Olivier Hecht is a corporate dropout.

Just three months after getting laid off from Circuit City in June 2007, he purchased a Handyman Matters home-improvement franchise and struck out on his own.

He hasn't looked back.

Nor have Betsy and Beau Dabney. They both worked at Capital One Financial Corp. Beau wanted to get out of the corporate world - "it was not a good fit," he said.

The Dabneys bought a Virginia Barbecue franchise and opened it in 2006 in the Lakeside area of Henrico County.

Hecht, who lives in Richmond, and the Dabneys of Ashland are part of what franchise experts say is an unprecedented growth spurt in the industry over the past decade.

From 2001 to 2005, the number of franchised establishments jumped 4.3 percent annually and jobs in those businesses grew 3 percent annually, according to the International Franchise Association in Washington.

The economic downturn may hurt some franchise operations, experts say. Financing is tough in the wake of the credit crunch, and starting a franchise requires capital plus hard work and a willingness to play by the rules.

But franchising is thriving, and the industry as a whole will continue to grow, said Matthew Shay, president and chief executive officer of the trade association.

Across the nation, 909,253 franchise businesses employed more than 11 million workers and generated $881 billion worth of goods and services in 2005, according to the most recent figures by the association.

In Virginia, about 26,000 franchise businesses provided 336,901 jobs, paid employees $8.6 million and produced goods and services worth $27 million in 2005.

A total of 49 franchise systems are based in Virginia, according to Frandata, a franchise information services organization in Arlington County.

Darrell Johnson, president and CEO of Frandata, said the big industry story is a flurry of new concepts and diversification within franchise sectors.

Gold's Gym and Bally Total Fitness, for example, are household names in the franchise industry's fitness sector. During the past few years, that segment has specialized and expanded.

There's Nifty After Fifty now, a California exercise studio for older adults, launched in 2006, and Anytime Fitness of Minnesota, a co-ed facility that caters to people who want to exercise in the wee hours, or anytime, in a safe environment. That franchise, which started in 2002, operates 24/7, every day of the year.

The challenges

Economic uncertainties have made it harder to get into a franchise, Johnson said. Banks have tightened lending requirements in the past 12 months, making it tough for prospective franchisees to access capital.

It may be easier to get financing through franchises listed on the U.S. Small Business Administration's registry at www.franchiseregistry.com, Johnson said. Franchises on the list have been scrutinized and meet lender criteria for qualified borrowers.

Total initial investment can range from $20,000 for the smallest franchise venture - say, a kiosk - to $6.5 million for a hotel franchise.

Franchise owners also pay royalties, an average 6.7 percent of gross revenue, according to the International Franchise Association.

Franchisees get an operating manual and training and support, including marketing and advertising guidance. In return, they pay recurring fees and royalties, and they must follow the sometimes restrictive rules and often-changing methods of the franchiser.

Operating a franchise is not for everyone, and owning one is not a guaranteed path to quick riches and early retirement, said franchise attorney Eric Perkins of Hirschler Fleischer PC in Richmond.

A primary cause of franchisee failure - like that in any new business - relates to cash-flow problems. "Franchisers are required to provide estimates of startup expenses and required capital, but they are not required to provide revenue estimates," Perkins said.

"Given the risk involved, very few franchisers offer any indication as to how much revenue you should expect to generate as a franchisee. Conservative budgeting and adequate financing are essential to the long-term success of a new franchisee."

The costs

Beau Dabney of Virginia Barbecue warned of unexpected expenses. Construction costs are "always double the cost and then some," he said.

Also, skyrocketing fuel prices have hit the restaurant with higher and unexpected charges for food delivery and Dumpster and linen services.

Still, these entrepreneurs say they are pleased with the decision to buy a franchise.

"To me, it's the perfect combination of having an independently owned and operated office - but with support," said Hecht, who owns two Handyman Matters territories, one in the Richmond area and the other in Northern Virginia.

"I've been barbecuing for almost 10 years," said Dabney, who purchased the first franchise from Rick Ivey, founder of the Fredericksburg-based Virginia Barbeque restaurant system.

"Barbecue is going to be the next cheeseburger," he said.

A typical Virginia Barbecue will cost between $36,000 and $202,000 to open, depending on the size of the restaurant, the company said on its Web site. The monthly royalty fee is 6 percent of net sales.

A Rainbow Station children's learning franchise costs about $5 million initially, founder Gail Johnson said. That includes land, site work and constructing two buildings.

Johnson owns three Rainbow Stations in Richmond and Mechanicsville. About nine are open or under construction in Virginia, North Carolina and Texas, according to the Rainbow Station Web site.

The advantages

Franchisees buy into a business model that is up and running. They say they prefer these assurances over the uncertainties and tedious process of starting from scratch.

Unlike big corporations, they are small and tend to be nimble, said Hecht of Handyman Matters.

But if franchisees make a wrong decision, the consequences are swift and sometimes severe. "You don't have a cushion if you make a wrong decision," as one might in the corporate world, he said.

Rainbow Station's Johnson said starting a franchise involves hard work, delayed gratification and is expensive.

"Sometimes you feel like you've hit a brick wall," she said. "But someone said that brick walls are there for you to know how much you want something. They also keep people that are less motivated out.

"If you're going to invest in a business, you need to have fire in the belly to get through the long days and nights as you start your business."
Contact Iris Taylor at (804) 649-6349 or chazard@timesdispatch.com.