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FRANCHISE SPECIAL ADVERTISING SECTION Business gurus from Peter Drucker to Warren Buffett have stressed that strong sales alone won’t make a great business. Drucker’s mantra, for instance, held that the purpose of business is to create customers. Buffett wants companies he invests in to have consistent earnings, strong management, and an attractive return on equity. But it all starts with the top line, and without robust sales that overwhelm costs, no franchise can create customers or generate earnings for long. SealMaster of Sandusky, Ohio, is one franchise concept that measures up well against almost any standard of business excellence. The company’s franchisees manufacture and sell pavement sealer as well as related materials and equipment. The fact that it is a manufacturing business makes SealMaster unusual in the franchise world. Its financial results also help it to stand out. The company reports that of 23 SealMaster franchises in operation at least five years, annual sales averaged $5.2 million dollars, with a 42 percent average gross profit. Franchisees sell to a large and growing pool of public and private customers. In addition to the road-building and maintenance departments of federal, state, and local governments, the market consists of pavement maintenance contractors, property management companies, airports, and other entities that own or are responsible for maintaining pavement. In addition to the seven-figure sales potential, another factor that makes SealMaster stand out is the size of the territories it offers. The company plans to offer just 48 territories in the entire U.S. Some territories are as large as entire states. While that gives franchisees plenty of room, it limits the opportunities available for new investors. As things stand today, SealMaster has only about 15 territories left in the U.S. Retro Fitness attracts fitness-minded consumers with a monthly fee of $19.99 along with features like group classes and child care that are more commonly associated with pricier memberships. “The Retro Fitness model appeals to most consumers regardless of the market because everyone is desperately seeking a health and wellness option in and around their home base that caters to both their fitness needs and pocketbooks,” said Jason Mattes, chief development officer of the New Jersey-based franchiser. The top 10 percent of Retro Fitness franchises generate an average of $2.3 million in annual sales and $798,350 in EBITDA. Membership dues create predictable monthly income, while ancillary income from the Retro Blends Smoothie Bar, personal training, group classes, tanning, child sitting, and the Pro Shop boosts bottom line returns. The gyms are designed to be run by professional managers, and Mattes said most franchisees own multiple locations and are not actively involved in day- to-day operations. Retro Fitness has 130 operating locations now, primarily on the East Coast. Target markets for expansion include recently opened markets in Chicago, Detroit, Los Angeles, Ft. Lauderdale, Orlando, Salt Lake City, Austin, Texas; Raleigh, North Carolina; and San Jose, California. Mattes said the franchiser anticipates expanding to 700 locations by 2020. No competitive endeavor as complex as business ownership can be reduced to a single factor, and generating strong revenues is just one part of successful franchising. But revenues provide a convenient and widely used method of measuring a business’s size, health, and ability to adequately reward employees, suppliers, lenders, and investors. And as these franchises show, when strong revenues pair with a solid concept, it makes a compelling competitive argument. by Mark Henricks SEVEN-DIGIT SALES FUEL MILLION-DOLLAR FRANCHISES
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