Franchising In America

(Sunday, October 24, 1999) - When AAMCO got into the franchise business 36 years ago, the entire concept of franchising was a relatively new one. Now franchising dominates not only the automotive repair industry, but fast food, hotels, restaurants and a host of other industries. "In 1963, franchising was a rather unique undertaking, and we were one of the first in automotive repair to try it," says Bruce Schmidt, marketing director at the AAMCO corporate home office in Bala Cynwyd, PA. "But through the years, franchising has had a much higher success rate than starting a business on your own."

Franchising has been flourishing in the 1990's because brand recognition has become more and more dominant as a marketing tool. "The bigger the name, the more business you do – and that has become a fact of life in the U.S. and around the world," says Bill Winters, president of Franchise Partners International, a franchise consultancy based in Fort Lee, NJ.

Brand awareness has helped the PostNet International Franchise Corporation add more than 650 franchise locations in 12 countries since it began franchising its mailbox rental and package shipping/receiving business in 1993. "Above all, the franchise provides brand-name recognition to attract customers to its doors," says Ken Ross, vice president of global development for PostNet, the country's second largest franchiser of packaging and business center in the commercial mail receiving industry. "A franchise needs to have a recognized brand name to thrive."

Advertising, brand name recognition and marketing are the keys to the turnaround at Pudgie's Famous Chicken, a skinless fried chicken chain of 35 stores in the New York metropolitan area. Franchisees at Pudgie's hold monthly meetings to decide how to apportion their advertising dollars, as well as to discuss menu changes and other issues important to the chain as a whole. "That doesn't happen in many franchises," explains Jeffrey Bernstein, Pudgie's president and CEO. "We try to operate on consensus."

In other words, success depends on more than simply a great product. "Our best asset is always our product, but what has made us successful for the last 10 years is to put the infrastructure and the support systems behind the product – making it an efficient model to serve that product," says Sue Hoover, executive vice president of marketing at the Denver-based Quizno's Corporation.

BUSINESS-TO-BUSINESS FRANCHISES

One of the biggest growth areas in recent years is the spread of franchising beyond retail to the business-to-business service sector. Because the service is business-to-business, franchisees can work from home, and don't have to buy real estate or heavy equipment to get started. Bevinco is a business-to-business concept begun in 1988 by restaurateurs in Toronto that monitors alcohol theft in the bar and restaurant industry. "Every bar has a problem – and when the bar owners hear of our system, they recognize immediately that we can help them, and they sign on," explains New York master franchise owner George Jinagyros. "They know we are putting money into their pockets – and the results show up in the detailed reports we make on their alcohol inventory."

Alphagraphics Inc. is a rapidly growing Tucson, AZ – based digital design, copy and print services franchise that focuses primarily on servicing business customers. "A retail oriented, do-it-yourself print shop is a very different type of business from the one that we run," says Alphagraphic's director of franchise development Dan Bish. "We made the move to bring in computers to send digital documents across our Alphalink network long before it was common to access the Internet. Now that we have expertise there, we can help business customers do the same. Once our business customers started accepting digital transmissions as a way of life, our business, as a provider of digital print services, has really taken off."

HOME-BASED BUSINESSES

With 400 franchises in 45 states, CruiseOne Inc., based in Deerfield Beach, FL, calls itself, "The first and the original home-based, cruise-only company." For a franchise fee of $9,800, CruiseOne franchisees get a seven-day training course in Fort Lauderdale in which they inspect ships, and learn the various marketing and advertising techniques to find customers.

The theory is that home-based businesses save both time and stress, and are therefore more productive –especially for workers who want to be at home to take care of children. "We sell a complete turn-key operation," says Vivian Ewart, vice president of operations for CruiseOne, which sells more than $85 million worth of cruises a year.

FRANCHISING FOR KIDS

Educational child care franchises for young kids are another home-based business that is filling a niche in a growing demographic sector. "Every year, four million children are born, and the birthrate is on the rise," says Philip Schumacher, president of Goddard Schools, based in King of Prussia, PA. "For that reason, anything related to young children is very timely right now. The number of dual income families, where mom and dad make very good incomes, is also on the rise, and they are all looking for high quality care for the kids."

The same is true for Kiddie Academy International, a child care franchise for infants through age 12, based in Bel Air, MD, that began franchising in 1992. "When we started the business in 1981, child care was rarely heard of. Now, with more and more women and single parents in the workplace, there is a great demand, and child care has become a necessity, not a luxury," says Michael Miller, Kiddie Academy's president.

Kids are also the target market of the Vancouver-based Puckmasters Hockey Training Centers, a one-on-one hockey training center. "We took the approach of McDonald's or a FedEx and applied it to sports," explains Tom Matzen, vice president of sustainable development for Puckmasters.

FRANCHISING FOR RETIREES

Demographics and the changing economy have also played a role in the success of Handyman Connection, a Cincinnati based home repair franchise founded by two retirees. Co-founder Art Neuman, 68, was serving as maintenance chairman of his condominium association when he discovered the need for craftsmen to take care of simple home repairs for his condo owners. After teaming up with his partner, Marvin Belkin, seven years Mr. Neuman's senior, the two founded Handyman Connection, which today has more than 100 locations across North America. "We found a market for small-to medium-sized residential home repairs and minor remodeling – and at the same time, we found thousands of idle craftsmen out there who needed the work."

Handyman craftsmen need a minimum of ten years experience in the contracting business – and many are retired or downsized workers. "We've found a real niche," says Mr. Neuman. "Unless you have the talent yourself, or a nephew who is a plumber, homeowners don't know who to call to help, so they call us."

THE IFA's INTERNATIONAL FRANCHISE EXPO

The 40-year-old International Franchise Association, based in Washington, D.C., is the world's oldest and largest organization representing the franchise industry. The IFA's 30,000 business— format franchisers, franchisees and their suppliers span 70 industries in 100 countries.

The IFA's next International Franchise Expo will be held from May 5-7, 2000 at the Orange County Convention Center in Orlando, FL. The annual three-day event gives potential franchisees the opportunity to comparison shop for franchises – of which some 300 will be on-hand. Franchisee investments range from $5,000 for a home-based franchise to larger retail and multi-unit franchises costing more than $1 million, and cover many different industries, including automotive products and services, children's education, Internet services, home improvement and remodeling, food, mail services, printing, sports and security, to name just a few.

Of the more than 20,000 attendees, a quarter will be individuals and delegations from the more than 80 countries outside the U.S. that will be represented. "The IFE is really a great educational process for novices as well as experienced franchisees," says Richard Macaluso, show director.

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