Dec. 19, 2019

By Rob Swenson, for SiouxFalls.Business

Here’s one way for a market to make a strong first impression: Rank at the top of the company the first week in business.

Jersey Mike’s Subs showed that level of success this fall, ranking No. 1 nationwide during its opening week, which began Oct. 28.

The Sioux Falls sandwich shop followed its opening-week showing with second- and third-place finishes during its next two weeks in operation. The New Jersey-based company has approximately 1,650 traditional and nontraditional restaurant locations in the United States, so placing high in sales is significant, according to Sioux Falls franchisee Andrew Ticknor.

“We’re just really proud,” said Ticknor, who plans to open two more Jersey Mike’s restaurants in Sioux Falls during the next couple of years. “We’ve been really well received.”

Nationally, Jersey Mike’s Subs is recognized as a business with strong potential. The franchise is ranked No. 9 on the Entrepreneur Franchise 500 ranking for 2019.

Ticknor attributes a big part of his first restaurant’s early success to its location at 57th Street and Louise Avenue in a busy commercial area.

Generally speaking, Sioux Falls has a track record of being a good market for new businesses, and a lot of new ventures in the community tend to be franchises spun out of successful ventures in other markets.

“Retailers, when they come to our market, seem to do very well,” said Ryan Tysdal, a commercial real estate broker with Van Buskirk Cos. He represents Jersey Mike’s in South Dakota and is negotiating a lease for Ticknor’s second store in Sioux Falls.

He attributes the general success of franchises in Sioux Falls to two primary factors. “One, Sioux Falls has some really good businesspeople and business operators,” he said. “Point No. 2 is the Sioux Falls market has good demographics and above-average, disposable money.”

There also are factors that might prevent new businesses from succeeding. The area’s tight labor supply is a deterrent to some businesses that would like to enter or remain in the market. In addition, regional differences in consumer tastes and preferences must be taken into account.

Finding enough qualified employees probably is the single biggest challenge for service-related businesses that come to Sioux Falls or want to come to the community, said Scott Blount, a senior broker associate at Lloyd Cos.

“Because the unemployment rate is so low in our state, it’s very difficult to find qualified employees,” Blount said. “I’ve talked to restaurant groups who say the challenges in employment in Sioux Falls would be more than what they want to deal with.”

Overall, however, the Sioux Falls market is looked at very favorably by business representatives at the national level, Blount said. “They see Sioux Falls as a vibrant, thriving economy, and they want to be part of this growth that we’re experiencing.”

Other businesses’ experiences

Sioux Falls is home to some franchises that continue to do well after a decade or longer in business – Budget Blinds, for example, which is No. 35 on the Entrepreneur Franchise 500 list.

Adam and Tara Balding acquired the Budget Blinds franchise in Sioux Falls and Brookings 10 years ago. They did about $390,000 in sales their first year and now do more than $3 million.

About 30 percent of Budget Blinds’ outlets have showrooms; the Baldings’ store at 5303 W. 41st St. is among them. The company’s other outlets are home-based or mobile.

Last year, the Sioux Falls franchise ranked eighth among Budget Blinds’ approximately 1,700 outlets. Adam Balding hopes to move the store into the top five this year.

It “blows the minds” of some franchise operators in large cities that Sioux Falls has such a big producer, Balding said. In addition to having smooth access to good product lines, he credits business to the steady pace of construction, including remodeling projects, in the Sioux Falls area.

“Building, both residential and commercial, doesn’t stop,” he said. “The projected growth is just unbelievable too.”

AlphaGraphics, a printing services franchise at 5020 S. Tennis Lane, has been in business for about 24 years and continues to perform well. Owner Paul Van Veldhuizen converted his parents’ printing business, Accu-Print, into an AlphaGraphics outlet.

“We were looking for a new direction, looking for marketing, product support as well as technical support, and AlphaGraphics fit our need,” Van Veldhuizen said.

The move to a franchise has been positive. The Sioux Falls outlet annually ranks in the top 10 percent of AlphaGraphics stores in business volume, Van Veldhuizen said.

“We’ve continued to grow year in and year out, except probably for those recession years that we had. We saw it dip there, like everyone else did. But it rebounded from that as well,” he said. “Sioux Falls has such a good business climate. There’s a lot of growth potential in this area.”

In addition to Jersey Mike’s Subs, franchised businesses that are off to promising starts include The Spice & Tea Exchange in downtown Sioux Falls and the SafeSplash Swim School on the south edge of the city.

Tami and Vernon Brown opened The Spice & Tea Exchange on June 14, and the store has performed well. “It’s been going great,” she said.

Several times during the summer months, the Sioux Falls outlet ranked in the top five or 10 in the company for sales, Brown said. The Florida-based company has about 75 outlets.

The Browns became interested in opening a Spice & Tea Exchange franchise after seeing one in Tennessee.

The specialty store’s location in the heart of the downtown shopping area is a perfect fit and convenient for customers, said Brown, a former teacher.

“We’ve known for years that local people come out and support local businesses. We’re a franchise, but we’re a locally owned franchise,” she said.

The Sioux Falls outlet has been meeting or exceeding company expectations, said Marty Amschler, executive vice president of franchise development and operations for The Spice & Tea Exchange.

Amschler, who is based in Atlanta, spent a day checking out Sioux Falls and possible store sites with the Browns before they started their business.

“Everywhere I went – and I’m not normally this effusive about towns – I was really impressed. I walked out of there excited about the opportunity we were going to have,” he said.

Amschler attributes his optimism and excitement for the Sioux Falls store to two factors: the strength of the franchise operators and the store’s location on Phillips Avenue.

“We couldn’t have a successful store in Sioux Falls without Tami and Vernon, and Tami and Vernon wouldn’t be a success if they didn’t have that space,” he said.

Strengths of the market

SafeSplash opened Jan. 19 near the south-side Walmart, and business has been better than expected, said Dan Sobocinski, who owns and operates the outlet with his wife, Christa.

Approximately 500 people – mostly children – are enrolled in swimming lessons. During the peak of the summer months, there were about 750 students.

“In talking to my peers in other communities that have started up a SafeSplash in a similar style to us, we’ve probably performed a little above average,” Sobocinski said. “We’ve definitely had a more success than we had kind of prepared for.”

Sobocinski grew up in the Twin Cities. His wife is a Sioux Falls native, and the city fit their criteria for doing business in a family-friendly community.

“I don’t think it’s any secret to anybody that this is a thriving community that is doing very well for its citizens in a lot of different capacities. People are highly employed and earning decent incomes and having a fantastic family life,” Sobocinski said. “We wanted to be part of something that would be supportive of that family life.”

The Sobocinskis’ business has 26 part-time employees and features a pool designed specifically for teaching people to swim. The pool is 4 feet deep on one end and 5 feet deep on the other.

When people think of major franchises that have been successful here and across the country, McDonald’s is likely to come to mind. The well-known restaurant chain ranks No. 1 on the Entrepreneur Franchise 500 ranking of franchise opportunities. Dunkin’ – an outlet that Sioux Falls lacks – is No. 2.

Ron Nelson of Nelson Commercial Real Estate said he has been talking to Dunkin’ for about 10 years. But the Sioux Falls area apparently isn’t big enough yet to rate high on the company’s list of possible expansion sites.

Nelson recalls that an executive with Dunkin’ once facetiously told him, “I don’t care if you have Warren Buffet for your franchisee, we’re going to come when we’re ready to come.”

In evaluating new ventures, Nelson said he doesn’t single out franchises from other startup businesses. “Sioux Falls is just a good market, and for that reason, franchises can succeed here as well as non-franchises,” Nelson said.

Franchise operators must be willing to adhere to company rules, which try to stay on the leading edge of innovation while also striving to maintain consistency from one operation to the next, Nelson said.

“They don’t sit on their hands and say what we’ve always done is good enough. They’re always trying to be cutting-edge and stay on the edge of innovation and new items,” he said.

Factors such as changing consumer tastes and advances in technology have rendered some franchises obsolete. Blockbuster video stores, for example, have almost disappeared – with one lone site in Bend, Ore. – because their service has become outdated.

The structure of franchises can be a big, ongoing advantage for some operators because the model offers established strategies and procedures, Nelson said. “Somebody has already plowed the pathway,” he said. “They made a lot of the mistakes, and they made the revisions.”

Of course, acquiring franchise rights for a community or area doesn’t guarantee business success. There are good and bad franchises, just like there are good and bad operators, Nelson points out. Some franchises do well in some areas but not well in others.

Nebraska-initiated Runza restaurants failed to catch on in Sioux Falls, for example, and Georgia-based Schlotzsky’s hasn’t managed to hang on despite two runs in Sioux Falls. A Red Mango frozen yogurt shop is another example of franchised business in a competitive field that closed.

However, facilities such as the Zeal Center for Entrepreneurship and support organizations such as Startup Sioux Falls provide people starting businesses with a good base of local resources, Nelson said.

Blount adds that despite the limited availability, Sioux Falls has good, productive workers, and the community provides a competitive business environment.

“There’s opportunity, and that opportunity is increasing for young people and those people who want to enter the marketplace,” Blount said. “There’s tremendous opportunity to grow and be successful in our market.”