Many franchisees build diverse business empires
By Joyce M. Rosenberg
NEW YORK For many franchise owners, it's natural to go from operating one restaurant or real estate office to two, three, four or more. Others expand in a different direction, buying into a totally different type of business.
Franchise owners Doug Reese, left, and Drew Nietzer have various franchises scattered across five metropolitan areas.
Leiter wanted the challenge of running different businesses.
"I recognized up-front the different dynamics. If it had been the same dynamics, I wouldn't have done it," he said.
Acquiring different franchises is a growing but fairly recent trend, according to Don DeBolt, president of the International Franchise Association, a Washington, D.C.-based trade group.
"Ten to 15 years ago, most franchise agreements would have prohibited a person from being in a similar business, and maybe even prohibited them from being in another business," DeBolt said. "The franchisor wanted the franchisees to be laser-focused on making that business successful and didn't want to have franchisees distracted by the ownership and responsibility of another business."
In the last few years, DeBolt said, franchisors have come to recognize that owners might gain valuable experience in a separate business that will help them better run their franchises. Franchisors also realize that many franchisees are really investor groups intent on running businesses well to maximize the return on their investments; these franchisees rely on managers to operate their companies.
One reason why it's easy for some owners to take on different types of franchises is that they often don't do hands-on work such as making pizzas or changing oil filters.
"You're going to hire the experienced mechanic to do that kind of work," DeBolt said. "Your job is going to be marketing the business, to bring in the customers, working with people that you need to make that business go."
Without managers, Doug Reese and Drew Nietzer couldn't have built their franchise empire five LeafGuard gutter systems franchises and two GarageTek garage organizing system franchises, in addition to several other non-franchise ventures. Reese and Nietzer are based in Atlanta, while their franchises are scattered among four additional metropolitan areas, Philadelphia, Detroit, St. Louis and Charlotte, N.C.
Reese said managers are given incentives to take charge of daily operations.
"They run them as if they were their own company, and we're paying them a percentage of pre-tax profits," he said.
Reese and Nietzer learned the value of good managers after they started in franchising with two T.J. Cinnamons operations.
"We were contractors who thought we could do anything," Reese said. "But the food service business, that's a tough business, so we brought someone in to run it."
Now they oversee their mini-conglomerate from a headquarters in Atlanta. They have a total of about 130 employees among their companies.
DeBolt advises anyone thinking about buying a franchise whether they're a first-timer or thinking of expanding to look for businesses they can be passionate about. The next step is to find a franchise you can afford; different companies require vastly different levels of investment.
When you find a franchise that feels like it will be a good fit, you then need to get in touch with as many current and former franchisees as possible at least 15 to 20 and find out the pros and cons of working with that franchise company.