Franchising in New England

The Boston Globe reports that  Elements Therapeutic Massage, a chain of massage studios, said it is seeking franchisees to roughly double its store count in Massachusetts.

The Colorado-based company says there are currently 11 Elements Therapeutic Massage studios in the Bay State; its first Massachusetts studio opened in 2007.

The company, which has 78 locations nationwide, said it has identified Massachusetts as a strong market for its services.

Why? According to the company, middle-class consumers have grown more comfortable with seeing therapeutic massage as a way to reduce stress. So perhaps the Bay State is a high-stress hotbed, and the locals are resorting to restorative rubdowns in droves.

In any case, the company said it is looking for franchisee candidates as it plans to award 12 more locations in Massachusetts. To that end, it has scheduled a franchise event at the Marriott in Newton in early April.

Paul Ziobro of Dow Jones Newswires reports in SmartMoney that GE Capital’s franchise finance arm is becoming more stringent in pricing and issuing loans for new franchisees, a pullback by one of the largest lenders to restaurant operators in the latest sign that Wall Street’s turmoil is spreading to small businesses.

While GE Capital spokesman Stephen White stopped short of saying there was a total freeze on lending to new franchisees, he said the franchise finance arm has become more critical in initiating new loans but continues to do business with existing customers.

“We are still active in the restaurant industry and we continue to quote deals where it’s competitive and appropriate,” White said. “In this environment, we’re taking a longer look and even a closer look than we have in different times and that just makes sense.”

Stephen Vaughan, chief financial officer of Sonic Corp. (SONC), told Dow Jones Newswires Thursday that franchisees of the drive-in chain have been notified by GE Capital’s franchise finance arm that it will temporarily stop financing new loans to Sonic franchisees. GE Capital is one of Sonic’s approved lenders.
Other restaurant industry deal makers have said in recent days that they have been turned away from GE Capital’s franchise lending practice when seeking new loans.

Sharon Zackfia, a restaurant industry analyst, said in an investor note Friday morning that GE Capital has halted new franchisee franchising, although it will continue to honor pre-existing financing agreements.

The action by the financing division of General Electric Co. (GE) is the second major lender to the restaurant industry to pull back this week, following news that Bank of America Corp. (BAC) has declined to increase existing loans to McDonald’s Corp. (MCD) franchisees, whose U.S. base is in the midst of installing equipment for sales of lattes, cappuccinos and other drinks.

Such moves could impede plans by restaurant operators to remodel existing stores, install new equipment, open new locations or convert existing company-owned stores to franchised locations, Zackfia said. She cited Sonic and Panera Bread Co. (PNRA) as two chains with a heavy reliance on franchise growth that could be most affected.

“While clearly other sources exist for franchisee funding options, the recent pullbacks of two of the main lenders in the arena are disconcerting, to say the least,” Zackfia said. GE Capital and Bank of America are two of the largest national lenders to restaurant franchisees and restaurant deals. Other major lenders include Wells Fargo & Co. (WFC) and Wachovia Corp. (WB).

Credit conditions have become tight in the restaurant industry over the last couple of years, as major lenders helped finance a hefty diet of loans backing leveraged buyouts and expansions. “Financing for the larger transactions is not as prevalent as it was a year-and-a-half ago,” said David Epstein, principal at the investment bank J.H. Chapman Group LLC.

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Steve Adams of the Brockton Enterprise reports that giving up the relative security of the corporate world for the uncertainties of entrepreneurship, Gina Guglielmi was looking for structure and guidance. Instead of starting her own business from scratch, Guglielmi bought a franchise from Wallingford, Conn.-based Edible Arrangements.

“With my marketing background, I saw how expensive it is to open a business and come up with a concept, a logo and a theme for the Web site,” said Guglielmi, a former marketing manager for private jet-service broker Jets.com in Quincy. “With a franchise, you’ve got a lot of that already established for you and you’re buying into that.”

Interest from investors such as Guglielmi has translated into explosive growth for Edible Arrangements and other New England-based franchise companies last year. The fruit bouquet company led the region’s franchisors in growth, with a 211-percent increase in store units, according to data compiled by Entrepreneur magazine and the New England Franchise Association.

Jim Coen, executive director of the Pembroke-based franchise association, said interest in franchise opportunities has intensified in the current fragmented media environment. “Today, because of the clutter of media, it’s more important than ever to have that brand name, which is very difficult to create on its own,” Coen said.

Edible Arrangements currently has 702 stores in operation, and has agreements for an additional 109 stores that will open soon, spokesman Jeff Alexander said. Guglielmi, whose store in downtown Plymouth opened in late 2006, said her 2007 sales approached $400,000. Commercials on shows such as “Phantom Gourmet” and a new first-ever national cable TV campaign that launched this month have boosted public awareness about the stores’ colorful fruit gift arrangements, Guglielmi said.

Under a typical franchise agreement, the parent corporation agrees to let the franchisee use its brand name and logos in exchange for an upfront fee. The franchisee bears start-up costs such as buying equipment and real estate, and pays a percentage of overall sales as a royalty to the parent company. They also typically pay a marketing fee which is pooled with other franchisees for advertising.

Ideally, the arrangement benefits both sides. The parent company can expand rapidly with minimal costs compared with opening company-owned stores, and the franchisees benefit from the name recognition and marketing clout of a retail chain.

For many first-time entrepreneurs, the benefits of the franchise arrangement outweigh the potential pitfalls.

After taking early retirement from Verizon, Jane Labossier of Plymouth started researching franchises to fulfill her lifelong goal of owning her own business. “I’ve never done if before, and I’m not foolish,” said Labossier, 49. “I know the statistics on opening a small business and how risky it is. With a franchise, you have the support and training and they put you through everything.”

Labossier settled on Hanover-based Lapels Dry Cleaning, which has introduced standardized business practices and sophisticated marketing techniques to the dry cleaning industry. She opened her store on Route 139 in Marshfield in November.

Since its founding in 2001, Lapels has expanded to 34 locations in 11 states and the District of Columbia. Four more franchise agreements are in place for future stores, CEO Larry Friedman said. “Providing marketing support for franchisees is a key strategy,” Friedman said.

When a new store opens, Lapels takes out newspaper ads and sends 5,000 postcards to households in the surrounding area that are considered dry cleaning customers. It also sends out a broader postcard mailing to 10,000 households in the area four times a year. “We take all the marketing efforts that you need to do in this day and age,” Friedman said. “(Franchisees) simply have to concentrate on minding their business and minding their customers.”

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From an article in Franchise Chat by Jerry Wilkerson is a former president and executive director of the International Franchise Association in Washington, D.C. and founder of Franchise Recruiters Ltd.®, an international franchise management executive search corporation with offices in Chicago and Toronto. He recently completed his 27th year in the business of franchising.

• Nearly 90 percent of franchisors consider communication/people skills as the major reason they hire an individual. During your phone or in person interview don’t just talk about duties and responsibilities you have undertaken, talk about accomplishments, and be specific. How did you save money, earned revenue for the company or handled difficult situations?

• The majority of jobs are filled through networking. Keep you communications system up and operating, and be sure to maintain contact with your search partner. Keep talking with the headhunter that presented your candidacy to the franchisor and established the interview. Keep communications open with the company.

• About 80 percent of franchise hiring managers prefers chronological resumes with dates accurately stated along with years and months. (Note: not just years.) Also, be certain to have valid reasons for leaving a company ready to articulate. You will be asked these questions.

• Don’t leave jobs off your resume. If you cheat on your resume, you cheat at other responsibilities. And do not claim to have a college degree if that is not the case. This information and data will be verified today with the Internet.

• Franchisors ask around the office what others think of you when you visited for the interview. This helps with the hiring decision. Remember, everyone you meet could be an important ingredient in the hiring process. Immediately send thank notes to each person you interviewed with at the meeting. A strong candidate will follow-up the next week with a few key point of research on the industry, marketplace, and a comparative analysis of competition. Give them a reason to remember you.

• Expect two, maybe three in-person interviews before a hire accomplished. Have your professional references ready with up to date phone numbers. Be sure to let your references know they may be called.

• If you can be the first person interviewed for the opportunity, it is likely the franchisor will use you as a benchmark for those candidates that follow. Listen carefully to what the interviewer says. Ask them questions early in the interview to fully understand what they want to accomplish with this hire.

• The top three qualities sought out by franchisors when hiring are honesty, enthusiasm and verbal skills.

• Research the company, industry, competition carefully and extensively. Draft a chart showing the brands position in the marketplace and competing systems. Show how you can make a positive impact on growth and development. Leave your research with the interviewer.

• Describe yourself at the conclusion of your interview by using these words: flexibility, detail-oriented, creative, teamwork and self-motivated. Describe your skills by giving examples for the qualities.

• The Eleventh Commandment: Thou shall ask for the order! If you liked what you learned during the interview opportunity, let the hiring people know this. Make them believe you want to work with them, that you are excited about this job, the company, and industry. Tell them that you think they have an outstanding system, and you can make it even stronger. Ask for the order!