The Path to Success: Franchise or Independent?
Every year, R&R features articles talking about different trends in the restoration industry. Today, franchises are undoubtedly on the rise – but so is the number of independent companies taking steps to be more independent than ever by not participating in third party program work. In this article, two franchise owners and two independent restoration company owners share their thoughts from their side of the aisle.
Lisa Rothacker (LR)
Roth Construction Cleveland, OH
Roth Construction is an independent, family-owned business that has been serving the insurance repair industry in Northeast Ohio since 1967. The company does not exceed 30 percent TPA work.
Christopher Yanker (CY) Buffalo Restoration
Chris’s parents started Buffalo Restoration in 1991 out of their garage, after seeing an opportunity to provide service for our community. A buffalo was chosen for the company’s name and logo because it represents strength and resilience. Less than 5 percent of Buffalo Restoration’s jobs are through TPAs.
Chris Spensley (CS) SERVPRO of Brighton/Howell & Greater Highland/White Lake | Brighton, MI
This is a family-owned and operated franchise now in its 16th year of business. Today, the company has 25 employees and is a full-service general contractor on top of their restoration services. Chris’s company gets about 15 percent of its workload via TPAs.
Josh Kijanko (JK) ServiceMaster of St. Charles, North County, Clayton, Westport & Metro-East | St. Charles, MO
Josh was first introduced to the brand through working for a ServiceMaster Restore franchise. Six years ago, after learning a lot about the brand, he purchased his first ServiceMaster Restore franchise, and has since been able to expand and add additional territories.
How have you been able to so successfully grow your company within your particular business model?
LR: We thrive by being on time, and on budget, one happy customer at a time. Plus, we believe in creative marketing and being innovative. We’ve gone a variety of routes with marketing, agent marketing, networking, building relationships, community outreach programs, program work, victim assistance, 23.5-hour emergency board-up service, and more. There is also the element of being sensitive to the needs of the property owner. Our carpenters can do the best board-up, but if the company doesn’t communicate, educate, and reassure the homeowner, we will not get the job. So, our teams are happy and dedicated, and laser-focused on customer service.
Photo courtesy of Buffalo Restoration
CY: The growth and success of our company has been earned through the hard work of building brand awareness. We have built our brand by learning and delivering industry best practices and standards of care in our daily work. This coupled with developing benchmarks with network groups and measuring our performance against these KPI’s has really helped us outperform ourselves on an annual basis. Not all of our growth has been in volume. It’s fun just to learn and grow personally as well as professionally learning how to do better business even if it’s not increased revenue In our small community word travels fast if you’re operating with integrity or not. My dad always says you’re only as good as your last job. We also like to be able to give back and support our community.
JK: There were multiple factors that drew me to ServiceMaster Restore. First and foremost were the four corporate objectives. For me, a company’s objectives offer insight into the type of company it is and what’s important to that business. They should provide a purpose for you to build a business that makes a lasting impact. I also had experience working with other ServiceMaster Restore franchisees and the corporate office, and had first-hand experience into the high level of professionalism and expertise within the brand. The financial foundation and opportunity was also important. I wanted to invest in brand that was a leader in the industry and had a focus on staying a leader – I found that in ServiceMaster Restore and the company was committed to focusing on serving customers and providing the best service in the industry.
What do you see as some of the benefits to being an independent/franchise firm?
LR: Our continual ability to make changes to our business plan has been crucial. Fifty years ago, Roth Construction had little competition and maybe one or two franchises in the area. In the Cleveland phone book, there were only eight companies in the Yellow Pages; now, there are 150 restoration contractors. Family-owned allows us to be a close-knit team. You are a member of the Roth Construction family, whereas with a franchise, you are one local part of a larger group and a corporate America atmosphere.
CY: What is your customer’s perception of the brand? In an independent company, you are solely responsible for the reputation of your brand and the culture of the team members that are representing your brand. In a franchise there are many different owners and operators all operating under the same brand. Another topic to consider is dues or royalties. Every company gets to face the choice of what’s happening to the profits from operations. What is the balance of the company’s profits, how much is going out to the owners of the brand, and how much is going back to grow and invest in the strength of the company? All companies are trying to develop their own secret sauce to differentiate themselves. Brand, operation manuals, contracts and KPI’s are hard to just come up with out of thin air. Getting those through a franchise can really give you a leg up. You need to truly understand and believe in the systems you are operating. Building them on your own can create more of the intimate knowledge and buy in. True understanding as to why you are doing a certain task as opposed to just doing what the task is that is stated in the operations manual is crucial to success.
Photo courtesy of ServiceMaster Restore
CS: Without a doubt it is the support of the franchises around us and our corporate office. Whenever we are overwhelmed, need extra equipment, additional labor, etc., there is always a fellow franchisee that is close to us and is willing to help. Also, I can obtain help on a large/commercial scale easily in a short amount of time. Furthermore, the national accounts offered by franchise systems allow for steady revenue and easier company growth.
JK: There are several benefits of being part of a franchise business versus an independent.
- The strength that comes with a national network like ServiceMaster Restore. You have owners across the nation you can lean on, learn from and grow with. They are there to support you as you experience growing pains and cheer you on as you grow – you will build a family you can always count on.
- The support from the corporate office is invaluable – from operating systems that are already in place, to business support across all functions – you don’t have to reinvent the wheel, you simply tap into a proven system.
- The purchasing power that comes with a strong, national network.
- There are fewer barriers to entry when you purchase a franchise.
- Having a strong national accounts program and relationships with key insurance carriers.
- Offering continuous training and development opportunities for owners and their employees.
- Sharing best practices that help you stay in front of industry trends and competitors.
Do you feel you have any extra hurdles to overcome compared to companies on the other side of the business model? What about advantages you may have over the competition?
CY: Each has its own unique opportunities as far as the basics of general business operation. In my opinion the advantage is just truly a fact of building a culture in your company of team members who understand the reason the business exists and operate in a manner that they believe in. Are you operating your business with drive and passion? I know of successful franchises and independent companies operating with integrity by driven people who want to work to succeed and preserve our industry. As restoration contractors in this day and age we all know the negative effects on our industry of those who don’t.
CS: Obviously…ROYALTIES! It is a considerable monthly cost. Also, the general public doesn’t realize (or care) that we are all independently owned and operated. Therefore, when a particular franchise has a negative reputation, it can affect those around it in a negative way. However, being a part of a franchise system has benefits that definitely outweigh the negatives (assuming the franchise system picked has a solid reputation, national accounts, and support). I can remember a time where we felt our business could achieve a higher profit margin than it was at that particular moment. Concerned, I contacted our corporate office who put me in contact with another franchisee who had a similar sized business as us. Within 20 minutes, that owner emailed me his Profit and Loss statement…literally the most sensitive document for a small business owner. After a few follow up calls, it was incredibly easy to make the necessary adjustments to achieve the margins we wanted. It would be difficult to have the same experience had we not been a part of the franchise system.
JK: As a network we share the same name, and because of that you have to place a high level of trust in your fellow franchisees to provide the same level of service that you expect every day. At times, the level of flexibility and autonomy can be limited. Meaning, there are standards and processes that are put in place to protect the overall brand and network. This can range from ideas and concepts that may fit your personal business versus the national brand, to contributing or participating in initiatives that may not benefit you directly but will help enhance the overall national brand and industry. There are also contracts implemented at the national level that directly impact your brand, and you have to trust that the brand is representing your local business in the process.
What advice would you give fellow contractors who are anxious to grow or change up their company, but not sure how?
LR: Roll up your sleeves and become on a first name basis with your banker. This industry is ever-changing. Think about how margins are smaller, length of receiving your receivables, a very tight labor supply, and other current factors. These elements will only increase in difficulty in the next few years.
CY: If you want to grow, define what success means to you. You need to understand and communicate with your team why the company exists. Next, you need to build a team that is in line with your values and believes in the vision of the company. Next, you need to set the expectations for what your team needs to do in order to deliver the vision of the company. Lastly, you need to do the work, fail fast, learn, adjust and celebrate your wins along the way. Support groups and mentors whether its franchises or your own independent group of contractors are invaluable in being able to learn and grow.
CS: The most important things a franchise system can do for you are: provide national account work and provide support through a corporate office and other franchisees near you. Without these two things, your royalty money is just being wasted. Therefore, ensure that the franchise system you are considering has a solid national accounts team as well as true network support.
JK: It’s important to take your time and research opportunities. This is not an overnight decision; you need to fully understands the industry, competitive landscape, the brand and its opportunities and challenges, as well as the network and support. I think it’s important to find a trusted advisor, someone who understands business and with whom you can have candid conversations about the opportunities and challenges. Ask to speak with other franchises in the network to gather their experience and feedback. Don’t be afraid to ask questions. Develop a list of questions and ask the franchisor, other franchises in the network and anyone else who can offer valuable insight into running a business. And as I mentioned above, make sure you’re passionate about the work. You’ll spend a lot of hours in that business and you’ll face many challenges along the way, so you need to be able to wake up each day and know your “why.”