It was the real deal that counted as Greg Muzzillo set out to franchise Proforma

Recruit the qualified
In 1978 it had been easy and inexpensive for Muzzillo to begin his business — he started with only $200. Within a year, Proforma racked up $250,000 in sales.
“Within a few years, we were a distributorship of printing and promotional products,” Muzzillo says. “We started on a shoestring, but through just hard work and determination and some good luck, we were able to grow to several millions of dollars quickly.”
But it wasn’t all that simple. Muzzillo was working with an erroneous impression.
“We were clearly undercapitalized to do what we did,” he says. “I thought franchising was a model where you use other people’s money as a type of venture capital, and that was really stinky thinking.
“It was very wrong, because people who give you money to join a franchise want 10 times as much value back.”
A company should be adequately capitalized to deliver both on the promise and the premise for why the people bought into the franchise, Muzzillo says.
“The real Herculean task was trying to keep those people happy even though we didn’t have all the resources that they demanded of you to help them grow from $1 million to $2 million, while you’re still recruiting other franchises.”
To further complicate the situation, when you recruit a franchise owner, there are disclosure laws unlike any other business — almost like going public, Muzzillo says.
“We had to disclose to all our franchise owners we were trying to recruit the names, addresses and phone numbers of all the franchises in the system. So when a prospective franchise owner would call up an existing franchise owner, if they ever said, ‘No, these guys aren’t doing what they said; we’re not really happy,’ we would’ve been dead.”
Selling on a wing and a prayer
If a company has a better idea and it wants to sell franchises, it needs a workable business plan — well planned and detailed.
“We figured our business model out on the fly,” Muzzillo says, as an example of what not do to. “Even though Proforma as a distributor was successful and was profitable, we had never really franchised it. I think a big part of the reason why we were successful was because Proforma itself — that multimillion-dollar distributorship — was successful, and it worked. And in today’s world, I see a lot of people trying to franchise on an idea.”
That method is usually not profitable and efforts are often unsuccessful.
“They think they can franchise on an idea, and that’s just not a good model,” Muzzillo says.
Few businesses realistically can be franchised. If it can only be functional in one place, you won’t be able to repeat it elsewhere. With an outstanding product or service that generates buzz among potential business owners, it’s a much easier job to sell franchises.
In the early going when you are starting to sell franchises, much depends on your message to the potential owners, and if you can deliver on your promise.
“You’ve got to recruit people who want to be a franchise owner in your system, even though you’ve got nothing going for you,” Muzzillo says. “Try going to distributors and saying, ‘We’ve got a better idea than you operating all alone. Why don’t you join us because we have a better idea?’”
An engaging and natural salesman, Muzzillo convinced his wife Vera, who is now CEO, to leave the banking and finance world to join Proforma.
Among the steps the Muzzillos took were to reduce the number of underperforming owners, increase the credit requirements for prospective owners and improve the financing leverage for franchisees and developing better relationships with them.
“People in the industry saw that we had sales and marketing tools, the training program, the support in the field and the purchasing clout with the vendors that gave us better pricing and better service than they could get on their own,” Muzzillo says.
“We could free them from all the back-office efficiencies so that they’d have more time to go sell, go grow a business and have fun.”
Peer advice worth millions
One of the practices about franchise building that may not receive its share of the limelight is the value of peer advice.
“Go hang out with people who know how to do it, who already get it,” Muzzillo says.
Muzzillo was to continuing to build the franchising effort, but it was still hard work.
“It was way easier to tell people what we were going to be someday,” he says. “Then, in the ’90s, we were becoming it and people could see it.
“One of the things we did was to join the International Franchise Association early on. I spent as much time as I could at that association, at meetings, trying to figure it all out.”
That networking effort from the early years was paying off. Muzzillo was named to the association’s board of directors where he met franchise kings from companies such as Dunkin’ Donuts, McDonald’s and Subway.
As a result of his being on the board of directors, Muzzillo met Fred DeLuca, co-founder of Subway, and the two became personal friends. After discussing his franchise situation with DeLuca, the Subway exec and his partner Peter Buck agreed to inject capital into Proforma, which at the time needed capital to improve its headquarters and expand.

“I was able to learn from the trade association and learn from the network of people I built,” Muzzillo says. “A number of them gave me unbelievable advice. To this day, some of that advice is worth millions of dollars.”

 

Takeaways:

  • Recruit the qualified candidates to own franchises.
  • Prepare all steps of your business model and then sell.
  • Get advice from your network and peers.