USA
20 March 2008
At the height of the real estate market a few years ago, Nick Mona made money building custom homes.
Now that the economy has weakened, the Annapolis area builder hopes to drive sales by developing franchises.
"It's steady work," said Mr. Mona, owner of Nick Mona Construction, a contractor that started work on an Auntie Anne's Pretzels franchise at Westfield Annapolis mall this week. "We're trying to be a little more commercial oriented."
Despite weaker market conditions, experts said there's still franchise building opportunities in an industry gaining steam across the United States.
Locally, there's plenty of action: The Virginia-based Five Guys Burgers and Fries recently announced plans to expand into Hanover, Odenton and Crofton. And Foster's Grille, a family friendly restaurant also serving up half-pound burgers and hand-cut fries, is targeting Maryland for expansion plans.
"We're always entertaining offers from builders," said Shawn Foster, founder of Foster's Grille, which has a new location in Frederick County.
Demand for the industry continues as investors turn to proven franchise models instead of starting their own shops from scratch, said Terry Hill, spokesman for the International Franchise Association.
Brands that began franchising between 2000 and 2006 added more than 22,000 franchise units, association data shows.
Mr. Hill said the industry "held its own" during the economic recession of 2001 as employees worried about pink slips opened franchises with well-known brands.
Builders such as John Klakamp are hoping for similar successes. His Annapolis company, Encore Construction, has already built up its franchise resume by building locations for Quiznos and Maggie Moo's and a Robeks juice bar franchise at the Annapolis Harbour Center last year.
In February, Encore broke ground on a $1.5 million deal to build an IHOP franchise in Washington, D.C.
"The big franchises, the Quiznos, the IHOPs, they keep going in any economy," Mr. Klakamp said. "They're sales driven. If they don't keep building, they're dead."
Indeed, there's plenty of money to be had. But stricter credit requirements mean franchise owners must put up more collateral for loan approval, Mr. Hill said.
Some lenders are only willing to fund larger transactions of $1 million or more, said Anita Baron, director of business development for the franchise finance division of Butler Capital Corp., which provides low-interest loans to franchise owners.
However, lenders that have already devoted resources to franchise concepts remain active in the market, she said.
"They're committed, they've studied them, they know which ones they are anxious to work with," she said.
There are plenty of benefits to building franchises in this market. Because franchise companies have already developed standards for prototype stores, builders stay on set development schedules without worrying about last-minute changes, said Mr. Hill of the franchise association.
"You don't have an independent entrepreneur tinkering with the plans," he said.
In addition to predictable construction, Ms. Baron said, franchise companies often mandate owners to remodel stores, creating more work for the contractor.
Mr. Foster of Foster's Grille said franchise jobs also are attractive because of their quick turnaround time: Builders spend between six to eight weeks developing a franchise, as opposed to the more lengthy construction of a big-box store.
Developers also have the comfort of knowing franchise owners have been approved for loans, said Mr. Foster, whose company paces its growth strategy by making sure franchise owners prove themselves in one sales territory before being allowed to expand into another.
Mr. Mona said he hopes to secure more franchise work with the mall and diversify his portfolio with more commercial work.
Already Nick Mona Construction has completed a 12,000-square-foot home office for the soil conservation district of Prince George's County, built a 9,200-square-foot office / banquet facility in Hanover for salaried employees of Northrop Grumman and now is finishing up a Stevensville shopping center addition.
"We can hit the ground running with the franchise because we've done them before," he said.
Source :
www.hometownannapolis.com
