The Franchise Experience

Jennifer Jester could have started her own music-training center. She could have listed her music credentials, marketed the company herself and saved on her $150,000 startup costs. But Jester said she never would have generated the attention and enthusiasm that her School of Rock franchise has brought to the table.

A few weeks ago, Jester packed Cartoon’s Oyster Bar & Grill two nights with a combined 350 family and friends of her music students as they put on British-invasion themed concerts. The concerts, designed to display the progress of the musicians in training, are a signature of School of Rock.

“I wouldn’t have been able to create the excitement around this nearly as fast, or as big on my own as I was able to with the School of Rock brand,” Jester said.

Jester is not alone.

Franchises are expected to grow at a slightly faster rate than the rest of the economy in 2014, according to research by the International Franchise Association.

This year, franchises are projected to create nearly 200,000 jobs, barely outpacing private-sector growth by 0.3 percent.

The number of franchise businesses is projected to rise by nearly 13,000, or 1.7 percent, to more than 770,000 in the United States.

Steve Heil knows a thing or two about operating under a franchise model.

Heil, who co-owns the new Cantina Laredo restaurant at 4109 S. National Ave. through CL Springfield LLC, owned and managed a Pasta House Co. franchise for two decades before deciding to make a brand switch.

In late 2010, Heil chose not to renew the 25-year franchise agreement his father signed in the mid-1980s, and Heil said the timing was right to pursue the Mexican restaurant concept he discovered at Branson Landing.

He took a considerable risk to pull it off.

Beyond Cantina Laredo’s $50,000 franchise fee and 5 percent royalties, Heil invested $2.5 million to renovate his 2.4-acre property just south of James River Freeway.

“We felt like it was a premium location, and with the expansion of our parking, we knew we could have a high-volume location with the right concept,” Heil said. “Springfield is a small community, but it is one that I think embraces a national concept.

“Other than Branson, we are the smallest market Cantina is in.”

With operations in London, Dubai and scattered across Texas and Florida, Heil said Cantina Laredo recently opened in Las Vegas, Chicago and Syracuse, NY.

Heil said he ran Springfield Pasta Co. for about a year and a half to buy time while he developed plans for the Cantina franchise. Revenues were steady with Pasta House, according to Heil, but weren’t matching the potential he saw in his prime real estate.

Though he declined to disclose Springfield Cantina Laredo revenue through its first four months of operation, he said the early results have bested his expectations by roughly 10 percent.

Janis Prewitt Auner, a practicing business attorney and associate professor of management at Drury University, said franchises have advantages and disadvantages.

“The No. 1 advantage is good will. Everybody likes McDonald’s french fries or everybody likes Apple products, so you automatically get that customer base,” said Auner, who teaches undergraduate and graduate level business law classes.

Other advantages include management training and support, building specifications and contractor referrals, financing options and typically proven products.

“That’s why people want to buy a franchise,” Auner added. “And they’ll often give you advice on site selection, which is a good idea because if customers can’t come in and out, they won’t come.”

She said the biggest drawback is the price.

According to Franchising.com, the average franchise fee is between $20,000 and $30,000, with royalty fees typically ranging from 4 to 8 percent.

“They are typically very expensive,” Auner said. “Also, site locations might be more expensive compared to where a sole proprietor might want to put their business.”

Franchises in the food and beverage industry typically require more investment while the annual return on investment is roughly the same, according to the National Association of Franchise Consultants. The median investment in 2011 for food and beverage franchises was more than $300,000, and annual profits were less than $100,000. Senior care franchises offered the best return with a median initial investment of nearly $100,000 and an annual profit of around $60,000.

“The other thing is there’s that fear that if you don’t strictly adhere to their operations, you’ll lose the franchise,” Auner added. “I have kind of laughed through the years if I’m driving through a small town and see a hardware store and can see the shadow of where it had said ‘Ace Hardware’ – but it’s not an Ace anymore, probably because they didn’t adhere to Ace’s strict standards.”

Three partners new to owning a business are pooling together $500,000 to open at least four Penn Station East Coast Subs in the Springfield area. Itamar Gartin and Chris Rand, along with minority partner Dennis Maple, signed on with the Cincinnati, Ohio-based franchise and are targeting the first opening Jan. 28 in Battlefield Market Place.

“It offers a bit of guidance for two individuals who have never opened a business from the ground up,” said Gartin, who previously worked in business development and account management for trucking company Prime Inc.

“Not to make Chris and I sound uncreative – like we couldn’t put a business together – but to be honest, why would you when there is something there where we could just buy into their program?”

The move comes with an expected payout of roughly $700,000 in revenue during each store’s first year. Penn Station franchise fees are $25,000 per store and royalties are 6 percent of revenue, with a commitment to spend 2 percent on advertising the brand.

Gartin and Rand, who lives in St. Louis, are longtime friends, and Maple joined the Penn Station pals to manage the property.

“It was a tradition that every time I’d go to St. Louis to visit him, we’d go to the Penn Station that was within walking distance from his house,” Gartin said. “Obviously, it wasn’t the only reason for starting a business, but it was kind of a buzzkill when he’d come to Springfield and we had no Penn Station here.”

Jester similarly filled a void in the market with the 16-year-old School of Rock concept that comprises more than 100 locations across seven countries. Last year, School of Rock was listed in CNNMoney’s 5 Hot Franchises, alongside Painting with a Twist, which combines art classes and wine, and French Fry Heaven, which sells gourmet fries from small huts.

The daughter of late developer Bill Jester, she discovered the suburban Chicago-based franchise system while working as director of the music business technology program at Millersville University in Lancaster, Pa.

“We started having kids coming through for auditions into the university from School of Rock … and they were phenomenal,” Jester recalled, before bringing the franchise to her hometown.

“For somebody who is essentially a nobody to come to Springfield and try to do this without the support of a much bigger brand, I wasn’t interested in fighting that battle.”