Moto Photo Finds New Identity As Moto Franchise Corp.

(Sunday, June 01, 2003) - Harry D. Loyle is excited. He is president and CEO of a new company, MOTO Franchise Corp. (MFC) after buying the assets of Moto Photo Inc. with five area developers in February 2003; the changing photo industry is offering new digital opportunities; and he is in the process of moving his family from their New Jersey house of 22 years to Ohio. There are lots of changes for Loyle; here is a look at how he acquired the Corporation and what he plans for the future.

The history


Harry D. Loyle, president and CEO of MOTO Franchise Corp.

In 1974, Loyle and his wife Barbara bought a small camera store in New Jersey, and turned it into a multi-store location. In 1985, they were looking for more ways to grow and found Moto Photo Inc., Dayton, Ohio, at the Photo Marketing Association Trade Show. They bought their first MotoPhoto franchise, along with acquiring the area developer rights for New Jersey. Loyle continued to invest in Moto Photo Inc. and became the largest stockholder.

About eight years ago, Moto Photo Inc. started having financial problems. Moto was unusual, as it represented both a brand name and a franchise store, Loyle explains. "Even though Moto had a great consumer brand, it wasn't financially successful." In June 2002, Loyle resigned from the Moto Photo Board of Directors and started strategically planning a proposal to buy the struggling company. Even after coming up with a good agreement of sale, Moto Photo Inc.'s debt still needed to be addressed.




Moto Photo files for bankruptcy

In November 2002, Moto Photo Inc. completed a 363 Filing in bankruptcy court and filed for Chapter 11. Moto Photo Inc. was in bankruptcy for less than 70 business days when the judge ruled the sale to Loyle and the developers was the best option. The purchase, for about $2.7 million, subject to some adjustments, was agreed upon and settled Feb. 10, 2003; and MOTO Franchise Corp. was born.

MFC, now the franchiser of the 269-store Moto Photo chain, began with most of the same management in place. "We made the decision early on this was not a people, industry, or franchise issue," Loyle recounts. "It's really a financial issue." Through the transaction, MFC continued its strong relationship with supplier Eastman Kodak Co., Rochester, N.Y. Kodak did not invest any money in the transaction, but shared data and ideas, says Loyle. MFC plans to continue working with Kodak to expand its digital offerings.



MFC's new decision models
MOTO Franchise Corp. is still located in Dayton, and remains similar in appearance to Moto Photo Inc.; but it is different in how it acts, explains Loyle. Early on, MFC drew up three main decision models to judge what is done as a company. The first model is for the MFC to view the franchisee as its customer. Already the franchisee forum has been expanded with new bylaws and officers, and Loyle thinks this forum will act as a good communication outlet between the franchisee and franchiser.
The changes may not be obvious to the consumer yet, but Linda I. Kramer, senior vice president of Operations, says it's immediately apparent within the walls of MFC. The "franchisee is our customer" model is very different from the prior model where the franchisee was considered our partner, Kramer explains. The franchisees already considered themselves customers, she says, so the switch in mindset has big implications.
The second model asks MFC to view digital as a new industry, not an extension of the old industry. To break into the digital industry, a store can't just add a digital minilab, says Loyle. As a new industry, it needs equipment, financing, training – all the things needed to start a new business. "The transition to digital is a revolution, not an evolution," he explains, and this is a different view from Moto Photo Inc.
This model shows we need to be promoting digital imaging more through public relations because it's a new industry, Kramer says. Customers don't really care that


Linda I. Kramer, senior vice president of Operations; Harry D. Loyle, president and CEO; Alfred E. Lefeld, vice president and CFO, stand in front of a MotoPhoto store in Dayton, Ohio.

it's digital, she says. They want to know what the benefits are to them. In general, MFC's marketing and public relations will have more of a digital focus. MFC's Imaging Consultant Training Program incorporates that digital focus by providing digital training to associates. Also, half the franchisees have digital minilabs and the capability of providing prints from digital media in an hour. Stores with portrait studios are converting to digital capture and proofing, and are providing photo enhancements to customers.
The last model recognizes MFC has system-wide financial responsibility. "Now, we clearly have the company positioned so we have a much better balance," Loyle says. He sees his job as one that nudges the organization out of the old habits of doing things, and that's why so much focus is placed on the mutually agreed upon decision models. "Old habits are hard to break," Loyle says. "We are better capitalized and financed than the old company. We don't need the money, we need the customers." System-wide financial responsibility also entails lowering prices franchisees spend on products from MFC, he says.
Kramer thinks Loyle brings a new leadership package and approach to management with his models, and these processes will allow the company to make better decisions. "We have never taken this kind of an approach in the past," she says. "It's never trickled down throughout the whole system."

MotoPhoto franchises
MFC wants to provide a compelling reason for its MotoPhoto stores to be more consistent in their look and feel. "We are recognizing the strength of a franchise system is in being a system," Loyle says. "We will be looking for more ways to speak uniformity to the customer." Consistency would also include product purchasing and similar brand standards. Digital imaging will play a more prominent role in franchises as well.
MFC demonstrates its push for digital and PR-focused marketing in two of its franchise promotions, Kramer says. Digital imaging is plugged into the Club Program. In this program, customers purchase an annual Club Card to receive upfront benefits and ongoing promotions like 25 percent off all processed prints, and now digital prints, too.
The second promotion is the Managing Information on Lost Kids (MILK) program, which has been running for two years. In this program, MotoPhoto franchises take digital photos of babies, infants, and children; put those images on a CD or floppy disk; and provide parents with software so, if their children are ever missing, the images can be immediately sent over the Internet to the necessary organizations. MotoPhoto encourages parents to update their children's photos every six months, and each sitting through the MILK program is free. Not only is the promotion for a good cause, it shows customers what digital imaging can do, Kramer says.

Marketing plans
These examples are just the start of what MFC is doing differently based on drafted decision and business models, Loyle explains. MFC plans to promote its digital services through public relations by pushing PR to individual stores' media five times a year. Loyle says other plans include reallocating advertising dollars by taking some away from digital services and putting it back into the more traditional silver-halide services. MFC wants to offer more third-party validation, Loyle says, through educational opportunities for customers, and company participation in charities and nonprofit organizations. And MFC is considering encouraging the home printing market. Loyle says MFC wants to give the consumer more potential options, even though it may sound contradictory.
MFC faces the same challenges as any company in the photo industry, but it hopes to grow and change with its new identity. "We are, in fact, a specialty retailer, and they look and smell and act differently," Loyle explains. "We don't have to, as a system, move the industry. We only have to lead the industry."

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