"Boats require more maintenance than automobiles do, but there's nothing like a Jiffy-Lube that can be found in harbors across the country," Ajootian says. "Marine dealers provide most of the service, and their industry has been mom-and-pop for years. They get really busy, and that leaves owners pretty annoyed." Those moms and pops are potential customers, points out Harry West, since they can outsource the service component of their business to the local Naut-a-Care franchise.
In addition, "the marine industry requires a considerable amount of overhead for the equipment and seasonal labor," she says. "Franchising might take away a lot of difficulties for the entrepreneur." One start-up expense Drysdale's scheme eliminates is land. "A really good marine business has always had to be by the water, where real estate is expensive," Ajootian says. "Since this business is on a boat, an entrepreneur could easily rent space at a marina or contract for dock space."
To date, Naut-a-Care has signed up three franchisees covering 12 California harbors. Plans call for the company to enter Florida and other U.S. markets this fall, then sell two $500,000 master licenses for international markets in 2000.
FLIES IN THE OINTMENT: Naut-a-Care expects to do a large part of its business overseas, which will make it difficult to ensure that franchisees are happy and adhering to their contracts. Drysdale is addressing the problem by selling international master licenses that will involve providing foreign franchises with company-trained local management. Also, one thing that Michael Seid, a franchise consultant based in West Hartford, Conn., isn't crazy about is Naut-a-Care's decision to charge licensees a flat monthly fee of $500 instead of a percentage of income. "I'm not a fan of flat fees in domestic operations," Seid says. "I think it's better to deal with the accounting issues than to walk away from them. The purpose of a franchise is for both sides to make money and for both sides to think that the deal is fair."
THE "HORATIO HORNBLOWER" FACTOR: It takes an old salt to know an old salt, and all three principals served in the U.S. Navy. Those credentials "make it very easy for us to talk to customers," says the elder West. "They give us a lot of respect." --M. H.
8. A Winning Exit Strategy
COMPANY: X-It Products LLC, San Francisco
YEAR FOUNDED: 1997
CONCEPT: Make and sell home-safety products--an escape ladder that folds up to the size of a two-liter soda bottle and a fire extinguisher as light as a can of hair spray--that are easy to use and store
PRINCIPALS: Andrew Ive, 31, cofounder and CEO; Aldo DiBelardino, 30, cofounder and chief technology officer; Kevin Dodge, 29, chief financial officer
PROJECTIONS: Growing from just over $1 million in sales in 1998 to about $3 million this year
FUNDING: A little more than $500,000 from 10 investors
BIRTH LEGEND: As a Harvard Business School student, Ive hated it when the fire alarms in his dorm were set off accidentally. He figured an escape ladder would restore his peace of mind, but the two he bought turned out to be difficult to unfold and seemingly too flimsy to support his 215 pounds. Certain that he could do better, Ive enlisted DiBelardino, who was in his product-development course, and they built a ladder as a class project. The aluminum-runged result of their labors, which supports twice as much weight as steel-runged competitors, hit Super Kmart less than six months later.
WHAT'S TO LOVE: There's something appealing about a bunch of Harvard Business School graduates (Dodge went there too) starting a company that makes products a child could understand and use. The compactness of the X-It ladder allows the stores that carry it to maximize their shelf space. It's also a product that, by most accounts, is so well designed that it fills a unique niche. "The market's very fragmented, and with most ladders out there you'd be better off just buying a rope," says Paul Enright, president of Jomy Safety Products, in Boulder, Colo., a maker of fire escapes and collapsible ladders.
Another true believer is Bill Brouse, who helped get X-It products into retail stores through his independent sales network. In addition to being in Super Kmart, the ladder is sold through such powerhouses as the Home Depot and Amway. As for the fire extinguisher, called Flame Stop, it was in BJ's Wholesale Club and Sam's Club just four weeks after the company's launch.
FLIES IN THE OINTMENT: The links in X-It's supply chain aren't quite as dependable as the rungs of its ladders. X-It outsources manufacturing to a company in China; the cost savings allow it to price its products competitively. But "it's a weakness when you don't control the crucial parts of your value chain," Ive concedes. And as the products' popularity grows, so will the opportunities for supply-chain snafus, says Patricia Negron, vice-president of equity research at Adams, Harkness & Hill, in Boston.
THE "CAN LIVE WITHOUT 'EM" FACTOR: "I think about venture capital constantly," says CFO Dodge. "There could be real benefits, but our business grows slowly, and it isn't sexy. But we may not need venture money at the end of the day. We already have real customers who buy a real product." --I. M.
