Sprucing up the carport: HouseWall can turn your garage into a luxury storage area, but with no retail presence, can the company compete against national giant Whirlpool?

South Florida CEO, Sept, 2005 by Yeleny Suarez

Imagine storing $5,000 worth of junk on a wall in your garage, while also keeping your $60,000 car parked inside. That is what HouseWall Garage System Inc., a garage organization and storage company, hopes to do for its customers.

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CEO Michael Dagen started HouseWall in late 2002 and took two years to iron out the design, production, patenting and trade-marking of his products. In 2004, the company generated $900,000 in sales, servicing Miami-Dade, Broward, Palm Beach and Monroe counties. Dagen predicts HouseWall will hit $3.5 to $4 million in revenue in 2006, up from its current $2 million.

In October, he plans to expand his business throughout Florida by looking for franchisees in Tampa, Orlando, Jacksonville and Tallahassee. Dagen says his goal is to have 40 franchises operational by the end of 2006.

Dagen's research showed him that the garage, which often makes up as much as 20 percent of a home's square footage, is packed with more stuff than any other space in a house. He also found that insurance companies spent $680 million in 2004 to cover damage to cars that were left outside during incidents such as hurricanes and other weather events.

HouseWall's system of grooved paneling serves as a foundation for cabinets, shelves, hooks and racks, which aim to get rakes, boxes, old toys, collectibles and other items off the floor and into space-efficient organization. That, says Dagen, should leave more room for the automobiles that belong in the garage.

The company's main product--a water-resistant, high-density fiberboard wall panel manufactured exclusively for HouseWall--is not available from any other company in the US, says Dagen, a former vice president of sales at a retail fixture company. Prices run around $6 a square foot for the wall and $3.50 a square foot for flooring; the total installation typically costs $800 to $3,000.

Dagen says HouseWall currently has 860 customers and 25 employees, including sales and installation crews. A 100,000-square-foot Hialeah warehouse stores its manufactured walls and accessories.

Built-in garage organization systems is not a market Dagen created, and House-Wall faces large national competitors. A year before HouseWall opened, Michigan-based Whirlpool Corp., a $13 billion company, helped start the garage organization trend with its Gladiator GarageWorks line.

"[Gladiator was] the first to come out in the market with a complete packet, after realizing customers were buying new appliances and storing the old ones in the garage," says Gladiator spokesman Grant Deady.

Deady says Sears Brands LLC and Lowe's Home Improvement stores are allocating growing amounts of inventory space to Gladiator's products. "It's a hot area and it's going to keep on growing," he says.

To compete with Gladiator's visibility, Dagen is spending $40,000 on a radio, television and direct mail marketing campaign. While it would be tough to match Gladiator's distribution network, Dagen has also signed on 15 local homebuilders to offer HouseWall products as an option to their new home buyers. Among them are Bonita Springs-based WCI Communities Inc., Coral Springs-based Transeastern Homes Inc. and Coral Springs-based Centerline Homes Inc. Before the end of the year, he plans to open new offices in Boynton Beach and Homestead, cutting the travel distance for installation and establishing a closer proximity to builders.

"The builder side also helps us on the retail side," Dagen says. "When you go into the models and see they carry HouseWall, you might not buy the house but you might call us to organize your garage."

Michael Seid, managing director of Connecticut-based Michael H. Seid & Associates LLC, is designing and implementing the franchise strategy. He says with HouseWall acting as the distributor, the franchisees will be able to offer their product at a lower cost than garage organization competitors.

Steve Hockett, president of Minnesota-based FranChoice Inc., a network matching franchisees with franchises, says HouseWall must be careful to focus on franchisee profitability, rather than on selling products to franchisees. He thinks the concept has legs, though. "Garage organization systems did not exist. So, is this concept going to continue to grow? Absolutely, but its success depends on how they structure it," he says.

For future franchisees, Dagen plans to charge a 10 percent markup on supplies, believing that if the franchises follow HouseWall's business plan, each will bring in approximately $1.5 million in sales.

Dagen plans to open franchises in Atlanta, along the East Coast and across the nation by the end of 2006, with hopes of reaching his 2008 goal: 150 franchisees generating between $120 million and $170 million in sales, with 6 to 8 percent of that going back to HouseWall. He ultimately hopes franchising will put him on the road to a public offering or open the door to acquisition by another major company.