Home Is Where The Money Is

Entrepreneur, Sept, 2000 by Julie Bawden Davis

And improving the home is where today's franchises are headed.

FORGET ABOUT exotic vacations and fast cars; today's consumers are interested in putting their money where they spend the most time: their homes. Tired of living with the same old kitchen cabinets, worn-out drapes and boring landscapes, homeowners are redecorating, remodeling and replacing at record rates.

According to the Home Improvement Research Institute, home-improvement product sales hit $158.9 billion in 1999, a 7.3 percent increase over 1998. And the institute predicts a growth rate of 6.3 percent this year.

While do-it-yourself projects are still popular among certain segments of the population, there's a growing trend among consumers to pull out their wallets and seek assistance from home-improvement experts. That means more profitable home-improvement franchise opportunities for entrepreneurs.

"People are more willing than ever before to spend money on their homes," says Gerald Baldner, president of Kitchen Solvers Inc., a kitchen- and bath-remodeling company that has 110 franchises in 31 states. In 1999, the franchise earned $11 million in sales.

"In the past five years, we've seen a dramatic increase in kitchen and bath remodels," says Baldner. "The growth is due in part to a good economy and an increase in discretionary income, but it's also related to the fact that nowadays people feel freer to spend money on their homes. Years ago, you bought a house and lived with it. Today, homeowners ask, 'How can we make it better?'

The demographic market fueling this home-improvement boom? Generally, married couples in their late 30s or older who have lived in their current home for at least five years and earn annual incomes of $40,000 or more, says Lori Marshall, owner and president of Decor-At-Your-Door International, a franchise specializing in window coverings, flooring and wallpapering. Marshall started as a franchisee with Decor-At-Your-Door in 1998, and did so well, she bought the company in early 2000.

"Many of our clients tell us that, rather than buying a new home, it's cheaper and easier for them to fix up what they have," she says. "They like their home, neighbors and school system, and they don't want to leave. By replacing carpeting or putting up window treatments, we can provide them with an effective way to spruce up their homes, and they're almost always delighted."

HOME IS WHERE THE BUSINESS IS

Thanks to the public's interest in updating their homes, Marshall has found building her business amazingly easy. "Customers don't want to do it themselves, so when they find out about me, they're really happy," says Marshall.

Marshall's clients also appreciate her affordable rates and access to new products. "We stay current on the latest trends, and we don't charge an hourly rate for our services," she says. "We're also able to get group discounts on the latest merchandise and pass those savings on to the clients."

The interior isn't the only home location to benefit from affordable, attainable technology, says Tim Hanauer, owner of Earth Graphics, a mobile service that provides digital images of proposed landscapes from an on-site van. "Six years ago, we didn't have a digital-imaging system with the ability to be mobile," says Hanauer. "The landscape industry's traditional lead-time for producing plans is about four weeks. With this mobile digital technology, we've cut that to one day, and customers are really responding."

Since Hanauer started the company in late 1994, Earth Graphics has seen a steady increase in business. Today, it has three vans and one franchise unit that generate $222,000 annually in design fees, and they are geared to open more franchises. Hanauer expects the company to create 925 residential landscape designs this year.

Like many in the home-improvement industry, Hanauer has found today's consumers eager to fix up their homes. "A lot of people want a landscape they can enjoy," he says. "With telecommuting and working from home becoming more popular, people want inviting landscapes."

During his 14 years in the landscape industry, Hanauer has seen job prices rise considerably. "When I started in the business, clients commonly spent $2,000 to $5,000 on landscaping. Now they're willing to invest $15,000 to $20,000," he says.

With the increase in expense has come a renewed interest in creative landscaping. "We're seeing a lot of naturalistic and authentic items," he says, "such as real cobblestones, landscape boulders and waterfalls."

WHAT'S COOKING

More than any other area of the home, kitchens succumb to outdated styles and wear more quickly than other rooms, which makes kitchen improvement a hot area. That's old news to Carrie and John Bordenkircher, who haven't been without work since they opened their Dayton, Ohio, Kitchen Solvers franchise in 1997.

"It's been so busy, we haven't had a problem finding work. Our biggest challenge is keeping it," says Carrie, who left a job as a full-time CPA to pursue owning a business.

For a little less than $35,000, the Bordenkirchers bought a Kitchen Solver franchise. In 1999, their gross sales were $225,000, a figure they surpassed in May 2000.