ACHRNEWS

Is HVAC Franchising For You?

Contractors Discuss the Ups and Downs of HVAC Franchising

June 4, 2012
AireServ technician with customer at door
The U.S. Census Bureau is gearing up for the 2012 Economic Census and one of the topics it will be studying across the nation is franchising. Taking place every five years, the 2007 Economic Census Franchise Report was the first comprehensive and detailed report by the Census Bureau on the franchising segment of the U.S. economy. The study found that franchise business accounted for 10.5 percent of businesses with paid employees in the 295 industries that were surveyed. Of the 4.3 million total establishments surveyed, 453,326 were either a franchisee- or franchisor-owned business. The economic census also revealed that franchise businesses accounted for nearly $1.3 trillion in sales.

New data is set to be collected beginning in October of this year with preliminary reports to be released in Dec. 2013. In the meantime, HVAC contractors are left with a question, the answer to which could significantly change their businesses.

“To franchise or not to franchise,” that is the question.

“To Franchise”

John Goldberg chose to franchise. In the wake of the new construction fallout, he found himself searching for a way to adapt his new construction plumbing and heating business, located in Panama, N.Y. Prior to December 2011, when his business became Aire Serv of Southwestern N.Y. Heating and Air Conditioning, Goldberg was searching for a way to professionalize and brand his 15-year-old business in hopes of saving it.

“We were transforming our new construction business into a service-based and replacement heating and air conditioning business. We didn’t have time to establish ourselves like a start-up — we needed to transition quickly,” he explained. “We found that the quickest way to transition was to purchase or become part of something bigger. In our case, Aire Serv had all the answers we were looking for.”

Chuck Hess chose to franchise as well. After retiring from the U.S. Air Force, Hess took his mechanical skills and began working in HVAC part time in North Pole, Alaska. It soon turned into a full-time job and, as time progressed, he desired to make a solid living as well as plan for retirement from his one-man shop with a single truck. That was when he was approached by Aire Serv.

“I have been a mechanic my whole life, so as far as the business side of it, I kind of struggle with that a little,” said Hess. “The franchise called me, and I agreed to listen. The company understood that I could turn wrenches and replace systems, so they gave me everything else I was missing. I have a coach who calls me probably once a week, and I meet with my coach once a month. After I joined Aire Serv, I did in three months sales what I had done all year by myself.”

As for his customers, Hess found that a few balked at the loss of the mom-and-pop feel of his former business model. The rest, however, have responded positively to his now uniformed appearance and his branded van.

His competition was another story altogether. “I was competing with about 30 other smaller companies and four big ones,” he explained. “Now that I am a franchise, I count myself as one of those four large companies. Being a part of a franchise has really put me in the running with the competition. Even though I am still just one person and a truck, the sense from the area is that I am much more than that.”

Other Opportunities

Goldberg and Hess found success with Aire Serv, but there are other franchising opportunities available to the HVAC industry. Another contractor who found franchising success is John McCarthy Sr., owner and president of McCarthy’s One Hour Heating and Air Conditioning in Omaha, Neb. McCarthy was one of the original companies to sign on with the franchise. He has continued to add to his franchise success with the Benjamin Franklin plumbing and Mister Sparky electrical brands.

“Being part of a franchise has increased my business faster than I could have ever done it on my own,” he said. “It has been the power of the branding that has made all three franchises grow. I don’t see anything stopping the growth of our brands, and I am glad that I am part of the team.”

Economic Reasons to Franchise

Aire Serv and One Hour are just two of the many brands that offer franchise branding and business services to HVAC and other trade industries. It isn’t just the branding, however, that makes a franchise successful in an economy that continues to swing on a pendulum. There are economic reasons to franchise. One example is Goldberg’s need to transition his business due to the downturn of new construction in his territory.

Franchising plays a “vital role in our nation’s economy,” according to Ken Walker, chairman of the International Franchise Association (IFA), as well as chairman and CEO of Driven Brands. The IFA partnered with the U.S. Census Bureau in collecting and analyzing the national franchising data for the economic census.
“Not only does franchising drive new job creation,” said Walker, “but the data also demonstrates that franchise business provides many options for entrepreneurs who may be considering starting a franchise.”

“Not to Franchise”

Franchising has its benefits, but some contractors aren’t as ready to choose all that goes along with those benefits. One of the biggest concerns raised by many of the contractors interviewed about franchising was the cost.

Walter Mott, owner of Dean’s Shop in San Marcos, Texas, looked into purchasing a franchise when initially purchasing his HVAC business. “I liked the franchise business plans available,” he said, “but the upfront costs and continuous fees concerned me.”

In the end, Mott chose the independent route.

Like Mott, other contractors were impressed with the business plans, but they were already settled into a successful business plan of their own. One contractor mentioned not needing to hire a boss for himself. Another said, “I have considered franchising; however, I have never done it as I’ve found I’m too independent to do things strictly according to a franchisor’s methods. I am probably not a good fit as a franchisee as I’d often think I have a better way of doing things.”

Eric Knaak, vice president of operations at Isaac Heating & Air Conditioning in Rochester, N.Y., pointed out a few things he thought could be an issue for franchisees.

“Franchises can bring stability and potentially very effective administrative tools to a struggling company, but it is not always the better answer,” he said. “What works in one city may not work in another, and there are a lot of cultural, regional, and philosophical differences around the country.”

Careful Consideration

The choice to franchise or not to franchise is up to each individual contractor. There are those that swear by them and there may be a few that swear at them. Between these two extremes, many HVAC contractors are educating themselves in an endeavor to make the best business decisions possible for their company. “To franchise or not to franchise,” that is still the question — but it cannot be successfully answered without a careful review of the business and economic considerations, as well as some contractor soul-searching.

Sidebar: What’s Your Answer?

Tell us what you think. Go to www.facebook.com/achrnews and give us your franchising answer. Then head over to our NEWSMakers podcast and listen to a complete franchising interview with Doyle James, president of Aire Serv. http://bit.ly/IOLhNA

Publication date: 6/4/2012