Entrepreneurs are sold on concept

FRANCHISE FEVER

April 08, 1992|By Michael Dresser | Michael Dresser,Staff Writer

When David Campbell was building Bekins Express into a nationwide air freight company during the early 1980s, he was a big wheel. He had a large corporate staff and hundreds of far-flung employees. But something just didn't seem right.

"I had the feeling that many of the managers were playing golf and hitting the pool tables," he said. Now, Mr. Campbell has a staff of five at the headquarters of Parcel Plus in Annapolis. And instead of office managers, he has a network of entrepreneurs at 51 of his 55 locations.

"Having done this for five years, I'd have to say it's a great way to go," Mr. Campbell said.

With their own money on the line, the people running his package-delivery stores are so motivated that none of the stores has failed since the company started in 1986, he said.

Mr. Campbell is not alone in his enthusiasm. It seems that everybody is getting into franchising these days. Fast-food restaurants, car rental agencies, tax preparers and even bungee jumpers are expanding by selling off the right to do business under their names.

The International Franchise Association estimates that a new franchise opens in the United States every 17 minutes, adding to a total that exceeds 500,000.

As big companies merge and shrink, franchises are becoming an increasingly important engine of job creation.

Maryland-based companies are enthusiastic participants in this trend. An exact count is hard to come by, but two dozen is a conservative estimate.

They range from a nanny-referral business to a candy store chain to a worldwide network of hotels. Since the beginning of the year, two well-known inhabitants of Maryland malls, mamma ilardo's pizza and Chesapeake Knife & Tool, have announced plans to go the franchise route.

This weekend, 11 Maryland companies will join at least 400 others at the Washington Convention Center for the franchise association's first International Franchise Expo, which runs Friday through Sunday. All will be hunting for the same thing -- franchisees.

The potential franchisees vary from stay-at-home mothers seeking part-time work to owners of multimillion-dollar regional companies whose sole business is to operate dozens of franchises -- often from several franchisers.

Franchise companies agree that the talent pool has become much deeper in recent years as more and more refugees from corporate America go their own way.

Many of them are former high-level executives who were handed hefty severance checks and told to clean out their offices.

"Most of the people I get are people that find their position is getting squeezed out because management is tightening the belt," said Joel Rosenberg, president of Silver Spring-based Candy Express, a four-year-old "full-service candy store" chain that expects to grow from 33 stores to between 400 and 500 within the next five years.

A growth pace that rapid would be a pipe dream for the founder of a small company were it not for franchising. The cost of expanding through company-owned stores would eliminate all but the most well-heeled companies. And even if the money were there, the task of building an organization to handle such expansion would daunt even a company such as Wal-Mart Stores Inc.

Franchising, however, is largely a self-financing method of organization-building. In the early years, the company's revenue largely flows from the franchisees, who pay sometimes hefty fees to join the network. In later years, if all goes well, revenue from the franchiser's share of sales outpaces fee income. Meanwhile, each franchisee is responsible for building his own franchise-level organization.

Maryland franchisers give many other reasons for preferring franchising as a vehicle for growth.

* For Bruce Frazier, director of franchise development at Millersville-based All Tune and Lube, the basic reason is simple.

"Owners just care," Mr. Frazier said. "You have somebody who has a vested interest in the business." The 6-year-old automotive maintenance and repair company, which has 264 franchises and one company-owned store, gets stronger as its grows because its ability to make volume purchases increases, he said.

* For Joe McGuinness, president of Columbia-based Signs By Tomorrow, the advantage is that "everybody in the system is really growing with you."

His 5-year-old company operates 21 stores -- 19 of them franchised -- that use computers to generate signs for businesses.

For his franchisees, he said, the system offers a tested concept and a headquarters staff made up of "consultants, trainers and teachers." Instead of having to invent a system from scratch, they have one from the day they sign up.

In return, he says, the company will reap benefits from the imagination of dozens of innovative entrepreneurs.

"Most of your ideas are expected to come out of the franchise stores," Mr. McGuinness says. "Every one of your stores and every one of your people become a miniature R&D center."

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