The Challenges and Rewards of Launching a New Franchise
Franchisors find new opportunities in many places. An entrepreneurial spirit and business savvy can often turn an idea into reality. Take the case of Dan P. White, who is a marine biologist by education. His desire to protect the environment for future generations led him to start an environmentally-friendly franchise operation called Rapid Refill Ink.
He says his scientific background as well as his business experience came in handy when he decided to launch this new venture. In addition to a degree in marine biology, White's career spans several business success stories. For example, a company he started called Impact Marketing Group was able to take several consumer software products to market. He also was a technical consultant in the franchise industry.
In addition, because he had once operated a group of East Coast video stores, he had a good understanding of how to build a chain of stores. Looking for a way to have a positive impact on the environment, he saw the manufacturing of inkjet and laser toner cartridges as a viable business.
Rapid Refill specializes in the remanufacturing and selling of inkjet and laser toner cartridges for printers, copiers, fax machines and all-in-one machines at prices 40 to 70 percent below those of original equipment manufacturer cartridges.
A Concept that Hit the Ground Running
The first store opened in 2002 in Eugene, Ore., and in two months sales reached the break-even level. Before the year was over, Rapid Refill Ink hit three-year sales projections.
Rapid Refill began franchising in January 2004 and within two months had gained commitments for 240 locations to be opened within 36 months. Eight stores are already open in Oregon. By the end of 2004, Rapid Refill Ink expects to have 75 locations in markets including Seattle, Denver, California and the Midwest. These operations are expected to generate $38 to $40 million in revenue. Projections for 2005 include 200 stores in operation with revenue of approximately $120 million.
White acknowledges that he has hit on a recycling concept that is especially popular now, but he says doing something environmentally beneficial and providing great customer service is really the mission of Rapid Refill. "We not only talk the talk, we walk the talk," he says.
White is committed to helping to keep millions of inkjet and laser toner cartridges from landing in the world's landfills. On average, 1.8 billion inkjet and laser toner cartridges are thrown into landfills every year. Their weight is equal to more than 67,000 SUVs. In addition, the average value of an empty inkjet cartridge is $4, which equates to billions of dollars being tossed in landfills ever year. He says that some cartridges can be remanufactured 20 to 30 times.
His stores exemplify the recycling concept. The carpeting in Rapid Refill stores is 52 percent post-consumer content and made in part from recycled milk containers. The walls are made of 100 percent wheat stock and the countertops from compressed sunflower seeds.
He also is very savvy when it comes to a good business opportunity. According to industry estimates, by 2005 there will be 360 million inkjet printers installed worldwide with a predicted annual growth rate of nine percent.
As most franchisors understand, White has made customer service a major factor in the running of this new franchise operation. "Customer service is what we're all about," he says. "Cartridges are not our business. It's a service we provide. To get to a Rapid Refill store you have to drive past a lot of places where you can get cartridges. We set up our stores with a principle of customer service that sets us apart from anybody and everybody else."
White also offers a simple guarantee to customers. Namely, if a Rapid Refill Ink remanufactured cartridge causes a printer to fail, the company will deliver a new printer on-site within two hours.
Rapid Refill also spends time properly training its franchisees. An intensive 10-day training program is provided. In addition, pre-opening support includes site selection help, store design and build-out guidance and equipment ordering. Ongoing assistance includes intranet support and quarterly field visits.
White has devised a unique way to operate Rapid Refill Ink. For example, retail locations include what White calls "A" stores, which house production equipment; "B" stores such as mall kiosks; and drop boxes are located in bookstores, supermarkets, video stores, dry cleaners and other locations. Production capabilities of one "A" store can service an entire region of two to five "B" stores and as many as 300 drop boxes. The kiosks typically carry over 1,000 different cartridges and 200 models of laser toner cartridges.
Ideal franchisees would open an "A" store and two to three "B" stores within a demographically defined region.
In addition, a Rapid Refill Ink production facility is able to produce 10,000 remanufactured inkjet cartridges each month using state-of-the-art equipment. He does not use the rudimentary "drill and fill" method of remanufacturing inkjet cartridges. White says Rapid Refill's standards meet or exceed those of original equipment manufacturers.
What does an investment in Rapid Refill cost? An "A" store, which includes production equipment, is approximately $110,700 to $190,775, including a franchisee fee of $30,000. Investment for a "B store is $63,600 to $113,000, which includes a franchise fee of $17,500. Franchisees also pay a royalty fee of 5 percent of gross revenues that increases to 6 percent in the second year and 7 percent at the start of the third year until the end of the term.
Business-to-business revenue makes up 35 percent of Rapid Refill's sales. The company makes pick-ups and deliveries to between 150 to 200 businesses each day, using bicycle couriers and fuel-efficient autos.
White also makes ethics an important part of his business, saying that he will never put money before people. "Should I ever become an Enron-type CEO, there is an actual plan in place to fire me immediately," he quips.
He also stresses community involvement. Rapid Refill offers a no-effort recycling fundraising program for charitable organizations, schools, churches and groups to earn from $1 to $3 for each used cartridge collected. Empties are picked up weekly and checks sent out monthly.
Starting a new franchise presents many challenges, but White has put a good deal of thought and resources into his concept and says his goal in the future is "to continue to get better at what we do."
Joan Szabo is a Virginia freelance writer who specializes in finance.
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