Franchise Frenzy

When John Strom attended his son's bachelor party, his family of law enforcement officials began swapping war stories. One such tale, involving the difficulty of gathering proof of obvious drug use during a traffic stop, turned Strom onto an idea that would catapult him into the world of franchising.

Related Headlines: Big Red Acquisition Simulation Back in the Saddle Great Expectations The idea was to take drug testing on the road.

Strom tested this thought with USA Mobile Drug Testing in 2009 and early 2010 before making the push toward franchising in late 2010. The company now has 42 franchisees, who contract with employers who need drug testing conducted on a regular basis. The parent company provides marketing support, and the franchisees service their assigned territory. The model has taken off, with revenues increasing 576% in 2011 so far compared with the same period in 2010.

Jeff Sardisco, COO of the Tampa-based USA Mobile, explains that firms underestimate the drag on efficiency that is bred by drug users in an office. The Center for Disease Control and Prevention estimates firms lose $81 billion annually in productivity from employees who abuse drugs.

But the loss of productivity from drug abuse is just as costly as the traditional method of drug testing, he says. "An employee has to drive two hours round-trip to a lab to get tested," he says, "and maybe he makes a stop to pick up something to alter the test." Sardisco further pitches the upside of mobility by citing consequences of a workers' compensation claim. "What if on the drive to the lab he gets into an accident," he asks. "Then you've got a costly workers' comp claim on your hands." So USA Mobile drug testing handles all the elements of drug testing. One of its representatives administers the test, takes it to a testing facility, and notifies the employer. USA Mobile even provides contacts for treatment of a revealed drug user. "We don't want an employee to get fired," Sardisco says. "We want them to get help." This education in inefficiency is the means by which USA Mobile has grown so rapidly. "Once HR departments see how much they stand to lose, they hire us," Sardisco says. "When they see one of our [mailers] with a picture of a guy doing coke and a surprising statistic, it gets them thinking," he says.

Looking to its future pool of clients, Sardisco says national firms have more to lose than smaller local ones. By creating a single brand that has a nationwide presence, USA Mobile can cater to larger firms that want one company handling its drug detection. Says Sardisco: "If you were an accountant at AMEX would you want to look over 76 invoices for something as trivial as drug testing?" The 42 franchisees added since October 2010 shows USA Mobile's presence is being noticed.

Bob Klein, vice president of franchising, says there are 88 territories out 850 in the U.S. being serviced by USA Mobile, from New York to California. A territory is a collection of zip codes that comprises at least 8,000 businesses. Klein puts initial franchise fees between $82,000 and $116,000 per territory. So a conservative approximation of revenues, which doesn't include royalty fees, would yield $7.2 million since the franchising operation began.

Klein, who has worked in franchises for 28 years, say in his experience new franchises tend to see a bump in revenues during their second year as they become established. And he says that USA Mobile expects to add more than 100 franchisees in 2012 � more than doubling revenues.

Growth expectations are hinged on the firm's ability to educate human resource departments on the gains that can be realized by going mobile � a task the firm handles deftly. "A lot of people don't know they need us," Sardisco says, "but they do."

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