Franchising can be retail opportunity

"What a great store... you should franchise." Ever hear that? Or think about it? Franchises play a big role in the home decorating industry, and the Internet makes it even easier to offer and explore new business opportunities in the field. There appears to be a fee structure and business model to match just about every pocketbook and energy level, evidenced by the rapid growth of Real Deals on Home Decor and Designs of the Interior, two retailers with very different game plans.

"Think Price, Bag Location" is one of the marketing slogans for Idaho-based Real Deals on Home Decor, a business model based on nontraditional locations and being opened just two days a week "so it becomes more of an event." The stores sell furniture and accessories in less-than-desirable locations to maintain a warehouse look and feel, and to keep overhead low. "By the time customers find us, they feel they've made a discovery," said Jeff Humphrey who, together with wife Marisa, co-owns the company with in-laws Carie and Nate Kelsey.

Real Deals just opened its 14th store at a location in Riverdale, Utah, and is planning six more openings by the end of the year. The Humphreys started out several years ago with a 90,000-sq.-ft. furniture store in Jefferson, Ga., on the bottom floor of an old cotton mill. Stan and Robin Atkins bought the mill in 1998 to house the first Real Deals on Home Decor and eventually sold the business, located on the top floor of the mill, to the Humphreys. Following the opening of several mini stores, the owners decided to keep average store size at around 1,800–4,000 square feet and began offering franchises.

How much to get in? The initial investment is estimated at between $38,000 and $92,450. This number includes the $15,000 franchise fee, initial startup costs and payroll, and opening inventory estimated at about $15,000 per 1,000 square feet. Franchise royalties are 5% of gross sales and contribution to advertising is 2% per month, split between local and national. In addition to initial and ongoing consultation, support and comprehensive training, the Real Deals franchisors provide point-of-sale software and hardware, logo and branded marketing tools, private label merchandise and access to Real Deals' international suppliers. The franchisee is responsible for purchasing or leasing a suitable location.

Barrington, Illinois-based Designs of the Interior (DOTI) offers something very different, an upscale interior design services and home furnishings business with a retail storefront. Owners Michele and Jim Evanger have grown the company to 30 DOTI Design Stores since selling their first unit in 1999. They plan to add 15 to 20 new locations in 2007 and 65 by the end of 2008.

DOTI Design Stores don't charge for design services, but depend on the individual in-home or store customer-designer experience to drive sales of high-end brands of furniture, wall coverings, window treatments, floor coverings, lighting and accessories. Eighty percent of sales are custom or special orders.

Many DOTI franchisees are former high-level managers or executives from the corporate world, and 11 of its franchisees are couples. "People ask, 'What business are you in?'" Evanger said. "We're in the business of developing people. That's what we do." Experience in the industry is not required. Instead, the owner's role is to build and manage the business. "It's about leading people, not matching colors."

An initial investment somewhere between $260,000 and $398,000 includes a $37,500 franchise fee, extensive training and support, set-up assistance, software, private label merchandise, a signature logo and established image/brand. Royalties are 6% of gross sales, and contribution to a national advertising fund is 1.5% percent of sales, not to exceed $700 per month. A comprehensive five-week training course at corporate headquarters in Barrington covers all aspects of running the business, including the hiring and managing of design consultants, site selection and market analysis. Continuing support is provided via phone and Internet, quarterly site visits, training programs and an annual owners' meeting.

Higher up in the chain are companies such as The Franchise Company of Ontario, Canada, that buy and control entire franchise systems. The Franchise Company's upper-level management members, all of whom have owned or operated franchised businesses, direct the rebranding and expansion of systems within a network of more than 1,700 franchisees. The Franchise Company owns or controls several franchise systems in residential services including California Closets, Floor Coverings International, Paul Davis Restoration, CertaPro Painters, College Pro Painters and Pillar to Post.

The Federal Trade Commission offers an overview of the FTC Franchise Rule, legal and "Before you Buy" advice, consumer alerts, franchise and business opportunity FAQS and more on its Web site at www.ftc.gov. DOTI and Real Deals' franchise details may be viewed at www.DOTIfranchising.com and www.realdeals.net.

Several retailers are growing their business by providing links to franchise information on their Internet storefronts.