Freedom! Abandoning corporate America for business ownership

Freedom! Abandoning corporate America for business ownership – Franchising: Business Service

Carol Steinberg

Richard Hurley was laid off from Sequent Computer Systems in August 1992. When his boss called him in, he could have delivered the speech himself. Hurley, a financial manager, was used to being let go. In the last seven years, he’d been downsized out of three corporate jobs. He had been offered relocation deals, but he didn’t want to leave the Rocky Mountains area he loved so much.

Sequent was the last straw. Hurley wanted out of corporate America. He seized control of his life and opened his own business. “In four years,” he says, “I’ve never had one regret.”

Corporate refugees are barreling into the franchise arena. “Everybody’s fed up with corporate politics,” says Dee Soder, Ph.D., president of The Endymion Company Inc., a Manhattan executive advisory firm. “People want something they can control.”

These experienced businesspeople are raising the standards in franchising. They expect top-notch systems and high-level training. They’re used to team management and involvement. “[This new breed] will mature franchising and make it more professional,” says Robert Gappa of Houston-based Management 2000.

Corporate refugees are leveraging their skills and energy to make a difference, most importantly for themselves.

Test Every Variable

HQ Network Systems rents executive offices and supplies administrative support to business people. While at Sequent, Hurley rented executive suites from HQ for his salespeople. He understood the company’s core benefits: flexibility and cost savings. He felt that he could launch a similar business in Denver, an area on an employment uptick.

Hurley visited 10 competitors and “didn’t find any showstopper.” Instead of buying an HQ franchise, he initially opened his own business. He used his severance pay and a 25 percent outside investor to secure the $150,000 needed to forge ahead.

Hurley kept a trim staff and tight control on financials. In the first 100 days, his office-rental facility achieved 100 percent occupancy; by June 1993, Hurley had two units with $1 million in revenues.

San Francisco-based HQ Network Systems took notice of his operation. For 18 months, it chased after Hurley to get him to convert to its franchise system. He finally agreed. With HQ’s name recognition and expertise, he could catapult his business to the next tier. The 150-plus-unit chain had another factor in its favor: It’s franchisee-owned.

In March 1994, Hurley forked over $50,000 for the HQ name and development rights to Colorado. Since then, his sales have climbed another 50 percent.

With business booming, he faced a welcome dilemma: whether to squirrel away $ 100,000 in profits or use it to fuel expansion. He leapt forward, choosing downtown Denver for his third site. After 30 days, the location boasted 40 percent occupancy.

HQ classifies Hurley as a “growth mode” franchisee. His centers are speeding toward $2 million in revenues. Within three years, he envisions a $5 million company in Colorado and contiguous areas.

Entrepreneurship has rewarded Hurley with a better lifestyle. When he worked for big corporations, he was on the road about 30 percent of the time. Now, he’s home for his daughters’ soccer games and dance recitals. This year, he’ll double his $75,000 corporate salary.

Says 41-year-old Hurley: “The independence of knowing that no one is messing with my life is huge.”

A Winning Game Plan

AlphaGraphics Inc. of Tucson, Ariz., has built its 355-unit printing enterprise on the strength of what chairman/CEO Michael Witte calls “experienced business generalists.” Robert Kraft, 44, and Harry Kaminsky, 47, fit AlphaGraphics’s profile to a T.

For 22 years, Kraft was on the corporate fast track. He rose from sales positions at various companies (including a business forms printer), to president/CEO of DCI Marketing, a point-of-purchase display company. He had moved eight times in his career before settling in Milwaukee. But Kraft was frustrated with DCI’s conservative growth plans and failure to embrace technology. In November 1993, he quit.

He started talking with his friend Harry Kaminsky, who had climbed the marketing/sales ranks at technical communications companies. But he had an entrepreneurial itch that wouldn’t go away. Kaminsky had long admired his father for developing a major life insurance company. In the back of his mind, he wanted to do the same. “It was a matter of getting pushed,” he says.

The two men were attracted to AlphaGraphics’s high-tech, future-oriented atmosphere. They did massive due diligence. Kraft visited 33 AlphaGraphics print shops over three months. Satisfied that their vision matched the parent company’s, the duo paid $1 million for the rights to develop Milwaukee. They opened their first center in August 1994.

Kraft and Kaminsky are implementing AlphaGraphics’s basic business plan with a vengeance. They’ve melded the best of their corporate training and their own ideas to yield aggressive sales and customer-relations strategies. A “grow or die” pledge signed by their 22-member staff also hangs on the wall.

They took 6,000 square feet — way above the average 2,500 square feet — in a top-notch downtown location. They’ve pumped about $700,000 — versus $250,000 to $450,000 for the average startup — into higher-grade machinery. A powerful computer system allows clients to download files faster and with greater capacity via modem to their center. “The future is driven by our ability to provide just-in-time printing services,” says Kraft.

They also need the right staff. The former college football players seek “business athletes – people who will go the four quarters,” says Kaminsky. They’ve developed a regimented three-week sales training program that emphasizes attitude, genuineness, and methodology. The franchisees drill office staff on protocol for site visits from clients — which contributes to a 90 percent close ratio. Another motivating factor: Company goals and profit-sharing plans are crystal clear.

“Their focus has been on building a team,” says Michael Witte. “In any environment, that pays off.”

Kraft and Kaminsky are breaking records. The Milwaukee center hit $963,000 in first-year sales — 63 percent above the chain’s record. Within six years, they plan 10 sites with at least $ 10 million in annual sales. “It’s like the shackles are off,” says Kraft. “I’m putting into practice all the things I believe in.”

Work on the Business

For Doug Fox, the only thing certain in corporate America was change. Between 1978 and 1990, he was let go from four jobs because of restructurings. He was a regional sales manager for a hardware manufacturer when he began exploring franchise opportunities. At that point, he says, “there was less risk in going into business for myself.”

Fox and his wife, Phyllis, stumbled across an ad for a temporary help franchise. They were impressed with the industry’s soaring growth. Their home turf, Johnson City, Tenn., was available. The strategy: Phyllis, a 10-year veteran of Texas Instruments, would continue as an independent trade show consultant; Doug would open the Interim Services franchise in June 1991. One week before Doug planned to quit, he was laid off.

Their unit scored from the start. Within six months, revenues climbed to $600,000 and the Foxes recouped their $40,000 investment. Doug recruited all his former employers as clients.

By January of 1992, Phyllis joined the franchise full-time. Their skills complement each other’s. A visionary, Doug, 41, had routinely developed marketing, communication, and budget plans in corporate America. Phyllis, 38, is a detail-oriented implementor. “I tell him he’s the balloon, and I’m the string,” says Phyllis.

Their Fort Lauderdale, Fla.-based franchisor supplies systems and ideas, such as billboard advertising and group health benefits. That frees them to focus on quality management and customization.

The demands of up to 75 percent annual growth has forced them to evaluate how they do business. The husband-and-wife team enlisted a management consultant and pored over The E-Myth by Michael Gerber and other books. They hired branch managers for two of their four offices.

“We’re working on the business rather than in the business,” says Doug.

They’re also working at being excellent managers. In corporate life, genuine praise had been a rarity. So the Foxes strive to make their staff feel good about their contribution to the company. For example, a new stress-relief program includes “off-the-wall” bonuses, like free car washes and sundae parties. Recently, they conducted an employee opinion survey. “It was most gratifying to see how the team has jelled,” says Phyllis.

In 1995, the Foxes’ $300,000 income was 2.5 times higher than their best corporate year. Revenues, at $7 million in 1995, will likely double by 1997.

The rewards keep coming. They’ve paid off their home — 10 years early — bought their first new car since being in business, and established a Christian education endowment. Phyllis usually takes her daughter to and from the school bus stop. Retirement beckons in 10 years.

“In corporate America, someone is always behind you,” says Phyllis. “Here, our best efforts make the difference.”

From Employee to Entrepreneur

You must leap over hurdles when moving from corporate America to business ownership. Here are the five biggest adjustments: 1) Financial sacrifices. Initially, franchise owners will miss regular paychecks and feel the sting of start-up costs. After 24 years in data processing, Walter Householder waged everything to become Knowledge Development Centers’ first franchisee, in Phoenix (investment: $225,000). He got $50,000 out of 35 credit cards; drained his company stock and half his 401 K plan; took out a second mortgage on his house; and got an outside investor. But with one year and $222,000 in revenues behind him, he’s now revving up for long-term rewards. 2) Increased time commitment. Long hours and dedication are prerequisite to a successful start-up. “It’s the modern equivalent of running an inn,” says Dee Soder, an executive adviser. “Everyone thinks it doesn’t seem hard. But it is.” 3) Total responsibility. All decisions — good and bad — fall on your shoulders and affect your bottom line. “We’re willing to do every job … if it means helping out at the front desk or sorting applications,” says interim franchisee Doug Fox. 4) Isolation. Executives-turned-business-owners may lack peers in whom they can confide. As a bank senior vice president, Doug Hale interfaced with CEOs and CFOs. As a Remedy Services franchisee, he looks to his client base for that level of relationship. 5) A new independent identity. In corporate America, “you tie who you are to what job you have and what company you’re with,” says HQ franchisee Richard Hurley. “Here, you’re in a new position that’s being defined as you do it. Your challenge is to pump yourself up every day and tell yourself it will work.”

COPYRIGHT 1996 Success Holdings Company, LLC

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