Spray-Net, Blink Fitness and Watermill Express tackle challenges
For a while Carmelo Marsala’s Spray-Net company was a one-man show. It was when he was high up on a ladder trying to field a phone call that he realized things had to change: He couldn’t afford to be the salesperson, production manager and spray painter all in one.
Spray-Net is an exterior painting franchise, which spray paints proprietary coatings on home sidings to increase curb value. After growing the business to three corporate-owned locations in the greater Montreal area, Marsala decided franchising was the way to go.
In business since 2013, Spray-Net has been labeled the fastest-growing Canadian home improvement franchise and won the International Franchise Association’s 2016 NextGen in Franchising global competition.
Average buildout costs for a franchise unit range between $245,600 to $269,600. Spray-Net has sold 33 franchise units so far, all in Canada, and has set its sights on the United States looking to grow at a more measured pace there. Marsala is hoping to have 10 franchises in place in the United States by the end of this year.
The franchise has sold territories by using in-house personnel and Marsala says franchisees have sought them out so sales haven’t been much of an issue. He doesn’t rule out bringing brokers in later in the game.
The switch over to franchising has been smooth but not without surprises. For one thing Marsala didn’t realize he would have to, in essence, create 12 different companies (four each for most of Canada; the Quebec region; and the United States). That came with a host of unexpected legal fees. Inventory was another challenge in the early days because forecasting which paint colors would be most popular was difficult, so the company often had more paint on hand than was necessary.
Marsala says they also hired more people than they needed early on and grew really quickly really fast. While that might seem like a good problem to have, he is determined to cut costs and improve efficiency by spending on the right systems.
For example, Spray-Net has invested close to half a million dollars in labor to build proprietary software in-house that can deliver real-time data on a daily and weekly basis about inventory and other operational aspects of the business. This software, Marsala says, is used both at the franchisor level to see what’s going on in production and distribution facilities and at the unit level so franchisees can avail the advantages of a data-driven decision-making system that flags problems while they’re still small in scale.
This system helps tune efficiencies and is a way of preventing problems before they occur. In effect, the software system helps reduce a whole host of costs and thereby maximizes profit. For example, if the production or labor costs at a location are too, the system can flag such discrepancies and Spray-Net can help sort such kinks out, Marsala says.
Premium experience for $15
Building a brand and sorting kinks out is something Blink Fitness already knew a thing or two about before it got into the franchising game. After all it’s the child of Equinox, a luxury fitness club. Moving from the luxury fitness model to the high-volume, low-price fitness market where Blink is positioned is no easy feat given how crowded the market already is.
So Blink differentiates itself by delivering a much more premium experience than the rest of the pack for the $15 monthly fee. “Think Target instead of Walmart,” says Todd Magazine, president. “There’s a word called ‘mass-tige,’ prestige delivered on a mass scale, which is what Blink does.”
Blink ramped up to 50 corporate-owned locations before taking up the franchising model of growth. Moving into franchising was a way for Blink to penetrate into market areas corporate couldn’t reach, at least right away.
The buildout per unit can range from $650,000 to $2 million and the plan is to develop 300 locations over the next five years, half of which will be corporate-owned. Blink is forging ahead on both franchising and corporate development fronts and franchise sales are being handled in-house.
Magazine says Blink’s focus on regular upkeep including care of machines is a savvy way of keeping an eye on expenses at the unit level since carefully maintained equipment needs fewer maintenance-related expenses. All membership forms and deals are driven through a kiosk, which further cuts on labor costs at the unit level.
“Both the labor and costs of manual record-keeping are cut dramatically that way,” he says, adding that having staff clean the facility every half hour also cuts down on longer labor hours for cleanup at the end of the day.
A culture of cost control
Concentrated geographical growth is the strategy that Lani Dolifka, president and CEO of Watermill Express, has pursued since she started the company in 1984 with her husband, Don. The Brighton, Colorado-based drive-up drinking water and ice franchise has 1,301 locations mostly in the Sun Belt states.
The biggest operational lesson she has learned is that franchisors usually cannot achieve an increase in revenue and control expenses if the locations are spread out too far. “They become too hard to manage. Be very smart in the beginning to tighten that operational footprint over a smaller geographical area. It gives you the best chance to have better revenue and better cost control.”
Dolifka says over the years she has fine-tuned her approach to expenses and seen it more as fostering a “culture of cost control.” For example, Watermill Express invests heavily in research and development. “We want to make sure we’re providing the highest quality pure drinking water and ice to our customers. We don’t cut corners, we spend everything we can on that piece,” she says.
While Dolifka didn’t share exact numbers spent on in-house research, she did add it was one of the largest line items in their budget. The research and development process not only targets the quality of the drinking water but also monitors all the equipment closely to make sure all is performing at peak capacity.
On the unit franchisee level, this saves labor costs because automated data reports are sent to the franchisee so staff doesn’t have to be constantly visiting the site for upkeep. The 24-hour computer multi-variant system keeps an eye on variables such as filter efficiencies and tank levels and alerts franchisees about potential problems.
Watermill Express also added “Waterocks” ice as a way of increasing net sales at the unit level. Of the 1,301 locations, 307 are franchises owned by just five multi-unit franchisees. Each franchise costs between $456,700 to $581,700 to develop. The last franchisee was brought on board by a broker.
For sales growth this year, Dolifka has hired a chief operating officer, Madison Jobe, who will manage operations of company and franchise locations and oversee franchise development for the year. Dolifka hopes to grow the number of franchise units in 2017 by 15 to 20 locations mostly in the southern United States but also in the north, in the Midwest in states like Michigan.
Advice from the experts
1. Don’t go too big early on. You don’t need a huge infrastructure at the start, says Steve Beagelman, president and CEO at SMB Franchise Advisors in greater Philadelphia. “You don’t need a full-time director of franchise sales, a full-time director of operations, a director of marketing. In the beginning, you don’t need all of that.” Instead, advises Beagelman, outsource services to sales companies. “There are sales companies that will do franchise sales for a retainer every month plus a commission.”
2. Make marketing work. One of the biggest mistakes young franchisors make, says Mark Siebert, CEO and senior franchise consultant at iFranchise Group in Homewood, Illinois, is not spending on marketing. “People will develop everything they need to franchise and then will say, ‘where’s my franchisees?’ They don’t spend enough money on marketing to generate the number of franchisees they need to.”
3. Training is key. Whatever revenue your franchisee makes flows right back to you on a royalty basis, so the best way to make sure your franchisee succeeds is to offer strong training and support, says Edward Kushell, president and founder of LA-based The Franchise Consulting Group.
Meet the CEOs
Carmelo Marsala, founder and president of Spray-Net, the exterior painting franchise headquartered in Quebec, Canada, started the company at age 23 after running his own student painting franchise and experiencing first-hand the limitations of commercial latex paint and the traditional brush and roller application. The franchise’s goal is to save homeowners the cost of replacing their siding, doors and windows by giving them a like-new factory finish with paint.
Todd Magazine, president of Blink Fitness, has held senior leadership roles at organizations such as Procter & Gamble, PepsiCo and Equinox (his current employer, for which he oversees Blink Fitness). Blink’s philosophy emphasizes “Mood Above Muscle,” which celebrates how exercise makes you feel, not just about how it makes you look. The fitness brand showcases people of all shapes and sizes, from thin to muscular to plus size, and is looking to attract a much broader group of consumers than the typical gym concept.
Lani Dolifka is the president and CEO of Watermill Express, the drive-up pure drinking water and ice company with more than 1,300 locations across the United States. In addition to dispensing pure drinking water through a patented self-cleaning dispenser, many Watermill Express stations have recently been upgraded to offer Waterocks (ice), made from Watermill Express’ pure drinking water. Watermill Express has a history of philanthropy and cause marketing hosting free water and ice giveaway events at every new station opening. Dolifka co-founded the Clean Water Here campaign to build awareness about the importance of sustainable solutions for clean, affordable water.