Franchise Fever

LovelandFYI:

Owning your own business is, for some, the American Dream. The ability to be your own boss and control your own destiny has its allure. But it is often not as easy as it sounds. The U.S. Bureau of Labor Statistics show that nearly half of all new businesses fail within the first 2 years. And even for those who succeed, ‘you don’t just open your doors and start counting money,’ said Jim Mills, president of FranNet, and a broker who helps match individuals with franchise opportunities.

A former Domino’s Pizza executive and owner of both a Domino’s and a Mr. Handyman franchise, Mills said there are more than 5,000 franchises in 80 different industries. ‘If someone has thought of it, it’s a franchise,’ he said.

A franchise offers new business owners an opportunity to open a business with an often-recognized brand name. The franchise is a license to use that name, trademark, products and business systems in exchange for an initial franchise fee and ongoing royalties.

Ray Hoekstra Jr., who co-owns Grand Rental Station in Loveland with his brother, Don, is one who believes in the franchise concept. A longtime business owner, Hoekstra bought his first franchise, a Yogi Bear’s Jellystone RV Park in Wisconsin, several years ago. With 2 years left on the franchise contract, Hoekstra planned to break from the franchise when it expired. But his experience with that organization proved to be so rewarding that when he moved to Colorado in 2001 and found a rental store for sale, he searched for a rental company franchise to purchase.

The discounted volume buying opportunities on equipment - Grand Rental Station’s parent company, True Value Hardware, operates 1,100 franchisees nationwide - plus ready-made, low-cost advertising pieces and a built-in network of advice from other franchisees helps Hoekstra compete with other large, national chains. Work for him depends on the season, but he still works an average of 50 to 60 hours a week, he said. In the beginning he worked enough 70- and 80-hour weeks to appreciate a 60-hour work week now. But the rewards of owning his own business make it worth it. ‘I enjoy seat-of-the-pants management,’ he said. ‘With a corporation, you can have the greatest idea in the world, but it might take 4 or 5 or 6 weeks to go through the approval process. By that time I lost my enthusiasm for the project.’

Dick Pickett is a franchiser who started out as a small independent business owner who opened Inta Juice as a family owned business in Fort Collins in 1997. He has since grown his single store into a network of 19 stores, officially franchising years ago. His first franchisees started out as former customers who enjoyed the company’s product, he said.

He said beginning business owners should expect to work as many as 80 hours a week when starting out, and it can take as long as two years for some businesses to turn a profit. ‘People, I don’t think, understand what it means to be married to your business until they own their own business,’ he said. And success, despite name recognition, rests largely on the shoulders of the individual. ‘Our most successful owners are the ones that are out promoting their product all the time.’

Ron Putlack has found that out himself. Another former business owner who owned both franchise and nonfranchise businesses, Putlack opened Charley’s Grilled Subs at The Promenade Shops at Centerra. Since opening in the high-profile mall in November, Putlack said he has not seen the traffic he expected and has had to spend an additional $1,000 a month - in addition to the $300 he pays the mall management - for advertising. He has also run his own promotional campaign, delivering refillable cups and coupons to employees of Co’s BMW, Thunder Mountain Harley-Davidson and other mall stores. ‘I figured we’d be able to open our door and the mall would support us,’ he said.

While Justine’s Pizza is not a traditional franchise, Greg Jensen, a longtime customer of Justine’s Pizza in Loveland, saw the value of the local institution’s name recognition, great product and 35-year history. He arranged with owners Mike and Judy Bernard to open a second store in Fort Collins. Since opening his store in April, he has been working 70-hour weeks and said the Justine’s name and reputation have contributed greatly to his success so far. ‘I’ve probably done quite a bit better than if I just opened up Greg’s Pizza,’ he said.

A first-time business owner, Jensen said he finds it rewarding and is much more invested in the success of his store than when he was with a corporation. ‘If you are at Hewlett-Packard or something like that you care how the company does, but here your whole livelihood depends on how your business does.’

But owning a franchise or a business with name recognition is no guarantee of success.

Paul Schofield opened his first Coldstone Creamery on Laurel Street across from Colorado State University 5 years ago. He added a Loveland store 3 years ago. Then when The Promenade Shops at Centerra was set to open, Coldstone came to Schofield and said they wanted to open a store there. Since he had the closest location they gave him first rights of refusal. He sold his Fort Collins store to finance the opening of the new location, which is struggling so much that Schofield has had to return to his career as a hospital administrator and is working out of state to support his family. ‘We thought that a couple of Coldstones would support a family,’ he said. ‘We now realize that means 3 not 2. I think it’s important for people to know that franchises are not the panacea; you need to have some other options for other income.’