Printed in USA Today
by Nancy Rathbun Scott
Downsized corporate executives are a hot commodity among savvy franchise companies. For franchisors, the allure of the formerly employed boils down to talent, commitment and money.
"MAACO and everyone of a thousand franchise companies are after the downsized management people," says Al Hornstein, director of public relations at the auto painting franchise. "These people are willing to work hard and many have good pensions or good severance pay."
Who Looks Good to the Franchisor
Especially appealing to franchisors are department-level managers, particularly those with a background in marketing, merchandising, sales or general management.
Sufficient capital to startup and hang in also turns a franchisor's head. In MAACO's case, the prospective franchisee would need to show $40-50,000 in equity, but the figure varies widely among companies.
Also attractive to some franchisors are young, go-getter execs looking for a better way. "Some corporate executives -maybe 30 to 35 years old-are downsizing themselves," says Steve Avanessian, national director of marketing services for Adventures in Advertising. "These folks realize they have tremendous skills, but corporate America simply isn't very loyal to them. They're ready to make their mark."
In some industries, downsized employees can take valuable corporate contacts with them. Says Avanessian, "One of the nice things about being in the promotional products industry is that our downsized executives already have been working with colleagues in major corporations. They can take their strong skills and their contacts with them when they leave."
The Plus and Minus of Corporate Experience
While most franchisors appreciate the energy that executives bring to the table, a corporate mentality also can block the entrepreneurial mindset. "A lot of people who have been downsized have been involved in corporate hierarchies," Avanessian says. "They have been used to a great deal of administrative support. That's been an interesting challenge for us-to work with them on the notion that this is your business. You're the chief."
A Case In Point
In the mid 80s, Jack and Eddie Pedigo both worked for General Tire and Rubber in Waco, Texas, when the plant shut down. Jack had been head of maintenance and engineering for years. Eddie, his son, worked as a mechanic. As a sideline, the Pedigos had also been running a small body and paint shop.
When the corporate rug was pulled out from under them, Jack and Eddie decided to buy a MAACO franchise. To the enterprise, they brought tremendous energy, a family-wide commitment and a determination to get better and better. But owning a franchise was scary at first. The hardest part, says Eddie, was making sure they hired the right people. "Anybody can learn the major things," he says. "To write an estimate, to be a salesman, to get the business in house. What you can't do without is a good crew. You have to get 100 percent from everybody, all of the time."
This year, MACCO is honoring the Pedigos' shop as the first center to ever hit the two million dollar mark. How have the Pedigos done it? Eddie knows right away. "An excellent crew. Quality work. Giving customers more than what they pay forand then letting them know what we've done for them, like fixing that small dent for free."
Where the Franchisor Makes a Difference
Virgin entrepreneurs coming out of corporate America usually need help. That means training and lots of support, especially in the beginning.
Adventures in Advertising fills the entrepreneurial gap by teaching sales and marketing types to become strong administrators. In fact, the company's two-week training program emphasizes just those skills. "What we really offer is Business 101, Accounting 101, Finance 101, Technology 101, Administration 101."
The new owner leaves training with a customized software package designed to automate everything from quoting prices to fulfillment. "Our software integrates the process, so a new owner can turn a quotation directly into an order, follow up, print out a report and expedite client management."
Adventures also has a "buddy system" that puts corporate headquarters in constant touch with a freshman franchise owner. "We work with new owners continuously in the beginning. For example, we'll accept reports weekly, instead of monthly. We offer this service because it allows us to review what they're doing. Do they need to follow up more extensively? Do they have too much drive time? Once they hit 90 to 120 days, they are off and running."
Adventure's objective is to create instant time management skills. "In order to reach that critical mass in the first 120 days, it's important for a new owner to spend days wisely, with the right combination of sales and administration."
Technology is another area that often needs some work. "When we're looking at downsized executives, we're looking at many people who may have been in middle management for 15, even 25, years. They may have missed out on the computer age. We fill in with a lot of technology support."
Mapping a growth curve for the new business also paves the way to success. "An owner needs to figure out a course to grow their business. They need a timeline for hiring people, for example. We can come in and say, 'Okay, when you reach this sales level, it's time to hire some part-time administrative help.'"
What Lures the Franchisee
What makes a franchise appeal to somebody coming out of a corporate enclave? The chance to be your own boss and the lure of better money probably head the list.
"I was struck by what a couple of our franchise owners told us," Hornstein recalls. "These are two women partners who own three franchises in Oklahoma City. They said MAACO appealed to them because we are a high-ticket item. Our theory is that a franchise owner can breakeven doing 22 to 25 cars a week. That next car is 80 percent profit. Since the average repair order is $400 to $500, that adds up."
MAACO isn't making any earnings promises, however. "A franchise owner may not make a profit for three years, or they may make a profit the first year. It depends." What MACCO does promise is a hefty training program. "Our four weeks of training teaches new owners to be managers in the MAACO system. We have enough flexibility in our system that owners can adapt the manual to their own style."
Money and independence are only two reasons to go into business for yourself. Avanessian suggests a third motive, one which may have growing influence in the New Age of self-fulfillment. "People coming out of corporate American are not used to having fun. Frankly, the promotional products industry is just a lot of fun."
Money Alone Isn't Enough
Many franchise companies will accept only franchisees who plan to be on site, working in the business every day. Dollars to invest simply aren't enough. "We don't want six doctors who want to invest because we've found that an absentee owner won't make it. We want somebody who will be the working owner," says Hornstein.
Other franchise companies-particularly those with high investment requirements-may welcome investors who partner with owner operators. The Chattanooga-based Krystal Company, a full service restaurant with 300 outlets in the southeastern U.S., requires a million-dollar investment. Says Bruce Bloom, vice president of development, "We are looking for well-financed franchise owners with reasonable business acumen. Two hundred thousand dollars cash is required for the full-service Krystal restaurant and $50,000 to $75,000 cash for the license program. Becoming an entrepreneur is a large step and the environment is very different from that of a middle-management function in terms of both the time and effort required. The cold, hard fact of reality is that there is no total safety net. People who come to us frequently come from other businesses in the food-related segment, or from other areas, looking for diversification. We do have investors who have partners with operating experience."
Who will make it as a franchisee?
Is there anyway to predict who will make a successful franchise owner? What MAACO has learned is "Don't judge," says Hornstein. "You never know. Somebody we think will never make it turns out to be a whiz."
He offers this advice. "Franchising is not for everyone. In a way, the franchisor is Big Brother. You have to turn in figures each week. You have to meet with the regional director, who evaluates the store. You have to have reports in on time. When they are doing well, some people will start to wonder, 'Why am I paying eight percent to MAACO?' Well, the answer is, 'You're paying for that sign.' And franchise owners have to be able to rationalize that."
So, even though franchisors think downsized corporate executives are a good bet, most acknowledge that it's foolhardy to predict exactly what background will help or hurt. A more important predictor is probably the prospective owner's personal initiative.
"Franchising is an excellent business venue for anyone looking to enter business as an entrepreneur," says Bloom. "But I'd say, do your homework, talk to other franchise owners in the system and understand what it means to be in business."
Landing on Both Feet In A Repainted Parachute
Randy Gentry had seen the handwriting on the wall in 1992, with a shift in top management at MATCO Tools where he had been a regional manager for 15 years. "They brought in a new 'textbook' CEO. He told the regional managers-there were nine of us-that the company had a lot of 'excess management.'"
Randy hung on to his corporate job for another 18 months, but when the CEO phoned to say "Meet me at the airport," Randy knew it was time to leave. A friend, Mike Sudweeks, had already left the shrinking corporate nest. "When Mike bought a MAACO franchise, MAACO asked him 'Are there any other people like you?' So I had already been in touch with MAACO and I called them."
Randy and his wife Ruth, who was working for an equipment rental company at the time, decided to purchase the auto painting franchise. The store they purchased wasn't exactly storybook, though.
"The buy who owned it was very negative. But, coming from where I did-the management side at MATCO-I had seen how attitude affects success. The whole time this guy was complaining, I kept thinking, 'Everything is in place: the structure, the framework, the operating system and you're still failing. If you'd just do what MAACO is telling you, you'd be fine."
Randy decided to run his shop by the book and it paid off. This year his store in Anaheim hit the enviable one million dollar goal. They Gentrys pushed ahead. "After the first million, I wanted to rachet up, so I put a frame machine in place, not to handle the big heavy collisions, but because some customers can use frame work. Then, when I wanted to rachet up some more, I bought a second franchise in 1995."
Now both are million dollar centers. How did the Gentrys succeed where others before them had failed?
The way Randy figures it, if somebody is going to pay thousands for a franchise agreement, it doesn't make a nickle of sense not to take advantage of everything the franchise company has to offer. "I just did what they say to do. My weakness was that I had no idea how to work on cars. And, when you're dealing in an environment where people doing business with you will cut your throat if possible, you need to master the technical information. MAACO was very helpful. They're the kind of franchise company that's not intrusive, but that gives the franchise owner as much help as they want. When I was researching the purchase way back when and talking to franchise owners, I looked at companies offering this kind of support."
Gentry followed other advice, too. "This business requires a lot of advertising. I'm in an industrial area, so there aren't lots of people just walking in to have their cars painted. We advertise in the newspaper, yellow pages, on TV and I do my own cable television ads."
Anything else? "My wife," he says. "Especially owning two franchises, we couldn't have done this without Ruth."
® copyright 1999 Nancy Rathbun Scott
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