From the June 1997 issue of Entrepreneur

The time is ripe for franchise expansion. Here's what two major franchisors have in store for the coming year and beyond:


  • Consumer electronics retailer RadioShack, a division of Tandy Corp., unveiled its RadioShack Select program in January in an effort to expand its distribution network by establishing co-branded locations over the next five years. The Ft. Worth, Texas, company expects to add 1,000 new dealerships to its current tally of 6,800.

RadioShack Select is targeting nearly 2,000 towns across the nation the company considers too small to support a full-scale store, explains Leonard Clegg, vice president of the dealer franchise division. Approximately 75 new dealerships are already operational.

So what makes a perfect candidate? "We're looking for the most successful retailers in these towns who have already established businesses and are looking to expand," Clegg says.


  • San Diego-based Mail Boxes Etc. is also looking for growth by way of area buybacks. For the past few years, the postal and business services franchisor has looked into purchasing those area franchises across the nation that meet one of the following criteria: They do not meet the necessary performance standards; they have matured so well, they now look like a prolific investment for the corporation; or the franchisee wants to sell.

Some 22 area franchises had been repurchased as of March; more are expected this year. Says Mail Boxes CFO Gary Grahn, "We're the best buyer an area franchisee has."

Franchise Forecast

Franchising is expected to grow by leaps and bounds--at least according to the findings of a recent study. Conducted by international executive search firm Franchise Recruiters Ltd. in Chicago, the fourth annual Franchise Business Development Survey looked at 100 of the fastest-growing U.S. franchisors to determine expected expansion areas and the reasons why.

"Franchising plays a leading role in the economy," says Jerry Wilkerson, president of Franchise Recruiters.
"It's a microcosm of the economy because it [covers] so many industries."

The good news: Franchising in the United States is predicted to increase by as much as 15 percent in all industries. Wilkerson says more international expansion is also on the horizon as American franchisors look to enter new areas; many companies have started the move or are already overseas.

Wilkerson predicts an increase in co-branding, too, because companies will be looking for new partners as part of their expansion plans.

What does all this mean? Wilkerson explains that when franchising is thriving, so is the economy as a whole. "Franchising has always led the economy in growth," he says. "When franchising starts to drop, the economy follows." For now, the future of franchising looks bright.

Dining Demands

Listen up, all quick-service restaurant franchises: A recent survey of more than 1,000 consumers nationwide found that convenience and speed were the top two factors influencing respondents' choices of fast-food eateries. Price ranked a surprising seventh on the list of concerns behind easy access and friendly service.

"Yes, price is an element, but there are other factors that come into play as well," explains Sheila McCusker of Advo Inc., the Windsor, Connecticut, direct-marketing company that designed the study.

The survey also found that younger consumers aged 18 to 24 rated restaurants with drive-thru windows nearly 20 percent higher than did those aged 50 and older. And when it comes to loyalty, pizza restaurants seem to have what it takes to keep hungry customers coming back: Nearly 50 percent of pizza eaters stick to their favorite chain vs. 25 percent of those who prefer burgers or chicken.

Field Of Dreams

There's nothing more exciting for a child than meeting his or her hero. And ever since Minneapolis-based Novus Windshield Repair Inc. decided to sponsor the Youth Baseball Clinic, that dream has become a reality for hundreds of kids nationwide.

This year, two Novus franchisees will each organize a five-hour clinic for children aged 7 to 12 in their communities. The clinics are free for the 400 to 600 children who participate each year; parents and others in attendance are asked for a $5 donation. Proceeds benefit the charity of the franchisees' choice. Last year, franchisee Michael Cass in Bloomington, Illinois, generated funds to support Mothers Against Drunk Driving (MADD).

The clinics mix tips on hitting, fielding, pitching and infield/outfield play with encouragement in good citizenship, such as the importance of getting an education and staying away from drugs and alcohol. The messages hit home runs with the children, partly because they're delivered by famous former baseball players such as Paul Blair of the New York Yankees and Bert Blyleven of the California Angels.

Leo Cyr, Novus' marketing director, says that although organizing the clinics is a lot of work for the franchisees, it's well worth the effort. "If you can help the community and get a certain amount of positive press for your business, then everybody wins," Cyr says. "And if you can benefit children at the same time, you have three winning situations."

Nothing But Net

According to the latest figures, more than 37 million users are connected to the Internet in North America alone--and half these logged on within the past year. Riding this techno-heavy wave are two innovative franchisors.

First Internet Franchise Corp. in San Clemente, California, offers franchisees the opportunity to become Internet service providers (ISP). With training from the franchisor, franchisees can offer customers local access to the Internet, design and host Web sites, and sell dedicated lines for businesses.

If you're not techno-savvy, not to worry: First Internet manages all the technological aspects so franchisees are free to spend their time marketing the business.

Another company offering Internet franchises is Z Land Inc. in Santa Ana, California. Z Land is not an ISP; rather, it franchises a high-tech Internet product which allows its franchisees to offer local community information and business services on the Internet. Franchisees' Web sites provide everything useful to a community, from Yellow Pages and classifieds to university information. Franchisees also help local businesses create interactive Web pages for online shopping services.

After an intensive four-week training course, Z Land helps franchisees through phone support or in-person visits.

Making The Grade

For students at Eaglecrest High School in Aurora, Colorado, learning firsthand how to operate a franchise is just part of a typical school day. That's because the juniors and seniors taking the "Marketing Education" elective also work as paid employees and managers for the on-campus, school-owned 7-Eleven.

The franchise, which is one of two school-owned 7-Elevens in the nation, has been operating since the fall of 1990. Each semester, after filling out job applications and going through interviews, 40 students rotate responsibilities such as ordering, bookkeeping and marketing. That way, each has an opportunity to get some business experience.

Although the store's primary goal is to educate, it also raises money for campus clubs. A portion of last year's sales of $172,000 went toward fund-raising efforts.

By encouraging entrepreneurial spirit in students, the program has inspired many former participants to become business majors in college.

Stamp Of Approval

By Janean Chun

After a lengthy, sometimes controversial process, the Small Business Administration (SBA) recently created a central registry for franchises, the system by which franchisees would be deemed eligible for SBA-guaranteed financial assistance. Previously, franchisees would apply for loans with SBA attorneys in district offices, which resulted in problems including delays and inconsistencies in the approval process.

The new procedure should be faster and more efficient than the old way, says Ronald Matzner, SBA's associate deputy general counsel. "Instead of waiting weeks for an eligibility decision," he says, "the franchisor and franchisee will get a response within hours."

The registry is the result of an almost yearlong debate between the SBA and franchisors, franchisees and lendors, which was spurred by the SBA's initial proposal: that franchisors sign a supplemental agreement to their loan application addressing eligibility issues.

Though the registry, which should be up and running this month, is different than the SBA originally envisioned, Matzner is satisfied with the results. "The industry really did come up with a better program than we started out with," he says. "It streamlines the process, which is all we really [wanted] to do. I think it will certainly benefit franchisors and franchisees mutually."

Earnings Curve

Just how much existing franchisees earn is one of the most sought-after pieces of information among prospective franchisees. A recent Federal Trade Commission (FTC) statement may keep it one of the most mysterious aspects of franchising as well. In its first formal step toward revising its Franchise Rule, the FTC published an Advance Notice of Proposed Rulemaking indicating a disinclination to mandate franchisor disclosure of franchisee earnings.

"The FTC has always been concerned that franchisor earnings claims have as great a potential to mislead as they do to inform," says Neil A. Simon, a franchise attorney with Hogan & Hartson in Washington, DC. "The FTC sees prospective franchisees getting this information anyway, from other franchisees in the system and by researching the industry."

Yet some still see mandatory claims as an open issue. "The FTC's notice simply says they weren't persuaded yet," contends Andrew Selden, a franchise attorney with Briggs and Morgan in Minneapolis. "The challenge to franchisee interest groups is to contribute information to the record that would support [mandatory earnings claims]."

Another looming factor is the state rule regarding earnings claims, which is still being deliberated by the North American Securities Administrators Association (NASAA). Most predict NASAA will recommend state guidelines be revised to require disclosure of financial performance, leading to an interesting conflict.

"Whether the states, by mandating a higher level of protection, trump the FTC, or whether the FTC flexes its federal muscle and preempts [the states], that's an unresolved question," says Selden. "Once NASAA releases its decision, the two [groups] will have to sit down and work out a practical solution."

And The Winner Is...

By Holly Celeste Fisk

When Jackson Hewitt Tax Service ran a drawing for its Franchise Territory Giveaway, the entries poured in. The Virginia Beach, Virginia-based tax-service franchisor began the promotion in June 1996, offering a free franchise territory to the winner. Anyone who submitted the names, addresses and phone numbers of five tax preparers not affiliated with Jackson Hewitt was eligible to win the territory, valued at $20,000.

The lead-generating promotion was a success for Jackson Hewitt. "We generated 2,561 leads," says Marty Mazer, Jackson Hewitt's vice president of franchise development and company store operations.

And the lucky winners? The Skidmore family of Cumberland, Maryland. "We just went on a scavenger hunt looking for names of people who did taxes," says Brenda Skidmore, 44, co-owner of three Jackson Hewitt locations in Cumberland and LaVale, Maryland.

The Skidmores' business was already a family affair: Brenda co-owns a territory with husband Tom, 44, for which daughter-in-law Bobbi, 31, is the marketing director. Now their son Tom Jr., 25, will run the new territory in West Virginia or Pennsylvania. "We didn't want to do a shoddy job," says Brenda, so the new franchise won't be up and running until next tax season.

Tom and Brenda worked for H&R Block prior to becoming Jackson Hewitt franchisees six years ago. The prize will help the Skidmores expand. Says Brenda, "We plan to buy all the territories touching ours."

Contact Sources

Briggs and Morgan, 2400 IDS Center, 80 S. Eighth St., Minneapolis, MN 55402, (612) 334-8485;

Eaglecrest High School, 5100 S. Picadilly St., Aurora, CO 80015, (303) 699-0408;

First Internet Franchise Corp., 1060 Calle Cordillera, #101, San Clemente, CA 92673, (800) 617-4227;

Franchise Recruiters Ltd., 3500 Innsbruck, Village of Crete, IL 60417, (708) 757-5595;

Hogan & Hartson, 555 13th St. N.W., Washington, DC 20005, (202) 637-5729;

Jackson Hewitt Tax Service, 490 Country Club Mall, LaVale, MD 21502, (301) 729-0315;

Jackson Hewitt Tax Service (headquarters), 4575 Bonney Rd., Virginia Beach, VA 23462, (800) 277-3278;

Mail Boxes Etc., 6060 Cornerstone Ct. W., San Diego, CA 92121, (619) 455-8992;

Novus Windshield Repair Inc. (headquarters), (800) 328-1117, (http://www.novuswsr.com);

RadioShack, 100 Throckmorton St., #1000, Ft. Worth, TX 76102, (817) 390-3499;

Small Business Administration, (800) 8-ASK-SBA.

Z Land Inc., (714) 708-8580, jveenstra@mail.zland.com.