Sponsored Section: Million Dollar Franchises
"A million dollars" has a nice ring to it, especially when the phrase describes the annual sales volume of a franchise business opportunity. And, says Rick Bisio, a Bradenton, Fla., franchise consultant and author of The Educated Franchisee (Bascom Hill Publishing, 2008), "It is a realistic expectation. I'd say that the majority of systems have at least a few franchises that are at $1 million or plus. There are some systems where pretty much everybody is at or over $1 million."
One of those opportunities is Bojangles' Famous Chicken ‘n Biscuits, a quick-service concept from Charlotte, N.C. In 2008, the average full-sized Bojangles' franchise served more than $1.7 million worth of made-fromscratch biscuits; hand-breaded, never-frozen chicken; dirty rice; and other menu items. More than 40 percent of Bojangles' daily sales occur at breakfast, and breakfast is served all day. That is a key element differentiating Bojangles' from other quick service restaurants, and also contributes to the unit sales volume.
The company claims that, unlike fast-food patrons interested only in convenience, Bojangles' customers will go out of their way to visit its locations. 'The combination of fresh biscuits, made from scratch every 20 minutes all day, freshly prepared food, and unique flavor make us a destination restaurant," ExecutiveVice President Eric Newman says."We have the most loyal customers in the business," he adds.
Franchisees need significant operational expertise in order to combine rapid service with fresh, hand-made food. "People who can operate the concept is our number one concern," Newman says. "It's more important than money. It's more important than anything."Thanks in large part to its appealing sales volume, Bojangles' has attracted enough highly qualified candidates to expand the 461-unit chain by a projected 44 new restaurants in 2010.
A creative concept coupled with operational excellence also underlies the high sales volume generated by Yogurtland franchises. The Anaheim, Calif., chain averages just over $1 million in annual sales at each location, says Larry Sidoti, vice president of development and operations. Sidoti says they rely on "the three wows" to draw customers to their offering of yogurt, fun, and value. "The wow when you walk into the store, the wow when you taste the product, and the wow when you pay for the product," he explains.
Yogurtland allows customers to mix their own yogurt dishes, employing custom flavors and toppings as well as active culture yogurt. Sidoti says that retailers today need to provide consumers with something besides a quality product and excellent customer service. 'It's great if you can have an element of entertainment,'he says.'And with Yogurtland,we have an outstanding product and the element of entertainment because you get to do it yourself."
Ideal Yogurtland franchisees have elements of both business and food service in their backgrounds. "It's not that simple a concept," Sidoti explains. "It's not a restaurant and it's not a quick-service food operation. You're dealing with dairy, and you're dealing with live and active cultures. And it's always more beneficial if you have a business background."
Yogurtland has 64 locations today, which he expects will expand to between 125 and 150 stores by the end of 2010. The company is targeting Sunbelt states from Arizona through the Carolinas and offers a number of area development opportunities within those markets."So it's a great time to get involved in this concept," Sidoti says.
Motorists who never think it's a great time for an oil change can find room in their day for a stop at Express Oil Change. The Birmingham, Ala., franchiser's locations strive to greet each customer within 15 seconds of driving onto the lot,change the vehicle's oil and check fluids in 10 minutes, and have the customer back on the road in 12 minutes, says Jerry Perch, director of franchise development. To reach that standard, the concept has drivers stay inside their vehicles during the oil change and never tries to sell unneeded parts or services.
The approach gives Express Oil Change considerable traction when it comes to generating sales. "Fifty percent of all our stores, including the new stores and acquisitions and everything, do dollar volume of over $1million,"Perchsays. Infact, he says they won't agree to place a franchise in a location that doesn't have the potential to reach $1 million in annual sales.
In addition to the oil change bays,the franchise locations have bays next door where more complicated mechanical service and repair takes place. Perch says this has helped keep overall revenues up in 2008 and 2009."They learn to trust us,"he says of customers."And when they need brakes and A/C, they go to the mechanical side."
Potential franchisees have to be willing to trust Express Oil Change's requirements and follow the system in detail.Franchisees are asked to purchase prime commercial real estate and own their buildings, for instance, rather than leasing. Done right, however, the system works."We've been in business 30 years and franchising most of those years,"Perch says,"and there has never been a lawsuit filed by a franchise against Express Oil Change."The company aims to increase its 173-unit chain with 12 new franchises in 2010.
As much money as there is in oil changes, there may be even more in custom-built closets, garages, home offices, laundries, pantries, and other storage and work areas. That is the premise behind Closets by Design of Cypress, Calif. In 2007, according to Chief Executive Officer Jerry Egner, the average Closets by Design franchise did $2.9 million in sales volume.
The company's offering attracts consumers because of its well-organized approach to doing business in what is otherwise a highly fragmented industry. "When you get an estimate from Closets By Design, you can tell there's something different," Egner says."You're more informed.It's easier to make a decision."
For franchisees, the lure is hefty revenues and the ability to leverage talents from previous exposures to business management. "In addition to someone who's willing to learn and is trainable, we're looking for someone that has business experience, who knows how to manage and motivate people, and understands the financial side of the business," Egner says. "What we're not looking for is a carpenter. That's one of the biggest misconceptions in our industry."
Closets by Design currently has 28 locations, and while the company has had significant growth the last several years, it's not expected to soonthe number of locations rapidly any time soon. Instead, they'll emphasize helping existing individual franchises improve sales."We don't want to grow fast,"Egner says."We want to add three to six locations in 2010. That allows us to continue to focus on per-store revenue and the growth formulas."
Another occupant of the home improvement space is CertaPro Painters, a painting contractor franchise organization based in Oaks, Pa. The company's franchisees generate healthy revenues, mostly painting residences for homeowners. Steve Hearon, vice president of franchise development, says, "We have quite a few doing over $1 million and our top franchisee does over $8 million."
CertaPro Painters aims to provide a great experience to people who hire its franchisees for painting jobs. That alone, says Hearon,makes them stand out from the crowd."We're really in an industry that is not known for its customer service," he observes.To try to give CertaPro Paintersa reputation for service, the company hands every client a satisfaction survey and urges franchisees to improve their rankings. Today nearly 80 percent of customers give them a perfect rating, Hearon says.
Franchisees like the relatively low initial investment for a potentially million-dollar business. To add to the luster, overhead is also low. "There's no commercial space required, no retail space required, no real estate, no build out," Hearon says. The primary overhead costs are for vehicles, marketing, and a small office space -- some franchisees start out at home.
No painting experience is required to become a CertaPro franchisee. Sales and marketing background is, however, an asset, as are skills at managing and motivating people. Otherwise, says Hearon, they're looking for"somebody who's a leader, likes to get things done, has a high sense of urgency to get things done, does not mind being inside customers' homes talking to them about their projects and their colors, and then could turn around an hour later and be standing in front of a painter."The company has 328 locations worldwide and expects to open 50 locations in 2010.
Another concept that doesn't require industry experience is Wingstop, a Richardson, Texas, franchiser of restaurants featuring chicken wings and a handful of sides. Chief Development Officer Wes Jablonski says the simplicity of the menu makes it attractive to people who don't have the background or desire to run a more complex operation."Our franchisees tend to be individuals who are looking for a better life than they have right now,"Jablonski says."They don't have a vocation to be a restaurant operator."
While the chain's most successful location does about $1.9 million in annual sales, the average Wingstop generates about $750,000 in annual revenues.Location is the main differentiator, according to Jablonski. The company has done well in smaller towns and lower-income communities, and is now looking at a push into college and university neighborhoods. The menu, while simple, is successful: Wingstop's wings won awards for flavor three years running at the National Buffalo Wing Festival. The food is affordable, which Jablonski says has helped franchisees stay busy during the recession filling to-go orders for people who opt to eat in to help save money. "We think we've benefited form economic contraction because people are basically spending more time at home," he says.
Wingstop had 435 locations at the end of last year, and Jablonski expects to open 69 new stores this year. The concept has shown it can travel outside the state where it began. While the largest market is still Dallas and nearly half the stores are in Texas, there are also large blocks in Los Angeles and San Francisco, among others, and the store with the highest volume of sales is in Chicago.
GreenLeaf's,asalad,Panini,andwrap purveyor,andBananas, which sells smoothies and non-yogurt drinks, are a pair of concepts that, especially when co-branded together, also have thepotentialtoreachsalesof $1millionormore."Weprobably have a handful of locations that are hitting the million-dollar mark, a lot of them around $800,000, and one that does over $2 million in the Newark airport," says Andrew Steinberg, senior vice president of business operations and franchising for parent organization Villa Enterprises in Morristown, N.J.
Co-branding helps franchisees by balancing the two concepts' differing labor and food costs, Steinberg says. Green Leaf's customers select from fresh salad greens, fruits, dressings, toppings, and other ingredients that employees assemble into salads. Its relatively high food and labor costs are offset by Bananas, which requires a shorter and less expensive list of ingredients and can be operated by fewer employees, Steinberg says.
Green Leaf's and Bananas are usually found in places with high foot traffic such as airports and shopping malls. These locations tend to generate irregular surges of customer demand compared to other restaurant locations. For instance, airport restaurants' rush periods are tied to aircraft schedules. "Because of that, you really need somebody that knows how to operate a restaurant, keep inventories straight, and use labor correctly," Steinberg says. "We really like to gravitate toward people with restaurant experience."
Green Leaf's and Bananas are in 40 locations,and the chain should grow by four more this year. Steinberg says they are also investigating a new concept, a Bananas-only kiosk, which calls for much less space, inventory, equipment, and labor."We're going to try to see if we can roll out a couple more kiosks this year, "he says.
Some franchise organizations haven't been around long enough to find out the full extent of their potential. One of those is UNITS Storage, a Charleston, S.C., provider of mobile storage and moving containers that just started franchising in 2006. The sales figures reported by franchisees so far are encouraging, says John Steeves, chief operating officer. "We're finding numbers that would equate to the million-dollar revenue mark somewhere between years five and six," he says.
Mobile storage itself is still a young industry, with many potential business and residential customers still unaware of its advantages. Businesses often use portable containers to help with records storage because it's cheaper than adding office space. Restoration and construction industries similarly find containers convenient, safe,and less expensive for on or off-site storage. Residential customers tend to employ the containers to help with relocations, parking a container in their driveway, and packing it themselves, then having UNITS pick it up for temporary storage or moving to a new home. That lets them save considerably over conventional pack-and-move services.
The newness of the concept supports its rapid growth in sales. "We're seeing high growth numbers in the 200-plus percent range within a five-month period," Steeves says. UNITS leverages the quality of its steel-framed containers to differentiate its offering as more secure and watertight than competitors."We've invested a lot of funding into making our container what it is today," Steeves says.
Franchisees like the opportunity to grow a sizable business with substantial assets without having to wait a long time. "It ramps up very quickly because of the need for storage," Steeves says. The typical franchisee is a former executive-level corporate employee who may have been downsized. Strengths in executive management or sales and marketing are particularly desirable, he says.
In 2010, Steeves plans to add from 13 to 15 franchise territories to the nearly 40 already opened. They also are introducing a robotic delivery system that can be operated from a distance, reducing the safety risks employees run when delivering containers. "Once the economy is turned around, we hope to be close to the 100 mark by 2013," he says.
As these examples indicate, franchises with potential for $1 million in annual sales are often businesses operating out of retail storefronts. These types of businesses tend to have higher investment requirements than concepts that can operate from home offices or vehicles.That shouldn't be too surprising,notes Bisio. "There is a connection between investment and gross return," he says.
Another business truism is that more sales don't necessarily translate into more profits. Businesses with sizable fixed costs, for instance, will generally offer lower profit margins than some other opportunities such as home-based consulting businesses.
Another consideration with a business operating out of a retail location is that it can be more involved to grow a great deal after initial ramp-up, Bisio notes. Often, that may require finding, acquiring, and building additional locations instead of just hiring moreemployees, leasing a few more trucks or putting in more hours.
Franchises with high sales volume also can offer special advantages. Investing in fixed assets, such as land and buildings, helps the owner of a business build its value, for instance. Barriers to entry are often higher and competitors fewer. And a well-padded top line can help remedy a multitude of other problems.
But in the final analysis, Bisio says, the best place to look for a million-dollar franchise is not in listings of opportunities. "In many ways, finding businesses that will get to $1 million is not that hard, but it requires dedication," he says. "At some point, you may want to quit. Then the challenge is less about finding the opportunity and more about finding the internal fortitude to get to where you want to go."
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