Anne Beiler never intended to build a large business. Beiler began selling pizza, snack food, and pretzels at a farmer's market to finance her husband's free counselling centre. Her success encouraged friends and relatives to want to open their own pretzel shops at farmers' markets. Jonas (Beiler's husband) began building booths in the barn, and they soon had 40 locations. What they did not have was a form of business ownership. They explored the idea of a sole proprietorship (because of the ease of starting up and so on) and also considered a partnership or a corporation. (The advantages and disadvantages of each type are covered in this chapter.) The Beilers contacted a lawyer to look at their business and make a recommendation. They decided franchising was an excellent way to expand. The company now owns 30 of its stores and the rest are franchises. Auntie Anne's currently operates 746 stores and is opening some 40 to 50 additional locations a year.

Franchisees find that franchising is not exactly like being an entrepreneur. They still enjoy the thrill of ownership, but their freedom to do what they please is limited by the franchisor's rules. On the other hand, franchisees have the advantage of marketing assistance. The assurance that franchisors like Auntie Anne's know how to do things right can reduce the franchisee's risk, which means fewer failures.

Unfortunately, franchises have disadvantages as well. One is the cost (sometimes huge) of buying the franchise. Often, however, the franchisor will help with financing to make the purchase easier. Franchising provides some ease of expansion (by using OPM-other people's money), but franchisors have to deal with scores of different owners who have diverse needs. Maintaining consistent quality control when working with so many different people can be a challenge for franchisors.

Auntie Anne's began with a philosophy that stresses customer service, cleanliness, and quality. Establishing good relationships with franchisees solved many potential problems. The company's success, however, has not made Auntie Anne's complacent. The firm works continuously to improve relations with franchisees and has had few problems. In fact, Auntie Anne's focuses so thoroughly on its relationships that the company has had only two cases of litigation with franchisees in 15 years.

Anne Beiler has not forgotten why she went into business in the first place: to help her husband do good in the community. She once considered seeking venture capital investment, but found that venture capitalists didn't share her values. Beiler believes when you give, you get, and then you give some more. She is proud of creating opportunities for women to become franchise owners and proud that a diverse group of people found good jobs in a community-minded company.

Thus far, Auntie Anne's has not done much selling over the Internet, but that may change. Expanding overseas has its challenges as well. Cultural variations are always present. For example, eating on the run is acceptable in North America but frowned on in other countries. People in some countries have never heard of pretzels. Still, with stores in over 13 countries, Auntie Anne's is slowly but surely doing its famous twist around the world.

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Making Profits with a Twist - Auntie Anne's Pretzels

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1			What lessons can you take from this case thatyou could apply in starting or buying yourown franchise?
2			What are the advantages of franchising versusincorporating when a company wants toexpand?
3			Is it a good idea for a company to have anattitude of “giving to the community” when itstarts? What conflicts might arise?
4			How do the advantages and disadvantagesof franchising compare to other forms ofbusiness?