Housing benefits

There's no cloud without a silver lining, say home improvement franchisors as the economy struggles through 2008 and beyond. Interest rate rises, a slowing housing market, the credit crunch and rising oil prices are early warning signs of a rough ride to come, observers have warned.

Yet some franchisors say that this year they plan to go from strength to strength. For home improvement franchises in particular, say insiders, this year is a huge business opportunity. That slowing economy is good news for some franchisors, says Simon McNeill-Ritchie, director of the Myhome group, which has been rapidly expanding its Surface Doctor brand.

'People are finding it harder to move house, and so are looking at home improvements, which is a big opportunity for us,' he says. 'And when the economy picks up again, that will put them in a stronger position when they want to sell.'

Bathrooms suffer from wear and tear like any other room in the house, says Simon - and, along with kitchens, are key to selling the house. 'We find that people are increasingly inclined to refurbish rather than change the whole bathroom, which is good for us,' he says.

Home improvements can be good for the environment, too, Simon points out. About a million perfectly good baths were junked last year, he adds, so to recycle them instead makes more environmental sense than sending them to landfill. With around 28 million baths in Britain, half a million hotel rooms and large numbers of schools and hospitals, the market has huge potential for growth, he argues, as customers become more environment-conscious.

Using state-of-the-art technology, which is well established in the US but relatively new to Britain, gives Surface Doctor a competitive edge. The franchise uses a unique surface bonding agent to treat almost any surface and can restore a bathroom to look and feel like new at around a quarter of the cost - and without the mess from days of plumbing work.

Surface Doctor is now advertising for new franchisees, and plans this year to start training them in Britain instead of the US. The expanding franchise is already attracting lots of interest, says Simon, and is set to win over more franchisees as economic slowdown means rich pickings in the home improvement market.

When the economy struggles, franchising does better, agrees Ken Dennis, franchise sales director at ServiceMaster. Homeowners who put off moving often spend the savings on improving their own home instead, and adding value for when they eventually move - that might mean calling in Furniture Medic to spruce up furniture and kitchens, TruGreen to improve the lawn or ServiceMaster to give carpets a professional clean.

While other businesses may struggle, established franchisors are using this year to build on previous triumphs and continue a programme of expansion, says Graham Russell, national franchise manager at In-toto Kitchens. The group had opened 50 showrooms by the end of last year [2007] and plans to continue its steady expansion of three to four new showrooms each year, backed up by a major advertising campaign.

'We're simply building on past successes,' says Graham, who points out that the company has grown 15 per cent per annum over the past couple of years, 'And while we keep hearing dire things about the economy, our market is fairly strong because even when they're not moving house, people are investing in home extensions and putting money into their property.'

And franchisees who leave the world of salaried work for a franchise can be sure that their franchise will thrive even when other businesses suffer. Ken adds: 'The whole idea of a franchise is that it's proven. We would always encourage prospective franchisees to choose a British Franchise Association member - after all, we've been doing this for almost 50 years, so we've got it right by now.' And early in the new year is always prime time for franchising, adds Graham at In-toto. 'We get fewer enquiries in the run-up to Christmas but far more enquiries early in the new year - it's new year, new start,' he says. 'Yet, for us, it's not about quantity but quality - better to have one good franchisee than five not-so-good ones.'

And rocketing house prices over the past few years have given many prospective franchisees a head start, he maintains. 'Most people finance their business by raising money on their property, and so many people will have built up a lot of equity over the past few years,' he says. 'Even if house prices fall, there is still a lot of equity there to call upon.'

Tougher times can even create the impetus for prospective franchisees, agrees Simon at Surface Doctor. He believes that a downturn in the economy could give many aspiring franchisees an incentive to enter franchising.

'This is the time to tell people about the opportunities we offer franchisees,' he points out, 'because in many cases redundancy and economic slowdown could be just the push people need to make them reassess their work. They start thinking about how nice it would be not to have to rely on employers for their living.

'From a work point of view, we find that franchisees get a lot of independence and satisfaction,' Simon adds. 'You walk into a bathroom one morning, and by the afternoon it's looking simply wonderful, and so you have a different grateful customer each day.'

ServiceMaster, too, sees an influx of prospective franchisees when redundancies are in prospect - many see it as a cue to launch into business for themselves. 'If the economy is booming, people stay in work - but when it takes a downturn, franchising grows because it gives people the push they need for the independence they've always wanted,' Ken argues.

'Franchising doesn't suit everyone, especially people from a corporate background who are used to having everything done for them, which is why we need to choose the right people. But in commercial terms, if you follow the system then you will succeed.'

As a relative newcomer to franchising, Countrywide Floorcare is also looking forward to more prospective franchisees this year. While he launched his franchises just a couple of years ago, managing director Ray Coleshill has been in the business for 30 years, and wishes that someone could have helped him steer clear of mistakes made decades ago - precisely the help his new franchisees are given, in fact.

'There is far more security in launching a franchise than in starting a business from scratch, as studies have proved time and time again,' says Ray. 'Franchising puts you on the fast track, because you have all that expertise behind you.'

As the economy takes a downturn and people choose the 'don't move - improve' route, the services of Countrywide Floorcare are more in demand, he points out: 'People think, "I'll make that last a bit longer by giving it a new lease of life". And we don't just clean floor coverings - we also restore them. So our message is: we're getting busier all the time, so come and join us.'

Tougher times can mean competitors go to the wall, but a good franchise will simply grow stronger, say insiders. 'As in all retail, it's tough out there right now, which is why we've just got to be better at what we do,' says Stuart Law, director of Blazes. 'The customer expects more, and so as a retailer we have to do more. But it's the old adage: when the going gets tough, the tough get going.'

High customer expectations present a challenge to all retailers, Stuart points out - but amid warnings of tough times ahead, Blazes has long been putting plans in place. 'We know we have to meet customers' expectations when it comes to quality, value and presentation,' he points out.

And as economists warn of stagnating or falling house prices, a slowdown in the housing market can be good news for fire and fireplace specialists, Stuart adds. '"Faced with difficulties in the housing market, we know that people tend to nest and improve their homes. But when the market is buoyant and people are moving house, they often want to replace the fireplace in the new house and that's good news for us, too.'

A leaner economic climate through 2008 may create difficulties for retailers, Stuart points out, but is good news too for franchisee recruitment. 'When the economy is sound and people are in good jobs, it's harder to make the decision to move to franchising. But for anyone hacked off with the daily commute on the M25 and under increasing pressure at work, this is the catalyst for looking at a franchise and being your own boss.' Blazes' award-winning franchisee launch programme offers a sound start to potential franchisees, he adds.

And the business model of a good franchise means that most withstand a slight economic downturn very well, says Russell O'Connell, CEO of Myhome plc. He points out that while there is some negativity around following the credit crunch, unemployment is low and house prices still relatively stable.

'When people start thinking about tightening their belts a little, they might drink less wine or have fewer restaurant meals,' he argues, 'But for the customers we target, no one wants to start cleaning their own toilet. Our customers are often mid-level executives who might have to work longer hours in tougher times - and since they're cash rich, time poor, they want to hang on to the cleaner.' Demand for home services has quadrupled over the past decade, he points out, and should double once more over the next three years.

And in harder times, Russell says, any good franchise looks at its business model carefully, to see whether it can get a better deal somewhere. As a successful franchisor with 12 different brands, Myhome also makes sure its advertising is effective. 'A lot of companies do brand-building, but we believe that if we advertise today, we need to see a result tomorrow.' The company now knows exactly how many new customers, or prospective franchisees, its advertising campaigns will attract.

Running a successful business through tougher times also means taking care of existing customers - lifetime customers are much more valuable than one-off sales, Russell points out, especially when the economy takes a dip. 'No business is immune, but certainly some businesses are more recession-proof than others,' he adds. And like other successful franchisors, MyHome also finds that tougher times encourage more disaffected employees to move to franchising.

So while the storm clouds began to gather with the crisis in the US sub-prime market and the credit crunch at the end of 2007, and pundits warn that the UK economy is in for a rough ride, those tougher times look set to bring greater triumphs for established franchisors who plan to build on their successes through 2008 and beyond.