A Franchising Pro Returns
In 1980, Tony DeSio founded Mail Boxes Etc. with three partners. The postal services franchise went on to amass nearly 5,000 franchised locations and was recently purchased by UPS. Nearly 20 years later, DeSio tried again, this time founding Image Arts Etc., a chain of digital imaging centers.
Franchise Zone recently spoke with DeSio and learned from this veteran what went into the creation of his two concepts and how franchising has changed in the past two decades.
Franchise Zone:Why did you decide to franchise your first concept, Mail Boxes Etc.?
Tony DeSio: In the beginning, when we attempted to raise capital [to] expand the concept, we ran into a lot of resistance [from] the banks and the venture capitalists. They perceived that we would be competing with the post office, so they didn't hold much hope for our success. We couldn't expand rapidly, because we couldn't raise the revenue. So we looked at franchising as an alternative, because in franchising, the franchisee basically puts up the capital to build the facilities. In retrospect, it was very fortuitous that we didn't raise capital, because franchising is really what made our company successful. We actually tried to run some corporate-owned stores and found we couldn't run them as efficiently as the franchisees did.
What challenges did Mail Boxes Etc. face when first franchising?
At the time, franchising wasn't as respectable as it is today. Some people kind of looked down their noses at franchises, so we had to overcome that. Launching a franchise seemed more difficult in 1980, because many independent operators felt they could do as well as a franchisee. Over the past 20 years it's become apparent that it's difficult for independent operators to compete with a well-run franchise, so it's easier to find financing to launch a new franchise and to convince prospective franchisees to join a new franchise.
Recently you founded Image Arts Etc. How did you come up with that concept?
I founded the company a couple of years ago when some of the ex-Mail Boxes people contacted me about looking at a new concept in wide-format digital printing. By that time I had retired from Mail Boxes, but I was interested in the concept and began looking at how we could adopt the new digital imaging technology, photography and printing to a retail concept. We played around with several concepts and ran some test programs for about a year-made some mistakes and had to close some of the facilities-but finally we came up with a concept we felt was franchiseable because it was generating sufficient revenue.
Was it easier to start up a franchise with Image Arts than with Mail Boxes Etc.?
You have to look at a lot of different factors in terms of timing of start-up, but in general I would have to say yes, it's easier to start a franchise today than it was 20 years ago. It's always difficult to introduce a new retail concept. In the early days of Mail Boxes Etc., people didn't know what we were offering, and we didn't have the financial resources to educate the public through advertising. I remember customers coming into our store and asking if we sold mailboxes. We face the same challenge today at Image Arts Etc. The solution is for the franchisees to get out of their stores and start calling on businesses in their area and educating the public by engaging in local marketing and PR activities. Sitting behind the counter, waiting for customers to walk in is sure to result in business failure.
Changes in the Industry
Does the ease of starting up Image Arts have to do with today's climate or your franchise experience, or a little bit of both?
It's both. Certainly my experience and the experience of the people associated with this venture make it easier for us to kick this business off as a franchise operation. But it's also easier to sell franchises today, because franchising is much more generally accepted as a way of doing business.
What do you think has changed to make franchising much more acceptable?
Over the past 20 years, franchising has [grown as a] percentage of U.S. retail sales. As people use franchises themselves, they understand the benefits and the value of national brand recognition. The growth of franchising has created a major attitudinal shift.
In the 20 years between starting to franchise Mail Boxes Etc. and starting to franchise Image Arts Etc., did you notice any difference in the kinds of people who want to be franchisees?
The only difference I've seen is that people are much more willing now to try to achieve their entrepreneurial goals through a franchise organization as opposed to doing it independently. Basically people with an entrepreneurial spirit haven't changed their goals, ambitions and character much-now they're just looking more at franchising as a respectable alternative, whereas 20 years ago, it wasn't looked at that way.
What changes have you seen in franchisee/franchisor relations?
Over the past 20 years, there has been a continuing effort to increase the franchisee community's involvement in making business decisions that affect the franchise system. Management has come to learn that franchisee advisory groups contribute significantly to the success of the network as a whole.
How have government regulations affected franchising?
Before the advent of government disclosure requirements, some companies sold franchises by making wild, get-rich-quick claims. They gave franchising a bad name. To overcome this, we avoided any form of earnings claims and referred prospects to our early Mail Boxes Etc. franchisees for validation of our concept.
The issuance of uniform disclosure requirements is certainly a desired government activity. The government, however, should refrain from interfering in the contractual agreements entered into with full disclosure by the contracting parties. Over-regulation could seriously damage franchising, which wouldn't serve the best interests of franchisees, franchisors or consumers.
What impact has the Internet had on franchising?
The Internet has affected franchising in a couple of ways. First, it has allowed new and smaller companies to reach prospective franchisees without the heavy cash expenditures required to advertise in major publications. Second, it has become a wonderful tool for communication within the franchise network.
A Closer Look at Franchisees
Is it easier to be a franchisee today?
I believe it is, for several reasons. First, it's easier to obtain financing to start a franchise business; second, it's easier for a franchisee to obtain a lease in a preferred facility; and third, it's easier to get the word out to customers about the product or service you're offering, especially for established franchises such as Mail Boxes Etc.
What qualities make a franchisee successful?
The qualities I look for in franchisees are dedication; willingness to work in a positive, cooperative manner with the franchisor; and the ability to take responsibility for the success of the business while still sharing information with other franchisees and complying with requirements established by the franchisor for the benefit of the entire network. Franchising is a team effort. If a person isn't team-oriented, he or she won't be happy in a franchise organization.
What do you think is the worst mistake a person can make when investing in a franchise?
Assuming that, by joining a franchise system, you're assured of success. The franchisor provides a tested concept, a business system and help in avoiding some problems. In mature systems, they can also provide common advertising and brand recognition, but the success or failure of any franchised business is primarily determined by the efforts of the franchisee.
What advice would you give to someone considering buying a franchise?
First, find a business you would enjoy working at. It's almost impossible to succeed at something you hate doing. For example, if you don't like dealing with people, don't get into a service business. Second, be prepared to work harder than you ever have for an employer.
What advice would you give to someone considering franchising his or her business?
Be certain you're willing and able to cope with the stress of dealing with franchisees on a day-to-day basis. Running a franchise organization is quite different from running your own business. Franchisees are inclined to take credit for everything that goes right with their business and blame the franchisor for everything that goes wrong. Countless attorneys out there attempt to convince [franchisees] they have no responsibility for anything bad that happens to them-that the responsibility for their failure rests with the franchisor.
If you learn to cope with these problems, franchising can be very rewarding. I still get letters from Mail Boxes Etc. franchisees thanking me for giving them the opportunity to build a successful business and achieve financial independence for themselves and their families. Knowing I've done so for thousands of individuals is the ultimate reward-it more than makes up for all the problems I've had to deal with over the past 20 years.
Image Arts Etc., (800) 865-4333