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Staffing franchises put you in the people business.
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This story appears in the October 1999 issue of Entrepreneur. Subscribe »

The employee of yesterday is gone. With low unemployment rates, fewer college grads and a growing demand for specialized, highly skilled workers, it's an employee-driven market--today, employers with dwindling resources are scrambling to fill positions. in order To sort through complex human resources issues, an increasing number of companies are forging bonds with specialized staffing firms.

"It's become a much more specialized world out there," says Bruce Steinberg, associate editor of Staffing Industry Report (SIR). "In many cases, companies may not have the human resources experience to know exactly what skills they need to reach their business goals. Staffing services have become strategic partners that help their clients reach their goals."

According to SIR, the staffing industry's annual revenues have risen an average of 18.5 percent since 1993, and with forecasts for 1999 at $117.6 billion, the industry shows no signs of slowing. Although specialized staffing represents just a small niche of the industry, the future is bright for segments like technical/IT staffing (which grew 19 percent between 1998 and 1999); medical (12 percent); and professional (22 percent), which includes marketing, accounting and legal staffing.

Many specialized staffing companies choose to grow via franchising; to do so, they need the right franchisees eager to apply their hard-earned sales skills, industry knowledge and contacts. Franchise buyers have a lot to gain as well--with franchisors picking up much of the payroll side of the business in this typically cash-flow heavy industry, the franchisees are free to concentrate on recruiting employees and attracting clients.

What The Doctor Ordered

Willie Fleischacker worked her way up the corporate ladder as a staffing coordinator in the health-care industry, yet felt something was missing in her career. "I've brought a lot of services to the communities I've worked in and made a lot of money for other people. I've always wanted to be able to [do this work] and say [the business] is mine," says Fleischacker, who owns two NurseFinders franchises in Des Moines and Davenport, Iowa, and plans to open two more locations in the state in 2000 and 2001.

Fleischacker originally joined her Des Moines NurseFinders office as an employee, but soon realized she wanted the then-company-owned location for herself. She purchased it in 1996, and has quickly grown her business into a $3 million enterprise with 11 office employees and 125 to 150 field caregivers on assignment.

Like most staffing business owners, Fleischacker divides much of her time between recruiting clients and employees, leaving much of the back-office paperwork, including payroll and billing receivables to the Arlington, Texas-based franchisor. "The receivables are funded by the company, so it's kind of like [having] a built-in banker," she says.

A franchisor backing you on the receivables end is, in fact, one of the major benefits of joining a staffing franchise. "When you're looking at specialized services, you're looking at very healthy pay rates, and it does become a cash-flow issue. Most staffing services bill [clients] on a monthly basis, but you pay [employees] on a weekly basis," explains Steinberg. "The franchisor makes sure you don't overheat and get into a bad cash-flow position."

Sell, Sell, Sell

With payroll supported in cooperation with the franchisor, the main focus for specialized staffing service owners is sales. Unlike most businesses, in which you're selling a product or service, in specialized staffing you have to recruit both your clients and your product: well-trained employees.

"The primary way you succeed in this business is through sales and marketing," says Bryce A. Arrowood, president and CEO of LawCorps, a Washington, DC-based staffing franchisor specializing in placing attorneys, paralegals and law clerks in temporary positions. "Our emphasis is getting in front of clients and prospects, because once we do that, our close rate is 70 to 80 percent [in the Washington, DC, office]. You have to be personable--someone who likes to cultivate long-term client relationships does well in this business because it's very consultative."

At Management Recruiters International (MRI) Inc., a Cleveland-based franchisor with more than 900 franchises staffing corporate management positions, franchisees undergo an intense, three-week training program specifically to deal with sales. "Even though our business takes more of a consultative sales [approach], all our franchisees live in a world of rejection," says Bob Angell, vice president of franchise marketing for MRI. "And part of our training teaches them how to overcome objections in a favorable manner--being consultative rather than confrontational."

Attracting employees is equally challenging in an industry often seen as a last choice for office and labor workers. But just as employers are being educated against this misconception, talented candidates are also realizing staffing services can offer the benefits of a full-time employer. "There's a war for talent out there," explains Steinberg. "The challenge isn't finding the clients; it's finding the people."

Fleischacker identifies a staffing service's greatest challenge as being viewed as an employer of choice. "I want to create an atmosphere where people in the field can feel they're connected to a company," she says. In addition to offering medical benefits and flexible working hours, Fleischacker tries to create a central hub at her office on paydays, when employees socialize with "co-workers" and bring in their children.

"We treat all our temporary employees as if they were permanent employees as far as benefits and compensation," says Arrowood. Indeed, LawCorps temps take part in a profit-sharing plan and receive medical insurance, paid vacations, incentive bonuses and professional liability insurance.

An Earning Experience

Although many specialized staffing companies have been around for quite a few years (MRI for 35 years, NurseFinders for 25 years), clients are just now fully realizing the value of using staffing for more than crisis situations.

"A lot of our clients are no longer just using our people to fill in during emergencies; rather, they're starting to budget [for it]," explains Arrowood, whose company offers franchised territories in secondary markets like Minneapolis, while keeping company stores in primary markets like Washington, DC. "There's no reason for a small law firm to hire a permanent tax associate if it only needs that person two months out of the year."

Another selling point for clients of franchises like NurseFinders and LawCorps is the avoidance of overstaffing. Hospitals and nursing homes can staff to meet their usual needs and then have a pool of talent to call on when busy. Law offices can hire extra lawyers and clerks when working on a huge merger and not worry about retaining those employees when the work is done. The employees are happy to add the experience to their resumes and move on to other challenging assignments.

So as more clients are educated and more employees seek the flexibility of working with staffing firms, specialty staffing franchises are poised to carve out an even larger piece of the industry pie. MRI seeks to open 50 to 60 new franchises every year and expand on an international level. NurseFinders, which currently has 56 franchises and 65 company-owned offices, plans to expand 20 percent both this year and next. LawCorps plans to expand on a smaller scale, adding as many as three offices to its existing three this year.

Specialized staffing services account for about $2.8 billion in wages paid. With jobs becoming more specialized and fewer employees available for hire, that number should only increase. "Because specialized staffing is still less than one-third of the staffing industry, the long-term prospects for it remain very good," says Steinberg. "I think it's coming into its own."

Find a list of staffing franchises on our Franchise 500®.

Contact Sources

LawCorps, 1819 L St. N.W., 9th Fl., Washington, DC 20036, http://www.lawcorps.com

Management Recruiters International, (800) 875-4000, http://www.brilliantpeople.com

NurseFinders, fax: (515) 225-7143, essential2@aol.com

NurseFinders (corporate headquarters), (800) 445-0459

Bruce Steinberg, (650) 948-9303, http://www.sireport.com

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