Profiles of the four runners-up for "Best-managed Franchises in America."
Pennsylvania or Colorado, print shop or lawn service, the Golden Rule is working
AMERICAN SPEEDY PRINTING
Operators: Bev and George Karmanos, 37 and 43
Number of units: 1
Projected 1989 sales: $1.6 million
Sales exceed avg. by: 344%
Sales/employee exceed avg. by: 106%* * *
New customers who walk into George and Bev Karmanos's Tallahassee quick-print store are sometimes surprised by the treatment they get. If what they really need is just a handful of photocopies, George may send them to a nearby copy shop, although he could outplace the work himself for a higher price. Bev may suggest they forgo a fancy four-color logo in favor of a simpler two-color design that will cost less and look just as good -- particularly if they're running a start-up. In short, the Karmanoses don't sell printing. They educate consumers, often taking them to the back of the shop so they can better understand and use the process.
The two founders don't see anything that unusual about their style. It's a selling technique based on the same Golden Rule they teach their kids -- "treating people the way we'd like to be treated ourselves." Most of their 1,000 regular customers are retailers or small-business people, after all; the Karmanoses know firsthand how hard that can be. Besides, if they help a customer save money on this job, they're likely to get more work on the next.
Treating people right is an attitude, not a policy, and it extends to everything the Karmanoses do. No job goes out without a letter thanking the customer for his or her order. The couple will rerun any job for a regular customer, no matter who was at fault; if a new customer makes a mistake by not proofing the type or by ordering the wrong thing, the Karmanoses will split the cost of rerunning the order and take 15% off the next job.
The results have been impressive. Starting five years ago, staked with $100,000 borrowed from George's brother, the Karmanoses' American Speedy franchise has won sales-growth awards for five consecutive years. Annual volume in 1988 broke the $1.1-million mark, far outpacing both the American Speedy average of $264,000 and the industry average of $224,000.
But it's not just the numbers that make the Karmanoses' franchise such an astonishing place. Equally impressive is how gracefully a husband and wife from a small town in Michigan have managed to translate their personal values into management and human-relations policies with echoes of some of the best-run businesses in the country.
The Karmanoses don't call it cross-utilization training; they just make sure that counter, bindery, and press people all understand one another's jobs and share the authority for quality control. They don't call it wellness pay; they just pay extra for sick days not taken. They don't call it workplace democracy, either, although that, in nascent form, is what they've got. Line employees designed the system that drives scheduling. When the shop moved to a new location this spring, they were the ones who set up the floor and work flow.
It's common sense, Bev says. "My people know more than I'll ever know about what they need."
Each press operator has his or her own machine to run and maintain and is expected to order paper and keep track of jobs. All nine employees are eligible for a 5% commission on any work they bring in and are encouraged to be entrepreneurs themselves, like Jonie Voich in the front, who drafted and sent her own marketing letters to all the professors in the business school at Florida State University.
Bev calculates monthly goals and posts the numbers on a wall calendar in the lunchroom at the beginning of the year, with the target initially set 50% above the year before. Then they all figure out, together, how to do better.
The rewards are shared as well -- in generous benefit, vacation, and holiday policies, in a profit-sharing pension plan that offers the maximum contribution allowed by law, and in hefty bonuses paid twice a year. But giving, too, is an attitude, not a compensation policy. The Karmanoses give turkeys in November and December, and Christmas gifts of gold jewelry or trips to bowl games. Birthdays are celebrated twice -- first with lunch out, then with a cake at the shop at the end of the day.
"It's not that hard to figure out how to treat people," George says. "How would I want things if the tables were turned?"
Both George and Bev had been unhappy as employees. After high school and a stretch in the Marines, he'd driven a truck and tended bar; she'd worked in a medical office. They'd both been frustrated by their lack of control, dead-end tasks, and bosses who wouldn't listen. So when George's brother Peter offered to set them up, they jumped at the chance. The owner of his own small computer business, Peter had been impressed by the American Speedy in his building and loaned them the $100,000 they'd need to buy one of their own. They decided to start in Tallahassee, 1,000 miles from home, after Bev read a newspaper article about the booming Southeast.
"It was scary," George admits. "We had three young kids, we'd moved to a town where we knew no one, and we knew nothing about the business."
It was a classic family-business start-up. The Yellow Pages ad that was their primary selling tool didn't come out until their sixth month, and they grossed less than $8,000 in each of those first months -- barely enough to cover their nut, let alone pay their living costs. Bev, allergic to newsprint, worked the counter, and George ran the press. They took turns taking out the trash, sweeping the floor, and cleaning the bathroom. With children then 10, 6, and 3, "at first it seemed we worked just to pay for the day care," George jokes. He came early, and Bev stayed late, juggling the carpooling, Cub Scouts, and karate matches between them.
But by December they were in the phone book and in the black as well. They've been growing ever since. They hired their first press operator in 1985, freeing George to concentrate on selling, then added a second press in 1986 and a third in 1987. In spring 1988, with a team of six employees, they sold $126,000 worth of work, breaking the American Speedy record. In May of 1989 they sold $236,000, breaking the record again. George has promised they'll all go to Hawaii, all expenses paid, when they hit their first $300,000 month.
For all their success, the Karmanoses have kept their small-town style, along with their original separation of roles. George is still Mr. Outside, handling deliveries and making direct-sales calls, passing out American Speedy pens to the cashiers at the supermarkets or from the Lions Club float in the annual parade. He never makes a sales call without some calendars and to-do pads to leave behind, along with a 25%-discount coupon for new customers and his letters of recommendation from grateful regulars.
Bev is Ms. Inside, responsible for shop and personnel. It was her idea to do free fliers for the sheriff department's Stranger/Danger and Just Say No campaigns -- as a mother, she takes her responsibility for the neighborhood children to heart. She's a self-proclaimed "soft touch" for charities, offering discounts or free printing to each one that asks. "The benefits are mostly personal," she says. "But it keeps our names in a favorable light, and that's important to us, too."
Neither of them had ever imagined this kind of success when they started nor had known they had the kind of skills it took to gross more than $1 million a year. But now their horizons are changing. George has become active in the larger franchise system, and Bev is at work with the line employees, struggling to find a productivity bonus system that works for all of them.
It's a future they're building, not just a business -- and not just for them, but for their employees, their community, and most of all, their kids. Their two sons, now 11 and 15, are learning to run a press, while their 8-year-old daughter has her heart set on typesetting. Bev dreams of perhaps someday opening a second unit or a third and a fourth, one for each of the children. "I'm different now," she says. "Now, I want a dynasty."* * *
Fort Collins, Colo.
Operator: Steve Lauer, 23
Number of units: 8
Projected 1989 sales: $2.5 million
Sales exceed avg. by: 37%
Turnover less than avg. by: 75%* * *
For Subway Sandwiches franchisee Steve Lauer, life is very sweet these days.
He did well in 1988: a weekly unit average of $5,074, 18% higher than the chainwide unit average of $4,300, with net 12.8% of sales. Then he did better in 1989: a weekly unit average of $6,596, nearly a 30% increase, with a net of 14.5%.
Not bad for a 23-year-old who left college three years before. Even more impressive, he had 3 separate units to run in 1988. By the end of 1989 he will have 11, an increase of 367%.
Lauer is a phenomenon. One of the youngest Subway franchisees in the state, he's also the most successful and longest tenured. Starting by making sandwiches behind the counter at $3.35 per hour in college, he went on to run his aunt and uncle's shop as a manager, then opened his own unit in 1986 with help from his dad.
He used his experience well, finding ways to keep turnover less than 50% a year, far below the 300% that many fast-food operations suffer. Scheduling is flexible, with staff free to set their hours around another job, a family priority, or school, as Lauer did himself. Tasks are rotated to help prevent burnout, and good work is rewarded with bonuses and parties. Unit managers get 75% of salary as a percentage of sales, with free days off if they beat quarterly goals in food cost, labor cost, or volume increase.
Lauer's greatest success, however, has been as a marketer, developing good-neighbor public-relations campaigns. To help the local youth baseball league, for example, he designed a coupon book good for $20 worth of subs for the kids to sell to friends, family, and neighbors for $1 each. He turned it into a contest, throwing a party for the league's four top-ranked teams and awarding two prizes -- 10-speed bikes -- because the top two salesmen ran so close.
It worked for the league. Minus printing costs, it earned 85¢ for each book, raising more than $7,000, 60% of its annual budget.
It worked for Lauer, too. Selling 8,000 coupon books meant reaching 8,000 potential new customers, all more likely to use the coupon than if they'd gotten it in the mail, since they'd already spent a buck on it.
Lauer is always promoting. As the Subway ad rep for all of northern Colorado, he oversees a sales budget that exceeds $75,000, but the 25% to 30% targeted for public relations is his major focus. Weekly softball leagues involve 8,500 people around Fort Collins each summer; each team manager gets a Player of the Game free-sandwich coupon to award, discounts for party-size subs, and a free party sub if that team wins its league. Anyone who participates in the Great American Smokeout, the March of Dimes Walkathon, or a Red Cross blood drive gets a coupon. Elementary-school teachers get coupons to hand out to students who complete the reading list they assign.
The costs are nil: if a new customer comes in and buys just one additional item, expenses are covered. The payoff comes in word of mouth and a steady stream of new business, along with the personal satisfaction of giving something back. After all, it wasn't too long ago that Lauer was playing youth baseball himself.* * *
THE MAIDS INTERNATIONAL
Operator: Harry Edgar, 55
Number of units: 4
Projected 1989 sales: $1 million
Profit margin: 18%
Sales exceed avg. by: 340%* * *
When 55-year-old Harry Edgar needs more help, he goes to church. Edgar, owner of four Maids International franchises in Pittsburgh, doesn't go to to pray, though; he goes to hire.
Finding the people to actually wash the floors and scrub the toilets is the hardest part of running any cleaning service. In the four years since he bought his first two franchises, Edgar has tried newspaper ads, door hangers, even bounties. But nothing has worked as well as visiting the church offices in blue-collar, ethnic Pittsburgh.
They're ideal housecleaners, Edgar says, "solid neighborhood people. Their kids are grown or growing, and they're attracted to flexible work." They're punctual and eager to earn a little extra for the family. For most, keeping a house immaculate has been a point of personal pride for years.
"They're a key part of the business, and we treat them as such," he says. Salaries start at almost $1 per hour more than minimum wage, with regular reviews and increases at 6 and 12 months. He offers his managers health insurance and has just developed a paid-vacation plan -- costs, he says, that pay off in quality. "These women would rather lose an arm than a customer."
That pays off in numbers. In 1989 Edgar's combined volume from his four units will pass the $1-million mark, five times the national average for housecleaning-service franchises. He has topped The Maids' sales charts for all 200 units for the past two years and is a profit leader as well.
"Harry combines superb business skills with entrepreneurial fire," says Dan Bishop, president of The Maids International Inc., who recently named Edgar's operation Franchise of the Year. But Edgar wasn't the only one honored from his units. Patricia Osborne of his downtown office was named Manager of the Year, and he nominated three of his employees for Maid of the Year, all three for the second time.
Edgar had been a corporate man. Starting in 1960 with the New York City-based Lerner Stores Corp., he'd risen to senior vice-president, responsible for 102 units in a nine-state area, when the corporate ownership changed and at 51 he had to find a new career. Not with a corporation -- he didn't want to have to move out of Pittsburgh. And not in retailing -- "I never wanted to have to worry about inventory again." Instead, he looked at service franchises he could run himself, choosing housecleaning for the growth potential. He planned on multiple units from the start, "something commensurate with my experience." Opening the first two on October 1, 1985, he committed himself to "running it like a big business, not a mom-and-pop."
Edgar was careful. With his children grown and his wife working, they could live on her salary, without taking anything out of the business for the 18 months it would take to get in the black. Then he got lucky. As the first national maid service franchisee in Pittsburgh, he got a long write-up in The Pittsburgh Press. "The day the story hit the paper the phones started ringing," he remembers. "I never looked back."
To keep the phones ringing, he modified the franchisor's marketing plan, advertising for first-time users through newspaper inserts, not direct mail. "Then we blitzed the city, 250,000 homes four times a year for two years." Today The Maids franchisees across the country use newspaper inserts, and Edgar serves as chairman of the executive advertising and advisory council.
It took 18 months to reach the black, as expected; then Edgar felt free to expand. He now has four stores and a fifth planned.* * *
Operators: Robert DeKraft, 53; Michael Lancaster, 39
Number of units: 2
Projected 1989 sales: $1.1 million
Profit margin: 20% after owner's draw
Customer retention rate: 80%
According to Russell Frith, president of Lawn Doctor Inc., what's most impressive about the success of partners Robert DeKraft and Michael Lancaster is that their growth came in Fairfax County, Va. The Beltway is, Frith says, "one of the most -- if not the most -- competitive lawn-care markets in the nation." Keeping customers takes more than just making their grass look greener; there's also the problem of transient professionals, the customer posted to an FBI office in Denver or sent back to California after a change in administration.
That doesn't seem to have slowed DeKraft and Lancaster, though. Two former technicians who bought their boss's franchise in 1975, they boast an annual renewal rate of 80%, one of the highest in the Lawn Doctor system. With more than $1 million in sales and a 20% margin after the owners' draw, they're among the system leaders in volume and profitability, winners of back-to-back awards for image and professional standards and, most recently, named The Best of the Best at the annual convention.
"This can be a tricky business," DeKraft admits. Although they apply product -- fertilizer, sprays, and seed -- the business is really based on the great intangible, customer satisfaction. Equally important, treating the lawn and servicing the customer both depend on the technicians who visit each house five or six times a year.
Theirs is still a personal business; DeKraft and Lancaster stay in touch with as many of their 4,000 customers as they can and train and supervise the technicians. They've added a two-stage curriculum, starting with four hours in a classroom set up in the office to review lawn-care-diagnosis and -treatment techniques, then moving out in the field, pairing a new hire with a veteran for the first two months on the job.
"It's still tough to keep people," DeKraft says. "Salaries are low, although we pay in the top of the market; the average guy stays in the job one and a half to two years."
To convince the best to stay longer, the pair has developed their own motivational plan, improving customer service in the process. Technicians can use equipment on weekends to seed lawns, earning a percentage on both the cost of the seed and the cost of the job. "Now, they've got an incentive to do jobs on a Saturday or a Sunday," DeKraft says. "We used to have trouble getting them to do it on time and a half."
-- Curtis Hartman