Other people’s business

 

	Tom Swartz, CGR.

Twenty years ago, Neil Peck and his wife founded S.N. Peck Builder Inc., a high-end Chicago remodeling firm that now has 28-30 employees and annual revenue of $6.3 million. Then in 2000 they bought a Case Handyman Services franchise, doing $1.3 million in their first year. Pat Nicholson, CR, the founder of Deckmasters Technologies Inc., began to specialize in decks in 1978. He started selling Deckmasters franchises three years ago; in addition to the corporate office in Pittsburgh, there are four working franchises, three training franchises and two satellite offices in Pennsylvania and Ohio. This month Tom Swartz, CGR, interviews the two on the pros and cons of franchising.

TS: Although the Mr. Builds of the past have failed, in the past three or four years we see a resurgence of franchises. Why did you decide that franchising was a smart move?

NP: Our clients kept asking us to come back to fix their door or do something little, and we were not set up to handle those kind of requests. To be honest, we didn’t do a good job of handling them. I’d have to go look at it, and then a month or two later I’d get a carpenter out there to check it out. Plus I could only charge for my carpenter’s time.

We started to look at what it would take to set up a handyman division within our company, and we did the numbers, and they didn’t work. We were looking to franchisers who had done the homework to come up with a system that would provide a highly professional service. We looked at three or four different franchisers.

PN: The whole concept of franchising to me was to grow my business, and having local offices with managers didn’t seem to work. But when you have a franchisee who has a vested interest, then you have a person who really does care.

TS: Who are you looking for? Who’s going to succeed?

PN: It’s extremely important to get a person who really wants to grab the reins and take control. Are we looking for field people to learn the marketing and the sales? Yes. Are we looking for corporate fallout people that need to learn the production but know how to do the marketing and the sales? Yes.

TS: Pat, what do you do for training, and how important is having a complete operating system?

 

	Pat Nicholson

PN: It’s a no-go if you don’t have it, period. We have construction manuals for decks, for porches, for wall systems. There are certifications for each program. Our menus of operations are quite extensive. There’s a lot of bookwork. We’ve created a satellite system where they actually work as a mock franchise, and they take on jobs and sales and production, everything except for the overhead. And they go about a daily, weekly, monthly process until they feel they can take off on their own. It’s been a little bit too much work for us this way, and we may have to shorten that process. The more training you give to a new franchisee, the better opportunity you’re offering them and the better likelihood of success.

TS: And he also has to pay for this opportunity. Can you talk about what that amount is and if you get paid extra after that?

PN: Right now they are $32,000 apiece for a certain amount of population. We have a 6% royalty on gross sales and a 1.5% ad fund that we all put money into for general advertising.

NP: We paid $35,000 for our franchise, and our franchise fee is 6% on gross sales. There’s a fairly extensive application process. There has to be a business plan, and you have to do some due diligence.

PN: Our franchisees spend a certain percentage as well. So they spend part of their overhead on 2-3% advertising, and the 1.5 is additional.

TS: One potential drawback is quality control. How do you get consistent quality all the way across the board?

NP: We have a 10-year minimum experience requirement. I’ve got 10 guys as home-repair specialists, and I’ve probably done between 70 and 100 interviews to get that. We’re looking at if certain HRSs are more efficient than others. We are able to do that with the software Case has provided.

PN: Each franchise, you have to be hands-on. Our days are all production up until about 1 o’clock. We also follow up with a written warranty. These guys know that if there’s a problem with that job, they’re going to have to go back.

TS: So Neil, how do you separate the franchise from your company or brand, and why do that?

 

	Neil Peck

NP: They’re two separate companies, separate employees. I’ve been running Case, and my wife’s been running S.N. Peck Builder. It is a marketing machine, handyman. Without the marketing, you will fail. That’s one of the things that we’re learning how to do, and looking at how we market the other company. We have not sent a lot of work from handyman to S.N. Peck. S.N. Peck has provided a lot of leads for the Case Handyman Services, especially in the beginning.

TS: Pat, is a Deckmasters franchise a supplement to another remodeling company?

PN: No, each one is devoted to Deckmasters.

TS: Neil, have any people you know of not made it or said, “Hey, this isn’t for me”?

NP: Yes, I do know of some franchises that have failed. There have been some guys that have not been successful, because I don’t think they have the experience to handle the production.

TS: Can a person who doesn’t have a remodeling or construction background make it in handyman services?

NP: They could. But there would be a longer lead time in getting ramped up. It is doable, but they would have to hire somebody with some extensive construction experience to run their production.

PN: We’ve had corporate fallout, and they’re successful so far. You grade the person as they go along and find their weaknesses, and then of course assist them. All our satellites in the past have not become franchises. They didn’t seem to think they’d make it as a franchise, and they probably wouldn’t have, so we never got them involved.

TS: What advice would you have for a remodeling contractor who is struggling, and he looks to getting into franchising because it has the systems?

NP: If a guy is struggling with his own remodeling business, he needs to get that business in shape first. I would not recommend somebody get into this business as a savior or silver bullet.

PN: There may be good reasons that they’re not doing well, and the franchise system could help them learn where their inefficiencies are and help them become a good businessperson. On the other hand, it may be their personality, not their practices.

TS: Any last thoughts that you have for a remodeler who’s saying should I do it, shouldn’t I do it?

NP: Not only should there be somebody who’s an experienced remodeler, it should be someone successful, so that they have good business tools. And they have to look at their market.

TS: Do you think it was a smart move, and would you do it again?

NP: Absolutely. I think it’s one of the best decisions I’ve made in my business career.

Selected portions of the interview are available on the audio page.