How are Franchisees Dealing?
The economy has many businesses in a slump. We spoke with several franchisees to see how they're overcoming obstacles.
Franchisee: Jay Palmer, 31
Franchise: Floyd's 99 Barbershop, a salon-style barbershop
Purchased first Franchise in: 2007
Location: Boulder and Fort collins, Colorado
2008 Sales: More than $1 million for two locations
"We're on store three, and because of the economy being the way it is now, I couldn't get a loan for the life of me, whether it was using my house as collateral or my parents' house as collateral. There [wasn't one] bank that would give us the money because of the market, and they felt we were building our stores too close in time to each other. It has been difficult, and it was poor timing on our part. The banks wouldn't give us a loan--not an SBA or a corporate loan. We couldn't find money anywhere."
"We found a personal investor and brought him into the shop. We gave him a shave and a haircut, [showing] him that the concept is great and the experience is unbelievable--great music, great vibe, great atmosphere. I wasn't even there [when he visited the store]. He asked around and found out that the [employees were] happy, they enjoyed their jobs, they enjoyed their boss and things were running well. After all that, he was happy to write a check for $150,000. He had some financial figures, but [it came down to] seeing a stream of people coming in and out the door, knowing our customers and our employees are happy, and realizing this is a good business."
Franchisees: Carrie and John Bordenkircher, 40 and 41, respectively
Franchise: Kitchen Solvers, a kitchen and bath remodeling and design services company
Purchased first Franchise in: 1997
Located: brookville and mason, Ohio
2008 Sales: about $1.5 million for two locations
Change in consumer confidence
"Over the past 12 months, our customers have changed more than the economy has. They've evolved into a new being that we didn't know before. It's really difficult right now for consumers to make decisions regarding a project. They have turned it into an accounting spreadsheet and are consumed with wanting to shop around on the internet and at places that are, in our minds, inferior places to purchase products. They are only looking at numbers and forgetting they're really doing a project and it needs to look good and maintain itself--their investment needs to be protected. For our company, leads in the past 24 months are down 19 percent and sales are down 25 percent."
"We are going to fix and [rebrand] all our vans, get some new signage on our buildings and send out more letters to past customers. We are doing things like always leaving a gift with our client after we've finished the kitchen. It's a little gift basket and they love that. Customers today are looking for the wow factor. It's not just in the performance of the work; it's in things that aren't really even related to the work. So we're trying to really up that customer service a little bit, give them the gift and make them feel good about themselves. We've been working more on the operations of our business and so has the franchisor. You can't just sit around waiting for people to call, so it does give us time to think about how to streamline the business a little bit more and put plans in place."
Franchisee: Michael Frampton, 52
Franchise: The Melting Pot, a fondue specialty restaurant
Purchased Franchise in: 2005
Location: Rocklin, California
2008 Sales: $1.4 million
Real estate crash
"At the time we were looking for a site, California was enjoying huge and rapid growth. The availability of suitable property was pretty limited, and the pricing was pretty high. There was an expectation that a number of [tenants] would open up around us. But actually, it became hard for the center to fill up quickly because 10 other centers were all opening at about the same time. We were probably one of the first upscale restaurants in that area. A number of smaller restaurants joined us, but the rapid opening of restaurants around us also put a fair amount of pressure on our business. Also, when we took the property on, we were paying about $500 a month in property tax. When the center got sold to a new landlord, property tax went up to $2,500 a month, so that $2,000 just came straight off the bottom line. It was never budgeted for. That pushed some of the tenants over the limit."
"We created loyalty cards and did a mass mailing to our local 10-mile area. We've done a lot of other direct mailing because it's measurable. We also very carefully analyzed where we're spending money [as well as] on what areas we can afford to not necessarily cut but control. One area was our linen costs--the towels and things we use to clean. We actually made that a focus for the managers, and we started saving [about] $500 a month. We looked at energy--when we turn our equipment on and how long it runs--and our staffing, which is one of the biggest [costs]. We also started opening for lunch on Sundays."
Franchisees: Wendy and todd Diskin, 34 and 37, respectively
Franchise: EmbroidMe, a company that specializes in promotional solutions for businesses, including decorated apparel and screen printing
Purchased Franchise in: 2004
Location: Lenexa, Kansas
2008 Sales: More than $700,000
"Throughout the past year, we [have received], on a routine basis, notices from our suppliers that costs are going to go up. [The cost of] getting products from overseas [to] customs to warehouses has gone up. It's almost a 5 percent increase in the cost of goods over last year."
"Because we're in the custom product industry, where competitive pricing is always important, we have to be competitive. But what we have been trying to do so it's not just a quote basis is provide more of a solution-based framework for our business. For example, if customers are trying to increase their readership, we think about how we can use our products or services to help them do that and then come up with a complete program. It's then about risk and reward and ROI instead of price, and that's how we've been trying to present ourselves to our customers. We also purchased a continuous marketing software program that sends letters and e-mails so we can stay in front of our customers on a regular basis without a ton of effort on our part.
"Being part of a franchise has helped us out because vendor relations is one aspect of the business we don't have to worry about as much as we would if we were on our own. [Corporate] is out there building strategic relationships with different suppliers and negotiating to get us the best prices we possibly can."
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