GREAT 36 IDEA: Franchise Your Business Concept
Maybe you've thought about franchising your business? Even if your business is wildly successful, it may not work well as a franchise. For the inside scoop, I turned to Rammy Harwood, a successful entrepreneur who took his first venture, Cosi, a chain of 80 popular sandwich and coffee bars, public in 2000. He went back to business school for an MBA and, after graduating, launched Kidville, a franchise with about 35 outlets in the United States and abroad.
Harwood said everything changed when his partner, Andy Stenzler, and his wife, Shari, had a baby. When Kylie was six months old, Shari took her to a music class for babies. The class met in the dirty basement of a Fred Astaire dance studio. She was so upset over the grungy location, she told Andy, ‘You have no idea what I just went through.’ ”
That was the lightbulb moment for Andy and Rammy. “We thought, there's got to be a better way to offer enrichment programs for kids zero to five,” recalled Harwood.
A believer in extensive market research, Harwood visited most of the 60 places on the Upper East Side of New York City that offered early childhood activities. The partners quickly recognized a need to create something wonderful for parents and kids up to five years old. Their business plan called for bright, well-designed centers with classrooms, perhaps a café, and a retail store. Some locations would also feature indoor playgrounds, a space for birthday parties, and a kids' hair salon with plasma screen TVs.
“We wanted to create a place that people would feel comfortable visiting with their kids,” said Harwood. “The Upper East Side is unique, and those families deserve the best quality and cleanliness.”
To launch Kidville, they tapped their own funds and attracted some very high-profile investors, including the Tisch family and tennis star Andre Agassi, who was a new father at the time.
“It is a privilege to be in this business,” said Harwood. The company owns five locations in New York City. There are Kidville locations opening up around the world, including in Cairo; and Dubai. (A former customer bought the right to open several in Dubai and nearby countries.) It costs about $50,000 to buy the franchise and several hundred thousand dollars to build the facility, depending on the size and location. Franchisees also pay a percentage of sales to the parent company.
To make sure they did everything right, they hired renowned franchise consultant Michael Seid, who also sits on the company's board.
Harwood, who earned his MBA at the Stern Business School, said he loves his job because he gets to see his preschool age kids, Cameron and Xander, almost every day.
If you think you have a successful and easy-to-teach business concept, here are some questions to ask yourself:
- Does my concept work well?
- Can I create a network of owners versus hiring general managers? “If you don't have the right partners, it can make or break your concept,” said Harwood.
- Do you love what you do?
“I had 3,000 employees in the restaurant business, but no one working for us wanted to be doing what they were doing,” said Harwood. “Now, I'm surrounded by people who love what they do and really want to work with kids.”
Opening new locations has not been without challenges, including a revolution in Egypt and where to park the fleet of strollers at every Kidville location. “We had to use part of the café to park strollers, which makes it by far the most expensive parking area per square foot in New York City.”
Harwood said his favorite thing is teaching new franchisees how to run the business. He is totally hands-on, helping create 19 training manuals, all available online. He said a secret of running a franchise is to make everything “idiot-proof.” That's why Kidville spends millions of dollars on its information systems.
Instead of struggling with complicated forms and software, Harwood said, “I want them (the owner) to focus on knowing little Johnny's name and giving him a high five when he comes through the door.”
So why should you buy a franchise rather than start a business from scratch?
“It works if you want to be an entrepreneur but you don't have the guts to do it on your own,” said Harwood.