Amidst economic uncertainty people look for ways to increase their financial security. From oil field workers let go due to Louisiana’s declining oil and gas industry, to former stay-at-home parents looking to enter the workforce, to those looking to escape the malaise of the corporate world, to retirees and investors, a New Orleans-based franchisee headhunter is seeing an increase in the number of people interested in owning a franchise business.
There are more than 3,100 franchise concepts available today in almost 300 industries. They employ more than 21 million people and generate more than $2.3 trillion dollars in revenue per year. Opportunities include hotels, automotive and repair, business services, cleaning services, restaurants, educational services, health and fitness, senior care and pet care among others.
Ted Fireman is the New Orleans area consultant for FranNet, a national consulting company paid by franchisors to find prospective franchisees. After more than 20 years in the corporate world, Fireman purchased FranNet Louisiana five years ago and has since provided free guidance and coaching to more than 200 individuals interested in exploring franchise business ownership in the Greater New Orleans area. Fireman recently spoke with Biz New Orleans about franchises, why they are an attractive option and the steps he takes to successfully match a potential investor with the right franchise.
Biz New Orleans: Why franchise?
Ted Fireman: I think a quick answer is that people who want to increase their chance to succeed want to go with a proven system.
Somebody else has already made mistakes, probably wasted time, probably lost money. They have the chance to avoid that and get off to a faster start with a good system that’s already been developed.
Plus, any good franchisor knows its market and looks very carefully before they’re going to award a franchise. A franchise company is successful only if the franchise owner is successful. So they’re not looking to sell a franchise unless they have really looked at the demographics and feel strongly that it matches what they need to be successful.
If it’s the right franchise matched with the right person, that’s a real recipe for success.
Biz: What types of franchises are available?
TF: There really are franchises in every sector, pretty much any type of business. People are very familiar, of course, with fast food and restaurants because that’s what they see when they’re driving to work every day. But there really is a wide range of franchises.
Biz: How much does it cost to franchise?
TF: It really depends on the business. There will be a franchise fee, which may cost several thousand dollars, to operate a business plus business operating costs. The franchise fee gives the investor the right to use the company name and trademarks, a uniform operating system developed by the company, and training in the system. Some franchisors offer ongoing support such as monthly newsletters, a toll free phone number for technical assistance, and periodic workshops or seminars and advice on management, marketing or personnel.
Biz: What types do you recommend?
TF: I focus on franchises that are need-based, things that people need to use over and over again every day. Usually this kind of thing is safer, and it’s going to create recurring income. It’s not a one time product or service.
I also tend to focus on the demographic megatrends. I don’t want to show concepts to my clients that are going to be popular today but don’t have staying power. When I talk about major demographic megatrends, I’m talking about things like health care, aging and time saving in the home or business.
We know that healthcare is always going to be needed, and it’s only going to increase. We know that the Baby Boomer generation includes 70 million people, and they’re going to need more healthcare and more services related to their aging process.
There are also time saving services; With as busy as we all are today, in most households everybody works. Things that people used to do themselves, they don’t want to do anymore. That might be anything from painting, to cleaning to repairs.
In an office, that might be outsourcing the IT functions because somebody doesn’t want to spend the money to have an IT director, or it might be sales training. It can be a variety of things that save the individual or the company time and let them focus on the core business.
Staffing companies have now moved into niches. It used to be when you thought about staffing you would only think about factory workers and administrative folks, but today there are companies that specialize in in the healthcare industry, in education and all the professions.
Another major area that is doing very well is fitness. These are not big-box gyms, but smaller niches based on martial arts, boxing or yoga that might be in a storefront, a 1,500-square-foot space. There’ve been a lot of places that have opened, but I think there’s still room for more.
The pet industry is another sector that has seen continued growth. People love their pets, and the spending that goes on is just unbelievable.
Not surprisingly, car care is another industry that does well in New Orleans.
They say that the average car in the country today is 11 years old. I don’t know if our cars are older or it’s making us deal with all the bumps in the roads, but one of the franchise companies that I’ve worked for has told me that a number of their top-performing franchises in the whole country are in Louisiana.
Biz: Are there any that you shy away from?
TF: Restaurants and fast food. The restaurant sector is very hard in parts of New Orleans because it is such an amazing and unique place for restaurants. So I think some of the franchise restaurants that might be successful in the Midwest or someplace else are just not going to be too exciting here.
With restaurants, the investment and the risk are higher, so the failure rate is higher, and the growth potential just isn’t as great. There is generally a bigger capital investment with a restaurant because you’re dealing with real estate and equipment and a lot of employees.
I don’t want to characterize the whole industry and say nobody can bring a franchise to New Orleans in that sector, but we feel there are better opportunities with less risk and a higher rate of return.
Biz: Is there such a thing as a typical franchisee?
TF: There used to be a time that I mainly worked with men in their mid-40s to late 50s who had been downsized from a corporate environment. That was kind of the way it was for long time, kind of the national profile.
It has always been a lot more diverse in New Orleans. Over half of my clients have been women — many times women that are returning to the workforce after maybe having stayed home with kids for a while and they don’t want to go back into the corporate thing. They want a little more flexibility and a little more control.
Right now, not surprisingly, I’m starting to see more people from the oil and gas sector who have been downsized.
Another category that’s surprised me is investors. I’m seeing a lot more people who used to invest in the stock market, and because the stock market has been so erratic in the last year or two, I’ve had more people come to me to look at owning a franchise as an investment strategy, a diversification strategy really. They’re not going to take all of their money out of the stock market, but they will take some percentage of it and look for the kind of business that they can be what we call a semi-absentee owner, meaning that they can manage the manager. They’re not going to work day to day in the business, but they’re going to hire a good manager. They’re going to have them trained by the franchise company. And the owner is going to oversee them, meet with them once a week, handle the marketing and make sure the systems are implemented. But they are not going to be the day-to-day operator. I’ve seen a bunch of people go that route.
I’ve also seen people, in kind of a related trend, who want to keep their job, but start a semi-absentee franchise on the side. So if they’ve got a good job and benefits, they don’t want to walk away from it. But they know that they’re not building a sellable asset in their job. They like the idea of a part-time business that they can build up and maybe transition into fulltime later.
For some, they look at it as an insurance policy in case they get laid off. They’ve also got the option to keep it into their retirement years as an extra source of income.
Biz: What traits, if any, do franchisees share?
TF: I think the number one trait is that they want to feel more in control of their career and finances. So many people, particularly once they get into their 40s or older, face the possibility of being laid off and they realize that there’s no security in their job anymore. So people like the idea of being their own boss and feeling a little bit more in control of their career and their finances.
These are people who are entrepreneurial, but they don’t necessarily have that one great idea. They’re not Bill Gates or Steve Jobs or Mark Zuckerburg, whose ideas change the world. They know they would like to own a business, but they’re a little more conservative. They want to do it as safely as they can. So they’re not going for the moon shot. They’re looking for a stable business that will do well whether the economy is good or bad. They’re not looking to be the next billionaire, they just want to create a good strong business that’s going to grow. They’re entrepreneurs. They just want a safety net. I think the franchise provides that safety net.
Biz: Can anyone succeed as a franchisee?
TF: Not all franchises have that proven record of success and it’s important for somebody to do their homework carefully and make sure that it’s not only a great franchise but that it really is a match for that individual.
One of the most important steps an interested investor can take in evaluating a franchise opportunity is examining their own skills, abilities and experience. They need to determine their goals and their ability and willingness to meet those goals. What are the qualifications? Am I qualified? What are the sacrifices and risks associated? How will this affect my time? My family?
If you are not prepared for the total commitment of time, energy and financial resources that any business requires, you should stop and reconsider your decision to enter the franchise business.
Shortcut to success
The importance of the Franchise Disclosure Document
For anyone interested in franchise ownership, one of the most important elements in getting off to a successful start is obtaining and understanding the chain’s Franchise Disclosure Document (FDD).
Franchising is overseen and regulated by the government, and an FDD is a requirement of the Federal Trade Commission. It has a wealth of information, which is updated annually, and must be furnished to a potential franchisee at least 14 days before any purchase
“It includes everything – the history of the company, the background of the owners,” says Ted Fireman, the New Orleans area consultant for FranNet, a consulting company paid by franchisors to find prospective franchisees. “It tells you if there has ever been any legal action against the company, exactly how much money it will cost to get the business started – not just the franchise fee, but the total investment. Are there any continuing royalty payments? If so, how much? It’s outlined in there. It tells you the obligations that you will have to the franchise company and the obligations that they will have to you.”
Fireman suggests potential investors thoroughly review the company’s background information with a franchise attorney to help them understand the subtleties of the business model.
One of the most valuable aspects of the FDD is the contact information of franchisees in the business who can discuss their experiences with potential investors. This gives a potential partner the opportunity to ask:
• What is the annual return on investment?
• How long did it take before the franchise broke even?
• Did the franchisor provide proper training?
• What management, tech and other assistance does the franchisor offer?
• What are the day-to-day duties and responsibilities of the business?
• What controls does the franchisor impose?
• If you had it to do over, would you do it again?
“Where the rubber meets the road is when franchise candidates talk to individual franchise owners and people that can tell them what they do everyday to be successful,” Fireman said. “They can tell a potential franchisee whether the franchise company has kept up its promises and helped them with marketing and training and support and IT and everything else. The franchisor is going to talk to the potential client about all they can do, but then it’s the individual franchise owners who can validate that the company will keep their promises.”
Investing for Retirement
Native New Orleanian Dede Redfearn turned to franchising to supplement her golden years.
Dede Redfearn has always loved helping people.
“I was a special education teacher for 10 years, spent time as an administrator for nonprofits and worked as a licensed clinical social worker,” she says.
Redfearn and her husband became interested in franchising as a retirement investment.
“I associated franchises mostly with fast food, but that is so far from the truth,” she says. “I went to this presentation by Ted [Fireman] and he showed us about 10 or 15 different opportunities that showed a really incredible range of businesses.
“Zounds Hearing was actually the first company I looked at and I immediately like it,” she says. “I loved that it would allow me to keep doing what I love to do — help people improve their quality of life.”
Redfearn decided to bring the fastest-growing hearing aid company in the U.S. to 801 Veterans Memorial Blvd. in Metairie.
“We provide thorough hearing assessments that help us determine the best hearing solution,” she says. “You can actually come in and be tested and fitted for a hearing aid in the same day.”
Redfearn says she was attracted to franchising because of the support it would give her as a business owner. She says she hasn’t been disappointed.
“There was a lot of support in the beginning,” she says. “When I went looking for a storefront the corporate office provided me with a list of guidelines and things to consider and then when I had found some possibilities, someone from corporate actually came down and looked at them with us.”
Redfearn says she and her husband attended a week-long training prior to the opening of their 1,000 square-foot store and still receive support as needed.
“I’ve really been happy with the whole experience,” she says. “And I love the fact that we have a business so focused on relationships. We encourage our clients to stay in communication with us, to come in for cleanings and to make adjustments as needed.”
The Smith Success Story
After becoming a franchisor with commercial cleaning giant Jan-Pro, Charles and Melissa Smith are cleaning up.
After more than 20 years in the business community of Southeast Louisiana, Charles W. Smith Jr. was ready for a change.
“I was a six-figure guy who was really talented and successful at growing businesses for other people, but I was at a point where I was capped as far as where I could go as an employee,” he says. “I had been coaching and mentoring for the better part of 15 years and I knew I could have a much more tremendous impact.
Smith says he paired up with Fireman and FRANNET and looked at approximately eight to 10 different franchise opportunities over a two-year period.
“Finally, we found Jan-Pro,” he says. “And I knew this was the one.
Smith and his wife, Melissa G. Smith, are actually franchisors who run all of Jan-Pros in Southeast Louisiana. “We have rights to all of Louisiana and are actively growing,” Charles says.
Named the No. 1 fastest growing franchise company in the U.S. by Entrepreneur Magazine in 2013, the commercial cleaning company just awarded the Smiths with its International Rising Star Award this year.
“We had one of the fastest first year starts in the company’s 25 year history,” Charles explains. “We opened 25 franchises in our first year and currently have 55. In September we’ll hit our company’s two-year anniversary and we just hit $2 million in revenue.”
Charles says that 70 percent of his franchises clients are medical companies, while the remaining 30 percent run the gamut — from car dealerships to law offices, to industrial.
“We are a very process-driven cleaning company is very focused on disinfection, which makes us a popular choice for medical establishments,” he says.
Charles says he’s very happy with the move to franchise life.
“I love being able to help people succeed,” he says. “No matter the investment, I can help you. I’ve helped eight people so far with approximately an $850 investment create six figure businesses.
