Insurance and Banking & Finance

Buzzing with Activity: Unique Broad Ripple biz ready to offer franchises

June 12, 2006

Buzzing With ActivityUnique Broad Ripple biz ready to offer franchises For business partners Wendy Reed and Pam Weaver, life these days is starting to look a lot like the frenzy their company name projects: Sugar Buzz.

They're not really hopped up on sweets, but the Indianapolis women are flying high nonetheless-buoyed by the glory of being featured in a national magazine and the promise of franchising their unusual mix of children's parties and dropin day care.

The longtime pals combined their business concepts under one roof in July. Since then, they've trademarked the company name and are plowing through piles of paperwork in hopes of selling other entrepreneurs on the idea as early as this fall.

The broad interest Sugar Buzz is attracting led them to believe their business model is ripe for duplication.

"It has been in the back of our minds since the beginning," Weaver said. "We probably would have waited another six months, but when Entrepreneur magazine became interested, we kind of stepped it up."

The national publication, drawn to the novel approach of combining play days and parties, featured the startup in its June issue.

But one local franchiser already making a career out of catering to kids cautioned against jumping in too quickly.

"It's fairly capital-intensive to get there and then you have to continue doing it," said Larry Shelton, who, with wife Cookie, founded the locally based Cookie Cutters children's hair salon franchise in 1994. "There's just a lot of stuff you need to do."

Banking on experience

The business partners are well aware of the risks and count their experience as an asset.

Reed, who fronts local bands First Impression and The Wendy Reed Band, owned Broad Ripple kids-activity shop Artzy Phartzy until 2001, when she decided it was too difficult to juggle parenting and a full-time business.

So she turned her attention to Sugar Buzz, a weekend party provider she launched after shuttering Artzy Phartzy.

The company has been at 1430 Broad Ripple Ave. ever since, but it evolved into its current form just last year. That's when Weaver came on board to offer the children's drop-off service, known as play care, after her friend lamented that the shop space went unused much of the week.

Unlike traditional child care, there are no upfront contracts or commitments with play care. Instead, parents use the service on an as-needed basis. Hours are 9 a.m. to 7 p.m. weekdays and 6-10 p.m. weekends. Cost is $9 an hour for one child, and discounts are available.

So far, the women have worked well together.

Reed, 44, has cultivated many contacts through the years to help find even the most obscure party favors-connections that should benefit franchisees, she said.

And Weaver, 46, has handy technological skills, using her experience as a Web developer to scour the Internet for hardto-find merchandise.

Their efforts to satisfy even the most difficult party requests have led parents to seek out the hard-to-miss Sugar Buzz building-it's painted white and lime green, accented with a purple awning.

Reed hosts as many as 30 parties a month, transforming the shop into any child's fantasy. "Star Wars" themed birthday parties are big among boys, who are treated to face paintings from the same artists employed for local Star Wars conventions. On a recent Friday, a Girl Scout troop spent the morning dressed as princesses.

Once, Reed found tooth necklaces and giant toothbrushes to decorate a party for a girl aspiring to be a dentist. For a boy who wanted to be a spy, she hired a limousine driver to take him and his buddies around the city to search for clues to a puzzle.

The two charge $265 for standard parties up to 10 children. They project revenue of $150,000 this year.

Reed and Weaver think nearby suburban communities such as Greenfield, Avon and Greenwood could support Sugar Buzz shops. And folks in Fort Wayne, Bloomington and Michigan already are showing interest.

Day care providers whose centers sit empty on the weekends might make ideal franchise candidates, the two said. The fact that they already have the insurance required to care for children would be an advantage.

That's the biggest conundrum the pair has encountered so far: Reed's insurance carrier dropped her coverage as soon as she said her party business would be hosting children during the week. It took six weeks to find a new insurer, mainly because Sugar Buzz is not a licensed day care and does not adhere to state regulations governing fulltime child care facilities.

If someone is interested only in providing parties, they may consider selling partial franchises. For that reason, the women have yet to determine an initial franchise fee.

"It is going to cost money, just like any other business," Weaver said. "It won't be a giant investment, when compared to other franchises. Not a lot of employees are necessary."

Expenses abound

Franchisee costs often top six figures. The investment in a Cookie Cutters franchise, for instance, runs $100,000 to $150,000. But the expense to the franchiser is equally steep. Legal fees cost thousands, and an additional $50,000 might be required to market the franchise to potential buyers, Shelton said.

It typically takes less money to build a company through franchising than it does buying stores on one's own, Shelton said, and operators can grow their business quicker.

Even so, he advised business owners thinking about franchising to wait at least seven years to make sure their concept is solid enough to support duplication. Franchises with established business models usually have an easier time locating funding than entrepreneurs starting from scratch because banks view them as less risky.

Nationwide, the number of franchise units grew 11 percent from 2004 to 2005, nearly three times the increase from the previous year, according to Entrepreneur.

The Sheltons conduct demographics studies to determine ideal locations for their shops. Salons are mostly in Indiana, Illinois, Kentucky and Ohio, and are soon to be in Michigan. The more profitable franchisees usually operate more than one shop, Shelton said.

Shelton once considered adding party rooms to Cookie Cutters' menu, but ultimately decided the addition would dilute the core haircutting service. He has met the Sugar Buzz owners at trade shows and is unsure whether their idea will succeed.

"That market is one that people think is cute, but I'm not sure how it is going to hold up," he said. "I'd want to make sure you get over that seven-year time frame first to make sure it's not a fad."

After five years in business, Sugar Buzz is approaching that point.

Contending with competition

Other challenges await, though-including competition from similar enterprises.

Sugar Buzz isn't the only children's party provider in central Indiana. Carmelbased Oogles n Googles got into the game in 2002 and began franchising its concept two years later.

Founders Kevin and Danya Mendell have helped launch 27 locations so far in cities ranging from Philadelphia to Dallas to Honolulu. The only other Oogles n Googles in Indiana is in Lafayette, although the pair may have one in Fishers soon.

The initial Oogles n Googles franchise fee is $27,000, not counting ongoing marketing expenses, Kevin Mendell said.

Mendell had advice for his competitors.

"You've got to be patient; it's not an overnight process," he said. "You have to help [franchisees] be successful. It's making other people successful with your business model."

Reed and Weaver are confident Sugar Buzz can be successful despite the competition, distinguishing itself with its mix of specialty parties and play care service.

Philip Whistler, a partner at the Ice Miller LLP law firm who represents both franchisers and franchisees in business disputes, advises clients, first and foremost, to make sure they find the right partners, as if they are getting married.

"It's not that different from other types of businesses," he said. "The people who are successful work hard at it. If things are not going well, there's a lot of opportunity to point fingers."
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