October 3, 2006
By: Jim Wyss
Source: Miami Herald
Griddle scraping and garbage hauling aren’t glamorous franchise options, but they are profitable – and growing.
Jim Sargent paid good money for his hot and dirty job.
As the owner of a FiltaFry franchise, he spends most days scraping out the red-hot innards of deep-fat fryers, while a contraption the size of a small photocopier sucks up and cleans murky cooking oil, giving it a few extra days of life.
FiltaFry is a small part of a sizzling category of franchising: the service sector.
While restaurants and fast-food chains are still the dominant features of the franchise landscape, representing 19 percent of all such businesses, the service industry is seeing the fastest growth.
From 2003 to 2005 the service-industry franchise sector grew more than 30 percent, while franchise food establishments saw just 5% growth, according to a study by FRANdata.
Sargent admits his job isn’t pretty but that’s part of what makes it profitable.
“Sometimes you have to find the thing nobody else wants to do because it’s dirty or not glamorous,” said Sargent, who charges about $55 per fryer. “But the hope is you can sell it and might make a run of it.”
Too often people go into the franchise process with a one-track mind, said Michael Bush, president of Franchise Advisors, a company that matches entrepreneurs with franchise opportunities. “Most clients I deal with start off talking about fast-food chains they like to eat at,” he said.
But the real opportunities can often be found behind the scenes. They’re the franchises that serve franchises – as well as other business customers.
A company called Sparkling Image, for example, sends teams out to provide ceiling-to-floor scrubbing of restrooms at restaurants. A franchise called 1-800-GOTJUNK hauls commercial garbage on short notice.
Most franchisees have to be led to these hidden opportunities, but Sargent, who was director of food services at Broward County Community College, recognized the potential of FiltaFry the first time he saw it.
Not only did filtering and changing oil on a regular basis save money, but because FiltaFry employees wear heat-resistant Kevlar gloves and arm guards, they can clean and service fryers while they are still hot – keeping kitchen interruption to a minimum. In fact, the oil has to be at least 350 degrees to run through the patented filtration system that helps extend the life of the oil.
And because “accidental burn rates in the industry are huge,” Sargent said he recognized how FiltaFry could help keep a lid on the liability that comes with having staff members service the grills.
Ultimately, he quit his job and took out a home equity loan to raise the $60,00O he needed to buy the proprietary filtering equipment and the retrofitted van to haul his gear from job to job.
Relatively low entry costs are another perk of service industry franchises, said Bush.
While the starting price for your average restaurant franchise is about $250,000, there are many home-based franchises available that cost less than $100,000, he said.
And financing a franchise can often be easier than raising money for an independent venture. While banks are reluctant to loan money to businesses without a track record, they will often consider going out on a limb for a franchise that offers a strong support network and recognizable name, said Althea Harris, a spokeswoman at the Small Business Administration, which has a list of franchises that are eligible for fast-track SBA financing.
“A lot of the risk factors are taken away with a franchise,” she said- “[So franchising] is one way that someone who really wants to go into business can sometimes skip the things that make lenders reticent.”
But that doesn’t mean that franchises are any more successful than other small businesses. The failure rate on loans to franchisees versus independent small-business owners is about the same, according to SBA data.
With eight months of FiltaFry work under his belt, Sargent said he’s still a long way from striking it rich. He has to pay the company a flat fee of $450 every month, plus an additional $110 in marketing fees, $10 for use of the company Intranet, plus the cost of replacement parts for his filtering machine.”
After expenses he says his profit is about one-third of what he was making at his old job. But if he can just spread the word that he’s willing to take on this job that many kitchen staffers loathe, he knows his business will have a future.
“I always tell people, I’m your best employee,” said Sargent. “I’m never late; I’m never sick, and I’m not even on your payroll.”