Franchises flourishing

Diane Helsel joined thousands of franchise owners in October when she opened Cinnabon in the Logan Valley Mall.

According to research released by the International Franchise Association Educational Foundation, franchise businesses are expected to grow faster and create more jobs than the rest of the economy again in 2014.

Franchises are expected to add nearly 200,000 new jobs in 2014 and the number of franchise businesses in 2014 is expected to rise by 12,915 in 2014, bringing total establishments to 770,368.

With the fastest growth rate, business services are expected to add 35,109 franchise jobs in 2014, while quick service restaurants, the largest sector in franchising, is expected to create 75,596 jobs.

“Throughout the recession and tepid, uneven economic recovery, the strength and entrepreneurship of the franchise sector has been a consistent job creator for the U.S. economy, said IFA president and CEO Steve Caldeira in a statement.

Helsel said the franchise fee for some franchises such as Cinnabon has become more affordable.

“The average person is able to purchase a franchise now, and people are taking the opportunity to do so,” Helsel said. “I like the corporate structure that goes behind a franchise and the corporate support. It is a business system that has been set up, and if you follow the rules, you should succeed.”

Credit has become easier to obtain and the economy is improving, said Matthew Haller, IFA spokesman.

“Credit is easing and that is helpful. The housing recovery is helping people to take equity out of their home to start up a business,” Haller said. “People are dissatisfied with job growth. They can control their own destiny by going into business for themselves. A franchise is like a business in a box – you can own it, earn money and expand it.”

Several local entrepreneurs have been involved in franchising for many years.

Pete Williams started working for McDonald’s in Williamsport in 1966. He moved to Altoona in 1969 to manage the first Altoona McDonald’s at 407 E. Plank Road.

In 1990 he bought the McDonald’s franchise at the Station Mall and later bought the franchise in the Logan Valley Mall food court and locations in Huntingdon and Mount Union.

His daughter, Heather Harrington, and her husband, Jerry, took over the McDonald’s franchises when Williams retired in 2011.

Greg Sheehan, franchise owner/operator of Holiday Inn Express, 3306 Pleasant Valley Blvd., grew up in the motel business. His father, George Sheehan, got into the business in the 1950s with the Mountain View Motel in Duncansville.

“I was reared in the motel. I worked the front desk at the age of nine,” Sheehan said.

In the early 1980s, his father recognized the franchise business was taking off and built and opened in January 1986 what was then the 484th Days Inn in the United States, the site of today’s Holiday Inn Express.

Terry Mulhern has been a Subway franchise owner and today owns four in Blair County – two in Altoona and one each in Duncansville and Roaring Spring.

He said he worked at Subway for nine years before becoming a franchise owner.

“I liked what I was doing, and an opportunity came about to purchase the franchises. There were three at that time. Over the years I have added and sold,” Mulhern said. “I like the fact it is structured, if you follow the franchise formula you tend to be successful and will make money. I liked what I was doing with the customers and decided that is what I wanted to do.”

Franchises are part of what is called a vertical marketing system, said Randy Frye, dean of the school of business at St. Francis University.

“The advantage for the franchisee is you acquire a tried and true business model like a turnkey operation. You have a product that is established, a management and marketing system. You are buying a business that is tested and that increases the probability of success,” Frye said.

Franchisors provide a lot of support to the franchisee.

“If you have a national brand you have the support of a national advertising campaign, what we call an integrated marketing system. You buy a lot of supplies from the franchisor and enjoy buying of economies, they buy in bulk and pass along the savings to you,” Frye said. “Why it works is it combines the best of both big business and small business. You have an entrepreneur owner who is very enthusiastic with the business and the two work very well together.”

The national advertising can be very important.

“It is not ‘Heather’s Hamburgers,’ but McDonald’s hamburgers. You are not starting out with your own product and they are there to back you up. It is attractive to new business owners, you have the backing and structure,” said Heather Harrington, vice president of Harrington Management Inc.

“With a franchise you have a national corporation behind you, you have a go-to person. Part of the franchise fee goes toward national marketing and you couldn’t afford that without their backing,” said Nancy Fellabaum, owner of seven Jackson Hewitt Tax Service franchises – five in Blair and two in Cambria County.

The downside for both the franchisor and franchisee is that both give up some control of the business, Frye said.

An incident on the national scene – such as when a finger was allegedly found in Wendy’s chili in 2005, could have an impact locally.

“The franchisee can be hurt by something that happens to the chain. You ride on the coat tails for better or for worse,” Frye said.

Anyone who is thinking about buying a franchise should do his homework.

“You have to exercise due diligence, make sure the business model is successful. There are some marginal ones out there, get one that is tried and true, not one that is just starting out,” Frye said. “Check the fine print and make sure it is a legitimate business model. Talk to successful franchise operators and get their perspective.”

“You need to be careful, do your research. There are too many scams out there. The older established franchises cost a lot of money to get into,” said Williams, who at one time taught business courses at the now Greater Altoona Career and Technology Center.

“I told my students anyone needs six months worth of living expenses to live on. The number one reason businesses fail are because they are underfunded,” Williams said.

“Check the company you are going to purchase, do as much investigating as you can. I had worked for Jackson Hewitt for 12 years so I knew what I was getting into,” Fellabaum said. “Be sure it is the right fit for you and there is a niche market for it in your area.”

Mirror Staff Writer Walt Frank is at 946-7467.