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Mid-Sized Goes Big Time

Mid-sized franchises are proving stiff competition for the larger players.

Opinions expressed by Entrepreneur contributors are their own.

Despite what you may have heard, bigger isn't always better. Prospective franchisees are discovering that while mid-sized franchises have smaller numbers and their brands aren't household names, they have plenty to offer that the superstars don't.

According to Entrepreneur's 2003 Franchise 500, mid-sized franchises seem to be growing at a faster rate than their larger counterparts. Chains with 50 to 199 units experienced 13 percent unit growth in the past year, while chains with more than 200 units grew by only 4 percent.

"The primary benefit? Usually mid-sized companies don't have the same level of bureaucracy and red tape," says Deborah A. House, who worked for McDonald's Corp. for 17 years before founding The Adare Group, an Oak Brook Terrace, Illinois-based consulting firm that helps small-to-mid-sized companies enhance profitability. "And Big Brother isn't watching as often. Usually mid-sized franchisees have more flexibility."

That flexibility and lack of bureaucracy can make it easier for franchisees to test new products and services. "The opportunity [for franchisees] to present their ideas is certainly available with companies the size of ours," says Kent Feazell, vice president of development for Express Oil Change LLC, which has 140 locations in the South. "Franchisees are able to get through and actually talk to people."

Because of the size of their system, Express Oil Change franchisees have access to everyone at the corporate office, from the owners all the way down. The franchise's leaders also take a more hands-on approach with individual units. "When you [find a site], it's not only our real estate people, but also our owner who visits the property and gives you an evaluation," Feazell says. "It's one of the things a small group can do."

Allen Gresham found this to be true, even though system size wasn't a top priority when he started researching franchises. After speaking with companies in different industries, he saw that mid-sized chains were offering the customization and personal touch he was looking for. "Generally, having surveyed a number of different franchise systems, the small to mid-sized systems just seem to have a lot more flexibility and interaction. They seemed to be much more personally involved long before you even signed on the dotted line," says Gresham, 50, who eventually bought an Express Oil Change franchise in Cumming, Georgia.

Smaller chains also often serve niche markets, another benefit to franchisees. "The law of marketing says you always want to be first in your category. Obviously, we couldn't be first in the category of haircutting or beauty salons, so we recreated a category of men's and boys' haircutters where we can be number one," says Gordon Logan, president and founder of Sport Clips Inc., a chain with 82 locations in 14 states.

And often by going after target markets, mid-sized chains can influence the bigger players. "Mid-sized chains are some of the most competitive franchising organizations in the world. They're the ones that provide the spark and impetus for growth," says Bob Justis, director of the International Franchise Forum, an organization based at Louisiana State University in Baton Rouge that helps businesses and individuals explore their franchising options. "The mid-sized [franchises] identify target markets and usually become very successful doing so."

For people buying franchises from mid-sized chains, a major motivation is growth opportunity. "Unless you're trying to open one store, and you're going to be happy with that one store, you really need to think about a franchise system that's got a lot of room for growth you can participate in," says Gresham.

Ironically, as franchisees and customers realize the benefits of mid-sized chains, the chains will grow and must find a way to continue delivering those benefits as their numbers climb into the hundreds or even thousands. "If everything falls into place and we can keep that same consistency, then we'd love to have 1,000 stores and be across the country," Feazell says. "But we're going to be just as happy if we have half that number of stores and they're all successful."

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