10 hottest deals in franchising: from food services to hospitality, we identify the best opportunities for African Americans
TO BE A SUCCESSFUL BUSINESS OWNER you have to take some risks. Perhaps no one knows this better than Jannetta Wells Allen, owner of two Williams Chicken franchises in Dallas and Tyler, Texas.
In 1988, Hiawatha Williams, owner of Williams Chicken, persuaded Wells Allen to leave her job at Taco Bell to work for him--for minimum wage. "People said I was crazy to leave $34,000 for less than $10,000 a year, hut I knew I could only go so far at Taco Bell," says Wells Allen, who now trains 75% of the current Williams Chicken franchise owners. "I knew I could grow with Williams Chicken. Plus the owner, who watched me work for years and said that I was the type of person that he wanted to work with, promised me that if I came on as an employee, stood by him, and helped him build the business, he would make sure that I would get my own franchise."
Of course, Wells Allen, had no guarantee that the owner, Hiawatha Williams, would make good on his promise, but she had faith that he would. Back then, Williams Chicken was just one small, little-known restaurant in Dallas that straggled to break even and had no consistent customer base. Today it spans 48 locations throughout, Texas and Louisiana. The stores generate an annual $28 million in gross sales.
Wells Allen helped market the restaurant by working 12- to 14-hour days, seven days a week, for a meager $210. She walked door-to-door to spread the word about Williams Chicken and even negotiated deals with area high schools to provide boxes of chicken for the schools' sporting events.
By 1993, Wells Allen was earning $1,600 per week, and the restaurant's sales increased from $5,000 to $20,000 per week. With the restaurant's increasing success, the time had finally come for Wells Allen to collect on the promise that Williams had made. And she did.
Williams not only kept his promise but also loaned Wells Allen the $150,000 she needed to purchase her own Williams Chicken location, which she bought in 1993. Her second franchise opened just four years later. Together, her two franchises have 35 employees and earned nearly $1.5 million in revenues last year. Wells Alien, 39, projects that with the third restaurant she plans to open this year, her franchises will earn $2.5 million in 2005.
According to franchise industry analysts, every eight minutes a new franchise opens for business somewhere in the United States. That crones as little surprise to Don DeBolt, president of the International Franchise Association, a trade organization in Washington, D.C.
"In the last two years the franchising community has seen a larger pool of qualified and financially capable franchisee prospects than they've seen in years," he says. "A lot of it is due to the recession that we've just come out of and job losses, [As a result], people had to create their own jobs and many of them chose a franchise business."
According to The Economic Impact of Franchised Businesses, a 2004 survey conducted by PricewaterhouseCoopers, there are more than 760,000 franchised businesses in the nation, generating more than $1.53 trillion annually. That's almost double the number of franchises recorded just one year earlier by the IFA, to help prospective franchisees identify the right business, each year BLACK ENTERPRISE compiles a list of lop franchises for African Americans. This year's list represents our editors' choice of the cream of the crop--the best prospects across a range of the hottest industries. The results are based on a national survey of more than 450 franchisors that are members of the IFA and included such criteria as the current number of African American franchise units, startup costs, and revenue grouch projections. Our survey was conducted by the BE research division. We have identified companies that completed our survey, responded to our research arm, or actively tracked their black franchisees. These companies also have significant numbers of black franchisees or substantial minority franchise outreach programs.
These days, what makes the hot sectors attractive to would-be entrepreneurs is America's insatiable appetite for looking good and eating right, and this means big bucks for franchises offering health and beauty products and services. "We're seeing a lot of impact in companies that are related to personal care, anti-aging, wellness, and laser technology for permanent hair removal," says DeBolt.
Franchises such as Comfort Keepers, Home Instead, and other units that provide home care for seniors are hotbeds of activity. "The business to business sector is also growing because there are just a lot of new businesses, and these new businesses need various types of services such as Internet Website hosting and Web design, advertising and marketing, payroll, and accounting services," says DeBolt.
Although hard hit by the events of September 11, DeBolt says the hotel industry is making a strong comeback as travel has increased. Restaurants, despite typically hefty franchise fees, are just as promising as other franchise operations. In fact, according to the National Restaurant Association, there are 878,000 individual restaurant locations nationwide, many of them franchised. What makes them so popular is the consumers' increasing demand lot convenience plus a shift in how people spend their food allowance.
"If you look at consumers" allocation of how they spend their food dollar in America today, over 46% of it is allocated to the restaurant community, [but] if you go back to 1955, at that point, it was just 25%," says Hudson Riehle, senior vice president of research for the National Restaurant Association. "So what has happened in less than half of a century is that how consumers spend on food in America has changed dramatically. Consequently, when you have that shift continuing to persist, it means that there are more and more opportunities for restaurant operators and specifically those that run branded restaurant operations."
Before Maurice Slaughter put up $1 million to launch the first of his three Harley-Davidson dealerships, he reviewed the company's Uniform Franchise @ring Circular, a disclosure document that spells out all aspects of the franchisor. He also spoke with existing franchisees.
"You have to do your due diligence, so I went and visited several of the dealers at their shops to see how the operations ran and what was required in order for me to succeed, everything from capital to man power," says Slaughter, who has dealerships in Portsmouth, Virginia, as well as Elizabeth City and Nags Head, North Carolina.
In his investigations, Slaughter, 45, found that although he didn't have to pay a franchise fee (auto and motorcycle dealers don't require one) he would have to purchase all of the equipment and inventory needed to get his first store up and running. That meant not just buying the motorcycles, but also parts, clothing, riding gear, and other items that a typical full-service dealership offers.
For his first store, Slaughter also needed a building since no existing dealership in the area appealed to him. To raise the money for all of the startup costs, Slaughter, a former Burger King franchisee and Toyota dealer, used profits from previous business ventures.
In 1998 he opened his first store. Bayside Harley-Davidson, in Portsmouth, Virginia. He added Elizabeth's Outer Banks Harley Davidson in 2000 and his third store, Nags Head Harley-Davidson, in 2002. Together, the Virginia and North Carolina franchises have 60 employees and generated $26.6 million in annual sales in 2003. Bay side grossed $15 million, ahead of Elizabeth's $10 million and the Nags Head dealership's $1.6 million.
HIGH HOPES ON HILTON
When Kirk Sykes decided to purchase a hotel franchise, he and business partners, Thomas F. Welch, Gene Sisco, and Corcoran Jenison Cos., solicited Hilton Hotels, which provided an optimistic market potential analysis. Excited about the project's promise, the partners shelled out an $80,000 franchise fee to buy into Hilton's Hampton Inn & Suites. But that was just the beginning of the costs. To complete the planned 175-room hotel, 22,000-square-foot retail space, and 650-car garage, the partners needed $65 million more.