Franchised businesses have grown to be so commonplace in our daily lives that we give little thought to their creation. But, as three Iowa-based franchisors in different stages of growth share with us, franchising doesn’t just happen overnight. A lot of deep thinking and research goes into taking this big step.

Bob Bowers, a business adviser with RLB Cos. in Des Moines, has helped to start many businesses, and he’s found that Iowa has some of the most stringent franchise laws in the country.

“About 20 states have something as difficult as ours, and about three have stronger requirements,” Bowers said. “Iowa has strong requirements to protect the people and make sure everything you’re offering is represented truthfully and factually.”

Though the laws may mean waiting approximately a year to get approval for franchising, the choice to start in Iowa has its advantages in the long run, Bowers said.

“One of the reasons we wanted to file in Iowa is that the rules are strict and they will meet most any other states’ guidelines,” he said.

Bowers is working with Eyebead Gemstones Inc. as the West Des Moines-based store prepares to offer a franchising package in June. Find out where the owners are headed with the business during this transition time. The Pizza Ranch Inc., which has just been in business 23 years, appears to be at its prime right now, doubling the number of stores it opened last year. Medicap Pharmacies Inc. was purchased in December, and following the transaction, the last two of the company’s original founders are entering “retirement” in their prime.

JEWELRY STORE PREPARES TO FRANCHISE

Eyebead Gemstones, formerly The Bead Garden, expects to be ready to offer franchises under its name in June, according to Bob Bowers, the store’s business adviser.

“If I were to pick a date, it would be sometime before the end of June,” Bowers said. “It would probably start in the Midwest and work outwards.”

Eyebead Gemstones opened in Valley West Mall in May 2002 and in Valley Junction this past November. The Valley Junction store at 214 Fifth St. will be the permanent headquarters and training center for franchisees when the mall store closes at the end of June, said store co-owner Brent Long.

Long has been in the jewelry business for most of his life. He got an early start working with his dad in the 1960s in Texas but left the business to move to Iowa in the late 1980s. He worked a variety of jobs, including sales and commercial landscaping, but in 2002, he and his wife, Mary Jane, decided to go into business on their own.

“The landscape business didn’t fulfill my drive,” Long said. “I like to go do things. I enjoy the adventure. The mall came open and I said, ‘Let’s give it a shot.’”

The adventure part for Long comes in the “sourcing,” the gathering of gems and products to sell. He goes overseas a few times each year and hits places such as to cultured pearl farms and turquoise mines. Strands of his stones start at $3 and go on up into the thousands of dollars.

“The stones are my passion,” he said. “With different grades of stones, you can’t just trust the Internet when you want to buy. You have to go to these places and see for yourself the polishing, the quality and the cuts they can do.”

When Long isn’t traveling, he’s on the phone and the computer doing sourcing about five hours each day. Mary Jane designs the jewelry from the cuts that he orders. In the relatively short time the Longs’ stores have been open, there’s been an encouraging string of customers from all over the world.

“We’re very competitive,” he said. “With over 30 years in the business, I can pull all that knowledge that I’ve learned and compete on a national scale.”

In addition to the strong patronage his stores have experienced, Bowers said there are three main market influences right now that suggest that Eyebead Gemstones will be a success on a national level. Two are the factors are trickle-downs of the first one, which is women’s growing presence in business and community leadership positions and their demand for jewelry.

“People prefer to have decorative accessories which are unique to them as opposed to mass-produced items,” Bowers said. “The store concept allows the one-of-a-kind product to be available to customers at reasonable prices because of the very reasonable labor costs in the countries where these stones are mined.”

Long said a major reason he’s proceeding with franchising is that there doesn’t seem to be anybody else who has a store like his, which he intends to capitalize on. By expanding Eyebead Gemstones’ name, the business can secure its name and place in the national market.

“Franchising will give me better buying power, which will probably lower the cost of the stones and help everybody out along the way,” he said. “Sourcing is what I want to do, and if I can spend more time doing what I’m best at, it will be profitable for everybody involved.”

Long anticipates six to 12 franchise stores opening during the next year. The new store at Valley Junction will also function as a “gemstone university” where Eyebead Gemstones’ franchisees can learn the business. A legal review of business performance and final approval from the Federal Trade Commission are all that stand in the way of getting started.

“The plan looks really good,” Bowers said. “The question now is executing that plan. The business has some great potential, and now it’s a matter of executing it.”

PIZZA RANCH FINDS NICHE IN SMALL TOWNS

Adrie Groeneweg sold his first Pizza Ranch franchise for a whopping $2,500, with the help of a franchise lawyer, whose fees totaled $4,200.

“If we had never opened another one, it wouldn’t have been a very good deal,” Groeneweg says with a laugh.

Now, 23 years after the first Pizza Ranch opened, the plan is to have 120 stores in seven states by year’s end. Groeneweg says the only things about the business that haven’t changed since the first Pizza Ranch are the recipe and him.

“We’ve added a lot more to the menu to appeal to the wider group,” Groeneweg said. “We have four crusts and three sauces. We’ve added chicken and a buffet seven nights a week.”

Just a year after graduating from high school, Groeneweg started his first pizzeria in his hometown of Hull, a community of 1,800 people in Northwest Iowa. Two years later, he opened a second restaurant in nearby Orange City. Shortly after, the idea of franchising entered the picture.

“A guy from Minnesota called me up and asked to buy the recipe, but our lawyer thought that franchising would be the best way to go,” Groeneweg said. “The only franchise lawyer in Iowa at that time was Brian Pingel from Des Moines, and he was the one who had gotten Godfather’s going, so it worked out well for us to work with him.”

The Pizza Ranch story is grounded in small-town America. A typical market for the restaurant chain is one with around 5,000 people, Groeneweg said.

“The smaller communities of 20,000 or less are really what we like,” he said. “You can become involved with the community and it goes back and forth. In the big cities like Des Moines, it’s different.”

Groeneweg said Pizza Ranch franchisees and managers are connected personally to their communities and contribute positively to schools and civic groups, which makes the restaurants a source of pride for small towns.

“In most of our stores on Monday night, we have different groups come in to work,” he said. “They work the night and they get a portion of the proceeds plus tips for their work.”

Almost every Pizza Ranch has a special story, he says, such as when the manager of the Orange City franchise found out that a female employee had cancer. The restaurant had a benefit night, in which it provided free food but suggested that patrons donate money to help defray the women’s expenses. A total of $15,000 was raised.

“Ninety-five percent of the time, somebody calls us and says they know of a town that would be perfect for a Pizza Ranch,” Groeneweg said. “We don’t really have to spend time marketing our name to them.”

The growth of Pizza Ranch has been steady, with eight to 10 stores added each year, but the chain expects to double that rate in 2004.

“We never had a year of huge growth where it just took our socks off and we got behind,” Groeneweg said. “We’ve added about eight to ten stores per year, but this year, we’re looking at adding 18.”

The anticipated growth spurt is connected to the chain’s recent success in Wisconsin, a new market where Pizza Ranch plans to focus its attention this year. Restaurants tend to open in areas where their reputation is already established, Groeneweg said.

“What we don’t like to do is go 100 miles past our closest store, because then you start losing the brand name of the Pizza Ranch,” he said. “If you stay in your area, then people recognize you and know that we have great service.”

MEDICAP’S SALE PROMPTS RETIREMENT OF REMAINING FOUNDERS

The orgins of Medicap Pharmacies Inc. can be traced back to 1971, when Russ Johnson opened the Medicine Chest, a drugstore founded on patient care and low prices, in Des Moines.

Johnson was joined by Charles Porter and Bill Kimball within a couple of years. With Kimball’s help, he developed the idea of franchising his methods of operations under the Medicap and began selling the concept to registered pharmacists in the Des Moines area.

“The average pharmacist hasn’t historically had a lot of training in finding a location, marketing, purchasing and general business accounting,” said Kimball, retired chairman and chief executive of Medicap Pharmacies. “We were able to bring expertise in those areas to help the pharmacist be more efficient in their business.”

In marketing Medicap franchises, Kimball found that the idea appealed to many pharmacists who wanted independence. Also, with their out-of-pocket prescription costs being pretty much the same everywhere because of insurance coverage, people began choosing their pharmacies based on convenience and service.

“Very often, the pharmacist wanted to stay in the same community, but was just ready to do their own thing,” Kimball said.

Medicap leads its franchised pharmacists through the business aspects of ownership. The parent company also negotiates prices with lenders. Because of the chain’s total volume, Kimball said, franchises can get better rates than an individual might.

“We’re really turnkey in terms of opening a store,” Kimball said. “We do a feasibility study, help to find a location and supervise everything, including stocking the shelves.”

Kimball said the franchising started out conservatively, with the first franchises in Iowa. By 1981, Medicap had 28 stores. By 1984, its first out-of-state store opened in Minnesota. By the time the company began selling on a national level, Kimball said, Medicaps were opening at a rate of 15 per year. Today, the chain has 182 locations in 34 states, with 23 additional stores in active development.

Now, the three original owners—Johnson, Kimball and Porter—are retired from Medicap. Johnson sold his shares in the mid-1990s and Kimball and Porter recently retired following the December 2003 sale of privately owned Medicap to Medicine Shoppe International, a subsidiary of Cardinal Health Inc. Kimball said the sale of Medicap should be advantageous to the company.

“By the time we reached the point of selling the company, we had put together a good staff that was committed to doing everything to help a pharmacist be successful,” Kimball said. “I think in today’s rapidly changing health-care environment, being under the Cardinal Health umbrella should be beneficial to our franchisees with the resources that they bring to the table.”

The Medicap name will continue to grow, according to Ron Cook, director of communications for Medicine Shoppe International.

“Each brand name will exist in the marketplace,” Cook said. “It will look the same to the consumer, but the best practices of each organization will be utilized by both companies, especially technology and buying power.”

The West Des Moines office, that had served as the corporate headquarters of Medicap Pharmacies, will now be a regional office providing support services for Medicap and franchise accounting for Medicine Shoppe International.

As for Kimball, a man who helped start it all, his plans are to give more attention to the real estate company he operates with Porter. He will also continue to serve on the board of directors of Principal Financial Group Inc.’s mutual funds and Casey’s General Stores Inc.

“I’m 56 years old and too young to retire yet,” he said.