Franchise Talk

WRRJ

I am a fairly new member of this site, and I know you guys have brushed on the topic several times, but I don’t think I have ever seen a full out debate. I want to get opinions on how contractors, how all of you, feel about the wave of franchise companies in the handyman and trade service businesses. Have any of you investigated any of the ones out there?

Of those who have looked at or considered them, I would also like to talk about what types of things that would encourage or discourage you from joining a franchise. And those of you who haven’t looked at or considered joining a franchise, what do you dislike about existing franchising businesses?

I've been following ContractorTalk for a while but just recently joined and I know everyone here is pretty frank on topics they comment on, so let 'er rip.

Bill (STL)

Grumpy

Here is the thing, I see franchises working for handy men. I once read that studies show that a franchise works better for people with alot of business experience, but no experience in the specific business. Reason being, a franchise is a system. Usually these handymen I see who are successful, aren't handy at all but might have a fleet of 10 people who are very handy.

In my industry, roofing and siding, I see alot of affiliations but haven't seen any successful true to the word franchises. The affiliations I am speaking of are Roofers Success Internation for example who will allow you to use their trade marked name and logo "Recommended Roofers". Yeah they have a system and yeah they try to convince you that their system is the best way of doing things, and yeah they have membership fees, but the bottom line is they are not a franchise.

I've had a similiar idea where I would "box up" an idea and make it a system, then sell off this boxed system. It is much like a franchise because you are buying a system, but not like a franchise because you have the freedom to change anything you'd want and wouldn't be sharing in the profits, like a true franchise would.

Do I think a franchise is a bad thing? Not at all. Why would it be bad? Unless it is some how lowering the "going rate" or flooding the market with substandard work, I think it's a good thing. Franchises aren't for everyone though. Some people want to learn and stumble for themselves. Some started doing side work and next thing they know are running successful companies. However the business man/woman, who really doesn't know too much about the trades and doesn't expect to be doing any of the actual labor... I think a franchise is for that person.

I once met a guy who owns a burger king and a franchise cleaners. This guy never flipped a burger and probably didn't wash his own clothes. This guy didn't even manage his own stores, he had full time managers doing the day to day operations. His sole job was to check the books and make sure bills were paid etc... but he had an assistant for that. Now I am sure he didn't start out this successful however he was able to do it because he had SYSTEMS, and that's all a franchise is... a System created by someone else with a proven track record of success.

The way I look at it, anyone in business has 3 choices. 1) Buy someone's system, 2) create your own system, or 3) stumble through constantly repeating mistakes.

ProWallGuy

WRRJ, feel free to talk franchises, but please don't let it turn into a sales pitch.

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ProWallGuy

On the subject of franchising, I know of a couple paint-related franchises that seem to do well.
1-800-paint job (well, maybe not a true franchise, but...)
Certa-Pro Painters I believe are another.

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Grumpy

These are the affiliations I was speaking about, they are like franchises, but not quite.

Mike Finley

Why buy a franchise? I believe there are only 2 reasons to ever buy a franchise.

#1 Brand name.
#2 You are clueless at business.

Teetorbilt

Once you enter into the franchise scenario: You are giving away a portion of your hard earned profit. At times this profit is pretty slender and the franchiser ends up making more than the franchisee.

Why would one opt into a franchise? You don't have a clue about business. They provide you with everything, in their view, and suck up the money that you worked so hard for.

The fact is, if your savvy, you'll make it without the franchise. If you're an average schmuk, you would be just as well off with a dayjob and bennies. If your a pipedreamer with visions of becoming Bill Gates, take your 'franchise' investment and give it to charity. It will serve better purposes there.

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Grumpy

Go back to the brand name for a minute. I think this carries ALOT of weight. In addition, in researching some of the trade handyman franchises before starting my business, quite a few also advertise for you and provide you with leads.

Just think of the ammount of time you are in an unfamiliar neighborhood and unsure of where to go for food, and then you see your favorite franchise restuaraunt (like McDonalds, or Burder King, or Hardees etc...) you know exactly what you can expect from that restaraunt and you go for it. That goes back to the system you buy when you buy a franchise. Every store prepares their food the same way.

Mike Finley

You missed the point on that one.

The brands you mentioned are companies with established brands or brands that occupy the publics consciousness in their particular categories.

What handyman franchise owns this mental ground? Unless you are in a unique situation for the most part no handyman franchise has created brand awareness.

And that is the point. If a franchise doesn't offer you a national brand and you are competent in business already there is little appeal for getting into a franchise. No franchise that I can think of has a product or service that cannot be duplicated outside the franchise.

There are thousands upon thousands of franchises to choose from, only about 100 of them actually have developed to a point where the brand is a valuable asset you are purchasing. For the vast majority of them the value is only in their system and YOU are developing the brand for them.

Bertram

I have been looking at various websites of those H.M. co's to see what the going rate is to purchase "their" systems. Here is a cut n' paste from a non-mentioned franchised co.
Franchise Fee $9,900
Exclusive Territory $30,000 (approx.)
Initial Package (equipment and supplies) $9,500
Additional working capital $40,000-$50,000 (minimum requirement)
Total Estimated Initial Investment (including working capital) $100,000


This one really gets to me....
Exclusive Territory $30,000 (approx.)
All that means is, this particular Co. can not sell another franchise in "your" area. It does not mean any of the other 3 dozen H.M. franchises can't or that a local guy/gal can't setup shop in the same area. Can you imagine how much advertising you can do with that much money. And how much "market research" do you think they really do to determine that the area you are looking to target and the area they deem is good, will be a good area to work in at all.
I'm sorry, but to pay $30,000 just to have exclusive rights to an area is BS in my books, because the only thing it excludes is the same Co. setting up another owner in that same area.

WRRJ

I first want to respond to ProWallGuy. This is not going to turn into a sales pitch. Right now, I don’t have anything to sell just yet. I am developing my companies franchise program, but just like everyone else here, I am just doing a little research to get the opinions of other contractors here in the states.

Grumpy, thanks for your comments. As a small GC, I know that system flexibility is important for the contracting business. And the contractor doing the work should always have the final say on the price of a project. In my research, I have seen systems where the corporate office/call center tell the contractor how much they should charge, which I absolutely don’t agree with.

Grumpy and Mike Finney, I understand your comment about “why would a contractor join a franchise” when he/she is already operating. Especially when most franchisors want to take a percentage of your revenue. The reason why I have even been working on a system is that I don’t think the existing franchises out there are really trying to grow by putting contractors in charge. They are putting laymen in charge and want to try to control the contractors’ business. I don’t think that is how it should be.

I recognize that some of you may dislike or don’t think that franchising can work in the contracting business, or may simply refuse to join a franchise because you want to go at it alone. Of those that have an issue with it, is it the royalty percentage that you would have a problem with? What if the fee was flat and very low, so as your business grows, you keep that growth to yourself?

Do you think that a franchise can’t give you anything that would make joining really worth it.? What if you had something like a private label credit card, so homeowners could finance a project but you get paid immediately?

And in response to Grumppy's last comment, about Brands pulling a lot of weight, I think he is absolutely right. We live in a branded society. And brands can not only sell their products and services at premium rates, but they can sell their businesses at premium prices.

I am just trying to pick everyones brain. I sincerely think that if contractors don’t find a way to take control of the industry, companies like Home Depot and Lowes are eventually going to figure out a way to do it. I’m for us.

Bill (STL)

Grumpy

I agree with everything you said, which is why I went the route of starting my own and building my own brand and my own systems. Except there are exceptions to every rule. For example, ownes corning does basement remodels... everyone has heard of the pink panther. I decided against persuing this franchise for reasons of under-capitolization.

Grumpy

Big boxes have been offering services for years(sears), and for the most part charge a humongous price for their services. While at the same time under-delivering and not really taking a huge bite out of the market over all. Heck they raise the "going rate" so I am all for them! I'm sure people were terrified when Sears started to sell Vinyl siding and windows and roofing. They no longer sell roofing, and there are still plenty of siding and window companies in operation.

I think the problem with most contractors is that they don't understand that they are running a business. Alot of these guys make more money than I do currently, but they run a very small operation, which is what they want. They want to stay small. IMO they are not really running a business, but are self emloyed (I hope that makes sense). However when they go to retire, I hope they have an IRA or 401K account because their business will be worth nothing more than it's liquid assets, which are a beat up truck, some used ladders and equipment... Hardly enough to retire on. A real business has good faith, and hopefully systems in place which allow it to operate without the daily management of the Share holders. This is more attractive to a potential buyer.

Franchise or not, I think once contractors realize that this is a business and stop living for a pay check they will be ok. I think anyone who entertains the idea of a franchise already realizes that this is a business.

copusbuilder

I take issue with those comments(respectfully of course). Perhaps it is a maturity issue? You have just started in your business and you had a recent post full of censored emoticons. You were fully frustrated with all your help?
Do you think it is suddenly going to turn around and become a calm trip? Don't hold your breath

I downsized my business, kept the good customers, kept the good employees and have never looked back. If I spend more than 2 hours a day doing paperwork and one day a week in Houston it is rare. This gives me time to persue other avenues which I couldn't entertain if I was baby sitting workers.

I could spend 10 hours a day making my business grow and maybe..realize a 15% increase in profits. Of course the hospital and shrink bills would offset that.

Society has been trained to believe that running the biggest business you can is success. I suspect that one day you will figure out that this is not true for many people.

Yoru idea of a business may differ from others.

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AkA Richard Cranium

Mike Finley

Actually.... the $30,000 for an exclusive territory is a very good sign and not something you should be upset with but should be very please with.

#1 we have to be talking about a franchise that is really a player, not some #35 out of a ranking of 40 in it's category. If it's a really good franchise the fastest way to big money is with exclusive rights.

The ultimate is called a Master Franchise license which gives you rights to maybe a whole state or at least a big section of it. Get yourself a good franchise with Master franchise rights and you will be on your way to becoming rich since you will control a huge territory.

The sucker bet is usually somebody who buys a onesie, twosie franchises, you never reach critical mass to really amount to much, the real money is on the master franchise with a big territory where you either develop it yourself with your own company stores or sell sub franchises to others after you establish the brand in your territory.

Of course the problem is little players starting out usually don't have the balls, nor more importantly the capital or at least the backing to start off with a master, because you are going to have to contractually comit to a development agreement with so many stores opened in so many years and that takes a lot of money to float it all as it gets going.

Teetorbilt

Personally, I'd just plain be embarrassed being labled as ........., part of ........

I'm an independent, artiste and by no means generic. To relate to that would be financial suicide if you are skilled. If you're just some dude with money to invest, go for it!

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Grumpy

I appreciate that you want to be self employed, however I want to run a business. If I wanted to be small I would be working for someone else. Period and end of story. I want to be big, I see no reason to be small.

I remember at 5 years old learning what the word Entrapaneur meant and if my foggy memory serves me correct my uncle hag a Entrapaneur magazine and I tried to comprehend what I was reading all the time saying "this is for me."

Yes I have some posts complaining about my past underachieving employees. However I truly feel that failure is always the responsibilty of the management, regardless of the size of orginization. Therefore it is my failure to fix. And once fixed I can grow and proceed to my next failure which will thusly be fixed. I have stumbled many times and will continue to stumble but I learn from my mistakes and stumble across the same mistake twice.

My end goal? Sale of my company (when it's time to retire). As stated above, I am speculating that the size of my company will fetch a higher sale price than the owner operator contractor model. I know there is more involved than just size, for example profitibality, contracts in the pipe line, steady customer base, and so forth. I am working towards all these.

Success is setting a goal and accomplishing that goal. It doesn't matter what the goal is. Society has nothing to do with my goal to be big. It has to do with my personal experience of working for companies who are large, and knowing I can do it better. Overall it has to do with my personal quality of life.

Copus, you once posted something about a fisherman and a college grad. The fisherman is sitting on the shore half asleep with a line in the water, and the college grad explains to him that he could hire people to do this and in a few years he wouldn't have to work and could relax ... and the fisherman explains he's not working now... The difference between the fisherman and the college grad is: after that grad builds his business and has people working for him he can sit next to the fisherman and fish all day BUT the college grad will be earning money while fishing based on the work his employees are doing. The fisherman will have to work for the rest of his life.

Copus, I acknowledge that my idea of business varies from others ideas. This is why I explained my idea in the previous post to which you are responding.

Copus, you and I fundamentally disagree on the topic of business size in each and every post that discusses it and I don't think we need to further beat this dead horse. We will continue to disagree until i get to the point that I am so frustrated that I give up on my goal and go back to being small... and at that time you have my permission to say "I told you so."

My bottom line is this: If I ONLY wanted to be paid on the basis of MY merit and MY merit ONLY, I would be an employee. I prefer to bust my ass and build a real busiess, a money machine, which can operate without my day to day management. Even if you as an owner operator and I as a business owner earn the same at the end of the year, every year... I will hopefully make more at retirement time. If not the heck, hopefully I have more people at my funeral

I dream big so sue me.

copusbuilder

Grumpy you are free to pursue your dreams
I leave you alone until you make a comment saying that small businesses are merely self employed people. As I have said earlier 'I run my business I don't let it run me.

I should also add that you my friend, are a small business

Today I am closing on a piece of land and will be building the first vacation rental home on the first of six lots I have. I couldn't do that if I was working 10+ hours a dayand investing everything into my business.

I will take those homes over the crap shoot of "maybe" being able to build my dream business.

Really one of the dumbest comments I have ever heard Don't know what book you have been reading but you should flush it down the commode!!

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AkA Richard Cranium

Grumpy

Copus in an effort not to pull this thread too far off track, I have started a new thread for us to discuss our disagreement regarding company size. http://www.contractortalk.com/showth...598#post107598

Bone Saw

I agree with this 100%

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