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Established Companies Try Franchising

Established Companies Try Franchising
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Not all new franchises are new businesses. In fact, some companies have flourished as smaller operations for years, while others that experimented with franchising in the past are giving it another go.

"Everything in life is about timing," says Diana Nelson, who acquired Denver-based specialty toy store Kazoo Toys in 1998 and didn't begin franchising until last year. "The timing wasn't right until now."

Nelson has been working to expand Kazoo's reach for some time. A year after she obtained the store from its founders, five retired teachers, Nelson launched KazooToys.com; the next few years brought partnerships with Amazon and the Army and Air Force Exchange Service. In 2008, a licensed store opened in Denver International Airport. "That was our first dipping of our toes into something like a franchise," Nelson says.

When marketing firm Franchise Growth Systems approached Nelson in 2010, she believed the time was finally right. "Our first franchise just opened [in June] in Montgomery, Ala., to wild success," she reports.

Nelson is adamant that franchising doesn't dilute her company's uniqueness, which lies not just in its product line of educational toys, but also in community involvement. That's why her franchise manual has built-in outreach projects, like a Christmas book drive for homeless children and an in-store children's art show.

Sometimes franchising does require compromise, however. Robert Ahrens discovered this when he decided in 2010 to franchise his 30-year-old Austin, Texas, bakery, which specializes in kolaches (Central European pastries). He even had to change his store's name, since it had already been registered by someone else. "Kolache Shoppe is a name I've had for all these years, and it was really hard to give that up," Ahrens says. "But it was necessary."

While he was willing to change the name to Kolache Creations, Ahrens refuses to sacrifice the health of his existing store to see the franchise grow.

In fact, he backed off his franchising efforts recently when his store lost two key staff members and he had to fill in. "My goal is for my franchisees to be successful," he says, "so I don't want to be hasty and rush the whole process. We're going to let it go at its own pace."

Barbeques Galore COO Henrik Stepanyan is taking the opposite approach. "One of the fastest ways to grow is to go the franchising route," he says. Once Australian-owned and brought to the U.S. in 1980, Barbeques Galore is not entirely new to franchising--but its previous effort failed, and the company declared bankruptcy in 2008.

That didn't deter Stepanyan from looking to franchising when tasked with growing the brand by the company's new owner, barbecue manufacturer Grand Hall. Instead, he studied the company's past to see what went wrong. He found that the structure and consistency that make franchising such a powerful model hadn't been enforced with former franchisees. With that structure now in place, he's confident Barbeques Galore can become "the McDonald's of the barbecue world."

Stepanyan is optimistic about franchising amid the volatility of the economy as a whole. "Franchising is going to be a growth market," he says. "Instead of investing in Wall Street or real estate, folks are looking for a business to invest in."

Tracy Stapp Herold is the special projects editor at Entrepreneur magazine. She works on franchise and business opportunity stories and listings, including the annual Franchise 500.

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This article was originally published in the September 2012 print edition of Entrepreneur with the headline: Slow Build.

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