January 2010 Franchising World
     
The CEO Leadership Roundtables conducted by the International Franchise Association over the past three years have served as a lively forum for executives to exchange ideas on ways to sustain and expand their businesses in this challenging economic environment. Franchising World magazine presents readers the opportunity to benefit from the insights, perspectives and experiences of four executives who participated in the 2009 Roundtables and agreed to share their strategies to overcome financial obstacles. The executives include American Leak Detection, Inc. President and CEO Stan Berenbaum; Creative Tutors founder Jan W. Van Blarcum, Ph.D.; FASTSIGNS International, Inc. COO Susan Last; and GolfTEC Enterprises, LLC President, CEO and co-founder Joseph L. Assell.  
  
FW: What type of programs did your company design or implement to overcome limited credit access? 
  
Assell: We offered payment plans to our customers so they could spread their purchase at our stores over up to 12 months. This helped our stores maintain sales levels in the tough economy.  
  
Berenbaum: As a mature and stable franchise system, we were quite fortunate. Our fundamentals at the franchisor corporate level, as well as our unit economics at the franchisee level, continued to remain quite strong and positive. As such, while access to credit is certainly more limited than several years ago, it has not materially impacted our core business. The credit issue has, however, significantly impacted the business of certain of our vendors, referral partners and customers. As a result, we have had to show greater flexibility in our dealings with them.
  
Van Blarcum: Creative Tutors, from its inception, has strived to operate under a debt-free philosophy. Although we have established lines of credit, our entire business model is based on self-sustaining, cost-effective business operations. During this time of limited credit access, we were virtually unaffected.  
  
FW: What were the most valuable lessons you’ve learned in dealing with the credit crisis?
  
Assell: Plan for the worst and then make sure you take the steps to survive in that scenario. If it doesn’t turn out as bad as you planned, you will be ahead. This strategy worked very well for us.
  
Berenbaum: In dealing with the credit crisis, we had three choices. First, we could have chosen to be arrogant. By relying on our company’s experience, history and brand, we could have steadfastly denied that our business or industry faced any economic issues. Second, we could have panicked by cancelling all of our meetings, visits and programs, as well as all proposed new product and service offerings. Alternatively, we could have introduced too many new product and service offerings, as well as over-scheduled meetings, visits and calls. Third, and what we did do, is take a systematic and balanced approach. We used the credit crisis and down economy as a time to make the changes we needed to renew and revitalize our brand and our business. 

Last: The entire corporate team is realigning our focus on what is truly important right now—helping our franchisees improve cash flow and profitability through a “back to the basics” approach and better business management.  
  
Van Blarcum: It’s not so much that we learned new lessons, but were reminded of one of the most important facts regarding our business. Parents will support their children, regardless of their personal economic situation.
  
FW: Has your company been active in sharing its financial concerns with local, state or federal policymakers? If so, how?
  
Berenbaum: The IFA has done a terrific job in helping us coordinate with our federal policymakers. Separately, we have personally met with almost all of our local officials, as well as certain state policymakers to voice our concerns.
  
Last: Our CEO, Catherine Monson, who actively serves on the IFA board of directors, has spent time on Capitol Hill on behalf of the franchise industry and our system. She has also been in contact with our senators and Congress members through e-mail on these issues. Catherine keeps our franchise partners informed and up to date on how they can take their concerns as individual franchise   business owners to their representatives (state and local).
  
Van Blarcum: Yes. Creative Tutors is a member of IFA and we attended the Public Affairs Conference in September. In addition to participating at the conference, Creative Tutors also joined the newly established Franchise Congress program set up by the IFA’s Government Relations division. As part of the Franchise Congress’ grassroots efforts, it is our hope that we can affect change by purposeful and lively discussions with our local and state politicians. Typically, the individual letters sent by small-business owners to their local and state politicians were the way to voice mounting concerns. Now, with Franchise Congress implementing a grassroots coordinated effort, the small franchise business owner can band together with larger franchise business owners and demonstrate that their messages together pack a punch.
  
FW: Has there been a positive impact within your company as a result of the current downsized economy, for example, more corporate-franchisee interactions or cost-cutting ideas offered from field representatives?
  
Assell: We have been forced to work harder and smarter than ever. We have been more creative with new products and promotions, while not eroding at the quality of our services. Another benefit was the reorganization of some of our staff resulting on getting some people in better roles where they have gone on to shine.  
  
Berenbaum: As a result of the downsized economy, we found that business actually becomes very simple. Our system as a whole focused on four key areas: profits, cash, the customer and our core strengths. As for profits and cash, we obviously reviewed all of our expenses. Unnecessary items were cut, eliminated or reduced. We focused heavily on our current customers while seeking to also gain market share from our competitors. Additionally, we looked at our core strengths, and, where appropriate, tapped into adjacent and related markets to increase sales. All of this has contributed to positive increased earnings year-over-year.
  
Last: Through these difficult economic conditions, one positive development has been our “back to basics” focus within the system—beginning at the corporate level. Daily, we focus on the different ways—large and small—that we can help our franchisees improve cash flow, reduce their expenses and increase their profitable sales. This has included continuously working with our major suppliers and vendors for better contracts and price concessions, encouraging franchisees to negotiate with local suppliers, reviewing our franchisee’s financial statements with them and even working with them to renegotiate their site leases. Overall, there has been a far more proactive outreach on our part due to the challenging economy than in the past.  
  
Van Blarcum: Creative Tutors knows that tutoring is a recession-proof business. We find that our clients continue to provide educational support for their children, even when the country is going through a recession, lost employment, deepening government debts and stock market contractions. Parents still need their children to do well in school so that they can secure a high school diploma, gain college acceptance or acceptance into trade school programs and become contributing members to our society. This year our franchise owners began an advertising co-op to allow for stronger advertising campaigns and less individual cost to the franchisee. Additionally, as franchisor, I took a strong position on social networking and now provide each franchisee with training on how to implement a strong social network program.  
  
FW: Please share any examples of ways you encouraged your franchisees and employees by extolling the strength and resilience of franchising over other business models.
  
Assell: While we are a very discretionary business (golf lessons) we have not been down nearly as much as some of the companies we benchmark against. It showed that we have a great product, and very loyal customers.  
  
Berenbaum: Our franchisees appreciate the value of franchising, the value of the brand and what it means to them financially in terms of entry and exit strategies. Throughout this economy, our franchisees have continued to suggest new product and service ideas, new business approaches, as well as refer new franchise candidates to us. Thus, it is our franchisees, by their actions and deeds, who have continued to extol the resilience and strength of franchising. As the franchisor, we are very fortunate and thankful for their support.  
  
Last: At least once a week, sometimes more, I send out e-mails to our system with suggestions and business operations advice. Our corporate team is comprised of individuals who are experts in their fields—whether it is finance, real estate, business management, and so forth.—and we make sure to pull from that collective knowledge and pass it on to our franchisees. These e-mails that I send out to our franchise partners include everything from specific sales tactics they should try, to promoting marketing programs we have available to them, to suggestions on how to reduce costs. The franchisees that actively carry out the recommendations laid out in these messages have sent us positive feedback. For example, just by following through on one of my e-mails, one of our top-producing owners was able to reduce his phone bill by $3,600 (annually). In this market every victory counts. While this may not count as “extolling the resilience of franchising over other business models,” it is an example of the benefits of franchising.  
  
Van Blarcum: Communication is critical between the franchisor and the franchisee. We talk about ways that we leverage the franchise system to reward franchisees with lower operational costs than if they were “doing it on their own.” As a means to help franchisees feel valued and a part of a team, we incorporate their strengths, opinions coupled with their missions and visions as active participants in helping to grow the franchise concept as well as their individual franchises. As a small franchise system, we have chosen to grow at our pace. Now, our franchisees and the franchise system are both ready for expansion and we embrace it as an opportunity to build a stronger brand while expanding into   new markets during a down economy.
  
The franchisees enjoy the benefits of a growing company that they feel passionately about, which ultimately helps them with brand awareness. Due to the sophisticated technology we have in place, our CT franchisees are able to predict if a dip in their individual sales is beginning to occur. They are able to take action to prevent the dip from becoming a cash flow problem. A small-business owner could not easily afford or justify sophisticated technology, but a Creative Tutors franchisee enjoys robust technology from day one.
  
We champion the message that we are a family first—with a mission we cherish and a vision that the child of today will become a happy, successful contributing adult in our society tomorrow.
  
It is a joy to prepare the next generation for responsibilities of our planet. There is no better place than Creative Tutors to get this job done. One child at a time. One business owner at a time. One community at a time.
  
Continual training, support, active development the strength of the franchise system outweighs the small business owner every time.