The Franchise Company – growing in an unusual niche

Even with this growing empire, Rogers keeps humble.

Canadian Business Franchise Magazine
March/April 1998

The Franchise Company – growing in an unusual niche
From a basement apartment operation in 1976, The Franchise Company now owns seven franchise systems, has 1,800 franchisees in 32 countries and about 15,000 employees with system-wide sales of $300 million US.
Donna Green

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Steve Rogers sits in his tastefully appointed but modest board room in a newly developed area of Etobicoke. Through the window behind him a giant inflatable blue hand with a cell phone is struggling to become upright in a windy, undeveloped field. Rogers laughs warmly at the advertising whimsy and jokes about slowly driving an inflatable pin towards it. Rogers a la Monty Python, but despite his playful destructiveness, he’s really out to build a big company with an unusual niche.

Rogers is the 41 year-old president and CEO of The Franchise Company, a little known Toronto-based company that buys and grows trades-oriented service franchise systems throughout North America. From a basement apartment operation in 1976, The Franchise Company now owns seven franchise systems, has 1800 franchisees in 32 countries and about 15,000 employees with system-wide sales of $300 million US. It is a success story that deserves more recognition.

The Franchise Company owns College Pro Painters, Action Window Cleaners, Certa ProPainters, Nutrilawn International, Stained Glass Window Overlay, Sidea (a computer software demonstration services company) and as of Oct 31, 1997 Paul W. Davis Systems Inc. (US) – a disaster restoration service with 230 franchisees and US $220 million in annual sales. Rogers says his company has been consistently profitable and reports a 10% profit for 1997 – better than it’s parent company.

The Franchise Company is the franchise arm of FirstService Corporation, a Bay Street company which also acquires and grows service-based companies providing a variety of property and business services to corporate, government and residential customers in North America. FirstService’s president and CEO, Jay Hennick began the whole enterprise by buying College Pro Painters in 1989. Steve Rogers, who had been a manager and franchisor with College Pro before leaving to start his own contracting business, Certa Pro Contractors, rejoined College Pro and was instrumental in helping Hennick grow his empire which now includes over 30 companies in addition to The Franchise Company’s holdings.

FirstService had revenue to the end of March ’97 of $178 million up 45% over 1996. Earnings also increased but, at only $4.7 million, their stock price (FSV on the TSE) continues to trade at a significant discount to most other companies in their industry. With The Franchise’s Company’s US$11.5 million acquisition of the profitable Paul Davis Systems Inc. of Jacksonville, Florida, revenue will increase by US$9 million. Apart from The Franchise Company, FirstService owns companies in eight service areas: community association management ($80 million in ’97 revenue), commercial security services ($65 million), residential and commercial grounds care ($35 million), residential and commercial cleaning services ($5.5 million), contract pool and recreation facilities management ($2.5 million); business data services ($24 million); and a marketing support materials distribution service ($23 million). And they’re looking for more.

Rogers is also looking for more – more well-managed, service oriented franchise systems – not just because he wants to grow his company, but because he wants to offer his franchisees opportunities to advance to more capital intensive, profitable franchises within his family of companies. “Our mission is to create value for our customers and profitable opportunities for our people,” sys Rogers. “Someone can get involved with one of our franchise systems and keep involved with our group, in essence trade their equity up. The scarcest thing to find in franchising is a good franchisee and when you do, you want to bend over backwards to try to keep them.”

“The franchisees are your customers,” he continues. “You’ve got to work hard to deliver the right bundle of goods and services to your franchisees while they’re delivering the right value to your customers. I’m always out there looking for what people want to do, what they find exciting and what gives them meaning in their work, so I can keep their opportunities in front of them. We’ve had people have a long history with us – right out of university with career paths throughout the company.”

Rogers might encourage a college student to start with a College Pro Painter franchise, trade it up for a Certa ProPainter franchise, then sell that to invest in a NutriLawn franchise. If painting doesn’t thrill a prospective young franchisee, Rogers can offer a window cleaning service (Action) or a software demonstration service (Sidea). Now franchisees can aspire to a Paul Davis System franchise.

When The Franchise Company acquires a system, the original management stays in place though they are required to buy a portion of the company as a pledge of their commitment. “One of our core philosophies is for management to have a vested interest in the place where they work because in the service business your assets walk in the door every morning and leave every night,” affirms Rogers. Management is also encouraged to go through the company’s leadership course (as are some franchisees).

Then Rogers goes to work honing their franchise system, implementing the benefits of economies of scale, and promoting systemwide service consistency (a perennial problem in any service franchise). “A tight system gives everybody a better chance at profitability,” says Rogers. The Franchise Company’s call centre is one example of this efficiency in action. Calls for College Pro, Certa Pro and Action franchises are routed through a central call centre and routed to the appropriate area franchisee. This is convenient for customers and for franchisees and it permits head office to monitor activity and customer interest. Among other things, this helps head office assess the effectiveness of the brand-name advertising campaigns the company undertakes.

Asked if he’s determined to continue expanding in trade oriented businesses, Rogers says he likes businesses where you can knock on a door when things are slow and hustle up some work, and he’s convinced he shouldn’t stray too far from what he knows well. “I come from a contracting background. I understand what putting drywall on is all about. I understand what working in the trades is all about. I understand franchising. In a lot of ways we’re an ideal parent,” says Rogers.

If practice makes perfect, this franchise parent may be nearly perfect. With the College Pro system, Rogers team must train nearly 800 new franchisees each summer, and get them running in time to capture the spring and summer exterior painting market. College Pro Painters, a Canadian concept, has a healthy 550 franchises in the US and about 250 in Canada. There is no initial franchise fee. Royalties are 15-20% of gross sales.

Franchisees can parlay their success at College Pro into the full-time painting service of Certa ProPainters or they can pursue other low cost options like Action Window Cleaners or Sidea. Certa Pro franchise fees are between $15-20,000 with a flat monthly royalty of between $800-$1200 per month depending on region. Acton and Sidea have no initial franchise fee, but like College Pro they do require a 15-20% royalty. Sidea is a software demonstration company that is now working at 85 demonstration sites in Computercity stores. It currently has eight franchisees, about 100 demonstrators, and as you might expect most staff are under 30.

Formerly the granddaddy of the system, Nutrilawn International offers clients an ecologically friendly approach to lawn care and franchisees an opportunity to generate revenues between $250,000-$400,000. Initial franchise fee is $15-35,000 depending on region with a 6% royalty.

Stained Glass Overlay is an Irvine, California-based company which was acquired in June of 1997. It is the world’s largest franchisor of decorative glass products and has over 350 units operating in North America and in 32 countries internationally. Stained Glass Overlay has a patented process to decorate with stained glass effect any glass or acrylic service. The franchise fee for this operation is $45,000 with a 6% royalty.

The newest addition to The Franchise Company’s family is Paul W. Davis Systems Inc. (US). This system specializes in restoration contracting and cleaning for the insurance industry. Franchises cost US$45,000 with a 3% royalty. The Franchise Company is master franchisor in the US only. Paul Davis Systems’ master Canadian franchisor is unrelated to FirstService.

Even with this growing empire, Rogers keeps humble. His head office staff consists of only three people including himself and he’s careful to stay grounded. He says he’s going to stay in the trade/service field and he’s committed to staying in Canada despite the fact that 85% of his sales are from US operations. “You grow up in the kinds of businesses we’ve grown up in, you have a good appreciation of a buck. You want a tough day at the office – be a painting contractor. I realize when I’m spending money it still comes back to me how many houses had to get painted to pay for this.”

Like franchisors, Rogers must be ever mindful of competitive pressures on prices. He must keep finding and retaining good franchisees and he must be on the look-out for continued growth and value-added opportunities. Maybe someone needs to service those giant inflatable advertising dummies…


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