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November 12, 2012

The Evolving Central Mass. Franchise Sector

PHOTO/EDD COTE Ryan Rouleau, a franchisee for Moe's Southwest Grill, prepares a meal at his Worcester store on Stafford Street.
PHOTO/MATT PILON Bing Yeo of Doctors Express: “The model ... is built upon having a business owner that focuses on the business side of things and leaving the clinical side of things to the doctor.”

If someone asks you to invest in their roulette or craps system, run.

But if a franchisor tells you they have a system for you to buy into, odds are it's probably working pretty well, according to Central Massachusetts franchisees in a variety of industries.

A system, after all, is a big piece of what franchisees pay thousands to hundreds of thousands of dollars to use. The only thing more important is the brand name, reinforced by numerous locations and the clout of national advertising.

Though franchising took a big hit in the recession, it appears robust and resilient. After 23,000 franchise establishments were lost between 2008 and 2011, franchising in the United States is expected show a net gain of jobs and establishments this year, according to the International Franchising Association.

The following three franchisees — whose establishments span from Worcester to Natick — came to the business in different ways, at different times, and with varying backgrounds and financial means.

All believe that franchising has been worth their time and investment because it provides them with a recognizable brand, delivery system, support and careful business planning.

(1) The Restaurant: Credit and Sweat Equity

Ryan Rouleau opened a Moe's Southwest Grill in Shrewsbury eight years ago, marking the company's entrance into New England. Since adding two stores in Worcester and Natick, Rouleau works seven days a week, often for well over eight hours a day. But he's not complaining. In 2004, the outcome of his venture — which had maxed out his credit cards and home equity and required him to work nights and weekends for a year refurbishing the Shrewsbury location on Route 9 — was less than certain.

“My friends all told me I was nuts,” Rouleau said. “It could have gone pretty badly, but you know what? It came out pretty good.”

Some of the benefits of having other franchisees in the area were foreign to Rouleau when he expanded the Atlanta-based company's footprint to the Northeast.

“I was in the wild, wild West,” he said.

Relying on his food and hospitality degree and prior restaurant experience, he set up food-supplier relationships largely on his own. And the company was not yet advertising here. That has since changed, but Rouleau doesn't blame his franchisor for that. He said Moe's has treated him with respect, and has not opened too many locations in the market, which in the franchise world is known as “cannibalizing.”

And he appreciates the system. The menu is fully tested. The interior decor, and even the music, are all selected for him.

“I didn't have to go look for furniture, which some people think is something that's simple,” he said. “Every little step, you'd have to make a decision.”

Now he can focus on running his three locations as best he can, with an eye to expansion. Rouleau said when he finds himself with free time, it's time for a new store.

“When the store's functioning well, it's up to speed, and I have good management, then I'm ready for another store,” he said.

That moment could come soon or in a few years. Rouleau said he's in no rush to work 20 hours a day again, but fully willing when the time comes.

One thing that will be in his favor when it does: Banks have hinted they will be more receptive to providing financing, he said. Rouleau opened his first location on credit, sweat equity and an investment from his mother.

Though he nearly signed on a Small Business Administration loan at the time, conventional lenders weren't interested in an untested restaurateur with a brand unknown to the area population.

“They said 'No way',” Rouleau recalled. When I opened Worcester in 2006, they still were a little hesitant, even though Shrewsbury was doing well. From now on, they're happy to loan whatever.”

(2) Health Care: Opportunity Seized

Bing Yeo, a business consultant and franchisee of men's hair salons in MetroWest, has noted the challenges of delivery and cost the health care world is facing. But as someone without a medical background, Yeo wasn't sure how to find a way into the market, until he found Doctors Express, a Maryland-based urgent care franchisor that works in the space between a primary care physician and the emergency room, offering x-rays and other walk-in services for non-life-threatening conditions. It's faster than going to the emergency room and usually costs less. The company takes insurance, but even the uninsured can receive services for $165, he said.

“The model with Doctors Express is built upon having a business owner that focuses on the business side of things and leaving the clinical side of things to the doctor.”

Though it seems like quite a jump from haircuts to health care, Yeo said his business knowledge is most important. Supplier relationships and price negotiations with insurers are handled for him.

The business is lean, with medical staff sharing administrative duties at the front desk. That helps the business charge less than a hospital, which must often subsidize other services with the revenue from its emergency room, which must always be open and staffed.

Yeo has a full-time physician leading the medical staff of x-ray technicians and medical assistants, and a handful of doctors rotate through on a part-time basis. The office, located in a commercial plaza on Route 9 in Natick, is open 12 hours a day during the week and 8 a.m. to 5 p.m. on weekends.

As an experienced franchisee in a new sector, Yeo's challenge is building brand awareness and educating a market that might not be familiar with the concept of urgent care centers.

He said he likes being able to offer a level of customer service one might not find in an emergency room or even a primary care doctor's waiting room. Yeo's waiting room has comfortable chairs, several flat-screen televisions, an iPad and a coffee machine for patients.

And while it seems hospitals may not be thrilled with losing business to Doctors Express, Yeo insists he has a good relationship with area hospitals and physicians, as he often refers patients to them, and they act in turn.

Yeo hopes to open two more locations in MetroWest in the coming years, which he says will help him leverage staff. Though he self-financed the first location, he plans to pursue financing for his next ventures.

“We're lucky here in Massachusetts because we're one of the fastest growing regions,” he said. “So we will get to a critical mass of franchise locations pretty quickly here, where we're able to pull our funds together to advertise together.”

(3) Services: Buying Into A Ready-Made System

After a decade in the plumbing business as a Mr. Rooter franchisee, Kyle Ritchie and his father Steve wanted to add electrical services. The question was: To franchise, or not?

The two men had their business processes down pat and could easily have hired and integrated electricians. But that wasn't enough. They needed name recognition, Kyle Ritchie explained at his Gold Street office in Worcester.

So the Ritchies bought into Mr. Electric, a sister brand to Mr. Rooter owned by the Texas-based Dwyer Group.

“It's not Kyle Ritchie's Plumbing And Electric; it's not Steve Ritchie's Plumbing And Electric,” Ritchie said. “It's easier for people to get behind a brand.”

And it appears they have. The Ritchies' business has grown from three trucks to 16, and they bought into Mr. Electric, a sister franchise, last year.

As for Dwyer Group's system, redundancy is more valuable than you might think, Ritchie said. He trains his crew members to do a checklist of things on every job, from parking at the curb, to complimenting customers' homes, to removing their shoes and not leaving a mess.

Creativity can be important, but sticking to the system has been the most vital component, he said.

Ritchie said one of the things that drew the father-son team to the Dwyer Group is that the company has a big lead-generation team that works on partnerships with big-box chains.

A significant piece of Ritchie's business comes from installing generators bought at Home Depot. And his crew has installed electric car chargers at Ford dealerships.

“In essence, in order to get into that relationship, it started with a national approach,” Ritchie said.

The Mr. Rooter franchise also built an iPad application its franchisees use in the field to log jobs and show pricing options to customers.

But for all the things Dwyer Group provides, the Ritchies alone are responsible for their success or failure.

“Execution is going to be yours,” he said. “At the end of the day, if you don't execute, you're going to pay the money for the brand, and the brand's going to go away because you're not doing your job.”

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