News Column

Femme Franchisees

September 2005, HISPANIC BUSINESS Magazine

Scott Williams

woman

Martha Llamas began her career as a cleaning lady in office buildings making $5.50 an hour. Today, she owns her own company employing 60 people and grossing more than $1 million annually. "I never dreamed of getting paid what I'm getting paid now," says Ms. Llamas of Mesa, Arizona.

Ten years after going to work for the first time, Ms. Llamas still cleans offices for a living. The difference is that instead of working as an hourly employee, she owns a Jani-King franchise with 18 clients who pay her between $300 and $40,000 a month. Jani-King is one of the world's largest commercial cleaning franchise companies, with more than 9,000 franchise owners around the world operating through a network of more than 100 regional offices.

Hispanic women constitute one of the fastest-growing categories of entrepreneurs, and for women like Ms. Llamas, franchising offers a balance between independence and security in running her business. The number of companies owned by Hispanic women grew 39.3 percent between 1997 and 2002, according to the Center for Women's Business Research, but the numbers for women-owned franchises aren't as clear. According to Women in Franchising, a Chicago-based consulting firm, the percentage of strictly female-owned franchises dropped from 10.9 percent to 9.72 percent between 1987 and 1994, while the number of franchises owned by both a female and a male rose from 20 percent to 20.43 percent.

The International Franchise Association reports that women own an estimated 30 percent of the nation's 760,000 franchises. Women have founded 23 franchise systems, the organization also states.

Ms. Llamas says franchise ownership has made her feel like the "queen of the world." The franchise format is "a big lift for any woman who wants to get better in life and wants to be her own boss," she continues.

"I'm a woman and I'm Hispanic, and I own a big franchise and I'm doing the work all by myself."

Franchises offer a way to own a business without requiring the owner to start from scratch, says Sonya Brathwaite, director of diversity and U.S. emerging markets at the International Franchise Association. The franchisor already has a system that the buyer can tap into, she says. Franchisees benefit from the experience of those who have gone before them, and that knowledge is passed down through the system and training provided by the franchisor.

Robert L. Purvin Jr., CEO of the American Association of Franchisees and Dealers (AAFD) agrees that franchising can be a good way to become a business owner, but he cautions potential buyers to beware. Unfortunately, the success of franchising has led to a significant imbalance in the relative bargaining power of franchisors and franchisees.

"The marketplace has been a seller's market for so long that the product that's being sold doesn't come close to meeting what it's represented to be," says Mr. Purvin, author of the book The Franchise Fraud: How to Protect Yourself Before and After You Invest. He says the AAFD was founded to establish fair franchising standards for both the franchisor and franchisee. The organization offers its Fair Franchising Seal to systems that follow the standards, and offers information on selecting a franchise on its Web site (www.aafd.org).

Mr. Purvin says potential franchisees should be aware of several myths. One is that franchisees receive territorial protection. This is not always true: The franchisor is interested in maximizing gross revenues rather than maximizing gross revenues from a particular franchise. That means the franchisor might sell more than one franchise in a particular area, reducing revenues for individual stores.

Another myth is that when someone buys a franchise they're buying into a well-run system; in fact, there's no guarantee of that. "Buying a franchise of a proven system will increase your odds of success," Mr. Purvin says, "but buying a franchise in a system that has not proven itself could be
your biggest nightmare."

In marketing, franchisees can benefit from mass advertising. Mr. Purvin recalls the example of Mail Boxes Etc. The owner of a single Mail Boxes Etc. franchise could never afford to produce and run a TV commercial during the Super Bowl, but the franchisor can do it by pooling the money from thousands of franchisees. Problems occur when franchisors direct advertising funds to other priorities. One franchisor, for example, collected $1 million for advertising from franchisees and spent it on advertising to sell more franchises. Another franchisor used advertising funds to run TV ads in markets with company-owned stores rather than in markets with stores owned by franchisees.

To help potential franchisees navigate such problems, the United States Hispanic
Chamber of Commerce (USHCC) created a program in partnership with the Women in Franchising consulting firm. "Franchising Today: Exploring New Markets and New Opportunities" launched in 2002 and has presented seminars in California, New York, Puerto Rico, Texas, Florida, and Washington, D.C. So far, "more than 500 individuals have participated in the series," according to the USHCC.

Mr. Purvin says that franchisees should have the right to go independent if the relationship with the franchisor doesn't work out. For example, Deborah Lopez, former owner of a Baskin-Robbins franchise in Porterville, California, says the ice creamery dropped her and her husband after a 16-year relationship because they refused to move their store to a different location.

After parting ways with Baskin-Robbins, Ms. Lopez and her husband changed the name to All About Ice Cream and continued operating in much the same way they had before. They were able to make a smooth transition because they owned all the equipment and had been well trained by Baskin-Robbins. In fact, the only money Ms. Lopez and her husband lost by dropping the Baskin-Robbins affiliation is the store's resale value. "We can't sell the store for $200,000 like we could if it was a Baskin-Robbins," she says.

Mr. Purvin emphasizes that the franchise model is a good one provided the buyer does his or her homework beforehand and buys into a good system. Ms. Brathwaite says the buyer also has to have a passion for the kind of work provided by the franchise, a sentiment shared by Ms. Llamas.

"If you have a franchise, you have to love the job," she says. "And if you have a Jani-King franchise you have to love how to clean. You have to love it to be successful."



Source: HISPANIC BUSINESS Magazine


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