Good help is so hard to find. This axiom has created an ever-growing industry-one currently led by Management Recruiters International (MRI), a franchisor based in Cleveland. Just a start-up in 1965, MRI has evolved into a staffing-industry leader with nearly 1,000 domestic and international offices and annual billings exceeding $500 million. While MRI is affiliated with a number of franchise concepts, we specifically explored their permanent placement services, franchises Management Recruiters and Sales Consultants.
Management Recruiters and Sales Consultants franchises operate similarly, with one exception: Sales Consultants franchisees specialize in placing sales professionals. In both instances, MRI claims to permit wide latitude to franchisees, and franchisees tailor their businesses to the industries in which they have experience. For example, if you were an accountant in your pre-franchise days, your franchised location could specialize in that area. The toughest part of the business is not finding clients, but finding people to fill the open positions.
MRI claims to make 34,000 placements every year, but the amount of money you can make in either of these franchises depends on how many account executives you employ. This is because the predominant way to earn a living through a placement business is still through contingent placement fees, and you're not going to earn these unless you have help looking for candidates. In other words, you don't get paid until one of your candidates takes a position. Once the deal is done, you typically earn a fee that's equal to 30 percent of that person's earnings.
Although MRI makes earnings claims, they wouldn't disclose any numbers for those franchisees who operate one-desk offices, even though these offices accounted for 137 of their 850 domestic locations. MRI did report earnings claims for offices with two or more desks in operation, but failed to state how long each of these businesses had been in operation, which, in my opinion, is a salient fact. While at least one of the company's brochures doesn't hesitate to point out that dozens of franchisees earn between $250,000 and $500,000 in operating profits each year, I suggest you pay close attention to the footnotes in Item 19 of the UFOC and inquire about the numbers pertinent to the size of the business you can afford to open. In this regard, MRI estimates franchisees will spend between $107,000 and $140,000 to open a 1,000-square-foot office that supports two account executives, assuming the franchisee leases his equipment, video-conferencing gear and office furniture.
At $72,500, the initial franchise fee published in the uniform franchise agreement is the highest I've observed in my 12 years as a franchise attorney. However, Item 5 of the UFOC requires franchisors to disclose the range of initial fees paid for the prior year and-interestingly enough-at least one franchisee paid nothing. If you have extensive industry experience or don't require all of the franchisor's services, equipment or supplies, you may be able to negotiate a lower fee-but don't count on it, as this company is proud of its reputation.
For that kind of money, you're certainly entitled to receive extensive support, and MRI has created one strategic advantage: a system known as Conferview that connects all the MRI offices via real-time videoconferencing. This has proven to be a great training tool and also permits potential employers to conduct first interviews without wasting the time and effort typically required by travel.
Another advantage of being associated with MRI is an interoffice referral system that allows franchisees to share company requirements. This interaction now accounts for approximately 30 percent of franchisees' sales. That's 30 percent you wouldn't have access to if you were to try a business like this on your own. MRI also broadcasts training and support materials via its own intranet.
According to Robert Angell, vice president for franchise marketing, the perfect franchise candidate for this system is an educated individual with excellent people skills and a solid background in sales and management.
Todd D. Maddocks is a franchise attorney and small-business consultant. You can reach him at TMaddocks@aol.com.
Contact Source
Management Recruiters International, (800) 875-4000, www.brilliantpeople.com
This story appears in the April 2000 issue of Entrepreneur. Subscribe »
