Franchising Over the Years

Chuck Modell October 24th, 2018

Our last post, New Franchise Offerings Continue to Expand, talked about the explosive growth of franchising over the last several decades. Larkin Hoffman has been helping entrepreneurs franchise their businesses for more than 40 years, and we thought a look back at some of our original franchise clients would be instructive to people seeking to franchise their businesses today. In 1977 and 1978, we helped 3 companies franchise their businesses.

Our first franchise client was a company called The Turkey Shop. If you never heard of it, you are not alone, as the concept died in its first 5 years. With 20/20 hindsight, the reasons for its demise are clear. First, the name was not unique; it was not a name that could achieve protection against copycats. Second, the concept was limited; others that have started with one product— like McDonalds or Boston Market (originally Boston Chicken)—found that to survive, they had to expand beyond a single product. Finally, the owners had limited financial resources and operated the business on a part-time basis.

Our second franchise client was M.G.M. Liquor Warehouse, now known as MGM Wine & Spirits. That company continues to operate today, under the same owners that started the company in the 1970s. How did MGM survive? First, they had a new twist to an old business model. They were revolutionary in turning the liquor buying experience from small, dark, dingy stores to the well-lit consumer-friendly stores that are the norm today. They started as one of the first “big box” retailers, introducing the “warehouse” concept to the sale of alcoholic beverages. Then MGM evolved. As service became more important in the industry, they moved away from the warehouse concept to mid-size, neighborhood stores that combine wide selection with helpful service in convenient locations. They also gave personal attention to their franchisees.  One of MGM’s multi-unit franchisees today is the third owner of a family business started by her father-in-law when he retired 40 years ago from his executive management position with a Fortune 1000 company and opened his first MGM store. While MGM has confined its growth to the Upper Midwest, it continues to offer franchises today.

Our third franchise client was a company called Food-N-Fuel. The company was started by gasoline wholesalers who recognized that the industry was changing from full service gas stations to stations combined with convenience stores. They offered stock to a supervisor from a convenience store chain in another part of the country to join them and operate the business full time. They grew to about 100 outlets in 5 states over a period of 10 years and then sold the business at a substantial profit to a competitor who combined the business into its existing operations.

In a nutshell, the experience of our first three franchisor clients mirrors what we have seen in franchising over the last 40 years. There have been failures among those who ignored some of the important steps to building a successful franchise system. There have been successes that have provided long-term livelihoods to their owners and to the families of their franchisees.  And, there are those that were successful in building a franchise system from scratch and selling it at a substantial profit.