Marco's to reward finders of new franchisees

4/20/2006

How about some lettuce with that pizza?

No, not the edible kind of lettuce. The folding kind - long green. Maybe $20,000 to $25,000.

Marco's Pizza, of Toledo, a franchisor with about 150 units nationwide, yesterday said it will start offering a reward to anyone who refers a buyer of a franchise. It said such a reference, if successful, could be worth about 30 percent of royalties for three years.

Its average pizza parlor grosses $550,000 annually and pays a 5 percent royalty to the headquarters.

"The idea [of a finder's fee] is not unique; we are borrowing an idea," said Jack Butorac, Jr., president and chief executive officer of Marco's Franchising LLC. But what may be a new wrinkle is that the chain is extending the offer to anyone, not just business brokers, or other franchisees.

"I've never heard of that," said attorney Carl Zwisler, a franchise-industry expert with the Washington office of the law firm of Haynes and Boone LLC.

It is fairly common for franchisors to offer a flat "finder's fee" of $5,000 or more, or a percentage of the upfront franchise fee, but inviting the general public to contribute referrals is new, he said.

Mt. Butorac said the bonus for spreading what he calls the "Marco's growth gospel" could be even larger if a referral turns into a multiple-unit franchise.

Cameron Cummins, vice president of franchise market recruitment for the firm, said the finder's fee is higher for referrals from existing franchisees and employees - 50 percent of the first three years' royalties.

However, when asked if new franchisees could, in effect, refer themselves and collect the finder's fee, he said, "The program wasn't designed for that."

The company firm is well on the way to fulfilling its goal of building the chain to 500 units over the next five years and as many as 3,500 eventually, Mr. Butorac said. Marco's added 22 units last year, 11 more this year, and will open several more in coming weeks and perhaps a total of 40 for 2006.

Mr. Butorac and an investment group took over ownership of Marco's two years ago from founder Pasquale "Pat" Giammarco, who founded the chain in 1978. Mr. Giammarco remains as a consultant and store owner.

"Pat Giammarco created a great business model," said Mr. Butorac.