To build a chain of stores, you take on the headaches, risk and
financial burdens of opening and operating multiple locations. On
the plus side, though, you have firm control of the
business—and the profits.
Lea Marquez-Peterson and her husband, Dan, founded American
Retail Corp. in 1996. The company operates a group of Tucson,
Arizona, gas stations and mini-marts that includes one Arco AM/PM,
one Shell and four Chevron stations. The 32-year-old co-founder had
technical know-how (she's got an MBA) and industry experience:
She had worked for Shell Oil. Her long-term plans are to have 30
stations statewide.
She and Dan, 33, put together a business plan and did three-year
cash-flow and income projections before starting the business. They
also recruited private investors to help fund the stations, each of
which operates as a separate limited liability company. The parent
company had an estimated $15 million in sales last year, and
because it's one of Arizona's largest independently owned
chains, it enjoys considerable buying power with oil companies and
other suppliers.
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Falling gasoline prices and a weakening economy have forced
Marquez-Peterson to be flexible—for instance, she made each
station a separate LLC to attract investors leery of investing in a
group of stations. In 2001, she founded a spinoff company, American
Retail Management Services, to manage corporate service stations.
"You have to look at what's out there, what's working
and then just go for it," she says.
American Retail expanded at a breakneck pace in the 1990s, a
strategy that was scary but probably smart. As Greg Njoes, a
PricewaterhouseCoopers consultant in Century City, California,
points out: "Many companies limit themselves by not thinking
big enough in good times, and others can't adapt to change
quickly in bad. You need to have a master plan, but constantly find
ways to provide things your customers want."
Vince Trapani has done just that, but his empire, unlike
Marquez-Peterson's, wasn't built in a day. He founded his
Bayshore, New York, automotive remanufacturing company, USA
Industries, in 1986. Ten years later, he employed 53 people and
pulled in $3 million annually in local sales—not exactly the
numbers of an empire. But since 1996, reinvesting in the company
has paid off: USA Industries has gone from $3 million to $27
million in annual sales, employs 240 people, and distributes to
clients nationwide through three New York locations and a
10,000-square-foot warehouse in Texas. Reinvesting gave Trapani the
money for marketing and to take on larger orders. And Trapani plans
to purchase a facility this year in California. "We played
everything very safe until we achieved financial strength and
started to grow," says Trapani, 48.
The slow-but-steady plan is the avenue most experts recommend
for building successful chains. Phil Holland opened his first Yum
Yum doughnut shop in Los Angeles in 1970 and learned the business
from the ground up. "I did everything myself, from making
doughnuts to taking out the trash," he says. After a year in
the trenches, Holland got a second store up and running by putting
additional financing in place and developing a solid idea of the
site criteria he wanted to follow for his new stores. Eventually
the chain blossomed to 138 stores. Holland, who sold his interest
in 1989 and now consults through his Web site, says
expansion timing is crucial: "An entrepreneur should never
start opening secondary units or franchising until the first unit
is absolutely solid, in the black, and all its operational systems
are in place."
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