Consultants offer services to companies considering franchising

Long Island Business News, Jun 23, 2009 by Bernadette Starzee

Vehicle Tracking Solutions in Deer Park provides systems to help companies with fleets manage them more efficiently. Its clients include the Town of Brookhaven and the Suffolk County Water Authority.

About two years ago, the company decided to pursue franchising as a method of growth. VTS hired Ed Teixeira, a franchising expert and founder of the Stony Brook consulting firm FranchiseKnowHow, to get the program up and running.

The company now has nine franchise locations in major markets such as Boston, Tampa and Phoenix.

After the launch, the company hired Teixeira as chief operating officer to manage and further grow the franchise program. Teixeira, who has since hired an additional staff member, said the goal is to open 10 to 15 additional locations this year.

The franchise business model can be an efficient method of growth for the right business.

"In our case, we have a simple, seamless concept; it's a business- to-business sale, and no brick-and-mortar location is required," Teixeira said. "With our guidance, franchisees call on companies with fleets. Many of them work out of their home offices."

Franchising is a good idea when the concept has appeal beyond an individual market area and is easy to replicate, Teixeira said.

"If you have a restaurant menu that is not easily duplicated, then it's not a good idea," he said. "But if you have a chocolate cookie concept with a recipe from Grandma, you could easily design a system for people to copy it."

Another important caveat: The company must assemble a team with franchising experience.

Tom Scarda is a Wantagh-based consultant with FranChoice, a national organization that matches franchises with buyers. "We counsel individuals who are interested in buying a franchise to look for one with an experienced team that's able to support people remotely," Scarda said.

But successful business owners can have trouble accepting that they can't franchise on their own.

"A business owner has to put his ego aside and bring someone on board with experience in franchising," Teixeira said.

He added, "It's important for company owners to realize that, even though they have built a successful business, they should not expect a franchise to have the same performance," since it will be a new business with owners that are also new.

When possible, Scarda suggests testing the waters with one location that's run by someone else. "Get your brother-in-law to open up a store," he said. "This will make you see what it will take to make a location run by someone other than you successful. When people buy a franchise, they want to see that it's been done successfully before."

A franchise launch also has to be properly capitalized. A bare minimum of $100,000 to $150,000 is required up front, Teixeira said, for legal fees, staff, marketing and setting up programs to provide franchisees with the tools they will need. Depending on the program, that tab can easily run into the hundreds of thousands.

And once a company gives tools to franchisees, its work is not done. "Going from owning your business to offering it as a franchise is like being single and then marrying someone with a bunch of kids - and the kids never leave," Scarda said. "You now have people that you have to service nonstop."

But franchising has its pluses. "Opening additional locations on your own requires a great deal of capital investment, and unless you have the brand awareness of a McDonald's or a Dunkin' Donuts, it should take three to five years before the new locations start flourishing," said John Mangione, who two years ago bought the development rights for the PRstore franchise in Long Island and New York City. Based in Charlotte, N.C., PRstore - which sells a wide range of marketing services at consistent pricing and has more than 40 locations nationally - targets small businesses. According to Mangione, a small-business owner can, for instance, walk up to the counter, order a direct mail campaign - including creative, printing and mailing - and pay for it with a credit card.

Mangione opened the area's flagship location in Ronkonkoma, while a second location was opened by a franchisee in Melville. Mangione said ideally, he would like to see 20 locations in his coverage area.

"If more stores open up, it builds brand awareness," he said. "If people see there's more than one, they'll think, 'there must be something to this.' The additional locations will help my business indirectly."

Besides increased brand awareness, franchising allows others to share the workload. Dina Saitta and Sherri de Carolis started Joe on the Go, a mobile business that sells coffee, cappuccino and espresso drinks and smoothies this year and are in discussions with their advisor at the Small Business Development Center in Stony Brook University about growing the concept through franchising.

"A Mr. Softee truck used to come through the industrial park area in Deer Park where we worked, but we were always in the mood for a coffee drink," Saitta said, in explaining how the idea took shape. The two women have since quit their Deer Park jobs and, with some help from their husbands, are trucking to special events and business areas in Western Suffolk. "There has been a lot of interest," Saitta said. "People come up to our truck and ask if we can come to their children's soccer field or their place of business."