From the October 1997 issue of Entrepreneur

In 1986, vacationing attorney Anthony Vidergauz reluctantly sat in on his mother-in-law's appointment to rearrange her closets. He never imagined he'd one day reorganize the closets and home offices of customers worldwide. Vidergauz liked what he saw at that appointment with a representative from San Francisco-based California Closet Co. Inc.--so much so that he soon left his home in South Africa to become the growing franchisor's legal counsel. "I believed in the company almost immediately," says Vidergauz.

Fast forward to 1994 and the purchase of California Closets by Vidergauz and his partner, Bill LeVine, founder of Postal Instant Press (PIP). While LeVine serves as chairman of the board, Vidergauz, now president and CEO, is taking California Closets to new pinnacles with the help of a new national marketing fund, implemented in 1996.

Franchisees, who overwhelmingly agreed to support the plan, contribute 3 percent of monthly revenues to the fund. This has enabled Vidergauz to aggressively expand California Closets' brand recognition through national ads in such high-profile magazines as Martha Stewart Living and Metropolitan Home, as well as through national TV advertising.

The company's visibility is also increasing as more franchisees open retail stores, in addition to their existing production facilities, and pursue local builders and interior designers. Says Vidergauz, "Every client of an interior designer is a potential client of ours." The company's list of celebrity customers includes Michael Jordan, Elton John, Tom Clancy and, recently, Tiger Woods.

With franchise locations spreading worldwide, the custom designed and organized closets, once considered a trend for the affluent, have found their way into the mainstream. Says Vidergauz, "All over the world, when people list their homes for sale, one feature they're including is `California Closets' because they see it as putting more value in their home. Obviously, we like to see that."

Back ToThe Future

By Elaine W. Teague

Looking to give its restaurants a fresh look, Spartanburg, South Carolina-based Denny's Inc. is testing the new Denny's Classic Diner concept in the southern Florida market, thanks to the idea of a franchisee. Complete with checkerboard floors, an old-fashioned Wurlitzer jukebox, and even singing and dancing waiters, the dining car concept originated with Ronald and Marcia York, whose Southwest Florida Restaurant Investments Inc. (SWFRI) ranks among Denny's top-selling franchisees nationwide. "We did some research, put together a package and got immediate [corporate] approval," says SWFRI's Todd York, the Yorks' son. The first Classic Diner opened in May, and early indications point to the likelihood of the new diners springing up nationwide over the next few years.

Although the diner's menu may be similar to that of a regular Denny's, Saturday nights at Classic Diners bring nostalgic surprises, such as visits from Elvis Presley and Marilyn Monroe impersonators.

The 117-seat stainless steel diner car is pre-manufactured. Says Todd, "As long as you have the land ready, it only takes three to four days, and you're up and running."

Sticker Price

By G. David Doran

Packing friends into a coin-operated photo booth for a group portrait used to be the best way to truly capture the moment, but a recent Japanese improvement on the booths has entrepreneurs on both sides of the Pacific excited. Atlus Co. Ltd.'s Print Club is a compact video-game-sized machine that takes a picture, offers 27 different colorful frame designs, and then prints the photo out as a page of postage-stamp-sized stickers.

To say that Print Club is popular in Japan would be a major understatement. There are more than 16,000 machines nationwide, and each averages more than 100 uses a day, with a page of stickers costing about $3. Although the frame designs are currently geared mainly to a young, female market, according to James Takenaka, Atlus' U.S. marketing director, "as long as you have the right licensed property, Print Club is equally appealing to both boys and girls."

Print Club machines are priced at close to $10,000 a unit and are typically placed in shopping malls, fast-food restaurants and video arcades.

Capital Idea

By Karen E. Spaeder

Looking to become franchisees' one-stop financing source, AT&T Capital Corp. recently created the Morristown, New Jersey-based FranchiseOne program. Since 1990, AT&T Capital has geared its Small Business Administration (SBA) and conventional loans toward the franchise market. FranchiseOne offers construction loans and equipment and vehicle leasing, which are not typically available through one financing source, says AT&T Capital's Bob Neagle. "We're encouraging smaller franchisees to grow with us," he says.

The SBA loans, for example, offer some leeway for those affected by the SBA's recent $500,000 cap on gross loan size, which set the maximum amount the SBA can guarantee at $375,000. "[AT&T Capital offers] an SBA loan with a companion loan," explains Neagle. "So if a prospective customer needs a million dollars but is worried about the SBA loan cap, we can take care of them under similar terms and conditions."

Its Your Store

By G. David Doran

Bet you never thought you could own a Sears store. Well, think again.

You can own your own Sears location through the company's Authorized Retail Dealer stores program. The stores--the first noncompany-owned stores since Sears, Roebuck and Co.'s catalog stores were discontinued in 1993--have opened in more than 500 rural communities and are located approximately 15 miles away from the nearest mall-based Sears. Store owners make an initial investment of $40,000 to $60,000 and, in return, receive extensive support from the vast Sears retail network, including merchandise, distribution and local advertising. The stores carry Sears tools, appliances and electronics but no home décor or clothing items.

"It's turned out very well for Sears and for us," says Bill Huber, owner of a Sears Retail Dealer store in Harrison, Arkansas. Huber's store, which earned $3 million last year, recently expanded its facility.

Sears' history and perceived merchandise dependability are strong selling points. According to Huber, "The number-one thing we have to offer customers is the Sears name and reputation."

Sears plans to begin opening Authorized Retail Dealer stores in what it calls underserved urban areas by fall 1997.

Mark Your Calendar

By Sloane Richardson

Have you always felt you could be a franchisee but lacked the education and know-how to get started? Then mark your calendar for October 23-25, when the College of Business Administration at the University of Texas,El Paso, will host its biannual Franchise Management Certificate Program. The two-and-a-half-day seminar includes 12 sessions by franchise insiders who will discuss the fundamentals of franchising, from whether it's right for you to the best ways to keep it up and running.

Tuition for the event is $825. For registration or more information, call (915) 747-7730.

Meat Of The Matter

By Janean Chun

While the connection between ham and fifth graders may not be immediately obvious, Heavenly Ham has uncovered the missing link. The Atlanta-based retail ham franchise offers its cure for the common curriculum: a program titled "Pilgrims & Progress: The History of Prepared Foods in America," which teaches fifth-grade students lessons about the first Thanksgiving, American Indians, foods the settlers prepared and consumed, and the Westward movement.

Offered in hundreds of schools in 34 states and taught by homeroom teachers, "Pilgrims & Progress" satisfies elementary schools' hunger for innovative curricula as well as Heavenly Ham's craving for hands-on philanthropy. "We wanted the company to get involved with the community at the grass-roots level," says Ashley Owings, director of marketing for Heavenly Ham's franchisor, Paradise Foods Inc. "And we realize [the quality of] education is a major concern with our primary ham purchasers--females who are 35-plus."

In addition to the curriculum, offered free of charge to schools, some Heavenly Ham franchisees offer ham gift baskets to the first five schools that sign up in their market; the schools donate them to those in need. "In some cases, the entire fifth-grade class hand-delivered baskets to needy families,' says Owings.

"We see this as [a way to] develop a long-term relationship with the schools and as a good investment for us," says Owings.

Side By Side

By Charlotte Mulhern

HQ business centers, a provider of turnkey business services, executive offices, technology support, administrative support and telecommunications, is extending a rare opportunity to franchisees: the option to purchase company stock.

In doing so, the San Francisco-based franchisor is allowing franchisees to play a role in determining the future of the business. Each participating HQ franchisee is limited to 15 percent of total company shares. An elected board of directors, comprised of eight franchisees and the company president, can vote on matters pertaining to the franchise agreement and help guide company direction and philosophy.

Whats New

By Connie Cousins

  • Glass Act

In a move to grow its home-services network of 1200-plus franchises, The Franchise Company of Toronto, owner of CertaPro Painters, Nutrilawn International and others, recently acquired Irvine, California-based Stained Glass Overlay (SGO). With the purchase, The Franchise Company obtains SGO's patented process for decorating glass and acrylic surfaces as well as its 350 operating units in 37-plus countries. Expansion plans call for enhancing the product line and opening additional franchise units in new markets.

  • The Whole Enchilada

Green Burrito/Carl's Jr. "dual restaurants" are cooking up sales increases of 25 percent at some locations. In July, William P. Foley II, chairman of Carl Karcher Enterprises Restaurants Inc. (CKE), the parent company of Carl's Jr., acquired Newport Beach, California-based Green Burrito Foods Corp. for $5.8 million. This, and the recent purchase of Rocky Mount, North Carolina-based Hardee's, makes CKE the fourth-largest burger-chain operator in the country. Expansion plans may offer a new three-in-one restaurant combo.

  • Bug-Eyed

Commercial hygiene company Swisher International Inc. has moved into the pest control business, following its $1.2 million acquisition of Monroe, North Carolina-based Carolina Pest Control. Launched in July, Swisher Pest Maintenance & Control expects to open three franchises every month for as long as possible. The pest control operation is the latest addition to Swisher's 230-plus-unit franchise system.

  • New Deli

Austin, Texas-based Schlotzky's Inc. has created a new look for its existing Schlotzky's Deli stores. Plans call for the new design to capture a flavor reminiscent of the original Italian market in New Orleans' French Quarter. The antique brick, 3,200-square-foot prototype features patio seating, subtler lighting and a double-window drive-thru. Menu changes, private-label groceries and more efficient behind-the-counter operations round out the new concept.

  • Under Construction

Dallas-based Holigan Homes is forming a new franchise division. The popularity of owner Michael Holigan's syndicated TV series, "Your New House," inspired the blueprint for franchising Holigan's home-building program. Franchisees will benefit from buying power with national suppliers, plus proven techniques in quality design, materials and construction.

Multiple Personalities

By Janean Chun

Franchisors who grant clusters of locations to multiunit franchisees have a lot to gain . . . but do they also have something to lose? The issue unravels as the trend itself burgeons. A recent study discovered that franchises of multiunit owners "tended to be in areas that have similar market characteristics," says Francine Lafontaine, an associate professor of business economics at the University of Michigan and the study's co-author. "For example, there are similarities in those markets regarding average income or percentages of African-American or Hispanic populations."

Lafontaine says franchisors encourage multiunit arrangements because they benefit from the franchisees' local market expertise and reputations. And while some industry insiders are concerned about a shift in the balance of power, Lafontaine feels multiunit ownership is more likely to benefit, not harm, franchising. "If franchisors are comfortable allowing these larger owners, it means they are comfortable negotiating with these people as to the future of the chain," she says, adding that even single-unit franchisees may glean some benefit from this trend. "Small franchisees might have an easier time communicating with larger franchisees, who can then communicate with the franchisor. [Multiunit owners] could create this in-between level through which franchisees and franchisors can connect."

Contact Sources

AT&T Capital Corp., (800) 713-4984

Atlus Co. Ltd, (714) 263-0582, fax: (714) 757-1288

California Closet Co. Inc., (415) 433-9999, fax: (415) 433-2911

Fidelity National Financial Inc., 17911 Von Karman Ave., #500, Irvine, CA 92614, (714) 622-5000

The Franchise Center/College of Business Administration, University of Texas, El Paso, 500 W. University Ave., El Paso, TX 79902, (915) 747-7730

HQ Business Centers, fax: (415) 781-8034, http://www.hqnet.com

Paradise Foods Inc., (800) 989-0509, http://www.heavenlyham.com

Schlotzky's Inc., 200 W. Fourth St., Austin, TX 78701, (512) 469-7592

Sears Retailer Dealer Store, c/o Bill Huber, P.O. Box 2225, Harrison, AR 72601, (501) 741-5466

Sears, Roebuck and Co., (847) 286-5583, http://www.sears.com

Southwest Florida Restaurant Investments Inc., 1500 Colonial Blvd., #102, Ft. Myers, FL 33907, (800) 56-SWFRI, ext. 14

Stained Glass Overlay, 1827 N. Case St., Orange, CA 92865, (714) 974-6124

Swisher International Inc., (800) 444-4138