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2012

Body_Franchising.jpgby Susan Caminiti.

 

John Lyons has been cooking most of his adult life, but it’s always been in someone else’s kitchen. That finally ended in 2010 when he and his wife Theresa opened their first Muscle Maker Grill in Oakland, N.J. The franchise, which has about 200 locations across the country, offers wraps, salads, and other healthier alternatives to fast food. The hours are long—an 80-hour workweek is typical—and managing a staff of inexperienced, mostly 20-somethings is a challenge, Lyons says. “It seems like it gets harder and harder, having to deal with staffing issues, and always being concerned about the food quality and customer service,” he says. But then if you ask him if it’s all worth it to be his own boss, his answer is simple. “I love it.”

 

Lyons has plenty of company. Consider these numbers from the International Franchise Association (IFA), the Washington, D.C. trade group that represents franchisors—the companies you buy a franchise from. Sales of goods and services provided by franchises now account for roughly $2.1 trillion annually. There are approximately 825,000 franchise units operating in the U.S. and those businesses employ nearly 18 million workers. The IFA’s Franchise Opportunities Guide lists over 1,100 franchise concepts, covering everything from accounting and business services, to pet care and wildlife control. “There really is a business for everyone,” says Alisa Harrison, senior vice president of marketing for the IFA.

 

PQ_Franchising.jpgThere’s a franchise for nearly every budget as well. Prices start at around $5,000 for a service business without a lot overhead and run up to nearly $2 million for an established brand such as McDonald’s. (The average total upfront investment according to the IFA is $250,000 to $300,000.)

 

Bumpy Past

Yet despite franchising’s popularity, the industry did suffer in the wake of the financial crisis. In previous recessions, laid-off workers, tired of being at the mercy of large corporations, often used hefty severance packages or home equity loans to purchase a franchise, thereby fueling the industry’s growth, explains Harrison.

 

“That all went away in 2008,” she says. “Few people were getting severance packages and with house values so depressed all over the country, not as many people were able to tap into their homes for the money.”

 

The industry is slowly seeing signs of improvement. According to data from the IFA, the number of franchise establishments is expected to increase 1.6 percent this year after falling for the past three years. The number of folks employed by franchised businesses is estimated to grow by a little over two percent in 2012.

 

Of course, that doesn’t mean that Hungry Howie’s Pizza or Camp Bow Wow (yes, those are real companies) will become the next Subway or Dunkin’ Donuts. But franchise consultants and other industry experts say that certain demographic and lifestyle trends are clues to which concepts are popular right now and therefore could be your best bet.

 

One segment attracting a fair amount of attention is elder care. Ed Kushell, president of Franchise Consulting Group in Los Angeles, says an aging population combined with government cutbacks in senior citizen services has fueled the growth in this area of franchising. Home Instead Senior Care, Comfort Keepers, and Home Helpers are some of the well-known companies in this segment.

 

A quick look at the numbers explains why these franchises could be good bets: Last year the oldest baby boomers began turning 65. By 2030, when all of them will have reached that milestone, fully 18 percent of the nation's population will be at least that age, according to Pew Research Center population projections. Says Kushell: “The number of elderly people in this country is not going to slow down anytime soon. Franchises in this segment have the demographics in their favor.”

 

Franchises that cater to health and wellness, such as gyms and so-called med-spas, are also attracting plenty of interest. Massage Envy is the largest massage therapy franchise in the country, with nearly 800 locations in 45 states. The company credits its popularity to the fact that Americans spend between $5 billion and $7 billion annually on massages. In fact, many Fortune 500 companies now offer massage as an employee benefit designed to reduce stress, according to the company.

 

Sol Glastein opened his first Massage Envy in Closter, N.J. in 2006 and says from the beginning, “the results were phenomenal.” He attributes the concept’s success to a business model that taps into the fast-paced, often stressful rhythm of modern life. “We’ve taken the massage out of the realm of something for the rich and wealthy and made it something that is both affordable and therapeutic,” he says. Customers can purchase a membership—like a gym—that entitles them to a one-hour massage each month. Glastein opened his second location in Waldwick, N.J. in 2010 and is so bullish on the concept that he recently bought the rights to become a regional developer, allowing him to sign up franchisees throughout western Pennsylvania.

 

Buyer Beware

While franchising has made many people rich, it’s not a business model without risks. According to Kushell, too few potential franchisees conduct the sort of due diligence necessary to determine the financial soundness and growth strategy of the franchisor. “We turn away 75 percent to 80 percent of the people who approach us about franchising their business because they just don’t have a business model that’s viable,” he says.

 

If a potential franchise interests you, Kushell advises asking about the company’s growth strategy and expansion plans in addition to examining its financial statements. And pay special attention to where a franchisor is looking to open new units. “If all the locations are on the East coast and you’re being offered a chance to open the first location in Texas or California, run for the hills,” Kushell advises. Why? Because one of the biggest advantages a franchised business has is the power of its brand name. If you own the only location of Mary’s Maid Service in the state, you’re getting little leverage from the name and the chance of failure escalates dramatically, he warns.

 

Keep in mind too, that part of franchising’s appeal is that you’re buying an established business concept with a particular way of operating. If your goal is to buy a franchise in the hope of using your considerable management or marketing experience to overhaul operations, a franchised business is probably not for you.

 

And finally, take the time to understand not only the franchise fee, but also the ongoing royalty and advertising costs, says Harrison. All of this information is found in a franchise’s disclosure circular, a document the Federal Trade Commission requires of all franchisors. In addition to the one-time franchise fee, you’ll pay ongoing royalty costs, typically equal to four percent to 10 percent of gross sales. You’ll also be responsible for contributing anywhere from one percent to six percent of sales for advertising expenses. The test of a well-run franchisor, says Kushell, is one that makes its money from these on-going royalties, not one-time franchise fees.

 

Running a franchise is really no different than any other business venture. It requires a lot of hard work and long hours with no guarantee of success. Yet the appeal of venturing out with an established concept and brand is clearly a business model that holds sway with many entrepreneurs. It certainly does with Lyons of Muscle Maker Grill. Despite the long hours and lack of vacation time, he and Theresa have already bought the rights to their second store.

Body_BusinessHindsight.jpgby Iris Dorbian.


“Regrets I’ve had a few,” crooned Frank Sinatra in the famous song, “My Way.” That fabled lyric can also apply to many small, established business owners when they look back in hindsight at their entrepreneurial journey, comparing the glorious highs to the abysmal lows. What do some of them wish they had known way back when they launched their business?

Success starts with the right people

David Guralnick, president of Kaleidoscope Learning, which designs and develops online learning courses for companies, wishes he had taken more time to find staffers that were the right fit for his company. He recalls an incident when he needed to hire a lead programmer to design and build a product for a Fortune 100 client, which was also co-funding the project. Because his business was still in its nascent phase, the project’s importance was heightened considerably. Unfortunately, his rush to hire ended up being counter-productive.


“As it turned out, I went through two lead programmers who did not work out before finally finding the right lead,” recalls Guralnick, whose 14-year-old company now has 40 employees. As a result of this staffing debacle, the product not only took longer than planned to complete, it fell short of Guralnick’s expectations. “More patience would have served me well,” he says now. “As an entrepreneur, it’s easy to start to think that you can do everything yourself, or at least to underestimate just how critical it is to work with great people whose styles mesh together well. Even if someone’s very skilled, things may not work out well if they’re unhappy in their role or aren't the right fit in terms of work type or personality.”

Don’t be shy about asking for help

Natasha Ashton, co-founder and co-owner of Petplan (a pet insurance company that launched in 2006), echoes Guralnick’s sentiments and also urges small business owners to surround themselves with experts who can help their company grow. “One of the best decisions we ever made as a company was to recruit Vernon Hill as company chairman,” explains Ashton. “His extraordinary experience in the financial services industry as the co-founder of Commerce Bank, coupled with his passion for creating fans not just customers, and his own experience as a pet parent, allowed us to take the business to the next level.”

PQ_BusinessHindsight.jpgTrust your gut

However, there’s something to be said for believing strongly in oneself. David Black, founder and CEO of Vicinity Media Group, which publishes several Northern New Jersey regional magazines (Suburban Essex, Vicinity, and InBiz), wishes he had placed a greater premium on his own instincts rather than ceding his authority early on to so-called experts.


“I’ve discovered only in the past couple of years that I know more about my business than the experts do,” concedes Black, who launched his company 20 years ago. “I only had a high school education and was never in publishing before. My theory was to get people who knew more than me and let them achieve my vision. It turns out they don’t necessarily get what you’re trying to do.”

Turning obstacles into opportunities

For husband and wife team, Natasha and Chris Ashton, it isn’t so much the regrets that they share, but an awed realization of the challenges they had to grapple with shortly after they began Petplan. Launching their startup in 2006, in the face of skepticism and a combined $250,000 in student debt, the Ashtons quickly found their foothold and by 2007, were seeing double-digit growth each month. But later that year, the burgeoning success of Petplan almost came to a crashing halt thanks to an unexpected turn of events.

 

“Chris shattered his ankle and broke two ribs in an accident,” recounts Natasha. To make up for his absence—Chris subsequently endured several surgeries and needed six months of rehabilitation—the Ashtons decided they must delegate if the company was to survive. “Our choice wasn’t safety or risk, but rather sink or swim,” she recalls. “By empowering our day-to-day managers, we could focus on our growth strategy.” (By 2008, Petplan’s staff size was 12 employees; today the company has more than 60 employees, according to Natasha).

Maintain focus, but be flexible

“As a small growing business, opportunities can seem endless,” says Guralnick. “There can be a temptation to jump at each new opportunity. On the other hand, being small does often allow you to be flexible. If something isn’t working or there is a particular new idea that is worth exploring, you can make changes. It’s a tricky balance.”

Establish core values

Set parameters for what your company will do and use that as a basis for making decisions.  “Regardless of how exciting an opportunity may seem, if it doesn’t support your core values, it probably isn’t right for you,” says Natasha Ashton. “As an organization of pet lovers, pets’ health and wellbeing is at the forefront of every decision we make.”

Find a space of your own 

In Virginia Woolf’s immortal short essay, “A Room of One’s Own,” published in 1929, she stressed the importance of women finding a private sanctum in which to incubate and cultivate their artistic ambitions and thus put them on par with men. Although Woolf’s admonition wasn’t about business, her passionate exhortation is akin to a best practice that Garden State publisher David Black emphasizes to small business owners just beginning their careers.  

 

“One of the best things an entrepreneur can do is find a space that they can think and dream creatively as often as possible,” he advises. “Because when you’re trying to do things in your head as an entrepreneur, it’s a lot different from reality.” 

 

To help him slip into a creative meditation, a state of mind he calls “a zone,” Black says he will often stay at home rather than go to the office and be distracted by the din of daily business activities. Engaging in this kind of focused reverie is an imperative for small business owners, particularly entrepreneurs seeking to embark on a venture. “You need to have a dream first and pursue it,” he reflects.  

Body_SilentPartners.jpgby Erin McDermott.

 

Psst. Is that silent partner you’re seeking really the best move for your small business?

 

When it comes to finding additional funding these days, it’s sometimes a tough road. As a result, people are looking at other avenues of capital, taking on all types of new partnerships, and even tapping into money through crowd-funding sites such as Kickstarter, Indiegogo, and AngelList.

 

Traditionally, silent partners have been the go-to investors, often family and sometimes friends, who pump in funding but also agree to stay out of day-to-day operations. They get a share of the profits and—unless there is a limited partnership agreement that rules out liabilities—risk taking a hit if an enterprise runs into trouble. Their presence is no secret to people familiar with a company, and often they are prized for their industry contacts or standing in a community.

 

So why choose to remain silent? There can be several reasons. For some investors, it’s a way to avoid the unwanted entreaties of others who also are seeking capital. Others might use a silent partnership to keep quiet about the extent of their business portfolios or to stay one step removed from a venture that they don’t want to be publicly identified as backing.

 

So, is this silence really golden for a small-business owner?

 

PQ_SilentPartners.jpgWhat you don’t get for your money

Mitchell D. Weiss doesn’t see much value in the proposition. He’s a longtime financial-services executive and entrepreneur who now teaches finance at the University of Hartford and is the author of Life Happens: A Practical Guide to Personal Finance from College to Career. To him, owners who recruit the strong, silent type of partners are missing a critical opportunity to gain knowledge from others who know the stakes and have years of experience and connections that are priceless for an entrepreneur.

 

“I wouldn’t want money from people who aren’t going to help me. I want someone who isn’t just a checkbook, but someone who’s in a position to mentor me and offer advice,” Weiss explains. “What’s more important for entrepreneurs is to seek out people who can give you good feedback. Not someone who hasn’t made a payroll, or can’t relate because they’ve never faced the pressure of running a business.”

 

Weiss himself has been there with business relationships both silent and not so silent. He recalls dealing with a principal at one of his early ventures who declared that he “likes his partners limited” and made clear that he wanted little advice from others, even while seeking investors. “That’s also known as ‘Give me the money and shut up,’” Weiss says now, laughing. “In the end, I learned a lot of good things and a lot of lessons about what not to do.”

 

Jaine Lucas also sees many entrepreneurs missing the boat.

 

“One of the issues with crowd-funding is you get the money, but not the advice, coaching, and mentoring you’d receive from angels, VCs, or others who might financially back your company,” says Lucas, an entrepreneur, former Fortune 50 marketing executive and now executive director of the Innovation & Entrepreneurship Institute at Temple University’s Fox School of Business in Philadelphia. “Most entrepreneurs will tell you that access to coaching and other people’s networks are just as important, if not more so, than the money.”

 

There’s always an exception

But Lucas does see the value of silence with one often-tapped group of investors: friends and family.

 

“They are often too involved emotionally and cannot see things objectively,” she says. “I see these things all of the time with our younger entrepreneurs who have very little access to capital other than credit cards and friends and family, so they take money from Mom and Dad. The problem is, to Mom and Dad, this promising entrepreneur is still their baby—and they don’t know anything! I see so many family relationships really impaired by money—and money has a way of blowing things up.” 

 

One way to avoid that conflict Lucas says, is to make sure terms are clearly outlined well before any funds are invested, including whether the friend or family member will have any right to input in the venture. “Sadly, it isn’t treated as seriously as it should, and agreements need to be put in place before any money exchanges hands,” she says.

 

Today, most investments come with an extra two cents

“I see [silent partners] as something that’s becoming a thing of the past,” says David Luk, the 33-year-old chief executive of Quewey, a startup online network of experts that facilitates business expertise via free question-and-answer platforms and paid phone-consulting sessions. As people become more sophisticated about investing, Luk says they should feel the urge to provide advice so they can contribute added value to their investment.

 

“If you asked me to go out and search, in this early funding round, for investors who want to be silent, I think it would be hard to find that. And frankly, I don’t want that,” Luk says. “If I have a choice between an investor who has a willingness and ability to help versus someone who prefers to stay silent and on the sidelines, I’d rather have the person who can add value and not just the capital. We’re a startup and it seems like a waste of a potential resource.”

 

Often, it’s elusive resources like experience that are most important for growing small companies—and sorely needed at crucial turning points—such as getting down to the business of using that new capital wisely and making money for all of your investors, silent or not.

 

Weiss says he’s seen entrepreneurs get an overzealous sense of “We’ve got it!” when funding does arrive. “Investors want that money back, and want their investment to grow—you’re just renting it,” Weiss points out. “It doesn’t just come with a lipstick kiss on the bottom of a Hallmark card.”

Body_QAkinassauer.jpgby Erin McDermott.

 

Flea markets rang up $30 billion in sales last year, according to the National Flea Market Association. Ki Nassauer (pictured) is executive editor of Flea Market Style magazine and founder of Junk Revolution a popular online forum for devotees of tag sales, vintage markets, and “junkers.” She recently spoke with writer Erin McDermott about what small businesses can learn from the tables and stands of these surprisingly big businesses.

 

EM: We know the old saying: “One man’s junk is another man’s treasure.” But that could also be called a niche market. What surprises you about what sells?

KN: The most difficult part is finding the place to sell it. So what sells in the West is different from what sells in the East; what sells in an antique shop is different from what sells in a flea market. That, to me, is the most interesting part of it all. There’s a buyer out there for pretty much anything, depending on your location.

 

EM: The Internet, with Ebay and Amazon, has added so much competition for many of the goods you might see at a flea market. And now there’s Etsy.com, which is so much more visual and appealing. How has this affected flea markets?

KN: It’s a different style of shopping. Etsy came at the right time: Everyone’s used to shopping online and they made it very easy. And in the last year, they’ve really improved their search, which personally has helped me dramatically with shopping online. You can search and go right to the vintage category and call up ‘crocheted potholders’ or ‘comic books’ or specifically search for the item for which you're looking. And that’s actually easier than shopping at flea markets because you can narrow the search if you’re looking for something in particular. It's more difficult to browse, certainly. I do it all of the time for magazine articles.

 

PQ_QAkinassauer.jpgEM: Flea markets are at the forefront of recycling, reusing, and repurposing materials. That’s also often true for entrepreneurs and small businesses when they’re starting out. What are you seeing in terms of a new focus on being green?

KN: It’s definitely a younger demographic than we’ve ever had before that appreciates flea markets. They appreciate recycling. They’ve grown up with it and it’s a cool thing to recycle, whereas, say, 50 years ago or even 25 years ago you didn’t see as many young people at antique shows or flea markets.

 

EM: What have you learned from flea and antique markets over the years? Are there lessons for entrepreneurs and small businesses?

KN: Flea markets themselves are an opportunity for people to start new businesses. There are people who would have never considered opening a small business, because of financial or time commitments. But here they can stick their toes in the water and try something. I get frequent calls and emails from people who say ‘I want to open a business’—maybe it’s decor or antiques or a vintage shop. I always recommend that they buy a few things, load up a truck, and go to a flea market. It’s the first step if you’re going into the antique or vintage industry.

 

Flea markets can teach so much to potential business owners. They won't be isolated. There is competition among sellers and they will be right there with them. They can watch other vendors who’ve been doing it over the years. Be it business practices or their style, there’s so much to learn from the people who’ve been doing it. And it’s all around them.

 

EM: Have you seen some great success stories?

KN: Oh, absolutely! There have been a lot of small businesses that have started with people opening a booth with a friend. I think a lot of it has happened with women hitting mid-life or couples who are retired, or considering retirement, or, particularly, people who have had corporate jobs with crazy schedules who finally say ‘Enough is enough: I love vintage and go to flea markets as a hobby. How can I turn this into a business?'

 

And they start by just buying and selling stuff at a flea market, and that turns into maybe a shop, or something larger if they’re traveling cross-country to a show. And you know—people are earning a good living from buying and reselling. There are even people who get a TV career out of it! 

Body_Homeoffice.jpgby Erin McDermott.

 

Nick Loper is a mover and shaker at his home office. Actually, these days, mostly a mover.

 

Back in December, he found a treadmill on Craigslist, and with a little DIY derring-do, he rigged his workspace to it. Now the CEO of ShoeSniper.com is walking 8 to 10 miles a day while he runs the shoe-shopping website from his place near San Francisco.

 

He’s had to learn to steady himself while walking and typing, got a bigger computer monitor that was easier to see at the top tier of his desk setup, and admits it’s been a bit tough to ignore the numbers on the exercise device’s panel. Even so, he’s hooked. “It’s kind of addictive to watch the amount of calories you burn as you go,” he says. But overall, it’s working for him, and Loper even recently punched another hole in his belt—on the good side. “There have been times since, when I’ve been away, working in a hotel, and I feel like I should be doing more, and being up and moving.”

 

It’s never easy to get your workspace just right, more so for anyone who regularly works from home. With the Bureau of Labor Statistics estimating there are now some 18.3 million home-based businesses, more people than ever are out there trying to project the professionalism of the office onto their home base.

 

“The recession has made more companies open their minds to the cost-savings that can come from working with telecommuters,” says Sara Sutton Fell, chief executive and founder of FlexJobs.com, an online job-service site dedicated to flexible work situations. Sutton Fell walks the walk, too: She’s worked from home for almost six years. From a loft above her detached garage in Boulder, Colorado, she manages a staff of 24 other home-office dwellers, half of whom she’s yet to meet face to face. “My kids know I’m up here, but they know not to interfere,” she says,  “It’s still a better alternative for me.”

 

What works best for these home-based entrepreneurs? Below are a few suggestions to make your home office hum:


A backup system…and a backup for your backup

It’s every computer user’s worst nightmare. Last year, Sutton Fell’s hard drive crashed. Unbeknownst to her, her data-backup system wasn’t working properly either. “It’s embarrassing to even admit this,” she says. She ended up losing a good amount of data. Now, in addition to her crucial two monitors she uses to accommodate all of her open tabs and her website, she also has two backup systems for her data. 

 

But what if your home and home office are destroyed? First, make sure that your home insurance is up to date and get a rider that covers your work setup. Then consider something similar to Binary Formations’ Home Inventory. This software helps you catalog everything in your home and home office—information that’s crucial if the unthinkable happens. “Most people think ahead to get riders on jewelry, but not many think about their home-business equipment,” says Diane Hamilton, Binary Formations’ managing partner, who, along with husband Kevin, runs the company from their Virginia home office. “You should think about the coverage for your workspace whether you work for yourself or work from home for someone else.”

 

Organization

If you deal with a lot of paperwork, you’ll need plenty of things like tabbed folders and file cabinets. But if you’re trying to go paperless, several small business owners recommend taking a look at the products from Neat. That company’s mobile scanner and software products can build a searchable directory of receipts, business cards, and important documents. And if you’re a really big thinker, unleash your creativity and surround yourself with one gigantic big dry-erase board, using new whiteboard paint products to turn your office walls into a wraparound notepad.

 

PQ_Homeoffice.jpgA map of your day, week, month

Psychotherapist and relationship coach Toni Coleman says it’s critical to establish a structure—with your routine, with your schedule, and with your family and friends. “To be really good at working from home, you have to be really good at getting into ‘the zone,’” she says. “However you set that up physically, you have to be able to do it mentally. And you have to clarify that with everyone around you.”

 

The mother of four operates her practice out of her home in McLean, Virginia, and says she sees clients get into trouble all the time as gadgets blur the line between business and life. She advises her clients to create a schedule and a routine and stick to it—shower, dress to get into the professional mind-set, grab your coffee, and then get into your office and go to work. Good planning is everything, Coleman says. “If you’re disorganized and you go to sit down and realize you’re out of ink, and want to run to Staples, it will throw off your whole schedule. You have to resist that urge and stay focused.”

 

A door

For nine years, Lori Karpman ran her management consultancy from an area off the kitchen in her Montreal home. She had all of the professional trappings, but she lacked the ability to shut herself off physically from the rest of her household. Though she says she’s always been very disciplined about her hours, there was no stopping her kids or other sirens of domesticity from testing her concentration. Karpman moved to a new home with a dedicated workspace about a year ago, and raves about the mental break that the door on her new home office provides. “When my day is over, I turn off the lights, shut off the ringer on the phone, and close the door—I’m not at work anymore and I’m really home,” she says. “It’s important to say that space is your workspace—not your living space. Psychologically, it makes it seem so much more professional.”  

 

A release

Got a picture on your desk to remind you of your work/life balance? Or a window that provides an inspirational view? Or iTunes cued up for a five-minute Motown session to recharge during the 2 p.m. doldrums? The isolation of remote work has its own set of stresses. John Paul Engel, marketing consultant and chief executive of Knowledge Capital Consulting, says he overcomes the pressure of 24/7-availability by going for a run outside his Sioux City, Iowa, home office to clear his head—and to engage both sides of his brain to sort out a problem. Others swear by sitting on exercise balls to physically vent and stay fit in the process.

 

The key is to make whatever works work for you, like Nick Loper and his treadmill desk. And now that he’s on his feet all day, does he test his wares on it? “No,” he says, before adding, “but I guess that could be a good writeoff.”

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