State’s Top Franchise Cleans Up on Rugs

Some of California’s top-ranking franchises have prospered by selling affordable businesses reflecting the California life style--real estate and fitness. But at the top of the list is something a little more mundane: clean carpets.

Chem-Dry Carpet Cleaning, Century 21 Real Estate and Jazzercise lead the list of California firms on Entrepreneur magazine’s list of top 100 franchisers in 1988. The magazine ranks franchisers based on years in business, start-up costs and growth.

Robert Harris, founder and president of Chem-Dry; Richard J.Loughlin, president and chief executive of Century 21, and Judi Sheppard Missett, founder, president and choreographer of Jazzercise, have all created strong, supportive franchising companies, according to franchise industry experts.

All three offer affordable franchises. Jazzercise is the cheapest, charging $500 each. Century 21 charges between $12,000 to $25,000, depending on the region. Chem-Dry, which features a carbonated cleaning process, sells franchises for $9,400 to $13,000 each.

And no formal complaints are pending against the companies by state officials, according to the Department of Corporations’ enforcement staff.

Each of three is headed by an individual who has built it from scratch and watched it prosper.

Has 2,000 Franchises

“I had no intention of starting a carpet cleaning business,” said Robert Harris, who began cleaning carpets in 1977 to put himself through Brigham Young University. When the business began to grow, Harris left law school to devote all his time to the company.

Today, Chem-Dry, based in Cameron Park near Sacramento, has about 2,000 franchises worldwide. Until 3 1/2 years ago, the company did not advertise at all, relying on word-of-mouth recommendations to sell virtually every new franchise, Harris said.

Chem-Dry features a carbonated cleaning process. “We are typically the most expensive carpet cleaners,” said Harris. “We are not cut rate, and we have the reputation of being the quality one.”

The privately held company reported $12 million in sales and $6 million in profit last year. Harris said Chem-Dry generates 64% of its profit by selling cleaning products and equipment to franchisees. One reason for Chem-Dry’s financial success is that it manufactures all its own products.

“Our chemistry department develops the products,” Harris said. “We do everything ourselves and cut out the middle men.”

Harris said the next big step is to sell cleaning products directly to customers. “Our people are in 10,000 homes every day and we already have credibility,” he said. The first Chem-Dry consumer product will be a concentrated laundry detergent called “Dirt Wrangler.” While Harris’ franchisees are busy cleaning carpets, Richard Loughlin’s 7,000 franchisees are busy selling houses around the world.

$60 Billion in Deals

“The concept of regionalization in franchising was virtually unheard of when we came into it in 1971,” said Loughlin. “Our primarily clients are the people who run the regions. This keeps the management at a very local level.”

Based in Irvine, Century 21 divides the country into 25 regions and has 6,200 franchises in the United States alone. In 1988, its agents participated in more than $60 billion worth of real estate transactions and earned $2.4 billion in commissions. The company, which is owned by Metropolitan Life Insurance Co., posted $126 million in revenue and $35 million pretax profit for 1988, Loughlin said.

After working for several real estate trade associations, Loughlin joined Century 21 in 1972 and purchased the Northern California region. He headed the region until 1981, when he sold it back to the parent company with plans to buy another business. But he said he was pleased to serve as president of the company when Century 21 asked him.

Loughlin, who spends about a quarter of his time visiting the regions and dealing with regional managers, said he supports the Federal Trade Commission’s proposal to streamline and unify the regulations covering franchising.

“I’m very happy to see federal control,” he said. “Now each state is different. Every time the state administration changes, the franchise law changes, and it creates a tremendous amount of extra work.”

California’s No. 3 ranked franchise is Jazzercise. The company, founded by dancer Judi Sheppard Missett, ranked 15th in the country and was first among fitness businesses, according to Entrepreneur magazine’s 1988 franchise survey.

Jazzercise founder and President Judi Sheppard Missett was in Japan last week and was unavailable for comment.

With a $500 franchise fee, Jazzercise makes most of its money by charging a 20% royalty fee. The royalty is high compared to the average royalties of 5% to 8% charged by other franchisers, according to franchise consultant Ed Kushell. But Kushell and others said the low franchisee fee makes the business an attractive one. Franchisees provide their own space for classes. Every two months, they receive videotapes with two dozen new dance routines developed by Missett.

Missett, a professional jazz dancer, started teaching classes in Evanston, Ill. in 1969. Concerned about the high drop-out rate among adult dance students, she created a blend of jazz dance routines and aerobic exercise to keep the students’ interest.

In 1972, she moved to San Diego County and formally launched the company. Jazzercise’s worldwide franchises gross $40 million a year and trains and supports 3,900 instructors, according to a company spokeswoman. With 400,000 students worldwide, the company believes Jazzercise is the world’s most widely taught fitness program.