So has productivity, thanks to proprietary software that allows franchisees to monitor accounts, schedule closings, and churn out feedback reports twice as fast as before. The software, claims Jesperson, "can knock off 30 man-hours per week." As a result, he says, RE/MAX agents average at least 20 transactions a year. That's twice the industry average, according to the National Association of Realtors.
Kwik Kopy Printing Corp., Cypress, Tex.
Franchisee Support and Involvement
here's nothing like a multimillion-dollar lawsuit to help a franchisor develop a deep and abiding appreciation for its franchisees.
And Bud Hadfield knows it. The founder of Kwik Kopy, a $400-million quick-printing empire, faced a franchisee mutiny in 1984. Back then he was too busy interviewing potential franchisees to pay much heed. One of the complaints: the royalties they paid on second units were too high. Hadfield won the suit but realized "we shouldn't be in the business of selling centers," he says. He loosely capped the number of franchisees at 1,000, vowing to make them "the best 1,000 we could possibly have."
Shortly afterward Hadfield started an employee stock ownership plan and added some inexpensive, homespun franchisee-support programs that have increased systemwide revenues by 15% annually in each of the past five years.
While franchisors typically wait for emergency calls, Hadfield's "Sweat Hogs," a group of 12 employees, phone franchisees monthly to check sales and margins and to garner feedback. Franchisee complaints or requests, which are tracked by computer, are typically addressed within 48 hours. When their copier died, Robert and Lee Smith, franchisees in Scottsdale, Ariz., received replacement parts within 24 hours and a better model in about 60 days. "They're great at following through on promises," says Lee.
Hadfield also taps franchisee know-how for the company's benefit. The Stars Program allows franchisees to mentor their peers by touring one another's shops, suggesting changes and submitting feedback reports to headquarters. Franchisees later file a report detailing the remedial steps they've taken.
As trainees, franchisees each spend five weeks at Kwik Kopy University. Continuing education, delivered monthly at headquarters and in various regions in regularly scheduled seminars, covers everything from basic accounting to taking advantage of new opportunities, such as providing mailing services. Kwik Kopy also tests new equipment for franchisees.
What's the cumulative effect of it all? Franchisees' average annual sales are $400,000, up 67% from a prelawsuit low of $240,000. Franchisees who are among the top 10% in annual gross sales attended 77 seminars in 1994, while those with anemic sales appeared at only 17. Says Lee Smith, "It's usually easy to blame your franchisor. But at Kwik Kopy they make it difficult."
Bruegger's Corp., Burlington, Vt.
Luring the Best Franchisees
Quick: what makes big-company types fall all over themselves to join smaller businesses? No, it's not the chance to answer their own phones. But it can be summed up in one word: equity.
That is exactly why Bruegger's Corp., seeking to attract fast-food veterans who could roll out its fresh-bagel concept speedily, decided to offer preferred stock in its parent company to a core group of franchisees. "We decided the best way to build a great company quickly was by partnering with the best people," explains chief executive Stephen Finn.
Bruegger's management first sketched a profile of a dream franchisee -- a fully capitalized operator of a multiunit fast-food chain -- and then identified 100 candidates. Of the initial 40 it contacted, 24 have joined, including a cofounder of Pizza Hut, the former chairman of Hardee's, and one of the country's largest Burger King franchisees.
Under the stock plan, franchisees agree to develop at least 10 stores in a given area over five years. A 10-store deal, for example, requires them to buy $350,000 in preferred stock ($35,000 per store): they pay $150,000 up front, and ante up the rest in annual installments over four years. Franchisees swap their management expertise for the chance to recoup their start-up costs -- about $270,000 per store -- and make plenty of extra dough (the green kind) if Bruegger's eventually goes public, at which time the preferred stock converts to com-mon stock.
The plan isn't for the cash poor, but those who can pay say it's well worth the price of admission to Bruegger's. "Preferred stock in your hand is much more than the typical franchisee has, which is normally a canceled check," says franchisee Dan Fitzpatrick of South Bend, Ind.
So far the elite franchisees have pledged to buy $17 million in equity; Bruegger's has received $8 million, which it can use to finance its 18 company-owned stores. Bruegger's now has 220 stores in 21 states. Its development plans call for a total of 270 outlets by the end of 1995. Sales of $145 million are projected, a 79% increase over 1994's $81 million.
And when will the company go public? According to Finn, a 1998 offering would not be out of the question.
-- Karen E. Carney
WHAT IT COSTS TO GET STARTED IN FRANCHISING
Company Name Franchise Fee Start-up Investment Working Capital Required
Sir Speedy $17,500 $120,000 $60,000
Play It Again Sports $20,000 $60,000 $30,000
Takeout Taxi $30,000 $71,000-$91,000 $10,000-$15,000
Environmental Biotech $40,000 $40,000-$50,000 not applicable
Primrose School $48,500 $800,000-$1 million $25,000
Wendy's $25,000 $525,000 (bldg.), not applicable
$200,000 (equip.),
land variable
