In these turbulent economic times for HVACR contractors, promoters of franchising are contending that their approach could be a bit of a safe harbor.
They maintain that they offer marketing skills to find customers; tools to educate those customers on investing in retrofit upgrades as well as preventive maintenance; proven accounting methods to tighten the bottom line and boost profit margins; and, in the most basic sense, “ways to work smarter.”
“Customers have more choices and they are looking for value,” said Doyle James of Aire Serv Heating and Air Conditioning, part of The Dwyer Group. “If you look and sound the same as the other guy, the low price wins. Franchisees have tools to educate the customer on the value they offer, increasing closing ratios and job averages.”
“What the economy has forced us to do is work smarter,” said Phil Mutz of Moncrief Heating and Air Conditioning, a Unique Indoor Comfort franchise. “All booms are typically followed by a bust, which we have avoided. Rather, we have grown steadily and consistently over the years.”
The current economy “means a smaller opportunity in both dollars and customers for the small mom and pop contractor,” said Mark Liston, vice president of sales and marketing for Clockwork Home Services. “We offer that contractor an opportunity to remain independent while getting the benefit of better costs, advertising, training, financing, direction, and understanding.”
Such response can breed success. “Many franchises in the Linc Service Network are having record years,” said Bert Kendall, COO of Linc, “because they’ve built up the maintenance base by providing top notch service.”
By the same token, this is also a time that requires “a careful evaluation of marketing expenditures and evaluating the productivity of media like Yellow Pages and radio,” said Bev Brandt of AdvantaClean.
For this story,The NEWSinterviewed five franchisees. Their replies show how the franchise sector is responding to the challenging economy.
MANAGEMENT HELPFor James, overcoming such challenges relates to the “business side. We have found that many HVAC contractors are excellent technicians but need help in marketing, sales, finance, and recruiting.”
Aire Serv was founded in 1992 and started franchising in 1994. It currently has 180 members in three countries. It is part of The Dwyer Group of Waco, Texas, which is a holding company of six service-based franchise companies.
The fact that the organization encompasses service, maintenance, and installation in residential heating, air conditioning, and IAQ has its advantages in these times, said James. “This is a huge market that is less affected by the current economic challenges you see with new construction.”
But there are still challenges.
“The economy should make any business owner or manager evaluate their business and make touch decisions that you might avoid in a good economy,” James said.
Concerning Aire Serv, he said, “We have done well over the last year, despite the current environment. We are taking a conservative view moving forward in the short term, while we still expect positive growth.”
For him, the key to franchising is to allow “any business owner to grow their business, surround themselves with great people, and ‘work themselves out of a job’ where they are no longer necessary in the day-to-day operation of the business.
“This allows them to choose to work on the business, not in the business.”
FOR THE BETTERFor Mutz of Moncrief, “The change in the economic conditions has certainly affected us. So we simply have to do the things we have always done … only better.” Moncrief is part of the Unique Indoor Comfort franchiser that was founded in 1967 by Phil Mutz’s grandfather, Thomas Mutz.
“The vision Tom Mutz had for Unique Indoor Comfort was to license the name and management of services to independent contractors who share ownership, culture, and operation standards.”
Those standards are critical these days, he said. “Our market has certainly changed. Many homeowners simply do not have the money to do big renovations or build custom homes, which was the icing on our cake. But what has been interesting, however, is our bread and butter Service Plans that have seen increased growth. It seems homeowners are very interested in protecting their investments through planned maintenance, rather than risk a failure and the unexpected cost of repairs and replacements.”
More than ever, he tells contractors to “do the right thing the first time, jump on problems, warranties, and complaints with full force … no matter what the cost. Simply put, take care of the customer and the money will follow.”
What a franchise like UIC gives these days, he said, is “a full range of service and expertise to suit each independent company. So you don’t have to be good at everything. You can surround yourself with people who are good at the things you’re not. If you are a great salesman, wouldn’t it be nice to be able to focus 100 percent on selling? Let someone else push the paper or solve the technical problems.”
LOOKING OUT FOR MOM AND POPClockwork Home Services, which includes One Hour Air Conditioning & Heating among its three brand names, was started in 2003 and current has close to 700 franchisees.
“Consumer financing has been our biggest challenge,” said Liston. “But we have actually seen our customer call count growing as the homeowner becomes more familiar with our brands and services.”
To adjust to the changing economy, he said, “We have been able to use our North American buying power to substantially decrease prices of equipment, parts, and services and negotiated a proprietary consumer financing program. Plus, recognizing greater challenges in the economy, we have enhanced our online training programs, our Internet interactivity, and search engine optimization, plus started a management development program.
The future can prove especially challenging for the so-called mom and pop companies, he said. “I perceive there will be very few companies serving the residential retail market. Those who do not affiliate with a company like ours will have to become a ‘super regional’ contractor or will continue to shrink in size and profitability and fight for a much smaller piece of the pie. In some North American markets today (Toronto, Indianapolis, Las Vegas, and others), four large companies or utilities now dominate over 60 percent of the market. Ten years ago, these same markets had no company with over 5 percent share. That means a smaller opportunity in both dollars and customers for the small mom and pop contractor.”
She said it is a situation that can be addressed by franchisers. “Our industry is changing and has already changed; most are not even aware as to why it is so much more difficult today. It really is not the economy, it is the changed level of market expertise that companies like One Hour Air Conditioning brings to its franchisees.”
PROACTIVE APPROACHFor Kendall of Linc Service Network, a proactive approach is critical. “Most contractors are reactive, hoping the weather gets hot and the phone rings. Many come up through the field. They are not trained in sales. Our franchise model teaches proven sales solutions, as well as effective methods to operate all aspects of a service business.”
Linc, founded in 1979, focuses on facilities in the 10,000- to 100,000-square-foot range. “Customers pay a fixed price a month,” said Kendall. “If anything is broken, it is fixed with no charge to the customer. Our incentive is to provide top-notch service.”
Currently he said there are 151 franchise locations of which 22 are company-owned.
According to the Linc Website, “Maintaining facilities with shrinking resources, keeping aging buildings and infrastructures running efficiently, reducing operating costs, and conserving energy are real challenges that single, and multisite building owners and facility managers face today.” In that regard, a local Linc contractor “provides a single-source for HVAC services, energy solutions, industry expertise, and leading products and programs.”
The equation, said Kendall, includes management expertise, field service training, taking care of paperwork, and keeping up with changing technologies. He noted contractors are encouraged to brand name with Linc but are not required to do so.
Regarding the present challenging times, he said, “The economy is tough. But that is all the more reason to become a Linc franchise.” He said one of its “best performing company-owned locations” is in Detroit, one of the hardest hit areas of the country.
Kendall is also one of those HVAC persons who emphasizes energy savings while some contend that can’t be done in a tough economy. But he said, “Linc has been green for 25 years, and green solutions are needed now more than ever.”
ADDING ONLike other franchisers, AdvantaClean has been adding to its membership. According to Brandt, in the past nine months, nine new franchises have been added. The organization was founded in 1994 as an insurance restoration contractor and soon diversified into IAQ, air duct cleaning, mold remediation, and water damage cleanup for residential, commercial, industrial, and institutional markets. In 2008, it added HVAC service primarily for the residential sector.
Brandt said the organization “has experienced consistent customer growth and an increased number of viable franchisee candidates over the past two years.”
Its structure has allowed it to ride out the economic downturn. “AdvantaClean has made no significant changes due to the recent economic swing,” she said. “Our low overhead design and highly automated, centralized platform has proven an ideal model for this economy.”
She echoed one recurring theme among all franchisers for contractors who are especially concerned about the economy and its effect on the business.
“This is an excellent time to come onboard. With the proper support, a franchise owner can concentrate on providing exceptional customer experience, creating projectable profitable growth.”