Founding a successful franchise brand is challenging enough for most entrepreneurs, let alone overseeing several additional ones.
Two Vancouver entrepreneurs who have each expanded their empires to include four separate brands say that although expansion gets easier with experience, there are pitfalls to avoid.
One thing they have learned is that a company should launch secondary franchise brands only when its core brand is successful. A second lesson is that new franchise brands should have a compatible customer base.
1-800-Got-Junk? founder and owner Brian Scudamore has followed that advice in his launch of a fourth franchise brand, Shack Shine.
He started franchising his junk-removal company in the late 1990s. Since then, his core brand has expanded to 157 franchises and is “quite profitable,” Scudamore told Business in Vancouver.
Shack Shine has five franchises so far and its franchisees wash windows and clean gutters. Scudamore’s two other compatible franchise operations include Wow 1 Day Painting, which has 36 franchisees, and You Move Me, a moving company with 40 franchisees.
All of the brands can appeal to the same customers and potentially the same franchise owners, although Scudamore said he does not offer reduced fees or royalties to franchise owners who want to expand to a second brand.
“We learned from 1-800-Got-Junk? that you don’t negotiate on the franchise fees,” he said. “All our rates are fixed.”
Another lesson is that it’s best to require all franchise owners to have someone who has “skin in the game” who is focused on overseeing secondary franchises, said Gary Charlwood, who has been in the International Franchise Association Hall of Fame since 2008.
In April, Charlwood’s Charlwood Pacific Group won the 2016 Canadian Franchise Association Hall of Fame Award.
He helped pioneer one realm of franchising in Canada in the mid-1970s, when he bought Canadian rights to the U.S.-based Century 21 real estate brokerage firm. Charlwood then took the B.C. government to court to win the right to franchise real estate brokerages in the province.
He followed the phenomenal success of that venture in 1980 by founding Uniglobe Travel International, which now has 700 franchises in 60 countries.
Being in different sectors – real estate and travel – worked well for Charlwood, and it added diversification. However, he told BIV that it makes more sense to have franchise brands that appeal to a similar customer and franchisee.
That’s why his later franchise gambits all revolved around real estate. Charlwood founded the mortgage-brokerage franchise brand Centum in 2002. He then entered into a joint venture, a few years later, to be the master franchisor for Century 21 in most of Asia. His Canadian and Asian Century 21 companies now have a combined 939 franchisees, who employ almost 19,000 salespeople.
Charlwood expanded his operations to a fourth franchise brand in 2010 by buying Canadian franchise rights to Utah-based Real Property Management (RPM), which manages properties for real estate investors. He also owns the first right of refusal to buy RPM franchise rights for Germany, France, Mexico and Spain.
“RPM isn’t about managing office buildings or condo buildings but rather we focus on the small investor who has two or three condos or houses,” Charlwood said.
RPM remains in startup mode in Canada with 10 franchises while Centum has 208 franchisees.
Charlwood’s real estate franchise strategy is similar to Scudamore’s home-improvement focus.
Most people who buy a home through Century 21 need a mortgage and can get that at Centum. If they plan to rent the residence, they could go to RPM to manage their investment.
Scudamore’s franchisees have customers who may repaint before selling their home or after buying a new one. They also may want to remove junk in advance of the move and clean gutters and wash windows to get the home in top condition.
It’s similar to the way that large hospitality franchisors, such as Yum! Brands (NYSE:YUM), Restaurant Brands International (TSX:QSR) or Imvescor Restaurant Group (TSX:IRG), operate.
Each of those companies have more than one restaurant brand that is franchised.
Scudamore counts his holding company O2E Brands’ gross sales from all franchisees at US$215 million in 2015, with about US$182 million coming from his core 1-800-Got-Junk? brand.
O2E’s revenue comes from one-time fees and royalty payments, so the money that trickles to Scudamore is much less than the gross sales tally.
O2E’s business, however, is booming.
Annual gross sales jumped 24.2% in 2015 and 61.7% in 2014.
Scudamore aims for O2E’s gross sales to hit US$250 million this year.
All that growth has spurred the hiring of an additional 200 people, most of whom will be call centre staff.
He already has about 250 employees in Vancouver and another 150 in Toronto. •