Ten years ago, a handful of franchise opportunities populated the remodeling landscape. Today there are dozens of franchise alternatives and the list is growing. These offerings (see page 22) have expanded primarily within specialized niches: basements, gutters and siding to name a few. But that could be changing.
Last fall at the Remodeling Show in Chicago, Case Handyman Services announced that a dozen of its 75-plus franchisees around the country would soon begin offering remodeling services. Those franchisees would then operate under the name Case Handyman & Remodeling. In addition, the company announced that five of its handyman franchises would soon offer full-service remodeling under the Case Design Remodeling banner, a giant step up from small-scale tasks to room additions and whole-house remodeling.
QR spoke with Case president, Mark Richardson, who explained why the move represents a natural progression for the right handyman franchisee and why he and other industry "thought leaders" see consolidation as a coming trend in remodeling.
QR : What led Case to allow some of its franchisees to expand their offerings?
Richardson: In the late '80s and early '90s we launched our Case Handyman division in D.C. It was launched not out of a passion for small-scale projects. We had a tremendous client base that was literally screaming to get some help on small-scale stuff. Many remodelers have a little handyman department for doing warranty calls, but until that time, no-one had been successful making it a business. By the mid-90s it had grown to be the largest part of our company. As a result, we generated buzz within the industry and we began getting calls from remodelers and builders around the country asking how they might go about operating a handyman division.
Fred Case and I, along with a consultant, sat down and thought about how best to respond to this market opportunity. We determined that franchising was the best way. Unlike most others in the handyman-franchise world, we are, first-and-foremost, remodelers. And we needed a vehicle to take it out to other markets. So when we launched Case Handyman, our idea was to have all of these fairly small offices all around the country doing what we developed in the Washington area. And what we found as we moved forward was that our franchisees' client bases pushed them into doing larger projects. They found that once the relationship was established, the homeowner would want more work done. This phenomenon led to the announcement that we made last October at the Remodeling Show that we were going to allow them to be Case Handyman and Remodeling. Additionally, we had a group of franchisees that were doing larger-scale stuff requiring design and we announced that they were going to add the Case Design Remodeling name.
QR : Repeat customers drove this change?
Richardson: Yes. If a customer develops a relationship with a company they trust, the first thing they do when larger projects come up is seek out that company. We have some handyman franchisees who own sister remodeling businesses and we will be converting those sister businesses under the Case umbrella. It is just more efficient in terms of not having a lot of confusion for the client.
We have all of the products and services to give to them with all the multiple divisions that we have here in our corporate office. We have the tools and resources to be able to give them.
QR : What are the numbers?
Richardson: Of our 75 handyman franchisees, we have 12 partners that have become Case Handyman & Remodeling. We have another five partners that are even further up the job-size scale and will operate under the Case Design Remodeling name. And we see those numbers growing not only by new folks that we bring on board that have the competency, but also we see the numbers growing with our existing partners. As we take the training wheels off of the handyman franchises and they learn the systems and processes, they are going to want to get into these businesses too.
QR : So Case is really then attempting to build the first full-service, national remodeling brand?
QR : What are the right qualifications for stepping into your franchise organization?
Richardson: Well it is interesting. When we launched this thing in 1997, we thought the only people who could do this kind of thing were people from the remodeling or construction industry. We found that the handyman business was more about business acumen than it was about sticks-and-bricks. Right now about two-thirds of the people that come into the Case Handyman business come from outside the industry. They are folks from corporate America. They have been in other kinds of businesses. Maybe they have retired from the military. In many cases, this gives them a better foundation for them to start a business than someone who comes from remodeling. It is sometimes harder to change someone than to create them from scratch.
QR : That is interesting because Case got into handyman from the remodeling side.
Richardson: I was the first remodeler to sit on Harvard's Remodeling Futures board. I would say that we are quite attuned to the marketplace in addition to having the thousands of years of collective remodeling experience. But what is also interesting is that as they graduate to Case Handyman and Remodeling or Case Design Remodeling, the technical construction component becomes more important. To think about someone building an addition to your house that does not have hard-core remodeling experience is scary, whereas to have someone without construction experience install a storm door is not scary. I am not lessening the importance of those skills from the traditional remodeler that is out there. The skill set that you need to have to run a handyman firm is more about H.R. and processes and marketing and sales, all those things that help you run the business.
QR : The industry is seeing a proliferation of franchising opportunities. Do you see this proliferation continuing in the future?
Richardson: Yes I do. I did talk up at (The Joint Center for Housing Studies) Harvard with all of the different manufacturers and one of the discussion questions was on consolidation and what is going on there. First of all, I think that consolidation in remodeling is happening. But the industry is so, so, so fragmented that it has barely showed up in any significant way. But I would bet that it is 10 times the number of remodeling related franchises today than say 10 years ago. If you go back and look at the residential real estate industry starting in the '60s and '70s, the majority of real estate transactions were done by little real estate offices. Today the majority of home transactions are done by national organizations and most of those national organizations are franchise organizations. I think we are going to see the same trend. The difference is that this is going to happen a lot faster. It is not going to take 30 years. It is going to take five years or 10 years.
Consolidation in remodeling is going to happen. It is just going to happen in a different form. In a lot of industries, when we think about consolidation, we think about one company acquiring lots of companies. And I don't think that is going to happen. There has been some attempt to do that with Remodelers Guild and Airroom but I think that the franchise model is going to prevail in remodeling.
QR : We see a lot of very narrow franchise offerings - just gutters or just siding. Do you see them expanding their offerings?
Richardson: You bring up an excellent point. It is probably why our formula - and I am certainly banking on it - is going to be the successful one. The handyman business is very specific in terms of scale of project and type of service. And what it does is build client base. Once you build a base of clients, there is a number of services that they are predictably going to ask you to do. And when they ask you to do something larger, you have an atmosphere to add more generalist projects to it. We got into remodeling with our franchise partners not because we said that that was our vision. Our vision was to have hundreds of smaller handyman offices around the country. It was their clients that pushed them into asking us to give them the tools to be able to do more things for them. The handyman gets the phone to ring. The handyman is what builds client base and once you have a mass of client base then you start to provide different services to them.
QR : Handyman lends itself to a ramping up of job size from repeat business?
Richardson: When I go and replace my gutters, I hope at lease that I am doing it once. We are doing five, six or seven projects per year for the same client. It is a dividend business. It is a client based business. It is not a project-based business. In design-build we do a project about every 7.2 years for the same customer. Don't kid yourself that if you work with someone once every 7.2 years that they are a client. That is not ongoing business. Like in the restaurant business, if I show up every 7 to 10 years, I am not really a patron. Handyman is a client based business. It creates dividends. It creates equity. It is a different kind of business.
QR : Will the Case franchises that are moving up to full-service remodeling utilize the systems that you have developed in D.C.?
Richardson: Yes. And they are all different processes. Design Build is different than kitchen and bath. We have this giant laboratory in D.C. We will do $50 or $60 million in local remodeling business. Our partners don't have to experiment. We've already proven successful processes.