Paying for a Plan and a Brand
Franchisors offer blueprints for success-at a price
Franchising in the United States is growing again. Like most industries, franchising slumped by several percentage points during the 2008-2009 Great Recession. It has since rebounded, and that's especially the case in the green industry where established franchisors are once again expecting growth.
Credit the uptick in housing sales and new housing starts, as modest as it's been, along with consumers' continuing interest in upgrading and maintaining their homes and properties; and why not? With interest rates so low and few options for getting a decent financial return on their extra cash, many people figure they might as well put their money where it gives them the most pleasure and pride.
Turf Holdings Inc., entered the U.S. market in the 1990s by recruiting some of the national's most successful independent lawn care pros as Weed Man U.S.A. sub franchisors.
PHOTO COURTESY OF TURF HOLDINGS, INC./WEED MAN U.S.A.
"There's a lot of room yet to grow," says Jennifer Lemcke, referring specifically to Turf Holdings, Inc./Weed Man U.S.A., the company where she serves as COO. "We've been growing 18 to 20 percent over the last three years."
As of mid-March, Weed Man U.S.A. numbered 279 unit territories, representing 126 license agreements. Sounds like a lot of activity for a company that entered the United States in 1996, right? Well, yes and no. Lemcke says the company expects to add another 40 territories in 2013, a small fraction of the hundreds still available. A territory is defined as a geographical region of 150,000 consumers.
Other franchisors, including green industry pioneers like Lawn Doctor, see even better times ahead. On a recent Fox TV "After the Bell" program, Lawn Doctor CEO Scott Frith reported that the New Jersey-based franchisor experienced one of the best years in the company's history with an 18 percent increase in customer count in 2012 over 2011. He said that Lawn Doctor's goal is to add 50 new franchise locations, which would bring the company's total to 500. Lawn Doctor began franchising 45 years ago.
Credit the continuing popularity of franchising in the green industry to one of three factors - or any combination of the three (or perhaps others) that fits your view of the industry and its future:
- continued growth in the demand for green industry services, caused by many factors, including the aging of the Baby Boomer generation;
- landscape companies adding new services as they move to full-service property management; and
- company owners (newcomers, too) attracted by the business systems, support and consumer awareness that they're confident they will acquire by joining a successful franchise operation.
Given the number of so-called "landscapers" in the United States (most estimates put the number well over 100,000), it's little wonder that acquiring a franchise would be attractive to many of them. This is probably especially so for owners seeking to improve their operations in bitterly competitive markets.
Franchising's Huge Economic Impact
The economic impact of franchising on the U.S. economy is staggering. The International Franchising Association (IFA) predicts a 1.4 percent increase for 2013, bringing the total number of franchise establishments to 757,055.
Consider that in the United States, franchises, according to the IFA:
- employ almost 8.3 million people (one in eight nonfarm jobs);
- represent 10 percent of nonfarm workforce in 47 of 50 states;
- generate $802 billion in annual revenues; and
- contribute $472 billion to the U.S. GDP.
Green industry franchise businesses fall into the category of commercial and residential services with approximately 62,000 establishments employing about 366,000 people. For the record, the green industry scores pretty high in terms of the nation's top franchise companies. For 2013, Entrepreneur ranked U.S. Lawns as 131 on its list of top 500 Franchises, Lawn Doctor 133, The Grounds Guys 299 and Spring Green 418.
The IFA is predicting a 2.8 percent growth in employment in this sector, almost a full percentage point above the franchise industry as a whole. (For the record, the biggest category of franchise operations is in the "quick-service" restaurant sector with 153,425 establishments employing more than 3 million people.)
While the economic importance of franchising on U.S. economy might surprise the man in the street, it shouldn't surprise those of us that have witnessed the number of franchisors grow and their continued expansion into the green industry.
It starts with training
Lemcke, like other franchisors we interviewed, stressed that Weed Man U.S.A. provides franchisees with proven proprietary systems that "deliver measurable results." Unlike competitors, however, Lemcke says her company offers a network of more than a dozen experienced, successful lawn care sub-franchisors that provide person-to-person support within their territories. "We take a very systematic approach to lawn care. It's truly a business," says Lemcke. "We help people work on the business and not in the business."
Every franchise company serving the green industry provides new franchisees with extensive training and ongoing support. Some offer several days of training and some offer a week or more. Although details vary from franchise to franchise, the goal is always the same: to get the franchisee off to as strong a start as possible.
Training is a three-step process for new Scotts LawnService franchisees, says Jim Miller, director of franchising. It includes in-branch training at an operating facility located in a market with agronomic conditions like the new franchisee's and covers "hands-on" training in all aspects of the business.
Classroom training includes proprietary company sales, technical and business management materials. Computer/office training features lawn care software and combines it with a state-of-the-art customer access website that's provided to all start-up franchises. A franchise operations manager also provides onsite follow-up and works with the new franchise holder in building a business plan.
Scotts LawnService, founded in 1998, continues to solicit and add new franchisees in territories that aren't already being served by corporate locations. A map on the Scotts LawnService website shows approximately 60 representative territories still available.
Freedom Lawns, Inc., based in Hampstead, N.C., is tiny compared to other lawn care franchisors such as Scotts LawnService, Lawn Doctor, Turf Holdings, Inc./Weed Man U.S.A. or Spring-Green Lawn Care. The company, founded by Mark Tamm, agronomist and certified turfgrass professional, in 1999, numbers just eight locations extending in a line, north to south, down the North Carolina/South Carolina coast.
A different approach
It's unique in another respect, too. Its franchisees provide lawn care for warm-season lawns in the U.S. Southeast only. Tamm said Freedom Lawns specializes in offering services using an "organically fortified line of products," and offers franchisees extensive training in environmental stewardship and customer service.
"We have the franchisee spend two weeks at one at our locations for technical training, customer service, sales and computer training," explained Tamm. "This includes videos, technical educational books and a series of company manuals that include marketing options, company policy manuals, accounting chart of accounts and website design for their market."
In addition, the company sends a representative to the new franchisee's business for a week to set-up sales and field training procedures. Each five to six weeks thereafter, for the first year, they return for updates and follow-up support.
Fees and other costs
Scotts LawnService still has franchises available in select markets that aren't served by other franchisees or corporate stores.
PHOTO COURTESY OF SCOTTS LAWNSERVICE.
The startup costs for a franchise varies from company to company and depends upon a lot of factors, not the least of which is the initial franchise fee that gives the franchisee the rights to a particular territory usually based upon population.
For example, the franchise fee for The Grounds Guys is currently $27,000 for an initial territory with a 100,000-person population. The Grounds Guys, like many franchisors, offers in-house financing and will also connect interested parties with external lenders. Similar to several other green industry franchises, The Grounds Guys offers a discount off the base franchise fee for military veterans (25 percent VetFran Discount). It also offers a 20 percent Public Protector Discount to prospects with a minimum of two years full-time experience in either law enforcement or firefighting.
U.S. Lawns says it sets itself apart from many franchise systems by maintaining a low overhead structure, claims its website. "With us, your start-up cost is minimal, and it provides you with all of the tools necessary to begin running your business. Start your business with a truck, trailer and pallet of equipment while adding office space, employees and additional equipment as you grow your clientele." The U.S. Lawns standard franchise fee is $29,000, although existing landscape operations may qualify for a reduced franchise fee of $15,000.
Beyond the initial franchise fee, franchises must pay ongoing royalty payments. This, too, varies from company to company and falls in the range of 4 to 10 percent of gross revenues. The royalty payments go toward ongoing operations, administrative and marketing to name the most obvious support provided by parent companies.
Adding to the cost of starting a franchise is the purchase of vehicles and equipment. Even when an established landscape company joins a franchise such as U.S. Lawns or The Grounds Guys, it often must upgrade its vehicles and equipment.
In the case of Truly Nolen, a franchisee will also be equipping their new business with an iconic yellow "mouse car" complete with ears on its roof, a colorfully eye-catching branding gimmick long associated with the 75-year-old, national, Orlando-based pest control/lawn care service provider.
"We establish franchise fees depending on the zip code of the area," said Ron Desear, vice president - domestic franchise division. "For instance, a city of 300,000 people would probably have a minimum franchise fee of $25,000. But then vehicle and equipment costs will range between $25,000 and $30,000, so a startup would be in the mid-50s and up. Of that investment, $5,000 is devoted to marketing, which includes setting up a customer friendly website."
Startup costs (ranging from $50,000 to $200,000, depending upon franchisor, size of territory and vehicle/equipment needs) are just that - startup costs.
For that investment, a franchisor can deliver training and one-on-one mentoring, administrative and marketing support, brand recognition and, in many cases, a corporate-sponsored purchasing program.
But, obviously, no franchisor can promise success. That relies almost entirely upon each franchise owner's willingness to put in the necessary hours, marshal his or her resources prudently and "follow the plan".
Ron Hall is editor-in-chief of Turf magazine. Reach him at email@example.com. Also contributing was Mike Ingles, a freelance writer based in Columbus, Ohio.