Strategies : Remedy Temp Moving to Spread Its Success Around

For years, Bob McDonough had been a financially secure corporate vice president content with Southern living.

Then suddenly, the 43-year-old executive had second thoughts. He reviewed his past and his all-too-well-planned future and decided that he had to escape.

“I was comfortable, but I had a restless spirit that wouldn’t stop,” McDonough recalled recently. “I looked ahead, and I wanted to do something different.”

So, after studying his options for a year, McDonough loaded his wife and children into a moving van and headed for California to open a temporary employment firm.

That was in 1965. Today, McDonough’s Remedy Temporary Services in San Juan Capistrano has 37 company-owned outlets in five states and expects fiscal 1987 revenues of $50 million.

Now 65, McDonough has announced a franchise plan that he hopes will make Remedy Temp a major competitor in a $7-billion national market for temporary employees.

Although the competition is expected to be tough, McDonough’s expansion effort may be well timed. In an effort to reduce overhead, a growing number of companies are limiting permanent work forces by using temporary employees in record numbers.

McDonough’s franchisees must invest about $100,000 each, quit their jobs and lose money for a year or so, according to Remedy Temp President Paul Mikos.

“The pool’s rather small,” acknowledged Mikos, who said Remedy Temp’s franchise plan envisions ribbon cuttings at five new offices within the next six months, and at 15-20 annually for the next several years. Eventually, Remedy Temp hopes to have more than 100 franchises.

The franchise operations will take Remedy Temp to potentially lucrative markets such as Atlanta, Boston, Chicago and Orlando, Fla. Still, Mikos said, it won’t be easy to find qualified franchisees who are ready to make a commitment.

“You don’t decide quickly to leave your job to start an employment agency,” said Mikos, who has received more than 300 responses to ads placed in the Wall Street Journal, USA Today and other papers. Most franchise inquiries have come from 35-to-45-year-old executives, both male and female, who want to own their own business.

By paying a $15,000 fee, a franchisee will receive exclusive rights to a specified market or geographic territory, a week of training at Remedy Temp’s headquarters and another week of hands-on work at a Remedy Temp branch office.

With help from Mikos, franchisees will then set up their own offices and begin soliciting temporary workers and job orders.

Mikos said a background in sales and marketing is helpful, but not necessary. More imperative, he said, is perseverance in making cold sales calls and in maintaining confidence, even when the office phone isn’t ringing.

“If someone wants a franchise (just) to invest money in, I say that they should go buy a Jack-in-the-Box,” he said. “This is a hands-on, touchy business that you must get involved in.”

The ideal franchisee would be someone like the McDonough of 22 years ago. At the time, he was vice president of an oil company and enjoying a genteel life style at his country estate outside Fairhope, Ala. His career path appeared safe enough, but he decided he wanted more than security.

After researching the growth of the the Inland Empire region of Southern California, he bought the Riverside franchise of a temporary employment firm called Snelling & Snelling and moved his family west.

After two years, he founded Remedy Temp in Riverside, then moved it to San Juan Capistrano in 1976.

“I wasn’t looking for something easy. . . . I knew I’d have to work my tail off, and I did,” said McDonough, who now signs about 3,000 payroll checks a week for temporary workers.

At a time in life when friends suggest that he relax a little, McDonough is battling for business in an increasingly crowded industry. In midsized markets such as Orange County, for instance, there are scores of temporary employment firms fighting it out.

As he starts his expansion, McDonough will also be competing for a limited supply of potential franchisees. He will be going head to head with more than a dozen national temporary-help firms, and most of them are several times the size of Remedy Temp.

Competitors say the market is crowded because the temporary-help industry is prosperous--and growing. Many companies have reduced the number of permanent employees on their payrolls and increased their reliance on temporaries to handle seasonal or sporadic increases in their workloads.

“The first seven years I was in business, I was explaining to people what I did for a living,” Mikos said. “I don’t have to do that anymore.”

The temporary-personnel industry had a 1986 U.S. payroll of more than $7 billion, up from $6.3 billion in 1985. On an average day last year, more than 800,000 Americans worked as temporaries, according to the National Assn. of Temporary Services in Alexandria, Va.

Even with all this growth, however, Remedy Temp’s franchising plans face obstacles, mainly because many other temporary agencies already offer similar franchise packages, according to Clyde Ramsey, an operations vice president of Olsten Temporaries, based in Westbury, N.Y., which has 400 U.S. offices, including 100 owned by franchisees.

An informal survey of several temporary employment franchisers showed that most firms charge a franchise fee similar to Remedy Temp’s, process payroll and billing records for franchisees and take a cut of franchise gross earnings each year, generally about 35%.

To spur franchise growth, ADIA Temporary, based in Menlo Park, has started acquiring small, independent companies and turning them into franchise offices, according to Gary Peck, ADIA vice president of franchise operations. Peck said small firms gain a suddenly stronger market identity when they affiliate with large franchisers.

The U.S. subsidiary of ADIA Worldwide reported U.S. revenues of $243 million last year and expects revenues to top $300 million this year, Peck said.

Mikos acknowledged that being a franchise newcomer might be a disadvantage: “We believe we have everything together. We believe we have the ingredients. We’ve never done it before, though.”

Still, he said, “Our future for franchise growth depends on the first franchises. That means I’ll be living with these people during their first days out.”