Jeff Elgin's business registered some dramatic growth in November, December and January, when revenue jumped 21 percent compared with the same period a year ago.
Franchise matchmaker is thriving
As unemployment rises, so does interest in franchising. That's good for FranChoice, which gains talented prospects.
By DICK YOUNGBLOOD, Star Tribune
February 4, 2009 at 4:33AM
The reason, Elgin said: The unemployment rate headed skyward and the stock market tumbled in the opposite direction. Elgin, 56, is founder and CEO of FranChoice Inc., an uncommon enterprise that operates as a franchise matchmaker, recruiting prospective franchisees and helping them find the right fit for their entrepreneurial strengths and financial resources.
"Our business tends to soften at the end of an economic cycle, when the unemployment rate is still comparatively low," said Elgin, whose gross fell 25 percent from a 2006 peak of $17.2 million to $13.2 million in 2008.
But when the jobless rate begins to grow, as it did with a vengeance late last year, "interest in franchising takes off," Elgin said. The collapse of the stock market only added to the anxiety that tends to motivate franchising candidates, he said.
Elgin has more than a three-month bump in revenue to support his notion that "2009 will be a giant growth year for us." Contacts from prospective clients interested in pursuing a franchise doubled in the past three months, compared with a year earlier -- "a huge uptick in the front end of the activity pipeline," he said.
FranChoice is the product of Elgin's 25 years' experience in franchising, including eight years as vice president of franchise development for Great Clips, the Edina-based chain of hair care salons.
It was an exceedingly productive period for Great Clips, which grew from 250 franchised units when Elgin started in 1990 to 1,200 when he left in 1998 to begin plotting the FranChoice startup.
"Jeff has done a fabulous job for us," both as its development executive and with his FranChoice system, said Great Clips CEO Ray Barton. "We've gotten a lot of knowledgeable, high-quality franchisees through his system."
Roger Block, CEO of Chanhassen-based Rapid Refill, a franchise chain that refills and remanufactures ink-jet cartridges, has used FranChoice to recruit nearly 20 percent of his franchisees and offers a similar ration of plaudits.
Four or five companies are in the franchise matchmaking niche, "and FranChoice is the best of them," he said. "The applicants FranChoice sends us are always well qualified. They know what they're doing and they're ready to do business."
It took 18 months to put the FranChoice system in place, including an analysis of nearly 2,000 franchise concepts to pinpoint those with significantly low (5 percent or less) failure rates, a track record of at least five years, a minimum of 25 to 30 units and a substantial amount of territory available.
In the end, Elgin wound up with a working list of about 400 franchisers, most of which fell into the FranChoice focus on midlevel operations -- those requiring an investment of $50,000 to $500,000. It's a range that eliminates the premium-priced McDonald's and Marriotts of the franchising world as well as the part-time concepts at the low end.
He then negotiated contracts with those franchisers to pay him a placement fee that typically runs about $15,000 for each franchise sold. It's an investment that Barton, the Great Clips executive, described as "worthwhile," given that FranChoice does the recruiting and prequalifying.
The quality of the prospects it uncovers and the franchise fit that FranChoice finds for them are the key to the company's success, Elgin said. And to handle that chore, the company has recruited and trained 65 veteran franchise executives around the country as independent consultants to handle interviews with prospective franchisees and help them find a franchiser match.
FranChoice relies on the Internet to recruit clients, spending most of its $1 million marketing budget for online advertising at a large number of franchise information websites.
And on the key Entrepreneur Magazine website, Elgin not only pays for referrals, but gains exposure with articles, advice columns and other editorial content.
All of which leaves one question: What does a franchisee get for a $150,000 investment? Well, hair care franchises abound in that price range; ditto for auto repairs and gift shops. On the less-expensive side, which accounts for about 80 percent of Elgin's business, are maid services, pet grooming and senior care.
My favorite in the lower-priced category: Bark Busters, an Australian import that trains its franchisees to teach dogs not to bark, a process that reportedly guarantees success in just an hour.
There are a couple of candidates for that service in my neighborhood.
Dick Youngblood • 612-673-4439 • yblood@startribune.com
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DICK YOUNGBLOOD, Star Tribune
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