Is Being Your Own Boss a Franchise Fallacy?
Many budding entrepreneurs mistake franchising as a way to become your own boss. But although some franchisers encourage owners to be creative, others want them to follow rigid rules.
Mauro Olivieri knew what it was like to run his own business but figured the quickest way to grow bigger was to become a franchisee.
So two years ago, he plunked down more than $100,000 for a Payless Car Rental franchise. Mr. Olivieri expected the transition to be smooth since he had started up his own independent rental car agency, Alba Rent A Car, in Miami.
Today, Mr. Olivieri knows one thing for sure: He no longer wants to be a franchisee. "I just want to get out of the business as clean as possible," says Mr. Olivieri. "I want to go on with my life."
Many wannabe entrepreneurs mistake franchising as a way to be your own boss, but that's not always the case. It's an important distinction as recent rounds of layoffs and a slow job recovery have pushed more people into starting their own businesses.
Being a franchisee may seem like you're running your own business but ultimately you do have a boss -- the franchiser. Depending on the franchise, some encourage franchisees to be creative, while others want them to follow rigid rules.
"If people are real entrepreneurial, they probably won't be as happy as a franchisee," says Cheryl Babcock, director of the International Institute for Franchise Education at Nova Southeastern University in Fort Lauderdale, Fla. "Franchisees follow a system. If they have a strong ego and want to see their name above the door, they aren't going to be happy with XYZ franchise."
Mr. Olivieri got started in the car-rental business as a 17-year-old check agent inspecting cars as customers dropped them off. When he graduated from Florida International University, he decided to start his own rental-car agency and took out $100,000 in personal loans and cash advances from credit cards to buy 30 cars.
He called his new business "Alba" -- the Italian word for sunrise. By 2001, Mr. Olivieri had built his fleet to 300 cars, but he wanted more.
"I was ambitious," he says. "I wanted to go all the way. I thought I was going to be the next Dollar or a Thrifty."
But the Internet held him back. Without a brand name, Alba couldn't get high visibility on the online reservations systems. That's when Mr. Olivieri decided to become a franchisee.
A few weeks after signing the Payless agreement, however, Sept. 11, 2001, arrived. The tragedy of that day shut down the nation's travel system, and business has yet to return to previous levels. Mr. Olivieri began selling off about 20% to 30% of his fleet of cars.
He hustled for business, focusing first on local customers. By the end of 2002, he decided to go after international customers, and he thought Payless would provide him with an international customer base. It didn't. So he decided to build it himself, hiring a two-person marketing team to pursue tour operators and customers in South and Central America.
Mike Harley, president and chief operating officer of Payless Car Rental Inc., says the company frowned on Mr. Olivieri's efforts because marketing to international tour operators and international customers just wasn't part of its core business. What's more, having many international travelers could drive up insurance costs because they're not familiar with driving in the U.S.
"I don't need the tour business," says Mr. Harley. "It's not part of our model."
Without the support of the corporate office, Mr. Olivieri stopped his international marketing effort after six months, but he kept trying to boost his business. This year, when another independent company folded, Mr. Olivieri bid -- and won -- the right to take over their counters at Fort Lauderdale and Miami airports. Over the summer, Mr. Olivieri beefed up his fleet to 800 cars, but then Payless shut off his reservations system.
The St. Petersburg, Fla., franchiser said it involved the franchisee's failure to pay bills to online reservation companies, and other related franchise payments.
Mr. Olivieri's lawyer, Robert Zarco, says the franchiser wrongfully cut off the reservations system to effectively terminate his client's business.
Without reservations, Mr. Olivieri couldn't rent his cars, forcing him to sell off vehicles and lay off staff.
If he had to do it over again, Mr. Olivieri says he would have done more research on being a franchisee. "I never really saw [the franchiser] as my boss," he says. "I was always very well aware I owned my own business. I always expected support. I always looked at it as working side by side."
Payless's Mr. Harley says Mr. Olivieri faltered because "he's an independent car-rental operator who found out working as part of a system you can't spread yourself too thin."
Mr. Olivieri is no longer operating a Payless franchise. He's selling off cars to reduce debt, but says he still likes being in business for himself and won't give up that dream. "I've always wanted to be an entrepreneur," he says.
Copyright © 2004 Dow Jones & Company, Inc. All Rights Reserved
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