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Hard Work, Heart, and Hamburgers

AT FIRST, ED DIDN’T BELIEVE IT. Every day, he bought about $20 worth of scratch lottery tickets from a Tedeschi Food Shops, a convenience store that sells a little bit of everything: cat food, detergent, motor oil, snacks, soda, and dozens of other items. He was one of the regulars passing in and out, talking about the weather, sports, and whatever else came to mind. Day after day, Ed went through his tickets, never finding a big payout. Then something extraordinary happened. Scratching tickets inside his car in the Tedeschi parking lot, he saw what appeared to be a $10 million winner. He rushed back into the store. “He came in, white as a ghost,” recalls Amy Williams Walcott ’95, who owns the Tedeschi with her husband, Chris. “‘Is this true?’ he asked. We were all in disbelief.” Flush with winnings, Ed retired and burned his work boots in his yard, but he still returns every day to the Tedeschi.

Amy Williams Walcott ’95

Amy Williams Walcott ’95
Photo: Webb Chappell

Located in Hull, Mass., a seaside town that grows clogged in the summer and sleepy in the winter, the Tedeschi serves as a town square of sorts. Walcott and her husband work hard to make it that way. The store sponsors many community events, including a 5K race, theater arts performances, and a summer festival. Walcott, a self-described people person, constantly chats with customers as they buy coffee and pick up sandwiches. “If they don’t get that welcoming feeling when they come in, they’ll go somewhere else,” she says. “Anyone can sell a gallon of milk.”

While Walcott brings her own flair to the Tedeschi, she is limited in how much she can personalize the store. That’s because it’s a franchise, one of about 200 Tedeschis in the New England area. Own a Tedeschi, and you do business the Tedeschi way. Walcott can’t change the color of the walls, for instance. She can’t change the uniforms.

But this lack of freedom doesn’t bother her. As a franchisee, she and Chris receive many advantages. Their store has name recognition, greater leverage with vendors, and a proven way of doing business. The parent company also handles certain responsibilities, from payroll to marketing, so Walcott and her husband can spend more time with employees and customers. “We’re able to be on the floor and have a presence,” she says.

One of a number of alumni involved in the world of franchising, Walcott always wanted to own her own business. She and Chris first worked at a friend’s Tedeschi simply to earn extra money to buy a house, and they learned all the ins and outs of the store. Shelving products, helping with the books, and manning the counter, they eventually decided to apply for their own franchise. Walcott enjoys being part of a winning brand that has been in business since the 1920s. “They know what they’re doing,” she says. “I have faith. They’ve been around for decades. I know I’m in good hands.”

PATIENCE NEEDED

Franchises are everywhere. According to the International Franchise Association, about 750,000 franchise locations are open for business in the U.S. alone. For those wanting to become a franchisee, one key is to research the multitude of possibilities and find a brand with a well-run operation, says Peter Biro, an adjunct lecturer in the Entrepreneurship Division, who co-owns nine Five Guys Burgers and Fries franchises. If you’re good at business management, Biro says, all you need is a good playbook to follow. With Five Guys, he and his partners have just that. “It’s a lot of work to open a store, but when we turn the key, the business is ready to go,” says Biro, who along with his partners, has the right to open as many as 20 Five Guys Burgers and Fries franchises in Massachusetts’ Middlesex County and some surrounding areas.

Rachel Taradash Deane ’88

Rachel Taradash Deane ’88
Photo: Julie Bidwell

One of the most successful franchisers is, no surprise, McDonald’s, and the hamburger empire is picky about who can open one of its eateries. It looks for the right owner and the right location, and it’s willing to wait a long time to find them. Just ask Rachel Taradash Deane ’88. For Deane, a McDonald’s franchise felt like the right fit. Her parents were McDonald’s franchisees, and she had experience working with food, running a bakery in high school with her sister and working as head student manager at Trim’s dining hall. Deane first started pursuing a McDonald’s franchise in 1990, but eight years passed before she was awarded one. “You have to be patient,” she says.

As she waited, Deane spent time working for free at a McDonald’s, a requirement for franchise applicants. All McDonald’s owners are expected to operate their franchises personally, and she was closely observed to see her work ethic and how she interacted with others. “They are constantly evaluating you,” Deane says. “Are you going to have what it takes? That’s what they’re looking for.” She also attended McDonald’s Hamburger University training facility. “I have a degree in hamburgerology,” Deane says. Over the course of two weeks, she learned all the nitty-gritty details for running a McDonald’s: making food, repairing equipment, hiring, scheduling, managing inventory. To this day, she still remembers the minutiae she was required to memorize. Ask her, for instance, how many hamburger patties come in a case? “384.” Or how long do patties last in the freezer? “270 days.”

Finally in 1998, Deane took over a franchise in Cheshire, Conn., from an owner who was retiring. Long days followed as she settled into her new restaurant. “You might as well put a cot in the backroom,” she says. “You are there 18 hours a day. I don’t remember having a weekend off that first year.”

Making sure the restaurant runs efficiently is essential. The profit margin on McDonald’s menu items is not high, so customers must be fed fast. “This business is about pennies,” she says. “It’s a lot of hamburgers we have to sell.” A big part of keeping operations humming is hiring the right people and onboarding them properly. “I work hand in hand with new members to make sure they know I have a vested interest in them,” she says. Deane has seen employees who couldn’t get a job elsewhere, those from halfway houses or those who didn’t know English, flourish. Some become managers.

McDonald’s has been good for Deane. In 2008, she bought a second franchise, a little more than an hour away, in Mansfield. She’s also president of a marketing co-op for McDonald’s restaurants in Connecticut and Western Massachusetts. While McDonald’s franchises put a percentage of their sales into a pool for national marketing campaigns, which focus on new products and the company’s core messaging, co-op members also pay a percentage for local marketing that’s meant to complement those national efforts. During the religious season of Lent, when Catholics abstain from meat on Fridays, the co-op promoted a deal on Filet-O-Fish sandwiches, and it also has publicized a $1 coffee endorsement. Of that effort, someone told Deane, “You put the shiver in Dunkin’ Donuts.”

Deane’s life is so intertwined with McDonald’s that she often checks out other McDonald’s franchises for lunch. Her favorite menu items include the Filet-O-Fish (“There is something about it I really like.”) and the Cheddar Bacon Onion sandwich (“It’s awesome. It just is.”).

ENTREPRENEURS AT HEART

Before owning a McDonald’s, Deane bounced around a number of different companies. She wanted to own a franchise because she grew tired of having her job subject to the whims of corporate offices. “I didn’t like that someone else was controlling my destiny,” she says. “I wanted to work for myself.”

Of course, franchisees do have obligations to the parent companies that awarded them franchises. Besides money for marketing campaigns, Biro says, franchisees pay an upfront franchise fee, which is essentially the price for “joining the club,” so to speak. Then there’s the development fee, which is the cost of getting the franchise up and running. Finally, franchise owners typically pay some sort of an ongoing royalty fee, maybe 4 to 6 percent of sales, to parent companies. “That’s where franchisers make their money,” says Biro.

Compared with entrepreneurs launching a startup, franchise owners clearly have less flexibility in how they run their businesses. Depending on the language in a franchise agreement, owners might not even be able to close if their store is failing. Shut their doors, and they may face a significant financial penalty. If you’re the type of person who wants total control of your business, says Biro, franchising is not the right path for you.

But make no mistake, Deane considers herself an entrepreneur. McDonald’s may have given her a brand and a playbook (as Biro calls it), but she is responsible for making sure her restaurants stay profitable and survive. To do that, she has thrown herself into her businesses as would any entrepreneur. She has cleaned toilets and shoveled snow, and she makes a point in working behind the counter every week. “I never ask an employee to do something I've never done,” she says. “I’m the quintessential small business owner.”

Over at Tedeschi, Walcott feels the same way. Her store is a 24/7 commitment. Literally. Because the Tedeschi is open 24 hours, she and her husband sleep with their phones in case an alarm goes off or a late-night employee becomes sick and they need to trudge into the store. “We could be woken up any hour of the night,” Walcott says. The husband and wife team also must be inventive, especially during a recession. For the first time, they have started accepting funds from the Supplemental Nutrition Assistance Program (formerly known as food stamps), because the store was losing business. “You’ve got to be creative” Walcott says. “The recession is a problem for small businesses right now.”

Biro agrees that owning a franchise, with all its risks and responsibilities, its sweat and stress, is just another type of entrepreneurship. “If you’re putting your own money on the line, you’re an entrepreneur,” he says. “If you’re signing your own paycheck, you’re an entrepreneur.”

SOARING THROUGH THE AIR

While franchisees hunker down with the concerns of their small businesses, franchisers look outward, seeking locations where they can plant their flag.

Erik McLellan ’00

Erik McLellan ’00
Photo: Marco Garcia

Erik McLellan ’00 remembers well the moment his career took an unexpected turn, landing him with a young but ambitious company that would soon take a leap into offering franchises. The year was 2004. He was working on an IT consulting project in Albany, N.Y., when he received an out-of-the-blue email from an old acquaintance, Dan Boren. “I don’t know what you’re doing,” the email began. “This is what I’m doing.” Boren explained that he and his father had started a Hawaiian zip line business, one that was looking to expand, and Boren asked if McLellan was interested in coming aboard.

McLellan thought about his job, about how it had lost its luster, and he looked out the window at the Albany winter. “There was three inches of ice on the trees,” he says. Hawaii seemed like a great idea. When he arrived in 2005, he found a business, Skyline Eco-Adventures, that was run out of a spare apartment bedroom but was poised to take advantage of a trend growing in popularity. Zip lining allows participants to slide along a suspended cable, as if they’re flying through the air. Skyline’s first location on the island of Maui takes guests through eucalyptus trees and over a valley, and its second location, which opened in 2007 on Maui, takes guests along the side of a mountain overlooking the ocean.

While those first two locations are owned by Boren and his father, McLellan became a partner in an entity, Zipline Franchising, that Skyline established to investigate opportunities for franchises. McLellan and his colleagues bought a prime website address, zipline.com, that a real estate company was sitting on, and they began the hard work of documentation. They compiled a franchise disclosure document, a long, complicated legal document that outlines the agreement between the franchiser and franchisee, and they refined their manuals to standardize their operations and make them replicable.

All of this essential paperwork took about a year to put together. With that out of the way, the first Skyline franchise, which takes participants over a 250-foot waterfall, opened in 2011 on the island of Hawaii. A company-owned franchise is set to open in 2013 on the island of Kauai. Because Skyline locations are laid out over wildly different landscapes, there is no cookie-cutter approach to building its franchises. This isn’t like plopping down a fast-food restaurant in a shopping center or strip mall, so setup takes time. Skyline franchises are also different in that beyond the usual royalty and marketing fees paid by typical franchise owners, Skyline locations must donate 1 percent of sales to local conservation efforts.

From thrill seekers to those afraid of heights, McLellan has seen all kinds of people come to Skyline locations and go soaring. “Anyone can do it,” McLellan says. “It’s a cool feeling.”

With interest strong, Skyline plans to continue adding franchises in Hawaii, as well as in the Southwest, particularly California. The company picks its franchise owners with care. With the company still building, the owners need to be ambassadors for the brand. “The first franchisees are very important,” McLellan says. The company also started another division, Skyline Attractions, that serves as consultants for other companies wanting to open zip lining sites. Currently, Skyline is helping build a zip line over Fremont Street in Las Vegas.

Who would have thought a franchise could be built upon such a whimsical idea as zip lining high in the air above beauty and green? As Biro would tell you, franchises are available for seemingly every possible type of business, from ever- present fast-food restaurants and hotel/motel chains to industries such as college prep tutoring, senior care facilities, and dog services. “If you have a passion for something," says Biro, "there’s probably a franchise for it.”

 

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IS YOUR BUSINESS READY TO BE A FRANCHISE?

Stephen Spinelli, MBA’92, is often approached by aspiring entrepreneurs with grand visions. “I have a great idea that I believe will be a good franchise,” they tell him. But Spinelli, one of the co-founders of Jiffy Lube, knows firsthand that franchising takes more than a great idea. “Ideas aren’t franchise-able,” he says. “Business formats are.”

To found a franchise, you'll face numerous questions and hurdles. For starters, don’t even think about franchising until you have a business that is prosperous. “If you have a business model that is proven to create value, you have crossed the first hurdle,” says Spinelli, now president of Philadelphia University.

Can the business’ success be repeated elsewhere? Some ventures succeed due to unique circumstances. The founder may be especially charismatic, or the business may sit in the perfect location, such as a burrito stand next to a high school, says Peter Biro, an adjunct lecturer in the Entrepreneurship Division who co-owns nine Five Guys Burgers and Fries franchises.

Next, you must standardize and document operations. Instead of just telling franchisees to “make burgers,” for instance, you need to create an easily understood video that describes how you cook them. If new sites open, their employees should be able to follow a playbook that you’ve developed covering every aspect of your operation. “You want to make it replicable,” Biro says.

The ultimate test is to open a second location not run by you. “If I’m not in the store, can the system work with an average person?” says Les Charm ’64, a lecturer of entrepreneurship who has sat on the board of franchise companies and has 25 years of experience as a franchiser with hair salon, cosmetics, and pet supply companies. “If the system can be managed by someone other than me, that’s the beginning.”

Being a franchiser requires a long-term mindset. For years to come, you need the infrastructure in place to support franchisees with such tasks as marketing, procuring equipment, and supply chain issues. You’ll also need to keep franchises fresh. Look at McDonald’s, Charm says. At one time, it didn’t offer breakfast, but it’s added that and many more menu items though the years. “I like to say you have to re-invent,” he says. —JC