Franchise Players: Serious Challenges Didn't Stop This Franchise Duo
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Franchise Players is Entrepreneur’s Q&A interview column that puts the spotlight on franchisees. This week, in honor of Valentine’s Day, we’re honoring power couples in franchising. If you're a franchisee with advice and tips to share, email firstname.lastname@example.org.
When Parks Hunter began looking into starting a business, he received some golden advice: don’t partner with anyone other than his wife, Michelle Mistele. That’s not to say the pair has had their struggles – they opened their first Rainbow Station child-care facility just as the financial markets capsized in 2008 and have spent $6 million getting the business up and running. However, for this power couple, the flexibility and skills gained by working together have allowed them to overcome any challenges thrown their way. Here’s how they do it.
Names: Parks Hunter and Michelle Mistele
Franchise owned: Rainbow Station, a child care facility in the Ballantyne area of Charlotte, N.C.
How long have you owned this franchise?
We signed our franchise commitment letter and put up our franchise fee in the spring of 2006. We were living in Richmond, Va. at the time owning and operating two Huntington Learning Centers. We sold those in the spring of 2006 and began looking for a suitable site in Charlotte. We opened our doors Aug. 27, 2008, right when the financial markets were capsizing. We could not have picked a more disastrous time to open a new business. Fortunately for us, revenues have grown nicely each year and our reputation in the market place is second to none.
I was working on Wall Street in 2001 and my PATH train was probably the last one that arrived in the belly of the Twin Towers the day they were attacked. The first plane had already struck when we arrived at our stop. I remember walking out onto Liberty Avenue thinking I was on a movie set, debris was everywhere. Soon after that I decided I wanted to own and operate a business. We bought a Huntington Learning Center in Richmond, Va., in March of 2002. The idea behind buying a franchise is that you are getting into a business that has vetted most issues and problems confronting small business owners. In theory, franchising gives you a higher chance of succeeding since it is well documented that 90 percent of all businesses fail.
What were you doing before you became a franchise owner?
I had been working on Wall Street in institutional equity sales since 1994 and Michelle was in software sales when we decided to look for a business to start or buy in the fall of 2001.
Why did you choose this particular franchise?
In the summer of 2005 we had three small children all under the age five and we were paying over $3,000 per month for them to attend a Goddard School while Michelle and I ran our two Huntington Learning Centers. Rainbow Station's flagship school was less than a mile from our house but we were unable to enroll our kids because each class had a long waiting list. We had seen and experienced numerous child care facilities during that five year period and had a very good idea of what we liked and didn't like in a school. Rainbow Station's model was one of kind, particularly having a separate building for after school care. More importantly, Michelle and I were very impressed and comfortable with Gail and Earl Johnson, the founders of Rainbow Station. I cannot stress that last fact enough since we were essentially investing everything in our name to open our Rainbow Station School.
How was the process of becoming a franchise owner different for a couple versus an individual?
Obviously, both spouses must be 100 percent committed to making the plan work. When I determined that we needed to be in the child care business versus the tutoring business in the summer of 2005 Michelle liked the idea. When it became apparent that we would have to move away from Richmond she wasn't nearly as supportive. I had to convince her that owning and operating a Rainbow Station was a wonderful opportunity for us even if it required us to leave Richmond. She was strongly against leaving Richmond but I was relentless in promoting the idea. I suggested two cities, Atlanta and Charlotte, that I thought would give us an excellent opportunity for success. Finally, she agreed or gave in (Michelle would probably say gave in to get me off her back) to the idea of moving that November and she determined that we should move to Charlotte. I was thrilled.
How much would you estimate you spent before you were officially open for business?
The entire project cost right around $6 million. Cost breakdown:
Land - $950,000
Buildings - $4,500,000
FF&E and WC - $550,000
Where did you get most of your advice/do most of your research?
When we were looking to buy/start a business in 2002 the best advice I got from literally everyone that I asked was that I did not want a partner other than my spouse. That was the best advice I ever got. In choosing Rainbow Station, our research was our experience with numerous schools over that five year period and our strong belief in the vision and leadership of Gail and Earl Johnson. We didn't talk with or look at any other national child care franchises. Some might accuse us of being shortsighted but we simply knew Rainbow Station was and is a category killer!
What were the most unexpected challenges of opening your franchise?
Easily, the most unexpected challenges came from the building and license inspectors when they demanded changes to the plans after these plans had been previously reviewed and approved during the permitting process. There were instances where we had to tear down or replace an item that had already been installed or the inspector would not give his/her blessing. It got to a point where I was no longer allowed to participate in the inspectors' final inspections because I found it very difficult to bite my tongue.
Other than that, the building process could not have gone any smoother than it did, especially considering this was our first major project. Our general contractor, Southside Constructors, was phenomenal. Our preschool opened at 68% occupancy, a record for Rainbow Station at the time. Michelle and the full-time staff did a wonderful job of painting a picture of what this construction site would look like when it was complete. When you consider that Rainbow Station was new to North Carolina and the Charlotte market, our opening day 68% occupancy rate was quite an achievement.
What have been the biggest challenges and positives of running a business with your spouse?
As with all small businesses, our biggest challenge is hiring the right people. I remember telling Michelle when we were starting out that if we bat 50 percent in the hiring process we are hitting a home run. Over the last 5.5 years we have put together an outstanding team which is critical to our success.
Our skills complement each other as well. Michelle is very detailed oriented and I am more big picture. She oversees the daily operations of the school and handles all the paperwork, collections, and billing. I oversee the buildings and grounds and work on developing new sites for future schools. We have 110% confidence in each other’s abilities and that allows us to be very successful. Rainbow Station has afforded us tremendous flexibility with our time. We work very hard but Rainbow Station does not consume us and that is not the case with many businesses. We spend lots of time with our children and that flexibility is invaluable.
What advice do you have for individuals and couples who want to own and operate their own franchise?
Look for businesses that have recurring revenue streams and excellent visibility of cash flow. Every Monday morning we know exactly how much tuition we are going to collect for the week and collections are not an issue. Also, look for businesses that do not require a tremendous amount of advertising to get your name out there in the market. Our most powerful advertising at Rainbow Station is word of mouth. We spend next to nothing on advertising. That was not the case with Huntington.
Have adequate cash reserves to live off while the business ramps up in its infancy stage. We paid ourselves a grand total of $45,000 the first two years of operation while the revenues ramped up. You must be very comfortable with and completely trust the franchisor that you will be working with on a daily basis. Gail Johnson is a visionary and has tremendous passion for Rainbow Station and that passion is evident in everything she does. There is no doubt that she and her highly esteemed team have raised the parent expectation bar for the child care industry.
Finally, do what you love and love what you do. Michelle and I love being around children and we firmly believe that Rainbow Station offers a one-of-kind nurturing environment for young children where they can grow and prosper on a daily basis. We want each child to be super excited to come to Rainbow Station every day where they will have a very fulfilling experience.
What is next for you and your business?
We are very close to starting construction on our second Rainbow Station in the Stallings/Matthews area of Charlotte. The process of obtaining financing has been incredibly arduous but worthwhile. Rates are very low and quite compelling. You simply have to move heaven and earth to get the loan but the rate makes it worth the torment.