Market RUBDOWN

Market RUBDOWN

Opening 10 massage stores during an economic slump might sound crazy. But growing like that is comfort food to one Gulf Coast entrepreneur.

retail by Mark Gordon | Managing Editor

The old business adage that businesses should try to build during a downturn to be ready for the market's comeback is back in vogue.

Problem is, as much as business consultants and entrepreneurial gurus pump that philosophy, the reality is that many small business owners just can't expand right now.

The lack of financing, the absence of paying customers and the possibility that the economy will get worse before it gets better are just some of the potential hazards.

Then there's Paul Esper. The onetime nuclear submarine engineer has already grown a printer cartridge business from a spare bedroom to almost $5 million in annual revenues, with offices in Sarasota and Tampa. Now Esper is starting another business, just as the economic downturn waddles into chest-deep waters.

Esper, founder of Sarasota-based Laser Rite Business Systems, a business-to-business printing, imaging and copier machine firm, is actually looking to expand in two ways: First, he's planning to grow Laser Rite by opening a retail ink and toner store he's going to call printercartridgeonline.com, an outlet he hopes will be able to capitalize on the growing recycled printer cartridge market.

And in a somewhat more risky move, Esper recently bought into a franchise concept new to the Gulf Coast: He's the lead developer for San Antonio, Texas-based Massage Heights' expansion across Florida's west coast. The company, through Esper's direction and investment as the master franchisee, is planning to open up to 30 stores from Tampa to Naples over the next five years.

Esper spent $285,000, mostly taken from personal savings, to launch the initial Massage Heights store. It opened Nov. 15 in a Sarasota shopping plaza, a few miles south of downtown.

Next, Esper plans to open at least 10 more stores on his own, including one early next year on University Parkway, near a big-growth area just west of Interstate 75. Esper then intends to sell the rights to the other Gulf Coast stores to other franchisees, in deals where he would get half of the 5% royalties.

It's an awful lot of confidence in a concept unproven on the Gulf Coast, and ramping up during uncertain times - a point not lost on Esper. But he believes the therapeutic massage business, under the Massage Heights business model at least, is as close as someone can get to recession-proof. The business model's biggest differentiation claim is that it works off a monthly multi-tiered subscription system, as opposed to a pay-per-massage model.

"Massage Heights brings all the comforts and benefits of a Tuscan spa to Sarasota customers without an excessive price tag," Esper says. "When people get a massage for the first time they are addicted."

'Burn bright'

Esper, 44, is addicted to entrepreneurial successes. He developed that spirit as a young boy growing up in Detroit, where from 12 years old he worked, going from paper routes to busboy to short order cook. He later took a job in his parents' furniture upholstery business.

But it turns out it was a five-year stint in a decidedly un-entrepreneurial environment - the U.S. Navy - that put Esper on the do-it-yourself career path. Esper was stationed on the USS Alaska from 1983 to 1988, where his title was nuclear power plant mechanical operator - he ran the tests for radioactive chemicals to make sure the stuff worked, including handling radioactive waste.

But in between gamma and neutron tests, Esper had time to read. His selections included books such as Napoleon Hill's Think and Grow Rich and Esper's favorite, Entrepreneur magazine. It was in Entrepreneur that Esper saw an ad about starting a toner cartridge business.

And that's exactly what he did when he and his wife moved to Sarasota in 1989, launching Laser Rite from a third bedroom in their house. The first year was the toughest, Esper recalls, as to get by, his wife took a job as a waitress and he took a job with Wells Fargo, servicing and refilling ATMs with cash.

By the second year, Laser Rite started to find a niche in working with small business clients, combining new printing software technologies with more traditional copying work. The next 18 years were marked by a slow-and steady growth to the point where the business now has 25 employees and is on the cusp of passing $5 million in annual revenues.

To reach into a new marketplace, Esper opened an office in Tampa a few years ago, to go with the 20,000-square-foot facility he already owns in a Sarasota office park.

The slow-paced expansion was by design, displaying the conservative side of Esper's risk-taking business philosophy. Laser Rite grew 10% in 2007, from $4.3 million in 2006 revenues to $4.8 million last year; it has grown revenues 33% since 2004. Says Esper: "I've seen a lot people grow too fast, burn bright and then go out."

Good concept

Esper is confident the Massage Heights concept, which was launched in 2004, won't be one of the fast burnouts. For starters, the business model hasn't matured yet, he says, a key for any new franchisee. "The last guy into a concept usually doesn't make it," says Esper.

There are other advantages to running a Massage Heights store, Esper says. That includes having a low overhead, not having any receivables and only selling a small amount of over the counter retail products. A successful store is designed to draw in enough monthly revenue, adds Esper, so that a franchisee can hire an experienced manager to run the operation. Says Esper: "You're not buying yourself a job."

Outside of the concept and business model, Esper believes there is another advantage to opening a Massage Heights store during the tough times: Top-notch locations are available in many areas and at low lease rates, as commercial landlords are eager to rent empty storefronts. Esper's first Massage Heights store, for instance, is in a prime location in the Landings, a high-traffic shopping plaza on U.S. 41.

An initial entry into Massage Heights requires a net worth of at least $250,000, a liquid capital base of $75,000 and $30,000 in working capital. The franchise fee is $42,000 and a franchisee can expect to invest at least $230,000 in a store. Massage Heights stores, of which there are currently about 45 nationwide, tend to be between 1,800 and 2,400 square feet.

In return for the investment, a Massage Heights storeowner, on average, can expect to take in about $100,000 a year in revenues, says Glenn Franson, chief executive of the franchise's parent company. Franson adds that most stores break even after about six or eight months and some become cash-flow positive as soon as one month after opening, the result of a boost of new clients paying for services a year in advance.

Says Franson: "We've been very fortunate considering the economic conditions."

Esper is sticking to his grow-slow mantra with his first foray into Massage Heights. His goal for the first year is to get between 70 and 100 new members a month, at prices ranging from $60 to $90 a month per customer. Top-level projections at that rate would put the company at about $10,000 a month in revenues, including product sales and add-on massage times.

While Esper's first goal with Massage Heights is to expand his entrepreneurial profile, he's also thinking bigger by becoming the company's master franchisee for the Gulf Coast. It's a way for him to grow his business while helping other entrepreneurs.

Says Esper: "I believe I can help other people out with their dreams."

REVIEW SUMMARY

Business. Massage Heights, Sarasota

Industry. Franchising

Key. An entrepreneur looks to bring a massage business to the Gulf Coast during trying economic times.

AT A GLANCE

Laser Rite Business Systems

Paul Esper's first company, Sarasota-based Laser Rite Business Systems, has grown from a startup to a 25-employee business over 20 years. Here's the recent revenue growth.

Year Revenues %growth

2004 $3.2 million

2005 $3.6 million 11%

2006 $4.3 million 16%

2007 $4.8 million 10%

Source: Laser Rite Business Systems

Franchise Firsts

Paul Esper, who built a $5 million printer cartridge business from a startup he launched in a spare bedroom, is entering the franchise marketplace. He is the lead developer and master franchisee for San Antonio, Texas-based Massage Heights' 30-store expansion on the Gulf Coast.

Here are Esper's tips for first-time franchisees.

• Find a business that's simple, but as recession-proof as possible;

• Choose a concept that allows time outside the business and has the revenues to pay for a full-time manager to run the daily operations;

• Select a concept that is still in its young stages, so the best locations are still available. Find one of the top performers in the industry;

• Find other people to help you, from financing to operations. Says Esper: "Be able be part of team because you will not be able to freelance with the specific franchise business model you are in."