Entrepreneurs / Small Business  July 15, 2011

When it’s time to leave the nest

Individuals start businesses for a variety of reasons: They have a an idea for a new product or service they want to bring to market, they need to replace income lost to a job layoff, or maybe they just want to be their own boss.

But starting a business from scratch can be expensive, time-consuming and complicated. One way to simplify the startup process while learning how to run a successful business is to buy an existing franchise.

The U.S. Census Bureau last year released figures showing that in 2007 franchises accounted for 10.5 percent of all businesses. They supported 7.9 million workers in 295 different industries and accounted for nearly $1.3 trillion in sales. (The next survey will take place in 2012.)

And depending on the industry and the parent company, the size of the initial investment in a franchise can be as little as a few thousand dollars – or somewhere in the high six figures. In addition to the startup money and ongoing costs of doing business, there can be licensing or other fees, usually calculated as a percentage of income. This relationship between the franchisor and franchisee can continue for any length of time.

Many businesses in Northern Colorado start out as franchises, but some eventually outgrow the relationship and become their own entities.

King Carpet & Air Duct Cleaning

Darwin King of Loveland is one of the latest franchisee-turned-company-owners. In the last few weeks, he cut his ties with Sears Home Services to open King’s Carpet & Air Duct Cleaning.

In 2003, King was ready to leave the corporate world to become an entrepreneur. He had investigated five different types of franchises before settling on the carpet business, specifically a Sears Carpet and Upholstery Care territory covering Fort Collins, Loveland and Longmont. He said his Colorado School of Mines education in chemistry meshed well with concepts of chemicals used to clean rugs.

It cost King $21,000 to buy into the franchise. Today that startup fee would be $28,000 for the carpet cleaning side of the business and an additional $14,000 for the duct cleaning portion.

An advantage of being a Sears franchisee was the training and technical assistance offered, King said, and overall, being part of the franchise was a good idea for the first three years. But now, some eight years later, King is becoming an independent. He said he appreciates all the mentoring and support the company provided, but not the 8 percent to 10 percent of income due each month.

Expanding his potential client base was another motivation for King to go out on his own. His new company can branch out to clean carpets in Boulder, Lafayette and Broomfield as well.

King is in the process of changing his logo on business cards, trucks, uniforms and marketing materials.

Graham’s Carpet Network

In 2003, Scott and Monica Graham were looking for new business opportunities, something where they could both be involved. Aptitude tests showed the couple had some overlapping interests – Scott in home improvement and Monica in fashion.

Since Monica was interested in going into what she terms “glamorous industries” that dealt with people, the floor-covering business appealed them. They decided to become part of the nationwide Carpet Network. The buy-in was $50,000.

The Grahams said they appreciated the detailed systems and procedures the franchisor offered, especially the new techniques and information on selling flooring available at every annual Carpet Network convention they attended.

After about five years, the Grahams’ business was adding employees and needed additional warehouse space and more vehicles to keep up with demand. They felt they had outgrown the franchise, which was more focused on smaller operations.

Severing the ties with the parent company while keeping the recognizable Carpet Network brand in the company name – Graham’s Carpet Network – was not easy. It involved drawn-out negotiations, lawyers and paperwork, but the couple felt it was worth the effort. Like King, the Grahams are glad to be rid of the monthly royalty fee.

Since becoming independent, Graham’s Carpet Network has been able to add to its fleet of cleaning vans, and has added several Kia Souls with the company logo on the side to save money on gasoline for trips around town. Monica calls this their “Soul Train.”

Print It!

Sometimes, it’s the franchisor that takes a turn in a direction that the franchisee doesn’t want to go.

The business now known as Print It! on Mountain Avenue in Old Town Fort Collins began more than 25 years ago as a Kwik Kopy franchise. When Briana Fischer bought the business from her mother, Alice Fischer, in August 2008, she dissolved the long-standing relationship with Kwik Kopy to become an independent shop.

Fischer said the business had always specialized in offset printing, used to cost-effectively produce high-quality prints, but by 2008, Kwik Kopy corporate was heading in the direction of becoming a copy center, much like Kinko’s.

 

As a locally owned company in the downtown area, Print It! has built a customer base that is 85 percent local, Fischer said. In turn, the company gives back to the community, supporting many local nonprofits, usually without much fanfare.

Daddy-O’s Green Onion

Terry Brundage had experience in business and spent time in the corporate world, but by 1997 he says he was looking for a new life. Although restaurant and retail operations were all new territory to Brundage and his wife, Roxann, they decided to open a Schlotzsky’s Deli franchise in Loveland.

“I never would have made it as a restaurateur without Schlotzsky’s assistance,” Terry Brundage said.

After agreeing to spend $30,000 for the franchise, the couple spent three weeks at the corporate office in Texas for training, and felt the franchisor “bent over backwards” to get them ready for their new venture.

The Brundages stayed with the franchise until June 2003. By then they had learned enough about the restaurant business to want their own place, and to be more creative with the menu.

Although Schlotzsky’s was collecting a portion of his earnings each week, Brundage said the building lease was a bigger expense, along with its maintenance and upkeep.

A year later, the Brundages found a location in a strip mall in west Loveland with lower overhead and a property management company to handle the details. Terry named the new place Daddy-O’s Green Onion, just because he thought it was a cool name.

Then the couple began to develop their own recipes for soups, sandwiches and other fare, since anything from the Schlotzsky’s menu was off-limits. They also bake the bread fresh daily in Daddy-O’s kitchen.

De-franchising, as Brundage calls it, has both pros and cons. Losing the recognizable Schlotzsky name hurt. Visitors to Loveland, especially those from Texas, would stop in to get a familiar meal.

On the other hand, Brundage can draw attention to his storefront by having all the front windows painted with colorful cartoonish ads, for example, something not allowed under his former corporate agreement.

Individuals start businesses for a variety of reasons: They have a an idea for a new product or service they want to bring to market, they need to replace income lost to a job layoff, or maybe they just want to be their own boss.

But starting a business from scratch can be expensive, time-consuming and complicated. One way to simplify the startup process while learning how to run a successful business is to buy an existing franchise.

The U.S. Census Bureau last year released figures showing that in 2007 franchises accounted for 10.5 percent of all businesses. They supported…

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