Employees Who Become Franchise Owners
Printed in USA Today
by Nancy Rathbun Scott
A popular board game contends that it takes only five steps to link any actor in Hollywood to Kevin Bacon. In Delaware, any Lawn Doctor franchise can probably be linked to Bob Carroll faster than that.
It all started with Bob and his childhood friend Jerry McGackin, two New Jersey boys who moved to Delaware to open side-by-side franchises after working for Lawn Doctor entrepreneur Norman Berman. A couple of years later, Bob's first manager, Bill Abbott, bought his own franchise. A second manager Dennis Faust, followed suit. Bob's secretary Diane Woolihan figured she should own a Lawn Doctor too, so Diane and her husband became franchise owners next. Meanwhile, back at Jerry McGackin's place, his manager Alex Stuart was also becoming a franchisee.
It didn't stop there. Employee-turned franchise owner Dennis Faust leap-frogged to the third generation, bringing his employees, Patty and Tim Zang, into the franchisee fold. Are we finished yet? Uh-uh. Anna and Jeff Kelly used to work for the Zangs, but they now own Lawn Doctor franchises, too.
How and why is this nuclear reaction occurring? Ask Bob Carroll's current manager, Paul Popo. "Lawn Doctor virtually trains you to own your own franchise and pays you while you are learning the business," he says. Lawn Doctor Chairman and CEO Russell Frith puts it this way, "Our employee purchase program enables an employee of five years to purchase a franchise for about half the usual investment and we finance two-thirds of that." Of Lawn Doctor's 350 franchisees, about 40 are former employees.
How franchise companies aid employee-purchasers
Whether, like Lawn Doctor, a franchise company touts a formal employee purchase-incentive program or not, more franchise companies are encouraging or enabling their employees to buy in.
For instance, Ohio-based Petland, Inc. offers what the company calls an "operating lease" to managers willing to take that first step toward store ownership, says Drew Musser, Petland's franchise development associate.
Charley Shin, founder of Charley's Steakery in Columbus, Ohio, waived the franchise fees for two of his top managers, who joined together to open a Charley's Steakery in a mall location passed up by the company. The new owners are now in the top five in sales among Charley's 47 franchise owners.
AFC Enterprises' Step 13 ownership program (now called the "New Age of Opportunity") enabled former Church's Fried Chicken employee Lewis Siplin to purchase his own store in the Jacksonville, Florida, area after ten years of rigorous on-the-job training and hard work. He now owns eight successful stores.
Incentives that spawn employee-purchase programs
Lawn Doctor developed its employee purchase program seven years ago in response to their franchisees' need to retain employees. "The object was to give employees an ongoing opportunity within the organization, even to own their own business on favorable terms, if they worked for a franchisee for five years," Frith says. So it became an advantage for an employee to stay with the franchisee and do a good job. In turn, the franchisee enjoyed more employee productivity and stability.
Rich Page, director of national development for minority owned Charley's Steakery, says Charley's assistance to would-be employee-purchasers is driven by the opportunities that arise, rather than by staffing problems.
Petland devised its operating lease-purchase program partly in response to the need to assign stores experiencing difficulty to the store managers, who often don't have the immediate financial resources to purchase the franchise. "Basically, the lease gives the manager full ownership except he is not on a franchise agreement. It obligates the manager to purchase the business or relinquish his or her duties by a certain cut-off date," says Drew Musser.
By contrast, AFC's program originated in the mid-60s with its commitment to come into urban areas in the Southeast and offer employees the opportunity to become managers and eventually store owners in their own communities. Siplin says, "It was a social commitment that made good business sense. In the chicken industry alone, 92 percent of all the fried chicken is consumed by African Americans, but less than two percent of franchises are owned by African Americans." AFC's commitment adds up to a sound business opportunity for both franchisor, franchisees and employees. "It's a service that's needed and a product that's appreciated," Siplin says.
What's in it for the franchise company?
Lawn Doctor's program has become a recruitment tool for franchise owners, but it also narrows the "guess-gap" for the company in choosing new franchisees. "The more knowledge the franchise company and prospective owner have of each other, the better for all concerned," Frith says. "With an employee-purchaser deal, the franchisor can get a lot of insight about the prospective purchaser from the franchise owner, while the employee of over five years has had a lot of exposure to the company and a pretty good handle on the business and its system," says Frith.
The program enjoys a high happiness factor. "With employees who become owners, we experience a much higher percentage of satisfaction, success and comfort than with a conventional purchaser," says Frith.
Musser agrees. "Petland's experience shows that once the purchase is made, a manager-purchaser's familiarity with the system and already established clientele can speed their way through the start-up curve."
What about the franchisee who's losing a good employee? "A lot of our dealers actually encourage their employees to do this. While they lose a good employee, the employee-purchaser adds another unit to the system -and the bigger the system is the better it is for the franchisor and franchisees," says Frith.
How the employee turned owner benefits
"We've never had anyone who didn't do well on this program," Frith says. "The employee-purchaser has had the opportunity to look at the operation from the inside. He or she knows what they are dealing with and have a pretty good idea of what the owner of their franchise is making."
Petland's leasing program provides managers with a window of opportunity to purchase a franchise, even without the ready means to finance the deal, which can cost up to $360,000. While Petland does not provide financing with its operating lease package, the program does allow manager-purchasers to prove themselves over a set period of time. "They still have to purchase the franchise from the franchisee before the lease expires, but we help them put together a business plan which, coupled with their track record during the operating lease term, establishes the credibility they need to get a bank loan to finance the deal," says Musser.
"I was one of the many African-Americans who benefitted from AFC's program that allowed someone of no wealth to work for the company and based on performance, own your own franchise," says franchise owner Lewis Siplin. He had to maintain a profitable operation, undergo rigorous annual physical inspections of his building and staff, and accumulate the money to purchase his store-about $50,000-through the money he earned from his profit sharing (not borrowed from the bank). It took him ten years to do that and a lot of discipline, but he learned the operation from the bottom up. He succeeded because he kept his eyes on the goal: to own his own franchise.
Siplin's greatest satisfaction, though, is passing on the benefits of the program to others in his community. "I do the work, but I put great value on the support that I get and the commitment of the AFC executive staff to these programs and especially to African Americans. I'm able now to be a leader in the community where I grew up," says Siplin. His personal example inspires students at his old high school, where he tells his story under AFC's adopt-a-school program. He actively recruits employees from the community. "We will have ten restaurants at the end of this year and when I reach my goal of twenty, we'll employ 250 people," Siplin says. "Whatever you give has a way of boomeranging back to you, benefitting you much more than those you set out to help."
How to Get From the Bottom Rung to the Top in One Easy Lesson
When Robin Visniski went back to school to get her M.BA, she was told that her lack of sales experience would hold her back from getting a professional management or marketing position. Determined to get that experience, she took a job at a local Fort Worth Petland, Inc. as a pet counselor for $4.00 an hour after she graduated.
Within eight months, Robin was promoted to assistant manager at one of the larger Petland corporate-run stores in Dallas-Ft. Worth. At the corporate training seminar, she got to see everything first hand while management got to meet her and evaluate her potential. She kidded them about maybe owning her own store. But when Petland's corporate headquarters offered her a store in Tyler, Texas, two months later, they weren't kidding. "They were going through a reorganization and they had several stores in bankruptcy that had to be sold or shut down," says Robin's husband and partner David Visniski. "They gave us two weeks to make up our minds."
That's where Petland's operating lease program saved the day. "We were able to try it out before committing ourselves to purchase the store," says David. "We had always talked about going into business together, but hadn't settled on anything." David had worked eleven years in the aerospace industry which placed them in a position to put together the needed capital fairly quickly. Besides, Robin had confidence in the success of the company's system so they signed the papers and Robin took over the store on December 1, 1991, knowing they could walk away without obligation if things didn't work out. A month later, David joined her in the business.
Six years later, they're thriving. The store, which had opened in 1984 and had seen two owners and two corporate managements, was very run down. "With competition moving in just down the street, we gutted and renovated our fish department two weeks before the competition opened and just blew them away," David says. They switched the store over from selling purebred animals to placing dogs and cats from the humane society. Now they have a strong reputation for community service.
"If we had tried this on our own, I don't know that we would have made it," says David. "But Petland's operating lease program, combined with excellent training and a success-proven system made franchise ownership attractive and achievable with satisfaction on all sides."

® copyright 1999 Nancy Rathbun Scott
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