Why Noble Roman’s Strategy Falls Flat

Seeking Alpha:

Noble Roman’s is a company that franchises 2 fast-food concepts: Noble Roman’s Pizza and Tuscano’s Italian Subs.

You can see a bit more about what they do on the company’s website. The company provides a perfect example of what I call operating accruals and why they are bad for companies. (Note–this is probably not the correct term.

If there is a better term for what I discuss, please tell me.) By operating accruals, I mean that the business is operating in such a way that today’s earnings are coming at the expense of poor earnings (or even losses) in the future. The obligations that go along with today’s earnings accrue in reality, but not on the financial statements. Accounting accruals are different but no less bad. Just google ‘Sloan accrual anomaly,’ and you can learn more about why accounting accruals can be bad.

Strategy Problems… read on.