Innovation Helps Franchises Grow
Even in a sinking economy, flexibility and creativity keep high-demand franchise concepts spreading.
In today's volatile economy, growing a franchise system can be tough. But some franchisors see hope in the current business climate. They offer innovative strategies that could benefit any franchisor trying to help existing franchisees succeed and attract future qualified franchisees.
Value and convenience are highly sought-after, and systems providing these attributes arguably see the best results. Yes, systems with relatively low franchise fees and startup costs are more likely to see growth, but the more expensive concepts, those with the higher build-out costs, can still tweak their systems to boost sales. And you don't necessarily need big bucks to tap new opportunities.
Opening Doors, Lowering Costs
Consider, for example, the collapsed real estate market. Lower property values have proven to be a good thing for Jerry Laesser, vice president of marketing and franchise development of Martinizing Dry Cleaning, in Cincinnati, Ohio.
"Rents are softening up all over the country, and that was not so 24 months ago," he says. "That saves our franchisees an additional expense," which over the course of a 10- or 15-year lease can amount to larger savings. And in the spirit of keeping costs down, a reduced plant size lets franchisees operate in 1,600-square-foot units, translating to lower rents and cheaper build-out costs.
Fast casual restaurant chains, too, are reducing the size of their "box," putting in place "express" units that are less expensive to build and require less staffing, thereby offering a less expensive option for prospects.
Another innovative approach? Laesser says his system now uses an environmentally safe cleaning process, which "has opened all sorts of doors," including shopping centers that reject dry-cleaner tenants using solvents. Laesser says since 2003 Martinizing has focused on multi-unit developers, who enjoy economies of scale and find locations more successfully due to greater clout among brokers and landlords.
Or, take the approach by Geeks On Call. The eight-year-old company went public in February, and as Chief Operating Officer Richard Artese puts it, has "two sets of interested parties to provide value to: our franchise owners and our shareholders."
Artese and his team had their "a-ha" moment for adding revenue in April at the International Franchise Association Expo. Overlooking the sea of 200-plus franchisors, Artese saw not just peers, but prospects needing computer services.
"I spoke to a dozen franchisors in two hours and asked, 'Who sets up computers for your franchisees?' " he recalls.
There and then Geeks on Call's Endorsed Vendor Partners program was born. Geeks On Call distributes company brochures that explain its offerings to targeted franchisors, who can vet the program and endorse them to prospects.
"We give them a discount code and become their preferred IT provider," Artese says.
Already six systems signed up, with at least five more signing on, and Geeks On Call has assigned a dedicated person to manage the program. Franchisees and prospects like it, Artese says, because "these are hot leads."
Cruise Planners, an American Express Travel Services Company based in Coral Springs, Florida, has more than 700 franchisees nationwide. Chief executive Michelle Fee says nearly 130 new franchisees joined last year. Despite the poor economic outlook, industry experts say cruising remains strong, expecting sales to match or exceed 2007.
"People have two weeks a year to vacation," Fee says. "It's the last thing they want to give up."
They even save money when booking a cruise to Europe, she adds. "They're buying in U.S. dollars and not paying any kind of markup because of the Euro."
This year, franchise sales are up nearly 10 percent. Fee navigates today's sinking economy by sweetening the deal, offering prospects either an iPhone or free advertising dollars if they come onboard once they have read through the FDD and Franchise Agreement within the 14-day period required by the Federal Trade Commission's Franchise Rule. It's a winning strategy--either way, franchisees get a valuable business-related tool that helps them succeed.
And at a time when people value flexibility, Cruise Planners has geared its message to engage stay-at-home moms who need the extra income but want to work only while their kids are in school and retirees who want to subsidize their income and enjoy some travel perks, too. Flexibility again comes into play for those who run home offices. Fee said many franchisees put in several more hours in the office once they put their children to bed.
It's easiest to help franchisees succeed, of course, if your concept's in high demand, like the education industry. Increased federal and state mandates mean schools expect improved test scores--and students, feeling the pressure, rely more heavily on tutoring.
Just ask Greg Helwig, vice president of franchise development at Baltimore-based Sylvan Learning Centers. With 1,200 centers, Sylvan has served 2 million families, and demand grows 12 to 15 percent annually, Helwig says.
But despite that growth, Sylvan isn't leaving anything to chance. In the past year, the company began marketing to its database of prospects who inquired in the past but never bought in.
"Maybe we didn't have an opportunity that suited their geographic need" at the time, Helwig says.
Sylvan informs prospects when new territories become available to gauge interest. Helwig says his response rate to this direct mail effort is about 2.5 percent above the national average, which experts typically put between 1 and 1.5 percent.
Flexibility and Convenience Matter
Jan Van Blarcum, the founder of Creative Tutors, in Plano, Texas, agrees that the tutoring industry is not slowing down. After 9/11, she feared a downturn but instead found that parents continued to put their resources into their children even as family budgets tightened. It's a message she brings to new prospects as she grows her system from eight owners in Texas and spreads it next year through Colorado and Utah.
Franchise fees begin at $20,000, and the concept is also home based, another plus that appeals to those who may not have deep pockets and need flexibility. And because consumers too want flexibility along with convenience, tutors meet students at their homes or in libraries, day care centers or sports facilities to accommodate busy schedules.
Sylvan is rolling out a home-tutoring service and also offers online, live tutoring, providing additional revenue streams for franchisees, Helwig notes.
Systems that offer that kind of convenience get good play with qualified franchise prospects, notes Tom Scarda, a Long Island, New York, consultant with FranChoice, which matches systems with people. The concepts that offer convenience for consumers and save them gas--such as Aussie Pet Mobile, which grooms pets at their owners' driveways--are, Scarda says, "the ones that are good business."
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