Home Improvement Industry Profile
The home improvement industry includes businesses related to home maintenance and improvement. Franchises in this category cover a wide range of investment levels and business models. Options include franchises that can be run from home offices, use mobile equipment for on-site service or operate from a brick-and-mortar base. Some franchises build on a franchisee's home service expertise; others don't require any specific experience or skill. Many businesses in the home improvement industry provide training and offer proprietary services that can be learned easily. For franchisees solely interested in investment, this segment includes businesses that allow absentee ownership.
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Outlook and Trends
An analysis by the Harvard Joint Center for Housing Studies reported that the home improvement industry is positioned to grow due to factors impacting the largest demographic groups in the United States. The study predicted that businesses that provide home improvement services will experience increased demand due to the changing lifestyle needs of baby boomers and an increase in homeownership by millennials.
In 2016, baby boomers spent the most home improvement dollars of any group, having held the leading position for 20 years, according to the Harvard study. As this population ages, and societal trends toward aging in place remain constant, older individuals are likely to continue to modify their homes to accommodate changing needs. In 2005, homeowners age 55 and over accounted for 31 percent of the home improvement market. By 2025, this group is expected to represent 56 percent of total industry expenditures, according to the report.
With the aging of baby boomers, the housing market is expected to experience an increase of older housing stock as individuals become unable to live at home or reach their demise. At the same time, millennials will become more eligible to enter the housing market due to income gains and lifestyle changes as they age. The transition is expected to result in a change from 16 million millennial households in 2015 to 40 million in 2025, according to the Harvard study. As housing prices rise, millennial homeowners are more likely to qualify to purchase older, more affordable housing stock. However, these structures are likely to require improvement and modern upgrades soon after purchase, increasing the demand for home improvement services.
According to the Harvard study, gains for the home improvement industry are expected through 2025. With favorable demographic changes in place, the industry also will benefit from rising interest rates, which may convince homeowners to renovate rather than relocate. The report predicted an average annual increase of 2 percent on home improvement spending, a rate consistent with anticipated economic growth. Based on that estimate, annual home improvement revenue is set to reach $269 billion in 2025, up from $221 billion in 2015, according to the report.
These gains are well overdue, says HomeAdvisor, a global home services marketplace. Due to a dramatic increase in homeowner equity beginning in 2012, HomeAdvisor says that homeowners are more willing to purchase upgrades because they feel they can recapture most of their investment when they sell. This trend, which HomeAdvisor calls, "Nesting is investing," is bringing a change of fortune to home service contractors who experienced business slowdowns between 2008 and 2012.
While rising housing prices may block some millennials from the housing market, the situation can result in a higher demand for rental and investment properties, meaning good news for home services and repair franchises. According to the Harvard study, rental housing in the United States has a median age of over 40 years. Harvard analysts found that, on average, owners spend twice as much improving housing units that are over 50 years than they spend on units younger than 10 years. Between 2010 and 2015, growth in per unit outlays increased 12 percent annually, the study reported.
The fact that many homeowners spend more time at home also is likely to add to the "Nesting is investing" trend, according to HomeAdvisor. Increases in flexible work schedules and telecommuting will contribute to a growing demand for renovations that meet changing lifestyles and work requirements. The impact will create opportunities for new services that respond directly to those needs.
New opportunities for growth also are likely as a younger generation achieves home ownership. Green niches, such as healthy homes, energy efficiency and environmental sustainability, as well as technological advances such as automated homes, are likely to appeal to millennials and create industry growth, according to the Harvard study.
Common Business Models
Homeowners use remodeling services to upgrade, enlarge, modify, repair or increase value. Some franchises offer an improved or less expensive option for a traditional service; others have proprietary and novel products and services for niche markets or specific needs. Most successful home remodeling franchises emphasize efficiency, personal service and integrity to reassure wary consumers.
Some of the most common types of franchises offering home remodeling include:
- Painting: Franchises including CertaPro Painters and Fresh Coat employ professional painters and emphasize quality and customer satisfaction to convince would-be do-it-yourself painters that a professional approach to painting is worth the investment.
- Kitchen/Bath Makeovers: Franchises such as Kitchen Solvers and Re-Bath each offer a range of one-stop specialized remodeling services that bring convenience to consumers and multiple revenue streams to franchisees.
- Storage: Franchises such as ShelfGenie and Closet Factory offer storage solutions that include traditional closet makeovers and extend storage solutions to every area of the house, expanding prospects for repeat customer interactions.
- Outdoor Improvements: Franchises such as Archadek and Outdoor Lighting Perspectives offer unique solutions for residents and businesses to improve their outdoor spaces for recreation, utility or beautification.
Repair and Maintenance
Repair and maintenance services help homeowners delay or prevent larger home projects or deterioration. Franchises in this segment often specialize in a narrowly defined product or service but can expand opportunities by becoming the local go-to specialty provider in their area. Maintenance services allow for either one-time services or contractual arrangements for the provision of services on a regular basis.
Some of the most common types of repair and maintenance services include:
- Landscaping: Franchises such as Lawn Doctor and The Grounds Guys provide contracted year-round landscape maintenance and related services for residential and commercial customers.
- Electrical/HVAC: Franchises including Mr. Electric and Aire Serv can sell, service and repair damaged systems, becoming valuable resources for homes and businesses whose owners can't tolerate interruption of their daily routines.
- Indoor Cleaning: A wide range of cleaning franchises includes Maidpro for residential cleaning, Office Pride for commercial cleaning and Home Cleaning Services of America, Inc., which handle both on one-time or contractual relationships with customers.
- Special Products: Franchises such as Pool Scout and Bar-B-Clean use proprietary products and techniques to service a narrow product segment in which they offer complete specialization.
The care and maintenance of a residential or commercial dwelling also requires services that accommodate unique needs or trends. While related to improvement or upkeep, the marketability of these franchises often centers on their exclusive approach to a specific home-related issue or their ability to make general services applicable to the home improvement industry.
Some examples of the other franchise opportunities in the home improvement industry include:
- Disaster Restoration: Franchises such as Delta Disaster Services and Rainbow International Restoration offer cleanup and restoration from damage due to factors including fire, smoke, mold, water and sewage.
- Property Management: Franchises such as All County Property Management and Property Management Inc. provide services that generate several streams including rent collection, marketing, tenant screening and maintenance.
- Home Safety: Franchises such as Slip Doctors offer solutions for making household surfaces safer and slip-free, a service that can be appealing for homeowners of all ages.
- Home Inspection: Franchises such as Pillar to Post and Watch Dogs Home Inspectors offer multiple types of inspection services to identify home problems with construction, radon and mold for diverse streams in the same specialty.
- Green Energy Solutions: Franchises such as SuperGreen Solutions and Vootu design, supply and install environmentally friendly solutions for residential and commercial customers who want to increase efficiency and take advantage of green rebates and incentives.
You can find a home improvement franchise that may work for you by searching Franchise Opportunities' Home Repair & Services Franchises category.
Costs for getting started with a franchise in the home improvement industry vary widely. You can gain ownership of some home-based franchises with as little as $20,000. However, specialized equipment, mobile units, supplies and inventory all can increase expenses into the hundreds of thousands. Some franchises require brick-and-mortar sites, often with showrooms for demonstration purposes. Even home-based franchises may need to rent physical facilities to secure and store equipment and vehicles.
As the owner of a home improvement industry franchise, you may incur additional expenses for liability insurance or licenses and permits. If you are working onsite as part of your team, you may need to earn specific trade certifications. You'll also be subject to ongoing fees typical of any franchise, which may include royalties, advertising costs, uniforms, rent or mortgage payments, utilities, payroll and site and equipment maintenance.
Depending on your franchise agreement, you may be required to purchase your equipment and products from a list of approved vendors so the franchisor can maintain control over the services you're delivering. For products and equipment specific or unique to your franchise, there may not be another option. However, franchise-vendor relationships often can give you access to reduced prices from reputable manufacturers and suppliers. As a result, you may profit from group discounts negotiated by your franchisor.
While the success of your franchise will depend on several factors, you'll have a lower risk of failure by owning a franchise. By design, your investment in a franchise includes a business plan that depends on proven products and services. You'll have an advantage in gaining customers based on the name recognition and reputation of your franchise. In cases where franchise territories are limited, you'll be the sole franchisee of your product or service for a specific area.
Industry experts concur that owning a home services and repair franchise can give you an advantage. In a report on achieving scale in the home remodeling industry, a Harvard University research analyst maintained that independent remodeling companies are unlikely to experience significant growth because the industry is so fragmented. Instead, a more attractive option for them is to join a franchise in which they can take advantage of benefits such as scale, well-established systems and extensive marketing, according to the study. In addition, the market research firm IBISWORLD reported that a high prior success rate was a key factor for continued success in the home remodeling industry. Franchisees have this advantage from day one by being associated with their franchisor's reputation.
The opportunity to own a home remodeling franchise also may be optimal for independent contractors/craftsmen who entered the industry with little business expertise. Without knowledge in systems involving marketing, human resources, profit margins, legal obligations, social media and customer analytics, an independent contractor must employ specialists or spend precious time acquiring the skills necessary to run a successful business. As a bonus, some franchisors offer discounts to contractors who transform or expand their existing businesses into franchises.
You also will benefit from your franchisor's interest in ensuring that the franchise brand remains well known and highly regarded. The corporate franchise team can advise and assist with decisions such as selecting the right location, securing financing, hiring employees and purchasing equipment. You'll have the benefit of your franchisor's experience in purchasing insurance, identifying customer leads, navigating local zoning regulations and handling franchise-specific challenges. As a bonus, you can collaborate with fellow franchisees to share resources and solutions.
One of the most important considerations you'll have as the owner of a home services and repair franchise will involve how to maintain an ongoing source of clients. For some franchises, client interaction is limited to a one-time service. In those situations, you'll have to make self-promotion your priority. Giving clients incentives or discounts for referrals can help grow your business without much effort. Devising creative applications of your services can lead to repeat business with satisfied clients.
You also will have to maintain control over administrative functions to keep your business running smoothly. Writing bids and proposals, filing permit applications and inspection requests and validating insurance coverage can create a mound of paper quickly. Depending on your abilities and available time, the cost of hiring administrative help may offset your time lost attending to these important details.
Long before online service directories and five star ratings, word-of-mouth referrals were a critical element for achieving success in the home improvement industry. According to a study by Deloitte, a multinational professional services firm, word-of-mouth consistently influences the purchases of more U.S. consumers than do TV ads. Recommendations from social media circles and online reviews also ranked very high in the list of factors that affect consumers' decisions.
With an emphasis on referrals and ratings, you'll have to be consistent in monitoring your presence on social media platforms such as Facebook and Twitter, as well as on review websites such as Yelp. You'll have to encourage satisfied customers to leave positive reviews, while also weeding out negative comments. Even if dissatisfied reviews are directed at another franchise location, you may be considered guilty by association and experience losses due to the confusion.
Characteristics for Success: Who Should Consider a Home Improvement Industry Franchise?
The home improvement industry has many options for franchisees who take pride in seeing the physical outcomes of their work. Having the strengths and skills listed below may help you enjoy what you do and find success in one of the many business models available in this industry:
- You prioritize customer service. Since this industry relies so heavily on word-of-mouth advertising, it is essential to provide impeccable customer service. Glowing reviews equal more business.
- You enjoy working in nontraditional environments. Even if you're managing a home-based business, most franchises provide services in clients' homes or businesses, so it's likely you'll spend a good portion of your time outside your place of business.
- You have knowledge within your industry. Being able to quickly recognize a job well done or one that's problematic is another key to success.
- You're not afraid of paperwork. Your ability to follow through on obtaining the right permits, licenses and inspections can mean the difference between keeping a job on time and on budget versus it spiraling out of control.
- You can be flexible. In many instances, clients won't be able visualize the effects of renovations or improvements until they begin, so it's important to be able to accommodate changes mid-stream without becoming flustered.
- You can identify and retain dependable employees. Clients will consider it a reflection on your professionalism if your crew doesn't show up or performs shoddy work, so it's important to invest in retaining reliable help.
- You can seek out networking opportunities. Some of your most lucrative referrals may come from other business owners who don't perform the same type of work you do.
- You communicate well and are personable. If you are a “people person” and can successfully communicate with and positively influence a diverse group of people, then you have a valuable skill that will serve you well in the home services industry.
Industry Snapshot*:Minimum Cash Required: $ 7,500
Average Cash Required: $ 55,315
*Based on currently active listings at FranchiseOpportunities.com