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An Accidental Blockbuster

Steve Nelson has never been shy about asking for money. Once he asked 138 lenders for financing before the 139th agreed to help fund his expanding network of mini-storage complexes.But in 1987 Nelson started a company that has become the nation’s largest shipping reseller, and he did it without raising a dime. Instead of looking for investors, he sold franchises. The model has worked so well that his company, Unishippers, can hang a “sold out” sign at its Salt Lake City headquarters. You can’t buy a Unishippers franchise in this country today — unless you buy an existing unit. To expand, the company is now selling international franchises, and its 300-plus U.S. locations will likely gross $233 million for 1999.

The company never actually touches the shipment; customers simply use a Unishippers account number with carriers such as Airborne Express. The customer pays Unishippers, and Unishippers pays the carrier.

Nelson, chairman of Unishippers, is now a big fan of franchising, but he bumped into the concept by accident.

Some of Nelson’s relatives wanted a chance to sell the concept under contract in Santa Clara, Calif. Soon, people were calling and asking for similar set-ups, so Nelson sold 12 “distributorships” across the country.

Owners Make It Happen

Then something wonderful happened.

The individually owned distributorships began to outshine — by far — the corporate-owned concerns that had employees, rather than owners, at the helm. “There’s this invisible hand that pushes people to do for themselves what you could never pay them to do,” Nelson says.

Nelson sold the company-owned locations to franchisees. “We didn’t make as much money, but it was easy money,” he says.

A couple of caveats: Is franchising a sure-fire way to expand any business? “It works best when building a brand name is really important, or if you need a distribution channel or the buying power of a franchise operation,” he says.

Yet it’s no panacea. When a physical therapist asked Nelson about franchising her practice, he advised her to create a cooperative instead. And he counseled a manufacturer of robotic equipment to license manufacturing rights rather than selling franchises.

Although it may be relatively “easy” money, franchising still requires fine tuning. You can’t merely sit back, twiddling your thumbs while the money pours in. “You have to turn over your bottom 10% of franchises,” says Nelson. “And for the ones that are doing really well, you’ve got to give them other franchise options that are synergistic, because they’ll want to invest their profits.”

Writer: Kathy Dimond