Meal Assembly Watch

How do we predict the future? We all know it isn’t possible, so people make predictions based on past experience or related industries.

What is the best comparison that can be made to what the meal assembly industry is going through right now?

Look no further than the Bagel industry of the 90’s.

Here is an old article that shows this quite well. http://www.paloaltoonline.com/weekly/morgue/monthly/2000_May_31.BAGEL.html

For some more historical reference look at this article, http://query.nytimes.com/gst/fullpage.html?res=990DE2D61F31F935A15751C1A960958260&sec=&spon=&pagewanted=print

Do quotes like this look familiar? “All together, bagel sales have grown by a factor of five in just three years, according to the American Bagel Association, whose formation last year is just one more indication of the ground that the bagel is gaining on cereal, bacon and eggs and other traditional breakfasts.”

Wow they have their own “Association” that really makes it look like it’s going to be the greatest thing since sliced bread (Bagel?)

Or this article https://www.aibonline.org/resources/statistics/bagel.html

The short version is this, in the late 80’s or early 90’s someone realized that bagels weren’t just an ethnic or “New York” food. Franchises started opening all over the country without much regard for how easy it would be for more established businesses, namely Dunkin Doughnuts, and grocery chains to add this as just another item to their menu.

Franchises were sold like hotcakes (er.. bagels… sorry I couldn’t resist) and practically over night cities went from no place to buy a bagel to having 20 or more choices. Sounds great right? Well, it seemed to be, until the grocery chains started selling (initially frozen) and then eventually fresh baked bagels. And of course when Dunkin, decided to add bagels to it’s 2000+ stores, that almost single handedly shut down the independent and franchise stores that just sold bagels. Also remember, you don’t really need a bagel shop on every corner.

Some might say that Bruggers, Einstein Bros., Manhattan etc are still around and that means it worked. Not so fast, while the companies might still be around, they are not the same companies that they were before.

http://franchisepundit.com/index.php/2007/09/24/bagel-franchises-have-reinvented-themselves/

Multiple mergers, sales, consolidations, restructurings and bankruptcies have occurred, and these are the ones that seem to have survived. They have also drastically revamped business models, going to a more café business model.

But how did those original owners survive? Most didn’t and those that were just holding on couldn’t continue to keep reinventing themselves every time the franchisor wanted a new look, or menu. How did the stores that seemed to have survived do it? Most (of course there are a handful of exceptions) have been sold and resold, each time a new owner investing a lot of capitol to make a go of it only to end up needing to sell at a loss just to mitigate further financial tragedy.

The franchise companies continue to make money on transfer fees, and new franchise sales (remember if the UFOC doesn’t list a item 19 earning claim, even a skilled accountant working for them, couldn’t make the number look good enough to trust) and the transferred stores don’t have to be reported on the UFOC documentation as having failed, only “transferred”.

Lets not forget one important fact, these companies might still be around, but what about those hard working franchisee’s that worked in their stores day in and day out only to find out that all of a sudden they no longer had a product you couldn’t get anywhere else. Now you could pick up a few dozen bagels at the same time you got your groceries, or at any of the two thousand Dunkin locations nationwide.

Don’t like the bagel analogy? Ever heard of the frozen yogurt industry? That really worked out great for those initial owners too.

How many life savings were lost? Credit ratings ruined? Let’s not even think about how many marriages were irreparably harmed as a result of this.

I read many comments on this site about how the industry is just going thru some changes, and it will all work out. Just keep your faith etc. While it might all work out, it will be on the backs of hundreds of failed stores nationwide. The current crop of owners won’t survive (of course there are a handful of exceptions) the shakeup. This is a very sad fact that cannot be ignored.
Realistically how long do most of you think you can afford to pay rent etc. on a store that is not turning a profit? Remember one of the most important factors here is your ability to service your debt.
What do you do when you have run out of business funds? The bank isn’t going to give you funds; they understand business financials very well. They aren’t’ blinded by the love of the store. You love your store or else you wouldn’t even bother reading about the industry, so clearly you’ll do what ever it takes to keep it open, knowing in your heart that the industry will turn around, the competitor down the road will close, you’ll sell your store, or some miracle will happen and you will be flooded with customers. Take a look at yourself, sound familiar?

But until then you will do anything you can to keep it open. Bills will start piling up and you’ll think, well we just need to keep it going a little longer, lets use some personal funds, accept money from family and friends, fill up the personal credit cards.. How about that 401k, that will get us over the rough patch, the equity line of credit on the house, that should be enough….. The kids college funds.. and then finally that’s it. It’s all gone, everything you worked hard for, here you are, your store has gone under, and so are you. You are forever changed; you join that “elite” group of people that have lost everything.

At least at this point the franchisor will be an understanding party in this, after all they know your financial information, and they know that you haven’t made money for months; they’ll understand or will they?
No, unfortunately they won’t, there are minimum payments due to them, lost future income, etc. Remember in their eyes, “they” have been harmed here, not you.

I think I’ll end this post here, and let you all ponder this scenario. How many of you are in this situation? Or can see that you might be at some point in the near future? What do you think the franchisor will do?

Other Articles of Interest:

• More stores than you can shake a stick at!
• More fantastically unbelievable stats
• New Franchise Idea: Fewer Rules, More Difference
• Will This Evolution Save The Meal Assembly Business?
• Quick Growth Can Be Kiss Of Death
• Interesting relationship between things – Origins of the AAMAO?
• It’s on to Plan B as a Hot Trend Cools Off
• Cena To Gone?
• Meal Assembly Fire Sale!
• Tupperware of the 21st century?

3 Responses to “Predicting the future with bagels and lox”