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A Franchise Sampler
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Valley Franchisees Speak
By Bob McCarthy
The Pioneer Valley is well represented by members of the franchise industry. What follows is a sampling of how and why people became franchisees, with an emphasis on how their experiences compare to starting, operating and growing an independent, non-franchised, business.
First, a few statistics:
1999 study by The United States Chamber of Commerce found that 86 percent of franchises opened within the last five years were still under the same ownership and 97 perct of them were still open for business.
A U.S. Small Business Administration study conducted from 1978 to 1998 found that 62 percent of non-franchised businesses closed within the first six years of their existence due to failure, bankruptcy, etc.
According to the U.S. Department of Commerce, franchise businesses are significantly more likely to succeed than individual new start-ups. This is especially true if you look at the figures over a period of time. According to Department of Commerce figures, after seven years, 91 percent of new franchises are still in business, as compared to only 20 percent of individual new start-up businesses. [Source]
Pizza pros
Brothers Mike and Steve Hurwitz both had experience working in the food service industry. Born and raised in the Greater Springfield area, after graduating from college, Mike worked in the insurance business; Steve had graduated from law school. Both soon tired of the "office life" and, after a while, said Mike, "we decided to look into franchises."
In 1988, a corporate-owned Pizzeria Uno opened on Boston Road in Springfield.
"We knew some of the folks at Uno's corporate, met with them and asked if they would cut out the rest of western Mass for us which they did," said Mike. "That's how we started with Uno's."
The Hurwitz's now own the Unos, at the Holyoke Mall at Ingleside, on the Riverfront, and a third restaurant in Worcester.
According to Mike, restaurant work runs in the Hurwitz family.
"My father was a managing partner in a chain of Kentucky Fried Chicken stores in western Mass.," he said. "I worked at Crestview Country Club as a bartender and waiter for a few years. My brother, Steve, put himself through law school as a waiter at [an] Uno's in Boston. He also opened their stores in Framingham and Harvard Square. So [we] had lots of food in our background."
What drew the brothers to Unos was the different menu. "They have the standard steaks and salads like everyone else," said Mike. "But they still have their signature deep dish pizza, invented in Chicago, and there is still not anything else like it. Even though our percentage of sales with deep dish pizzas has dwindled over the years because people want a wider variety on the menu, it is still a very strong piece of our menu."
And while Mike thinks that from Uno's point of view he and Steve brought youth and energy to the table, experience and enthusiasm are not enough. After all, this is a business.
"There were obviously some prerequisites," he said. "There are all kinds of variables, but the gist of it is that most franchisors are going to look for some kind of net worth, and they will require you to do a strong demographic study in your area for the business."
For the potential franchisee, his strong recommendation is to do extreme due diligence on the company you are buying into. Every franchisor has to have a UFOC (Uniform Franchise Offering Circular) in which they detail everything about their corporation. All of the franchisees we talked with repeatedly emphasized the need for due diligence on the part of anyone considering a franchise. As Hurwitz noted, "It's a two way street early on; they are checking you out and you're checking them out."
Mike and family is also "checking out" other areas in the Valley for possible expansion of the Pizzeria Uno Restaurants franchise, but in the meantime the Hurwitzs have created a partnership with Reins New York Style Deli in West Springfield. It is not a franchise.
The original Reins is in Vernon, Connecticut. The Reins family has owned and operated there for 34-35 years. It is one of the highest grossing restaurants on the state. His paternal grandparents had a deli in Bloomfield, Connecticut about 40 years ago.
"I remember going there on Sunday mornings and helping them it. The deli business has always been in my family's blood," recalls Hurwitz.
"My dad has talked to the Reins family for 20 years to try and get them to open a restaurant in western Massachusetts. So finally, he told them 'enough is enough.' We got offered the site at the old Ground Round and 13 months ago we opened the deli."
Restoration Pros
Kevin Fall has owned and operated ServPro of Hampshire County since 1996. Based in Ludlow, his primary market is the two western counties but because his is the only ServPro franchise west of Worcester, they cover much of the western part of the state.
Kevin Fall had oblique franchise experience before he joined ServPro as a franchisee." I have spent a number of years as a restaurant manager for Marriott Corporation managing franchised fast food restaurants on the Mass Pike," says Fall. "So between managing Burger King, Roy Rogers and Popeye's Fried Chicken, I most of my working life someway connected to the franchise system."
In the early 1990's a friend Fall's who owned a ServPro franchise was looking for a manager, so Fall made the transition from restaurant into cleaning. "It was a good fit," Says Fall, "because as a restaurant worker you understand cleaning and sanitation, so it's not far fetched to go from one to the other."
Based in Gallatin, Tennessee, ServPro identifies its franchisees as fire and water damage cleanup specialists for residences and businesses, but Fall and his crew of 16 have expanded their services to include property management companies, real estate agencies, local high schools and colleges. Says Fall, "We can help maintenance staff and physical plant managers keep their properties clean and safe." Clients find them through the Yellow Pages, referrals and insurance agencies or claims adjusters.
From a business perspective, Fall and the others cite the system as a salient benefit of the franchise industry. Says Fall, "A (successful) franchise has a proven track record for franchisees. A franchise system pretty much takes care of any of those things you might forget. It might be the checklist of things you need to do before you open your doors, and the need for adequate insurance to protect against liability. And you get the training and support from the franchisor with components that have been tried and proven in the "real world."
The ServPro system includes two weeks of intensive training at corporate headquarters where the new franchisees are taught cleaning procedures, office procedures, estimating, marketing, computer programs and equipment usage. Once a franchisee has started, Fall notes there are business development materials developed by more experienced franchisees to help him and others measure their progress and anticipate future needs.
These business development benchmarks, says Fall, signal, for example, "at what point in your business's growth you need to hire a secretary, or hire an accountant, or a general manager, another marketing person and so on. So a manager can look at the stages of development and know that in six months he will have to add another truck to his fleet."
Non-Profit to Profitable
Manuel Acevedo had no direct franchise experience. Born, raised and educated in Puerto Rico, first came to western Mass in 1968. Ten years later he returned and worked with Nueva Esperanza, a community action program in Holyoke. "I was hired to provide technical assistance to small business owners and people who wanted to start their own business in the Holyoke area," says Acevedo. "And due to my education, a B.A. in business management, I was working with primarily with Hispanics." He learned about the franchise world as an alternative to starting an independent small business. . "The more I learned, the more I liked it."
All of the franchises have different requirements, whether it is the application process or the type of business. Some franchisors are more interested in minorities for franchisees. "The more I learned, I convinced myself that there was something in it for me. As I did my analysis about the industry, I wound up with two companies that interested me. One was a home cleaning service and the other was Subway," recalls Acevedo. "According to my personality, I felt that Subway was the better fit. And my net worth at the time was also a better match."
However, not only did Acevedo have no experience in food service, he had never eaten at a Subway restaurant.
"When I went to an interview with the people at Subway, they asked me, 'Which of one sandwiches do you like the most?' I said, 'I don't know. I have never set foot in a Subway."
Acevedo bought the Subway store on Boston Road in the Raymour & Flanigan Mall. From the outset he has made it a practice to do his homework and get involved. Due diligence is mandatory. "You're sending a [royalty] check every week to [the franchisor] and if you will be a most miserable person if you are sending them money and you don't like what you are doing," he says.
"It is also important," says Acevedo, to be an active member with in the system." He has joined a board with other franchisees to help coordinate and implement regional advertising campaigns with Subway restaurants in the eastern part. He also notes that franchisees do have some leeway when it comes to pricing. "Subway does make recommendations for pricing but area franchisees do have some leeway when setting their store's prices."
For a man who had never eaten a Subway sandwich, Acevedo's approach to treating the franchise as his business has been successful. He has managed the store for five years, has paid off his business loan and has been approached by Subway to purchase other restaurants in the area. He has declined. People have also approached him with other business opportunities, offering to back him financially he will manage operations.
Acevedo chuckles. "Having survived as a franchisee, now I'm bankable. Everybody wants to lend me money. At the beginning nobody wanted to lend me money." But he does admit that even while working seven days a week at his restaurant "I like working seven days a week. but I don't necessarily have to. I like being here and I love my customers he is looking to expand his operations, if not into other restaurants possibly into other areas.
Franchising Pros
While the Hurwitzs, Fall and Acevedo combined their own due diligence and/or experience in seeking opportunities within the franchise industry, there are other resources available to people with a desire to start their own businesses. One of those resources is The Entrepreneur's Source, a franchise for potential franchisees, if you will.
Working out of an office on the Springfield-Enfield line, Steven Rosenkrantz has been a coach-consultant with the company for ___ years.
"The Entrepreneur's Source is an international franchise of coaches who assist individuals who are exploring change," says Rosenkrantz. "We offer career consultations for folks who may be thinking about becoming self-sufficient. We are kind of like a matchmaker. We find the right types of existing franchise and business opportunities and mesh it with the goals, needs, expectations and the criteria set forward from by the consultations with our clients."
After graduating from Babson College, Rosenkrantz joined the family business, Serv-U Stores full time and became the operations manager of the stores. He remained in that position until the fourth quarter of 2001 when the decision was made to downsize the stores' operations.
"When the family business decided to downsize," says Rosenkrantz, "for the first time in my life I was at a career crossroads. I simply got on the Internet exploring. I didn't know much about franchises but asked myself, 'Is there was a system I could follow? 'and still bring my ideas and creativity to the table."
From his surfing, Rosenkrantz a Boston-based coach from The Entrepreneur's Source offered to help him locate the opportunities in self-employment. In the fall of 2001, Rosenkrantz became a client of The Entrepreneur's Source, a franchisee and coach-consultant with the company. When he joined there were 48 consultants. Today, six years later, there are 300 in the United States and Canada.
More recently, two years go Rosenkrantz expanded his role beyond being a coach and became a regional developer of a cadre of coaches in the mid-west. He provides these coaches the resources they need to properly help individuals seeking to enter small and medium size businesses and provide coaching services as well.
The services offered by Rosenkrantz and his fellow coach consultants are free. According to Rosenkrantz, they "help people understand, be okay with and then overcome the detours any human being would probably experience when they are looking the potential change in their career and in their life."
Franchising is "hot" says Rosenkrantz because "in a ten year period 82% of independent business fail. In the same ten year period, more than 90% of franchises are still in business and succeeding." The ownership might have changed but the same franchise still exists.
"What franchising has enabled the typical person to do who wants to have control over their life," says Rosenkrantz, "is to kind of be in business for yourself, but not by yourself."
The Micro and Macro
To a person, these franchisees state that they have control within a proven system, a system that allows the franchisor to focus on the macro while they manage the micro. What they also have in common is their due diligence, an realistic appraisal of their strengths and weaknesses and a thorough enjoyment for what they do. Mike Hurwitz will make deliveries for Rein's Deli then help cover the lunch crowd at the Riverfront Uno Restaurant. Kevin Fall spends much of his time administrating but admits he enjoys getting out of the office and being on the job. Manuel Acevedo unabashedly states, "I love my customers!" Steven Rosenkrantz believes is his natural inquisitiveness about people has helped him succeed and in 2004 be named Consultant of the Year by the parent company.
Is a franchise for everyone? No. But for these four local businessmen, it seems to have worked very well.
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