Innovative incentive attracts franchisees

Release date: August 27, 2008  /  Print This     RSS    

Maaco's "money-back guarantee" to new franchisees attracted the attention of the Philadelphia Inquirer, the Wall Street Journal online and other media.

"Maaco Collision Repair & Auto Painting says business goes up in a recession, but it gets harder to find more franchisees willing to pay nearly $300,000 - $75,000 down, the rest borrowed - to start new shops," wrote Inquirer reporter Joseph DiStefano.

"So the King of Prussia chain, owned by the family of the late Anthony A. Martino (he also founded, and sold, Aamco Transmissions Inc.), has eased terms: Maaco promises to buy back franchises and take over loans if new owners gross less than $750,000 in the first 15 months of operation.

"Maaco is extending its risk in hopes of cashing in on recession business. 'I've never seen this done before,' said Ron Feldman, chief executive officer of Philadelphia-based Siegel Capital, a business broker and loan-finder who works with Maaco franchisees.

"The company says it's working. Applicants have averaged 22 a month since the offer started in May, up from 17 as the economy slowed last year, said Patrick Donohue, a vice president. Maaco signed six in July and seven this month, up from an average 2.5 per month earlier this year, said David Laaps, chief operating officer."

The Wall Street Journal online noted:

"To accelerate its expansion plans, and reduce the uncertainty of would-be franchisees about buying one of its car-painting shops, Maaco Enterprises Inc. recently introduced an extraordinary proposition: If after the first year a new franchisee hasn't achieved a certain sales level despite having operated a "first-class" business, the company will buy the franchise back. Certain conditions apply, including using sale proceeds first to pay off loans outstanding and any money due Maaco.

"Company president David Lapps expects that in the current credit environment Maaco's guarantee will make banks weighing loans to prospective franchisees 'much more comfortable with the investment, because it's somewhat underwritten.'"