Off 102nd Street, not far from where the worst of the 1965 rioting scarred Watts, lies Franklin Square, a suburban, quiet cul de sac of 39 pastel stucco homes, built on what was once rubble.

The square's most prominent creator, Ted Watkins, a bald, bullet-headed man wearing a well-made suit and a diamond pinky ring, drives restlessly up and down the block, gesturing and talking without interruption. With the federal government talking about urban enterprise zones and suggesting that inner cities pick themselves up by their bootstraps, he is one of the nation's most successful exponents of the self-help approach.

However, Ted Watkins is not a happy man.

His organization, the Watts Labor Community Action Committee, has built more than 400 homes for senior citizens and low-income residents, displaying a remarkable talent for securing multimillion-dollar bank loans for construction in the city's worst neighborhoods.

The committee runs the only place you can buy gas in Watts, a clean and shiny Mobil station. It provides senior citizens 4,000 meals a day. It runs three food stamp outlets, two grocery stores (the only ones in Watts that don't sell liquor), a restaurant and a large department store. It plans to open soon a laundromat and ice cream and sandwich parlor to make more money and train jobless youths.

Of the many local groups who have announced themselves as would-be saviors of grimy, riot-scarred south-central Los Angeles--the Black Panthers, the Nation of Islam, the Black Congress--Watkins' group is the most conspicuous success.

As committee president, Watkins, 58, has become so widely known among poverty officials worldwide that three months ago a private British group brought him across the Atlantic to inspect the scene of recent riots in the districts of Brixton and Bristol. He became an instant star in the British press, delivering for the television cameras blunt attacks on the lack of black participation in the political and economic life of the damaged area.

For 15 years, politicians, diplomats, journalists and union leaders have been sticking their heads into his small, hopelessly jumbled office at South Central Central Avenue and 14th Street, wondering if they are in the right place. But when Watkins conducts one of his famous automobile tours these days, showing visitors what can be done, he also complains bitterly of how little help he is getting from the federal government.

Some of his complaints are with federal budget cutbacks. About 40 percent of the funding for his projects comes from nongovernment sources, but a good part of the rest comes from programs that are getting the ax under the Reagan administration--among them the Comprehensive Employment Training Act.

In the last six months or so, Watkins' committee has had to lay off half of its 1,400 clerical, construction, sales, secretarial and food service workers. He says he still has workers engaged in some federal-supported housing projects "that were approved under the Ford administration," but the federal and state officials he deals with "are having major problems even in meeting their own commitments that they made in the past."

But budget cutbacks are only part of his problem. Watkins waves his arms about his department store and home improvement center and then runs a finger over intricately carved African doors that he hopes to sell for a profit.

"This is the kind of stuff Mr. Reagan does not control," he said. "But his economics might make all of this useless."

The local General Motors plant has closed. The Ford plant has closed. The Firestone plant has closed. The liquor stores seem to provide the only prosperous consumer business these days; dozens of men stand in front of them with apparently little to do.

"The frustrations and possibilities are there for a major uprising," said Watkins, steering the car past a vacant lot where about 15 men stood or sat in rugged clothes and cooked something on an open fire.

Watkins keeps moving, trying in any way he can to break the poverty cycle that seems to be sucking in even his enterprises. After a fight of several years, his organization has permission to begin growing vegetables for market on unused land under the huge electric power lines running through the district. The committee proposes to build a new industrial park and 900 more housing units to replace those destroyed for the new Century freeway.

"We've got to become more productive," said Watkins, who said he came here when he was 14 from Vicksburg, Miss., to avoid a lynching over his beating of a white youth. "We've got to become masters of our own destinies. We've gotten too far away from producing the food that we eat and the clothes that we wear."

His message seems lifted from a Reagan campaign speech. Watkins, although no supporter of the president, shares Reagan's faith in the benefits of hard work and capitalism. He also believes, like Reagan, that a man should not be condemned for driving a Bentley or wearing diamonds, which Watkins does, especially if he is creating jobs for lots of other people. He is still sensitive about his lifestyle, however, and makes a point of telling interviewers that he bought his diamond pinky ring 15 years ago for only $2.50.

"I'll tell you the truth, I wouldn't take a million dollars for him," said Ruth Williams, a 39-year-old housewife on welfare who lives in one of the Franklin Square homes. "He's concerned, he really cares."

His committee has purchased land around the new Martin Luther King Jr. county hospital, hoping to build housing that will attract the doctors and nurses who work there. "They got $70 million on the payroll and less than $1 million of that stays in the community," Watkins said, pointing to the hospital employe parking lot full of late-model cars driven in from the suburbs.

He said he hopes the local economy will improve and stimulate his own projects when a shopping center, the first in the area in years, goes up under a government-supported project.

The Watts Labor Community Action Committee, founded by Watkins, a former United Auto Workers official, and 50 other labor union leaders in 1964 with $5.30 between them, survives on ingenuity.

In the beginning, Watkins and the others used some federal money and loans wheedled from local banks to buy abandoned houses in the Los Angeles International Airport noise zone for next to nothing and move them to vacant property in south-central Los Angeles. The new development became Franklin Square, named after Henry Franklin, the man who runs the committee's construction projects. He named a senior citizens project Ramona Estates after another supporter, the wife of county supervisor Kenneth Hahn.

Watkins said he is proud that his projects have mostly escaped the vivid graffiti that decorate many south-central walls. He hires unemployed community members to patrol and repair his projects, and is fiercely protective of them himself. Within 10 minutes after a reporter began knocking on doors in Franklin Square, Watkins turned up. He said he was responding to a call from a resident about a stranger in the neighborhood.

Bernard Shaw, 26, and his wife, Marvis, 21, says there are still some problems in their three-bedroom house in the square. The wood floors are buckling in places under the wall-to-wall carpet, and they are still waiting for Watkins' repairmen to turn up with promised materials. But they do not deny their good fortune at acquiring such a home, the result of their names being pulled in a drawing five years ago.

"I wouldn't be able to find anything like this," said Shaw, a former salesman now totally disabled by sickle-cell anemia. The family's monthly income is $800. Their rent is $430, but they pay only $183. The rest comes from a federal rent subsidy program. In 20 years, Watkins says, they and the other renters on the square will own the houses outright, under a contract arrangement that says whoever is in possession of the house 20 years from the date of the lease will get the deed to it.