Is franchising right for everyone, especially those with or without an HVAC business background? The NEWS recently made a trip to two communities in Illinois approximately 220 miles apart, Herrin and Jacksonville, for the purpose of seeing what makes One Hour and Aire Serv franchisees tick. We found a lot of operational similarities and motivational qualities between franchisors and franchisees, as well as franchisees and employees. But there were differences, too. Both franchise owners took different routes to their current positions.

The cumulative result of the visits shows the value that comes from owning a franchise and the potential for growth - profitably and geographically.

ONE HOUR AIR CONDITIONING & HEATING

Herrin, located in Southern Illinois, is a community of approximately 11,000 citizens. It is also the home of Pass One Hour Heating & Air Conditioning, owned by Francis and Richard Pass, who became a partner in 1982. Francis, who entered the HVAC business in 1969, opted for a career in refrigeration over reenlistment in the Army. He joined a company whose owner had a vision for the importance of air conditioning and had a wealth of opportunities available in service and replacement. "I bought the story and joined his business, sharing the vision," said Pass. "I made the decision to walk through the window of opportunity."

Pass loved working in the business, feeling "lucky to be in it." But he probably spent too much time "in" the business instead of working "on" the business. "I didn't realize you could work your butt off and still not make any money," he said. He made the decision to start his own business and develop a solid niche. He also decided it was best to develop other people who could do what he did, in order to free up time to work on the business.

He said he "chased new construction" but housing took a hit during the oil embargo. Luckily his banker helped him out during the crisis and he eventually decided that all he wanted to do was HVAC service and replacement.

His early business philosophies were influenced by HVAC legend Mike Callahan, who encouraged Pass to change his business from reactive to proactive. Before he met Callahan he said that 97 percent of his business was reactive, waiting for the telephone to ring. Today his business is 73 percent proactive with yellow pages advertising a necessary evil and a huge cache of service agreement customers.

His road to One Hour led through business training with the former Contractors Success Group and AirTime 500. All of his experiences with these organizations enabled Pass to develop three different exit strategies that he built his business plan around.

"The One Hour brand went along with my existing business philosophies," he said. "It is hard not to go back to my mechanic mentality. You need a business aptitude to begin your own franchise. It will not work if you only have a technical aptitude."

Pass credits his business training for preparing him to become a franchisee and he likes the discipline that goes along with owning a One Hour franchise. He is required to give daily management reports to One Hour, reports that some business owners only do once a week, month, or even longer. "I am not afraid of giving the report," he said. "I look forward to it. And if you don't pay attention to your numbers, you don't know where you are at.

"Let's face it - you are going to run a tighter ship if you are a franchisee."

Pass bought into One Hour because he believes in the idea of branding and in the idea of operational excellence. More importantly, Pass needed a vision for his company's future and the franchise business model supported his vision. In fact, by having a brand name and a solid business plan, he believes he can expand his business into more communities in the future.

His goal is to have satellite businesses centered around a central hub, giving customers a hometown feel and presence. "I see the move to a more local presence because business owners will be limited in movement by the higher energy costs."

And another benefit Pass enjoys about being a One Hour franchisee is the interaction with other franchise owners. "We can call up other owners and talk about business with them, without worrying about sharing secrets," he said. "In the beginning, we were seeking out other people, and now a lot of people are seeking us out.

"It seems that the people running One Hour are more aggressive and successful than typical contractors. And by being successful we will have a lot of different options for exit strategies."

Pass said his company had $1.5 million in revenues last year and expects to approach the $2 million mark soon, not bad for a man who almost passed up the vision for another stint in the Army.

AIRE SERV

In central Illinois, directly west of Springfield, the state capital is the town of Jacksonville, population just under 20,000. It is the home of Aire Serv, a franchise owned by Larry Speakman. Speakman did not start out in the HVAC business, having been a teacher. But he was offered a good position with a contractor in 1976 and started his new HVAC sales career.

He eventually bought the former Henson Robinson Co. in Jacksonville in 1985 along with four other partners, including Bob Campbell. The company was, and still is, a union contractor, which has been moving away from industrial/commercial work and more into the residential replacement sector. In the years following the purchase, Speakman saw his company sliding down a path to failure and he needed to do something about it.

"We were on a steady downhill grade, not making any money," he said. "But we were doing great work and our customers loved us."

To add insult to injury - literally - Speakman got into a bad car accident and couldn't work for a while. The time off allowed him to reflect on his HVAC business and what he could do to get it out of the funk. During his recovery he read an ad for Aire Serv, which was offering the opportunity to purchase franchises. "I was looking for the silver bullet to help us get out of the hole," Speakman said.

He started talking with the Aire Serv people in May 1998 and went to visit them in Waco later that year. He officially became an Aire Serv franchisee on Jan. 1, 1999. It wasn't an easy transition to the new way of thinking.

"It was hard to put the Aire Serv system in place at first," said Speakman. "We had to completely change our way of thinking. We had a field systems manager who kept his thumb on us and kept us in line. He nagged us to tears but we needed that. We were way too complacent."

Speakman went from losing money in 1998 to making money within the first few months of 1999. His company had its best year ever last year with $1.5 million in revenues. He credits the turnaround to the Aire Serv philosophy.

"We were able to turn the company around very quickly because of the system," he said. "We were willing and able to make changes."

He noted that the company lost some employees who were unwilling to accept the changes. But that was OK with him. He needed people who would buy into the system.

Campbell said that Aire Serv "gives us the business background to run the business. We just didn't know what our costs were.

"But it doesn't happen overnight. New franchisees may take a couple of years to institute all of the necessary changes."

Some of the changes included moves to flat rate pricing, one-year guarantees on parts and labor for work, daily service meetings, and monthly staff meetings, something that Speakman wasn't accustomed to at all. "Aire Serv encourages its people to interact," he said. "And they encourage us to do whatever we can with the customer's best interests in mind."

Can anyone become a successful Aire Serv franchisee? Maybe, said Speakman. "They can start from scratch but they should surround themselves with the right people," he noted. "It can be done as a turnkey operation."

He also said one of the keys to being a successful franchisee is to buy into the system and live by it. "The people who don't make it are ones that can't break loose of what they are used to doing," he said. "If you don't take the approach of looking at things differently, you won't succeed.

"There is a lot of hard work to switching from independent owner to franchisee. You need a lot of out-of-the-box thinking. The Aire Serv franchise formula focuses on what you should do in the HVAC business, regardless of what other people outside of the industry are telling you to do."

For more information, visit One Hour Air Conditioning & Heating at www.venvestinc.com/ohach.asp and Aire Serv at www.aireserv.com.

Publication date: 07/10/2006