Small Firm Finds Right Franchise

(Tuesday, June 26, 2007) - Norman Holtz developed an eye for promising business models in his decade of overseeing corporate acquisitions. So when he left that world to buy a franchise, he cut quickly through the chaff.


His preferences included a franchisor that ran its own business, a contract with flexibility on buying supplies, and a selling area big enough to grow in.

After two weeks of research, he found a match in Closets by Design -- a purveyor of custom-crafted storage and home office space – and an available territory in northern New Jersey.

Most important, the former chief financial officer said, he discovered a business model that suited his interests and desire for scalability.

"You don't buy a franchise to be an innovator," he said. "You have to pick something so that, if you succeed, it's a place you want to be at. If we went into doing home inspections or selling pretzels, I don't think we would have enjoyed it even if we were successful."

Closets by Design, Carlstadt
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Franchise owner: Norman Holtz

Purchased: 2002

Employees: 55

Revenue: $6 million +

Territory: Northern half of New Jersey

Advice to prospective franchisees: "Make sure the end result is what you're looking for," Holtz says, "and understand what failure is – it means losing everything."

In going with a closet company, his wife Nadine's broad background in interior design and sales didn't hurt.

"Norman saw this business and said, 'This is something both of us can do,' " she said in the couple's showroom one recent morning.

The Holtzes emphasize speed in their jobs, which are nearly all residential and range from $500 to $100,000.

All manufacturing is done in Holtz's 20,000-square-foot warehouse off Washington Avenue. He and his wife employ 20 full-time sales representative-designers, enough so that customers can usually set up next-day appointments, the couple said.

"I tell people that we are the most reliable contractor they will hire," Norman Holtz said. "We are often delayed because a painter or floor guy didn't show up on time or finish when they were supposed to. When we set an installation date, we don't change it."

To that end, Holtz, 51, has invested in $500,000 worth of machinery to cut and shape doors, panels and wood detailing.

"I don't know how to turn any of them on but they're sound," Holtz yelled over the cacophony of circular saws.

"The real cost is not the machines, though. It's to fund your operational losses until you break even."

The California-based franchisor was just two years old when he bought his franchise in 2002. In a region where some customers expand their homes just to add closet space, Holtz said he was able to turn a profit in eight months, and says the business is now growing at 15 percent a year.

"If you buy a retail outlet, you can be limited by the store radius, where the only growth comes from buying up other outlets," he said.

"In this business, you get a territory you can develop." Holtz's territory is New Jersey north of Princeton.

He spends about $600,000 a year on print advertising -- above what he pays the parent company in ad fees. That has gotten him notice, but the designers are his larger investment, Holtz said.

"You're not going to buy from me because of our advertisements," he said. "You're going to buy from us because we sent you the more qualified person."

New designers are trained for a week or two, then given progressively more difficult jobs. Holtz said he offers a 401(k) plan, health benefits and pay meant to be competitive with what installers could make on their own.

Holtz's 20-year career at the Interpublic Group advertising agency – including a role in acquiring about 100 companies -- ended after 9/11 when he lost his position as a divisional chief financial officer in an executive shakeup.

"For someone losing a job midlife is very challenging," he said. "For me, I quickly said, 'OK, let's look for something else.' I had a severance package and was able to use it to move quickly into this business."

With his corporate background, he liked that his chosen franchisor was itself in the home-design business.

"It's good to have a franchisor that is very connected to the business," he said. "Because they're such a leader I can leverage off their experience and get great promotional expertise."

Unlike some franchise arrangements, he doesn't have to buy all his materials from the parent. Yet the company's patterns and designs have varied appeal, Nadine Holtz said.

"It lends itself to people who want simple/no frills and others who want a more elaborate look," she said. "That leaves plenty of room for creativity."

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