AMHERST — Allan Bald, owner of the Meat House franchise on Route 101A, wants to make one thing perfectly clear: He's still open for business and doing quite well, thank you.
Since he opened in September 2012, business has been brisk. "We're doing extremely well," he said. "I exceeded the numbers forecasted for my first year."
As the only franchisee in New Hampshire, Bald is concerned that consumers may be confused about the status of his store, since the rest of the Meat House's free-standing locations in Maine and New Hampshire are corporately owned, and closed, at least for the time being.
"Service is a big part of our success, and quality is a big part of our success," he said "We've combined that with a lot of community involvement."
Despite the confusion associated with problems at the corporate level, Bald said his location has seen a spike in sales since other locations in New Hampshire shut down.
"I was surprised that my sales actually got stronger," he said. "As the worst news came out, I had my best week."
Other franchise owners contacted by the Union Leader report that they are continuing in business, and unable to comment on anything happening at the corporate level.
Like Bald, they are watching the situation closely, with much at stake.
The Amherst franchise owner said the business model for the stores is working well, as consumers cut back on dining out, but invest in a gourmet meal to make at home instead. "The corporate stores did very well in the beginning. They did extremely well," he said.
As for the apparent demise? "I can't comment on that because I don't have their information, and I don't live in their world," he said. "They have yet to meet with us. We haven't heard anything. They went dark. They didn't tell us they were closing their doors."
Each franchise has to acquire and maintain its own inventory, does local marketing and handles all of its own real estate, so the chaos at corporate is not having a dramatic effect, said Bald, beyond cross-store gift card redemption and the potential impact on the brand, especially from the allegation of purchasing meat from nearby grocery stores.
"I find that appalling because that's not what the company represents," he said.
A difficult position
Kevin B. Murphy, an attorney and franchise expert at the Franchise Foundation in San Francisco, said franchisees like Bald can find themselves in a difficult position when turmoil arises at the corporate level.
Franchise agreements, he said, are generous in options to the franchisor, but not so kind to the franchisee. If a franchisee goes bankrupt, the contract with the franchisor is usually nullified, but not so the other way around.
"The franchisees will continue to be bound by the terms and conditions of the franchise contracts they signed," he said, "even if there is a bankruptcy or reorganization."
The franchise contracts may be the best asset Meat House corporate owners have to offer during investor or bankruptcy negotiations, he said.
He predicted those contracts will be purchased by someone, either through a market transaction or as part of a bankruptcy process because "they are basically long-term annuities."
"Someone is likely to swoop in, and those contracts would be sold by a trustee to the highest bidder," he said.
Potential investors or new owners may be waiting for a bankruptcy to proceed and erase much of the company's debt, rather than acquire the company through a market transaction and inherit all that liability.
Murphy said the notion that the franchisees can be prospering while the franchisor is struggling is not common in the franchise industry.
"Typically, the corporate-owned locations tend to operate more profitably than franchisees because for one thing they don't have the expense of royalties and marketing fees," he said. "In theory, the franchisor knows best how to run the operation and should be able to run it better than the franchisees."