Learn how to invest your IRA or 401k into a franchise penalty-free. ($50k min)
A crime-scene cleanup service is just one of several new unusual franchises filling a need in the marketplace. But are these intriguing ideas good business investments?
When someone says he had an epiphany for a franchise business while watching the movie "Pulp Fiction," you know he's talking about something different...very different.
Neal Smither, 35, of Orinda, Calif., says, "I was a downsized mortgage banker and looking for something to do when I watched the part of the movie where two characters had to clean up after a gruesome murder. I suddenly had an idea that you could make money doing really severe cleanups."
Mr. Smither started Crime Scene Cleaners Inc. and within a couple of years had 17 employees in the San Francisco Bay area, cleaning up after rodents and biohazard spills, as well as murders and suicides. When Mr. Smither snagged national accounts--one hotel chain that shall obviously remain nameless averages three cleanup calls a day--he decided to franchise.
What's amazing is that his company isn't the most unusual franchise we've encountered recently. That honor belongs to 1-800-AUTOPSY in La Canada, Calif., where founder Vidal Herrera, 50, has two prospective franchisees waiting for his first training class in early 2003. Other off-the-wall (or, in one case, in-the-wall) concepts include:
- 1-800-GOT-JUNK, a junk-removal service, in Vancouver, British Columbia;
- Gigi's Hair Gallery, of Carlsbad, Calif., whose franchisees sell hair extensions with names like Alluring, Foxy and Devilish;
- Bail Bond Franchisors Inc., of Reading, Pa.;
- Interquest Detection Canines, of Houston, "providing scent-trained dogs to schools, industry and governments;" and
- The Crack Team of St. Louis, a franchise that kids around about its name but really does repair cracks in basement walls.
To sort them out, we turned to management consultant Peter Birkeland, 41, who was just named one of the "10 best minds in U.S. small business" by Fortune magazine and whose Ph.D. dissertation at the University of Chicago became the book Franchising Dreams: The Lure of Entrepreneurship in America (University of Chicago Press, 2002). Surprisingly, Mr. Birkeland says that buying a somewhat zany franchise is risky, but the payoff can be better than purchasing a more established concept. "If you get in at the beginning of something hot," he says, "you can run the business for a few years, then sell it at a profit."
A unique franchise certainly gets more attention. Franchisee Nathan Randall, 25, of Salt Lake City, says every time he leaves his Crime Scene Cleaners truck with the motto "Specializing in Homicides, Suicides and Accidental Death" in a parking lot, crowds gather. Some even take pictures. The day we talked, Mr. Randall had just cleaned up after a suicide--by shotgun, which he says isn't as messy as with a high-powered rifle--but says such tasks haven't made him callous. "We get to relate to the families of tragedy," he says, "and they are all so grateful."
As you might hope, Crime Scene Cleaners is paid well for its services. Fees average $375 an hour, although franchisees must pay a 50% royalty. (They pay a franchisee fee of $3,000.) Even so, Mr. Randall says he's doing "fine." His franchise even helps him meet women. "Either they're freaked out or really intrigued," he says.
Brian Scudamore, 32, of Vancouver, British Columbia, had his own intriguing epiphany while in a McDonald's drive-through lane. Just in front of his car was "Mark's Hauling" an old truck with junk spilling from the back. "I was 19," Mr. Scudamore says, "and had $1,000 in the bank. I spent $700 on a used pick-up truck and started my own garbage-removal business."
Mr. Scudamore soon owned what he likes to call "the FedEx of junk removal--on-time service, upfront rates, shiny trucks and friendly, uniformed drivers." To franchise, he changed the name to 1-800-GOT-JUNK and set up a North American call center to handle business for his 36 U.S. and Canadian franchisees. The franchisee fee is $10,000, plus $6,000 for each territory of 250,000 people; total investment is about $80,000; royalties are 8% and the call center takes another 7% of gross sales.
And they can be gross. Mr. Scudamore's own worst load: a large deep-freezer full of salmon, which had been unplugged for a long time. Even though the freezer was tied shut, it opened when it was lifted. "My stomach turns whenever I think of that smell," he says. Last summer, a driver for franchisee Gerry Cote, 48, of Palatine, Ill., found an alligator skeleton in a storage shed, with some of the meat still on it. And franchisee Jocelyn Gold, of Oakland, Calif., recently cleaned out a house where 65 cats had lived alone--for four months.
Franchisees charge about $430 a truckload, which includes an hour of loading time, although some jobs, like Ms. Gold's cat-ruined house, cost a lot more. Nevertheless, Mr. Cote and Ms. Gold, who have both been hauling junk for about a year, say they aren't yet breaking even.
That doesn't alarm Mr. Birkeland, who says most franchisees don't make money until their second or third years. "I'd feel more uncomfortable about a franchise that claimed you could make money right out of the box," he says. He also warns franchise shoppers to be wary of unrealistic growth plans, like the concept that claims in a press release that it will expand from two units to 150 in 2003. "You can grow by 150 units after your fifth or sixth year," he says, "but never in your first."
That is, unless the franchise is part of an established company, such as EmbroidMe, the latest entry from the Titus family of West Palm Beach, Fla., founders of Minuteman Press and Sign*A*Rama. Michael Brugger, 38, vice president of operations, says EmbroidMe, a personalizing service launched in 2000, now has 70 franchises with 30 more about to open. The franchisee fee is $32,500; total investment is $115,000 to $130,000; and the royalty is 5%.
Gil Greenfield, 61, watches computer-controlled sewing machines zap identical monograms onto a row of dress shirts in his Northbrook, Ill., EmbroidMe franchise and says he never expected to own such an enterprise. "I'd sold my direct-marketing businesses and was in semi-retirement when the stock market went to hell," he explains. His son, Howard, who was an executive with Sign*A*Rama before switching over to EmbroidMe, told him this franchise is "a winner."
Mr. Greenfield relishes being part of the only franchise that sells personalized shirts, hats, purses and other items and the only such retailer to locate stores in shopping centers instead of hiding them in the back of industrial complexes. "In the first month, 70% of our business came from customers of the Dunkin' Donuts franchise next door, who stopped in to see what we do," he says. Mr. Greenfield's sales were $10,000 that month, then grew to $16,000 in October and November. When revenues hit $23,000 a month, he'll cover expenses plus his salary, he says.
Of course, all oddball franchises won't be winners. If you choose something too trendy, Mr. Birkeland warns, "you can be left holding a bag of something whose value is just going down." Keep some financial resources in reserve, he advises. Whereas you might risk investing 75% to 80% of your assets in a well-established system, put only about 25% into something unusual. If it takes off, you then can buy more units, he says. "You have to go with your gut feeling," Mr. Birkeland says, "and your sense of the clarity of the vision of the company's founder."
Mr. Herrera's vision is to build a nationwide team of 1-800-AUTOPSY franchisees who provide private autopsy services, costing $2,000 and up, to families whose hospitals or HMOs have refused to examine the remains of their loved ones. Autopsies, he says, have declined in the past 40 years, while medical malpractice and wrong diagnoses are rising.
Franchisees--so far he's lined up an embalmer and a paramedic--won't perform autopsies themselves. Instead, they'll pick up the deceased or disinterred and transport them to hospital laboratories or funeral homes after scheduling doctors to do the examinations. Total investment of $92,000 covers training, equipment and the lease on a specially-equipped van with a big 1-800-AUTOPSY logo on each side. Now that will really draw a crowd.
Copyright Â© 2004 Dow Jones & Company, Inc. All Rights Reserved
For reprints and licensing questions, click here.