Learn how to invest your IRA or 401k into a franchise penalty-free. ($50k min)
Franchisers are capitalizing on the growing demand for home-repair professionals. Some franchise systems were born of frustration over the poor service and shoddy workmanship of craftspeople they'd hired for their own homes.
Two years ago, a leaky dishwasher pushed Michael Ferry to the edge. He waited four hours for a repairman to show at his Phoenix-area home and paid nearly $200 for a quick service call to replace an inexpensive gasket. But Mr. Ferry, then an information-technology manager, thought there might be a business opportunity in his grumbling. Why not offer consumers a home-repair service in which the contractor arrives at an agreed-upon time and the customer pays only for time and materials?
He spent the next year working with a franchise consultant to see if his business model could be profitable. Satisfied that his idea could work, Mr. Ferry launched Maintenance Made Simple, trained his first batch of franchisees in October 2003 and joined one of the fastest-growing franchise categories in the U.S.: home repair and improvement.
The home-repair or "handyman" franchise category has exploded in recent years, fueled by a booming residential real-estate market and time-constrained homeowners eager to remodel and repair their nests. Homeownership in the U.S. is at a record 68.4%, with low mortgage rates spurring frenetic home-buying activity. And many of these homeowners are investing in their properties - for the year ended in September, homeowner expenditures on remodeling rose by an estimated 6.6% over the prior year, with spending totaling $125.2 billion, according to Harvard University's Joint Center for Housing Studies.
But there's another factor helping home-repair franchises: consumer experiences with repairmen who are unreliable, take advantage of homeowners or are so busy that it's impossible to get them to return phone calls, let alone complete a job. In a 2003 survey by the National Association of Consumer Agency Administrators and the Consumer Federation of America, home-improvement contractors were the No. 2 source of consumer complaints filed with state and local consumer-protection agencies in 2002 (after car sales). These companies also were the fastest-growing complaint category.
"The biggest complaint that you find for anyone who comes in to do anything in your home is the lack of reliability--showing up when they're scheduled to show up and doing what they said they would do at a price they promised to do it at," says Don DeBolt, president of the International Franchise Association in Washington, D.C. "Franchising is imposing a discipline that will bring about greater customer satisfaction. If you have Don DeBolt's repair service come to your home and he doesn't even call to say he won't be coming, whom do you call to complain?" says Mr. DeBolt.
Demand for Reliability
Patty Ball, a homeowner in Cape Girardeau, Mo., says she felt she almost had to baby-sit house painters she had hired to paint her ranch-style home. During the past year, she and her parents turned to a local home-repair franchise to do their odd jobs--projects like hanging a chandelier and installing a dryer vent and mailbox. Ms. Ball says she appreciates that its employees are bonded and insured and have had a criminal-background check.
In fact, home-repair franchises are capitalizing on consumer concerns about hiring the independent "guy with a truck." These mom-and-pop operators are home-repair franchises' biggest competitors, and most franchises are eager to differentiate themselves from them. The franchises tout their stringent hiring standards, which often include criminal-background checks, skills assessments and, in some cases, a minimum of 10 years' experience in home-improvement or construction. Knowing that their reputation will make or break their business, most franchises typically guarantee their work and will return to a customer's home to address complaints or redo a project if necessary.
"One of my big pushes with this company is to restore respectability to the industry," says Kaile Warren, founder of the Rent-a-Husband home-repair franchise, based in South Portland, Maine. Mr. Warren, the home-improvement expert for the "CBS Early Show," interviews every prospective franchise owner personally and helps franchisees when they begin hiring their electricians, plumbers and other employees.
"[This industry] is my life and my passion," Mr. Warren says, via e-mail. "There are a lot of great people working with pride and great fervor to get this industry drafting in the right direction."
The home-repair franchise category has grown quickly. Until four years ago, the category didn't exist in Entrepreneur magazine's annual Franchise 500-ranking issue, according to executive editor Maria Anton. The magazine's 2003 ranking lists five companies in the magazine's "handyman services" category. In all, at least 12 home-repair companies now sell franchises in the U.S., and a third of those companies entered the market since 2002.
Born of Frustration
While the number of home-repair franchise units overall may be modest compared to fast-food and other giant categories, home-repair franchisers clearly are betting that a certain percentage of inept or overscheduled homeowners in large metropolitan areas will call them for help. In fact, some franchisees say that they decided to buy a home-repair franchise rather than another type of franchise simply because they had become so frustrated trying to hire reliable help to work on their own homes.
"Intuitively, you can envision demand for the service from your own experience," says Fred Harms, vice president of franchise development with Cincinnati-based Handyman Connection. Mr. Harms says the company, which is one of the largest home-repair franchisers, anticipates $72 million in revenue from its 102 franchise territories in 2003.
Mr. Ferry, the Maintenance Made Simple founder, is the newest member of the home-repair franchise segment. He developed his company's business model, in which a consumer can buy a block of time--five or 10 hours, for example--for maintenance or repair, from his experience as a fed-up homeowner. "My background isn't in home improvement or being a handyman at all," he says. "But I was getting very frustrated dealing with multiple contractors and repairmen coming to my home, and 15 minutes of work was costing me hundreds of dollars." He used his IT background to develop the company's proprietary database system and centralized call center in Scottsdale, Ariz., and he hopes to add 25 new franchisees in 2004.
Many, though not all, home-repair franchisers will sell franchises to buyers without previous experience in construction or a related trade. In fact, as with many other types of franchises, some prefer a buyer who's a blank slate of sorts. In home repair, this means a franchisee who will bid and complete jobs based on the system set forth by the franchise, rather than by standards carried over from a previous career.
Other home-repair franchisers insist on at least some knowledge of home repair or improvement. Rent-a-Husband's Mr. Warren prefers someone who has worked in or around the industry with mid- to upper-level management experience, though he says some of his best hires are former members of the military who never worked in construction. Mr. Warren, who owned a small construction firm before starting Rent-a-Husband, says seasoned construction-project managers who are tired of the worksite grind are good candidates, as are real-estate appraisers, who have learned about home building through their appraisal jobs.
Denis Shelley spent his career working for AT&T Corp. and then Lucent Technologies Inc. He also enjoyed doing home-repair and improvement projects on his own house. Just prior to early retirement, he applied for a job as a part-time handyman at a Handyman Connection franchise in Denver. The franchisee turned him down, saying he didn't have enough paid experience in home repair. Angry, Mr. Shelley decided to buy his own franchise. He opened the Colorado Springs, Colo., Handyman Connection in January 2000 and is bringing in three times the revenue as he expected, though he won't reveal his earnings.
Mr. Shelley, who has a master's degree in marketing education, says his business and home-repair experience have meshed well. "I spent 25 years in sales and marketing. To open up a business and take the things I learned in my previous career and apply them here is a natural," he says. His home-repair knowledge also has been important to his success because it gives him more credibility with the 40 craftsmen who work for him, he says.
Many home-repair-franchise owners say that hiring and managing craftspeople can be the toughest part of the business. Mr. Shelley tries to build family-type relationships with his employees by keeping an open door, holding a catered picnic each summer and treating his employees and their significant others to a holiday dinner in a fancy restaurant. He also spends thousands of dollars each year to stock his office with snacks and beverages, which encourages his workers to visit him. And he's always ready to lend an ear--but never money--to an employee in need.
Rick Hetzel bought a House Doctors franchise in Cape Girardeau, Mo., in 2001 after a career in military law enforcement and a stint as the chief of police in Cape Girardeau. He says he was drawn to House Doctors because it requires a minimal financial investment ($24,000 to $51,600) and allows franchisees to tailor their operations to their communities. For example, his business lets customers run a tab because "that's what the community likes," he says. In 2002, his franchise grossed $360,000 with an average sale of $650. About 35% of his customers are repeat business.
Mr. Hetzel currently employs five full-time employees, including a secretary, and he hopes to hire a full-time estimator so he can open additional franchise locations. His biggest challenge is finding laborers in the surrounding community who meet the company's standards.
Jim Gibson learned about Chattanooga, Tenn.-based home-repair franchiser Andy OnCall through his job as a franchise broker. He bought his franchise in Columbia, S.C., and opened in October 2001. He has 22 craftspeople working for him as independent contractors; full-timers can earn $800 to $1,200 a week. While he won't reveal his franchise's revenues, he says he nets about 25% after overhead, advertising and labor costs and franchiser royalty fees.
He says his biggest problem is that his craftspeople are scheduled five to 10 days out, sometimes longer, and that causes him to lose potential customers who don't want to wait that long for a handyman. In fact, he hasn't been able to hire his own craftspeople to work on an 18-year-old home he bought recently. "We haven't had any time for them to do that, so I guess I'll have to do it myself," he says.
Copyright © 2004 Dow Jones & Company, Inc. All Rights Reserved