Archive for March, 2011

How do Franchise Territories Work?

March 31st, 2011

(Buy A Franchise Unlimted, Buy A Franchise Bellevue, Buy A Franchise Seattle)
 
This one of the most important and contentious topics in the franchise industry over the past 20 years.  This answer has been provided by Jeff Elgin of FranChoice. 

Many, but not all, franchises grant an “exclusive territory” to their franchisees as part of the rights given under the franchise agreement contract. The purpose of doing this is to assure the franchisee that they will have some area in which they can market and operate under the franchise brand without any competition from another franchisee or even the franchise company itself. This territory is normally described in geographical terms (area code, street or waterway boundaries) though it can also be described as a specified radius originating from the actual location of your unit.

Regardless of the method used to define the boundaries of the territory, the message implied by the territory grant is always the same. In a nutshell, you’re being told that this area is large enough and has a sufficient number of potential customers to enable you to build a successful business for yourself. This is where the conflict can come into play.

As the franchise system continues to grow, the franchisor will often desire to increase their number of distribution points by adding as many additional units into the market as possible. Sometimes these units can cannibalize the sales of existing units, temporarily or permanently. That “encroachment” can cause a lot of ill will among the existing franchisees.

Whenever you are evaluating any franchise, be sure to ask the existing operators whether they feel that the territory structure is fair and reasonable, and ask them as well as the franchisor whether there is an appeal process in place to allow for the resolution of any new unit impact conflicts without having to resort to litigation. These types of steps can help ensure that you are selecting a franchise with a strong sensitivity to these sorts of potential issues.

(Buy A Franchise Unlimted, Buy A Franchise Bellevue, Buy A Franchise Seattle)

Popularity: 6% [?]

Own a Franchise with Few to No Employees

March 18th, 2011

Always wanted to own your own business, but held off because you were weary of the headaches that can accompany hiring, paying and managing staff? You might find the perfect fit in these five franchise business models, all well-suited for franchise owners who are seeking to go into business solo.

1. America’s Swimming Pool Company

The country’s largest provider of swimming pool service and maintenance, America’s Swimming Pool Co. (ASP) has 58 franchise locations spanning seven states. Founded on a commitment to superior swimming pool service and solutions, ASP serves both residential and commercial properties.

An ASP franchisee is not required to have any past experience in swimming pool service and the franchise owner can be the sole service provider. CEO Stewart Vernon said the qualities that make an ASP franchisee successful are having a business mind and service mentality.

Potentially one of the greatest testaments to the ASP franchise model is that none has ever failed. Vernon attributes this to ASP’s commitment to franchisees to “act as their corporate backbone and provide the stability necessary to achieve success in the world of self- employment.” Additionally, ASP provides dedicated training through “Pool School,” which provides everything the franchisee needs to run the business. The total investment for a single ASP franchise ranges between $50,000 to $60,000, which includes the franchise fee and all necessary capital.

ASP fully discloses revenue numbers and the top and bottom producing locations. Vernon stated that the company is poised for its strongest growth yet in 2011, with plans to continually reinvest in its franchisees.

2. Stroller Strides

Recognized as one of Entrepreneur’s “Fastest Growing Franchises in 2009,” Stroller Strides is a postnatal group exercise program that allows moms to work out with their babies.

Founded by Lisa Druxman, a fitness industry pro since 1990, the idea was inspired after the birth of her own son. Lacking a viable fitness option that would accommodate having an infant, she created her own workouts using the resistance of the stroller with her son in it. Stroller Strides now offers franchise opportunities in 45 states.

Druxman noted that while Stroller Strides is a great option for anyone passionate about fitness, it’s particularly great for entrepreneurial-minded moms who want to run a successful solo operation.

“There are so many moms out there who want to work, contribute and to have something stimulating and rewarding in their life, but who also want to have it fit with their family,”  Druxman said.

Stroller Strides franchisees are home-based, and most work just a few hours each day.

In addition to a flexible schedule, the franchise program also allows for creative locations. Classes can be held anytime, and anywhere, a mom can walk with a stroller, whether that is outdoors, in a park, the gym or a mall.

Depending on the size of the territory, a Stroller Strides franchise investment ranges from $3,700 to $6,050. From there, the size and scope of the franchise varies. Some franchisees care to teach just a few classes each week, while others offer several weekly classes at multiple locations throughout the franchise territory.

“We totally support both desires so long as the classes are great for the clients,” Druxman said.

3. Lawn Doctor

If the thought of a lawn service conjures images of a dump truck and mom-and-pop operation, you haven’t encountered Lawn Doctor. The 45-year-old company has carved an industry niche through a focus on innovation, both for customer lawn needs and franchisee operations.  In addition, franchise owners can work a flexible schedule, and provide services as a solo operation.

With 450 franchise locations, Lawn Doctor is the nation’s leading lawn service and care company.  Scott Frith, Lawn Doctor’s VP of marketing and franchise development, advised that potential franchisees who are outdoor-loving, goal-oriented business people with some prior sales experience consider it as a franchise opportunity. In a lagging economy, consumer demand remains strong for the service, with 2010 sales up 17 percent over the year prior. Further, Frith noted that “franchise owners maintain a system wide gross profit margin of 68 percent.”

Because the industry is founded on repeat service, franchisees are well-poised to “mushroom” business for continued growth. Frith said that Lawn Doctor has “the highest retention rate of any company in our industry at approximately 80 percent, which indicates a high level of satisfaction in our services and creates a platform for selling additional value added services.” Lawn Doctor’s goal is for franchisees to break even by year two of operation.

Owning a Lawn Doctor franchise requires a total investment of $80,000. The company also offers in-house financing to aid potential franchisees.

4. Safeguard

For more than 50 years, Safeguard has supplied businesses with needs ranging from checks, forms and filing systems to full-color printing, promotional products, apparel and online services. A subsidiary of Deluxe Corp., a $1.4 billion company, Safeguard currently has nearly 250 franchisees.

Scott Sutton, vice president of franchise development for Safeguard, said that the most successful franchisees are those that thrive on building and maintaining strong, solutions-based business relationships.” The nature of the business imposes no geographical limitations to the brand and each market in the country is a target market, Sutton said. Safeguard recommends that potential franchisees have about $75,000 of available capital to get started. 

One particularly appealing feature Safeguard offers franchisees is the ability to work solo from home, while leveraging constant support. Through “Base Connection,” franchisees are connected with skilled customer service reps who are housed in Safeguard’s corporate offices. Franchisees can route their customer service numbers to Base Connection, ensuring that a person is always at the ready to address customer needs.  Further, it allows franchisees to spend time building the business instead of handling administrative issues, and ensures that Safeguard’s 73 percent annual customer retention rate stays intact, Sutton said.

Safeguard franchisees are also free to maintain the kind of business they choose. Sutton noted that the company provides significant levels of support to each type of franchisee — those that want to grow and those that want to remain smaller.

5. Mom Corps

If you’re seeking flexibility in a franchise, Mom Corps is founded on that very philosophy.  The company bills itself as a national staffing firm that connects progressive employers with experienced talent looking for flexible work. Mom Corps currently has 14 franchise markets, and is quickly expanding into other metro areas.

The company is focused on matching established employers with experienced, highly skilled candidates who seek flexible work alternatives for optimal work-life balance.

CEO Allison O’Kelly started Mom Corps out of her own personal experience juggling the demands of corporate life and family. Realizing the need for an alternative work scenario, she started her own practice serving small businesses in a consulting and financial planning capacity. Seeing the demand for her services, O’Kelly was eventually driven to fundamentally change the way companies fill their intermittent staffing needs and founded Mom Corps, she said.

The startup cost for a Mom Corps franchise is $25,000. As a staffing business, franchises have low operating costs and overhead.

“The biggest investment is made upfront to get up and running,” O’Kelly said. She also said the most successful franchisees have sales experience as well as a background in professional services and should thrive on working independently (but with the support of a great team and franchise network behind them). The brand has been nationally recognized in media outlets like The New York Times, CNN and “Today.”

Popularity: 9% [?]

Out of Work? Invest Time, Savings, in Franchises!

March 7th, 2011

(Buy A Franchise Unlimited)

As job growth continues to sputter, some frustrated or laid-off workers are taking an alternative route to finding new employment.

They’re opening their own businesses, often through the world of franchising, in which they take someone else’s successful business concept and run with it toward the goal of becoming financially independent.

Jumping into business by buying a franchise doesn’t come without risks, though. Costs can run from $20,000 to several hundred thousand dollars to get started. And not all franchise parent companies offer their offspring the same level of marketing, back-office and sales support.

“Fire Your Boss!” screams a banner over several booths in the Nashville Convention Center during a recent two-day Franchise Expo, an event designed to put would-be small-business owners in touch with franchise opportunities.

“A lot of people are tired of working for someone else — and tired of the uncertainty that comes with that,” said Judy Moreland, coordinator of the Nashville event. Franchise opportunities range from sandwich and yogurt shops to quick oil change outlets. The least expensive options often attract first-time business owners who may be less savvy about the financial risks and only dream of the possible rewards.

At a marketing booth for Yogurt Mountain, the chain’s franchise vice president, Brian Robinson, said that about 40 percent of would-be entrepreneurs inquiring about opening one of the Birmingham-based company’s stores “are people who have lost their jobs and are down to the last of their savings.”

The company came to the Nashville expo because it hoped to find its first franchisees in Middle Tennessee, said founder David Kahn, who started selling yogurt in late 2009 after getting out of a Blockbuster video rental business.

Franchising is an idea I’m ready to embrace,” said Lewis Cleaton, who took early retirement in 2008 after 31 years with General Motors to avoid being laid off at the automaker’s Spring Hill plant. He’s been looking for some other line of work since.

“I’m not ready to retire, but I am at a place in my life where I want to find something I’d enjoy doing,” Cleaton, 55, said. He was visiting booths at the expo to see which franchises might fit his key criteria: something simple, inexpensive and not too time-consuming that he could do from home.

Some first-time franchisees use Small Business Administration loans to get started, but business analysts say tight credit during the past three years has slowed the rate of growth that the franchise world typically sees.

“The SBA had been the lender of last resort in the past, but lately it has become the primary lender,” said Alisa Harrison, spokeswoman for the International Franchise Association, a trade group. “We’re trying to get the banks more comfortable about making loans. Once we get credit flowing again, we will see franchising begin to grow as it did in previous recessions.”

Ideas abound, but costs vary.

Franchise ideas are almost limitless, with more than 3,000 companies now offering franchises, according to the Washington-based International Franchise Association.

Many franchises are quite well known — such as McDonald’s, Subway and Pizza Hut — and some of the most famous ones come with expensive buy-ins. Others are less visible, but they may offer modest startup costs and the ability to work from home in some cases.

Among the possibilities are senior-care services, one of the fastest-growing franchise fields because of the aging of baby boomers and their need for health care, said Joel Buckberg, a franchise attorney with the Baker Donelson law firm here. He coordinates quarterly franchise conferences.

“There are some franchises as low as about $5,000, and some that go into six figures,” he said. “The frozen-dessert segment is hot now, along with any kind of services that can be provided from your home. Those include such things as employment agencies, cleaning services and business consulting.”

Although Lisa and Bill Meek of Murfreesboro had good jobs, they started searching for a small-business opportunity in hopes of becoming their own bosses. They found a unique (if somewhat stinky idea) in the Charlottesville, Va.-based DoodyCalls, a pet-waste pickup service that offers franchises.

The business involves removing dog waste from people’s yards or cleaning litter boxes for people with cats. Anyone calling the company to inquire about the service is greeted with a tongue-in-cheek phone message: “We’re No. 1 in the No. 2 business.”

“Yes, we heard a plethora of jokes when we told our friends we were going to do this, but we’ve been at it for a little over two years now, and I’ve already quit my other job,” said Lisa Meek, who used to be a physical education teacher. “I’m already making more money.”

She said her husband read about DoodyCalls in a newspaper ad.

“When he first told me about it, I said, ‘You’ve got to be kidding.’ But we fell in love with the idea, and it’s perfect for us.”

It cost the Meeks roughly $25,000 to start the business, besides buying a truck to drive to clients’ homes. They took out a Small Business Administration loan to help.

One key to a successful franchise business is finding a parent company that provides marketing, accounting systems and other key services. The Meeks rate DoodyCalls as a good partner in that respect.

“We have done our own marketing, but we get lots of referrals from the company’s website, and they pretty much taught us everything we needed to know to make our business a success,” Lisa Meek said.

Buckberg advises clients to check out a franchise carefully before signing a contract.

“There are a lot of concepts that have done well, and some that have not done so well,” he said. “I always suggest that you talk to people already in the business to find out about their experiences.”

Franchisors often give potential new owners help finding a good location, along with other training. Many franchise parents take new owners to a training site at the corporate headquarters or a flagship store for a few weeks to drill business routines into them.

“With a franchise, you benefit from the learning curve of people who came before you,” Buckberg said.

Some people choose to buy an existing franchise location, but most owners start from scratch.

That’s exactly what Scott Snover, who operates a FastSigns location in Antioch, did.

He moved to Nashville from Dallas in 1994 to open the business, having scouted around the country for a good location. Today, he’s the largest FastSigns franchisee, and his business making signs and banners of all descriptions grossed more than
$5 million in sales last year.

“I was a tennis professional after college, but I didn’t want to do that forever,” he said. “I stumbled across FastSigns, and because I had a computer background in college, decided it was the right business for me.

“I came to Nashville for the first time to scout out the area, and after eight hours decided this was the place. I didn’t know anyone here, so I started from scratch with an investment of about $150,000.”

Even with the more liberal lending rules of the SBA bolstered by last year’s federal Jobs Act that raised the limit on small-business loans to $5 million (up from
$2 million), “financing remains a challenge for everyone,” Buckberg cautions would-be franchisees.

But the SBA has a program specifically to help people seeking loans to start franchised businesses, said David Tiller of the agency’s Nashville office. The SBA has a “franchise registry” that lists companies whose business plans the agency has reviewed and approved.

“All of our loans are open to franchisees, and they range from $5,000 to $5 million,” Tiller said.

The SBA recently made two large franchise business loans, including one for $4.95 million to a company setting up a DirectBuy warehouse in Brentwood, Tiller said. Community First Bank & Trust in Columbia facilitated the loan through its Franklin office.

Jerry Woods, Community First’s senior vice president and chief lending officer, handled the paperwork. He said the bank actively seeks good candidates for small-business loans, especially those seeking to open franchises.

“The first thing we do is make sure they’re on the SBA registry,” he said of the business concepts. “If they’re not, that doesn’t mean we can’t get them registered, but the SBA has to review their documents. Most experienced franchisors know this, and they make sure they’re preregistered before they go out to market.”

The amount of a loan “depends on the type of industry,” Woods said.

“A popular sandwich shop franchise can run in the tens of thousands, but we’ve done hotel franchises, too, and those can run into the millions. It’s really all over the board.

“If it’s a startup and an owner has no direct experience, I like to see the borrower put in a third of the project’s costs,” Woods said. “If we don’t do that, it’s just too highly leveraged.”

Also important is a good business plan, he said.

“We have to plan for the unforeseen. I need to see their projections on income and profits for the next two years, and cash flow needs for the first 12 months. We work hard with people to determine what their cash-flow and marketing expenses will be. Sometimes they underestimate that, and it can cause them to run into trouble.”

Subway sandwich shops are among the most successful franchises, especially for people with smaller amounts to invest, Woods said. “They have done a spectacular job of selling franchises,” he said. “They have a relatively low cost of entry, and they do a pretty good job of supporting franchisees.”

The SBA’s Tiller said prospective borrowers need “reasonably good credit,” but the approval criteria vary widely and are set by individual banks reviewing the loans. SBA guarantees the small-business loans.

“Some require really high credit scores, but each one has a different outlook on what is considered good credit,” he said. “All of them require a business plan and a thorough package of franchise information.”

(Buy A Franchise Unlimited)

Popularity: 8% [?]