What It Takes to Be the Best
What It Takes to Be the Best
Behind every successful franchise concept is a successful franchiser. Is this obvious? Perhaps; but according to Karen Spencer, CEO and founder of Fran-Systems, a Marietta, Georgia, franchise consultant, it bears repeating. "Some people are a natural fit as franchisers, and some are not" says Spencer. Those who don't conform, she says, face the likelihood that their concept won't live up to its potential, unless the person or people at the top either acquire the necessary attributes, or step aside for others who already have them.
Spencer lists four traits she finds in franchise leaders who can hope to be masters in their field. First, she says, they need a certain level of financial capacity. At a minimum, franchisers need the wherewithal to fund the six-figure costs of preparing disclosure documents and operations manuals. "You really do have to have some money in the bank to get that started," she says.
"The second thing we're looking for in a master of franchising is the acumen level -- the skill level," Spencer adds. By that, she means both the ability and the inclination to teach and mentor other people. "Because that's, in essence, what you're doing with franchisees," she says.
Next, consider whether the franchiser displays a serious commitment to franchising. One indicator is whether the money to fund development of the concept is in the bank. Another is whether the franchiser has assembled a strong management group. "If they make the commitment to hire the team right out of the gate, that's a huge commitment," Spencer adds.
Last is a comprehensive yet elusive quality Spencer calls "culture." It's something of a combination of all the above, almost a feeling. When she finds a viable franchising culture, she says the rest of the requirements will naturally fall into place: the money will be raised, the necessary skills will be acquired and the capable executives will be hired. Indeed, culture is probably the most important single variable of all. "I'll take that above any of the rest," Spencer says.
When leaders of franchising businesses talk about what makes a viable opportunity, they tend to downplay their own personal characteristics, however. Instead, they want to highlight the markets, brands, products, services, and support systems they can provide.
When Jeff Thames talks with would-be business owners about picking a franchise concept, for instance, he tells them to choose an industry with growth potential. "After all, this is your livelihood," reminds Thames, the president and COO of franchise sales for Hastings, Minnesota-based Anytime Fitness. "You want to be in an industry that has the potential to support you and your family."
The fitness industry certainly has that, Thames notes. Even though medical experts, public health officials, insurers, and employers increasingly stress the importance of maintaining an active lifestyle, relatively few people belong to health clubs. As ever-larger numbers of people take up exercise, health franchisers stand to benefit enormously. "There are a lot of tailwinds in the fitness industry today," Thames says.
People deciding which club to join are drawn to Anytime Fitness's convenient locations. Potential franchisees are interested in participating in a growth industry with a concept that has a strongly increasing membership base -- now approaching 1 million people -- involves helping others, and enables many franchisees to indulge their personal passion for fitness and health.
The combination has led Anytime Fitness to open 1,334 facilities and an ongoing growth rate equivalent to opening approximately one new club every business day. Clubs already operate in five countries besides the U.S. and Canada, and in all 50 states. "We still have great expansion possibilities in the U.S. and Canada, but we're just scratching the surface internationally," Thames says.
Potential franchisees who like the idea of a business opportunity offering the rare combination of a well-established name and wide-open possibilities for opening new territories, are drawn to AlphaGraphics. Art Coley, vice president of global development for the Salt Lake City-based franchiser, says that although they have been around for 40 years and cover much of the United States as well as eight foreign countries, available territories exist in many states and major metropolitan areas. "We have a tremendous opportunity for growth," Coley says.
In addition to the prospect of enticing markets, franchisees are drawn to AlphaGraphics because it's a business-to-business concept. That means regular hours and the potential to reach seven-figure annual sales volumes with a single location. Customers, typically small businesses, come to AlphaGraphics not just for printing and document solutions, but increasingly for design, direct marketing, and digital marketing services that amount to providing an outsourced marketing department.
Today AlphaGraphics has nearly 300 business centers up and running and expects to add 30 more in the next 12 months. Coley says large domestic markets including Houston, Miami, Tampa, Orlando, Las Vegas, Washington, D.C., the San Francisco Bay area, and greater New York City all offer attractive opportunities for expansion.
The attraction of Coverall Health-Based Cleaning System resides in its low cost of entry and the fact that it operates in a huge industry -- commercial cleaning -- where most competitors are unsophisticated mom-and-pop operations. "It's an industry that hasn't seen a significant amount of change for 50 or even 100 years," adds Ted Elliott, president and CEO for the Boca Raton, Florida-based franchiser.
Coverall is out to end the lack of innovation, if nothing else. "What we've done is really get into R&D from the chemical and equipment side and put together what we call the Coverall Health-Based Cleaning System, a process that cleans at an unseen level as opposed to only an aesthetic level," says Elliott. While providing a powerful lure for consumers concerned about health issues, the approach doubles its leverage by also significantly improving franchisees' productivity, he adds.
Coverall has nearly 9,000 franchise owners globally and anticipates growth of approximately 400 this year, Elliott says. A focus for the next 12 months will be international expansion. "We just opened Qatar; we anticipate opening Sweden over the summer; and we really hope to get the U.K. open by the end of the year," he says.
While the world beckons to many franchisees, others find plenty of opportunity for growth closer to home. Fiesta Insurance franchisee Oscar Neri has opened four locations in and around Fresno, California, since joining the Huntington Beach-based chain in 2008, and he still sees plenty of opportunity in his own backyard.
For Neri, the key to Fiesta's attractiveness is the opportunity to reach Hispanic consumers. The company name and logo lend themselves to a marketing effort targeting that demographic, Neri explains. "Being bilingual, I've always dealt with Hispanic people," he says. "And I always advertise in Spanish."
Neri further enhances his draw by offering extended hours seven days a week at all his locations. "It's an advantage to me because a lot of companies close at around 5 or 5:30 pm," he says. "We get most of our business between 5 and 7 pm." Finally, he emphasizes the affordability of Fiesta's products. "We have 45 different companies to choose from," he says. "I feel really comfortable saying we can absolutely get the lowest price in the area."
While Neri's current plans confine future growth to California's Central Valley, he's not sitting still. "I have two more planned this year," he says. "After that, my goal is to open one office every six to eight months, at least one a year at the slowest pace."
The goal at PuroClean is to offer potential franchisees a genuinely recession-proof opportunity, says Lauren Reid, CEO of the Tamarac, Florida, property emergency services company. "Whether the economy is good or bad has no impact on our business," Reid says. "Fires happen every day; pipes break every day -- that's the core of our business."
Another draw of the PuroClean model is that it's business-tobusiness, meaning that hours tend to be 9 to 5. The company typically contracts with insurance companies to clean up insured properties after disasters. It's critical to be able to offer insurers the ease of dealing with a nationwide network of providers known to be reliable, Reid says, while also providing high-touch services to policyholders who, understandably, are often in the middle of one of the worst days of their lives.
PuroClean has 310 locations in the U.S and Canada, and Reid anticipates adding another 50 to 60 locations by this time next year. Locations currently tend to be concentrated east of the Rocky Mountains, so one focus will be on the western portion of the continent. "We've had some initiatives of late attempting to fill in the white spaces," Reid says.
Filling in the space later in life, when staying in one's home is challenging but an assisted-living facility isn't the right answer, is the mission of Seniors Helping Seniors. Philip Yocom, co-founder and CEO of the Reading, Pennsylvania-based company says the solution is what they offer: An opportunity for franchisees to address a large, fast-growing market with a company that emphasizes efficient and effective processes and synergy between franchiser, franchisee, and customer.
"I believe one of the greatest values of a franchise is to create a very strong brand that differentiates itself from all forms of competition," Yocom says, adding, "I believe we can do good and make money simultaneously. And the more good we are able to do, the more money we can make."
Seniors Helping Seniors has more than 110 franchise locations and anticipates doubling in size in the next year, he says. The company is expanding in areas including the Great Lakes, the Southeast, Texas, Arizona, the Rocky Mountain region, California, and the Northwest. So far, Yocom has not expanded internationally. "We continue to target those markets where we are currently," he says.
Customers of Seniors Helping Seniors like the way using the company's in-home non-medical services allows seniors to remain in their own homes. They also like the fact that staying home can be a less expensive alternative, Yocom adds.
Good financial planning, like good health, has a lot to do with ensuring a comfortable retirement. Helping people to make the right choices in that kind of planning is the objective of Matthew McGonigle, co-founder and CEO of RetireCo, a Hartland, Wisconsin, licenser of retirement services that provide customers with products that can earn competitive interest in appreciating markets, protect during declines, and provide guaranteed lifetime income.
"Our target market of retirees is set to double within the next five years, and the sales of the products we provide are up drastically over the last couple of years," McGonigle says. In addition to access to this appealing market, licensees can tap a sophisticated marketing and lead-generation program, thanks to co-founder Kevin Johnston's experience providing creative to top Fortune 500 companies.
The company just began licensing earlier this year,and McGonigle says response has been strong, with more than a dozen licenses granted in just a few weeks. The initial stage of their nation wide expansion plan is to have an office in every state and major metro area in the country. "RetireCo is positioned to be the next major provider of retirement solutions in the United States," he says.
ShelfGenie Franchise Systems offers its customers the opportunity to improve the function and look of their kitchens and other home spaces, inexpensively and attractively. It's a very potent appeal during hard economic times, says Allan Young, CEO of the Marietta, Georgia, franchiser of businesses that sell, design, and install glide-out cabinet storage systems.
For franchisees, ShelfGenie gives them a chance to get into a low-investment, home-based business that is still highly scalable. "Our designer and installer partner programs enable our franchisees to scale their business without increasing their overhead" Young says.
ShelfGenie has 110 locations after just two years of franchising. "We plan on growing to 200 or 250 in the next two or three years," Young says. Just where and how fast they'll grow depends largely on the quality of franchisees they encounter, he says. "Our goal has been to grow by finding the right people versus just finding a lot of franchisees."
For Markham, Ontario-based yogurt chain Yogen Früz, the goal has been to permit would-be entrepreneurs getting into business for themselves -- without being by themselves -- as owner-operators. "We stress customer service and product quality, and we believe that this can be best delivered to the customer through an owner-operator who is at the location all the time," says co-founder Aaron Serruya.
Yogen Früz has grown to 1,200 locations in 25 countries by offering consumers healthy and functional alternative treats. The growth plan calls for adding 1,000 new locations during the next decade, with a focus on Europe, Asia, and Persian Gulf countries, Serruya says. A major recent initiative has re-branded the concept, with a new store look appearing alongside a raft of new flavors.
At Dunkin' Donuts, the emphasis is less on new and different and more on tried and true. "We refer to it as ‘quick quality,'" says Grant Benson, vice president of franchising and market planning for the Canton, Massachusetts-based restaurant franchiser. "We can get people in and out of stores fast, but it's a quality product."
While serving up tasty coffee and food to customers, Dunkin' presents franchisees with the chance to partner with a company that has lengthy experience in franchised restaurant operations and iconic name recognition yet plenty of room for growth. "We have a brand that has close to 7,000 locations in the U.S., yet we are very heavily concentrated in the Northeast, Middle Atlantic, and Florida," observes Benson. "Very few brands have the opportunity in so many markets to develop very aggressively."
And the company does plan to develop aggressively, targeting markets east of the Mississippi where they have an existing presence but room to fill in. "Regardless of economic times,
Dunkin' has always been among the very top in the restaurant business in terms of new unit growth, and we'll continue to do that," Benson says. "I couldn't cite specific numbers, but we would be near the top, if not at the top, in number of new locations this year."
CiCi's Pizza has shown up at or near the top of some recent industry rankings of per-store sales growth. That does a lot to polish the Coppell, Texas, restaurant franchise's image to potential franchisees. With regards to consumers, CiCi's restaurants tend to do well in economic downturns, in part because of pricing, says J. Forbes Anderson, chief strategy officer. "CiCi's pizza has positioned itself as a value brand," he says. "With Americans reemphasizing value, I think we're poised to take advantage of that."
Today, CiCi's has approximately 630 locations in 35 states. The company's goal is to open 40 new stores a year for the next few years. Target markets include Southern California, Phoenix, Miami, Chicago, and Philadelphia. "Our expansion plans are really coast to coast," says Jim Sheahan, vice president of franchising.
Would-be entrepreneurs in any market like the low initial investment and high potential business opportunity from AdvantaClean, says Jeff Dudan, founder and CEO of the Huntersville, North Carolina-based franchiser of air duct cleaning, mold remediation, and emergency service businesses. The company's home-based franchisees enjoy modest ongoing overhead costs. "That's as a result of a lot of the background services we provide franchisees, such as answering the phone, customer service follow-ups, and operating platform," Dudan says.
AdvantaClean can also make a claim that its market demand is not much affected by economic trends. "These are nondiscretionary services," Dudan says. "When your house floods, you have mold or vermin in your air ducts, or you're bringing a baby home, people are going to buy this service; they don't have a choice."
From 40 locations currently, AdvantaClean anticipates growing to 100 stores by the middle of 2011. Dudan says that they have locations inthe northeastern,southeastern, northwestern, and southwestern United States east of the Mississippi and are building on that in their expansion plans. "We have the corners tagged, and we're filling in quickly. We also have several deals in the pipeline moving out toward the West Coast," he says.
When it comes to the franchise industry as a whole, and to its leadership in particular, franchising consultant Spencer sees a lot of change in the pipeline. Specifically, she predicts significant turmoil over the next few years as established franchisee organizations transition to next-generation leaders who want to do things differently. "These kids are saying, ‘You worked like this with my father, my grandfather, my uncle; but that's not going to happen now, '" she says. "'Please teach me how to be a different franchise owner from my parents.'"
In some cases, the incoming generation of leaders won't be able to reconcile its vision of the future with the realities of staying within a franchise system. When that happens, new leadership will be required. As a result, Spencer expects record number of ownership transfers to sweep through the industry in the not-too-distant future. "People are going to retire, there's going to be no generation behind them, and they're going to have to sell their units," she says.
Clearly, while leaders are important in business, so is timing. And, whether you open a new location or bring a new vision of growth to an existing franchise, right now appears to be an opportune moment for would-be business owners to take a look at the offerings and consider franchising.
Barriers to entry such as the cost of real estate, interest rates, and labor availability have dropped to rarely seen levels, notes AlphaGraphics' Coley. "So many things are stacked in a new business owner's favor that, quite frankly, if you find a good brand, you should get going," he says. "Now's a perfect time."