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FRANCHISING

Should You Franchise Your Business? In the decades since late industry legend Ray Kroc began selling McDonald’s franchises in the 1950s, franchising has become a proven way to rapidly create a national chain. Here are seven questions to ask yourself if you’re looking to expand your business. BY CAROL TICE

en Davis always hated 2008. The chain’s members pay up business of empowering confident getting his hair cut. The to $8,000 a year for straight-razor gentlemen to change the world.” former insurance-startup shaves, shoeshines, manicures With the clubs pulling in more executive wanted to start and other pampering in a classy, than $1 million in annual sales a business he could grow wood-paneled setting. The Gents apiece by early 2016, The Gents into a national brand, so he Place thrived by becoming a haven Place was ready to grow through B decided to create one that for stressed-out CEOs and startup the time-tested method of selling offered a better haircut experience. entrepreneurs and opened three franchises. His brainchild is The Gents additional clubs in Dallas and By summer’s end, hope was high Place, an upscale men’s grooming Kansas City. at The Gents Place, with Davis re- and lifestyle club that opened its “It’s not just upscale men’s porting strong interest from poten- first location in Frisco, Texas, in grooming,” Davis says. “We’re in the tial franchisees and several deals in

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progress. He expects to see roughly ing in 2002 and now has more than FRANdata. That means the brands nual sales figures in the federal chise Owner! The Start-Up Guide to half a dozen Gents Place franchise 1,000 restaurants. haven’t registered to sell franchises Franchise Disclosure Document Lowering Risk, Making Money, and deals signed before year-end. But simply filing the legally for at least three years. that all franchisors must file in Owning What You Do. Every year, hundreds of eager required paperwork to become a Why do some businesses suc- order to sell franchises. Brands just “A very small percentage of the entrepreneurs strive to franchise franchisor is no guarantee of suc- ceed in selling franchises, while starting out that don’t yet have people I talk with are open to being their business. Their interest is cess. Of 318 franchise brands that others find no takers? If you’re sales figures are seen as riskier a first or second franchisee,” he fueled in part by the megasuccess debuted in 2012, more than 100 are thinking about franchising your propositions, says independent says. “They have to be looking to get of chains such as Five Guys Burgers now “inactive,” according to in- business, consider the following: franchise adviser Joel Libava, in on the ground floor of something and Fries, which began franchis- dustry research and advisory firm who’s the author of Become a Fran- that could turn out to be big.” 1. IS YOUR MODEL PROVEN— AND PROFITABLE? Franchise experts often hear from entrepreneurs who have an idea With concerns about for a franchise chain. But it’s tough mosquito-borne illness A CHOCOLATIER TASTES SWEET SUCCESS to sell franchises for a business that exists only in your head, says on the rise, professional What does it take to turn a family chocolate business into one of Michael Seid, managing director mosquito control is more Entrepreneur magazine’s top new franchises of 2016? In the case of of the franchise-consulting firm important than ever. Chocolate Works of Valley Stream, New York, it took almost 40 years, a MSA Worldwide in West Hartford, name change, new leadership, a wife’s inspiration, a 1,200-page operations Connecticut. Prospective franchi- manual, a pro franchise team and more than $1.5 million. Join Mosquito Joe sees are looking for a concept with The journey began in 1999, when son Joe Whaley took the helm from father a track record of proven success, to help make John Whaley at what was then gourmet chocolates purveyor 5th Avenue ideally at multiple units. outside fun again. Chocolatiere. His wife Colleen Whaley’s idea to boost business? Let people “No one with any sense is going make their own chocolates at the factory—and have parties. to develop a franchise without a • Recurring revenue Response was enthusiastic: A typical party rang up nearly $700. Whaley prototype,” Seid says. “Your fran- stream and a service began hearing from entrepreneurs interested in opening a standalone chisee is not your guinea pig. If Ray chocolate-party store. Kroc [the founder of McDonald’s] that is high in demand. Whaley developed a retail store prototype so the concept could fit in a came back to earth today, showed Great as a stand-alone typical mall space. For the new format—renamed Chocolate Works—he had up at my door, and said, ‘I want to • to invest in creating downsized candy-making equipment that would fit in a franchise a new burger chain,’ I’d business or 1,500-square-foot store. Now, what Build-a-Bear Workshop did for buying a say, ‘Why don’t you go open one?’ ” complement to an stuffed animal, Chocolate Works does for buying a box of chocolates. “It’s like Successful franchisors usu- existing business. Willy Wonka and the Chocolate Factory shrunk down to a retail store,” he says. ally operate for years and slowly In 2011, Whaley tested the new concept through two licensing agreements, improve their margins before they • Low investment a form of partnership that has fewer legal requirements. Soon after, two sell franchises. For instance, 5 Guys and fast start up. No Chocolate Works opened, in Manhattan and Scarsdale, New York. Burgers and Fries opened its first experience necessary! After those units proved successful (one did $800,000 in sales its first restaurant in 1986, but didn’t begin 908.889.PETS year), Whaley hired an experienced team to help turn Chocolate Works into an selling franchises until 2002. K9RESORTS.COM official franchisor. It’s important that franchise Whaley reports the first franchise sold in just a few months. Including the models be highly profitable. That’s $50,000 franchise fee, a typical franchisee spends roughly $350,000 to open because franchise owners pay a With 25 years of consecutive industry growth, pet services is the a store, depending on local retail lease costs. Several early franchisees have monthly royalty to the franchi- business to own. Make your dreams come true by owning a K9 Resorts already purchased additional franchise locations, Whaley says, including one sor—typically, 5 to 6 percent of Franchise, and bring to life that “Work Hard, Play Hard” mentality! Missouri franchisee who signed up last May to build four more units. sales. There’s also an initial fran- From its 2013 franchise debut, Chocolate Works now has 20 stores chise fee that can range as high as operating and 19 more franchises sold, in New York, New Jersey, Connecticut, $35,000 or more. Margins need to AVERAGE GROSS REVENUES Missouri and Pennsylvania. The main factory has tripled in size to keep up with be high enough that the franchise franchisee demand. owner still makes a profit after the What tips does Whaley offer would-be franchisors? “Make sure you hire franchisor takes a cut. 2015 CORPORATE LOCATION 2015 FRANCHISES the right people and have a solid concept before you franchise,” he says. “We One big reason longstanding $ $ * started with just chocolate, but added candy and ice cream, as we tested operators often see better success 1,340,924 916,210 855-JOIN-JOE Chocolate Works out.” selling early franchises is because EBITDA $610,432 EBITDA $366,660* MOSQUITOJOE they’re able to share average an- * This information is based on the average unit gross sales percentage increase for 7000 sq foot FRANCHISE.COM franchised K9 Resorts units that were in operation for the entire 12 month period ending December The filing of an application for registration of an oering prospectus or the acceptance and filing thereof by the New York Department of Law as required by New York law does not constitute approval of the oering or the sale of such franchise by the New York 31, 2015. See Item 19 of the Franchise Disclosure Document for more information. Franchises are Department of Law or the Attorney General of New York. Minnesota Registration #F-7090. © Mosquito Joe Franchising, LLC | 349 Southport Cir, Ste 106 | VA Beach, VA 23452 offered by prospectus only. IN-DEPTH

FRANCHISING “I MAY BE THE HEAD COACH, BUT A FRANCHISE NEEDS OWN A BUSINESS AND A GREAT COACHING CHANGE THE WORLD 2. IS YOUR IDEA UNIQUE? locations in 44 states and will buy TEAM AND GREAT packaging, our approved suppli- tional office staff to assist franchise There are roughly 3,000 different more than 8,000 houses this year. PLAYERS.” ers—every single aspect has to be owners, corporate trainers and Love What You Do franchise offers that prospective Virginia-based Firenza Pizza, in there.” more. Then, if you’re lucky, it’ll be Mathnasium is a one-of-a-kind buyers can choose from today, says which began selling franchises in —DAVE WOOD, CEO, FIRENZA PIZZA Training methods also need to three to six months before you see opportunity to earn a living by making a Libava. To attract those critical first late 2015, stands out from other be standardized so that customers the first franchise-fee check, says difference. With more than 700 centers franchise buyers, your idea will pizza chains by offering unique aspect of operations documented have a similar experience and are consultant Libava. world-wide, and more opening each need to stand out. topping options such as asparagus to make it easy for owners to follow treated in the same way, no matter To ready its chain for franchise week—Mathnasium is growing rapidly. The Gents Place has that going and avocado slices. “One of the and to create consistency. Fran- which unit they visit. sales, Mosquito Joe raised $3.5 That’s because we are passionate about for it since there isn’t a national [other] ways we are different from chise buyers expect to review these At pest-removal franchise million from a pool of 50 investors, what we do. chain of day spas for men as yet. other pizza chains is the interac- materials when they evaluate your Mosquito Joe in Virginia Beach, including Wilson. The company Simply hopping on an established tive control we give the customer,” concept. Virginia, CEO Kevin Wilson says now has nearly 170 locations open, In 2002, we had just one Mathnasium center in Los Angeles, California. Today trend—say, opening a new frozen says CEO Dave Wood. “There is no For Chocolate Works founder they’ve developed more than 20 with 100 more franchises sold. we are teaching children in communities yogurt brand—is unlikely to suc- guessing how much pepperoni the Joe Whaley, that meant creating hours of recorded orientation and The Gents Place’s Davis went across the United States, Canada, and ceed, he adds. customer wants—the customer a 1,200-page operations manual training videos they post online a different route, raising just countries around the world—providing If your idea isn’t new, putting a tells us as we make the pizza.” describing everything from how to for prospective franchisees and $400,000 but putting two key part- neighborhood environments where fresh twist on an existing business The concept is working. “We use candy-making equipment to another 50 hours of training is nerships in place to help launch the humanity combines with math expertise. type can work well. That was the have reached agreements with how goods should be displayed. delivered live at headquarters. chain. He brought on The Elevated case for Dallas-based HomeVestors, great franchisees to open over 60 “We had to put everything To help develop these systems, Brands—which operates the 150- The Mathnasium Method ™ the home fixer-upper network that locations over the next few years,” we did on the fly, that was in my most companies, if they have no unit massage and facial franchise began franchising in 1996 and shot Wood says. head, onto paper,” Whaley recalls. past franchising experience, hire Massage Heights—as one partner, A Mathnasium franchise is an excellent business opportunity in an important to success with its “We Buy Ugly “Which Pantone colors we use, franchise pros to assist them. and Pro Football Hall of Famer Em- 3. IS THERE A SYSTEM? field with high demand. With a modest Houses” slogan and “Ug” caveman all the molds and recipes, how to Mosquito Joe’s Wilson—who was mitt Smith, a Gents Place member, investment, our franchisees have the mascot. The company has franchise To sell franchises, you’ll need every temper chocolate, where to get your the founder and CEO of franchisor as company spokesman. opportunity to seize a significant share of Benny’s Bagels and also previously The move allows The Gents Place a billion dollar industry. owned a CiCi’s Pizza franchise— to take advantage of franchise sales was recruited to get Mosquito Joe and support and training staff that ready to sell franchises in 2012. He Elevated already has in place, sav- Mathnasium Fast Facts hired an executive team with simi- ing greatly on up-front spending, • Ranked #25 in Top Fastest Growing lar experience, to create support Davis explains. Franchises by Entrepreneur Magazine services for the franchise owners. • $40K USD franchise fee and simple “We have 80 years of cumula- 5. HOW WILL YOU PROMOTE IT? start-up • Proprietary curriculum, extensive tive franchising experience on this Once you’re legally set to sell training, and ongoing support team,” he says. franchises, there’s the challenge of • An exclusive, protected territory for getting noticed in the crowded field each Mathnasium Learning Center 4. HOW WILL YOU FUND IT? of franchise offers. Franchise-sales • More than 700 centers world-wide! Those little things out the Turning your business into a fran- staff will prospect, often among window? They’re not just houses. chise is a costly process. The legal successful franchisees of other paperwork alone can cost $15,000 chains, who may be looking for ad- We’re Taking The They’re dollar signs. to $25,000, says franchise attorney ditional brands to add. Market By Storm Harold Kestenbaum, who’s the co- Beyond that, media attention Mathnasium’s North American growth in Take flight on your next money-making opportunity. HomeVestors® is author of So You Want to Franchise can help a new franchise brand the child tutoring industry has surpassed the leading real estate investment franchise opportunity with a proven Your Business. Besides the FDD, reach more potential franchise expectation. We did this with a unique you’ll need to register with each buyers. For instance, Davis of The focus on math education. Our success is business model and franchise system that has purchased over 65,000 state where registration is required Gents Place says he’s hoping that the result of doing one thing and doing it houses. Call us as soon as you land, and watch your future take off. to sell franchises. That’s just the Smith’s celebrity status will help the right way. beginning of the expenses new attract positive press. franchise chains typically see. Hiring public relations help The Mathnasium Method™ is a proven “Being undercapitalized is one made a big difference when the approach to helping kids understand of the great downfalls of companies pet-care chain Camp Bow Wow math, yielding results that have been the that want to franchise,” he says. launched. President Christina catalyst for incredible franchise growth “Often, they’ll pay my fee and have Russell says publicity got them a over the last 10+ years. Mathnasium—We no money left for marketing.” prime “company story” ad spot on Make Math Make Sense HomeVestorsFranchise.com | 888-210-1731 Franchisors need marketing the home page of AOL. More than help to sell the franchises, addi- 3,000 franchise leads poured in as Let’s talk franchising! 1-888-763-2604 For more information please visit www.mathnasium.com *Each franchise office is independently owned and operated.

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FRANCHISING FRANCHISOR RESOURCES

Interested to learn more about becoming a franchisor? These resources can help. a result, she says, as many as the national Franchise Association’s supporting franchisees who flip the personal touch, says Libava. chain usually sees in a year. Educational Foundation. He recom- burgers,” Reynolds says. These are entrepreneurial types The International Franchise Association: FRANCHISE TIMES At HomeVestors, the company mends reading competitors’ FDDs You can make your new role who’re willing to take a risk on your franchise.org franchisetimes.com FRANdata: attracts media attention by holding and analyzing their profit margins easier by choosing franchisees who budding business idea. In return, BLUE MAUMAU frandata.com “ugliest house of the year” contests and fee structure. are a good fit for your organization. they’ll expect more face time with bluemaumau.org and giveaways of fixed-up homes to “You need to understand what “You don’t want to take anyone as a top managers and input into the EDGAR: sec.gov/edgar/searchedgar/ deserving persons such as veter- the marketplace is offering,” he franchisee who you wouldn’t want brand’s development. Books: companysearch.html ans, says co-president David Hicks. says, “and then make those franchi- as a partner 10 years from now,” If you’re used to being the boss So You Want to Franchise Your Business by Whenever the company enters a sees a better offer.” says Camp Bow Wow’s Russell, and calling all the shots, prepare Harold Kestenbaum new market and those “We Buy noting that’s the term of a typical to learn collaboration skills, says Publications and websites: Ugly Houses” signs go up, articles 6. READY TO BE IN A franchise agreement. Libava. It’ll be worth it: Franchisors FRANCHISE UPDATE Franchise Your Business: The Guide to and TV coverage usually follow, NEW BUSINESS? Choosing early franchisees care- who listen to early feedback often www.franchising.com/franchisors/ Employing the Greatest Growth Strategy Ever by as newcomers to the brand seek When you have a successful busi- fully is important, because it’s criti- gain valuable new ideas for growing magazine.html Mark Siebert to understand what’s behind the ness, you’ve already mastered the cal that initial franchisees succeed, revenue. catchy slogan. art of, say, making pizza or how to Libava says. Most franchise buyers For instance, the idea for the One important way you can efficiently do people’s taxes. want to talk to existing franchise “ugliest house of the year” con- tion. “Most of our good suggestions who works with up to 25 company stand out from the pack and at- As a franchisor, you’re in a new owners—so those first owners need test at HomeVestors came from come from franchisees,” he says. franchisees, says CEO Wilson. tract better franchisees is with business—the business of mak- to be happy and successful or your a franchisee, says co-president Besides taking their sugges- Successful HomeVestors strong financials. Strive for higher ing your franchise owners suc- dreamed-of franchise chain may Hicks. A new iPad app the company tions, be prepared to offer exten- franchisees can apply to become profit margins or a faster return on cessful, notes IFA’s Reynolds. You never get any traction. introduced that lets franchisees sive, ongoing training and support “development agents,” who pro- investment than other franchise need to help those owners grow Since your first franchisees won’t evaluate a home’s profit potential to make sure your owners succeed. vide support to new franchisees chains in your sector, says John sales. “There’s nothing in com- be able to talk to existing franchise and its repair needs on the spot was New franchise owners at Mosquito through ongoing training and ad- Reynolds, president of the Inter- mon between flipping burgers and owners, you’ll need to sell them with also a franchise owner’s sugges- Joe are assigned a business coach vice. “We pay them to support the

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other franchises,” says co-president Hicks. “We have a company culture where our franchisees like helping each other and want each other to be successful.” For business owners who are used to controlling every aspect of operations, it can be tough to let go and allow franchise owners to manage their locations as they see fit. But leaving room for owners’ creativity is a key to franchise success.

7. HOW DO YOU DEFINE SUCCESS? For business owners who look at Five Guys’ success and dream of creating a huge national chain, the reality of a typical franchisor’s more modest success may be disap- pointing. Most will never hit 100 units, says attorney Kestenbaum. But a regional chain that has home- town appeal can be lucrative and easier to manage. “I have one client in Tampa in the pizza business,” he says. “He’s got 50 franchisees, and he’s not interested in going outside Florida.” For many entrepreneurs, the point of building a franchise chain FRANCHISE OPPORTUNITIES Ask about is to build the system and then cash our new out. Two years ago, for instance, AVAILABLE NATIONWIDE! Development Camp Bow Wow was acquired by Incentive, which may provide animal-hospital operator VCA Inc. As a Tide Dry Cleaners franchisee, $30k/unit The sales price wasn’t disclosed, you will have: in savings. but at the time, systemwide sales at • Ground-floor opportunity with a Camp Bow Wow were $71 million. growing brand If the odds seem long on suc- • More than 65 years of fabric care cessfully turning your business knowledge & experience into a franchise chain you could • Best practices shared among an sell for big money, that may be a impressive group of franchisees good thing, says IFA’s Reynolds. • Instant brand recognition and consumer trust Hopefully, that encourages busi- • Comprehensive training and ness owners to keep working on support from Agile Pursuits their profit margins and refining Franchising, Inc., a P&G company their concepts until they’ve got the capital to make it through the OPPORTUNITIES ARE LIMITED. Proudly using initial years of trying to build a franchise brand. Please email [email protected] “Franchising is not a get-rich- or visit TideDryCleaners.com/Franchising. quick scheme,” he says. “And it Agile Pursuits Franchising, Inc., a wholly never was.” owned subsidiary of Procter & Gamble

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