a piece of the pie
a piece of the pie Franchising can be a fine fit By Joyce Wiswell Joe Abro doesn’t mind working long hours, but he doesn’t like the thought of spending day after day stuck in the same place. Partnering in eight Domino’s locations in Metro Detroit has proven to be a good fit for the 28 year old. “The younger generation like me doesn’t like being stuck in one spot. Being able to move around and spread myself out is more fun than being locked up at one place 80 hours a week,” Abro said. His Domino’s are located from Birmingham to Northville. “The drive gets easier and I don’t even have to take the Harry Barash: “The power is in the numbers and more and more people are starting to realize that.” highway to go from store to store,” he laughed. Abro is among many Chaldeans entering the franchising business. The International Franchise Association says the industry is strong, with the number of franchise establishments growing by 2.5 percent in 2011 to a total of 784,802. Franchising’s economic output, says a report by PricewaterhouseCoopers, will reach 9.9 billion this year, a gain of 4.7 percent. A franchise occurs when a company grants the right to an individual or group to market its goods or services within a certain territory or location. Most people think franchising equals fast food, but there are actually more than 120 different types of businesses that franchise, everything from oil changes to house maids, hotels to battery retailers, weight-loss centers to rug cleaners. According to the International Franchise Association (IFA), the three franchise business lines projected to see the largest percentage increases are Automotive (7.2 percent), Commercial and Residential Services (6.9 percent), and Personal Services (6.5 percent). “More Chaldeans are getting into it,” said Harry Barash, a commercial real estate broker for the Beale Group and himself a franchisee. “These franchises have a success story and they are profitable. The power is in the numbers and more and more people are starting to realize that.” Barash became the area developer for Southeastern Michigan for California-based Play N Trade Video Games about a year and a half ago. “I’ve always been fascinated with franchising, and I noticed a void in the marketplace in terms of video game retail specialty stores,” he said. Franchises comprise 10-11 percent of the nation’s business, said Ardag Tachian, a franchise placement broker who owns Alliance Franchise Consulting in Northville. The company acts as a matchmaker of sorts, helping those who want to buy a franchise find the right fit. “Chaldeans, being the hard-working entrepreneurs they typically are, are looking for business opportunities,” Tachian said. “Franchising allows anyone who is entrepreneurial to hitch their wagon to a business that is already established and successful and is looking to clone itself.” Investment requirements differ tremendously depending on the industry and the type of business, the IFA points out. Start-up costs can range from less than ,000 to more than million. In addition, the initial franchise fee for most franchisors is between ,000 and ,000, and there is also an annual royalty to pay. Seventy percent of franchisors charge an initial franchise fee of ,000 or less. The average investment, excluding real estate costs, is between 0,000-0,000, according to the IFA. Most contracts range from 10 to 20 years. “You’re entering into a business marriage,” noted Tachian. Advocates point to the many advantages associated with franchising. “They have taken all the brainwork out of building a brand,” said Barash. “They have brand recognition, buying power and the advertising dollars that most startups can’t afford. And, most importantly, they have systems in place.” Abro said he appreciates the preexisting corporate structure. “Instead of one person trying to do everything, each person is held accountable for certain things at the corporate level,” he said. Thorough training is an important part of the franchising deal, Tachian said. “A good franchiser is really going to be invested that their franchisees represent the brand in a positive light, so training is key. They provide quality training and make certain the franchisees have all the tools necessary to become successful, and most provide ongoing support to make certain they remain successful and viable.” But franchising is not for everyone, especially those who bristle at strict rules and procedures. “Someone who is extremely creative and wants to do their own thing may have some challenges and find themselves feeling confined and restricted,” Tachian said. “Franchisors have created a system they believe is successful and they want folks who will comfortably work with that system and not make drastic alterations.” Or, as Barash put it, “If you like to march to your own beat, franchising is definitely not for you.” Abro said that while he generally likes the corporate structure, it can hinder decision making. “It can be its own enemy because there are too many steps to take and people to get through in order to get stuff done,” he said. Since many franchisees spend as much time as independent entrepreneurs on their business, it’s essential to go into the relationship with open eyes and a passion for the product or service, Tachian said. He advises clients to do a lot of research into the many available franchising operations before choosing one. Next, he said, it’s important to contact existing franchisees to learn about their experiences with the parent company, and also to seek professional guidance in the form of an attorney, accountant and/or a business advisor to interpret the myriad documents involved. “It’s very critical to have a deep understanding of the contracts you are signing,” Tachian said. Consultants like Tachian are paid by the franchisor after a contract has been signed. “It really doesn’t cost the client any money and they don’t pay any more for the franchise fee,” Tachian said. “There is a franchise for just about everything. Seek something you enjoy, something you are passionate about and know about,” Barash advised. “Do your homework and due diligence, talk to the corporate office frequently and ask tough questions. Find out how many lawsuits they have been involved in.” Abro said he has gained invaluable experience by learning to deal with people both at the corporate level and in his stores. “We Chaldeans get it mixed up sometimes,” he said. “It’s not how you manage your store — it’s how you manage yourself.” 40 CHALDEAN NEWS DECEMBER 2011
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