As if declining prices and increasing inventory weren’t enough of a challenge for home builders, there’s a new competitor on the housing industry building block: home building franchises.
G.J. Gardner Homes, an Australia-based home builder franchisor, has taken a toehold in the United States. The company launched its first American franchises last year in California.
Randy and Jennifer Mills are Colorado’s first home building franchisees. Their territory includes Monument, Gleneagle, Tri-Lakes and most of Black Forest.
Randy Mills, a licensed general contractor, built two custom homes during the last year in northern El Paso County. He owned and operated Superior Building for 15 years, and grew up working in his father’s framing business. He is preparing to break ground on his first G.J. Gardner home in Black Forest this summer.
The Mills found the company online, and decided that purchasing a franchise package would be easier than building a business from scratch.
“We never expected we’d be doing this, but it’s very reassuring to know that we can pick up the phone and call other franchisees in California or Australia to compare notes,” he said.
Word of the company’s opening was news to George Hess, president of the Housing and Building Association of Colorado Springs and owner of Vantage Homes. But he agrees with Mills’ conclusion that a franchise arrangement can be helpful to budding entrepreneurs.
“What they offer is probably process and procedure, which is one of the hardest pieces of the business to formulate when you start a business,” he said. “They’ll provide the rules to the game … allowing them to focus on profitability. For someone who says ‘I’m a good builder’ but not a businessman, this (franchise) can help.”
Malcolm Dutch, who owns the G.J. Gardner Homes franchise in Visalia, Calif., said the company’s software has simplified providing estimates, getting bids, scheduling subcontractors, ordering and allocating budgets for materials, tracking change orders and final accounting.
“We can actually deliver a quote to a buyer in four hours,” he said. “And everything is kept in one organized file — no missing pages or contracts. The building then becomes the easy part.”
Jeff Elgin, a franchising consultant and a columnist for Entrepreneur.com, sees both opportunity and challenge in the Gardner concept.
He said that an increasing number of entrepreneurs are choosing to expand their businesses by purchasing a franchise. In the G.J. Gardner case, he said, that growth would be “horizontal,” allowing a business to do more of what it does best by incorporating a proven management and marketing system.
“In this case, knowledge of a specialty like framing or in-depth experience with plumbing or electric, for example, can work to your advantage,” he said. “(Mills) probably knew a heck of a lot when he got into it, just from working on framing jobs over the years. It’s a little riskier to get into a ‘young’ franchise that doesn’t have a track record, but it sounds like this one has some history behind it.”
G.J. Gardner Homes was founded in the early 1980s and began franchising its business model in 1995. At that point Greg Gardner was building up to 1,000 homes a year. He and his partner, Darren Wallace, realized that independent builders were struggling for market share in an increasingly competitive marketplace dominated by large national builders and needed the tools to be successful.
These included a software management system, group purchasing power, marketing and a place to showcase the product, said Brook Swientisky, master franchisor for the U.S. market.
Today the company has 76 franchise operations that build more than 22,000 custom homes in Australia, Germany, New Zealand, South Africa and United States.
One in every seven jobs in the United States is produced by franchised businesses, and the 760,000 U.S. franchised establishments generate more than $1.5 trillion in economic activity annually, according to a study conducted for the International Franchise Association’s educational foundation by PricewaterhouseCoopers.
And the field is growing.
In “The Profile of Franchising 2006,” a study conducted by FRANdata Corp., researchers determined that 900 new concepts began franchising in the United States between 2003 and 2005.
Of the existing 18 categories of businesses, ranging from retail food to business services to automotive to real estate to retail products and services, 17 had experienced significant growth.
G.J. Gardner Homes is hoping to be part of that growth. The company expects to add five additional franchise operations in the Pikes Peak region during the next few years, Swientisky said, including a just-signed agreement in Pueblo.
He said the company’s software platform provides an advantage for small builders looking for a competitive edge in a soft market, where single family building permits are off 40 percent year-over-year.
“We allow builders to control their costs and their time effectively,” he said. “Our typical build time is nine months. And we can work with national suppliers to get the best prices.”
For now, Mills is betting on the future, focusing his time marketing a $575,000 spec home in Black Forest. He said he also has five prospects lined up, two of which have purchased property.
“Our forecast is ambitious — 16 homes this year,” he said. “Now we just need to get to work.”