

Subway Ends Sub Club

As reported by Newsday.com, Subway announced on June 2, 2005 that it is ending its long-standing free sandwich promotion, amid concerns that counterfeiters have been creating and selling copies of the restaurant's proof-of-purchase stamps and cards. Subway, which franchises more than 23,000 restaurants in 82 countries, created the Sub Club promotion in the 1980's for customers to receive a free sandwich for every 8 that they purchased (customers received 1 stamp each time they purchased a six inch sandwich). Since 2003, Subway has discovered an increasing number of counterfeiters using high-quality printers and online auction sites to sell the counterfeit stamps. According to Subway, it is now designing a new promotion to replace the Sub Club promotion, which will be phased out by October.

McHealthy?

McDonald's recently teamed up with nutrionist and author Dr. Rovenia Brock ("Dr. Ro"), who will support McDonald's new education campaign to help consumers better understand the keys to living healthy and balanced lives. To support this "it's what i eat and what i do ... i'm loving it" campaign, Dr. Ro plans to bring the campaign to life through an ongoing schedule of national and local appearances, in an effort to increase consumer health awareness and to educate consumers about the importance of food/energy balance and incorporating fruits and vegetables into their daily diets. The first step to healthy eating? McDonald's new Fruit & Walnut Premium Salad.

Frosty of Appreciation

This weekend, from Friday May 13 through Sunday May 15, Wendy's restaurants nationwide are offering free Junior Frostys to thank their loyal customers for their support following the incident in San Jose involving a woman who allegedly found a finger in her bowl of Wendy's chili. The company estimates it will give away more than 14 million Junior Frostys during this special 3-day event. Recently, when Wendy's conducted the same offering in the San Francisco Bay area and in Sacramento, customers turned out in record numbers for more than 100,000 Frostys.

McMilestone

After serving “billions and billions,” McDonald’s celebrated its 50th birthday on April 15, 2005 by opening a state-of-the-art restaurant in Chicago. The new restaurant boasts 60-foot tall golden arches, sports glass stone and furnishings from around the world. McDonald's has more than 30,000 restaurants worldwide and is ranked seventh in the annual ranking of global brands.

Fat Fight

The New York Post's Online Edition, reports that the latest weapon to be introduced into the fast food battleground is fat. In an effort to sweep up the young male consumers that McDonald's is losing in its healthy living campaign, fast food chains such as CKE Restaurants and Burger King have introduced items to their menus that are higher in calories.

While items such as Burger King's Enormous Omelet Sandwich (760 calories, 44 grams of carbs) are in high demand throughout the on-the-go male population, the Center for Science in the Public Interest warns that these chains are making themselves susceptible to lawsuits. The rebellious fast food chains' respond by claiming that the public can decide for itself.

Call It A Grand Slam Comeback

This article from ChainLeader.com details Denny's remarkable year and the company's marketing strategy that combines a focus on service improvements with an emphasis on its core strength, breakfast. The strategy appears to be working-- the chain has reported same store positive sales for nine straight months. Although Denny's continues to struggle with its massive debt, it's focused on continued growth and asserts that franchisees are essential to its survival. The franchise department is the second largest at Denny's, and has doubled its franchisee recruitment budget. Denny's hopes to open twenty franchised units in 2005.

Subway Focuses on Childhood Obesity

After months of touring the country and speaking to children about healthy eating habits, Jared Fogle, the Subway spokesman who lost 245 pounds eating all-vegetable and turkey Subway sandwiches, will appear in a new ad campaign for Subway highlighting the success of three children who improved their diets and became more active. Subway plans to spend up to $35 million on local and national ads for their Fresh Step campaign.

Cendant Brands on Real Estate

How do competing brands co-exist under one corporate umbrella? In real estate and other industries, Cendant Corporation has demonstrated a peaceful and profitable co-existence of distinct brands. This article in Real Estate News claims that the Cendant approach marks a franchising trend for success. Cendant owns Century 21, ERA, Coldwell Banker and Sotheby's International Realty, as well as a number of brands in the hotel and travel industries.

McDonald's Explores Brand Journalism

In AdAge.com, this article explores McDonald's marketing strategy, as discussed by Larry Light, the Chief Marketing Officer. The new technique seeks to drive McDonald's slogan and branding into four cultural languages, according to Light -- sports, music, fashion and entertainment. The "I'm lovin' it" campaign has coincided with McDonald's financial upswing in the last year, although analysts question whether that trend should be attributed to the campaign, the economy or the recent menu shift.

McDonald's Enters Co-Branding Arena.

Reuters reports that McDonald's is venturing into the world of co-branding by opening the first restaurant that combines the McDonald's hamburger concept with Boston Market products. McDonald's purchased Boston Market in 2000 and operates 630 restaurants under the Boston Market trademarks. The co-branded unit will open in Northwest Chicago -- close to McDonald's corporate offices in Oak Brook, Illinois -- and will feature hardwood floors, accent lighting and cushioned seating, which features are in line with the newer Boston Market units.

Healthy Eating Campaign Ends in Settlement between KFC and FTC.

The FTC announced last week that it has reached a settlement with chicken purveyor KFC over its advertising. The Kentucky Fried Chicken franchisor became the subject of an FTC investigation after it aired commercials last fall suggesting that its chicken was a component of a healthy eating plan and that it was compatible with low-carb diets. While the FTC did not endorse any specific diet, it recognized that both the Atkins and South Beach diets restricted dieters' consumption of breaded foods. KFC pulled the campaign shortly after it was launched. See blog entries dated 10/29/03 and 11/20/03. The FTC charged KFC with making false claims in its advertising. In the settlement, the parties agree that KFC will not (i) compare the health benefits of its food to a Burger King Whopper, (ii) state that its products are compatible with low-carb eating plans, or (iii) make any representations about its chicken, unless the statements are true and are supported by evidence. A copy of the settlement is available here.

Advertising Wars

Fighting for #2. This article in Forbes describes the battle between fast food giants Wendy's and Burger King for the number 2 position in fast food burger chains. Burger King currently holds the number 2 position but its sales have been faltering, falling off 3.4% in 2003. Meanwhile, Wendy's sales increased 11% in 2003. After some turnover of ad agencies at Burger King, the chain has revived its "Have it your way" campaign, first introduced 30 years ago.

Quizno's Franchisees Deal with Controversial Advertising. Some Quizno's franchisees call the company's new ads "horrific" and are directing the daily customer inquiries to the Denver-based franchisor. The company has announced that it receives 1,000 calls daily form customers about the new ads that feature two creatures described as "singing rats."

Other Fast Food Debates

McDonald's Looks to Downsize its Menu. Here's an article on McDonald's recent announcement that it will no longer offer Super Size menu items. McDonald's competitors, however, will likely wait to follow suit until they can determine the impact, if any, of McDonald's new strategy.

Taco Bell and the Farmworkers. More here on the continuing efforts to force Taco Bell (and its parent Yum!) as one of the largest tomato buyers in the country to increase the prices for tomatoes and help to improve pay and working conditions for vegetable pickers. Audioslave guitarist Tom Morello and Coup singer Boots Riley are supporting the protest against Taco Bell at the company's Irvine, California headquarters.

More States Consider Legislation Banning Obesity Lawsuits: I

In Washington state, a bill recently passed the House and was sent to the Senate banning lawsuits related to health problems form long-term consumption. In Georgia, a similar bill was recently introduced and awaiting a committee hearing.

Wendy's Tries Out New Spokesperson

Two years after founder Dave Thomas's death, Wendy's introduces the public to "Mr. Wendy," the chain's new spokesman, designed as a Wendy's zealot. Wendy's is looking to regain some of its brand awareness, which has suffered significant attrition since the death of Mr. Thomas, the most recognizable spokesman in advertising. The chain continues, however, to associate itself with its founder's image, having had a whole new set of posters made that bear Dave Thomas's image for store display.

The Co-Branding Solution. This article

The Co-Branding Solution. This article from the Los Angeles Daily News reports on merging franchise concepts under one roof. After buying the chicken chain Koo Koo Roo last year, Fuddruckers has moved its burger concept into at least six of the 18 restaurants in the system. Likewise, CKE Restaurants has combined its Green Burrito and Carl's Jr. concepts, seeking to eliminate the veto vote -- that is, the vote of one or two persons in a group that doesn't like the kind of food offered by one concept.

Happy New Year! Mad Cow Repercussions Reach into Chicken Marketing Efforts

Happy New Year!

Mad Cow Repercussions Reach into Chicken Marketing Efforts. You may be familiar with Chick-Fil-A's advertising campaign featuring cows trying to persuade consumers to "Eat Mor Chikin." Based on the recent discovery of a diseased cow in Washington state, the franchisor has decided to suspend its newest installment in its advertising campaign to avoid the appearance of insensitivity. Seems a little overly sensitive perhaps but at least one marketing consultant has praised the move saying that "You always want to lie low in these situations." The individual stores will continue to carry on the campaign.

Subway and Atkins Sign Deal.

Subway and Atkins Sign Deal. Two of the biggest names in food have teamed up in a deal announced on December 26. Subway will sell two Atkins-friendly wraps -- the wraps are made with special soy and wheat grains and will cost about 50 cents more than regular Subway sandwiches.

Other franchise concepts face some trouble in adopting low-carb menus. Hardee's has introduced the Thickburger, which it offers without a bun, wrapped in lettuce, with less ketchup. The bunless burger has only 5 grams of carbohydrates. The Thickburger, however, has recently been dubbed "food porn" by the Center for Science and Public Interest. The burger has 1,201 calories and 88 grams of fat. CSPI's executive director advised that "A good rule of thumb is that if a burger needs a comma in its calorie count, it's virtually impossible to fit into a healthy diet."

Subway Named #1 Franchise of

Subway Named #1 Franchise of the Year. In a year in which it opened its 20,000 restaurant -- with 4 restaurants receiving the honor because the franchisor could not pinpoint which store was actually the 20,000 opening -- Subway restaurants has been named the #1 franchise by Entrepreneur magazine.

H&R Block Teams with Wal-Mart.

H&R Block Teams with Wal-Mart. The Kansas City Business Journal reports that the new year will bring changes for H&R Block franchisees. Following some fairly contentious times for H&R Block and its franchisees (last year H&R Block franchisees instituted a class action -- as well as separate lawsuits -- against their franchisor and H&R Block won the right to allow hundreds of H&R Block franchise agreements to expire), H&R Block has entered into an alliance with Wal-Mart. In January, H&R Block will open 560 tax preparation kiosks in Wal-Mart stores across the country. In a statement on the partnership, H&R Block said that it's a chance to get its name before 138 million prospective customers every week. It's unclear whether H&R Block or its franchisees will operate the kiosks.

In other H&R Block news, H&R Block announced last week that the SEC has launched an investigation of tax preparation company. H&R Block provides a refund anticipation loan program where taxpayers receive their refund as a loan form a bank. The SEC investigation centers on disclosures about the refund anticipation loan program. In litigation regarding the program, allegations were made that H&R Block received kick-backs from the bank that gave loans for the program. The company would not comment on the investigation except to say that it was cooperating with the SEC.

Multi-Branding on the Franchisee Side.

Multi-Branding on the Franchisee Side. Diversifying your portfolio has been a trend in an uncertain stock market, but this article from the Associated Press suggests that it has also become a trend in franchisee holdings. From investor groups to sophisticated businesspeople, franchisees have negotiated the right to own and operate other franchises during their franchise term, a practice that was prohibited by many franchisors just ten to fifteen years ago. Some franchisors still require that a franchisee devote full-time attention to the operation of the franchise, but in many cases, franchisees are not involved in the day-to-day operation of the business, leaving the operation of the franchise to experienced management and other employees.

Hefner Ads Make an Impression.

Hefner Ads Make an Impression. It's not quite the reaction Carl's Jr. may have been looking for, but the President of Thomas Aquinas College, a Catholic institution in Ventura, California, announced yesterday that Andrew Puzder, President and CEO of CKE Restaurants, Inc., will resign from the board of the college. CKE Restaurants is the parent company of the Carl's Jr. chain, which recently launched an ad campaign featuring Hugh Hefner discussing his views on variety. The college president indicated that Mr. Puzder's resignation was directly related to the ad campaign, stating: "We've been proud of a long relationship with Carl's Jr. founder, Carl Karcher, and his company . . . . We have enjoyed a continuation of the relationship with the company through Mr. Puzder. But Thomas Aquinas College stands for principles that are in direct conflict with those of Hefner and Playboy."

KFC Abandons Healthy Eating Ads.

KFC Abandons Healthy Eating Ads. After launching a bold ad campaign that attempted to promote its chicken as healthy, KFC announced yesterday that it would stop running its healthy campaign by the end of this week. On October 29, the blog included an article discussing KFC's plans to air television spots that suggest that eating healthy could include sitting down with a bucket of Kentucky Fried Chicken. Just three weeks later after a complaint was lodged with the FTC by a consumer protection group, KFC has pulled the campaign. KFC would not confirm whether this move responded to the FTC complaint and the FTC would not confirm whether it planned to investigate the claim.

Franchise Marketing - Key to

Franchise Marketing - Key to Success. In this month's Denver Business Journal, Rick Gretz authored an article entitled -- "When the franchisee gets tired of paying royalties." Strangely though, the article is not about the end of franchise relationships but rather it focuses on a franchisor's duty to market its brand for the benefit of the franchisees. While Mr. Gretz's premise -- that a franchisor has a fiduciary responsibility to support its franchisees -- is not consistent with the law in most jurisdictions, he makes a good point about the need for franchisees to conduct due diligence on their prospective franchisor's efforts to sell its brand and support its franchisees.

Promotions Are Back. Maybe you

Promotions Are Back. Maybe you didn't notice that they were gone, but this article from the Indianapolis Star indicates that after a lull (or perhaps just a recycling of the same promotions), marketers have been turning out innovative promotions to fight for consumer dollars in a trying economy. From zero percent financing to CDs under beverage lids, businesses are aggressively campaigning for sales in new ways looking to wow customers into spending money.

KFC Looking for New Ad

KFC Looking for New Ad Agency. Yum! Brands, Inc., the parent company of KFC, is looking for a new advertising agency and the business is worth $224 million. The courier-journal.com reports that Yum! chairman, David Novak, has blamed the decline in KFC sales on its ads. The two companies currently competing for the job are Foote Cone & Belding Worldwide of Chicago and incumbent BBDO of New York.

Supercuts Settles for $3.5 million.

Supercuts Settles for $3.5 million. An EEOC complaint filed by a white Supercuts manager in 1998 sparked a five-year investigation into claims that the hair salon chain discriminated against minorities. According to the Miami Herald, Richard Quick was fired after refusing to assist in decreasing the number of black workers at his store. Supercuts denied any wrongdoing, but the company agreed to pay the settlement to black employees and job applicants during a 5-year span. The settlement funds will be used to set up a claims office and for other discrimination prevention measures.

The hazards of brand saturation:

The hazards of brand saturation: Alissa Quart, in the New York Times' op-ed section, comments on brand sponsorship of school activities, junk food products in schools and recent trends in the education/business intersection. "On July 1, Kraft Foods announced that it would withdraw its advertisements for processed foods from the in-school television station Channel One. A week before, New York City's Education Department banned soda and candy from the vending machines of its public schools. The department's action came on the heels of similar measures by school districts in San Francisco and Los Angeles."

Pizza Hut-Pasta Bravo cobranding put

Pizza Hut-Pasta Bravo cobranding put into action: Yum! Brands has plans to open its first co-branded Pizza Hut/Pasta Bravo restaurant in Clarksville, TN this fall. The menu, including Pizza Hut pizzas as well as pastas and salads, will be offered in a more casual-dining atmosphere than at typical Pizza Hut restaurants.

"Taco Bell launches 'outside the

"Taco Bell launches 'outside the bun' Caesar Salad," begins this Food Ingredients First article, which continues, "High-quality menu items is a core part of the food chain's ongoing strategy to capture the attention and appetites of consumers."

"Full of Holes? Some Doubt

"Full of Holes? Some Doubt Krispy Kreme's Growth Prospects" is the title of this article from the L.A.Times. The article also comments that, "As Starbucks Corp. did with coffee shops, Krispy Kreme has transformed a commodity product into a branded specialty with devoted fans."