Posted on: 15/06/2009 

Rob Cox spent a decade getting rich off well-placed bets. On his best day, the former Citigroup trader brought in $100,000 for the firm, taking home enough to pay his mortgage for the year.

Now, Cox -- who took a buyout last year in the midst of company downsizing -- is placing his bets on a different type of gamble: frozen desserts. Later this month, the 33-year-old plans to open a Jersey City franchise for Tasti D-Lite, a chain that aims to add 30 to 40 stores over the next few years in New Jersey alone.

"Every crowd is into this dessert. Why wouldn't you be into it?" Cox said of the low-fat dairy treat, which is offered in flavors like Snickers, cake batter and banana pudding. "I'm going in, and I'm going to be successful."

Like Cox, many from the ranks of the unemployed are now looking to the franchise sector, which remains one of the few bright spots in a sluggish economy. Defying the downward trend, sales last year for the top 100 fast-casual chains grew nearly 11 percent, led by the Asian/noodle, bakery/cafe and Mexican food categories, according to Chicago-based research consultancy Technomic. This year, the fast-food and casual dining categories are projected to grow by 1 percent to 2 percent overall as consumers trade down to cheaper food options, according to the International Franchise Association.

"We anticipate we're going to continue to see franchises outpace other businesses," said Alisa Harrison, an association spokeswoman.

POTENTIAL GROWTH
In New Jersey, where more than 20,000 franchise establishments form a $24.6 billion industry -- with expansion led in recent years by chains like Dunkin' Donuts, Subway, Quiznos and Cold Stone Creamery -- many companies are seeing potential for more growth.

Tasti D-Lite, which started franchising last year after a change in ownership, recently surveyed more than 300 markets across the country and ranked the Garden State in the top 20 percent based on consumption and exercise habits, said Nikki Sells, vice-president of franchise and development. The chain is now recruiting franchisees to open stores in suburban markets such as Livingston, Summit, Morristown, Westfield, South Orange and Millburn, she said.
Meanwhile, Panchero's Mexican Grill, a quick-service franchise that opened its first New Jersey location in Mount Laurel last year, is planning to add another 75 to 150 stores across the state over the next decade.

The expansion is being spearheaded by Raj and Navina Patel, food franchise veterans who have opened two Panchero's locations in the past year. Over the years, the couple have also owned and sold five Dunkin' Donuts, a Blimpie and a McDonald's -- all for a profit.

Craving a bigger challenge, they signed up with Panchero's in 2007 because the small, but rapidly expanding, chain offered them a chance to act as area managers for the entire state. The Patels invested about $400,000 in their Mount Laurel location, and they estimate each new store will bring in between $850,000 and $1.6 million in annual revenue.

Raj Patel, who worked as an engineer for Ford and General Motors until the early 1990s, said the recent turmoil in the auto industry reaffirmed his decision to go into restaurant and fast-food franchises. With the Mount Laurel store already selling 150 burritos an hour during peak traffic and the average menu item costing less than $10, he's confident he has found a recession-proof niche.

"The price is right," said Patel, 47, of North Brunswick. "People can still afford it in this economy."

'IT HAS STRUCTURE'
Franchise companies are generally regarded as safer investments because they offer an established business model.

"For somebody who's never owned a business before, the franchise industry holds appeal because it has structure," said Nick Cohron, a Summit-based career coach.

For a set startup cost, an investor is granted not only his own store but also access to the company's marketing, support and training resources. Invest-ment costs vary according to company and location. A Subway sandwich shop, for example, costs between $114,800 and $258,300, while Tasti D-Lite locations range from $253,700 to $431,410.

Franchising also has a reputation for outpacing other sectors of the economy. Between 2001 and 2005, the franchising sector expanded 18 percent, adding more than 140,000 new businesses nationally, according to the International Franchise Association.

However, economists warn against expecting growth to continue with such momentum, pointing out that, like other businesses during that period, franchises were backed by easy financing. In 2005, the New Jersey Small Business Administration granted 278 franchise loans, totaling $90 million. That number dwindled to just 65 last year, totaling $29 million.

"That period probably tells you what the future will not be like," said James Hughes, a dean at Rutgers University's Edward J. Bloustein School of Planning and Public Policy. "The world's changed dramatically."


BIG INVESTMENT

Cox, the Tasti D-Lite franchisee, said after being turned down a dozen times for loans, he was forced to tap into his savings and 401(k) to fund the venture.

"It's been insane trying to get any funding," he said.

So far, he has personally invested about $400,000, which covers construction, equipment, marketing, three months' inventory and a $30,000 franchise fee.

Still, he is already eyeing his next step.

If he can break even in six months, he said, he might be able to obtain loans to open other Tasti D-Lite locations in Jersey City, Livingston, Caldwell, Newark and Long Island.

He knows months of hard work lie ahead, but the former trader said he thinks the odds of success are overwhelmingly in his favor.

"I have ambition," he said. "I'm going to try to be number one in the nation.