The #Takeoff series is about crowdsourcing issues important to Canadian small businesses. They tell us about their defining moments and we write about their stories, the issues, and strategies for success or how to overcome obstacles.
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As a master electrician and owner of Vegreville Electric in Vegreville, Alta., Rocky Pooke was keenly aware of safety when working on excavations for laying power lines. He out existing underground lines to prevent injuries to people and damage to infrastructure.
Then one day in 2008 he got a letter from a local utility that revealed a disturbing gap in the system. An excavator had struck a live wire and the utility had been found negligent for improper mapping of the line, which was not its own. It was notifying customers that it would no longer provide information on lines it had not installed.
With several jobs on the go, Mr. Pooke tried to find someone who could locate lurking underground hazards that had not been registered or had been abandoned, the kind of things the utility company would no longer look for. What he found was a dearth of companies that could provide such a service.
So he decided to start one.
Employees of 2nd Call in Vegreville, Alta., flag potential dangers underground that cannot be located through the One Call service. (Ian Jackson for The Globe and Mail)
"Once I identified that this need was out there, I knew I had to do something – create a system that would work in addition to the One Call service to help in injury prevention," he said. "I fully support and endorse One Call, but there's more to do. You're relying on this stuff for your life."
He raided his life savings to buy the necessary equipment and get the word out that his company would locate underground power, water, sewer and gas lines or other potential hazards for oil and gas companies, pipeline providers, farmers, commercial builders or people who simply want to plant big gardens. His company, 2nd Call Corp., double-checks mapping by utilities, as well as finds things that may be unregistered.
The service became so popular in the Edmonton area that Mr. Pooke decided to section out the rest of the province and sell franchises. With the help of a franchising lawyer he put together a plan that would allow buy-in for about $68,000, which includes a $25,000 franchising fee, as well as training and equipment costs. He decided on royalties starting at 5 per cent of gross revenue or $150 a month, whichever is larger, for the first year, topping out at 10 per cent or $500 a month in the third year.
He now has eight franchisees in Alberta and has been putting out feelers in Saskatchewan and British Columbia. He also has an operation in Florida, which is on hold pending a full economic recovery there.
Mr. Pooke believes there is a market for his service throughout Canada, the United States and beyond. But there is only one of him – and like most small-business owners he has a finite amount of time and money and wonders about the best way to expand his business to its full potential.
2nd Call locates underground power, water, sewer and gas lines or other potential hazards for oil and gas companies, pipeline providers, farmers, commercial builders or for residential requests. (Ian Jackson for The Globe and Mail)
Experts say he should keep some key factors in mind as he expands.
"It's a question of how the franchisor develops the operation to ensure that the number of franchisees are well supported," says Lorraine McLachlan, president and chief executive officer of the Canadian Franchise Association. "The infrastructure needs to expand along with your business."
She says franchisors should be careful about expanding too fast. "If you have only one field rep supporting franchisees and making sure they're doing things to the right standards, you're going to be pretty challenged if you've expanded into 60 units in four provinces."
In general, Ms. McLachlan sees two critical points when franchisors tend to make quantum leaps. One is when they have 15 to 20 units and need to start formalizing a head-office staff that goes beyond themselves and one or two employees. "After they've hit 15 or so, that's when the question comes up, 'How do I clone myself?'" she says. Another critical point is the 30- to 50-unit range, when it becomes challenging to have the right number of people in the field who can help new franchisees establish themselves without neglecting the needs of existing partners.
The CFA has a mentoring program to help beginning franchisors and midsize companies move through various growth stages. Called Zor-2-Zor, it is free to CFA members.
J. Perry Maisonneuve, a Mississauga-based management consultant who specializes in franchising licensing and distribution, says focused expansion will be key for 2nd Call. "I get the context and I get the need and I get the demand, which is all good," he says. "But I see a few issues."
2nd Call has eight franchisees in Alberta and is looking to sell more outside the province. (Ian Jackson for The Globe and Mail)
Expanding throughout Alberta, Saskatchewan and British Columbia makes sense, but he believes Mr. Pooke should hold off heading to Florida. He advises becoming established in Canada first and then expanding into contiguous U.S. states. "Economic recovery or not, Florida is just too far away," he says. "There's the risk of creating what we call an orphan."
Based on what he has seen at his company, Northern Lights Consultants Corp., he says Mr. Pooke should be careful to hire business people to run the franchises, who can in turn hire technicians to travel to building sites and map the ground. "Technicians generally don't have the marketing or business savvy to actually get out there and get the phones to ring and to deal with customer service."
He also cautions Mr. Pooke to be aware of a need especially relevant in service franchising, which is to keep close track of what franchisees are doing and to keep them tied in to the operation so they don't abandon him to go it alone after some initial success.
"I suggest he give some thought to a call centre and have the calls go through him so he controls it and then pays the fees directly to the franchisee on a weekly, bi-weekly or monthly basis. Also, call centres can follow up after the fact to make sure the customers are happy with the quality of the service."
Having a call centre that can direct calls to the nearest provider is also a way to avoid rigid geographic boundaries, which gives a business more flexibility to grow based on market demand.
An important way to keep franchisees on board, he says, is to offer good brand-building services, training and group discounts on everything from insurance to equipment purchasing.
Being part of a group can definitely be an advantage when it comes to financing equipment, says Toronto Dominion Bank's Darren Cooke, president of TD Equipment Finance and vice-president of Commercial Banking.
"I think it's a terrific idea," he says of Mr. Pooke's plan. "If you can determine a unique niche that is underserviced, that's an exciting proposition not only for him as a franchise owner, but for future franchisees as well."
Mr. Cooke, whose group provides a customized approach to equipment financing, says while it ultimately comes down to the creditworthiness of individual borrowers, franchisees have an advantage because they are part of a proven template even though they may be just starting up.
"That business template certainly gives somebody a head start," he says.
And he believes a franchisor such as Mr. Pooke should leverage his ability to research financing options for prospective franchisees to find financial institutions that understand what a borrower is looking for.
"It makes that credit granting process a little bit simpler," he says.