McDonald's continues to supply interesting franchising disputes. The most recent revolves around the Dollar Menu: though the cost of food is rising, prices on the Dollar Menu remain fixed. McDonald's and its franchisees view this problem through different lenses.

McDonald's receives royalties based on sales and, thus, has an incentive to increase sales, even reduced-margin or, in some instances, negative-margin sales. On the other hand, franchisees profit only when revenues exceed expenses. The problem with the Dollar Menu is that franchisees don't make money selling a Double Cheeseburger for a dollar.

Franchisees can opt out of the Dollar Menu, but they still are required to pay into a collective advertising fund, so all of those ads promoting the Dollar Menu (reportedly $100 million of McDonald's $810 million measured media buy) are wasted on a non-participating franchisee. Or worse, if customers are upset about not being able to purchase food on the Dollar Menu.

McDonald's is experimenting with Double Cheeseburgers for $1.09 in Georgia and Mississippi, but that sort of blows away the notion of a Dollar Menu. For a brief report on the situation, see Marketplace.

This story reminded me of the old McDonald's television commercial stating that you could get a full meal (burger, fries, drink) and still get change back from your dollar. Gas was about $.25/gallon at the time, too. Anyway, I looked for that old ad on You Tube and couldn't find it, but I did stumble across this very early version of Ronald McDonald ... Yikes!

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The WSJ had a story yesterday on a new movement: "Freedom Franchising."  Apparently competition for good franchisees has become so intense in the past few years (with more than 900 franchise concepts rolled out since 2003) that some chains are taking a new tack:  giving their franchisees more leeway to run their operations as they see fit.  Great Harvest Bread Company, for instance, is allowing franchisees to decide what items to put on the menu and where to buy supplies, instead of restricting their menus or the suppliers they have to use.  I'm going to assume, though, that all Great Harvest franchisees still have to sell bread.  (Great Harvest has also, BTW, trademarked the term "Freedom Franchising").

I was intrigued by the article and premise, especially after teaching the Krispy Kreme case study from the Smith & Williams casebook, but I still wonder how a franchise can succeed if its stores aren't (pretty) uniform.  The article also quotes the head of the Beef O'Brady chain of sports bars.  The chain has been giving its franchisees freedom to set prices, but "[a]s we grow," he said, "we do feel that we need to be tighter and do more streamlining...to create a clear brand for our guests so that they know what to expect."  Isn't a "clear brand" and uniformity the whole point of a franchise?

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Krispy Kreme lost its CFO and Vice Chairman yesterday, and the stock is still in the toilet, where it has been wallowing for the past three years. (W$J) The company is trying to execute a turnaround, but it's slow going. Two weeks ago, the company held the first conference call with investors in years, and the mere occurrence of that event was heralded as a significant marker in the progress of the turnaround plan. Still, my sense is that the problems at Krispy Kreme transcend financial scandals. The more fundamental concern is that people don't really like Krispy Kreme doughnuts that much anymore. It was fun while it lasted, but we have moved on. And that whole wheat thing is not going to bring back the magic.

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One of the testy and recurring issues in franchising has to do with how the franchisor uses the funds collected from the franchisees for marketing. Subway established a trust in 1990 to manage those funds, but the trust is now suing Subway's founder and Doctor's Associates Inc. (the franchisor) for changing the franchise agreement in a manner that disregards earlier commitments. I will try to track down the complaint and/or the franchise agreement here because the news stories are too sparse for much analysis, but this looks like it could be an interesting case.

Thanks to former student Juan Lozano for the tip.

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I teach a short section on franchising in my law and entrepreneurship course, and that section begins next week. I have been a longtime reader of venture capital blogs, but I have never been a consumer of franchising blogs. The numbers are smaller, and the quality is mostly low, but I found two worth reading:

Wiggin & Dana's Franchise Law Blog: I wasn't looking for legal blogs, but as is often the case, lawyers lead the way. This blog is devoted to recent cases and news stories. The main negative is that they don't post enough.

Franchise Business Opportunities: This blog is part of Dane Carlson's excellent Business Opportunities Network. Lots of content, mostly focused on recent news stories about franchising.

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The cover story in the December issue of Fortune ("Risk Reward") is on franchising. Here is the provocative theme: "The scant research that exists suggests that, as risky as starting an independent business is, buying a franchise is an even bigger roll of the dice." The article paints a pretty dreary picture for franchisees:

[B]uying a franchise too often ensnares would-be entrepreneurs in the worst of both worlds: You get all the financial exposure, headaches, and stress of business ownership—but someone else collects royalties on every nickel that comes through the door, not to mention fees for marketing, fees for this, fees for that, more fees for anything you can imagine (and some stuff you can't); and all the while, the franchisor dictates virtually every detail of what you can do, including what kinds of signs you can put up, how you price your wares, how much overtime you can pay your employees, and who'll be your suppliers. Violate the agreement, even in some tiny particular, and the franchisor can—and often will—snatch your franchise back.

I once taught a student who had been in franchising, at times as a franchisor and at times as a franchisee. After he graduated and formed his own law firm, I asked him, "If someone came to you with an idea for a franchise, how would you advise them to proceed?"

"Stop. Don't proceed. Find another idea."

To be fair, I have spoken with many franchisors and franchisees who love their businesses, and in certain industries (fast food being the prime example), franchising has made many people quite wealthy. Franchising may be more treacherous than starting an independent business, but I suspect that the reason failed franchisees are so outspoken is that they develop a sense of entitlement from the payment of the franchise fee.

The perception that a franchised business is a "sure thing" is enhanced by the disclosure that accompanies franchise sales. Although franchisors are every bit as vigilant at paying lip service to risks as sellers of stocks and bonds, the message does not always penetrate the eager franchisee's brain. Instead, they see projected earnings and imagine themselves as successful, independent entrepreneurs. The law reporters bear testimony of failed dreams. Franchise disputes are common, despite elaborate contracts. The bottom line is that franchising is a tough business, from both sides of the table.

Thanks to Marc Shuman for pointing me to the article.

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Like Gordon, I generally try to eat at local places, rather than franchises, when I'm on the road.  I find it amusing that both Gordon and I, despite our shared intellectual interest in franchising, stay away from the joints ourselves.  In fact, Gordon and I may be acting irrationally, at least from a branding perspective. 

Why do people tend to stop at McDonald's or Arby's on a road trip?  Answer after the jump.

Branding, of course.  The search costs are high for someone passing through on the interstate.  Suppose you are trying to get in 500 miles one day and stop in a small town for lunch.  You could go stop at a motel and ask for recommendations, then inspect the menu at a few different places, etc.  But this is time-consuming, and since you may never come through the town again, you have no reason to invest in the research. 

Instead, the rational consumer just looks for the golden arches.  Fast food companies spend money creating and advertising the brand, and they enforce standards on franchisees to ensure some minimum level of quality.  Most of the time, when you stop at McDonald's, you know what you'll get.  It may not be gourmet quality, but it's not likely to give you food poisoning.  When you stop at a local diner, you are rolling the dice.  Worse yet, the diner's owner knows that many customers are just passing through, and so she has less incentive to produce a high quality product.  Especially with difficult-to-observe things like kitchen cleanliness.

There are strategies to beat this lack-of-repeat-play problem.  One basic strategy is to go to places that appear to be crowded with locals.  Stay away from the empty places or places where the majority of license plates are out of state.  Judge Michael taught me an even better trick:  go where the cops go.  Cops eat a lot of food in their car, and they tend to go to places where food is fast, cheap and pretty good.  (Truckers seem indifferent to food quality, and instead look for product attributes like food quantity, big parking lots, roomy booths, and truck stop amenities like showers and table-side phones.) 

Travel guidebooks (the kind that list B&B's) can also help.  AAA guidebooks, back when they were in wider use, gave roadside diners an incentive to maintain high quality.  I am hopeful that as mobile technology improves, it will be possible to type an exit number or intersection into your phone and instantly see reviews of local establishments.  (Google Local, through SMS technology, can get you listings but not much in the way of reviews.)

Why go to all the trouble?  Why not just stop at McDonalds?  Well, sometimes I do, esp. when time is of the essence.  But while I have nothing against franchised restaurants, I do prefer to support small business and entrepreneurship.  I appreciate a diversity of eating options and want to do my part. 

Also, and I suspect Gordon is with me here:  It's just fun to try out new places.  I'd rather risk the occasional disappointment than just have another bland and boring roadside experience. 

Finally, there is my fondness for the open road.  And when I think of roadside Americana, I think small town diner, not Travel Plaza McDonalds. 

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Did you know that Sears is a franchisor? I didn't before today, when I read about a lawsuit by Sears franchisees, who feel wronged in the wake of Kmart's takeover of Sears. You see, these little Sears stores (all located in rural areas and about one-fourth the size of urban Sears stores) are being forced to compete with Kmart stores that stock the same products, like Craftsman tools. The Sears franchisees negotiated exclusive territories, which they claim are being infringed.

These sorts of claims -- called "encroachment" claims -- are common among franchisors and franchisees. I would like to read the provision in the Sears Dealer Agreements, which I assume places some limits on Sears beyond the establishment of additional Sears-branded stores. In this case, Sears did not encroach by establishing new stores, but by distributing Sears products through Kmart stores, something that may not have been contemplated at the time of the agreement.

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While driving "up north" in Wisconsin, we saw four or five dairy farms that had a sign that said "Land O'Lakes Member Farm."  We were unfamiliar with these signs, and I assumed (wrongly) the evil Land O'Lakes conglomerate had gone and bought out mom-n-pop dairy farms or turned them into farmer-franchisees.  Upon doing some research, I found out that Land O'Lakes, which is headquartered in Minnesota, is a cooperative and always has been.

Land O'Lakes is both a producer co-op (4000 members are dairy or agricultural producers who sell to the co-op) and a consumer co-op (1200 members are farms that buy feed from the co-op).  Although the company is not publicly traded as a corporation, it does issue bonds.  On it's balance sheet, I noticed that it does engage in hedging activities.  The co-op is run by a board of directors, elected by the members.  I would be interested to know if the member-owners feel more control than a shareholder-owner of a similarly large publicly-traded corporation.

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I was looking through the March issue of Business 2.0 (subscription) and found a short article about Curves franchises and Gary Heavin, founder and CEO. (Two questions: (1) Why is it that the founder and CEO of a for-women-only fitness chain is a man? (2) Does any CEO have a more appropriate name for his company than "heavin" for an exercise chain?) One of the perpetual problems faced by franchisees is that they almost always are required to agree to pay the franchisor a percentage of revenues as a royalty. Since increasing revenues do not always result in increased profits, this royalty system creates a conflict between the franchisor and the franchisee. Heavin thought he had a better idea:

When I sold my first franchise in 1995, I learned that fast-food franchisees paid 6 percent of revenues each month, but that didn't make sense to me: Why should franchisees that make the most money have to pay me more? Instead, I charged $20,000 to open a club and a flat monthly fee of $395. Most of my franchisees were profitable in 90 days and were shouting from the rooftops about their quick success.

As his franchise has become more popular, he has raised the initial franchise fee to $30,000, and franchisees now pay 5 percent of revenues, but that payment is capped at $795. At some point, new store openings will slow and Heavin may find himself wanting a bigger piece of the pie, but this is a brilliant strategy for encouraging early success.

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When I teach the segment of my Law & Entrepreneurship class on franchising, and I use Culver's as a case study, I inevitably draw a comment from a student who tells me that Kopp's Frozen Custard is better. Culver's is a franchise, and Kopp's remains a small family business with just three stores in and around Milwaukee. Tonight, for the first time, I had the opportunity to eat at Kopp's. The hamburger was outstanding -- one of the best I have ever eaten. The custard, on the other hand, was a bit too warm (soft) for my taste. I tried both vanilla and Rocky Road (which had those cheap, hard mini-marshmallows ... yuck), and although I am no custard connoisseur, I have a slight preference for Culver's.

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You must remember all of the snide remarks about plaintiffs Ashley Pelman and Jazlen Bradley (and their lawyers) who were suing McDonald's claiming that the company's misrepresentations had led to a parade of horribles, including obesity, diabetes, heart disease, high blood pressure, and elevated cholesterol. That suit was dismissed in 2003 -- oddly, by a judge named "Sweet" -- but it is back again after the U.S. Court of Appeals for the Second Circuit (look under "Decisions=>Recent Decisions" for the text of the case) found that Judge Sweet erred in holding that a misrepresentation claim under the relevant New York statute required more evidence of causation.

When initially dismissing the suit, Judge Sweet wanted to know:

What else did the plaintiffs eat? How much did they exercise? Is there a family history of the diseases which are alleged to have been caused by McDonald’s products? Without this additional information, McDonald’s does not have sufficient information to determine if its foods are the cause of plaintiffs' obesity, or if instead McDonald’s foods are only a contributing factor.

According to the Second Circuit, Judge Sweet was too hasty: "This ... is the sort of information that is appropriately the subject of discovery, rather than what is required to satisfy the limited pleading requirements of Rule 8(a), Fed. R. Civ. P." So McDonald's was right in casting the decision as "procedural," but I cannot imagine that they are too happy to have the plaintiff's lawyers digging through their files.

Of course, this decision ties in nicely with Christine's post on the Academy Awards because the documentary "Super Size Me" was nominated for an an Oscar. When asked about the Second Circuit's decision, filmmaker Morgan Spurlock said, "For me it's a tremendous decision.I think we've reached a point where people and the judicial system are starting to realize that there is a separation between personal and corporate responsibility, that corporations do have a line they have to uphold when it comes down to what they present to people." Actually, the decision doesn't say anything about the merits of the case, so Spurlock is just blowing hot air. I suppose that's better than blowing his lunch.

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While driving around my hometown of Lubbock, Texas this week, I wanted to show my kids the Baskin-Robbins ice cream store where I worked during high school. Not there! Notably, all of the Baskin-Robbins stores in Lubbock are now Kaleidoscoops ice cream stores. My dad mentioned to me that he had heard that the three Lubbock BR franchisees had had a falling out with BR and had terminated the franchise agreements. I was interested in the collective action of independent franchisees, so I looked on Google to find the story. The story is even more interesting than I imagined. Kaleidoscoops is a cooperative, started by 40 frustrated BR franchisees in Texas and Louisiana, and the Lubbock locations were some of the first to hang out the Kaleidoscoops brand. Power to the people!

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Krispy Kreme & Starbucks

I was thinking of Gordon's post on Krispy Kreme's this morning as my dad went to go get some KK donuts "for the kids." I remember living in Atlanta in 1993 when KK were something only found in the southeast and were something really amazing. Have profits slowed because of overexpansion into markets where KK was unknown? Gordon also alluded to the Atkins march against doughy treats. Because I do a lot of thinking about markets and competitors, I started making an argument (to myself) that KK really competes against Starbucks. They don't have competing products, but they are in the same time slot. You can't justify stopping at both places on the way to work or taking the kids in the stroller in two directions.

In Milwaukee, Stone Creek Coffee and Bruegger's Bagels share storefronts for a one-stop coffee and sustenance destination. I may not be the first to suggest this, but a one-stop Krispy Kreme and Starbucks destination would be an attraction. I don't drink coffee, but surely there is some overlap there.

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What started as another Atkins belt-tightening has turned into a crash diet for Krispy Kreme. According to the W$J, the latest quarter was down again, and included first decline in same-store sales since Krispy Kreme went public in 2000. Bad news. And so unexpected from a company that has been around as long as Krispy Kreme. This looks like a company that went into too many markets too fast. Support for new store openings was rabid, but not enduring.

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Entrepreneurial blogs are talking about franchising. David Patterson started it over at Small Business Trends by citing this study of the International Franchise Association. Jeff Cornwall then observed:

Franchising is often not the happy partnership that the marketing packages franchisors send out to interested parties. Franchisees will often band together in an almost union-like manner. In fact, one of the most common seminars for franchisors done within this industry addresses the litigation issues they face with their franchisees. Broken promises, unmet expectations, and a perception of little value for the often high monthly fees paid to the franchisor lead to these legal battles.

This is all true, which makes franchising great fun to teach in a law school. Given the high absolute number of franchises in the U.S., I suspect that seemingly large number of disputes represent a very small proportion of the whole. At any rate, franchises are certainly more successful than most marriages. While I always advise prospective franchisees to be very cautious (a piece of advice most often ignored), the conflicts inherent in the relationship normally do not bring it down.

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Over the summer I wrote about a small Madison family business called The Soup Factory. Last week I finally tried Simply Soup, another Madison production. Great soups ... plus an Italian ice cream bar. That is a killer combination. They have only two locations so far, but their website announces franchising opportunities. (It just looks like a franchised concept ... much slicker than The Soup Factory.)

If you are thinking about franchising a soup restaurant, you might also check out Al Yeganeh's new concept. Yeganeh, immortalized as the "Soup Nazi" on Seinfeld, has begun franchising under the name "The Original Soup Man". According to the chairman of the new venture, "He's a total character and characters sell." Unfortunately for franchisees, however, most customers won't be able connect Yeganeh with the Soup Nazi, at least if Yeganeh has his way. According to the WSJ$, franchisees will be "strongly discouraged" from using references to "Seinfeld" or the Soup Nazi in their marketing:

For all the attention and business that the "Seinfeld" publicity has brought him, Mr. Yeganeh is not exactly grateful -- in fact he says he loathes the show's star. He refers to Jerry Seinfeld as "Jerry the Clown," and insists that it was he who helped make Mr. Seinfeld what he is today. The source of the friction is the nickname that the show made famous, the "Soup Nazi," which he says is offensive.

Yeganeh claims that he doesn't need the money that would accompany a successful franchise. It's a good thing because this business is off on the wrong foot.

Thanks to Professor Bainbridge for the tip.

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State Street in Madison is an amazing little economy, with stores coming and going with regularity. Madisonians value the unique flavor of State Street, which is a combination of local and national businesses. In my two years here, however, I have noticed an increasing number of franchises on State Street, and today I picked up a sandwich at Jimmy John's, which claims to have the "World's Greatest Gourmet Sandwiches." They really are quite good, but how hard is it to make a good sandwich? (A: not that hard) Based in Elgin, Illinois, Jimmy John's now has three stores in Madison, and I believe all of them are franchised. The company has a nice website, which contains the following numbers based on 14 franchise stores:

* Average Sales: $849,779
* Average Food and Paper Costs: 25.91%
* Average Income from Operations: $226,806
* Average Unit Net Profit: 26.69%
* Average time before a first-time franchisee is doing so well that they decide it'd be silly not to open another franchise: 18 months

So they count "income from operations" as "net profit"? It's hard to tell whether "operations" includes financing costs and lease payments on the store property, but it is pretty clear that franchisees are not taking home over $200,000 from these stores. (If nothing else, the website contains the following: "How much can I make as a Jimmy John's franchisee? We are restricted by the Federal Trade Commission and various state franchise sales regulations from providing you with specific profit projections. To learn more about actual experiences, we suggest you contact existing franchisees.") The franchise fee is $30,000, and the royalties are 6 percent of gross sales. All this for a store with a menu that is nothing special? No, I am afraid that it will be hard to get me excited about a new food franchise until someone executes my idea for a Vegan fast food restaurant.

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Which franchise would you choose? Having watched people choose franchises, I am always impressed at the power of the moment to overwhelm good business sense. Especially in fast food, where fads are plentiful. Starting and maintaining a food franchise that is successful over the long term is no small feat. Even a brand as established as Krispy Kreme, with roots dating back almost 70 years, has hits some speed bumps lately.

My hunch -- completely uninformed by data -- is that food franchises with a full menu (the various burger restaurants, for example) are more likely to have staying power than food franchises with a specialty product (pastries, juices, ice cream, etc.). It's also pretty clear that the oldest food franchises, like McDonald's, have lost a lot of their appeal. They still get a lot of business, but I wonder if purchasing such a franchise is still a great value proposition.

Which leads me to Gandolfo's Deli. Yesterday, while perusing a BYU sports board, I found an entry with the heading, "GANDOLFO'S COMING TO VEGAS!!!" This was followed by a response: "GANDOLPHO'S TO NORTH CAROLINA TOO." The caps belong to the writers. I had never heard of Gandolfo's, but that sort of excitement catches my eye. From the website (linked immediately above), this appears to be a company in heavy growth mode. The front page proclaims: "Start your own franchise and experience success." The focus here is on potential franchisees, not customers.

My initial response is to wonder whether the world needs another deli. Actually, Madison could use one, but still. Is this likely to be a long-term success? The nice thing about delis is that their menus have some room for play. And sandwiches are not going out of style anytime soon. This is a franchise that might be worth exploring.

Speaking of good franchises, a burger place that I still like is Culver's. They are now celebrating their 25th anniversary, so this is not a flash in the pan. They have a broad menu (considering the format) and high-quality food. Everything there is better than anything at McDonald's.

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So, is this a franchising idea that could work in the U.S.? We encountered our first Nutelleria in Frankfurt earlier today. The concept comes from Italy, but it translated nicely into German. For photos, check the next page.

My first encounter with Nutella was over 20 years ago in Austria. At that time, it was unavailable in the U.S. Now Nutella is available in most general grocery stores. People love it for obvious reasons. The Nutelleria capitalizes on those warm feelings, offering a narrow range of products like crepes, muffins, and milkshakes, all laced with Nutella.

These pictures attempt to provide some feel for the surpisingly mode store. The decor was all about Nutella, of course, and the most clever part was the artwork, a few samples of which appear below. (For a slightly larger version of each picture, just click.)

UPDATE: To see the Nutelleria photos, go here.

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Did you notice what happened to the price of Krispy Kreme stock yesterday? It dropped by 29 percent! Wow! The drop was the result of this press release, in which Krispy Kreme announced that it was lowering its earnings projections for the coming year by 10 percent. CEO Scott Livengood blamed the company's decline on the popularity of low-carb diets:

For several months, there has been increasing consumer interest in low-carbohydrate diets, which has adversely impacted several flour-based food categories, including bread, cereal and pasta. This trend had little discernable effect on our business last year. However, recent market data suggests consumer interest in reduced carbohydrate consumption has heightened significantly following the beginning of the year and has accelerated in the last two to three months. This phenomenon has affected us most heavily in our off-premises sales channels, in particular sales of packaged doughnuts to grocery store customers.

The company is discontinuing Montana Mills bread concept, which it acquired about a year ago. Boy, I sure hope this low-carb fad dies before all of the good bakeries go out of business.

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 "Colonel's landmark KFC is mashed." That is the headline in the Deseret News story about Harmon's original Kentucky Fried Chicken in Salt Lake City. The story behind this store is one of the great stories in America's vast entrepreneurial lore. You can get a pretty full version of the story here, including pictures of Harmon, Sanders, and the original Harmon's Cafe in its heyday. (For this story, along with others in franchising history, see John Love's excellent history of McDonalds: Behind the Arches.) If you have time only for the abridged version, here it is:

A year after meeting the Harmans, the Colonel traveled to a religious conference in Australia. He had a short stop in Utah, so he looked them up. "I took him to Hotel Utah's Roof Garden for lunch, and through the Salt Lake Temple grounds and the Bingham Copper Mine," Harman recalled during an interview with the Deseret News. "On the way out there, we mentioned we needed some kind of a specialty item for the restaurant."

Harman planned to take his guest out to dinner, but Sanders insisted on cooking it. It took a while to borrow the pressure cooker, find four chickens and heat the oil to the necessary 400 degrees. "We ended up having dinner at 10, and my wife had been sitting out there since 5 o'clock," said Harman.

He watched when [Harmon's wife] Arline picked up a drumstick and took a taste of it. "She never said anything, but she got the darndest gleam in her eye, and I knew it was good," Harman said. "It was so much better than any chicken we'd ever had."

With a handshake agreement, the couple agreed use Sanders' recipe on their menu and pay him a nickel for each chicken they sold.

Harman wanted to advertise the chicken on the cafe's 10-foot-high windows, but he wasn't sure what to call it. He conferred with his sign painter, Don Anderson, who agreed that Utah Fried Chicken didn't sound right. "Kentucky" had an image of Southern hospitality and good food.

My wife is from Salt Lake City, and it took me a long time to understand why they referred to the KFCs as "Harmon's." Now you know, too.

Thanks to Juan Carlos Lozano for the pointer.

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In my Law & Entrepreneurship class, we have moved on from venture capital to franchising. We begin each section of the class with a case study (like business school, only we focus on contracts). This year, our franchising case study is the Wisconsin, fast-food juggernaut Culver's. In reading Culver's promotional materials and franchise agreement, I was intrigued by their requirement that all franchisees personally operate their stores.

Consider this from the Culver's web site:

Our owner/operator philosophy is one of the core elements to our success. We require each franchisee to personally manage and operate their restaurant in a full-time capacity. He/she cannot delegate management or operational responsibilities to another individual without the written consent of [Culver's] and must maintain a minimum of 50 percent ownership in the operating business entity.

The owner/operator requirement is a nod to Ray Kroc, who imposed the same requirement on early McDonald's franchisees. According to Kroc, an owner/operator had obvious advantages over the area developer. Most importantly, the owner/operator was heavily invested (both financial and human capital) in the success of a single outlet, thus creating intense incentives to succeed.

Contrast this to Krispy Kreme, which finances expansion through area development contracts. For what it's worth, my money is on Culver's.

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As a native of Wisconsin, I should know more about Frank Lloyd Wright. Sure, I watched Ken Burns' film, and I visited the Robie House while I was living in Hyde Park. But I don't know much about the man and his work, except that I love the Robie House chairs and windows.

Today I left work early to go for a fall color drive with my wife and twin sons (age seven). We decided to head for Spring Green, about 25 miles from our home. I wanted to tour Taliesin, Wright's magnificent home. Unfortunately, children under 12 are not allowed on the tour. Even if they were, the tour is $40 per person, which seems a bit steep for us frugal Wisconsinites. So we contented ourselves with a drive-by.

As we took in the beautiful color in Spring Green, I wondered about Wright the man. Perhaps this is a by-product of doing this blog, but I wondered if we might consider him an entrepreneur. Of course, he is usually referred to simply as an architect. Nevertheless, he surely displays the attributes we normally associate with entrepreneurs, including innovation coupled with implementation.

You might be forgiven for wondering why I would care what we call him, but this issue has become salient for me recently because of my participation in a group that is exploring ideas to promulgate entrepreneurial values across the UW campus. I will write more about this in the future, but we are struggling with fairly fundamental questions relating to the viability of our enterprise. Questions such as: What attributes distinguish entrepreneurs from other people? Should anyone outside of the business school care about entrepreneurship? To what extent is wealth creation central to the idea of entrepreneurship?

I would be happy to hear your thoughts.

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