Bottom line focus for Wireless Zone; an Amazon labor fix at Mosquito Squad
Illustration by Jonathan Hankin
“That’s a phenomenal question,” said Wireless Zone franchisee Chris Severo, after being asked how he plans on recruiting workers for the outlet he intends to open soon in Chappaqua, New York, in affluent Westchester County (median household income: $213,040).
“One challenge in high-end markets is the local community isn’t looking for those types of jobs,” he said. Instead, Severo will recruit workers from the county’s less wealthy areas, which he notes are only 15 to 20 minutes away. “We’re looking for young men or women who are motivated to make money and learn the craft of sales and service. The more we can develop those two skillsets the more success we can have,” he said.
The Chappaqua store, by the way, will be Severo’s 46th Wireless Zone. As of mid-September, he was negotiating to acquire three more, all in his home base of Connecticut. The purchase price as a multiple of earnings varies, he added, from 1x to 3x cash flow for single units to 4x cash flow or higher for multi-unit transactions. So far, he has been buying single units as well as opening units ground up.
Wireless Zone’s franchise disclosure document estimates the cost of opening a new location is $160,000 to $394,500. The royalty fee is 22 percent on gross profit of $5,000 or less in a month and decreases for each $5,000 of gross profit, down to 9 percent on gross profit above $100,000 in a month. Median gross revenue for 312 franchised outlets in 2018 was $1,387,745, while average gross profit stood at $382,574, the FDD shows.
Severo said he has “the full spectrum” of landlords—some easy to deal with, others nearly impossible. Still, he noted, the Verizon retail brand helps because many landlords want the stores in their development.
Rents vary, he said, from $15 to $60 per square foot. “I will also say as a franchisee I have to focus on the bottom line. We’re not in a position to have a flagship store just to have one. We have to be very conscious that rent isn’t going to sink us.”
Because nearly all his outlets are suburban, busy restaurants and retail—Panera Bread, Starbucks and Whole Foods—matter. “Where people are shopping everyday,” he noted.
The Brooklyn-born 38-year-old learned how to sell phones after majoring in English while working in a busy Manhattan shop. Eight years later he moved to Connecticut to open a Wireless Zone in Darien. Since then, he’s opened units throughout state and in Rhode Island, New York, Pennsylvania and New Jersey. His goal is to reach 50 outlets.
When I asked Severo what separates his franchise from Verizon’s myriad competitors, he explained it is his old-school approach to operations. Employees, for example, wear shirts and ties or skirts or dresses. Corporate Apple and Verizon stores “are going to T-shirts and a more laid back look. We are in business attire and my stores are immaculately clean,” he said.
He also stressed his employees are knowledgeable on current promotions and phone plans. “They are doing this not as a part-time job,” he said. “They are doing this as a profession to feed their families.”
In March, Mosquito Squad franchisee Rick Norwood opened an office in western Michigan, his nine-year-old pest elimination and control franchise’s 11th territory. “The goal in hiring a company like ours is to get rid of the root cause, though not every single mosquito,” he explained, adding ticks present a more serious problem for customers these days.
“Lyme disease is way bigger than West Nile. We are focused more on ticks than mosquitos,” he told me.
In fact, in the western Michigan region his franchise services Lyme disease-carrying black ticks abound, according to a map from the state’s Department of Health & Human Services. A United States map on the Centers for Disease Control’s website shows a variety of ticks are widely distributed east of the Rocky Mountains.
Norwood, meanwhile, was negotiating for his 12th Michigan territory we when spoke in late September. “Now we want to buy southern Michigan, the Benton Harbor area,” he explained. Should he acquire it, he and his two partners will own a contiguous string of territories from northwest Indiana to southern Wisconsin. “It’s the last leg,” he said, referring to the deal.
The partners, who used an SBA loan to finance their last acquisition, are borrowing from a bank for the current one. As one might expect, territory valuations focus on profitability. “Most people will use a 2.5x to 3.5x multiple of earnings to determine a price,” Norwood explained.
The 2018 FDD notes the cost for a new territory is $48,300 to $79,425, which includes a $32,000 initial franchise fee. The monthly brand licensing fee is a flat fee that climbs annually for seven years, from $400 per month to $2,150 per month. The FDD also shows 227 outlets open at the end of 2017.
Keeping a trained workforce has been problematic for the veteran franchisee. Hiring “is the hardest part,” said Norwood, referring to the challenge during his business’s three busiest months. He would prefer not to hire college students because they can’t begin work early enough in the season.
“Training is difficult and time-consuming,” he added.
Norwood, however, has an idea he described as the “ideal situation” to ease his company’s labor pains: Partnering with Amazon. After all, he reasoned, his busy Mosquito Squad knows how to efficiently route vehicles.
Amazon drivers, he said, “work for us for five months, and then when things get busy during the holiday season they transition to driving for Amazon. We think we could be a really good fit for them. We know how to do it and how to route it.”
Now, Norwood sighed, if he could only find someone at Amazon to talk to.
David Farkas has covered the restaurant business for 25 years as a reporter and food writer, and writes about development deals in The Pipeline in each issue. Send your franchise’s development agreements to him at firstname.lastname@example.org.