Small Firms Are Taking
On Second Jobs: Franchises

While Maury and Beth Frankel's events company had grown in size and clientele over the past 10 years, it still had months when business was pretty slow. The company sets up inflatable attractions in town festivals and other events in the Pittsburgh area, most of which happen outdoors from May to October.

So this past summer, the couple took on a second job of sorts to fill the gap during the slow months: They added on a franchise to their existing business, E.L.F. Entertainment Inc. of Gibsonia, Pa.

DOUBLING UP

The Situation: Small-business owners are adding franchises to their existing operations.

The Pros: An add-on business can lure new customers. For seasonal operations, it can fill a revenue gap during the slow time of year.

The Cons: Owners aren't free to run that side of the business as they see fit because they must follow guidelines set up by the franchiser. And there is no guarantee a franchise will boost customer traffic to the original business.

The Frankels opened a Christmas Decor Inc. franchise, which provides installation and removal of outdoor holiday lighting for homes and businesses. They already have 20 houses signed up. A typical Christmas Decor franchise decorates between 80 and 125 houses on average.

"It will keep our business and our employees busy 12 months out of the year," says Laura Rodavich, E.L.F.'s director of sales and marketing.

Extra Income

Many independent small businesses are tacking on franchises to their operations. Some are seasonal businesses looking for a way to make extra income during the slow months. Others are looking to expand their clientele or offer products and services that complement an existing business.

Either way, an add-on franchise's established brand and reputation can help pull in new customers or get existing customers to buy the new offerings. And while managing two operations is no easy feat, owners say the franchise model, with its tried-and-tested approach, leaves plenty of room to focus on their main business.

"What franchise businesses found and what independent businesses are finding [is] that bringing in a franchise is a way to increase customer traffic for that new business and the previously existing business," says David Kaufmann, a franchise specialist and partner at New York law firm Kaufmann Feiner Yamin Gildin & Robbins.

But with a franchise, people must follow guidelines that lay out the foundation of how the business runs. "That element of your business is not yours to run freely or any fashion you like," says Mr. Kaufmann. Also, the franchise may not necessarily affect the success of the original operation.

A Good Fit

The Frankels say the addition of the Christmas Decor franchise to their business has been seamless since they already had all the necessary infrastructure: staff, trucks, a warehouse to store the decor and the knowledge of doing big setups. E.L.F. employees will decorate their first house this week.

Brandon Stephens, director of marketing for Christmas Decor of Lubbock, Texas, says the franchise is a good strategy for seasonal businesses like E.L.F.'s because they don't have to lay off workers and don't have to use the profits they've made during the warmer months to sustain them through winter.

"We fulfill a niche for these people," he says. "We urge them to give the franchise some priority but we also understand that they have another business. We are an add-on business." Mr. Stephens says the average profit margin for businesses that own a Christmas Decor franchise is 24%. A typical outdoor installation costs $1,300.

The concept has been working for Michael List and his wife, Karralea. The Hebron, Ky., couple added a Christmas Decor franchise to their lawn-maintenance service back in 2000 to bring in extra income during the months that their business lays dormant.

From November to January, the franchise brings in an average of $175,000 in sales, or 38% of the company's total yearly sales of about $460,000. They decorate about 90 homes and six shopping malls each season. Mr. List says some clients have liked the outdoor decorating service so much that they have hired the Lists the following summer for their lawn-care services.

Advertising on Wheels

Jason Oldham's add-on franchise also is giving his home-remodeling business, Oldham Construction, a year-round reach -- as well as a mobile marketing vehicle.

Jason Oldham in the trailer for his Screenmobile franchise.

In June, Mr. Oldham, 41, decided to buy a Screenmobile Corp. franchise to install screens on doors, patios and windows. A sizable trailer with a big Screenmobile logo and sign on the side is attached to his truck, which, he says, never fails to attract new customers. "It helps me more out in the community and be more accessible without have to do other kinds of advertising," he says.

The Screenmobile business also is helping to boost his core business. Mr. Oldham says he's pretty good at selling his other fixer-upper skills to Screenmobile clients. "Both businesses kind of accent each other," says Mr. Oldham, who had five to six appointments a day for Screenmobile clients during the summer. A screen job costs $300 on average.

He says revenue for summer, normally a slow time for the home-remodeling business in California, is up 50% from a year ago.

Seasonality is one of the issues why Screenmobile is a "flip season business," says Scott Walker, president of Screenmobile, Thousand Palms, Calif. "And the other is diversification."

Expanded Services

Not all businesses are using add-on franchises to fill seasonal gaps. Brian Fox wanted to give his general-practice clinic, Fox Medical Center, a face lift by providing additional services to patients. So he added a scaled-down version of a Dermacare Laser & Skin Care Clinics franchise.

Patients can make regular medical appointments as well as schedule treatments like Botox, laser hair removal and skin resurfacing. He says the franchise brings in about $35,000 to $60,000 per month, on average doubling his monthly intake. There's little new overhead or inconvenience since Dr. Fox and his staff use the same exam rooms for laser and injectable services and medical examinations.

"The benefit that I've been able to develop out of this is not just from the financial end," Dr. Fox says. He says he finds the Dermacare procedures fun and a break from attending to sick patients or dealing with insurance companies.