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Executive Summary
Company. Big Frog Industry. T-shirts, apparel, franchising Key. Company aims to maintain rapid growth rate.
The business axiom that growing too fast is more trouble than it's worth smacked Leeward Bean in the face in 2011 — just when things were getting good at his franchise-based custom T-shirt company.
The business, Dunedin-based Big Frog, was in year four of selling/awarding franchise rights. From 2008-2010 it awarded a total of 22 franchises. In 2011 alone it sold 20 units — a fast yet frightening boom.
“We went holy crap on a cracker,” says Bean, CEO of the company, better known as chief executive frog. “Now we have to support these stores.”
Bean and his team were able to provide the support. Four years later the company remains on a growth track, and now it's more manageable. Big Frog, now with 59 franchisees who operate 62 locations spread through 21 states, had $14.41 million in system-wide revenues in 2014, up 26.8% from $11.36 million in 2013. Executives project at least $18 million in 2015 sales.
Big Frog is run out of a 3,400-square-foot office on Main Street in downtown Dunedin, where there are 10 corporate employees. Bean, 66, recently bought a 1,200-square-foot office next door, space for more franchisee support staff. “We are really pleased with how things are going,” Bean says.
More pleasant growth: Average annual revenues per store at Big Frog jumped 217.5% from 2010 to 2014, from $117,545 to $273,283, according to company franchise data. That figure is up 12% in 2015, Bean adds.
On a store-by-store basis, four locations in the chain did more than $400,000 in sales in 2013, while five stores surpassed $500,000 in 2014. This year, says Bean, two stores are projected to hit $700,000 and four more are in reach of $600,000.
Average annual sales per location are important to Big Frog because those are the unit economics prospective franchisees see. It's so important, that even with the recent positive growth data, Bean's top priority remains the same: Shift the bell curve of unit economics, so the lowest 10% do a bit better, the middle 80% improve and the top 10% get even bigger.
“That's the number everyone looks at,” Bean says. “That's the key to making this whole thing work.”
Big Frog is moving the curve in several ways. One is through expanded training for franchisees, both at the firms' offices, in what it calls Big Frog University, and at its annual franchisee trade show, the Frog-a-Thon. In addition to training, networking and seminars, Bean gives an annual State of the Frog address at the Frog-a-Thon. The company also recently hired two full-time business coaches who will work with franchisees on revenue goals and other tasks, through weekly phone calls and in-person visits. Bean plans to add three more coaches to the payroll in the next year or so.
Break down barriers
The work with franchisees is paying off. Take Tim Campbell, one of the few franchisees to have two locations. Campbell bought an existing store in 2013, and has since doubled the space there. He opened a second location over the summer. Both stores are north of Atlanta.
A former executive with foodservice giant Aramark, Campbell says Big Frog, with the right balance between structure and freedom, has been the perfect exit from the corporate grind. The firm's franchise philosophy, he says, allows him to make a lot of his own decisions and use his artistic “closet hippie side” without being totally on his own. “This is isn't the typical franchise, like McDonald's, where there is only one way to make a French fry,” says Campbell.
Working with people like Campbell, and in T-shirts, is a big shift for Bean. His first career was in cameras and film, when he ran worldwide business imaging for Polaroid Corp. In 1991, Bean and four partners co-founded a fiber optic research firm, Dunedin-based Ocean Optics. A U.K. company bought Ocean Optics in 2004 for $50 million, and Bean found himself semi-retired.
In 2006, two other former Ocean Optics executives, Christina Bacon and Ron DeFrece, approached Bean with an idea. They were going to start an Internet-based, geek-friendly novelty store. They asked Bean if he would join them, both for capital and advice.
Bean joined the venture and a few months later, with a $60,000 startup budget, the trio added T-shirts. Not wanting to do cheap mass-production lines, Bean heard about a high-tech printer that could deliver ink directly to garments. Bean says the machine is “like an inkjet printer on your desk, only on steroids.”
With that machine, the company added a storefront location. Franchising came in 2008.
The printing technology, says Bean, is a core part of the company's success. But just as important, he adds, is the no-job-too-small ethos. To wit: Big Frog has no minimum purchase requirements, no set-up or art fees and offers 24-hour turnaround. “We want to break down barriers for people who want small runs,” Bean says.
Right mix
One big lesson Bean has learned along the way in franchising is that no matter what the business is, be sure the supply chain runs smoothly, from equipment to assembly line. “If you don't get that right,” he says, “that could be devastating.”
That happened to Big Frog recently when some printers, from companies such as Brother and Epson, released second-generation technology. The switch had some glitches, namely not all the new systems worked. “It almost killed us,” says Bean.
Bean ultimately replaced 22 printers in the field, spending more than $250,000 in the process. But that kept the franchisees in business, and was also a pay-it-forward act of goodwill. Which leads Bean to another franchise pearl, something he heard from a friend at an industry trade show. “If it's good for the franchisee,” says Bean, “it will be good for the franchisor.”
An ongoing challenge the Big Frog corporate office faces is finding the right franchisees, a task Bean likens to hiring the right people. That franchisee needs to have the basics, a list that includes a $39,500 franchise fee; $50,000 in working capital when the store opens; and another $100,000 for store build-out, furniture, equipment, fixtures and inventory. The royalty fee, according to franchise documents, is 6% of monthly sales.
Financials is only one part of finding the right franchisee. Big Frog also wants someone with the right mix of creativity and smarts, a person comfortable selling T-shirts for a living.
Bean also follows the advice of management experts when it comes to finding franchisees: hire slow, fire fast. Big Frog, to that point, has dumped franchisees who went rouge, and veered too far from the company's model. Says Bean: “We have learned that it would be better to have no franchisee than a franchisee who isn't good.”
Why ask why
One of Big Frog CEO Leeward Bean's current favorite books is “Start with Why: How Great Leaders Inspire Everyone to Take Action,” by business author and worldwide speaker Simon Sinek.
The thesis of the book, “it doesn't matter what you do, it matters why you do it,” resonates with Bean.
“My core belief in growing is asking questions,” says Bean, in an email. “When you start with 'why' there has to be an answer. The more answers you get from 'why' the better you understand the opportunities. Why people do what they do, why customers buy your products, why customers come back, why don't customers buy, why don't they come back. Once you answer all the 'why' questions, you can formulate a strategy to proceed.”
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