Question: Do I need a franchise to enter water damage mitigation?
Steve’s answer: Ask yourself five “introspective questions” and then investigate carefully.
Good afternoon, Steve ,
I own a 20 year old contents restoration business. Several national franchises want to help me add water damage mitigation and of course they all push their services. However, I fail to see the need to pay them. I already have the client base and the franchises make it clear that they do not supply many (if any) jobs- I am just paying for their name. Am I missing something here?
Contents in Colorado
Thanks for writing in, Colorado, with a very good question which boiled down is, “Should I pay all the extra upfront fees and ongoing royalties of a franchise when they can’t guarantee me any jobs?” My answer? IT ALL DEPENDS! (You just knew I was going to say that didn’t you!)
NOTE: You’re not the first to ask this age-old “should I go the franchise route?” question. In fact, a Memphis contractor wrote me this spring with a similar question. And a Nashville carpet cleaner wrote in with the same question almost two years ago. However, you are already in the restoration industry so things are a bit different.
So what to do? There are many more advantages to a franchise than just “paying for their name”. You are also buying proven systems and procedures. (I assume after 20 years you already have these but maybe not for the on-location side.)
One advantage for the typical entrepreneur is the franchise organization will (or at least should!) hold you accountable. (Far too often we ourselves are the greatest enemy to our success!) Plus with a new field the knowledge and experience that a franchise may provide is quite valuable.
Here are some points for you to think on, Contents. (May I call you by your first name?)
1. Here is one huge question: “What is a given franchise’s LOCAL reputation?” They may be a big name nationally but what do local adjusters think about them? If previous franchisees have trashed the franchise’s name you will be paying big bucks for an uphill battle!”
2. S0 just how well do you “play with others”? My guess is after 20 years on your own you may be a typical independent entrepreneur! If so, you may chafe under the rules (some of which you may view as stupid) and accountability that any good franchisor will insist on.
3. What are your expansion plans? Will you have to share your area with other franchisees from the same group? If so, what are their reputations like? (See #1 above.) Will there be room for you to grow or will you be hemmed in territory wise?
4. Money? Assuming you are happy with the answers above then it comes down to dollars and cents! Make the franchise group prove to you that their help will more than cover the extra costs they add to your overhead. And one more question based on something more than dollars…
5. What is your time-line for ramping up into water damage? Do you want to make a big splash (forgive me- I couldn’t resist!) or go dip your toe in and get wet slowly? (Ditto!) Buying a franchise will definitely help you grow faster and develop your infrastructure faster initially BUT with an ongoing cost.
NOTE: Another “time-line” to consider is when do you want to cash out and sell your company? All other things being equal a franchise operation will be easier to sell.
6. Investigate. Please invest the time and money to check your franchise candidates out. Make a personal visit to your finalists. (Some franchises will even pay your travel expenses!) Ask for a list of ALL their franchises and call ones at random. Then focus in on companies that are your size. Ask the tough questions including, “May I come visit you?”
Remember if you do go the franchise route to insist on it being a “conversion agreement” where you will pay no royalties on the existing accounts/business you have already developed. And obviously use a good “bull dog” attorney!
I know like all of the above seems like a lot of work and expense. But remember, Contents, that you are getting “married” to this franchise. “Divorce” will be both expensive and traumatic! Choose wisely.
Steve