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BUYING A SMALL BUSINESS

Garage Makeover

In March 2006, we profiled GarageTek CEO Marc Shuman, who faced the prospect of shutting down a quarter of his franchises.
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The Problem Marc Shuman founded his garage makeover company in 2000 and, in an effort to get big as rapidly as possible, began soliciting franchisees the following year. By 2003, he had 57 franchises in 33 states, but 15 "weren't performing up to minimal standards," he says. He wanted each GarageTek to sell at least $50,000 a month, but some were doing just half that. All the failing franchises were owned by hands-off investors; successful GarageTeks, by contrast, were run by owner/operators with skin in the game. Shuman admitted that the home office may not have provided adequate training or support but also saw that the majority of franchisees were doing fine on their own. He gave the struggling franchisees six months to turn around. When none did, he decided to shutter all 15, as well as six owner-operated businesses located in less promising, second-tier markets. Shuman says performance metrics clearly showed the shuttered GarageTek franchises weren't working, so he was able to reach settlements without litigation. In 2005, sales at all franchises combined rose 33 percent to $20 million, despite the reduction in the number of franchises.

What the Experts Said Steve Hockett, president of FranChoice, and Francine Lafontaine, a business professor at the University of Michigan, applauded Shuman's decision. Hockett said his "direct and honest approach probably saved his company." Lafontaine said it was a "wise move" that "gave his franchisees a way out." Steve Bergenholtz, president of Franchising Ventures Group, felt Shuman didn't offer the necessary support, and said he "should have shown good faith" and returned the investors' money.

What's Happened Since "My philosophy has turned 180 degrees, from quantity to quality," Shuman says. He now sells only to owner/operators and instituted a minimum net worth requirement of $1 million. He also added more home office support, as well as field visits from corporate to help create best practices in sales, marketing, and operations. In 2006 sales rose 50 percent, to $30 million, and 14 new locations have been added, bringing the total number to 50. GarageTek recently introduced 20 new products, such as sports equipment holders and lighting products, and in 2006, the value of his average sale rose more than 12 percent.

What's Next Shuman expects GarageTek franchises to reach $36 million in sales in 2007 and has a goal of opening up to 10 this year. Says Shuman: "It's much nicer to have profitable, successful franchisees on the other end of the phone."

Last updated: Jul 1, 2007




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