Franchising vs. Independent: Weighing the Pros and Cons
Four industry professionals sounded off about the advantages and disadvantages that they’ve experienced from their decision to either stay independent or go the franchise route.
Sooner or later, even an experienced and successful independent restoration business will likely ponder whether or not franchising is the way to growing business and making a more comfortable living. And franchising does have its benefits over being an independent company, just as how staying independent has its advantages that franchising can’t match.
So what’s better – being a franchisee or an independent business? There is no right or wrong answer, as it all depends on the situation your business is in. But it’s a question that many professionals in this industry struggle with. So in order to shed some light on the pros and cons of each, we talked with four professionals in the restoration industry, two who are on the franchise side of things and two who operate independent companies. We asked them to reflect on their current situation, the decisions they’ve made throughout their careers in the industry as well as share some advice with others in the industry that might be struggling with the decision that we posed at the start of this paragraph. Here’s what they had to say:
Russell Regan has been in the restoration industry for 30 years, working as a subcontractor for the first 20. He ran four trucks and called himself a “glorified sub.” He says things were going well and the money was good, but he lost a lot of workers in this time – many of whom went out on their own and started taking business away from the companies that referred him work. When he confronted the various companies about why they were giving away work that they always referred to him, they shrugged him off.
“So I said, ‘Now I’ll go after your work,’” Regan recalls.
In 2004, Regan signed on with Rainbow International and now owns Rainbow International of Long Island in New York.
“The major benefit of being a franchisee is credibility,” he says. “Now that I’m Rainbow, I’m part of something, I’m part of a bigger network – you look bigger than you are.”
And there are other benefits of being a franchisee. According to Regan, national accounts are a big bonus. He says he gets work from 3-4 insurance companies who don’t even know who he is, but give him work solely because of his franchisee status. In other words, business isn’t being taken away from him anymore – it’s being delivered to him.
William “Bubba” Ryan, CEO/President, Rytech, shares similar sentiments to the value of franchising.
“There’s a trend in the industry for programs – national and regional programs,” he says. “Typically, the carriers are signing with networks. There’s your big advantage. Who knows, who can predict the future, but if the trends continue, the available access to these carriers’ business is starting to go away because if you’re not a part of a network, you’re kind of on the outside looking in.”
Ryan is quick to point out another big benefit of franchising – it’s an easy, fast way to learn the business, as a good franchisor gets you started on the right foot and provides you with a blueprint for long-term success. But Ryan also admits that going the franchise route might not be the best option for everyone – notably, already well-established companies.
“If you know your business, you do a good job, you’ve learned through experience, you give a good product at a fair price… the fact of now having to pay a royalty – that’s a tough decision,” he says. “For someone who is experienced and has been in the business for a long time, they really need to look hard. Where are the benefits for what you’re going to be paying?
“I would suggest they do their homework. Decide what it is you’re looking for in joining a franchise network.”
Carl Sherman began his career as a carpet cleaner in 1971. Two years later, he started what’s now known as PHC Restoration after realizing the need for a full-service restoration company in North Carolina. PHC grew from an initial staff of four employees up to 31, where it stands now. It’s also expanding its facility to accommodate the company’s growth. Today, PHC is run by Sherman’s daughter, Katie Smith, and her husband, John – each of who joined the team in 2005.
“There’s a sense of entrepreneurial satisfaction and pride that comes from knowing there’s no ‘corporate’ to fall back on,” says Katie Smith. “We are responsible for building our own clientele without the assistance of a national marketing campaign. We have the freedom to write our own business plan, set our own goals and execute those goals. Our business plan encompasses many challenges, risks and fears and forces us to be creative and stay focused. Oddly enough, many of these benefits can be a source of stress for us, but at the end of the day we enjoy being accountable for the success of our company.”
Jaclyn Carpenter, Ideal Restoration, shares a similar backstory to Katie Smith. San Francisco-based Ideal Restoration was started by Carpenter’s father, Butch, in 1983 and she took over the business in 2004. Carpenter also shares similar sentiments in terms of being able to control aspects of her business as an independent.
“A couple of years ago, I decided to shift our client base, change our logo, change our location – change everything,” she says. “We did a big shift and one of the benefits of being an independent company is being able to do that, having control over your brand and how it’s perceived.”
However, Carpenter was also quick to point out some disadvantages of being independent.
“I definitely think there’s more risk with an independent company and liability is there and it costs more money at the end of the day,” she says. “You don’t have a brand to fall back on, you don’t have an HQ somewhere to get an issue resolved – you’re on an island. That said, you end up creating your own advisory team around you to help guide you and all of that costs money.”
Both Smith and Carpenter said they’ve never seriously considered going the franchise route. For Smith, that’s due to the solid reputation that PHC Restoration has built since the company’s founding and all the relationships and contacts that have grown with the company. In fact, she estimates that 30% of PHC customers are either repeat clients or new work from word-of-mouth recommendations.
Carpenter has also never given thought to going the franchise route, but says there would be pros to heading down that path.
“Let’s say I was failing or not doing so well,” she says, hypothetically. “I would probably entertain that thought because I think there’s more assistance.”