A Port in the Storm

In times like these any competitive edge is welcome, even for hard core entrepreneurs like plumbing contractors who think they can do things better themselves. These are guys (and gals) who chafed at somebody other than them setting the rules. Plumbing franchises, however, are made for times like the recession of 2009.

“What we're seeing is an obvious spike of interest outside our normal lead generation over last year from contractors who, if they had been struggling, are really struggling now,” says Tab Hunter, president of franchise operations at Clockwork Home Services, the parent of Benjamin Franklin Plumbing. “We hear the same thing each time we talk to them. They know the value of proven business system and that the success rate of any franchise in any industry is phenomenal while the failure rate of a startup is overwhelming.”

Hunter, who was a contractor himself for 25 years, knows it's hard to convince contractors. Through his exposure to Clockwork's Plumbers Success International, he had the opportunity to buy one of the first Benjamin Franklin franchises. He skeptically sat on the sidelines before buying number 86.

The franchise just builds on existing skills, Hunter says. “Once you tell me it's proven and how to do it, I can knock it out of the park.”

A system to follow

An established system is the key. Mary Kennedy Thompson, CEO of Mr. Rooter, is an ex-Marine and, as such, she is a big believer in systems. Thompson says that Mr. Rooter has had more inquiries than ever as plumbing contractors look for help these days.

“I started out as a franchisee in another concept and I tell everybody that I'm extremely biased,” Thompson says. “I believe franchising is the great American dream. You take people who are entrepreneurs and want to run their own business and franchising gives them a system. I was in the military, which has lot of systems. I wanted a system to follow to get to my success. What we most have in Mr. Rooter, in particular, is a strong system that creates success. You take somebody who knows how to be a plumber, but doesn't know about managing the customer relationship or managing a staff or how to approach the customer on a daily basis in their homes. That is what we bring. In this economic climate, you can't do trial and error; you've got to be hitting on all cylinders.”

Franchises outperform independent business owners during a recession for several reasons, says John Sembower, president of Mr. Waterheater. Mr. Waterheater has created a system whereby plumbing contractors can dominate their local water heater replacement market, even against big box competitors. Franchises are contractually obligated to advertise regardless of the economy, Sembower notes, while independent business owners often cut back on advertising in a recession, which predictably hurts sales. Also, the group buying power of the franchise system allows a franchise to operate more profitably than independent owners.

In good economic times, contractors and other business owners want to go their separate ways, but in tough times they stick together for survival, says Donald MacDonald, CEO of Rooter Man. Rooter Man has 125 franchisees operating 400 locations in 28 states, about 25% of the U.S. population.

“The benefit is networking, motivation and support help,” MacDonald says. “Doing it yourself is lonely. Here you can motivate the motivator. The people who work for you will be more motivated.

“Customers want drug-tested, security-checked employees,” MacDonald continues. “Look how the independent rubbish guys disappeared. It's a sign of the times. It's branding. People expect a better level of service and if they're not satisfied, they want somebody to complain to. Customers have been abused in good times and now in tough times, the tough have to get going.”

MacDonald told CONTRACTOR that he had just gotten off the phone with a Colorado franchisee that was prospering and hiring plumbers. Once again, the system is the key.

Get back what you put in

“The ones who are doing it get back what they put into it, but you if don't do it, if you don't follow the system, then you don't benefit,” he notes.

“Most of the plumbing professionals who inquire about our franchise opportunities don't have the sales, marketing and accounting expertise to run a successful business,” explained James Pierce, president and CEO of 1-800-PLUMBER, a new franchise company that is launching across the U.S. “We've created a business model that offers the systems and guidance to help them become truly successful and allows them to concentrate on what they do best — great plumbing.”

1-800-PLUMBER is in its early growth period and has franchise territories available across the country. It features a 24-hour central call and dispatch center, state-of-the-art systems and technology and an easy-for-consumers-to-remember name.

One franchise that has had mixed results is American Leak Detection. Some franchisees are doing well, some are flat and some are down, reports Judy Howard, director of franchise relations. The firm has 115 franchisees in the U.S. and most territories are filled.

Markets in California and Florida are hurting, but Texas is doing great, Howard says, while the recession is starting to hit Midwest franchisees. A lot of work in the Northeast is pool work and people are not opening pools this year, although Howard's theory is that customers will be more prone to open their pools than to spend money on a vacation. One franchisee told her that the recession is costing him one extra job a day that he's not getting this year.

“Our system has been pretty steady with some ups and some downs and some in between,” Howard says. “Our business is not recession-proof, just resistant to it. What's happening for us is that plumbers are keeping the work in-house and not referring customers to us, but that will change when the economy turns around. We've been lucky that no franchisees have had to close their doors.”

Another franchise with mixed results is Roto-Rooter. According to Security and Exchange Commission filings by its parent Chemed Corp., Roto-Rooter's sewer and drain cleaning work in 2008 was down slightly while its service and repair work was up slightly. The firm also reported that its HVAC service work was up slightly. For the first quarter of 2009, Roto-Rooter reported that plumbing service and repair work was up 6.8% compared with the first quarter of 2008, but its sewer and drain-cleaning segment was down 5.9%.

Roto-Rooter's largest franchisee, Hoffman Southwest Corp., has experienced the same ups and downs, but Marketing and Business Development Manager Jesse Lohnes says the Roto-Rooter franchise is invaluable. Hoffman Southwest does business as Roto-Rooter Service & Plumbing Co. Headquartered in Mission Viejo, Calif., it employs 500 and owns 10 franchises in six states with territories that span from Southern California to Texas.

The company also owns Professional Pipe Services, which performs large sewer work for municipalities, other government entities and developers.

“We've noticed that in areas like our branch in Dallas seems to have not been affected by the housing crisis as much as Southern California has,” Lohnes says, “so our business there is doing well while it might be slow in parts of Southern California.”

While Hoffman Southwest is a big contractor that doesn't need Chemed Corp. to tell it how to do its accounting or handle personnel, owning the franchise helps make the company successful.

National exposure

“I do all the marketing, advertising and national accounts,” Lohnes says, “and being a Roto-Rooter franchisee we have the Roto-Rooter name, brand recognition and reputation behind us. If we were a smaller company, we might have a great niche in the local market but nobody would know us beyond that. We have the Roto-Rooter jingle: ‘Roto-Rooter, that's the name, and away go troubles down the drain.’ We use it in our radio advertising. We don't have to build the brand, just remind people about our service work and that we're not just drain cleaning.”

The company is required to follow the franchisor's branding and logo-use rules, pay franchise fees, and run a certain amount of advertising in the Yellow Pages and on radio and TV. Being the largest player, however, Hoffman Southwest is always going above minimum requirements and how it runs the details of the business is up to it, Lohnes notes. All the services are the same from franchise to franchise; the contractor performs septic pumping in areas where septic tanks are common, and they do trenchless replacement that's common to most, but not all, franchisees.

“They [the franchisor] put together radio and TV commercials that we can piggyback on without much editing,” Lohnes notes. “But we've done some just taking the jingle, and we've done voice over and other editing. It's the same with brochures. We'll take some of theirs and other times we'll take what they have and revise it to better meet our needs.”

Lohnes also pointed out that Hoffman Southwest benefits from national publicity, such as Roto-Rooter's sponsorship of shows on the DIY Network or the Ghost Hunters show on the Syfy Channel that features two Roto-Rooter technicians investigating the paranormal.

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Plumbing franchises offer much more than branding. Rooter Man's MacDonald believes that franchising is better than a trade association or a best practices group because franchisees don't compete and, “there's no chance you'll use it against them.”

“This economy opens doors for us to educate the plumber,” says Benjamin Franklin's Hunter. “Most guys think they can't afford it and this year some guys will pay the same amount for a brand new truck for what the franchise will cost them. Which one would have a bigger impact?”

Five goals

Plumbing contractors who approach Benjamin Franklin are looking for five key things, Hunter says: profits; free time; wealth; an exit strategy, i.e, a business they can sell; and growth.

Some contractors will buy a new truck and not get any of those five things they're looking for, Hunter argues. Franchising is affordable when a contractor looks at the big picture, and Hunter is always happy to run the numbers for prospective franchisees.

“It's a big step,” Hunter says, “because it's a conversion franchise. You take Joe's Plumbing off the door and put up another name.”

One Pennsylvania franchisee who joined in 2004, the former Larry Rohrer & Sons Plumbing, discovered to his dismay that few customers in his trading area knew his name after 45 years in the business, Hunter says. Five years, with son Scott Rohrer running the business, he has quadrupled his customer base. Larry Rohrer told Hunter that he believes it's too hard to run as an independent contractor these days.

“We actually have more people coming to us now than we ever have,” says Mr. Rooter's Thompson. “They're looking for security and an established business system. Our message resonates with plumbers who have one truck and have been working hard their whole lives but they don't have a business they can sell because it's all wrapped up around them.”

In these times of tight credit, Mr. Rooter offers financing for both franchisees and customers. Financing for franchisees depends on their credit rating, but it's generally a five-year payout. For homeowners, the financing is 90 days same as cash with various terms going forward from that. Thompson notes that few homeowners have the cash on hand if they need to replace their sewer line.

“The way I look at it, this is part of the solution for our customers,” Thompson says. “It's our way to make it right. Most people aren't having a great day when they call us, so we're here to make it a great day.”

Mr. Rooter trains contractors on their top line, bottom line and front line — their people. The franchisor trains on how to train people to create an outstanding customer experience that will make customers want to come back time and again. Another aspect of franchising is making use of the collective intelligence of the whole, along with collective buying power. Mr. Rooter has an online trading network called ProTradeNet where franchisees can go 24/7 to buy service equipment, vehicles, pipe wrenches, uniforms or truck accessories. Not only are the prices cheaper than buying individually, but franchisees get rebates. Thompson says Mr. Rooter recently distributed more than $50,000 in rebates to its 258 franchisees.

A year ago, the franchisor developed a new marketing plan, new TV and radio ads, new door hangers, and vehicle wraps, all of them researched extensively to find out from customers what they liked and responded to.

Best practices

Mr. Rooter has a best practices forum online that franchisees can reference. Each franchisee has a franchise coach who covers 30 franchisees to coach them on performance enhancement — if you're at A, Thompson explains, let's go to B and then to C.

“My passion is the customer experience,” Thompson says. “The second is my love of plumbing. The world is a better place because of plumbing. We wouldn't have good living standards without plumbers.”

The advantage of a coach is that he or she provides a different set of eyes and ears, she explained. They can hold a mirror up to let the contractor see himself more clearly. Even Tiger Woods has a coach, she points out. For her, coaching is what made her a better businessperson when she got into franchising.

Thompson started as a franchisee before she went to work for her franchisor.

“I used to be a field person,” Thompson says. “When I went out to franchises I would say, ‘I can be your reflection. I don't know more than you.’ We have a sound and proven system but everybody is in a different place in the system. It's a matter of what does this person need to get to the next level?”

Franchising is not for everybody. It's for those people who want to take their business to the next level and make the move from being a technician to being a business owner, but they can benefit from having a system to follow.

Aristotle said that we are what we repeatedly do, Thompson notes, so it's best to repeatedly do things correctly.

Hunter has a final piece of advice from an article he read in the back of Entrepreneur magazine about franchising. The article said to look for guys who have been in that same line of work, and for a company that owns its own outlets, so that it is in the business that it's trying to sell to franchisees.