Can You Compute?
For many of us, when the computer goes down, we're out of business. We're the ones you see standing in line at the service desk of your local "superstore," like wanton refugees, with CPUs cradled on our hips. At the end of the line, we expect to find a slack-jawed sales clerk with virtually no training who will eye us suspiciously when we explain that we've received the dreaded "illegal operation" message. Accordingly, help is usually days and many dollars away.
Here to add a personal touch in the sale and service of new and used computers is Computer Renaissance (CR), which, along with Play It Again Sports and Music Go Round, is one of the many franchise children of Gro Biz International Inc. With the recent appointment of successful franchisee Taylor Bond as president, the chain aims to become a service-oriented provider of computer solutions rather than just a reseller of used computer gear.
This transition comes not a moment too soon. Selling computer hardware can be murderous business. Competition is fierce, and the margins start off slim and deteriorate rapidly as inventory ages. CR helps alleviate this problem by allowing franchisees to order directly from preferred vendors, eliminating the need for large inventories. This is an especially nice feature, considering the typical 2,000-square-foot CR retail location simply can't hold much in stock.
CR management is emphasizing customer service as a way to distinguish its stores from other mega outlets that push price as the primary selling point. The benefits for franchisees are two-fold: Service also helps drive hardware sales, and you can pay a service technician $12 per hour and charge $60 per hour for his time--a much better margin than you'll make on the sale of new hardware.
This franchisor now boasts 219 franchise locations, and insists that franchisees be on-site operators. Purchasing a CR franchise requires an investment of anywhere from $154,000 to $286,000, according to Item 7 of the UFOC. However, this estimate only includes opening inventory valued between $60,000 and $85,000. One of the chain's more successful franchisees suggests you'll need considerably more inventory than that to reach the franchise's earnings estimates.
I visited a store in Boise, Idaho, and met with franchisee Jim Allen, who illustrated to me that CR franchises ultimately succeed because the people who run them are hungry, outgoing, friendly, concerned about their customers and willing to follow the franchisor's directions. "Techies" be forewarned: You cannot hide behind the bench if you expect to succeed at this business.
CR makes earnings claims in Item 19 of the UFOC. In this case, I was pleasantly surprised to learn that as of fiscal year 1998, average annual gross revenues were reported as $818,323. Considering I shop for a new franchise every month and have been doing so for years, I can safely say this gross revenue is higher than any I have seen for a 2,000-square-foot store. However, the franchisor does not disclose average first-year sales or gross margins. Because hardware margins are so slim, finding the answer to these questions by interviewing existing franchisees will be essential in determining whether this opportunity is right for you.
Todd D. Maddocks is a franchise attorney and small-business consultant. You can reach him at TMaddocks@aol.com.
Computer Renaissance, (800) 868-8975, http://www.cr1.com
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