If you’ve been around the business world, you’ve heard of franchises. They are most common in the fast food industry, but they exist in almost every industry. Including construction.
I’m often asked about the wisdom of buying a franchise for a construction business. The sales pitch is good – they promise a proven method to help you run your business and a proven path to wealth. Well, I don’t think it’s a wise thing to do, and here is why.
I first started researching the reasons that construction related businesses fail back in 1969. Since then, I know of at least eleven major construction-related franchises that started in the US. All eleven of them have failed. Not some of them, all of them.
One of the most famous, Mr. Build, was founded in the 1980’s by Art Bartlett, the person who started the Century 21 franchises. Mr. Bartlett died in 2009. Century 21 is still around, and his obituaries describe him as the founder of that franchise. They don’t talk about Mr. Build, his other franchise that failed in the late 1980’s.
Side note: Inc. Magazine covered Mr. Build in 1984, shortly after the franchise began. I’m quoted in the article, you can read the article online at The Conversion of Skip Kelly. Spoiler alert – I didn’t like franchises then,either.
Mr. Build didn’t fail because Art Bartlett didn’t understand how to setup a franchise organization. It failed because he didn’t understand the construction industry.
Franchises have two things that prevent them from working in construction. The first is that construction doesn’t sell a commodity. We are a cost based business that sells one job at a time. We don’t build the same thing the same way, every single time, in Alaska, Maine, Oregon and North Dakota. Every job is different. The construction industry isn’t that cut and dried.
Most franchises are just a variation of “put the red box on the blue skid”. The same thing, the same way, every day. Franchises are setup to cook burgers or dryclean clothes.
The second reason that franchises don’t work in construction is that they hire people to manage their franchises who aren’t capable of running their own construction-related company. When they find the rare manager who is capable of doing the work, they give them too many franchises to oversee, severely limiting their management capability.
So, when the franchisees (the construction business owners) have trouble with their business, they can’t get the help they need. Even if the franchise manager was able to help, they are too strung out trying to help too many other franchises. Eventually the construction business owner, the franchisee, reverts back to the way they did business before they bought into the franchise system. And the business fails.
Along with that failure comes a whole laundry list of complaints about the franchiser. Those complaints reflect on ALL franchisees – after all, you’re sharing the name. And reputation is a big part of what you are paying for.
Historically, most of the construction-related franchisers have grown to between 260 and 280 franchises before the problems start. At that point, some of them change to “licensing” instead of franchising, they change the game around and change the rules, but still end up going nowhere. What they really achieve is to alienate a group of hard working contractors who were simply looking for a better way to run their business.
Think long and hard before you head down that path my friends. Plain and simple, franchises don’t work in construction. Many contractors who’ve gone before you spent their hard-earned money to learn that lesson.
The knowledge and experience Michael Stone gained in his 60+ years in construction has helped thousands of contractors improve their businesses and their lives. He is the author of the books Markup & Profit Revisited, Profitable Sales, and Estimating Construction Profitably, and is available for one-on-one consultations.
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