All 7 Valleys Custom Blends franchise stores have this set-up, allowing for product display along the wall and product demonstration at the table. |
|
FEATURE STORY
Extending your reach
Is franchising for you?
By Tracy Cox
Is your business franchise-friendly? Franchising their operation is one way retailers can expand business and increase profits in today’s competitive marketplace. It can also be a way for retailers eventually to take a step back from day-to-day store operation and still make a profit. Growing a brand and building name recognition can be one of a business owner’s proudest moments. However, there are both advantages and pitfalls to creating a franchise, and owners should make an informed decision by considering a range of factors, including quality and nature of business concept, cost and the increased responsibilities of the building their business.
Mark Wolfe, director of franchise services for Custom Blends shows how the demonstration table is used
by franchise owners and their employees to show
customers how to save money by making their own
cigarettes. “If the customer tells us they currently smoke a brand cigarette, we make them a sample cigarette of one of our blends (and tubes) that is comparable to the brand they currently smoke,” Wolfe says. “We use the injectors you see on the table to make the cigarette. If they roll their own, we show them how to do that as well, using papers and a hand-roller.” |
Building a brand
Mark Tucci, owner of Custom Blends Franchise Services, LLC in York, Pa., opened his first Custom Blends Tobacco and News store in York in 1993. It wasn’t until this past year, 13 years later, that Tucci and his wife Frances took that next step and decided to franchise the business. With remote management as his ultimate goal, Tucci realized he could use the Internet and technologies developed in the late 1990s to monitor store locations. The company opened two 7 Valleys Custom Blends franchises in Camp Hill and Gettysburg. In addition to their own tobaccos and a selection of RYO/MYO supplies, the stores sell pipe tobacco, cigars and now a new line of 7 Valleys Custom Blends coffee.
“We wanted to grow the brand,” Tucci says. “But first I wanted to make sure the concept was solid.”
Custom Blends’ concept was a standout and years of preparation were all part of the plan to refine the concept before franchising, according to Mark Wolfe, director of franchise services for Custom Blends. “We have the only all-natural, chemical-free franchise concept,” he says.
Port City Java, a coffee franchise based in Wilmington, N.C., also has an organic focus. The business is solidly rooted in the organic coffee concept, with plans to go completely organic within the next 18 months. The first Port City Java store opened in 1995, and today the growing franchise has about 42 locations from the southeast to Indonesia, Saudi Arabia and Costa Rica. Port City Java Owner Don Reynolds didn’t choose to franchise the company until late 2003. “This is a very fragmented business,” he says. “We had to develop our own roasting systems and form relationships with plantation owners. Franchise owners really have to start with a strong concept.”
Tips for successful franchising
A successful franchise has to be a win-win for franchisers, franchisees and customers, according to Darren Schwartz, owner of Smokers Choice, based in Monticello, N. Y. Schwartz provides several tips on top-notch franchise operation:
- Start with a franchise concept that offers a competitive edge
- Motivate franchisees and customers with incentives and good products
- Provide customers options—for example, a wide variety of products
- Always strive to create value
- Educate franchisees and customers on your value-add
|
A good franchising concept isn’t the only starting point, says Wolfe, who has a strong franchising back ground. Your business also has to be financially healthy and debt-free. And a business owner has to know why the business is successful and do research accordingly. “You should have a niche in the market,” he says. “You may not be able to expand into other areas of the community where there’s competition.”
Any good business must be able to be replicated in order to franchise well, and franchisers should assess whether the first business model can be recreated. “Owners have to ask themselves, ‘Can this be done again?’” Wolfe says. “If so, the business must be documented with an operations manual. You need a running prototype for franchise growth.”
Tucci points out that the tobacco industry is more complex than many other franchise businesses. “You really have to know the laws, taxes and tobacco consumption,” he says. “And franchisers should research the tobacco markets and cultures in each state—California will be different than Kentucky. Your franchisees have to fit into the tobacco culture of the state they are in.”
Darren Schwartz, owner of Smokers Choice in Monticello, N. Y., took years moving through all the right channels before franchising. Smokers Choice was founded in 1997. Just this year, with more than 20 stores throughout upstate New York, Schwartz got his New York franchising license. Today, he already has 25 franchisees on board. “People had been asking us to sell them a store, or they wanted to be partners with our company,” he says. “We figured, why not try it and see what we can do? We waited a few years—we wanted to be careful. It’s a long process to get franchising done in the state of New York.”
Pros and cons
Many retailers create franchise operations with the No. 1 priority of creating a new income stream. Schwartz says Smokers Choice has already seen great success, with the first franchise more than doubling profits in the early months of business. “It was much more profitable for me to sell my business model to someone else, so they can focus on increasing their business,” he says.
“Franchise owners get into franchising because they have a successful concept and rather than spend $200,000 to $300,000 to open up a new store, they get someone else to do this front-line work,” Wolfe says. “Then the franchisers can collect the royalties,” Wolfe says. “And if they (franchisees) can grow your brand well, the increased marketing will also bring more profits.”
However, many franchise owners can attest to the fact that more profits are the result of more work—at least in the early days of a start-up franchise. Good franchise growth is the result of an investment in time as well as money. Although Tucci today is semi-retired and lives in South Carolina, he put a lot into creating his franchise. “You are talking many hours in just development of a franchise system,” he says. “It’s actually a lot of money and a lot of work. I had a lot of personal involvement with the rollout of our first franchise stores. It’s also a lot of responsibility—you need to be more careful with your business growth.”
And with increased responsibility comes increased risk. Franchisers should be prepared for potential litigation. “Lawsuits do happen,” Wolfe points out. “Franchisers should have good attorneys and not be surprised by this fact.”
The good news is that a franchise with a successful concept is based on a tried-and-true concept, with a good operating plan that has already survived one business start-up. Restaurants are a prime example of success based on a franchised concept, Wolfe says. “The failure rate with an independent restaurant is 65 to 75 percent,” he says. “But with a franchised restaurant, your numbers drop drastically.”
Franchising basics 
Structuring a business franchise appropriately starts with the uniform franchise offering circular or UFOC, filed with the Federal Trade Commission. Franchise owners should be well capitalized, as Wolfe estimates that franchisers need about $100,000 for initial costs including attorney fees for the UFOC filing. “The UFOC process is highly complex, including the fact that certain states also require franchise owners to file,” Wolfe says. “Franchise owners are not always businesspeople, and they need help with this process.”
Once the UFOC is filed, the franchiser should create a business manual. This manual will prove invaluable to business operations at each franchise operation. This blueprint for repeat success should be well established, developed, updated and monitored throughout the life of your franchise business. 
Marketing is key to franchise success, and franchisers need to consider attracting franchisees. “Go to trade shows, put ads in the newspaper—whatever you need to do to get the word out about your franchise,” Wolfe says.
“Build it and they will come” has been the working philosophy for Smokers Choice’s franchise creation. Soliciting franchisees was an easy task for Smokers Choice, due in part to years of business networking and tracking contacts, according to Schwartz. “We haven’t made one sales call,” he says. “Our franchisees came to us—people that had been interested over the years. We keep a list of those people interested, and we always keep an eye out for the right franchisees.”
Most people underestimate how much time, energy and resources one bad franchisee can drain from a franchiser, Reynolds warns. For this reason alone, franchisers must have in place the appropriate franchisee-screening process and franchisee profile. “You really need to bring the right people into a system,” he says. “We are very particular about who we bring on board.” 
Once the right franchisees are in place, franchisers should make it a priority to provide them with good training and support, Wolfe advises. “After all, franchisers are married to these franchisees for five or 10 years—whatever their particular agreement states,” he says.
Tucci agrees. “We conduct announced and unannounced inspections to ensure that they are on the right track, that they are well-motivated to do a good job,” he says.
He also believes employees should be well-motivated. For this reason, Tucci says his staff are well-compensated and provided with incentives that inspire loyalty and superior performance.
Franchisers should not underestimate the importance of coaching franchisees. “Good franchisers know how closely their success rate is linked to their franchisees’ success,” Wolfe says. “And they motivate and coach franchisees to do well. Franchisees are often investing their life savings in a franchise operation, and these franchisees’ investments of work ethic and loyalty also play important roles in business success.”
“I feel like my franchisees are my brothers in this business, and I think that I do have a moral duty to do everything that I can to make my franchise operations profitable,” Tucci says. “In that respect, I consider myself both an entrepreneur and a businessman.”
In the end, business growth at a frenzied pace will most likely not benefit a franchise or franchise owner. When planning to grow a new franchise system, franchisers should manage business growth in pace with their ability to service and support franchisees. “We are growing quickly, but not too quickly,” Tucci says. “We don’t want to get ahead of ourselves. We follow a business plan where we strive for a goal and then take a break. My personal motto is, ‘Be a business owner—don’t let the business own you.’”
All photos courtesy of Custom Blends Franchise Services, LLC |
