Becoming a franchisor falls squarely in the realm of business strategies that aren't for the squeamish, yet a handful of Ozarks companies have mastered the art of franchising - with the occasional misstep here and there, of course.

Building a successful franchise that's easily replicated in other markets is no simple feat, and Springfield-area businesses providing corporate support to a growing number of franchisees have learned lots of practical lessons.

For starters, develop a market-driven model and stick to it, no matter how much pressure franchisees might apply, said Jim Roudenis, franchise director for Nixa-based Aire-Master of America Inc. And make sure sales territories aren't so large that they overwhelm franchisees, he added.

Too Hotties Inc. CEO Greg Wilhelm stressed the importance of setting a realistic timeline for building out a franchise network and then patiently sticking to the plan. Springfield-based Too Hotties tapped into its male demographic five years ago with a local hair salon that beckons patrons with billiards, videogames and exclusively female stylists. The company has seven franchise stores in Arizona, Nevada, Texas, South Carolina and - as of last week - the Washington, D.C., metro area.

While Too Hotties executives started their company with franchising in mind, at least one local entrepreneur only decided to go that route after people kept asking him for advice about starting a business.

"That's when I realized this is more than just cleaning and sealing decks," said Stan Krempges, who with wife Sonja co-owns Springfield-based Wood Re New & Tile Too. "It's the marketing. It's the bookkeeping. It's the business image. ... That's when I started researching the franchising."

Perhaps the biggest mistake franchisors make is jumping the gun before they've established a successful business closer to home, Krempges said.

"My concern is there are so many people that go into business now thinking, 'I'm going to franchise this,'" he said. "Franchisees are coming back to them saying, 'What do we do with this?' (The franchisors) have no experience. That's why you pay a franchise fee. You're buying experience."

'The right fit'

Local franchisors said a franchise is only as successful as its franchisees, whose personalities and level of commitment vary greatly.

After eight years of vetting potential franchisees and providing corporate support to new stores, Krempges at Wood Re New has developed a rule of thumb.

"You're going to have 25 percent or so in the top runnin' and gunnin'; you're going to have about 50 percent in the middle that are just comfortable and cruising along; and then you're going to have about 25 percent that aren't going to make it and probably shouldn't have invested in a franchise," he said.

Wood Re New has 23 franchise stores in nine states primarily in the Midwest and Southeast, but the company's road to franchising has had its fair share of twists and turns.

Wood Re New eased into licensing nine years ago by opening a corporate store in Tulsa, Okla., which flopped, and another in Fayetteville, Ark., which thrived. Krempges eventually connected with a Dallas-based franchise attorney who was instrumental in helping him develop the support structure for regional franchisees. Wood Re New is now in the final stages of a deal that would take the franchise nationwide, Krempges said.

Still, future success depends largely on franchisees who buy into Wood Re New, which charges a $30,000 franchise fee and commands a 6 percent royalty on revenues. Total startup costs are about $60,000, Krempges said.

"This isn't about closing a bunch of franchises. ... If I don't have the right fit, this isn't good for anybody in the long run," he added.

Wilhelm at Too Hotties said the company has modified its policies to identify passionate franchisees with business experience who aren't interested in reinventing the wheel. The goal is to avoid people with an "oppositional reflex," he said.

"They just can't be coached; you say go left, they go right," Wilhelm explained. "So we started doing testing for that. ... It's probably more of a salesman's profile than anything. We have a company in Dallas, Texas, that's doing that for us now."

Scott Axon, director of franchise development for Incredible Pizza Co., said the Springfield-based chain recently hired Tony Cox as its junior vice president of franchise development to proactively recruit quality franchisees. Incredible Pizza, which posted 2008 revenues of $82.6 million, has 18 family-fun franchise sites in eight states and one in Monterrey, Mexico, said Axon, who noted that another store in Salt Lake City is under construction.

"Everybody wants to franchise," he added. "It is - like many projects - more expensive, more time-consuming and more difficult than it appears on the surface. ... The key to franchising is about consistency, and the key to consistency is people."

A recession-proof franchise?

The slow economy has had little effect on the franchising streak at Aire-Master, which sells odor-control and commercial-hygiene products to businesses.

"Every business has a bathroom," said franchise director Roudenis.

Twelve Aire-Master franchises began operations in the most recent fiscal year, which ended March 31, Roudenis said. That's two more franchises than the company added in the preceding fiscal year.

"When the economy gets slow, people start looking at franchising as an option," Roudenis said. "Maybe their job is in jeopardy, or they've gone another year with no pay increase. ... And franchising has always had greater success than going independently, because there's a brand usually associated with that franchise and a lot of money is spent to build that brand."

Aire-Master, which began franchising 33 years ago, now has 86 franchises - almost exclusively based out of franchisees' homes - in 40 states and two Canadian provinces. New locations include Spokane, Wash.; Sioux Falls, S.D.; and Meridian, Miss.

Aire-Master franchise agreements are for a term of 20 years with renewals every three years, Roudenis said. The company charges a $29,000 franchise fee for a service area of 500,000 people, requires franchisees to buy $4,000 in product upfront and collects a 5 percent royalty.

"Franchisees think that royalty pays for support, but it doesn't," Roudenis said. "It pays for the true cost of the value of the territory for the life of the franchise. You couldn't afford to charge them the true cost upfront. ... So we charge you that royalty fee every month as you get the business. You never pay for business you never get."

In fiscal 2009, 34 Aire-Master franchisees broke standing monthly sales records 81 times, Roudenis said, singling out a larger western New York franchise that hit $100,000 in monthly revenue in August 2008.

Cultural speed bumps

Incredible Pizza jumped at the opportunity to sell a 20-store franchise deal to Gonzalo Barrutieta - a member of Mexico's third-wealthiest family - but adapting the distinctly American business model for Latin culture has been fraught with challenges.

"We didn't fully understand the scope of the project of custom-tailoring to a culture that is required to be successful in another country," Axon said. "We understand now, and we have - more or less - put any further international expansion on hold for an indefinite period."

Much of what Incredible Pizza learned about franchising outside of the U.S. was gleaned from its first Mexican store in Monterrey, an industrial center about 150 miles from the Texas border.

After conducting extensive market research, the franchise altered its food offerings and the music that greets customers, Axon said.

"We found out that the current Mexican customer ... isn't really familiar with 50s music and doesn't like it," he said. "Our Monterrey store (is) the only store in the system that's got local Mexican mariachi music."

Two years ago, Incredible Pizza began exploring franchising opportunities in China, but Axon said company officials are inclined to grow their stateside franchisees before entering other international markets. However, Incredible Pizza continues to receive interest from China, Saudi Arabia, France, Germany and Brazil.

"Our response to international inquiries has been, 'Call us back in a year or two,'" Axon said.

Startup costs for an Incredible Pizza franchise range from $2.5 million to $6 million, depending on store size, and the chain's newest franchisee in Chattanooga, Tenn., is slated to start construction later this year, Axon said.

Source: Springfield Business Journal