The International Franchise Expo wrapped June 21 in New York City. There were reportedly as many as 20,000 attendees and delegations over the expo’s three days with 450 brands from 80 countries offering franchise concepts.
Matt Haller, senior vice president at the International Franchise Association which sponsored the event, says most attendees can be classified into two groups. The “tire kickers,” or people thinking about franchising for the first time and just wanting to learn more, and serious investors who narrowed their search to a list of five or 10 concepts.
Gregory Coston from Brooklyn, N.Y., is in the latter group. He attended the expo with a clear purpose to start a new franchise.
Coston, an ex-law enforcement official and franchising veteran, took a few minutes to talk to BlackEnterprise.com about his experience with the risks of starting a franchise and things to consider before jumping in those waters.
BlackEnterprise.com: What were your goals in attending the expo?
Gregory Coston: I’m with Coverall, the cleaning company. I used to own a Jani-King. I’ve been in the cleaning service for 10 years, so this time I’m looking at a fast-food or food product–something different. I’m thinking maybe a 7-11, or Philly Pretzels—something on that level.
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Since you have experience with franchises, what do you look for when seeking to invest?
For cleaning service franchises there’s no networking. Once you pay your franchise fees or initiation fee, you’re on your own. There’s no support. I found that out 10 years ago with Jani-King. I can’t say it’s the same with all franchises, but I’ve been with two franchises so far. It’s not like McDonald’s where everybody wants your service.
So what’s the alternative?
You gotta market yourself. I learned that from experience with Jani-King and then I picked it up with Coverall. You gotta be your own marketing service.
You mentioned leaving the cleaning business to get into fast food. Why did you make the transition?
I’m selling my cleaning business. I learned a lot from the two franchises that I’ve [been involved in.] They have a habit of under bidding on contracts that new franchisees should look out for.
Statement from Jani-King and Coverall on next page …
International Franchise Expo welcomes attendees in NYC
Elaborate on the concept of under bidding in terms of franchises.
[Those interested should do their] own bidding, which is why [they] should learn the business. Again, I’m only speaking about the businesses I’ve been involved with. In those cases, for new franchisees, the bidding process to acquire contracts for your franchise is handled by a sales group or sales rep. They work on commission. So maybe I get offered a contract for $2,000. I accept and when I start the work, I realize it’s really worth about $8,500, but they underbid just to make the commission. I learned that the hard way over time. Jani-King was new to me, so I didn’t know. With Coverall, I had a better idea, so I understood about the marketing and the bidding plans by this time.
How profitable were your franchises?
My first was a learning experience. The second one, I had an idea what was going on. I’ve built my franchise up to the point where I’m not needed that often. But it’s essential to learn the market because you have to do your own bidding. If the contract is worth $30 an hour, they might bid $10 an hour, just to get that contract. You have to learn about the competitive market in the industry. You’re trained how to do the cleaning but not enough about the bidding process because they want you to come back to them.
So what are the sticking points?
The franchisors don’t check up on me like I believe they should. They don’t have the requisite monthly meetings in the New York region. It’s different from maybe a Texas or West Coast region where they have monthly or quarterly meetings among their franchisees. The New York region doesn’t do that. Plus, underbidding was a sticking point. In addition, to having to pay the fee on each contract they secure, because they underbid, it might take a year to gain a profit off that particular contract.
So what’s your advice for potential franchisees?
Ask lots of questions. I can’t stress this enough. Do your research before you go out there and get a franchise. There are a lot of good ones out here but you have to do your research. The salesmen usually give a good pitch about the concept and what they can do for you, but you have to talk to other franchise owners if you want to know what’s really going on.
Blackenterprise.com reached out to Jani-King and Coverall. They sent in the following statements:
Robert Kindred, Director of Public Relations, Jani-King:
“Mr. Coston is a former Jani-King franchisee who ceased doing business in the Jani-King system nearly a decade ago. Commercial cleaning is a competitive industry and Jani-King bids accounts according to industry-wide production standards while taking into account unique aspects of the franchising model. Jani-King’s bidding process includes multiple safeguards to ensure that accounts are bid in a manner that allows franchisees to earn a profit while providing superior service to customers. However, we also recognize that Mr. Coston has established a competing business. Jani-King wishes him the best of luck in his operations.
Rick Ascolese, CEO, Coverall North America Inc:
“Coverall is committed to the success of its Franchised Business Owners. We place our franchisees at the top of the Coverall System. Our success depends on their success.”
Last year Black Enterprise named Coverall to the 25 great franchise opportunities for African Americans list, saying, Coverall is “within one of the hottest sectors poised to flourish within the industry,” and franchisors like Coverall offer alternative financing to help entrepreneurs access capital.
