For many franchise owners, it’s natural to go from operating one restaurant or real estate office to two, three, four or more. Others expand in a different direction, buying into a totally different type of business.
Gary Leiter bought a Merry Maids franchise 10 years ago in Providence, R.I., after being downsized from a corporate job in the insurance industry. Then, six years ago, he acquired the rights to run a Home Instead Senior Care franchise in the state.
Leiter wanted the challenge of running different businesses.
"I recognized upfront the different dynamics. If it had been the same dynamics, I wouldn’t have done it," he said.
Acquiring different franchises is a growing but fairly recent trend, according to Don DeBolt, president of the International Franchise Association, a Washington, D.C.-based trade group.
"Ten to 15 years ago, most franchise agreements would have prohibited a person from being in a similar business, and maybe even prohibited them from being in another business," DeBolt said. "The franchiser wanted the franchisees to be laser-focused on making that business successful and didn’t want to have franchisees distracted by the ownership and responsibility of another business."
In the last few years, DeBolt said, franchisers have come to recognize that owners might gain valuable experience in a separate business that will help them better run their franchises. Franchisers also realize that many franchisees are really investor groups intent on running businesses well to maximize the return on their investments; these franchisees rely on managers to operate their companies.
One reason it’s easy for some owners to take on different types of franchises is that they often don’t do hands-on work such as making pizzas or subs or changing oil filters.
"You’re going to hire the experienced mechanic to do that kind of work," DeBolt said. "Your job is going to be marketing the business, to bring in the customers, working with people that you need to make that business go."
Without managers, Doug Reese and Drew Nietzer couldn’t have built their franchise empire — five LeafGuard gutter system franchises and two GarageTek garage organizing system franchises, in addition to several other nonfranchise ventures. Reese and Nietzer are based in Atlanta, while their franchises are scattered over the metropolitan areas of Atlanta, Philadelphia, Detroit, Atlanta, St. Louis and Charlotte, N.C.
Reese said managers are given incentives to take charge of daily operations. "They run them as if they were their own company, and we’re paying them a percentage of pretax profits," he said.
Reese and Nietzer learned the value of good managers after they started in franchising with two T.J. Cinnamons operations.
"We were contractors who thought we could do anything," Reese said. "But the food service business, that’s a tough business, so we brought someone in to run it."
Now they oversee their miniconglomerate from a headquarters in Atlanta. They have a total of about 130 employees among their companies.
Leiter runs his franchises as autonomous businesses, with offices 18 miles apart in Rhode Island. He also has understood the need to delegate work to managers; he found that both the Merry Maids and Home Instead Senior Care franchises were being hurt by his attempt to run the older operation while learning how to operate a different business.
"I started really focusing my attention on building management teams," he said. "Now I have two successful franchises."
DeBolt advises anyone thinking about buying a franchise — whether they’re a first-timer or thinking of expanding — to look for businesses they can be passionate about.
"That’s a critical factor in anyone’s success," he said.
The next step is to find a franchise you can afford; different companies require vastly different levels of investment.
When you find a franchise that feels like it will be a good fit, you then need to get in touch with as many current and former franchisees as possible — at least 15 to 20 — and find out the pros and cons of working with that franchise company.
"Ask them, ‘If you had to do it all over again, would you?’ " DeBolt said. "If the answer is no, you should move on to the next one."
Small Business is a weekly column on the topic by The Associated Press.
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