From the September 1997 issue of Entrepreneur

Old habits die hard, it seems.

At least that's true for Pizza Hut Inc. founder Frank Carney and Boston Chicken Inc. founder George A. Naddaff. The entrepreneurs left their ventures years ago to pursue other interests--but now they're back, competing in the same industries they abandoned and against the companies they started.

Carney, who left Pizza Hut in 1980, took his pizza know-how to Louisville, Kentucky-based Papa John's International Inc., buying his first franchise in Houston in 1994. He now owns 48 restaurants in Missouri, Kansas and Texas and hopes to open 20 more in those areas within the year.

And Naddaff? The 67-year-old entrepreneur acquired grilled chicken franchise Ranch 1 last year.

For Carney, 59, becoming a Papa John's franchisee was a matter of taste--the company serves up pizzas made with high-quality ingredients. Last year, sales at Papa John's company-owned restaurants grew nearly 12 percent, twice the industry average. Meanwhile, Naddaff hopes Ranch 1's healthy chicken-and-pasta menu will redefine fast food. He expects to double last year's sales of $12 million.

Despite competition from their former companies, the restaurateurs remain confident. Says Naddaff, who plans to add 50 company-owned units in the next few years to Ranch 1's tally of 22, "I've had incredible success in this field. I understand the business."

Sweet Smell Of Success

By Connie Cousins

One pushcart in one shopping mall. That's how friends Marcelo Moreno, Marcos Moreno, George Percovich, Marco Pigozzo, and Luis Urcuyo, all in their 20s, started Scents of Nature Enterprises Corp. last year. In just one year, the company has emerged as a wholesale distributor of a vast array of incense products, essential oils, potpourris, and gift sets to more than 35 U.S. locations.

Their wooden pushcarts are displayed on the main walkways of major shopping malls. Each mall provides its own kiosk; the display is custom-designed by Scents of Nature according to the shopping center's requirements.

Though locations are mostly on the East Coast, the company recently signed with a business consulting company for exclusive rights to open 10 locations in the Caribbean within five years. They also plan to expand throughout the United States, Latin America and Europe.

Independent resellers lease space in shopping malls and can buy products from other distributors as well. In fact, they're not required to use the Scents of Nature name or display, but most do, says Percovich, "because we provide competitive prices and quality, test-marketed products."

The partners' business makes good sense: Projected sales for this year are wafting in at $1 million.

Revving Up Students

By G. David Doran

Auto shop students at 12 Kansas City, Missouri-area high schools have a brighter future in the automotive industry, thanks to a mentoring and scholarship pilot program sponsored by Jiffy Lube.

Heartland Automotive Services Inc., which owns seven Midwestern Jiffy Lube stores, designed the Jump on Life! program to give students interested in the automotive industry a head start. "Auto tech students typically don't get any recognition," says program coordinator Laura Muir.

Jump on Life! offers students management training through paid internships at one of 16 Jiffy Lube stores. The internship program has produced 15 graduates, all hired by Jiffy Lube after graduating from high school.

Participating schools get a boost as well: Those lacking the diagnostic equipment or training materials required to repair today's computer-controlled cars have been given more than $15,000 in supplies so far.

Muir believes this type of program is adaptable to other franchises. "There isn't a school in the country," she says, "that wouldn't welcome assistance from local businesses."

Good References

By C.C.

Franchisees of Handle With Care Packaging Store are getting more than just lip service from their corporate office. Through a national lead-generating program, the Englewood, Colorado, franchisor helps bring in additional sales for franchisees using a sales staff based at its headquarters.

A portion of the royalties that franchisees pay for marketing development funds the program. Last year, the staff of five placed more than 39,000 phone calls to prospective national accounts and reeled in sales of $1.5 million. Total sales last year were $45 million.

After the national account is on line, an automated system identifies the two franchisees closest to the customer, who then selects one to work with.

One of the goals of the program, says Handle With Care's Carl Pimental, "is to develop strong relationships between store owners and national accounts."

Ready To Go

By G.D.D.

If they build it . . . you'll open your franchise faster. In a trend that has gathered steam recently, franchisors are offering pre-built franchise locations.

Getting a franchise up and running usually takes anywhere from six to 16 months. Investing in a pre-built location, however, can considerably shorten the time frame. A pre-built Valvoline location in Indianapolis, for example, opened just 60 days after the franchisee signed the contract. "The best selling point of pre-builts is we've already identified the market at a site," says Les Fry of Valvoline Instant Oil Change Franchising Inc., which began selling pre-built locations last year.

Party Land Inc. in Plymouth Meeting, Pennsylvania, has taken the concept a step further. In 1995, the company bought 20 Hallmark stores, changed their names and then sold most of them to franchisees. "The appeal to the investor," says John Barry of Party Land, "is they'll be in a location with a track record of profitability."

Surfs Up

By Elaine W. Teague

Uncle Sam recently traded top hat and tails for surf trunks on "Business Opportunity Surf Day," aimed at identifying Internet advertising making unsubstantiated earnings claims. The Federal Trade Commission (FTC) and the North American Securities Administrators Association (NASAA) issued fraudulent advertising notices to 215 sites. The results? Follow-up visits found 37 sites removed from the Web and seven sites with false earnings claims removed. There's been no word yet whether the cited advertisers will be subject to further investigation, but the information posted on all offending sites was downloaded for possible future use by law enforcement officials.

With cyberspace abuse rampant, the FTC and NASAA plan to surf the Internet on a regular basis and recommend consumers take a cautious approach to business opportunities advertised there. Among their suggestions: Insist on written substantiation of earnings claims. And don't commit without consulting your accountant or attorney first.

For investor education and consumer protection materials, visit the FTC and NASAA Web sites at http://www.ftc.gov/opa/busops and http://www.nasaa.org

Get A Clue

By Janean Chun

Determining which franchises will survive has always been somewhat of a guessing game--one potential franchisees can hardly afford to lose. "It's hard for someone buying into a new franchise system to know which ones are going to grow into the next McDonald's and which ones are going to be utter failures," says Scott Shane, assistant professor of entrepreneurship at the Massachusetts Institute of Technology in Boston.

Finally, franchise shoppers have some tangible clues to follow, as a recent Small Business Administration study conducted by Shane reveals the three biggest factors determining a franchise's chances for survival:

1. Whether the franchise system operates in a registration state. Such regulation subjects franchises to greater scrutiny, which tends to separate the chaff from the wheat, says Shane. "Being in a registration state makes no difference to the good franchisors," he says, "while it is somewhat of a problem for the bad ones because they have to disclose their problems."

2. Whether the franchise system allows passive ownership. When a franchisee is not the person operating the franchise outlet, one of the major advantages of franchising is lost in these cases. "There's no entrepreneurial incentive," Shane explains.

3. How a franchise system is ranked in Entrepreneur's Franchise 500. "The ranking is a significant predictor" of franchise survival, says Shane. "Picking a [system] that is more highly ranked in Entrepreneur gives potential franchisees a slightly better chance at deciding which systems will be around 10 years in the future."

"These three factors," says Shane, "are easy to track down and give prospective franchisees a better chance than they'd have picking randomly."

Contact Sources

Handle With Care Packaging Store, (800) 344-3528, http://www.packstore.com

Heartland Automotive Services Inc., (800) 417-7308, ext. 37, fax: (402) 333-2338

Papa John's International Inc., P.O. Box 99900, Louisville, KY 40269, (502) 261-4098

Party Land Inc., (610) 941-6200, http://www.partyland.com

Ranch 1, 130 W. 42nd St., 21st Fl., New York, NY 10036, (212) 354-6666

Scents of Nature Enterprises Corp., 1450 N.W. 21st St., Miami, FL 33142, (800) 54-SCENT

Valvoline Instant Oil Change Franchising Inc., 3499 Dabney Rd., Lexington, KY 40509, (800) 622-6846.