Stocks Continue to Struggle On Dubai, Sales

Stocks continue to struggle today on the stock market as Dubai remains a bit of an issue. Also contributing to the bearish slant to today’s trading is the fact that Black Friday sales ended up being mixed. However, stocks aren’t down as much as they could be, since there are some silver linings to the stories dominating the markets today.

Dubai isn’t that big a deal

While the reaction on Friday to Dubai’s possible debt problems was huge, over the weekend, investors realized that U.S. direct exposure to Dubai markets isn’t that big. Additionally, the UAE promised to provide funding for Dubai banks, and things appear to be relatively contained for now. That has some investors breathing a sigh of relief.

Cyber Monday might make up for Black Friday

The other issue giving investors pause this morning is the lackluster sales performance on Black Friday. Yes, sales were higher than last year. But only just higher. And individual spending on Black Friday was down. This indication that consumers are still holding back has some investors concerned about economic recovery, since consumer activity is such a large part of economic activity. However, there are hopes that today, Cyber Monday, will make up for it as consumers look for online deals.

In the end, though, it is clear that investors are mostly waiting. They are waiting for indications of how the holiday shopping season will go, and for indications about how bad things are in Dubai.

Image source: Imre Solt via Wikimedia Commons

Post from: EveryJoe

Stocks Continue to Struggle On Dubai, Sales

Will Raises Make a Comeback in 2010?

The end of 2008 saw a serious dent to bonuses, due to the financial crisis. And this year saw salary freezes at a number of companies. As a result, raises have been few and far between. But things might change in 2010. Hewitt Associates points out that only 13% of companies plan to freeze salaries next year. You might not get a huge raise, but you might get something more than you got this year. And that could be helpful to many who are struggling right now. It will be especially helpful if economic recovery results in inflation next year. So far, inflation has been relatively modest, but if prices rise and salaries don’t, many people will find it difficult to keep up with their obligations.

The job market itself is likely to take longer to recover. Even though there are signs of stability, the fact of the matter is that it took three years after the last two recessions for unemployment to return to pre-recession levels. And there are some economists who believe that we may not see a return to pre-recession levels of employment for even longer this time. One of the biggest reasons is to do with the fact that many industries and companies have been making substantial changes to the way the do things. There may be no need for a great deal of hiring.

Image source: sxc.hu

Post from: EveryJoe

Will Raises Make a Comeback in 2010?

KUMON: NJ Franchise Owner Shares Concerns

Kumon educational franchise owner David Joseph originally posted the following as a comment on the post KUMON Franchise Owner Complains of Overexpansion.  We’ve moved it here because of length, the quality of the content and the importance of the franchise issues Mr. Joseph raises.  Please feel free to share your opinions below.

Comments from David Joseph, NJ Kumon Franchise Owner

Hello, My name is David Joseph and I own a minority share in a center located in NJ. I’m putting up this post to make my views plain and clear to everyone. My statements here are mine and mine alone. I’m concerned about Kumon’s strategy. I’m not concerned about issues involving associations, products, services, or contracts. I also don’t care about rants and insults that are now popping up on this page.

I’m concerned about Kumon’s strategy because I’m seeing encroachment and cannibalization. Although I’m not affected by encroachment, I directly and indirectly know people that are, as I believe we all do. For owners that are not directly affected now, you may be affected in a few months or a few years because of Kumon’s strategy and implementation plan.

For those who don’t own a center, think of encroachment and cannibalization as a pay cut or a layoff. I use this analogy because you lose money and, in the worst case, you can lose your job.

Kumon’s strategy is to build brand awareness through expansion. In essence make Kumon a household name because there will, so to speak, be a Kumon on every corner.

When I think of educational companies with great brand awareness, I think of Sylvan. However, I don’t see a Sylvan on every corner. In North America, there are approximately 1100 Sylvan centers. Kumon has approximately 1500 centers in North America. Yet the average person is more familiar with Sylvan than they are with Kumon.

Sylvan’s brand awareness was developed through heavy TV advertisement. TV ads and spots can cost a lot of money. The money used for advertisement directly affects Sylvan’s bottom line because that money comes directly out of the corporate budget. Sylvan corporate took a financial risk because they invested corporate money into advertising. I’m not sure what Sylvan’s return on investment was but I feel safe to say they achieved their brand awareness goal.

Kumon’s brand awareness strategy is based on increasing the number of centers. Speaking strictly from a corporate viewpoint, it is a brilliant strategy in terms of capital and return on investment. The majority of the money needed to expand comes from owners buying new center locations. New centers may end up encroaching on existing centers but from the corporate viewpoint that is OK. Corporate believes that there will be an overall increase in enrollment. Again, strictly from a corporate viewpoint, there is a lot of upside with minimal financial risk. The risk, from a corporate view, is generating vocal owners. These vocal owners will limit Kumon’s ability to attract new franchisees.
In order for Kumon to justify expansion, they must justify that the market can handle more centers. That is why I questioned and will continue to question the assumptions used to justify expansion. For current owners, take the time to understand your local market in terms of the number of potential students, family income of the students attending your center(s), where they live, etc and estimate what your market penetration rate is. Your concerns and challenges will be dismissed by corporate if you do not come with hard facts. You will also be more confident when you raise issues.

From the franchisee view, expansion can be positive or negative. It is positive if you are operating in an unsaturated market. However, it is especially dangerous if you have large center(s) or if your center(s) are in a saturated market(s). There are centers in NJ that have lost 100+ subjects because a new center opened up in close proximity. Although those centers are very large, loosing 100+ subjects is a huge hit on the profitability of those centers. This is why some owners, especially in NJ, are very concerned about Kumon’s expansion strategy. For owners that operate in less saturated markets, please understand that if left unchecked, expansion will turn from a positive to a negative very quickly.

I put posts on twitter that eventually resulted in postings on unhappyfranchisee.com. I did not hide my name so that Kumon corporate can find me. Eventually corporate contacted me and we had a heated discussion. To be honest, I was too heated to articulate the reasons I chose to post on twitter so here goes:

1) I wanted to demonstrate how much attention only 1 owner can generate and therefore the true risk of Kumon’s strategy.
2) I wanted to be a voice for those who are concerned about expansion and could not get their voice heard.
3) I wanted to give potential franchisees information on some unstated/understated risks of owning a Kumon center.
4) I wanted to demonstrate the effectiveness of utilizing a low cost alternative media channels.

On point 4, let me be more specific. I don’t have a lot of followers on twitter, yet I managed to reach a very broad audience. How did I do it? I spent a few hours finding my target audience. In this case it was Kumon franchising personal, certain franchising experts, and a few owners that actually used twitter. I crafted messages that spoke to different segments and the rest is history. My point here is that my upfront time was figuring out my goals, figuring out who I should target, and crafting messages to get the results I wanted. It only took a few hours over a weekend to generate the buzz.

Now think about Kumon’s customers. Imagine if Kumon corporate invested the resources into understanding customers segments and helping franchisees reach those segments. That is why I challenged Kumon to gain a better understanding of their customers and develop customer segments. I sincerely believe it is a better investment to gain an in-depth understanding of customers and reach people that will truly value Kumon’s offer rather than simply saturating a market.

In addition, the cost to build brand awareness has dropped dramatically. It is not necessary to spend a lot of money on traditional media to reach a targeted audience. Kumon is a word of mouth business and right now word of mouth can be multiplied 1000 fold by utilizing social media. I’m not saying that every Kumon owner needs to get on twitter. I believe it is actually more effective for Kumon corporate to invest their resources into developing a social media plan. Kumon corporate already knows there is something to it because a lot of Kumon’s franchising team already utilizes twitter to attract potential franchisees.

Take aways:

Kumon owners – Don’t just talk about how you lost business to a new center because corporate does not see that as big picture issue. Think in terms of corporate goals, strategies and assumptions used to justify corporate goals and strategies. There are a lot of assumptions that can be challenged. Do your homework and your challenges will carry more weight. If you decide to use public online outlets, do not get yourself dragged into taunts and fights. It’s a waste of your time. Utilize public forums to draw attention to your concerns about Kumon’s expansion strategy. Its not just about you, it’s about everyone that owns a Kumon center.

Kumon Corporate – The expansion strategy has a lot of financial upside but it is very risky if continue to alienate owners. More and more owners will utilize public forums to express their opinions about expansion. NJ is only one market. Imagine if owners in other markets start doing the same thing. Imagine the affect on franchisee recruitment.

The cost of building brand awareness is a lot lower now than just a few years ago due to alternative media channels. If the goal is to build brand awareness, social medial is an effective low cost tool to reach target customers and build brand awareness.

Potential franchisees – If you found this post, you have received insight that most of the current owners did not have at the time they purchased a franchise. It is an interesting time at Kumon. There is a lot of potential but there is also a lot of risk depending on how Kumon moves forward with their strategy. There are some good posts that can help you make a more informed decision. Work with your franchising people but also seek out information from current owners. Ask current owners the benefits and downsides of owning a franchise. Ask their opinion about Kumon’s strategy. I’m sure there are enough owners out there that will give you their honest opinion. Also, if expansion is limited, you can feel safer about your investment.

Final Thoughts: I’m very passionate about business and Kumon. I believe Kumon offers a good service but my opinion is that Kumon’s expansion strategy will escalate franchise franchisee conflict. Escalated conflict will limit both franchisor and franchisee in reaching their goals.

If you’d like to talk to me directly, please find me on twitter. I’m happy to address any questions or concerns.

Sincerely,
David Joseph

WHAT DO YOU THINK? SHARE A COMMENT BELOW. LOGO: Kumon

Dubai Shakes Things Up for World Markets

Yesterday, the news broke that Dubai was experiencing some serious debt issues. Dubai World, which is a financial entity owned largely by the Dubai government, announced that it would be restructuring and that it would be stopping debt payments. This news has shaken world markets. In Asia and Europe, the markets were shaken yesterday. But with the Thanksgiving holiday, it appears that the U.S. reaction was delayed.

This morning, investors work up and sent the Dow plunging more than 200 points. While the losses have moderated so far, with the trading day almost over, there are concerns that Monday could bring another round of losses. After all, today is a short trading day — ending at 1 p.m. Eastern — and many investors are traveling or enjoying time with their families. Time to consider the information may lead to bigger losses on Monday. The news is also taking away from optimism, prompted by Black Friday, about the holiday shopping season.

The investors participating in the markets today, though, are mostly gravitating toward U.S. Treasuries and the U.S. dollar. Stocks are considered riskier, and in times of uncertainty and in times when the markets are in upheaval due to such monumental news, it is little surprise that investors are turning to the relative safety of government bonds and the U.S. dollar, both of which are backed by the most stable taxpayer base in the world.

Image source: lardo via Wikimedia Commons

Post from: EveryJoe

Dubai Shakes Things Up for World Markets

KUMON: Franchisee Association Pushes for Change

Burger King owners aren’t the only franchisees pushing for change.

Kumon franchise owners have voiced concerns here (as well as on Facebook and Twitter) that the international education franchisor is prioritizing systemwide expansion over the success of its franchise owners.  While the group was not responsible for the initial comments, the President of the International Association of Kumon Franchisees has acknowledged that these comments have resulted from “very challenging and high-stress” internal tensions within the Kumon franchise community.

In an earlier post about the Kumon franchise complaints, Concerned Owner complained that Kumon’s reliance on incomplete demographic data has led the corporation to “overestimate their market potential” and to create an “unjustified expansion plan.”  Concerned Owner contends that franchise owners, especially in saturated markets such as New York, New Jersey & Connecticut, are being packed in to the point of competing with one another and cannibalizing sales.

Commenter Joe Cack added that while the franchise owners are being forced into discounting to remain competitive, the franchisor is reaping a whopping 30% royalty off top line sales, regardless of franchisee profitability.

Nicole, the president of the International Association of Kumon Franchisees, added this statement to the post:

The concerns expressed here come out of a very challenging and high-stress situation which we as the International Association of Kumon Franchisees are doing our utmost to address.

We are in constant negotiations with the high-level employees of Kumon North America on many topics to do with our franchise, and, while we know it will be a long process to address all the issues, we are encouraged that considerable progress is being made in real consultation on many fronts.

The great strength of franchisees in New Jersey is that they are working together in very constructive ways on things like profitability studies to analyse how to improve their businesses, marketing studies to grow their centres better and other initiatives to address their situation.

They have the highest representation of association membership (over 80%) and have demonstrated in a recent meeting with the CEO of Kumon North America a very admirable professionalism and creativity in moving the Kumon Vision forward.

I am proud to support these franchisees and others throughout North America in their efforts to use their considerable skills and areas of expertise to develop and maintain their Kumon franchises and to have a positive impact on the Kumon North American system as a whole.

Best wishes,

Nicole,
President, International Association of Kumon Franchisees.

Franchise owners organize into independent franchisee associations in order to present their opinions, requests and sometimes demands to their franchisor.  If franchisees don’t feel their concerns are being taken seriously or adequately addressed, they will often take to voicing them on the Internet.  If franchisee concerns are further ignored, the dispute can even result in litigation and a public relations debacle, as seen by the recent Burger King dispute.

It will be interesting to see whether international franchisor Kumon and its U.S. franchisees can work out their differences amicably.

ARE YOU FAMILIAR WITH KUMON?  WHAT DO YOU THINK? SHARE A COMMENT BELOW.

logo:  Kumon

Unhappy Franchisee: “I have signed a deal with the devil”

FranBest.com has an interesting post you should check out:

Why Franchises Fail & What to Do About It Part 1

It raises an interesting question that is often debated here:  who’s to blame for franchise failures?

Franchisees?

Franchisors?

Sometimes both?

Always both?

The FranBest post gives the example of an actual printing franchise owner named Jenny. 
Jenny’s Twitter page entries indicate that her approach to building her printing business involves following celebrities online, gazing out the window and “watching the world go by.” 
Here are her actual Twitter page entries:

12:59 PM Mar 10th Sitting in my print shop waiting for a sudden onslaught of customers

12:13 PM Mar 18th looking out of the window watching the world go by

7:29 AM Mar 20th Wondering if there is likely to be any work t do today. Might actually have to attempt some marketing

1:09 PM Mar 23rd I have just spent ages picking my favourite top 5 albums on facebook. Now I have finished and everyone can see, I feel a bit pretentious

7:58 AM Nov 24th Never ever get involved in a franchise I have signed a deal with the devil

As the FranBest article points out, this franchisee’s survival in the fiercely competitive printing industry is, at best, a longshot.  Who could survive with such a lackadaisical and passive attitude toward building their business?  And it’s almost a sure thing that this franchise owner will blame her franchisor (aka “the devil”) for her lack of success.

But who really is to blame here? 
Is the franchisor or the franchisee the victim?

On the one hand the franchisee has taken up a franchise territory, is almost certainly not following the system, will likely default on her franchise agreement and will give the brand a black eye in that market.

On the other hand, isn’t the franchisor’s job to qualify franchisees, to weed out those who will not follow the system, to set realistic expectations and mandate the necessary level of promotion? 
Isn’t it a franchisor’s obligation to, in essence, save some franchisees from themselves and replace their natural inclinations with a structured, mandatory business system that’s been proven to succeed?

WHAT DO YOU THINK?  SHARE A COMMENT BELOW.

Why Franchises Fail & What to Do About It Part 1

When a franchise location fails, everyone involved loses.   Can most franchise failures be prevented?

Whether you are a franchisor, franchisee, future franchisor or franchisee, or service provider to ‘zors and ‘zees, it’s safe to assume that you want to succeed.

In order to understand and implement the principles of success in franchising, it’s essential to recognize the attitudes and behaviors that so often lead to conflict and, ultimately, failure within franchise systems.

As a 20 year veteran and a daily student of franchising, I’ll share my beliefs and observations on the subjects of franchise successes and failures in this multi-part series – and welcome your thoughts, questions and comments at the end of each blog post.

The inspiration for this series of posts came to me in the form of a short Twitter message by a franchisee named Jenny:

“Never ever get involved in a franchise,” Jenny tweeted this morning, “I have signed a deal with the devil.”

What Satanic franchisor was tormenting this poor woman so? I wondered.

I clicked on Jenny’s message and was transported to her Twitter page. In just five short Twitter entries, Franchisee Jenny had created one of the most compelling, revealing and depressing franchise cautionary tales I have read.

Here is the content of her entire Twitter page with her picture; only her location, identity and franchise name have been obscured:

Name jenny —–

Location ——-

Web —–.com

Bio Run a print and design company in —–. Desperate need of interesting conversation

12:59 PM Mar 10th Sitting in my print shop waiting for a sudden onslaught of customers

12:13 PM Mar 18th looking out of the window watching the world go by

7:29 AM Mar 20th Wondering if there is likely to be any work t do today. Might actually have to attempt some marketing

1:09 PM Mar 23rd I have just spent ages picking my favourite top 5 albums on facebook. Now I have finished and everyone can see, I feel a bit pretentious

7:58 AM Nov 24th Never ever get involved in a franchise I have signed a deal with the devil

Jenny is the poster child for franchise failure.  Despite the fact that she owns a small business in one of the most fiercely competitive segments of the service industry (printing), she seems content to just wait for fate to decide whether her business will succeed or fail.

Instead of posting a photo that shows that she’s an energetic professional eager for your business, Jenny displays herself slumped lazily on her couch.

Instead of making sales calls, attending Chamber of Commerce networking events, or putting on seminars, Jenny prefers to wait in her shop “for a sudden onslaught of customers.”

Instead of dropping by new businesses in town or bringing donuts to customers she hasn’t seen in a while, Franchisee Jenny is “looking out of the window watching the world go by.”

Rather than sending out email blasts, postcard mailings or putting together a webinar, Franchisee Jenny is “spending “ages” picking her favorite albums on FaceBook.

Rather than using Twitter to find and follow hundreds of potential customers in her area, Franchisee Jenny follows 22 “people” that include Neil Diamond, The Ellen Show, John Mayer, Britney Spears, Martha Stewart, Demi Moore, 10 Downing Street & Barack Obama.  She’s built a following of 14 followers consisting of a few spammers plus Britney Spears & 10 Downing Street.

When Jenny’s printing business fails (as it surely will, barring divine inspiration and/or intervention), she will lay the blame entirely upon the terrible economy, her greedy landlord, unforgiving lenders and vendors… and especially on her evil franchisor.

In franchising, success is a team effort.  Unfortunately, so is failure.

You don’t need a crystal ball to see what is going to happen next.  In the printing industry (as in many others), aggressive marketing, efficient operations and diligent customer service are critical for success in the best of times.  In a down economy, they’re a matter of survival.  Printing franchisees who spend their days gazing out the window waiting for an onslaught of customers are not long for this world.

Jenny’s print shop franchise will likely fail.  She will likely lose her investment, her credit rating and perhaps her home.  The lenders will end up with a defaulted loan, the landlord with an empty space and no rent monthly check, and the vendors with more used, repossessed equipment in their warehouse.

The franchisor will lose the future royalties due from the now-bankrupt Jenny;  they’ll lose her store’s contributions to the advertising fund and the system’s buying power, and their reputation will be damaged in that market.  In time, they may resell the territory to a new franchisee, but every franchise failure is a black mark on their record, one that must be disclosed to future potential franchisees.

Fingerpointing, hard feelings and, possibly, litigation will follow.  Franchisee Jenny will blame the franchisor for making unrealistic promises, not providing enough support and, in short, not making her successful.  The franchisor will blame Jenny for not following the system, not promoting her franchise and, in short, not taking responsibility for her own success.

Both, probably, will be right.

Simply blaming Jenny for her lack of motivation, accountability and sales & marketing acumen is easy but short-sighted.  Many critical questions remain:

How did someone as ill-suited to be a printshop owner as Franchisee Jenny end up in this situation?

Could the franchisor have anticipated this result with a better franchisee screening and selection process?

Could the franchisor have reoriented Franchisee Jenny with a better marketing and sales training program and requirements?

How did Franchisee Jenny get the idea that fate – not her own hard work – would provide an onslaught of customers?

Could the franchisor have mandated sales and marketing programs that Franchisee Jenny would be required to follow?

What else could have been done to prevent this situation – or can now be done to keep it from becoming worse?

Also read: Why Franchises Fail & What to Do About It Part 2

WHAT DO YOU THINK?  PLEASE SHARE A COMMENT BELOW.

Cyber Monday Deals via Text

As consumer spending rises, and as people feel better about the stability being shown in the jobs market, this holiday shopping season is shaping up to be fairly solid. And online retailers are hoping to get in on the action come the Monday after Thanksgiving. Cyber Monday is the biggest online shopping day of the year, and now you can stay fully alerted to hourly and daily deals with a little help from your cell phone. SoundBite sent me a press release about this service (which I do not intend to use):

Americans send 50,000 text messages per second. Ninety-five percent of those messages are opened and read, most within 15 seconds of sending. The brevity, immediacy, and mobility of the text messaging channel makes it ideally suited for communicating Cybermonday.com’s Deal of the Hour. By simply opting in on CyberMonday.com, consumers can receive Deal of the Hour text messages and benefit from great savings while on the go.

I was also informed that you can get on the special deals text message list by texting Cybermonday to 77053.

If you are a hardcore deal seeker, looking for the best deals on Cyber Monday, this might be just the thing for you. Being able to get alerted immediately to good deals can save you money — provided you were planning on spending it anyway.

Post from: EveryJoe

Cyber Monday Deals via Text

EFUSJON: Is Efusjon Energy Club a Pyramid Scam?

According to the efusjon website:  “efusjon energy club products offer remarkable taste, pack tremendous energy and deliver health and vitality! …Made from 100% all-natural ingredients and with no preservatives or additives, efusjon’s energy drinks give you a rich, smooth flavor you can enjoy anytime – completely guilt-free.”

efusjon is more than a drink… it’s a business opportunity.  Says the efusjon website:  “Not only does efusjon energy club offer the healthiest energy drinks available anywhere, but we also provide you with a unique opportunity to make a serious income! When you become an efusjon energy club Associate, you become part of the most unique compensation structure in the network marketing industry. Our revolutionary new system rewards you not only for the efforts of you and your organization, but even for sales in other people’s organizations! It’s part of the efusjon energy club’s ‘share the wealth’ philosophy that’s a win-win for everyone!”

However, a class action lawsuit has another term for the efusjon energy club’s ‘share the wealth’ philosophy:  An illegal pyramid scheme.  According to the COMPLAINT AND DEMAND FOR JURY TRIAL of LAUREL COOK, on behalf of herself, those similarly situated, and the general public, Plaintiffs, v. EFUSJON, INC., a Nevada corporation; ROBERT TOWLES; R. S. EDWARDS; KEITH DILLON; AARON CALLAHAN; KATHY HUMPHREYS; KENNY GILMORE; MARC SHARPE; KEN VANDER KAMP; and DOES 1-300, inclusive, Defendants filed in the SUPERIOR COURT OF THE STATE OF CALIFORNIA COUNTY OF SAN DIEGO, NORTH COUNTY DIVISION dated November 20, 2009:

Efusjon, Inc. (“efusjon”), a Nevada corporation, sells efusjon’s energy drinks to distributors through a pyramid scheme disguised as a multi-level marketing program. The efusjon pyramid scheme is fraudulent because it induces individuals to invest in products and to recruit new victims into the scheme with the false promise of enormous profits. Completely contrary to the law, efusjon forces its distributors to make purchases and then conveniently considers those purchases as “sales” to meet its legal obligations of accruing retail sales.

New entrants into the pyramid scheme are effectively required to invest approximately $170 per month to buy products from efusjon in order to stay qualified and be compensated under the scheme. Because efusjon distributors essentially do not sell products to consumers who are not also distributors, they obtain returns on their investment in the efusjon program only by recruiting new distributors who will then buy products (and recruit more distributors who will buy products), which purchases result in “bonuses” to the recruiting distributor. The efusjon pyramid scheme is a prototypical one, purportedly formed as a multilevel marketing (MLM) system, with rules and regulations which are drafted solely as a pretense, which are not enforced, and which have no substance in the operation of the business.

In the section of the complaint titled “Nature of Classic, Illegal Pyramid Schemes,” the Plaintiffs allege:

“An illegal pyramid scheme is characterized by the payment of money to a company in exchange for: a) the right to sell a product, and b) the right to receive rewards for recruiting others to join the scheme, independent from the sale of products to the ultimate users… Essentially, participants are duped into believing they are buying into a legitimate business opportunity to sell a product but, in reality, the profits are derived almost solely from money advanced by new recruits inducted into the scheme. In efusjon’s case, the new recruits are under exorbitant pressure to “get their three” and purchase the requisite amount of product for personal use, not for resale… Since the financial incentives require distributors to focus on enrolling new participants in the matrix, the sole way to make money is for the Executive Associates to continually recruit new distributors who are also willing to buy and self-consume, inventory load, discard, or give away the efusjon products. There is no incentive to make outside retail sales. This fact alone renders efusjon a classic recruitment pyramid scheme.”

DOCUMENT (PDF): 22852924-COOK-v-EFUSJON

ARE YOU FAMILIAR WITH THE EFUSJON ENERGY CLUB MLM OPPORTUNITY? SHARE A COMMENT BELOW.

Image:  prlog

KUMON Franchise Owner Complains of Overexpansion

According to the Kumon franchise website, Kumon is “an after-school math and reading program that employs a unique learning method designed to help each child develop the skills needed to perform to his or her full potential.”

With an international network of independently owned and operated franchises, Kumon claims it the largest and most established program of its kind in the world.  States the website:  “Kumon has nearly 250,000 students enrolled at more than 1,500 individually owned and operated Math & Reading Centers in U.S. and Canada alone.”

One would think that having brand dominance of the supplemental education market would be a benefit for Kumon franchise owners… unless continued expansion results in cannibalization of sales between competing franchisees.  We received an email from “concerned owner” who worries that, among other things, Kumon is overexpanding at the expense of existing owners.

Concerned Owner writes:

Many Kumon franchise owners are concerned about recent expansion of Kumon in seemingly saturated areas.  The corporation is using generic criteria to evaluate potential market areas, namely family income and a specific number of children in K-8.  The generic criteria is not adjusted based on disposable income, cost of living, and who actually contributes to average family income.  The exclusion of important market data has led the corporation to overestimate their market potential and an unjustified expansion plan.

Kumon corporate also does not have a good understanding of their customer.  Kumon offer a good value but they do not know the segment of customer that respond to the value.  Instead, they are trying a shot gun approach to increase brand awareness.  They are trying to sell expansion as an investment in brand awareness but awareness is no substitute to a targeted message to the customer segment that responds to a companies value prop.  Again, this lack of market knowledge and poorly thought out increase in brand awareness leads to over expansion.

In more saturated areas, such as the tri-state NY, NJ, CT area, the corporation is just trying to open up centers in close proximity to some of their largest centers.  The corporation does not seem to care that an owner can lose 20 to 30% of their revenue because the corporation hopes to net an additional 5 to 10% growth between the 2 centers.  Kumon corporate does not put in capital for the center, that responsibility is on the franchisee.  Because the franchisee puts up the capital, Kumon does not share in the risk of the current and new owner.  For the current owner, its a loss because they are losing on their top line.  For the new owner, they will not get an adequate payback on their investment (build out, furniture, advertisement, etc).  Kumon corporate does not care because they can get an extra 5 to 10% without risking anything.

The poor market data, cavalier attitude towards existing/potential franchisee owners, and no risk sharing between franchiser and franchisee leads me to believe that a Kumon franchise may no longer be a wise investment.

Most franchisors have an expansion strategy based on market saturation.  Their goal is to dominate viable markets with the greatest possible presence in order to create strong brand recognition, to squeeze out competitors and to maximize systemwide revenue.  Overexpansion can result in franchise encroachment, perhaps the greatest source of franchise litigation and unhappy franchisees.

What do you think?  Is Kumon Math & Reading franchise doing what it needs to do to create a strong system, or is it overexpanding to the detriment of its franchise owners?

ARE YOU FAMILIAR WITH THE KUMON FRANCHISE?  WHAT DO YOU THINK?  SHARE A COMMENT BELOW.

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