Noble Roman’s Double Talk

A good executive knows when to take the blame: when his or her management or lack thereof causes a serious problem. Bad executives like to find scapegoats. That is exactly what Paul Mobley of Noble Roman’s (OTC BB: NROM) did in an article with Daniel Lee of the Indianapolis Star (see also the reader comments on the article). In describing the company’s expansion troubles, he placed blame for failed franchises fully on the franchisees, claiming that “Some of the franchises we sold didn’t have very much business or being-your-own-boss experience.” His comments make it seem like he was surprised. He should not be surprised: what does he expect when Noble Roman’s has such low requirements for franchisees? People who probably shouldn’t be franchisees (or who would need lots of help and training to succeed) choose Noble Roman’s over other franchisers solely because its fees are lower. Noble Roman’s then fails to provide proper support and training and the franchisees fail.

With about 1,000 franchisees, one would think that Noble Roman’s has some idea how to select and train franchisees. It is incredibly easy to select only experienced and well-financed franchisees. But Noble Roman’s executives do not appear to care about the success of their franchisees or even about the ultimate success of the company. All they seem to care about is “growing” as quickly as possible, even if most of the company’s growth is not real (over the last year, 90 Noble Roman’s franchisees opened, but 38 franchisees closed). (Noble Roman’s franchise closure rate of about 3.7% is fully one percentage point higher than the industry average of 2.7%.) And if Noble Roman’s were to be more selective and were to take the time to train its franchisees, it would not be quite so exciting as a “growth” company. Of course, to anyone who has looked at the company’s financial statements and seen how 24% of the company’s royalties are from one-time initial franchise or area developer fees, it is obvious that Noble Roman’s is not a growth company (number from the most recent 10Q).

Potential franchisees would do well to keep this in mind and avoid companies like Noble Roman’s whose sole selling point is their low franchise fees and requirements.

Disclosure: I am short NROM. I have a disclosure policy that has been franchised successfully in 87 galaxies.

0 thoughts on “Noble Roman’s Double Talk”

  1. As for your article about noble roman’s ; the fact that an executive admits a
    mistake about a bad jugement is something to be commanded for.(is not scapegoat).
    the failier of any business most of the time is because of prduct ,service or management and i think most restautants(in any company) fail or they go bad is mainly because of management. i say to whiners this – Failiers blame
    the winners and winners quastion winners.
    to be fair i am a franchisee of noble roman’s.

  2. Very thorough & insightful posts on Noble Roman’s. You’ve got a good understanding of franchising. I have a weak understanding of stocks. I hope you’ll stop by Franchise Pick and share some insights on occasion.

    I reference this article in a post. Sorry to diss you, but sal proved your point with more persuasively with fewer words:

    ARE NOBLE ROMAN’S FRANCHISE OWNERS FAILIERS?
    http://www.franchisepick.com/are-noble-romans-franchise-owners-failiers/

  3. Michael:
    I wasn’t attacking you. Your point was that Noble Roman’s had low quality franchise owners. That Sal’s inarticulate and almost unreadable comment proved your point quickly and emphatically was a slam on him, Noble Roman’s, Paul Mobley, the quality of their franchisees and their lower standards, but not on you. Sorry for the confusion.
    I’m in agreement with you on NR and think you picked up on one of the accessories all the sham franchisors are thing: The Master Franchise arrangement. Scam of the century.

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