Localized support, faster response time, creating new brand awareness, and cracking tough markets are some of the reasons franchise organizations turn to area developers to help expand their systems. Sometimes called regional developers, area developers, master franchisees, area franchisees, their names can be as different as the many ways their fees and compensation are structured. What's not different is how these individuals can help quickly build brands, awareness, and stores in a given territory.
After years of popularity and a peak during the 1980s before waning, there has been a resurgence in the use of area developers in franchising.
"In the last few years, area developers have become the number one way for franchise organizations to grow their systems," says Michael Seid, an industry consultant and the founder/managing director of Michael H. Seid & Associates. "Organizations don't fear multi-unit operators anymore and they understand the value an experienced area developer can bring to the table."
Seid says that area developers can put more locations on the ground quickly. And because area developers are often required to put up their own money to secure the territory, they have a vested interest in really making the stores work and operate at maximum capacity. And that's important because poorly performing stores not only cost the area developer, but can cost the franchisor as well by potentially damaging the brand.
Good area developers are generally very knowledgeable not only about franchising in general, but about the franchise brand in particular. Usually these individuals have personally operated one or more of the franchise's stores; sometimes they are even required to continue operating a store of their own while serving as an area developer. So they've been franchise operators themselves, they know the ins and outs and have a track record of performing. But perhaps most importantly, they bring a local connection to a national franchise.
How Can Area Developers Help?
That local connection is something that PostNet "area franchisee" John Francis knows something about. Francis is responsible for developing the territory of Minnesota and Wisconsin for the Henderson, NV-based franchise. Like most area developers, Francis not only has a background in franchising but also operates three of his own PostNet stores and oversees seven other stores throughout his two state area.
"I bought these territories and I know the marketplace, the real estate, the good and bad areas, and I know the most effective marketing channels here," explains Francis. And maybe more importantly according to Francis, "People in Minnesota want to talk to someone from Minnesota. They want to put a local face with the organization."
PostNet president and CEO Steve Greenbaum is quick to acknowledge Francis' point. "We had struggled to gain a foothold in that market (Minnesota/Wisconsin) so it has been a great solution for us to have John Francis on the scene locally developing that area." Greenbaum says that some markets are simply difficult to penetrate without help at the local level. He believes area developers are invaluable in situations like these. PostNet currently has 14 area franchisees.
Keven Sasser is a "regional developer" for Oklahoma-based Express Personnel Services. His territory includes most of Texas and he is presently overseeing 25 franchise offices with several more in the works. In Sasser's case, he was not required to purchase the territory, but was "granted" the area after a thorough evaluation by corporate officials in Oklahoma City. He is paid commission based on sales of his stores.
"I ran an Express Personnel Services office in Austin, Texas, for years so I really understand the nuts and bolts of what it takes to successfully operate an Express office," he says. Sasser employs one other person who assists him, and he hopes soon to have a staff of three or four to help him build up his territory in Texas. He, too, agrees that the local support angle is what makes area developers a critical part of the franchise growth plan.
"It's not just that we know the area, that we have the experience of operating a franchise ourselves, but also that we are there for the office operators after they are up and running," he explains. He says he calls on each of the franchisees in his area twice each week just to make sure everything is running smoothly and helping offer solutions to any problems they may be encountering.
And, he adds frankly, some of his operators require more assistance than others. "Like any system, there are high performers and low performers and my job is to be able to work with both groups, and everybody in between to help them take their businesses to the level they aspire to," he explains. "Some are interested in strong and rapid growth and in the staffing industry that can require a tremendous amount of planning and implementation to do it effectively. I'm the perfect contact point for the franchisees."
Cartridge World is an Adelaide, Australia, franchise organization that is rapidly making inroads into the U.S. market. And what better way to expand than by hiring 13 reps throughout the country. One of those, Kathy Serls, in Lancaster, Pa., covers the areas of Pennsylvania, Delaware, and part of New Jersey. Although referred to as a master franchisee, Serls functions similarly to an area developer. She was required to invest upfront for the rights to the territory, she receives a cut of the ongoing franchisee royalties, and it's her responsibility to recruit and provide ongoing support to franchisees. She has only been with Cartridge World since July of last year but has already opened two stores with one more on the way.
"My husband and I have one store, which he mainly operates because of his operational skills, while I use my sales and marketing skills to locate and recruit new franchisees," she says of the couple's team approach. "The very nature of Cartridge World is more technical than most franchises. So operating our own store and knowing what the latest technology is related to refilling and refurbishing printer cartridges is a real plus for us as the developer for this region. We're able to offer that technical information to the franchisees from our first-hand experience."
Serls says she also spends her own money to cover the costs of local advertising and marketing efforts. Cartridge World does coop advertising for national advertising.
"Part of my responsibility is to keep the integrity of the Cartridge World system intact," she says. "I try to do that by maintaining consistent contact, calling the sores, visiting the stores, offering solutions to problems. It's really all about relationships," she adds. "And that relationship is not only downstream to the franchisee operators, but upstream to the franchise office as well."
Each of these area developers agrees that it's a partnership approach between the franchise organization and the area developer. Developers need various kinds of support to be successful in their territories. Much of that can be supplied by the corporate office.
How Can Franchises Help Area Developers?
Without question, area developers can provide a number of attractive possibilities for franchise organizations and their growth, but what kind of support do they typically need?
PostNet's Greenbaum says that area developers "give us an extra added value in some markets. They can help identify prospects, identify locations, and provide hands-on assistance in a local market. It's really a partnership approach." He says area developers play an important role as the eyes and ears of a local market óbut they can't work alone.
Franchise organizations can assist area developers by providing the right tools. Although these developers are committed to the system, either by paying for the territory, operating their own franchise, or earning commission, they still need franchise support.
"We provide our area franchisees extensive training about our system and how to sell it," explains Greenbaum. "We use all the best marketing channels at our disposal, like print and online advertising and marketing, to generate leads. Those leads are then evaluated and forwarded to our area franchisees." Qualifying the leads gives developers a leg up. Greenbaum says the company supplies its developers with whatever marketing brochures and printed information materials are necessary.
Nikki Sells was an area developer for Express Personnel Services in Missouri for eight years before joining the corporate office in Oklahoma City as vice president of franchising. So she's seen both sides of the fence and knows what tools are needed.
"I think one of the most important things we do is generate leads for our area developers through our 800 number and in our advertising and email qualifying on our web site," she explains. She says the corporate office is much like a funnel in that it can pre-qualify the strongest leads and disseminate those out to the regional developers. The organizations also typically have the technology infrastructure to organize and coordinate all this data.
But there are needs beyond lead generation and marketing materials support.
Sells says Express Personnel Services even provides corporate execs to travel to the respective areas and territories of their developers to make franchise presentations to both prospects and brokers who may know some prospects.
Many organizations provide other support mechanisms in areas such as real estate, site selection, purchasing and building assistance. For example, once a new franchisee is delivered, PostNet has a team that travels around the country to build and assist directly in the launch of the new store. Greenbaum adds that the corporate office is always just a phone call away from, "Providing specific answers to questions concerning real estate and construction."
Paperwork and compliance is another area where franchisors can provide strong backup. Sells says that the corporate office handles most of the paperwork that's required to get a new franchisee up and running. "We send out the info kit with all the required paperwork, the UFOC, and then we keep track of it all to make sure everything is properly signed and filed." The corporate office also keeps all the necessary paperwork up-to-date and legal in all areas.
And franchise technical support is imperative, especially at start-up. Regional developer Keven Sasser says the Express Personnel Services system is a "ready made package." He says, "The corporate office really provides most of the support to get the franchise up and going. They customize the computer systems, the phone systems, the office equipment systems. My ultimate role is to be that local contact point between the franchisee and the corporate office. The corporate office has already developed a system that works."
Technical support is highly important at Cartridge World where Serls says the company is "heavily involved with research and product development." She says it's incredibly important for the company to stay current on all the products and to get that information out to its franchisees in a timely manner.
Once the new franchisee is up and running, the support must remain available. That's where phone support and Internet/intranet applications can be implemented. PostNet's site includes a number of information resources such as message boards with Q&A on all kinds of ideas, problems, solutions, and downloads. Cartridge World staffs a U.S. office in California to provide support for its master franchisees and franchisees via a call center and a private intranet website full of questions and answers.
And of course, most organizations offer ongoing training opportunities via home office meetings, regional meetings, owner meetings, conventions, and conferences.
There's much support that can be offered and if the franchisor and the area developer are successful in building a territory, both can enjoy strong revenues for years to come.
The only publication dedicated exclusively to the hottest topic in franchising - Multi-Unit and Multi-Brand Franchisees.