Taking a Family Company to Franchise Level Is Tricky By JACQUELINE FOX Staff Reporter Dan and Lisa Boaz are putting the finishing touches on a long and costly plan to franchise the family firm they launched in 1997, Valencia-based Vital Express Inc. The company, which provides courier, airfreight forwarding and long-distance delivery services, has doubled its staff and revenues over the last five years and has taken a portion of its profits, roughly $300,000 so far, to conduct a near yearlong study on franchising their businesses. “We went out and we found the best experts we could find in the franchising industry, the best lawyers and the best marketing people and if all goes according to plan, we’ll see 100 Vital Express locations roll out over the next 10 years,” said Dan Boaz. “We are targeting an initial rollout date for January 2004, but that date could change as we get a little closer to the end of the year.” Manuals and company guidelines are being edited now for potential franchisees, detailing the company’s vision, expectations and marketing strategies, as well as start-up costs and other expenses. The Boaz’s have established roles for themselves in the post-roll-out phase: Lisa will take over management of all existing operations in Valencia, and Dan will focus on the franchise program, including the application process for franchisees. A test franchise has already been up-and-running out of state for several months and, according to Dan, is thriving. Vital is now set to launch a nationwide marketing and public relations blitz with a soon-to-be named, well-known public figure as the official Vital mascot, announcing the franchising opportunities. According to the experts, the Boaz’s have done much of the heavy lifting and already have established some solid guidelines. But they caution that the legwork is only half the battle. As a family operation, opening up the business to outsiders is one thing. Taking on franchisees, however, is almost akin to, well, hiring on more family members. A few weigh in on the issues of franchising the family firm below, using Vital as a case study. Leslie Dashew I would say that, with franchising the first issue that would come to my mind is the control issue. There’s more emotion in a family business, especially one run by a couple. The owners have more of their identity tied to it and they’ve probably been dealing with control issues anyway. So they have to be prepared to let some of that control go. Another issue is demand: franchisees choose that kind of business venture because they want structure and guidance and they want something with a proven track record. I would also anticipate a lot of pressure from them because they are going to make demands on the owners for more structure along the way. And, since this is a couple, they can expect those pressures to also put pressure on their marriage, so I’d recommend they keep that in mind. Rachel Mickelson Dan and Lisa must be crystal clear on personal visions and would benefit from taking time to imagine their ideal business and personal life over the next 10 or 20 years. Growing, franchising and preparing a business for the public market requires tremendous time commitments and travel, not to mention the lack of downtime. This can be taxing on a marriage and family. They need to know the business’ strengths: just because Vital Express understands its current industry, does not necessarily mean they will succeed in the franchising industry. That said, it is an optimum time to enter the franchising business. There’s a new pool of entrepreneurs out there created by an aging baby boomer sector, searching for a retirement strategy, as well as workers laid off as a result of the economic downturn. Also, do not underestimate financial resources. Growing a business through franchising and an IPO demands significant resources. It will be important to bring in financial and legal experts to advise them on all of the implications of their decision. Mike Trueblood I would recommend that this couple have an advisory board that focuses only on the franchises and what it is they have planned out. And, it needs to be headed up by an expert in franchise and franchise law and they should probably make that person a partner and put him on the payroll long after they begin rolling out the franchises. Otherwise, they have to be willing to invest some money in outside expertise, not just now, but after the franchises are being sold and established. Where do you find people like that? They are all over the place. Maybe a good candidate would be former expert of a McDonald’s chain. But the key is to go out and find the right executive to take on that kind of marketing expertise. I can’t emphasize that enough. About the Experts Rachel Mickelson Partner, Doud, Hausner Vistar Glendale Leslie Dashew Owner, The Human Side of Enterprise, family business consultants Scottsdale, Ariz. Mike Trueblood Director, Family Business Council Cal State Fullerton Family News The Family Business Center at Cal State Northridge will hold a seminar on Risk Management in the Family Business, Thursday, Oct. 16 from 7:30 a.m. to 9:30 a.m. at the University Club near the corner of Dearborn Street and Zelzah Avenue. Panelists include: Sue Binder, vice president, Client Resources Group, and Vicki Sternfeld, vice president, Dodge, Warren & Peters; William Famini, former vice president, and David Jones, risk manager, California State Compensation Insurance Fund. Discussions will focus on how family owned firms can manage financial risks ranging from increases in workers’ compensation insurance to general liability. Reservations are required by Oct. 9 and can be made by e-mail to the center’s director, David Russell at [email protected], or by phone at (818) 677-2438.