Franchise Business Wireless Zone Dials New Profit Model

Date

May 03, 2016

Wireless Zone has operated on a gross revenue system since 1988, when it was founded as the "Car Phone Store," but today it seeks to boldly reinvent its profit model. 

Under the old system, revenue was generated in two ways: individual phone activation and the purchase of products at wholesale for mark-up and sale at franchise locations. When a customer activated his or her phone through a store, the brand received a commission. The company also received part of the royalty rate, with the rest of the money going to the franchisee. While this worked well for the company, the net profit wasn't as favorable for its franchisees.

In late 2014, Joe Johnson became the CEO and President of Wireless Zone. Johnson looked at the industry's increasingly unpredictable and competitive fluctuations and decided the franchise chain's revenue-generating system needed a radical overhaul.

According to Johnson, the chain made money by buying at wholesale and selling the products back to franchisees. While this served the company well for years, that changed when Verizon began to allow customers to lease devices rather than buying them outright. The lease option didn't work as well for franchisees, and the brand became torn between running a lucrative business and providing the lowest cost possible to franchisees. It was this, Johnson says, that led the chain to develop a new model that would allow both the corporate team and franchisees to benefit.

In 2015, talks started between franchise advisory council members, such as Michigan franchisee Debbie Peterson and Pennsylvania franchisee Michael Sabbatini, and the brand's executives. All agreed that the model needed to change, and Johnson asked the franchisees to help him rebuild the royalty system into something that would benefit both the franchisees and franchiser.

Johnson says he asked the franchisees to start from the beginning so the interests of the company and its franchisees could be aligned in the fairest way possible. The solution they arrived at was simply the sharing of gross profits. Under the new model, the cost of goods is deducted from a franchise business' revenue, leaving the gross profits. The chain takes its royalty off of that gross number instead of product mark-ups or specific activations. This makes the company directly invested in a franchisee's success, allowing both parties to work together for a bright future for the business.

The new royalty model was launched in January of 2016, and Johnson believes it holds great potential for the company and its franchisees. Close to half of all existing stores chose to enact the new model by March, and all new stores going forward will automatically work under it. Stores that have gone with the new model are already outperforming those on the old model by more than 8 percent, and sales at those locations are also up by more than 16 percent.

The WZ Franchise Opportunity

Co-branded by industry leader Verizon, Wireless Zone has been in the mobile industry for more than two decades and is currently seeking franchisees nationwide. The initial franchise fee ranges from $1,000 to $30,000, and the total investment for this franchise opportunity runs from $126,500 to $392,500 excluding costs for real estate.

To learn more about this unique and exciting franchise opportunity, visit FranchiseExpo.com.


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