Dennis and Laura Sallee opened a new business in 2008 while the nation’s recession was gaining steam. But as Vancouver franchisees of Coeur d’Alene, Idaho-based Pita Pit USA, they had a safety net that many business owners do not.
Like many franchisees, the Sallees opted to work under a parent company rather than strike out on their own because they saw franchising as a way to quickly build a business that could eventually run itself.
“We’ll always have our thumb in everything, but we hope to step back and let people run it down the road,” Laura Sallee said.
Others said they enjoy the simultaneous structure and independence of franchising.
“You have the support of a parent company without necessarily having a boss,” said Trevor Bryant, co-franchisee of Max Muscle Sports Nutrition in Vancouver.
New to the biz
The Sallees were unfamiliar with the food industry when they decided to open Vancouver’s first Pita Pit in May 2008. But they said the support and training of their parent company helped them learn the ropes.
“They’re taking the business they’re successful with and teaching (us) how to do it,” said Dennis Sallee.
Support from Pita Pit included lowering fees for franchising, royalties and equipment to keep the Sallees moving forward in the slow economy, they said. It took about two years to secure and prepare the first Vancouver location.
The cost of equipment, signage and franchise fees for Pita Pit is about $125,000, the Sallees said. Expenses for property leasing and development can vary from site to site –between $80,000 and $150,000.
The couple own the rights to open five Clark County Pita Pit locations in five years, with the second Vancouver store opening in May at 7710 N.E. Fifth Ave. The second store will create 19 jobs.
Inside and out
Before buying a Max Muscle franchise in January 2008, Bryant learned the other side of franchising as a business manager for Kenosha, Wisc.-based Snap-on Tools Inc., where he recruited, trained and supported franchisees for nearly eight years.
“I watched a lot of franchisees decide they wanted to do things on their own and not follow the business model,” he said. “So often that led to their demise.”
Now, selling nutritional supplements and coaching, Bryant said his background and his Anaheim, Calif.-based parent company give him firm footing as a new business owner.
He declined to share financial specifics, but said his store profited earlier than expected and exceeded sales projections in certain months.
“Gyms are still extremely busy and that’s a good portion of our client base,” he said. “In times of recession, one of the few things people have control of is their health.”
Bryant and his wife, Tracy, opened the store Aug. 25 and plan to open a second Vancouver location before long.
Gaining solid experience
Brad Loucks opened his Vancouver franchise of Seattle-based The Rock Wood Fired Pizza in July 2008, and has worked in franchising since 1986.
Along with The Rock, Loucks franchises five Seattle-based Taco del Mar restaurants in the Vancouver-Portland metro area. Prior to that, he owned Vancouver-based Papa Murphy’s franchises in Seattle.
Franchising doesn’t always leave room for creativity, Loucks said, but he doesn’t mind that at The Rock because he chose the company for its pre-set systems, menu and décor.
“Instead of developing something on my own, I was able to use their methods, which have proven successful in the Seattle market,” he said. “We looked at developing our own (pizzeria) and the effort we were putting into design and recipes was mind-numbing.”
The larger company also helps with purchasing power. With The Rock, Loucks said he makes up for franchise fees and royalties in savings from buying food at the company’s reduced rates.
Loucks declined to share financial specifics on his stores, but said Taco del Mar is struggling while The Rock in Vancouver has become the nine-store chain’s second-busiest location.
The Rock has a $50,000 franchise fee and an ongoing 4 percent royalty fee, Loucks said. Each Taco del Mar franchise costs $15,000 to $20,000 with 6 percent royalties.
Building on a brand
In 2008, Vancouver-based developer Daniel Kirkwood set out to find a franchisee to open a coffee shop at Kirkwood and Kirkwood’s Eastside Spectrum development in Vancouver. Six months later, he and his partners opened their first store as franchisees of Seattle-based Tully’s Coffee Corp.
“We approached Tully’s and asked if they’d like to open a shop here,” he said. “They said they’d need a franchisee and we started to explore the options.”
The developers chose to franchise rather than open an independent coffee shop for the benefits of brand recognition and Tully’s pre-set systems.
“The quality of the brand and the coffee, I believe, truly helps set us apart from a neighborhood coffee shop,” Kirkwood said.
Kirkwood and Kirkwood now has two Tully’s locations in Clark County with hopes of opening three more in the Vancouver-Portland metro area. Each will create at least 12 jobs.
The Kirkwoods follow Tully’s guidelines for general interior design, beverages and marketing, but had room to develop a lunch menu, offer free Wi-Fi service and host community events.
“We’re given quite a bit of freedom,” Kirkwood said.
Meanwhile, the Kirkwoods are expanding operations of their Big Al’s family entertainment business. Construction of a Beaverton Big Al’s begins this summer, and there have been requests to franchise the brand.
“Once we get a real good track record of operations, procedures and marketing, we might consider franchising our brand,” Kirkwood said. “At this point I think it’s too premature. You have to build a brand before you can sell it.”
FROM THE FRANCHISORS
Developing a franchising relationship requires careful research and screening from both the parent company and the potential franchisee, said local franchisors.
Vancouver-based Papa Murphy’s International filters about 5,000 requests each year to buy franchises of its take-and-bake pizzeria model. About 2 percent lead to store openings, said Director of Franchise Sales Jim Werling.
“We don’t take everybody, nor are we for everybody either,” Werling said. “It’s a process you have to go through – like panning for gold, there’s got to be a nugget in there somewhere.”
Papa Murphy’s franchisees are required to have $250,000 net worth and $80,000 in liquid assets to open a single store.
Franchisees opened 102 stores in 2008, ending the year with 1,135 locations. Sales for 2008 were $585 million, 17 percent higher than in 2007.
Franchisees are often attracted to the company for its low overhead costs, Werling said. Papa Murphy’s stores can operate in small spaces with a short staff roster and no ovens, dining tables or public restrooms. Werling estimated that opening a traditional franchised pizzeria can cost at least $150,000 more.
Meanwhile, after 10 years in business, Don and Alison Lovell are preparing to sell the first franchises of their Vancouver-based company, The Barbers.
The Lovells now operate nine barber shops corporately. Barry and Kim Spiegelberg, who have run four Portland shops under a license agreement for about five years, will become The Barbers’ first franchisees.
“The franchisee relationship defines the role of both (parties) a little more concretely,” said Don Lovell. “After 10 years, we’ve developed a pretty turnkey way of doing this stuff.”
The Lovells hope to open six locations this year in Puyallup, Lacey and Olympia.
“No matter how cool (a shop) is, people are only going to come from a mile or two away,” said Don Lovell. “We realized there were other communities that could potentially support it.”
The Spiegelbergs got involved with the business first as friends of the Lovells, and Don Lovell hopes to grow the company through similar relationships.
“We could take it as big as we want to, but we want to find people we trust, that we know we like to do business with,” he said.
FRANCHISING IN A NUTSHELL
What is it?
The process that allows an entrepreneur to own and operate a branch of a larger corporation, often in food and service industries. Each branch is similar in its product or service offerings, décor and operations.
How does it work?
Potential franchisees apply to buy the rights to open a certain number of branches in a geographic area. If they meet financial requirements and develop approved business plans, they can get corporate training and store support in exchange for franchise fees and a percentage of sales (aka royalties).
Charity Thompson can be reached at cthompson@vbjusa.com
