Franchising Is Elusive Pot of Gold SMALL BUSINESS / JANE APPLEGATE

Franchising Is Elusive Pot of Gold
SMALL BUSINESS / JANE APPLEGATE
June 29, 1990JANE APPLEGATE
Ask entrepreneurs if they've thought of franchising their businesses and watch the gleam in their eyes. With 2,400 franchise companies and 500,000 franchises in operation across the country, cloning a successful business is tempting.

But it's not as easy as you might think, according to Mark Frydman and Robert (Goody) Goodman, principals in Box Bros., a Canoga Park packing and shipping company that is struggling to launch its franchise program.

Although their seven Southern California company-owned stores are successful and the company is registered to sell franchises in California, the state with the toughest regulations, Box Bros. has only one franchise deal pending.

In struggling to make their efforts pay off, the two entrepreneurs have learned some lessons that might apply to other would-be franchisers. For example, if yours is a good idea, the field is probably already crowded with competitors. Also, banks may balk at loaning money to people who want to buy your franchises, particularly if the franchise operation is new. Moreover, time you spend on your franchising plans is time taken away from your original business.

In two years, Frydman and Goodman have spent $50,000 and expect to spend another $50,000 before their franchising program is running smoothly.

"We have gone through two sets of consultants who said they could help us," said Goodman. "We spent $2,000 with one company that treated us like we were stupid."

Another firm offered its services for $10,000 a month with no guarantee of success. Unwilling to spend more at the expense of the core business, Box Bros. is now regrouping.

Franchise consultants said Box Bros. may be having trouble because 25 other packing and shipping franchises are glutting the market. Although Box Bros. deliberately set its franchise fee below the others, beginning at $27,900, it is still competing with larger, established companies such as Bekins Boxstore, Mail Boxes Etc., Box Works and the Packaging Store.

Goodman, who was working for a local mover before quitting to start Box Bros., said he got the idea after realizing that a large percentage of moves are coordinated by women who don't like to go into industrial areas to buy boxes. So he opened his stores on busy streets in retail shopping districts, where both men and women feel comfortable shopping for boxes and everything else.

"No matter how attractive your idea is, we have learned that franchises do not sell themselves," said Frydman.

Without a fat advertising budget, the company relies on trade show exhibits and local advertising to get the word out. But even when it collects leads, the company, with 22 employees, lacks a full-time sales and marketing staff to follow up.

Then another obstacle surfaced: Frydman and Goodman learned that there are very few financing alternatives for potential buyers of new, unproven franchises. Even bankers who prepare Small Business Administration loan guarantee applications told Goodman and Frydman it would be difficult to qualify prospective buyers for financing......BY : Jane Applegate June 29,1990 Los Angeles Times / Small Business