Bette Fetter’s business began with eight small children and a passel of colored pencils scattered across the table in her Elgin, IL kitchen. It was 1988, and Bette, an artist and stay-at-home mom of four, began offering children’s art classes as a way to make extra money. At first, she charged five dollars a head and earned just thirty-five dollars a week, but when the classes grew popular, she brought them to local preschools. By 1992, her venture, Young Rembrandts, was a success, grossing about $250,000 a year. Bette wanted to expand nationally, but there was a minor problem: “We didn’t have enough money.”
Inspired by the example of other once-small businesses (such as Wendy’s and Papa John’s), Bette took the leap and decided to franchise. Happily, the gamble paid off: In 2006, there were fifty-seven Young Rembrandts franchises earning $4.3 million. Bette’s Elgin-area branches pulled in nearly $700,000. More than 760,000 franchised enterprises operate in the United States, generating more than $1.53 trillion annually.
Many small-business owners, including mom entrepreneurs like Bette, find franchising a good way to grow their brand. Franchisors profit by charging an initial franchise fee, typically $20,000 to $35,000, and royalties, which can either be a fixed fee or a percentage (typically five to six percent) of gross revenues. But franchising is not a sure thing. “There’s a financial reward, but you also have to provide training, marketing, support, and administrative direction to the franchisees,” says Betty Otte of SCORE, a not-for-profit organization of small business counselors. “The best businesses to franchise are those that are easily duplicated without a great deal of specialty training.”
Consider waiting two or three years first, suggests Kay Ainsley, managing director of MSA Worldwide, a franchise consultancy in Kennesaw, GA. “You need to prove that your business model works through all seasons, through both highs and lows.” Set aside $80,000 to $150,000 for costs, and think about hiring extra people to maintain your original unit or business. Just like parenting, franchising requires you to pay attention to your own needs while tending to those of your offspring.
