You've got a nice little business that makes you a decent but nothing to write home about living. You'd like to go nationwide but you don't have the capital. That's no reason not to grow, say Carol and Paul Collis, co-founders of Red Rock Chili Co. in Santa Ana. Regular readers of "It's Your Business" might remember the Collises, who managed to open a fast-food restaurant in Fashion Island's Atrium Court in Newport Beach in 2002. Even with the proceeds from selling two sandwich shops, they didn't have enough money to launch that venture and only managed to get a stateguaranteed business loan on the strength of Carol's 30 years of restaurant management experience and Paul's construction background and flair for creating tasty recipes. Three years later, the Collises have sold 15 franchises with plans to open 300 nationwide over the next decade. They are the first to say Red Rock Chili is far from Easy Street, but their entrepreneurial boldness is instructive for other who want to build sustainable, growing companies. ISSUES OF CAPITAL Franchising was part of the Collises' strategy from the beginning. It is the growth avenue of choice for many companies that lack the money, personnel and time to grow internally. "It was a real struggle the first year (after Red Rock Chili opened) because we were under-funded," Carol says. "The state loan was for $70,000; now I know to ask for more." Lack of money isn't all bad, she adds. "If we had a lot of money, we probably would have made more foolish mistakes." To position themselves for future loans, they paid off the state loan in one year. They have since taken two more loans and are seeking one to open their second corporate-owned Red Rock Chili restaurant in Cerritos. LEARN FROM DEALS Despite the early financial struggles, the Collises knew they had a good concept because customers at the original Red Rock Chili site in Fashion Island kept inquiring about investing in the company or buying a franchise. "We were also approached by a dozen consulting companies that wanted us to give them $15,000 to do a feasibility study," Paul says. One restaurant franchising company considered buying Red Rock Chili but decided against it, Carol says. "They thought our concept was too complicated. We were making all the chili on-site from scratch every day. They decided we needed to be more established." But the Collises learn something from every encounter. "From the franchising company we realized it is easier to grow through other people's money (OPM) than through our own," Carol says. SYSTEMS ARE VITAL But for Red Rock Chili to franchise, it had to have written systems and simplified operations. To assure uniformity and quality, the Collises set up a central commissary to prepare its chili and soups and seal them in 10-pound pouches that can be shipped to each restaurant. That also solved a personnel problem. "The hardest position for us to fill is the cook to make the chili," Carol says. "We either have to pay a lot or high higher turnover, and that is unacceptable in a franchise." GET PROFESSIONAL HELP The Collises couldn't franchise on their own. They hired an attorney who specialized in franchise law to do the filing paperwork. Graphic artists, web designers, architects, marketing, business planning and help from friends and family made the difference. The Collises sold six franchises before contracting with Fransmart in Newport Beach to sell as many as 300 units by 2015. Fransmart works with fledging franchisers with operations, site selection and franchisee screening. "It keeps our overhead low because we outsource everything," Carol says. "But we are a long way from being millionaires." The first franchise opened in Arcadia in 2004. A Century City franchise will open by the end of the year, followed by Santa Ana, Seal Beach and five in Dallas. The Collises eventually expect to sell Red Rock Chili to a major restaurant company, but only if a buyer comes along before Red Rock Chili grows too large to benefit from an alliance. "You have to sell before its gets to 500 units � or there is no reason to sell it," Carol says.
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