Franchisers try new approach to finding franchisees

Traditional ways don't always work

Denver Business Journal - by Ed Sealover, July 22, 2011

Lea Bailes, CEO of Guier Fence Guier Fence Latest from The Business Journals Fencing company looking to expand brand into Alamo City Good fences: Guier Fence hopes to welcome franchisees into the fold Follow this company , set about looking for a Denver franchisee for his fencing company the traditional way: through print directories, franchise brokers and Internet franchise portals.

But he found no one he wanted.

So he started pitching stories about his company to trade publications. He used social media. And he participated in multicompany franchisee webinars. Through those means, he’s signed six franchisees nationally and developed a handful of promising Colorado leads.

Guier Fence, a 32-year-old Kansas City, Mo.-based company, just began franchising last year, but it didn’t take company leaders long to learn what many longtime national brands have discovered: Traditional methods of finding franchisees no longer work.

Regional expos and thick directories that get franchisers thousands of bad leads are out. Now what works is one-on-one interaction and more subtle media mentions that inspire truly interested candidates to find out more about a company before committing.

“The decision-making is different. Now people do a lot more background research on these companies before they ever decide to submit a request form,” Bailes said. “The stories of success are what drive people toward a franchise ... There’s a lot more interaction, and I think people now demand that and expect that.”

At the end of 2010, Colorado was home to 18,135 franchise businesses that employed 197,294 people and generated $5.3 billion in payroll, according to the International Franchise Association International Franchise Association Latest from The Business Journals Franchisors join forces to pitch business conceptsFDA should reassess calorie labelingFDA urged to reassess cost of food, calorie labeling rules Follow this company of Washington, D.C. The number of franchises is predicted to rise 2.5 percent nationally this year.

The type of business people looking to buy into franchises has changed, said Steve Beagelman, CEO of SMB Franchise Advisors of Doylestown, Pa. Longtime executives who lost jobs or decided to leave companies during the economic downturn have been drawn to owning their own business and being their own boss.

And these new franchisee candidates, especially in computer-savvy cities such as Denver, aren’t the type to pick up 100 business cards at a franchise show or flip through a directory, officials said. So companies must change their recruitment methods.

Max Muscle Sports Nutrition, a nutritional supplement and athletic apparel shop, used to advertise on portals that attracted what Tom Sampson, senior vice president for franchise development, termed “midnight clickers and tire kickers” — people who surf the Internet looking for new career options.

But the Anaheim, Calif.-based company, which is looking to open four more franchised shops in the Denver area, found it needed 125 to 175 leads from a portal to find one candidate to award a franchise.

Max Muscle tries Facebook, LinkedIn

Now it advertises on Facebook and LinkedIn, targeting website users of a certain age and occupation in parts of the country where the 150-store chain wants to grow, Sampson said. And it’s participating in webinars hosted by Beagelman where 10 companies can pitch their stories to a captive midday audience serious about learning about the businesses.

Using targeted Internet marketing, Max Muscle has been able to award one franchise for every 25 to 30 leads it’s gotten in the past year, Sampson said.

Beagelman noted these methods are not only more cost-efficient, but also allow a franchiser to hone in on the Denver or Colorado Springs area rather than throwing darts blindly at the U.S. map.

“The startup and the smaller franchisers [of 50 stores or less] have seen a huge benefit because it builds name recognition for them,” Beagelman said. “You’re finding people in Denver that are finding out about a brand with five units in New Jersey.”

The Pita Pit, a 320-location restaurant based in Ontario, Canada, that’s 90 percent franchised, used to get most of its store owners from the crop of devotees it spawned in its college town locations, said Kevin Quinn, director of franchise development. But with the chain moving into cities that aren’t college towns — it does have locations in Fort Collins, Boulder and Greeley, but also is looking to open its first in Denver — it’s had to contract a public relations company that specializes in social media ads, he said.

Other franchisers looking at Colorado aren’t spending any money marketing themselves, either in traditional or newfangled ways. Terry Corless, CEO of MadDogs British Pub MadDogs British Pub Latest from The Business Journals Albuquerque split: Rentals rise, offices mope Chain gang moving into AustinNew pastry chef joins team at Ritz Buckhead Follow this company of San Antonio, which is looking at Colorado for a possible expansion, said he’s put up signs in his main location that draws tourists and conventioneers, drawing inquiries from many out-of-state business people.

While earned media and social media are today’s best methods for finding franchisees, Sampson cautioned companies to remain nimble to stay up to date on newly evolving methods.

“Any franchise company that is paying attention, they have to be where the eyeballs are looking,” Sampson said.

Massage-Therapy Biz Growing in Colorado

By Dennis Huspeni

June 3, 2011

It’s not clear if more people were stressed out during the Great Recession and needed a massage, or if it’s Colorado’s reputation as home to a lot of fit people. But the state has been a hotbed of growth for massage-therapy businesses in recent years.

“Our growth here has been phenomenal,” said Jeff Jervik, president of CEO of Fitness Together Holdings, parent company of Elements, which came to Colorado in 2007 and just opened a Centennial location, its 14th in the state.

Massage Envy, with the highest number of franchise massage-therapy businesses nationwide, now has 24 locations along the Front Range. The Cherry Creek North store is the biggest, by sales and volume, of any of the nation’s 680 Massage Envy locations, said Larry Reiff, Colorado region franchise developer and owner of two Highlands Ranch stores.

“Demand continues to increase here,” he said.

The number of licensed massage therapists in the state has more than doubled in two years, from 4,789 to 9,949, according to the Colorado Department of Regulatory Agencies.

Much of that growth stemmed from the fact that the state Legislature mandated licensure as of April 1, 2009, and thus many therapists already practicing in Colorado went out and obtained their Colorado licenses.

The state’s Division of Private Occupational Schools lists 57 schools offering massage-therapy training in Colorado. No historical data on the number of schools in prior years are available.

But Erik Bostrom, owner of Highlands Ranch Hand and Stone, which has 45 locations nationwide, said an American Massage Therapy Association study showed Colorado has the highest per-capita number of schools of any state.

Jervik wouldn’t provide exact sales numbers, but did say that Elements locations open for more than a year all have generated same-store sales figures of double-digit increases from the prior year.

“The growth continues to be very robust,” he said, estimating Elements could open up to 10 more locations in Colorado in coming years. The nationwide chain has 83 locations, with another 25 opening this year and another 75 set to open in 2012, Jervik said.

Bostrom said franchise agreements were signed in March to open two more Colorado Hand and Stone locations, one in Cherry Creek North this fall and another in the Westminster/Broomfield area in 2012.

“Our growth rate in Colorado is good,” said Bostrom, also the Colorado regional developer. “Very active, health conscious, educated people are attracted to Colorado. They are more readily accepting of the benefits of health therapy than those in other parts of the country.”

Bostrom said since opening in December 2008, during the lowest point of the economic downturn, “we’ve experienced some phenomenal growth. We’ve grown every single month since opening.”

“The healthy demographic and active lifestyle of Denver consumers make the market a great place to own and operate a massage business,” said Les Sweeney, president of the Associated Bodywork and Massage Professionals (ABMP).

The ABMP estimates there’s one massage therapist for every 535 Colorado residents, much higher than the national ratio of 1-to-1,036.

Sweeney said the state’s move to regulate the industry has helped fuel that growth.

“One of the primary benefits [to consumers] of that move was the requirement of professional liability insurance,” he said, noting the ABMP has 4,500 members in the state.

In Sweeney’s opinion, the industry grew here despite rough economic times because more people are educated about the benefits of massage therapy, and many were looking to pamper themselves on a budget.

“I was surprised massage weathered the down times so well,” he said. “But people didn’t stop doing Ride the Rockies, or triathlons — that’s just the nature of the population in Colorado.”

Reiff said Massage Envy made massages “convenient, professional and affordable,” which opened the door to many who previously thought it was a luxury expense.

Said Bostrom: “This just seems to be an incredible time to get into the industry.”

Urgent care franchises gaining acceptance

Premium content from Denver Business Journal - by Ed Sealover
May 27, 2011

With emergency room costs rising and the number of primary care doctors declining, national chains of urgent care centers have stepped in to provide a third option for people seeking health care right away.

These centers quickly gained acceptance. And now, new urgent care-center companies that sell franchises have begun operating.

Just one chain of franchised centers — Doctors Express — has a location in the Denver area. But it will open a second facility around year-end. And industry observers say they expect more franchised urgent-care centers to follow quickly in the Denver area.

Franchised centers have some advantages over chains, in which all of the locations are corporate-owned, said Kevin Hein, who heads up a legal practice on franchised health care at Denver’s office of Faegre & Benson.

The corporate owner shifts the economic risk to the franchisee, but the franchisee gets the benefit of owning and running a practice without having to invest the same kind of capital needed to start an independent business, he said.

“There’s a niche,” Hein said. “There’s a significant market. And as people become more familiar with it and accept it, it will grow. As it becomes harder to see your primary doctor for anything other than a pre-scheduled appointment, this is going to become a standard way to get health care.”

The concept of franchising health care services dates to the 1970s and early 1980s, when companies such as The Medicine Shoppe pharmacy and eye-care specialist Pearle Vision began selling franchises.

In the past 10 years, that concept has grown to include dental care, senior care and now urgent care; Hein estimates there are about 55 health care companies now franchised nationally.

Doctors Express pioneers

Steve Nitchen and Dr. Christopher Prior teamed to open the first Doctors Express in Centennial in May 2010.

Nitchen bought the master franchise rights for Colorado and Wyoming from the Towson, Md.-based company, and Prior bought in as medical director at the first facility.

The concept interested Prior because after two-year stints at two independent Colorado practices, which asked him to make a certain amount of revenue from each patient rather than to think first about their medical needs, he wanted a place he could do it right.

Nitchen handles functions such as human relations, tax payments and legal matters, while Prior sets the rules for patient care for the two other physicians that practice there as well.

Doctors Express, at 8006 E. Arapahoe Road, operates from 8 a.m. to 8 p.m. weekdays and 8 a.m. to 5 p.m. on Saturdays, treating everything from strep throat to broken bones.

It specializes in dealing with families who live in the area, Denver Tech Center hotel guests and people from nearby assisted-living centers, Prior said.

The location is profitable, and clientele has grown to 25 to 30 people per day, Nitchen and Prior said. It supplements its urgent care by offering workers’ compensation testing, corporate travel vaccinations, and pre-employment drug screens and physicals, Nitchen said.

Doctors Express has gained clients because the declining number of primary care physicians has made it harder for a parent to get their child in to see their family doctor when illness arises, making new urgent-care locations more accessible, Prior said.

A second franchisee is expected to open another Doctors Express location in the Denver area within eight months, Nitchen said. Other potential franchisees are considering buying in as well, he said.

Those who do buy in are likely to set up their practices more cheaply and quickly because of the bulk purchasing discounts that come with being part of a national chain, Nitchen said. And with the company supplying standard billing and other office practices, they can concentrate on dealing with patients, he said.

Because of that, both Prior and Nitchen believe it won’t be long before more franchised health care centers pop up around Denver.

“When you’re completely business-run, you can tend to ignore the health care needs. When you’re run completely by medical people, you can ignore the business side,” Prior said. “We combine our business expertise and our medical expertise. ... It’s an attractive model for physicians and businesspeople.”

Hein added that the more people get to know centers such as Doctors Express, the more they’ll be branded like other franchised businesses, such as restaurants or stores. And that will play well in Colorado, he said.

“Between the fact that you’ve got a very comfortable regulatory environment here, you’ve got people who are willing to try things and you’ve got a lot of transplants, I think this branding concept will be very big here,” Hein said. “There’s almost an unlimited market, because people are getting sick all the time or getting hurt all the time.”

Restaurant and Stores closing slowdown

The number of store and restaurant closure announcements fell to nearly 1,800 in the first quarter, from slightly over 2,800 a year ago, marking a 36 percent drop, according to ICSC-PNC Real Estate Research. This roughly 26.6 million square feet of space represents 0.2 percent of the total U.S. retail space and is up 31 percent from first-quarter 2010. Borders, Charming Shoppes and Max Rave, which together account for 40 percent of quarterly closure announcements, announced a combined 666 closings in the first quarter. Borders alone says it expects to shut 226 stores, totaling 5.5 million square feet, 21 percent of total space slated for closure in first-quarter 2011.

Many of the chains that announced closings also said they plan to open stores, reflecting a repositioning trend for economic reasons. GameStop announced 200 store closings and 200 openings, while Big Lots announced 45 closings and 90 openings.

Compiled by the staff of Shopping Centers Today. © May 17, 2011 International Council of Shopping Centers.

Blockbuster purchase creates options

Premium content from Denver Business Journal - by Greg Avery

May 13, 2011

Dish Network surprised many observers by emerging from nowhere to claim fallen video rental empire Blockbuster Inc. at an April 6 bankruptcy auction.

But for those inside the company, the deal capped more than a decade of interest.

That’s how long Douglas County-based Dish Network, the nation’s second-largest satellite TV company, has wanted to be in business with Blockbuster.

“You hang around the hoop long enough and something will bounce your way,” said Stanton Dodge, Dish Network’s general counsel.

Dish Network (Nasdaq: DISH) spent about $320 million buying Blockbuster after a crippling bankruptcy forced the Dallas-based company to close hundred of its stores. The deal closed April 26.

Eleven years ago, Dish Network tried to negotiate in-store promotion space and other marketing pacts with Blockbuster, but lost out when Blockbuster made a marketing partnership with its rival, El Segundo, Calif.-based DirecTV.

Buying Blockbuster became the most likely way for Dish to partner with the company. Doing so would’ve been more expensive during the years when Blockbuster dominated movie rentals.

But the cost wouldn’t necessarily have stopped Dish Network from weighing a deal.

Under the leadership of CEO and Chairman Charlie Ergen, Dish Network constantly is exploring mergers and acquisitions. Even when deals can’t be struck, there’s information and perspective to be gained, Dodge said.

“We’re not the kind of company where we assume we’re the smartest at everything,” Dodge said. “You learn something every time.”

What about the stores?

Since the bankruptcy auction in New York City, business and media press coverage has speculated about what Dish Network will do with Blockbuster’s 1,700 remaining stores, online movie-streaming business and automated rental kiosks found in big cities.

The satellite broadcaster’s executives sound confident a lot can and will be done.

Blockbuster’s bankruptcy put it into what Dodge called “a death spiral” — studios weren’t willing to offer it the hottest titles on credit, which meant fewer enticing titles to rent out — and that eroded Blockbuster’s business even more.

“We’re buying an asset that’s in need of resuscitation,” said Tom Cullen, executive vice president of Dish Network’s sales, marketing and programming. “... but Blockbuster is a powerful brand.”

Combining Blockbuster’s stores, online streaming, mail rentals and on-street kiosks with Dish Network’s satellite service gives the combined company more ways to get movies to viewers than any competitor.

Blockbuster again has money to reach movie-rights deals with the six biggest Hollywood studios.

On May 18, Dish Network will start offering new U.S. customers three months of Blockbuster’s DVD rental by mail, which normally costs $11.99 a month or more.

In large cities — where the major telecoms and cable companies dominate — the combination of Blockbuster stores, on-street kiosks and by-mail DVD rental could win business from consumers that Dish Network hasn’t attracted to satellite service.

Blockbuster has hundreds of stores in Great Britain and Mexico, where Dish Network doesn’t offer TV and where the DVD rental business has remained stronger than in the United States.

New hope for future follows purchase

Dish Network’s purchase rejuvenated Blockbuster store employees, who think the deal will reverse the brand’s decline, said Bryan Morrow, who manages Blockbuster stores nationwide.

“There’s a lot of passionate people in Dallas — people like me, who love blue and gold — and we’re excited to see this happen,” said Morrow, attending a May 6 Dish Network trade show in Denver. “The opportunity is amazing ... And it’s better than the alternative.”

The Blockbuster purchase came on the heels of Dish Network buying DBSD, a satellite company with valuable broadcast spectrum. That deal valued DBSD at $1.5 billion.

Earlier this year, Dish Network bought Denver-based Liberty Bell telecom for an undisclosed amount. Dish Network plans to start offering landline broadband services in Colorado through Liberty Bell next month.

EchoStar, Dish Network’s sister company, is buying Germantown, Md.-based Hughes Communications in a transaction worth $2 billion. Hughes provides thousands of rural households with satellite Internet access and manages payment transactions for thousands of businesses via satellite.

Ergen, co-founder and chairman of both Dish and EchoStar, recently likened his company’s strategy to the TV comedy “Seinfeld.”

The show had multiple story lines running in parallel until late in the show, then they all came together and made sense. His companies’ acquisitions should be viewed that way, too, Ergen suggested.

Cullen echoes that, saying it’s too soon to know exactly how Blockbuster and the new pieces of Dish Network will work together.

“We’re in minute four of this episode,” Cullen said.

Dish Network is trying to stay ahead of consumers’ changing media consumption, which is “clearly a march toward more digital and wireless technologies,” he said.

With Ergen being Dish Network’s controlling shareholder, the company is run with a long-term vision, not emphasizing quarterly financial results that satisfy Wall Street, Cullen said.

“Fortunately, we’re financially strong,” Cullen said. “We’re placing some bets on where we think [the market] is going to be. We want to be here in 10, 15 years.”

SuperTarget likely to anchor Tamarac Square

Unless there is serious objection from neighborhood groups, the redeveloped Tamarac Square on East Hampden Avenue will likely be home to a SuperTarget as the mall’s main anchor. According to Denver’s department of community planning and development, Tamarac’s owner, Developers Diversified Realty in Ohio, has had a “concept meeting” with the city to build a new Target. “They are tearing down the main portion of the mall for the Target,” said Nancy Kuhn, deputy communications director for Mayor Guillermo “Bill” Vidal. “The other buildings on the site are remaining.” Target spokeswoman Sarah Bakken confirmed that the Minneapolis-based mega-retailer is “exploring an opportunity to bring a new Target store to the Tamarac Square area.” The next meeting among the developer, Denver’s planning department and the public will be from 6 to 7:30 tonight at Tamarac. Representatives from Developers Diversified are supposed to provide information on the redevelopment of the specialty center during the meeting, according to City Councilwoman Peggy Lehmann.