Read arcticle and answer questions 1 AND 2, while integrating integrity as a core value.
Cousins Maine Lobster
Sabin Lomac and Jim Tselikis launched Cousins Maine Lobster as a food truck in southern
California. Would you purchase a franchise from this fast-growing franchisor?
Some of the fondest memories that cousins Jim Tselikis and Sabin Lomac have of their
childhood days near Portland, Maine, are family picnics that featured fresh, locally caught
lobster and lobster rolls. Eventually, both Tselikis and Lomac moved away, Tselikis to Boston
and Lomac to Los Angeles. In 2011, Tselikis flew to the West Coast to visit his cousin, and over
drinks one evening, the two began reminiscing about the wonderful fresh lobster meals they
had enjoyed as kids. They also noted the popularity of food trucks and decided to pool their
resources to launch a side business, Cousins Maine Lobster, that would serve lobster flown in
from Maine in the form of lobster rolls (chunks of lobster meat served on split-top rolls topped
with butter), lobster tacos, lobster bisque, and clam chowder. They invested $20,000 of their
own money, bought a food truck, and began outfitting it as a rolling lobster wagon. In April
2012, on their first day in business, Tselikis and Lomac saw a line of customers that wrapped
around the block. Business was so brisk that they ran out of food, and they knew that they were
on to a business with real potential. Within six months, they quit their jobs to run the business
as a full-time venture.
Local media coverage led to an appearance on ABCâ€™s Shark Tank, where the cousins pitched
their idea to the sharks and endured intense questioning. During the eight weeks leading up to
the show, Tselikis and Lomac practiced their elevator pitch, reviewed their companyâ€™s financials
to come up with a value for the business, and rehearsed answers to the questions they thought
the sharks might ask. At the end of their segment, Barbara Corcoran agreed to invest $55,000 in
return for 15 percent of the company (which established a value of $367,667 for Cousins Maine
Lobster). Corcoran proved to be a valuable investor, helping Tselikis and Lomac land
appearances on national television shows, including The Today Show, Good Morning America,
Master Chef, and others, and helping them realize that franchising would be the ideal way to
expand their business. Although Tselikis and Lomac had never envisioned franchising when they
started Cousins Maine Lobster, they began working with the Franchise Development Group to
create the Franchise Disclosure Document that the Federal Trade Commission requires every
franchisor to provide to prospective franchisees. Because they had been operating their food
trucks, which now numbered four, for only a year, they spent many long days developing
training manuals and courses for franchisees. They were still learning about payroll, insurance,
and maintaining quality control and were busy opening an e-commerce division focused on
shipping lobster and other seafood products directly to customers across the country.
Once their Franchise Disclosure Document was completed, Tselikis and Lomac made a followup appearance on Shark Tank, where they announced that they were selling Cousins Maine
Lobster franchises. Their appearance garnered more than 1,000 inquiries from would-be
franchisees, and the flood of applications continues. Franchise Development Group conducts
the initial screening of the applications, before Tselikis and Lomac interview the remaining
applicants either by phone or Skype. They make the final decision about awarding franchises
only after meeting candidates in person at one of the companyâ€™s discovery days in Los Angeles.
Every potential franchisee spends time in one of the company-owned food trucks, and Tselikis
and Lomac have learned to include the chefâ€™s opinions in their final decisions about awarding
franchises, pointing out that they are almost always right about which candidates will be
successful. Currently, the company, which generates $20 million in annual sales, has 20 food
trucks in 13 cities across the United States, with more on the way, including some in
international markets. Cousins Maine Lobster estimates that franchiseesâ€™ total investment
ranges from $143,000 to $345,000. Franchisees pay an upfront franchise fee of $38,500, an
ongoing royalty fee of 8 percent of their gross sales, and a 2 percent advertising fee. Looking
back, Tselikis and Lomac say that although their journey into franchising has presented a steep
learning curve and that relinquishing control to franchisees can be disconcerting, they are
extremely satisfied with the path they have taken and the results so far.
1. Suppose that your best friend is considering purchasing a franchise such as Cousins
Maine Lobster. What advice would you give him or her about the right way to go about
purchasing a franchise?
2. What advantages do entrepreneurs who purchase a franchise get? What disadvantages
do they encounter?
Sources: Based on Jason Daley, â€œThe Maine Course: A Case Study,â€ Entrepreneur, March 2015,
pp. 76-83; Jim Tselikis, â€œâ€˜Shark Tankâ€™ Success Story: How Lobster Truck Guys Turned $20,000
into $20 Million,â€ CNBC, June 2016, http://www.cnbc.com/2016/06/30/shark-tank-successstory-how-lobster-truck-guys-turned-20000-into-20-million-commentary.html/; â€œCousins Maine
Lobster,â€ Entrepreneur, 2017,
Purchase answer to see full