Noble Roman’s Sued by Franchisees

I am quoted in another excellent article by Cory Schouten of the Indianapolis Business Journal. Ten former and current franchisees have sued Noble Roman’s for misleading them when it sold them their franchises.

Here is what I was quoted as saying:

But plenty of the blame for franchise problems rests with the Mobleys, according to Michael Goode, a St. Louis stock trader and financial blogger who writes GoodeValue.com.

The company owns only a few stores, giving it little opportunity to prove the model works and to test new products or strategies, Goode said. The Mobleys also tried a nationwide expansion despite lacking national marketing and having limited brand recognition.

But the biggest red flag for Goode was the barrage of area developer agreements that boosted revenue and profit.

“They engaged in business in such a way to get lots of near-term earnings at the expense of future earnings,” said Goode, who previously bet against Noble Roman’s by selling the stock short but no longer has a position.

Further Information

I argued that Noble Roman’s expansion strategy was doomed to failure back on December 2, 2007 when the stock was priced at $2.48. I later criticized management for blaming franchisees for their failures. More recently, I mocked the company’s effort to hire an investment bank to sell itself, calling the company overvalued at $1.50 per share. The stock currently trades at $1.00. Most recently, I reported on the company’s 54% decrease in earnings.

Disclosure: No position in NROM, long or short. I have a disclosure policy.

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