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Virginia Beach-based Geeks on Call gets upgrade

09/04/2011 | The Virginian-Pilot

Business On Call

Gone is the guy wearing a baseball cap, a polo shirt and eyeglasses with broken frames. Someone wearing a crisp white shirt and a tie has taken his place.

The change in Geeks On Call's signature Geek reflects the computer-repair company's heightened emphasis on selling services, including voice-and-data services, to businesses.

"Before, our franchise owners were technicians who knew how to fix computers," said Glenn Davis, CEO of Geeks' parent company, On Call Holdings International. Today, he said, Virginia Beach-based Geeks is seeking franchisees with entrepreneurial drive and an ability to sell.

Davis and business partner John Finguerra spent almost two years revamping the company's strategy after buying the assets of Geeks On Call America in late 2009. With several changes in place, they began offering Geeks franchises this month.

Davis and Finguerra already had built a telecommunications services company by the time they acquired what remained of the former Geeks On Call. Despite the departures of key managers and several franchisees, Davis and Finguerra figured Geeks' franchise structure could become a vehicle for selling telecom services to businesses throughout the country.

Organized in 1999, the previous Geeks began selling franchises in 2001 and expanded rapidly. At its peak, it had franchisees in more than two dozen metro areas, including Boston, Chicago, Denver and Los Angeles. Service personnel drew attention to the company by driving Chrysler PT Cruisers bearing Geeks' toll-free phone number.

However, a split within the management prompted some officers to leave in 2006. More left in 2009. Franchise owners, too, bailed out.

By early last year, the number of franchisees had dwindled to 54. Today it stands at 44. One reason for the falloff was the difficulty some franchisees had adjusting to the weak economy, especially if they relied on residential computer-users, said Richard Artese, president of Geeks On Call International and an officer in the earlier company.

When Davis and Finguerra bought Geeks, "we walked into a very lean shop," Davis said.

Still, the new company was able to handle customers' inquiries and deliver services to franchisees without disruption, he said.

The new Geeks has 30 employees, with slightly more than half working in the Virginia Beach call center. Ten employees in the parent company, On Call Holdings, provide accounting, advertising and marketing services for Geeks and its franchisees.

Coming up with a different model for selling Geeks' franchises took longer than the partners expected. One reason was their determination to realign the costs for franchisees and eliminate a heavy royalty that Geeks was charging, said Davis, who serves on the Virginia Beach City Council.

"Some franchise owners worked 60 to 70 hours a week, and some worked 40 hours," he said. "We figured, 'Let's not penalize the owners who put in extra effort'" by imposing the royalty on their revenue.

The new model also had to include a way for franchisees to sell voice-and-data telecom services to businesses. That's important because sales of these services can generate a steady stream of income for franchisees, Davis said.

Because Geeks had become a new company, its owners had to compile a new franchise disclosure document for the Federal Trade Commission and get approval from states that require franchise offers to be registered. Several states, including Virginia, require franchisors to provide detailed information about their background, financial condition, complaints involving franchisees and the cost of buying and operating a franchise.

Geeks is selling franchises in 36 states and registering to sell in the remaining 14, Davis said. The company also plans to offer franchises in Canada, he said.

A faltering national economy has complicated the sales of some franchises, especially those that require significant financing. Today, companies selling franchises want prospective buyers to have greater resources, including more working capital, because of the economic uncertainties, said John Pearce II, a professor of management and operations at Villanova University's School of Business, near Philadelphia.

"The franchisor makes money from the success of the franchisee" and is looking for greater assurance that their investment will generate a return, he said.

However, Geeks On Call has scaled back the fees that a franchise-buyer once had to pay. The cost of a Geeks territory includes an initial $20,000 franchise fee and a monthly membership fee of $500.

That compares with a franchise fee of $25,000 for a single territory, an 11 percent royalty on the franchisee's gross revenue and a weekly advertising payment of $275 for each territory under the predecessor Geeks.

The company has received inquiries from prospective buyers, but has not sold any franchises, Davis said.

As part of their restructuring, he and others at the company sought to address several issues that upset franchisees in the past, including the fees, lapses in customer support and advertising costs.

"There's no question that things are better under the new ownership," said Shep Bostin, who owns nine territories in Maryland suburbs of Washington. "These guys have the ability to run a business and give us the support we need."

Geeks' new owners still have work to do, said Bostin, a Gaithersburg, Md., resident, but the complaints among franchisees are now, "When is the new stuff coming in?" rather than "How am I going to keep the doors open?"

Meanwhile, Geeks' emphasis on selling services to businesses "is more consistent with where the real money is," he said.

Liz Lasicki, who owns franchise territories in the Charleston, S.C., region with her husband, lauded the company's communications with franchisees and the expansion into telecom services.

"It helps us get our foot in the door with businesses that don't need computer services" but may want to reduce the cost of their voice-and-data services, she said.