Business-to-business franchises are booming

Business-to-business franchises are booming

Companies outsource services they once performed in-house

Long ago, U.S. corporations used to handle their own public relations, their own accounting, their own hiring. They had work crews to address equipment failure; some even did their own printing. Then downsizing swept through corporate America like an Old Testament plague. Companies grew lean and mean; outsourcing became the name of the game. And suddenly the hills were alive with the sound of pink-slipped middle managers typing their résumés. The ’80s downsizing movement was a boon to franchising, in that thousands of corporate refugees bought retail franchises with their severance money. But some of today’s hottest franchise companies are making a killing by selling products and services to other businesses. In many cases, these so-called business-to-business franchises are picking up all sorts of work those big companies used to do in-house. “This is an explosive growth area,” says International Franchise Association president Don DeBolt. “You used to have huge businesses with their own accounting or advertising departments. They took care of all the various needs within the company, but now they’ve outsourced a lot of this stuff.” This has triggered an outsourcing chain reaction that ultimately benefits entrepreneurs, DeBolt explains. “Many of these outsourcers are small companies that, in turn, rely on other small companies for many of their own business needs.” The numbers bear him out. Although business-to-business franchises have been around for a while – office-cleaning systems such as ServiceMaster come to mind – their numbers have shot up dramatically in recent years. Counting professional staffing firms, about 8 percent of the 1,156 U.S. franchise companies profiled in a recent IFA study were business-to-business enterprises. (Although this was the first study to isolate business-to-business franchises as a category, IFA spokesperson Kara LaGrassa says that the number of business-to-business companies enrolled in the IFA has increased sharply in the past five years.) To help you make the most of this extraordinary opportunity in franchising, we spoke with some of the most accomplished franchisors and experts in the field to gather inside tips on finding and running a business-to-business franchise that’s right for you. WHY NOT FAST FOOD? Why should you consider a business-to-business franchise rather than some traditional retail concept? Big-ticket sales, for one thing: business clients usually spend more money than retail customers. “I would rather deal with one person who’s going to place a thousand-dollar order than 10 people who are going to place 10 orders each for $100,” says franchising author and trainer John P. Hayes, Ph.D. “It’s less wear and tear on your staff, and dealing with one person is more efficient than dealing with 10.” Also, businesses are usually repeat customers. “If you have a customer who comes in four or five times a year for a small job, you don’t really get to know him very well,” Hayes adds. “But if you’ve got a commercial account and they’re calling you every week, you have more of an opportunity to keep them satisfied over a longer period of time. You might screw up or make a mistake, but it’s easier to make that up to someone you know and deal with regularly. You might give them a percentage off their next job or take them to a ball game.” The bottom line: You’ll get more business from business clients. Minuteman Press International is a case in point. Since 1973, company president Bob Titus has grown his commercial-printing business from one store on Long Island to a worldwide franchise of nearly 900 stores with total sales approaching $300 million. “Direct consumers have only an occasional need for printing,” Titus says. “They print invitations or birth announcements, and they need copies once in a while. But businesses are far and away the largest users of printing services.”

Posted by on September 1, 1999

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