Restoration and Disaster Recovery Industry Profile
Franchises in the restoration and disaster recovery industry assist residential and commercial clients with the cleanup of homes and businesses damaged by catastrophic events. These franchises offer services to restore structures and their contents affected by water, fire, mold, biohazard products and physical impact. Since services typically are performed at the damaged site, many franchises can be operated from home offices. Depending on the location of the restoration and disaster recovery franchise, some franchisees may require licenses and/or certifications to perform specific types of services. In addition to the financial benefits of working in this lucrative industry, many successful business owners say they enjoy the satisfaction of using their services to help disaster victims rebuild their lives and return to normalcy.
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Industry Overview and Trends
Professionals in the restoration and disaster recovery industry contribute important services in the aftermath of many types of disasters. Statistics from the Insurance Information Institute indicate that many factors contribute to an ongoing demand for services offered by this industry:
- About 500,000 structural fires occur every year, with about 70 percent affecting residential properties.
- Close to 4.2 million homes, representing property values totaling $1.1 trillion, are at risk for damage caused by hurricane storm surge flooding, according to a study of U.S. coastal areas by CoreLogic.
- In the aftermath of residential flooding, structures and contents that are not dried within 24 to 48 hours should be treated for mold growth.
- Almost 900,000 U.S. residential properties across 13 western states are considered at high or very high risk of wildfire damage, representing a combined estimated property value of $237 billion, according to a CoreLogic study.
In a 2017 Restoration & Remediation magazine survey of 10,000 industry professionals, 50 percent of respondents identified water damage as their primary business. The likelihood for this service to present an ongoing revenue stream for so many industry professionals is tied to these statistics:
- Up to 14,000 U.S. consumers are involved in water damage emergencies at their residence or business each day, according to statistics reported by Water Damage Defense.
- Almost 37 percent of homeowners claim to have suffered losses from water damage, according to the same report.
- Non-weather related water damage ranked second behind wind damage as the most common cause of homeowner insurance claims, according to an industry report by Insurance Journal magazine.
- The Insurance Institute for Business & Home Safety reported that most closed water damage in homes was due to: failures in water pipes, plumbing drains, toilets, water heaters and washing machines.
Professionals in the restoration and disaster recovery industry are looking forward to continued growth. According to an industry survey by Cleanfax magazine, approximately 74 percent of restoration companies reported an increase in revenue in 2016. Of those surveyed, 37 percent said they expected to grow more than 10 percent in 2017. The results of the survey were reported in the July 2017 issue of Cleanfax – more than a month before the United States suffered the damage from hurricanes Harvey, Irma and Maria.
In the aftermath of these three U.S. weather disasters, industry analysts predicted that billions of dollars would be funneled to the affected areas for restoration and recovery. The need for services was expected to provide restoration and disaster recovery businesses with opportunities that could impact their firms for the long-term since reconstruction extends well after a disaster strikes. In major disasters, the process requires years of work. According to a report by The Atlantic magazine, restoring and rebuilding structures was ongoing at the 10th anniversary of Hurricane Katrina in 2015.
Franchises in the restoration and disaster recovery industry are likely to find additional growth opportunities due to the following considerations:
- Industry analysts identify the rebounding construction and development industry as a source of continued revenue for remediation services.
- Most states restrict the disposal of medical and other types of hazardous waste, so the cleaning and restoration of crime scenes is best handled by professionals trained in proper biohazard cleanup.
- While mold is a common health risk in many homes, the Environmental Protection Agency (EPA) recommends that consumers contact a mold remediation professional to address mold in areas larger than 10 square feet.
- Some climate scientists predict a continuing increase in the number of intense rainfalls due, in part, to the effects of increased atmospheric moisture and global warming.
Common Franchise Models for the Restoration and Disaster Recovery Industry
The services provided by restoration and disaster recovery industry franchises help customers minimize losses and salvage valuable assets. The restoration and recovery industry includes a wide range of businesses that provide these services to commercial and residential customers. While analysts define the industry as positioned for growth, uncontrollable factors related to the long-term frequency or absence of severe weather can have a significant impact on the bottom line of these businesses. As a result, many franchises offer multiple services to ensure numerous revenue streams that are not weather-dependent. Those that specialize in a specific application typically succeed by diversifying their client base and uses for their services.
Some of the most common business models for restoration and disaster recovery industry franchises include:
- Bio-Hazard and Trauma Cleanup: Franchises such as Spaulding Decon and Steri-Clean provide services when there has been a death, whether by natural course, accident or crime. These franchises also may offer services related to the cleaning and removal of hoarding sites, drug labs, industrial chemicals, sewage and other materials classified as biohazards.
- Contents Restoration: Franchises including Fibrenew and N-Hance Wood specialize in cleaning and repairing specific types of materials so that customers can minimize loss of contents in a disaster. As material specialists, these franchises often offer remodeling and standard repair services as primary revenue sources for all type of damage.
- Mold Remediation and Abatement: Franchises including Bactronix and The Mold Pros specialize in identifying and removing mold growth as an independent occurrence or as the result of a water disaster. These franchises provide specially trained technicians who clean and remove mold so that they, as well as those who live and work in affected areas, don't suffer health problems as a result of the cleanup.
- Water, Flood and Fire: Franchises such as PuroClean, Delta Disaster Services and Steamatic Restoration and Cleaning offer several specialized services for the effects of water, floods and fire, as well as other types of damage, in one full-service franchise. In many disasters, customers require more than one type of service, so these franchises offer advantages of efficiency and convenience in a wide range of situations.
Owning a franchise in the restoration and disaster recovery industry is possible within a wide range of investment levels. Cash requirements of $50,000 are typical for businesses in this industry that involve the use of proprietary products and specialized equipment. Since many restoration and disaster recovery franchises can be operated from a home office, franchisees can save the cost of renting and maintaining commercial space. However, depending on the products and equipment used in your franchise, you may have to consider renting storage space to secure these items safely when not in use.
Franchises in the restoration and disaster recovery industry typically include the same standard costs that all franchisees pay, including ongoing fees for royalties and advertising. Fees for specialized training, proprietary software, mobile apps or other supplemental support vary by franchise. Since licenses and certifications may be required to perform the specific services offered by your franchise, you also may have ongoing costs related to education, testing and other fees associated with keeping professional credentials current.
There are financial advantages to owning a franchise in the restoration and disaster recovery industry. These include:
- More accessibility to financing since banks and other lenders view franchises as having a lower risk than independent new businesses
- Potential opportunities for in-house financing or leasing options from your franchisor
- Franchisor-negotiated group discounts that reduce the cost of products and services used across the franchise
- Home office tax deductions if your workspace is used exclusively for your franchise, subject to IRS laws at the time of your tax filing
Even with lower financial requirements, you may require financing to secure a cleaning industry franchise. The good news is that you may find financing easier to accomplish with the backing of a franchise since your money is supported by a proven business plan. This association may mean that you present less risk to wary lenders. In some cases, franchisors may assist in financing your loan, helping to negotiate a loan, or even arranging equipment leasing to save the initial costs of equipment purchases at start up.
You can find a restoration and disaster recovery franchise that may work for you by searching Franchise Opportunities' Restoration and Disaster Recovery Franchises category.
According to a report by CNBC, investors interested in pursuing opportunities in the restoration and disaster recovery industry may have limited choices because there are a small number of publicly traded options. Instead, the report identified franchise ownership as one of the few paths to investing in an industry described as "highly profitable." According to comments from the Institute of Inspection, Cleaning and Restoration Certification (IICRC) included in the report, water damage caused by natural disasters, such as hurricanes, is a growing industry. Potential gross profit margins can range up to 60 to 70 percent, according to the IICRC comments.
Owning a franchise versus an independent business in the restoration and disaster recovery industry is an opportunity to enter this lucrative market with less investment risk because:
- You are buying into a proven business plan.
- You gain the name recognition and reputation of your franchisor from day one.Fulfill appropriate insurance requirements
- You can offer customers the security of knowing they'll receive consistent service with the backing of an established organization.
- Your association with a franchise conveys credibility versus an unknown independent contractor.
- Your franchisor likely will assign an exclusive geographic territory to your franchise.
- You may be able to grow and expand your business in less time with the backing and geographic reach of a franchise.
As part of a franchise family, you'll also have access to a corporate support team for the life of your franchise. These professionals have the experience and expertise to help you avoid mistakes and recognize opportunities within the franchise system. They can give you the benefit of their knowledge in areas including marketing, hiring and franchise management. You'll also receive the technical training you need to provide your services effectively. In addition, your network of fellow franchisees can offer support and firsthand advice to help you succeed.
While franchise ownership can give you a running start, all business in the restoration and disaster recovery industry can encounter some common challenges. Concerns regarding employee hiring and retention affect all types of businesses in this segment. In the 2017 survey by Restoration & Remediation magazine, 74 percent of participants reported that finding skilled workers was their biggest challenge. While a report by Cleaning and Maintenance Management magazine said that employee turnover rates of over 200 percent were not uncommon in the general cleaning industry, businesses in the restoration and recovery industry report more staying power. Nearly 50 percent of the industry professionals surveyed by Cleanfax magazine reported that their employees stayed with their companies for between four and 10 years.
As a franchise owner in the restoration and disaster recovery industry, you'll likely have to deal with the following considerations in the course of conducting business:
- Ensuring that you and your employees maintain respect and empathy when dealing with customers who have been physically or emotionally traumatized
- Securing appropriate liability insurance, worker's compensation insurance and employee bonding to ensure the safety and security of your job sites
- Managing cash flow while waiting for reimbursement from insurance companies, a wait-time that is typically three to five weeks, according to 50 percent of those surveyed by Cleanfax
- Avoiding guilt by association and protecting your reputation when problems arise at another franchise location
While you'll have the backing of your franchisor's reputation, your franchise eventually will establish its own credibility based on your individual performance. You'll help maintain a steady flow of new clients if you encourage satisfied customers to share their experiences. According to a Nielsen survey, 92 percent of consumers trust referrals from people they know and people are four times more likely to make a purchase when referred by a friend. You'll be best positioned if you're the first name people think of when looking for help in a time of crisis.
Characteristics for Success: Who Should Consider a Restoration and Disaster Recovery Industry Franchise?
Owning a franchise in the restoration and disaster recovery industry includes opportunities for franchises that offer comprehensive or specialized services. Successful franchise owners are prepared for the unique demands and challenges of this growing industry. You'll be more likely to reach your professional and personal goals with franchise ownership in the restoration and disaster recovery industry if you possess the following strengths and skills:
- You have experience in customer service and enjoy working with people. While your services may require expert physical labor, much of your long-term success will depend on your ability to keep customers satisfied from your first encounter.
- You're willing to attend ongoing training to keep updated on industry best practices. You also may be required to take examinations to obtain necessary professional certifications and licenses.
- You can establish and enforce safety and procedural protocols to provide the most effective service. You'll have to ensure that chemicals and equipment are handled appropriately to avoid causing additional damage and injuring employees and customers.
- You can convey professionalism and trustworthiness both in person and via electronic communication. Since your first contact with potential customers may via phone or email, it's important that you can offer the reassurance they need to trust you with their property.
- You can stay on top of paperwork, insurance claims and customer billing, or are willing to hire someone to do so. Since many of your jobs will involve insurance claims, you'll need to understand and follow through on the requirements necessary to obtain fast and accurate payment.
- You can empathize with individuals who may be emotionally distraught. While your job is to help customers deal with physical damage, it's important to consider that they may be dealing with other effects of a disaster, such as personal injury or even the loss of a loved one.
- You can remain physically and emotionally stable when encountering the sights and smells of post-disaster damage. You should be able to handle the possible physical and emotional effects of devastating events.
- You're willing to work when the need arises. Since disasters can occur at any time of the day or night, it's important that you remain dependable and accessible 24/7 to take advantage of opportunities when they arise.
Industry Snapshot*:Minimum Cash Required: $ 40,000
Average Cash Required: $ 63,333
*Based on currently active listings at FranchiseOpportunities.com