Remodeling Franchises Endure

Despite efforts in the 1980s to franchise remodeling following the successful Century 21 real-estate model, franchising never made an extraordinary splash in the industry. For a time it seemed as though it might take off. There were more than 600 Mr. Build franchises in the mid-1980s, and Dial-One was a close competitor, but the transition from real estate to remodeling was a rocky one, and the two brands faded away.

Yet franchising overall has a huge presence in American service and retail business. The 2007 business census conducted by the Washington, D.C.-based U.S. Census Bureau found that franchising crosses about 300 business lines, says Alisa Harrison, vice president, communications and marketing for the Washington-based International Franchise Association.

Entrepreneurs look to franchising as a way to grow their businesses in a faster and more effective manner. “If it’s something replicable and something that works in multiple environments, then people will move forward on it,”

Harrison says, noting that “a lot of people start the process, but they never get around to actually selling a franchise. Starting your own business and a franchise is one thing. Actually getting out there and selling it and convincing someone it is a good concept they can do well in is another thing. You have to have the marketing and support behind it.”

Franchises Start Every Day

“Franchises start every day, and we see a lot in the commercial and residential services, especially in the contracting area,” Harrison continues. “What we’ve seen especially during the recession is what we call conversions, where you have independent businesses and contractors that will sign up or convert to a franchise because of the support they get.”

“The No. 1 thing is that a [franchise business] has to be replicable,” Harrison stresses. “You have to put together a good operating manual and turn it over to someone so they can replicate what you’ve done. If you can’t do that easily or you don’t do it well, then you’re not going to be off to a great start.”

Franchising continues to grow quietly in the remodeling industry, at least in part because of changing economic conditions and consumer priorities. Some remodelers, for example, may find buying into an established business plan more attractive than building their own from scratch in uncertain times. Consumers, for their part, may search for established brands in a time when information overload is the norm.

"Franchising is an entirely different business than just being a remodeler."

Mark Williams, RSU Contractors

Although remodelers usually think of buying a franchise related to their existing business, establishments with a successful, workable business model may consider becoming franchisors themselves, selling that business model and expertise to others. That undertaking is not for the faint of heart, as two emerging franchisors—RSU Contractors and Delta Disaster Services—will attest. What a franchisor puts into a franchise is what a franchisee gets out of it. The stories of these two franchisors, therefore, are instructive to would-be franchisors and franchisees alike.

Mark Williams of Remodeling Services Unlimited in Murfreesboro, Tenn., has launched a full-service remodeling and home-maintenance franchise opportunity called RSU Contractors. Although he has no official franchisees yet, his goal is to have 10 by the end of 2011.

Williams says he’s focused on finding the right people to purchase franchises, ones who are dedicated to quality. “These first few franchises will be the key, and therefore we’ll dedicate the time, energy and resources to make them a success,” he says.

Williams hasn’t approached franchising casually. He considered it in the 1990s and looked into a franchisor-in-a-box company “where you write a check for $150,000 and they take you in one door and you go out the back door as a franchisor,” he relates.

“I knew it wasn’t that easy,” he says. “Franchising is an entirely different business than just being a remodeler.”

Williams feels the dynamics of the remodeling market have changed as a result of the economic circumstances of the past several years, making the move to franchising the right decision. “I think consumers are less likely to jump to a new house,” resulting in growth opportunities in remodeling and ultimately franchises. In the past, he says, his biggest competition [as a remodeler] was a new house.

Conversions

Williams sees opportunity to attract franchisees in what the franchising industry calls conversions—existing businesses with related experience who are attracted by the business model and support offered by a franchise. “Someone who is doing remodeling and knows they need help would look to us to provide those key parts that would take them to the next level,” Williams says.

Home builders looking to enter remodeling are another source of potential franchisees, Williams says. “There are some very quality-minded builders who have said ‘I’m not going to do remodeling unless I can do it well,’” he says.

To address the new reality of the remodeling market, Williams has developed a home-maintenance program with a goal of establishing client relationships. “We’ve developed a process in which we visit the client’s home on a regular basis. It’s more than just providing a handyman service; it’s providing a bit of expertise and a process by which to maintain their home.

“Research has shown the average homeowner will do a project every five to seven years,” Williams continues. “We found that if we can visit the home once or twice a year, we can increase our chances of getting all their business.”
RSU Contractors has developed a software solution for franchisees that it calls a “command center.” The software suite covers everything from leads and client management to estimating and production. There also is a client portal through which homeowners can manage selections and track job progress. Project supervisors are able to track job costing each day without entering cost codes. The data feeds into an accounting program so multiple entry of data is not required.

“We’re pushing to that next level of contact with the client, building that long-term relationship. The software is totally designed around the business; it’s not something where you constantly have to use workarounds,” Williams says.
Michael Mastous, president and founder of Arvada, Colo.-based Delta Disaster Services, would agree that starting a franchise is not to be taken lightly. “Many people have tried to get into franchising on the quick, thinking they would ramp up a system and get rich. It has affected the franchise industry from the perspective that it’s given less value,” he says.

People who have a successful business and think they can easily franchise it “have no concept as to the amount of work and detail and struggle that goes into putting a franchise together and, more important, what it takes to truly support and make people successful,” Mastous notes.

"They have to want to change the way they do business."

Michael Mastous, Delta Disaster Services

“I started Delta Disaster Services five years ago with the concept of a franchise in mind. Our prototype was built every step of the way to create a formulated system we could then transfer to a contractor to be a successful franchisee. A myriad of consultants was brought in,” he continues.

Mastous isn’t new to the franchise business, having been involved in more than one franchise startup in addition to working for an insurance company as a consultant handling claims disputes.

Business Within a Business

Building a franchise is “starting a business within a business,” he says. “To be honest, the last two years have been 60 to 70 hours a week minimum, six or seven days a week, and I have a full staff here that’s working on the franchise so I have four or five other people in my company that are doing what I’m doing,” Mastous relates.

“It’s not for the faint of heart. You have to have a vision, and you have to realize the price you pay. There are a lot of people who would like to come in and help you package your franchise and take your money. You have to be careful on that end, too,” he says.

“You have to have a very solid proven business model that works before you can transfer it to someone else, and you’ve got to be able to model this to who your prospect is—in our case the remodeler is the ideal person to align with, although we have some new home builders who are also very interested,” Mastous says.

He isn’t looking for just anyone to become a Delta Disaster Services franchisee. His ideal candidate would be a licensed general contractor who is currently running a business successfully and earning between $500,000 to $2.5 million in current sales.

“We have a relationship process of three to six months to get to know them. We visit their operation, interview them and go through a nine-page profile about who they are, why they want to get in this business,” he says.

“They have to want to change the way they do business. Our business model is different than the way most general contractors run their businesses, so we’re marketing to entrepreneurs, but we also need to market to people who want to be part of a different system, yet one that’s proven to be successful,” Mastous relates.

“Our infrastructure is more like an insurance claims process than a contracting process. We joke that the easy part of insurance restoration is the construction. [The difficult part is] getting to a fair and equitable settlement for both parties and keeping both parties happy; after that, the work is frankly easy,” he explains.

“It’s not like putting new cabinets in the kitchen, where I’m going to plan it and shop it for three months and take my time. In our world, the phone rings and you’re out picking cabinets the next day, and, by the way, [the client’s] house is destroyed and he’s living in a hotel,” he says.

Not a Business in a Box

This is not a business in a box where you get two weeks of training and a couple of loose-leaf binders, Mastous notes.

Delta Disaster Services’ operations manual includes several volumes, and the training program is thorough, including experts on customer relations and insurance claims. A former regional claims manager talks about how to build relationships with carriers. Office operations, including a software program tailored to the business, is another training topic. Finally, the mitigation work itself is covered.

“There shouldn’t be anything that we haven’t experienced and documented that [the franchisee] will have to experience without an answer, solution or procedure,” Mastous says.

“That’s what franchisees are investing in. They can spend 20 years researching this industry or they can start out at the 21st year. They don’t have to reinvent the wheel,” he notes.

Delta Disaster Services’ franchisees are required to have a full-time marketer. “A lot of my remodeler friends will tell me they became successful through word of mouth,” Mastous says. “In this industry you have to blow your horn and you have to market. There are a lot of ways to market, but one of them is getting the right referrals. We do require [franchisees to have] a full-time marketer, and we’ll train that marketer.”

“I think the way people do business and the way people make buying decisions has changed dramatically in the last five to 10 years,” Mastous concludes. “You do have to promote yourself, and you have be very aggressive in that area. The way consumers shop today is completely different. That’s not to say word of mouth isn’t important, but people go to many, many sources for information.”

For Qualified Remodeler’s list of franchise opportunities, visit QualifiedRemodeler.com/franchise.

Alternatives to Franchising

In addition to franchising, there are two other methods by which businesses can expand their market and distribution channels:

Distributorship

In a distributorship, the distributor usually:

  • has a contractual relationship with the supplier
  • buys from the supplier in bulk and sells in smaller quantities
  • is familiar with local markets and customers
  • may do business with many companies, more than just the supplier/producer
  • may not receive contractual support and training from the supplier/producer like a franchisee

Some distribution arrangements are similar to franchises and vice versa. A franchisee with a great deal of leeway in how to run the business may look like an independent distributor. On the other hand, a distributor may be subject to many controls by the supplier/producer and begin to resemble a franchise.

Licensing

Licensing allows a licensee to pay for the rights to use a particular trademark. Unlike franchises, in which the franchisor exerts significant control over the franchisee’s operations, licensors are mainly interested in collecting royalties and supervising the use of the license rather than influencing the operations of the business. For more information, go to www.licensing.org.

Source: “An Introduction to Franchising,” International Franchise Association Educational Foundation, www.franchise.org

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