HATTIE: Hi. I'm Hattie Bryant and this is Small Business School. If you want to understand how business works from the inside out, stay with us for the next 30 minutes.

Need a sign and need it fast? Here's a business owner who spotted a trend, and jumped on it. And this is a company that's helping others to open their own business.

In 1985, Gary Salomon, founder of FASTSIGNS, saw something similar to what you're seeing now: a computerized system for producing high-quality signs in hours instead of days.

GARY SALOMON (FASTSIGNS): There's probably about $5 1/2 billion worth of revenue on an annual basis in the sign industry--at least that's what the trade associations tell us. The niche that we go after are the more temporary signs, and--you know, everything from banners to vehicle graphics.

(Voiceover) We do a lot of the stuff that the big sign companies would consider, many years ago, a bother.

Unidentified Man #1: OK. Much easier to work in small pieces like that.

HATTIE: (Voiceover) After the sign is designed on the computer, a high-speed plotter cuts the graphic from adhesive-backed vinyl. The excess vinyl is removed, leaving behind a message, which is then transferred to a sign surface.

Unidentified Man #2: We take this lift tape, and we tape everything together, and this is how we ensure that we get a nice, straight tape line. OK, then once we pull it off, all the letters are nice and straight, and they're flat. None of them moved anywhere, and that's why we use the tape, to keep them all straight. And that's it.

HATTIE: (Voiceover) Anything from acrylic to aluminum to window to vehicles, all in a matter of minutes.

GARY: Not only did we create a niche that really wasn't being serviced properly, but no one cared about it, either.

HATTIE: (Voiceover) Today there are nearly 500 franchise locations worldwide. The typical FASTSIGNS is located in a strip shopping center much like this one in Arlington, Texas, owned by Myra and Dan Phillips.

What has surprised you about owning a business?

MYRA PHILLIPS (Owner, FASTSIGNS Franchise): How much work there is. How dedicated you have to be and how much fun it is, actually. You get to know a lot of people, you get to be creative, you just get to do a lot of things.

HATTIE: Do you have a lot of repeat customers?

MYRA: Yes, we do. We do have a good mix of a lot of repeat, and at the same time we always have the percentage that we should have of new customers all the time, which is understandable. This area has a lot of growth. So I think we're going to have a lot of new customers.

HATTIE: Tell me how you find people.

MYRA: Well, I had a banner up there, and he walked in. And I think I hired him the same day, didn't I, Will?

WILL (Employee): Yes.

HATTIE: Was it a good idea? You glad?

WILL: I think it was a good idea, because I enjoy working here.

MYRA: All right.

HATTIE: So you put the banner up--`Now Hiring'--that you have up now.

MYRA: Yes. It has...

HATTIE: And that's how you got Will.

MYRA: It has worked pretty good, better sometimes than spending a lot of money in newspaper ads, which I have done before. And it has not worked out well, as the banner. It just...

HATTIE: So what you're saying is, you sell signs and you use signs to build your business.

MYRA: To build my business. Exactly. And that's what I tell my customers, too.

MIKE MACKEY (Consultant): They're a part of the community. They establish relationships with their customers and thank them, and they keep coming back.

HATTIE: (Voiceover) Mike Mackey works for FASTSIGNS as a consultant to a small group of franchisees.

MIKE: Face it: To some degree, signs can be something of a commodity, but the people here in Arlington, Texas, enjoy doing business with Myra Phillips.

HATTIE: So you ran for school board, huh?

DAN PHILLIPS (Owner, FASTSIGNS Franchise): Mm-hmm.

HATTIE: And you won?

DAN: Yeah.

HATTIE: Have you had a meeting yet?

DAN: Oh, yeah. That was last May. I've been on it almost a year now.

HATTIE: Oh, OK. All right. How important were these signs to your election?

DAN: They were important because a lot of people knew my name, but a lot of people didn't know who I was. In other words, a lot of people already knew me by seeing me and a lot of people probably knew my name, but they didn't put the two together. By putting this up, people knew who I was, and put my name in with my face.

HATTIE: GARY, tell me about the first time you put the FASTSIGNs plan in writing.

GARY: Well, it was over breakfast on a napkin, and Steve Mailman and Bob Schanbaum and I sat down and talked about exactly what we were going to do and how we were going to do it, and that if it worked out, we'd franchise. So, you know, that napkin was filled up.

We never really sold a franchise to someone that had been in the sign business before. We were selling franchises to people that had been professional managers and marketers and salespeople, and said, `Now this technology will help you compete in an industry that you probably didn't know anything about before.' We operated a very lean, mean, effective franchise machine. We didn't have the money to lose, so we made darn sure that we didn't, and there was quite a number of years where I didn't take any money out of the business, which was fine, because I had a previous business that I sold off that I was able to live off of.

HATTIE: Did the two of you--the two partners, just scrape together some cash to lease your first retail space and buy equipment? I mean, how did you get the cash together?

GARY: We used our personal funds and also got a loan from a bank, not a big loan, but got a loan from a bank in order to set up the first store, and that's pretty much how we did it. It wasn't a lot of money. I mean, we put together, I think, about $40,000.

HATTIE: And you got the first store up and running for that, but did you also keep your other job going? Is that what you said, in that first 10 months?

GARY: Yes, I did.

HATTIE: All right. So again, when people start businesses, it's not magic. I mean, it's not like, instant. It's not like...

GARY: No, there's no silver bullet, there's no question about that. I mean, you're a jack of all trades, you're juggling. It's like herding cats. I mean, you are--when you don't have systems, when you don't have a franchise program to get into where all the job descriptions and all the definitions of what you're supposed to be doing are nailed down, you're learning on the go, and it's very inefficient, and it's very frustrating, but it also gives you the opportunity to truly learn hands-on.

One of the best experiences I can tell you about is we had a store that I was a partner in. This was after we started franchising. The store was not getting off the properly and I went up to allow the owner to get out of the store and I did all the telemarketing appointments. An individual walked in at the time and wanted to know where to get some gold medallions for the back of an envelope. He obviously wasn't interested in a sign. Anyway in the process he said, "I own an ad agency and last year we lost a large account because the sign company couldn't deliver on time and that was a tennis tournament."

Obviously I was sorry he lost the account and I showed him which direction he needed to go to get those gold medallions. And I went back to the telephone and started calling every single country club and tennis club in town to find out when is its tennis tournament that this guy obviously lost last year. I came to find out it was the Virginia Slims Legends and we nailed that account.

HATTIE: New franchisees attend extensive training programs. I asked some of them, `Why FASTSIGNS?'

Unidentified Woman #1: We chose FASTSIGNS because it was business to business, so it suited our lifestyle, and it was one of the best performing sign companies in the world. And we came over to America to observe the sign industry as you do it in America, and decided that that was a good sort of business for us to go into.

Unidentified Man #3: Well, I decided it was time to take control of my own destiny, and I have a friend that's had a FASTSIGNS business for about seven years. He's done extremely well. And he's been working on me for a long time, so here I am.

HATTIE: What were you doing just before you decided to buy the business?

Unidentified Man #4: Before getting into this business, I was a commercial banker for about 20 years.

HATTIE: Wow.

Man #4: And...

HATTIE: So you saw a lot of good business numbers and bad business numbers.

Man #4: That's exactly right. We saw the companies that succeeded, the ones that failed. We looked at the reasons why they succeeded and failed, and when I compared that background, when I developed into the FASTSIGNS operation and the people, I clearly saw a winner.

GARY: Sometimes we have had situations where franchisees who were interested in buying the business had more enthusiasm for it than they had probably the background or the capability to do it and we've had to turn them down.

We had an individual who came to us a number of years ago that was an engineer and engineers are typically not great sales and marketers. They're usually very wonderful at detail work and they're very good at follow through and they're good at following a system. But our business also requires someone who is good at sales and marketing. But this was an engineer that was frustrated with being an engineer and he had a wonderful personality. You could tell he was stuck in this engineer box and he was screaming to get out. He turned out to have a very successful business. We've also had some CPAs come on board that also fit the same characteristics. They didn't like being a CPA and they wanted to go out and have a business of their own and they had the willingness to go out and do some stuff that quite frankly they hadn't done before. But they had the energy and they had the commitment.

HATTIE: You even have a new franchisee in your training right now who was a banker.

GARY: I know. I don't know how we managed that. He must have slipped through the cracks.

HATTIE: A banker!

GARY: I hope he had a real easy time getting his loan.

HATTIE: (Voiceover) Franchising is responsible for 50 percent of retail sales--almost $1 trillion.

GARY: On this entire end of the facility, you've got everything from operations...

HATTIE: (Voiceover) Don DeBolt is the president of the International Franchise Association. He came in from Washington to see FASTSIGN in action.

DON DeBOLT (President, International Franchise Association): The International Franchise Association is the world's oldest association representing the franchising community, and what's unique about it, we represent the franchisors, the franchisees and the suppliers. And we all come together with a unified voice to speak on behalf of franchising whenever there's a regulatory or a legislative issue, or any other issue that affects the franchising community. We're there to protect.

HATTIE: Gary, all the the FASTSIGNS people, are members of IFA. What is their greatest benefit? Why do people join the IFA?

DON DeBOLT: I think Gary would say networking is one of the major things that he gains from IFA; the networking with other franchisors to learn how to operate our business better. This was a very young company. Just 13 years ago it started to franchise. So, I mean, it's been pretty exciting for them, and where did they go? They went to other people in franchising they hooked up with through the International Franchising Association to learn how to do it better.

HATTIE: Why are franchisees so successful?

DON DeBOLT: First of all, they're in business for themselves, but not by themselves. They have their franchisors, their peer group of franchisees to help them along the path. All of the obstacles that any small business faces are still going to be faced by the franchisee, but they're going to have a lot of support and help. When you acquire a franchise, you acquire a recognized trademark or brand name, a proved operating system that's perfected year after year. And, of course, the marketing and advertising support that makes that brand more recognized in the marketplace. But most important, continued training and support by the franchisor and the other franchisees in the system.

HATTIE: All right. So the odds are greater that a franchisee will succeed over a start-from-scratch guy.

DON DeBOLT: I think just look at the record. There are over 500,000 franchisees in this country today who figured out it was better to open up under a brand name that was recognized in the marketplace than Joe's Hamburger Stand.

HATTIE: All right. How many franchise concepts do we have to choose from?

DON DeBOLT: Well, there's a varying number, from 2,000 to 3,000 franchise concepts out there that you can select from. We know there are at least 2,000 very serious concepts that are major players in the franchise field today. So you have a lot of choice, and most importantly, 70--70 different industries.

HATTIE: What have you learned about the ones that do it right?

DON DeBOLT: The ones that do it right are in partnership with their franchisees. FASTSIGNS is a terrific example of that. They have over 400 franchise--and this is after 10 years of franchising--they have 400 franchisees out there. My suspicion is, if you went to the annual convention of the FASTSIGNS operation, you'd see a bunch of happy people that are really bonding and very proud of the affiliation they have with this company, and I think if you'd go to many other franchise conventions, you'd experience the same uplifting, rewarding--and see a lot of passionate people.

GARY: I had been operating as a franchisee of another system, of a direct mail dealership. So I had some idea as to when a franchise is run properly, what you get and when it's not, what the frustrations are of a franchisee. So I brought that to the party.

But probably the biggest `ah-hah,' for lack of a better term, was when I went to meet other franchisors at some seminars, one of them that was put on by the IFA and another one that was just a separate--I guess an offshoot for doing franchising. And I sat down and bought a couple of beers for some fairly well-established franchisors--one of whom was Tony Martino of AAMCO, and then--now MAACO; another one was Fred DeLuca, of Subway Sandwiches--and just asked them a whole bunch of questions. And you can't just take whatever these individuals say as that's the way you have to go. You have to assimilate it, and you have to extrapolate what works for your particular concept, and also how you want to create the culture of your own business. And I picked up some pearls that have definitely helped form the way this business is run today.

The Lightbulb in the Studio

HATTIE: You don't have to invent a product to own it. Gary saw the technology. By striking a deal with the inventor, he learned how to use it, and, with vision and sweat equity, he became a leader in his market. You don't have to be the inventor to be the owner.

At Small Business School.org there are plenty of resources about franchising. Follow links from the Overview and read the entire transcript and study guide for this episode. Learn about five other franchise stories and even go to the Wall Street Journal.

HATTIE: (Voiceover) The FASTSIGNS leadership meets every Monday morning.

GARY: Steve.

STEVE: Just a couple issues. This week we're working with Alternative Living. It's a company that's been turned in by Chris Rose. They have 400 locations that they're doing a name change with. They want them done rapidly.

HATTIE: Who has an idea, or a theory about why this particular group of people sitting around this table gets--why do you get things done, why does this group work well?

Unidentified Man #5: This team works well as a group because, like I said, a number of people have had their own businesses here, and we enjoy also working in the--getting entrepreneurs started in their own business.

Unidentified Man #6: It's probably the fairest organization I've ever worked for.

HATTIE: What do you mean by fair?

Man #6: Gary, Don, everybody sitting at this table really takes the time to listen to all sides of every story to make a decision.

Unidentified Woman #2: I guess I'm here because--right now I'm here because Gary cares about everyone who works here, as well as cares about the franchisees.

GARY: You have to work through people a lot more than when you're running a smaller operation. The typcial store in our system has anywhere from four to eight people. The larger stores maybe have ten or twelve. You can keep your hands on all that is going on, to a certain extent, in an environment like that. When you have a staff of 75-80 you've got to work through people and you've got to make the shift from being an entrepreneur to being more of an organized business.That's a threshold that I had a great deal of difficulty coming through many years ago.

HATTIE: How did you get through it?

GARY: I finally decided to stop meddling with what they were doing. In the beginning I had to keep everything in my head and after awhile it became evident that while that fed my ego it didn't allow the people that I had hired, put in place and paid a decent wage to be able to be fulfilled by what they were doing. Because you put people in place you have to let them do their job properly.

The more people we attracted over time the more I was looking for the areas that I was not really the best at. I'm great at ideas, I'm great at marketing, I'm great at sales. But when it comes to the day in and day out activities of management, that's not my bailiwick.

GARY: I try to keep things as simple as possible. Basically, I try to have people get the feedback they need in order to be as productive as possible and I try to reward accordingly. I think the bottom line is I don't have much of an ego. I'm not really interested in as much being right as I am interested in having the best result or the best solution, and if it's not my idea, I really don't care. I'd rather it just be, you know, the best idea.

When you have that attitude, people aren't afraid of giving you an opinion, because they know they're not going to be shot down. And as a matter of fact, you know, while I sometimes have some excellent ideas, I'm sometimes showed the door, in a manner of speaking, as to how unreasonable that idea might be. But what it does is, is it fosters the ongoing embracing of ideas coming from other people, because they know that it's going to be considered, and that we mean it.

So, you know, does that necessarily mean that you always get the right solution to a problem? No. But at least people aren't afraid of offering it. And I think that, you know, compensation is a part of keeping good, quality folks, but it's not really the top item. It's creating an environment where people feel like they can make a difference, and that they're being listened to.

I think one of the most rewarding things in the world, if you're running a business, is to know that you underpromised and overdelivered beyond their wildest expectations. And that's pretty much the postulate by which we run the FASTSIGNS franchise system. We want to surprise people. We want to make sure that they understand that we could have done this, but we did that. And that franchise agreements, or any agreement, whether it's by written agreement or by handshake, are the basis by which you move forward, but what you do above and beyond that is really how you build the relationship.

HATTIE: Is that transcendent to anything, any business, and that is promise this and give this?

GARY: I think it's in any relationship, whether it's business where money changes hands, or whether it's personal. I mean, if you exceed the expectations of the individual that has some expectation, you're usually going to create a pretty darn good relationship, and I think that with--in franchising, that's always the case.

HATTIE: (Voiceover) Gary's smilling because he's helping so many make their dreams come true.

HATTIE: (Voiceover) Gary's just one of thousands involved in franchising. Blair Taylor, who owns an Athlete's Foot store in Los Angeles, is committed both to franchising and to urban development.

BLAIR TAYLOR (Owner, Athlete's Foot Store, not far from Watts in LA): I came from a background of sales and marketing. And when I wanted to make the transition into entrepreneurship, there was no better vehicle than to utilize a franchise concept, particularly one that was well-established and had a track record of success, because that helped us to get off the ground very quickly, especially when you're going into a new market like an urban market. The urban marketplace has typically been a little underdeveloped. We saw that as an opportunity, and we wanted to marry ourselves to a leading-edge franchise concept so that we could get into that market with a name brand concept and have all the success that's associated with that.

HATTIE: Why do you think so many folks are afraid to do business, or to come into--bring their businesses into urban areas?

BLAIR: Well, you know, I think there's a lot of misconceptions about the urban marketplace on the part of major retailers and on the part of small-business people as well. Sometimes I think there's a misconception that folks believe there's not enough business to be had in the urban marketplace, which if you look at, for example, the consumer of athletic footwear, a large percentage of athletic footwear consumers and a large percentage of the dollars spent are coming from individuals who live in communities like Compton.

Typically, what's happened, though, is that those individuals are going out of their community to buy those goods and services, and so our concept was really to bring those goods and services right back to the home location. And when you get into the question of why do major corporations have some issues with urban development, I think there's still a lot of stigmas attached, there's still a lot of misunderstandings about what the urban marketplace is, and what it can be. And I think one of the things that we have positioned ourselves to be is a vehicle to help some of those companies really understand, `Hey, there is a viable business opportunity here.' It is a wonderful growing community and with the right model and approach to store development, there's some great things that can happen in those partnerships.

HATTIE: OK. Does this store make money for you guys?

BLAIR: Absolutely. This is probably going to turn out to be our most profitable store, and it already is well en route, even after six months, to being just that.

HATTIE: Dr. John Hayes writes and speaks about franchising.

So what advice can you give someone when they're trying to figure out, `Should I buy a franchise?'

JOHN HAYES: I think the first thing they've got to think of is franchising is sort of a wheel with a lot of spokes in it. You invest in that wheel from the very first day, and you continue to reinvest in the wheel, in the spokes of the wheel, because the more spokes there are and the sturdier the spokes, the faster the wheel will spin and the faster the wheel spins, the more money you're going to make. So you've got to, number one, be willing to invest in it from the outset. There's going to be a franchise fee, there's going to be royalties, there's going to be advertising fees. Accept that.

Number two, follow the system. You've got to be willing to follow somebody else's prescribed operating system. They've already gone out and tested it, they've done it, they've proven it, it works, just follow it.

And third, make a commitment to being trained and retrained and retrained, not only for yourself but for the people who work in the franchise with you, because there are always new products, there are always new technologies, there are new problems with customers and with employees, and you've got to be trained on those concepts, and the franchisor will do that for you.

HATTIE: (Voiceover) Learn more from John at hayesworldwide.com.

HATTIE: (In the Studio) For more information on franchising, visit the International Franchising Association's Web site, franchise.org.

What lessons can all business owners learn from Gary even if you don't want to franchise your business? We can learn that by putting teachable systems in place we will no longer be a slave to our business. FASTSIGNS has also embraced technology and they have moved their best business practices to the Web. They're making sign and graphic solutions simple to create and order from your desktop. And remember, you don't have to invent a product to own it. We'll see you next time.

The Closing of the Show