COFFEE REPUBLIC - about to boil in 2006?

Dominos franchise (IMHO) because they want their name to be synonymous with pizza delivery. The quicker they get global coverage, the quicker they raise brand awareness and achieve pricing power and advertising/marketing synergies all of which pushes up the profits of the franchisees and the franchiser. The only way to get global coverage fast is to franchise because of the capex requirement (as you said) of doing it themselves. They don't need to buy out the franchisees - they have tight restrictions on what the franchisees can and cannot do and so get a much higher return on capital from the franchisee model. With CFE, I don't see that much of a direct comparison.

1. When you think coffee, you think starbucks and nothing CFE can do will change that. The only way they'll get brand awareness is through having better coffee than starbucks - or better deli offerings than pret a manger etc..

2. They have little marketing - only mainly instore promotions AFAIK so there's not many savings there.

3. Dominos franchises are profitable for the franchisees. CFE coffee shops (as a whole) are not even prior to the 10% sales royalty. That may change with the deli format though, as a franchisee, I'd want to see sustainable evidence of that. Maybe they've just been so badly managed that my auntie could turn them around, but if that's the case, it doesn't particularly make me want to invest either.