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March 2007 |
Volume 8, Issue 3, Part 2 |
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 March:
Rites of Spring
Get the Facts First. You can distort them later.
-Mark Twain
In this issue...
Street Smarts:
Straight from the veteran's mouth
Industry Focus:
Spring Cleaning with MaidPro
Guest Column:
The Revised Franchise Rule Brings Clarity to Franchise Marketing Departments
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Straight from the veteran's mouth
In Part 1, we told you about VetFran, a program for veterans who want to own a franchise. We thought it would be interesting to talk to a real life veteran who actually took advantage of VetFran to get the real scoop. So we interviewed Lenny Geibel, owner of Spring-Green Lawn Care in Lawrenceville, Georgia.
Lenny came out of the Airforce in 1993 after spending four years as a ground radio maintenance technician. He returned to corporate America and worked as a cable technician for Bell South - until an injury kept him from returning to work. He decided that owning a business was a good alternative and proceeded to research business opportunities. That's when he came across the Spring-Green Lawn Care franchise, one of 200 VetFran participants.
Q: How did you learn about the VetFran program?
A: Spring-Green made me aware of it. One of the reasons I decided to go with Spring-Green is because they do take care of veterans.
Q: What did the program do for you?
A: It gave me a 25% break on my $35,000 franchise fee, which is not too shabby. I was able to use that money to turn back into the business, which helped me ramp up a little quicker than normal.
Q: What did you learn in the military that has helped you run a successful franchise?
A: The discipline and diligence that the military will instill in a person is number one. Attention to detail has really helped me, too, especially in the lawn care industry where it's critical to have an exacting eye. And perseverance and a determination to win, to succeed. Before I went into the military I'd have to say that I was your typical shiftless teenager. The military helped me get my priorities and my morals straight and that has translated well to running a business.
Q: Would you recommend franchising to other veterans?
A: Absolutely. It's a great system and following a system is definitely something that translates from the military. It's just a natural fit.
Q: Any advice on finding a good franchise that works with veterans?
A: Go to the VetFran website and look at the list of providers there. Try to find the kind of business that you think would suit you, your personality, and your market. It's a great resource that can give you a nice little leg up that your common (civilian) person doesn’t enjoy.
If interested in VetFran participating franchises companies, go to www.veteranfranchises.com
Spring Cleaning with MaidPro
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Company: MaidPro
Units: 81 in over 30 states
Startup costs: $60-85k
Franchise fee: $7.9K
Address/phone: 180 Canal St. Boston, MA 02114
Phone: (888)6243776
Website: www.MaidPro.com
In business: 1991
Franchising since: 1997
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As we mentioned in Part 1, everyone loves the idea of spring cleaning, but not everyone has the time (or desire) to do it themselves. For as little as $89, you can have the pro's at MaidPro come in and do it for you. That's a pittance for such a luxury! But Richard Sparacio, cofounder and VP, says that's the whole idea behind MaidPro.
Sparacio's partner Mark Kushinsky was appalled when he went shopping for a cleaning service. He was ready to dig deep to pay the outrageous prices being asked, but the real disappointment was the poor quality of service. After recounting his bad experiences to his friend Sparacio, the two decided they could do better. Much better. MaidPro opened its doors in 1991 with this simple idea: have quality, trained professionals provide exceptional service at affordable rates. The concept worked like a charm. Within one year, MaidPro had expanded its offices and was voted the best maid service by Boston Magazine.
"Our concept works because we stick to what we do well," says Sparacio, "which is bathrooms, kitchens, floors, and dusting. And we focus on the experience for the client. We leave a 49-point checklist behind, use toilet paper stickers, call each client afterwards to make sure the service was up to their standards, and leave a signature scent so the home smells like it was cleaned and serviced properly. We stay competitive by cleaning at a level that really wows our clients. People are stressed today. We do what we can to make this feel like a spa experience."
Although there is an upswing in one-time service calls in springtime, Sparacio says that overall there is minimal seasonality in the business. "Spring is personified with cleaning so there are one-time surges. But this is primarily a recurring revenue business based on weekly or bi-weekly service."
What's the outlook for the industry? It's continuing to grow at 20% annually according to Sparacio. "Residential (only) cleaning is a $10 billion a year industry with about 10% of the pie going to national professional companies and 90% to independent services. But it's changing. Overall the pie is getting bigger because more people are using home cleaning services. In addition, more people are switching to national companies such as ours versus using local independents. They want to find a company which is dependable, reputable, and where there is recourse if something goes wrong. So, not only is the pie getting bigger, but the slice for the national companies is getting bigger."
 The Revised Franchise Rule Brings Clarity to Franchise Marketing Departments
By: Jim Coen
The long-anticipated Franchise Rule change by the Federal Trade Commission will involve revisions to nearly every UFOC disclosure item. A number of the changes provide clarification to certain parts of the "old rule" that caused significant compliance confusion within franchise marketing departments.
This Revised Rule is effective as of July 1, 2007, but Franchisors can phase it in and use their current UFOC format or the new FTC Rule format for one year from this effective date.
The changes to the UFOC and related practices are many, but I have listed the ones that impact franchise marketing activity the most:
• The first personal meeting trigger for providing a UFOC will no longer be present in federal law (but may remain in certain state regulations), allowing Franchisors to have face-to-face discussions without the need to deliver a UFOC.
• The 10-business day pre-sale disclosure requirement (the UFOC and General Agreement) has been converted to a 14 calendar day requirement. The actual individual franchise agreement must now be in the prospective Franchisee's hands 7 calendar days before signing or paying funds.
• All Franchisors will be allowed to use electronic means for delivery of the UFOC.
• Item 3 will include litigation filed by a Franchisor against its Franchisees.
• Item #19 Earnings claims (will now be called Financial Performance Representations) will remain optional.
• Disclosures related to the use of brokers are eliminated from Item 2.
• Information must be supplied to the prospective franchisee related to trademark specific independent franchisee associations.
• Item 20 (Outlets information which details franchise units leaving the system) has been revised to help resolve certain double counting issues which could have the effect of inflating apparent system turnover.
There will be significant implications for Franchise Marketing Departments in transitioning to the new format, but ultimately aspects of the revised FTC Franchise Rule will be beneficial to both Franchisors and Franchise investors.
About the Author: Jim Coen is the owner of Franchise Perfection, a franchise consultancy and brokerage company. Jim has been in franchising for over 25 years with experience as a franchisee, in franchise management and franchise development. Jim serves on the Board of Directors of the New England Franchise Association. His articles can be seen on a number of popular franchise websites and at his blog; Let’s Talk Franchising www.franchiseperfection.com/blog . You can contact Jim toll free at 877-469-3002 or email him at jim@franchiseperfection.com.
ServiceMaster Acquired
 ServiceMaster Co., which provides housecleaning, landscaping, and termite and pest control services, announced this month that it is being bought by an investment group for about $4.48 billion cash. The buyout, led by the group of Clayton, Dubilier & Rice Inc., will also assume about $1.02 billion in debt.
ServiceMaster's board has approved the acquisition. Its stockholders will vote on the transaction at a special meeting expected to be held in the second quarter. ServiceMaster currently serves residential and commercial customers through a network of over 5,500 company-owned locations and franchised licenses. The company's brands include TruGreen ChemLawn, TruGreen LandCare, Terminix, American Home Shield, InStar Services Group, ServiceMaster Clean, Merry Maids, Furniture Medic and AmeriSpec. (ChicagoTribune.com, 3/19/2007)
Hilton Hotels Unveils Aggressive Growth Goals
 Hilton Hotels Corp. recently told its limited services owners at a company meeting that it plans to open 1,000 hotels in North America by 2012. Hilton, meanwhile, has even more aggressive development goals outside North America. By 2017, the company said it intends to open another 1,000 properties and the vast majority of these would carry the flag of one of its three limited service brands - Hampton Inn, Hilton Garden Inn, and its extended stay product, Homewood Suites by Hilton. The strong growth in distribution in 2006 for Hampton, Hilton Garden Inn and Homewood Suites was a bellwether for growth prospects in the coming years.
The limited-service brands are leading the company's international expansion for three reasons: They are less costly to develop than full service hotels; they require a smaller footprint so identifying suitable sites is easier; and demand for this type product outpaces supply in many international markets. (hotelbusiness.com. 2/27/2007)
In an effort to differentiate itself from other casual dining competitors and present more variety, chains like Outback Steakhouse and O'Charley's are now offering items such as sashimi and calamari on their menus. Casual dining chains, better known for traditional salad bars and routine burgers, are attempting to attract more customers by adding food that is more common in ethnic or high-end restaurants as well as to satisfy the increasingly adventuresome tastes of their customers.
The casual dining landscape has changed in recent years and competitors known as "fast casual", such as Panera Bread and Moe's Southwest Grill, have been proliferating, offering decent, quick meals for a sometimes lower price. In addition, the casual dining chains have added a huge number of restaurants during the past several years, leaving them vulnerable when gas prices escalated which hurt their target lower-and-middle-income consumers during the past two years. Chains such as Outback and O'Charley's hope that their menu upgrades will help profits over the long term and stem the recent loss of customers. (Tennessean.com, 3/5/2007)
Ruby Tuesday Expands in Middle East
 Ruby Tuesday, the 900-unit casual-dining chain, has expanded its Middle East development agreement for an additional 25 restaurants. The expansion deal with the National Arabic Co. (NAC) for Restaurant Management of Kuwait City calls for opening the stores over the next seven years in Bahrain, Egypt, Jordan, Kuwait, Lebanon, Oman, Qatar, and the United Arab Emirates.
The chairman of NAC would establish a training center in Kuwait City for Ruby Tuesday employees. This marks the first franchisee-operated training facility and it will be modeled after the Ruby Tuesday training complex at Ruby Tuesday headquarters in Tennessee. This is the second time the franchise development agreement has been expanded since 2001. Ruby Tuesday currently has four restaurants in the Middle East including locations in Kuwait City and Abu Hlaifa, Kuwait and Jeddah, Saudi Arabia. (Nation's Restaurant News, 3/22/2007)
According to a recent report, franchising is flourishing in Australia because their market offers U.S. companies a stable, transparent and developed business environment with world-class infrastructure. Since 2004, franchise systems have grown by 12.9 percent to reach 960 systems, reflecting a confident, regulated franchising sector in a strong local economy. Over the past 20 years it has expanded to include virtually every product and service sector. Australia now has the most franchising outlets per capita in the world and three times more per capita than in the United States.
A recent survey estimates that there are 61,860 franchised units operating in Australia including 5,660 company-owned units, which in comparison to a total of 54,000 units in 2004, illustrates the strength of the sector. (Franchising World, February 2007)
 Restaurant chain-operator Cosi Inc. reported this month that it continues its projections for a profitable 2007, excluding stock-option expenses. The company affirmed earnings guidance between 8 cents and 12 cents per share in 2007, not including a stock option expense. Cosi projects revenue from company-owned stores will rise to between $150 million and $155 million. The company also expects to open 14 new company-owned restaurants and between 45 and 55 new franchise restaurants during the year. (www.boston.com, 3/22/2007)
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