Trust part of franchising strategy

When Gus Schuberth hired his first employee to help coat garage floors, he didn't let the worker even hold a roller brush for the first month.

"I did not want to let go. That was scary for me," said Schuberth, a self-proclaimed perfectionist who with his wife, Pamela, owns Floorguard, an Aurora-based garage floor coating company that also provides garage organizer systems.

With 16 employees and franchises in three states, Schuberth has conquered his fear of delegating. But he's still plenty picky. "There were times when I'd finish up a floor and decide it's not right. It could be better. So I'd tell [the customer], 'I'm coming back tomorrow,'" he said.

The company also is particular when selecting employees and supervising their work. "We don't want callbacks," said Pamela Schuberth, vice president. The pickiness extends to franchising too.

As with hiring, being selective in awarding franchises is a good strategy, experts said. It's easier to avoid problems through a careful screening upfront than it is to correct mistakes later, experts said.

Franchising has become a popular expansion model, with more than 760,000 U.S. franchised businesses generating more than $1.5 trillion in revenue, according to the International Franchise Association, a Washington-based trade group. But not all franchisers are as selective as they should be, and the mistake can lead to failed franchises and a tarnished brand image, experts said.

"When he says he's picky, that's very smart. If you get into a 10-year contract, that's like a marriage. If they're going to be married, don't you want to make sure you get along?" said franchise consultant Dick Rennick, past chairman of the International Franchise Association and a former franchiser.

Before awarding a franchise to someone, Rennick recommends holding a "Discovery Day" where franchisers and franchisees can get to know each other and explore a potential business relationship.

With a service business like Floorguard, where franchisees may need to get their hands dirty, Schuberth is steering clear of those interested in a financial investment only. He needs a hands-on owner-operator who isn't afraid to strap on cleats and coat garage floors, he said.

Schuberth, who grew up in foster homes and was determined to make a better life for himself, developed the business through trial and error. He started out in concrete work, then started a carpet-cleaning business. When a customer asked if he could seal a floor, he didn't say no, even though he had never done it before. "At that time, if they asked me to build a space shuttle, I'd say I could do it," he said.

He soon saw an opportunity in garage floors. He started Floorguard in 1988 as a one-man show, doing everything himself, until the business grew to the point where he had to bring in help.

It took Schuberth 3 1/2 months before he let his first hire do even the preparation work by himself. During those months, "he learned by example. He saw how I did the job," Schuberth said.

When Schuberth couldn't find a coating product on the market that met his standards, he worked with chemists at major suppliers to create a proprietary formula. "It took me about a year to get it worked out," he said

He continues to update it as technology changes. Floorguard's weather-resistant formula is more expensive than an off-the-shelf product but has given the company a competitive edge, Schuberth said.

When the company expanded to garage walls, Schuberth again developed his own patented modular slatted wall system called Mighty Wall, which can be combined with cabinets and rearranged for organizing basement or garage spaces.

Customer referrals have been the company's best advertising method. As calls and inquiries started arriving from other states, Schuberth began thinking about franchising.

He spent more than a year putting together a 900-page manual on every facet of his business, completed the necessary legal registrations, then started interviewing potential franchisees.

Franchisers have to be thorough, experts said. "The No. 1 responsibility of the franchiser is building the brand and protecting the company," Rennick said.

Part of that involves maintaining the company's culture, he said. "It means making sure you're doing your best in picking people," he said.

Schuberth's franchise attorney, Christine Tani, partner at Carter & Tani in Wheaton, agreed. "One problem franchisee will outweigh 10 good ones. They'll take all your time and hurt your brand if they don't run a business well," she said.

How well a franchise performs often comes down to the relationship between the franchisee and the franchiser, she said.

During the training period, a franchiser typically gains insight into a franchisee's personality or attitude. "Some shouldn't be in business for themselves or can't take direction," she said. If they have trouble finishing the training session, that's the time to pull the plug on the deal, returning the franchise fee to the franchisee, she said.

Total start-up costs for a Floorguard franchise range from $165,000 to $240,000, depending on equipment and territory size, Schuberth said. The company also receives royalties of 6 percent of franchise revenue and sells its proprietary materials to franchises.

Franchisees are buying the franchiser's know-how, as well as the company's brand and credibility in the marketplace, Tani said.

"The ability to start a business and not have to make the same mistakes someone else has is very valuable. It saves time and money and may make the difference between success and failure," she said.

For the franchiser, entering into franchising is like starting a second business, experts said. "You have to put your core business in the hands of another manager and focus on franchising," Tani said. "You need to treat a franchisee like a customer or you will have a relationship problem."

Schuberth's goal is 60 franchises in five years, up from three today, yet he is willing to wait for the right candidates, he said. "We're not just trying to get franchise fees. Franchisees are an extension of our business."

Schuberth said he has turned down numerous candidates who lacked business experience or didn't share the company's philosophy. "We want someone with the same mind-set on quality as we have," he said. "If I'm going to sell a franchise, we have to make sure it's a success."

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760,000: Approximate number of franchised businesses in the United States

$1.5 trillion: Revenue generated by such businesses, according to the International Franchise Association.