Top 10 Franchises for 2006 1.      Subway 2.      Quiznos Subs 3.      Curves 4.      The UPS Store 5.      Jackson Hewitt Tax Service 6.      Dunkin’ Donuts 7.      Jani-King 8.      RE/MAX Int’l. Inc. 9.      7-Eleven Inc. 10.      Liberty Tax Service

The barbershop business has staged a steady, if unspectacular, comeback since hitting bottom in the late 1980s. Now, Joe Grondin is trying to jump-start the business by franchising the traditional corner barbershop.

Mr. Grondin, 56 years old, opened his first Roosters barbershop in 1999, and began franchising the brand in 2002. There are now 14 Roosters barbershops open, eight more under construction and 20 under contract to be built.

But the question remains: Can the traditional neighborhood style be preserved in a franchise setting?

After all, the basic idea of a franchise is to standardize a successful business model and replicate it across geographical boundaries, allowing the brand to proliferate while keeping costs down for the franchisee. But the success of a barbershop has depended to a great degree on the barbers as individuals — not just their skills, but their personalities. Men traditionally have gone to barbershops as much for the comfortable camaraderie as for a haircut or shave. Can that personal touch work within the standardization of a franchise?

Mr. Grondin is convinced that it can. “Men like the concept,” he says. “They’ve gotten real tired of going to their wife’s beauty shop. And the wives were tired of having them there.”

The number of licensed barbers in the country climbed to more than 220,000 last year from a low point of about 185,000 in 1989, according to the National Association of Barber Boards of America, based in Arkadelphia, Ark. That is still down from an estimated 350,000 in 1960, when longer hairstyles started to come into vogue, triggering a decline in business. “Elvis and the Beatles started it,” says Charles Kirkpatrick, the barber association’s executive officer. But short hair has made a comeback, and so have barbers.

Roosters MGC Inc. is trying to re-create the traditional barbershop experience, where men go to hang out, argue about politics, chat about the weather and, while they are there, get a shave and a haircut.

Some observers are skeptical about the company’s efforts. Barbershops are “all totally individual,” says Mic Hunter, author of “The American Barber Shop,” a book about neighborhood barbershops. “If you try to franchise it, it doesn’t work. You can put a dead animal on the wall, and a gumball machine in the corner and say ‘This is a barber shop,’ but unless you know the barber, it’s not a barbershop.”

But Mr. Grondin isn’t deterred. He acknowledges that he is up against a tough task, but suggests that the advantages of franchising, careful selection of franchisees and a detailed set of standards will overcome the difficulties.

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FOR WHAT MUST BE THE worst direct mail campaign in the history of the craft, look no further than a recent effort from Kia of Paramus, NJ, aiming to get customers to trade their 2000 models for 2005 or 2006 vehicles.

The effort was so bad it’s difficult to know where to begin. Moreover, it couldn’t have reached its target at a worse time.

First, the letter spelled my wife’s name wrong and addressed her incorrectly throughout.

The misspelling would be bad enough, but oh, that was only the beginning.

The upper right corner of the letter had the words “second notice.” Never mind that we couldn’t remember receiving the first notice, should a company aiming to make a five-figure sale begin its pitch as if it were a collections warning? Probably not.

Then, with no salutation, the all-black-type pitch began in sans-serif caps: “PLEASE REVIEW THE FOLLOWING INFORMATION CAREFULLY:”

At this point, we think we’re about to be threatened.

“Kia of Paramus on Route 4 East, Paramus NJ has been selected as a site to conduct a special week long market test pricing and financing event. Your status as a Kia of Paramus customer qualifies you for this private sale,” the letter continued, once again in that hard-to-read sans-serif type.

“Kia of Paramus is in desperate need to acquire several pre-owned 2000 models in order to fulfill special used vehicle requests. Our records indicate you own a used car [How can a car owner not own a used car?] and our new car managers have been authorized to buy back your current vehicle.”

Yes, we did own a Kia Sportage, “did” being the operative word in that sentence. We leased it for five years [I know, too long]. And when the lease came up we decided to buy it because it had been such a trouble-free vehicle for 60,000 miles.

Then, less than a month after we bought it — I swear I’m not making this up — it broke down to the tune of about $2,000. Several weeks later, it broke down again at a cost of another $2,000. And some weeks after that, it broke down again…and as before, the repairs were in the couple-thousand-dollar range.

Because we are not complete idiots, after the third breakdown — each mechanically unrelated to the other — we figured maybe it was time to unload the Kia. We found a Honda Pilot we liked and told the dealer we were prepared to buy the following weekend. He offered us a $4,000 trade-in on the Sportage. Deal!

We drove away in the Kia relieved that we’d be rid of it in a week. Then…as we were driving on New York Route 17 to our house in the Catskills, a weird grinding sound began to come from the engine.

“Don’t you think you ought to pull over?” asked my wife.

“No, dammit. We need to get to the house,” I responded — as if saying it would make it so.

As the grinding grew louder, the dashboard temperature gauge buried itself on “high” and the car began to lose power. I had to pull over.

This was the third time the Sportage stranded us on a Northeastern highway. The two other times involved hundreds of dollars in towing fees.

Once safely on the side of Route 17, the Kia began to emit billows of steam from under its hood.

As cars whizzed by us at 70 miles per hour in 90-degree heat, I began to pound my fists on the steering wheel, saying “I [POUND] CAN’T [POUND] FRIGGIN’ [POUND] BELIEVE [POUND] THIS! I [POUND] HATE [POUND] THIS [POUND] FRIGGIN’ [POUND] CAR [POUND, POUND, POUND]!

Then my 2-year-old son began to cry in the back seat. Nice job, dad. Now you’ve scared Max.

“It’s OK, buddy. Daddy’s just a little frustrated. I’m OK now. Everything will be fine,” I said.

So we called Triple-A for the third time in two months. This time the Sportage was finished. The engine had spun a bearing and the car had to be junked. And the warranty ran out at 60,000 miles, just two months before.

Counting the trade-in money we didn’t get, that car nailed us for $10,000 in about 60 days, and dropped dead.

Then came the letter from Kia of Paramus inviting us to a “private” sale.

“We would like you to exchange your 2000 Kia Sportage for any new 2005 or 2006 vehicle. With factory incentives and generous trade-in values, we feel confident that you can make this exchange with little or no out of pocket expense and with a monthly payment that fits your budget,” the letter said.

We didn’t buy our Sportage from Kia of Paramus. We simply had it serviced and repaired there, which means if anyone would’ve taken two minutes to check our service records, they’d know our auto budget had taken some pretty serious hits in the previous few months.

“Due to the nature of this event and your status as a customer of Kia of Paramus, this event will not be advertised to the general public. This will be your only form of notification.”

The letter read as if Hal from Kia’s accounting department took a direct mail course, learned that creating a sense of urgency and exclusivity can help sell, and decided to use one of his accounts-receivable form letters as a template.

“Do you think everybody’s 2000 Kia is breaking down, and this is just a quiet way to do a recall?” asked my wife in all seriousness.

Yes, we’re that scarred.

A lot of recent attention has been devoted to the so-called housing price “bubble.” At first, press reports noted the high rates of increase in sales activity and price levels in key local markets, primarily in California, Nevada, Florida and New England.

In Texas, local Realtors reported record sales volumes and record high prices although the rates of increase, especially in prices, have been more modest compared with other areas. Recent reports focus on when (not if) the bubble will burst, what factors will precipitate this event and what data may signal it. Leading indicators include national and Texas foreclosure rates, and foreclosure rates in certain Texas metropolitan areas, especially Dallas and Austin.

Texas’ Foreclosure History

Data reported on foreclosure postings, foreclosure activity and the actual number of new foreclosure sales provide an interesting picture of what is happening in Texas and the rest of the country. Current trends may reflect Texas’ historical economic and foreclosure activity (Figure 1).

During the recessionary 2000-01 period, the Texas foreclosure rate was significantly less than the U.S. average. But both rates began to exhibit a general upward trend in overall percentage of loans foreclosed, corresponding to record low interest rates and highly aggressive mortgage lending practices. By 2003, Texas foreclosures again exceeded the national average, but this increase may reflect the slower pace of home price increases plus more liberal underwriting criteria and lower interest rates rather than an underlying market weakness.

Within the past year, data from Foreclosure.com, one of the largest providers of current property foreclosure and preforeclosure data, indicate that Texas’ rate of new foreclosures (monthly foreclosure sales) has trended downward, while the rest of the United States is trending upward (Figure 2).

The number of properties actually sold at foreclosure sales and now in lenders’ inventory (Table 1) is dramatically different from the number of foreclosure postings (Table 2).

In the high-appreciation states of California, Florida and Nevada, properties actually sold at foreclosure number significantly less than postings. The principal reason is fairly simple. In states with rapidly increasing home prices, an owner served with a default notice and foreclosure posting can easily sell the property and cure the default, probably at a profit. In states with less appreciation, such as Texas, owners typically do not have the opportunity to sell the property at a high enough price to cure a default. This discrepancy may also reflect the fact that many homes are being purchased by first-time homebuyers who qualify for loans based on initially lower interest rates and more liberal underwriting criteria applied by aggressive lenders. Many people are able to acquire a loan and buy a house but are unable to keep up with payments on the loan because of high property taxes, insurance costs, maintenance and other normal homeownership costs for which they are not prepared. Higher numbers of foreclosures in states like Texas probably indicate easier home credit and the owner’s inability to sell the property on default because of low rates of home price appreciation.

As the saying goes, everything is bigger in Texas. But it’s not altogether clear that there is reason to be overly concerned about the large number of home foreclosures reported in the state.

Like markets across the country, Texas’ housing market has prospered during the past several years because of low interest rates and the push by mortgage lenders to make qualifying for new loans easier. Although most Texas localities reported record sales and price levels, the state’s rate of home appreciation ranked lowest among the 50 states and the District of Columbia. As in many other states, the number of first-time homebuyers has increased and is evidenced by rising homeownership rates. Lenders continue to make qualifying for mortgage loans easier through numerous private as well as government programs, including Alternative-A (”Low-Doc” and “No-Doc”) loans, home equity lines of credit and Option ARM (negative amortization) loans. Buyers are able to acquire homes with reduced down payments and low initial monthly payments.

For some homebuyers, reality sets in as adjustable mortgage interest rates change and as they incur normal homeownership costs such as taxes, insurance, maintenance and homeowner association fees. Defaults and delinquencies that lead to foreclosures occur most often during the first few years of ownership.

The groups that should be most concerned about foreclosures in Texas are lenders and purchasers of mortgage-backed debentures (unsecured notes or bonds). If lenders continue to make riskier loans that get packaged into the secondary mortgage market, the market may not bail them out through higher prices.