As the owner of a lawn maintenance company in Minneapolis, Rick Place was resigned to one fact of life: Wintertime shuts his business down. But as the winter of 1997 loomed, Place was no longer content to be discontent. So in October of that year, he opened a Christmas Decor franchise. Since then, the seasonal franchise, which provides installation of outdoor Christmas lights for homes and businesses, has enabled Place and his employees to work during the cold, lawn-less months.
"Christmas Decor has become a perfect complement to my lawn maintenance business," says Place. The timing of the franchise's peak season seems perfect, too. "The first day we started putting up Christmas lights, it snowed."
Best of all, Place's Christmas Decor sales are growing rapidly. After only three years, sales from the business have surpassed those of his 10-year-old lawn-care company.
"The phone rings constantly during the Christmas season," says Place, who started the company for $19,000 and made $20,000 the first year, despite a late start. In 1999, he brought in $120,000 from October through mid-December.
Place is just one of many entrepreneurs riding the tide of elevated earnings during the Christmas season. According to the International Mass Retail Association, retail sales are consistently up during the fourth quarter of each year. Total department store sales in the last three months of 1999 were more than $98 billion, compared to $72 billion during the summer months of that year.
The holiday season can be extremely lucrative, says Jim Ketchum, CEO of Christmas Decor Inc."Our franchisees are only limited by how many lights they can actually install," he says. "Most do very little, if any, advertising [compared to other franchises]. They've found if they advertise more than 10 days, they get inundated and can't keep up."
Of course, Christmas lights aren't the only things people buy during the holidays. People need ham, too-and The HoneyBaked Ham Company and Caf?, which boasts 28 franchises in 15 states, gives it to them. "Sixty percent of our sales occur during November, December and Eastertime, so our franchisees naturally get very excited about the holiday season," says Mike Whitten, HoneyBaked Ham's vice president of franchise operations.
Due to the very nature of seasonal businesses, franchising these concepts tends to work best as a business format. "We tried to export the Christmas lighting business and open branch offices in other cities, but it just didn't work, because there was a nine-month off-season for the people we hired," says Ketchum. "We finally realized, in order to make the concept work, we needed entrepreneurs with an equity interest."
Julie Bawden Davis is an Orange, California, writer who specializes in small and homebased business issues. She often contributes to The Los Angeles Times and The San Francisco Chronicle.
Holidays aren't the only time of the year that calls for seasonal services. Many franchisors are doing what they can to build business throughout the year. In 1999, Christmas Decor Inc. added Nite Time Decor, a landscape lighting franchise, to provide additional income to its franchises during the off months. They now have 48 Nite Time Decor franchises nationwide.
"Our lighting companies are in offsetting seasons, so we're now in the position to sell two franchise concepts, creating year-round business for entrepreneurs," says Ketchum.
Honeybaked Ham has also made changes to strengthen off-season business for its franchisees. In November 1998, they acquired Hickory Hams, a small Georgia chain of cafes that serve sandwiches, as well as take-home hams and turkeys. According to Whitten, acquiring the stores allowed HoneyBaked Ham to enter the lunch/cafe business.
"Our franchisees have the best of both worlds," Whitten says. "Not only do they have the strong brand identification of HoneyBaked Ham and the subsequent high volume of seasonal sales, they also enjoy a healthy cafe business, which carries them through the rest of the year."
Michael SanFilippo, 50, and his wife, Sonya, 38, own 13 HoneyBaked Ham stores in Alabama, Georgia and South Carolina. Some of their locations were originally Hickory Ham cafes. "When the Hickory Ham cafes became HoneyBaked Ham locations, we saw a tremendous increase in seasonal sales," says Michael. "In 1997, a year before the Gainesville, Georgia, [Hickory Ham] store became a HoneyBaked Ham store, the sales were $354,000. We took on the HoneyBaked name in November 1998 and sales jumped through the roof. We had made $637,000 in 1998 and generated $757,000 at that location in 1999."
Tips For The Season
Though the profits may be high at certain times of the year, you should consider the various special challenges of running a seasonal business. Here are some tips:
- Prepare for lack of off-season cash flow. Budgeting your income is critical to surviving the slow times.
- Staff appropriately. One of the biggest challenges facing seasonal businesses is finding enough quality employees to meet peak demand. Most job seekers aren't looking for a seasonal job. "Going from a crew of four or five people to a work force of 40 to 50 people overnight requires good recruiting skills," says Michael, who grew up in the restaurant business. "You need to be outgoing and know a lot of people."
The good news is, once they do hire core groups of workers for a holiday rush, many seasonal business owners find those same workers return each year. Says Whitten, "[Our stores] often hire high school or college kids home on break."
- Keep the energy level high. "You have to be adaptable to run a seasonal business that does such a high percentage of its annual sales in such a short amount of time," says Michael, who's on call 24 hours a day from 10 days before Thanksgiving to a couple days before Christmas.
- Be prepared and organized. Seasonal franchisees promote their businesses throughout the year and begin preparing for the holiday season long before it actually starts. "On rainy summer days when landscaping is impossible, I have my crew inventory and string Christmas lights," says Place. "That preparation may seem strange in the middle of August, but it really helps us get off to a running start in October when the season begins."