Archive for April, 2010
Wall Street Journal Features Showhomes and its Innovative Internal Financing Solution
by Julie Bennett, 3.25.2010
While banks are expected to lend $6.7 Billion to US franchises this year, it would take $10.1 billion in lending to fully fund newcomers who want to start franchised businesses and existing franchisees who hope to expand, according to Frandata, a reserach firm in Arlington, VA.
Ron Feldman, CEO of the Siegal Financial Group in BalaConway, PA, says many francisors are working with individual franchisees to help shore up their credit, find additional investors or provide lenders some type of additional guarantee – the franchisor will take over the business if the franchisee gets into trouble, for example.
But others, like Nashville based Showhomes, a nationally francised home staging business, are acting like banks themselves. Matt Kelton, Chief Operating Officer for Showhomes says, “when lending became so tight, we started financing half our franchise fee ourselves.” Mr Kelton plans to launch 25 new franchises this year to franchisees who can put down $15,000 and pay Showhomes the other $15,000 over three years plus interest.
At least 50% of the new franchisees take advantage of the financing, including George Hart of Denver, CO, a retired military officer who borrowed $24,000 from Showhomes to purchase two franchises. “I felt the terms were good and I wanted to get started quickly to take advantage of the real estate rebound.”
Showhomes franchisees supply luxury homes with live in home stagers who move in with their own furniture. Franchisees collect a reduced monthly fee from the stager so the home owner doesn’t have to pay up front or ongoing staging fees, steeply reducing the cost to stage a home. Home owners pay the franchisee a fee at closing when the home sells, usually faster and for a much higher price.
“I have a lot of live in stager candidates now,” Mr Hart says. “Who are good people in transistion from one home to another or from one city to another.” He just moved into an 8,000 square fot, $3.2 million dollar mansion and he had to store some of his furniture and accessories.
Mr Kelton says Showhomes turned to self-financing because banks are especially adverse to making business loans under $100,000.
To read the entire WSJ article, Click here
To get a leg up in a buyer’s market, the real estate industry turns to a little-known niche: professional house sitters.
by Amy Biegelsen
Last weekend, Michelle Sifford and Jennifer Ding helped the Armstead family move into a house in Church Hill with lightning speed. In five days’ time they fully arranged the furniture in the three-bedroom renovation, made sure the décor tied everything together and removed every speck of dirt. Most importantly, they made sure the family was ready to pack and leave again.
Sifford and Ding aren’t renting the house to the Armsteads. They’re contracting with them as home managers to live there while the owners try to sell it.
In August during the height of the real estate meltdown, Sifford and Ding opened Showhomes Richmond, which contracts with professional house sitters. While it might seem a potentially treacherous time to start a company, Sifford and Ding say the timing’s just right.
- Jennifer Ding and Michelle Sifford, owners of Showhomes Richmond, specialize in hiring couples and families to live in houses they’re trying to sell. Photo by Scott Elmquist.
“Estimates are that between 30 and 40 percent of homes in Richmond on the real estate market are vacant,” Sifford says. “So there’s ample opportunity.”
Supporters tout the live-in staging business as one in which everybody wins. Furnished and decorated, which industry insiders call staged, such spaces
are sold 78 percent faster than when the same houses are put on the market empty, according to the Real Estate Stagers Association. The rate will skyrocket if an insurance company can be persuaded to continue covering a vacant home — which isn’t a given: Copper pipes and
appliances can wander out of unoccupied homes. Real estate agents sometimes pay a small fee, but far less than they would for all the staging and upkeep that contractors take care of while living in homes they often could not afford to live in otherwise.
Despite their two sons, 4 and 17 months, Nichole and Stafford Armstead have agreed to keep the house in immaculate condition; showroom-ready 12 hours a day. House managers must comply with lengthy checklists for cleanliness. They pay all the utilities and keep the air conditioner on all day during the summer in case of visitors. If they’re home before a real estate agent stops by, they’re asked to turn on all the lights, play soft music, and, time permitting, bake cookies to perfume the house. Setting up the house with Sifford and Ding was like being on HGTV, Nichole says.
The Armsteads expect to be there for about six months, but aren’t sure. “That is the nature of the adventure,” Nichole says. “But the pros far outweigh the cons.” They pay a fee similar to the cost of rent in their old West End apartment, but with much more space.
Nichole works at the Federal Reserve Bank of Richmond and Stafford is a motivational speaker, but the Church Hill house gives them an opportunity to get their finances back in order. “Definitely it allows us to do some saving and allows us to get caught up on some things,” Stafford says.
If the home sells and another Showhome is available, the company will help the Armsteads move to the new space. If not, the family will have until the closing — usually a month to two months — to find a new place to live.
Sifford and Ding, both former executives at Circuit City Stores, stumbled into Showhomes while researching business opportunities after Circuit City folded a year ago. Showhomes, with 42 locations in 24 states, seemed the ideal recession-buster.
Business booms when the real estate market deflates, Showhomes founder Dan Ortega says: “We absolutely blow up when the market goes in the tank.” He sold the business in 2004, but still operates the Atlanta Showhomes franchise. Because of the financial crisis, business has doubled.
Ortega launched the business in 1986 during the savings and loan crisis. “See, the same economy that produces foreclosures produces people who need somewhere to live right now,” Ortega says. It thrives in up markets too: When times are good, the business pivots to corporate relocation clients and plays up its staging services.
Ding and Ortefa say they screen potential house managers through criminal background and credit checks. Tough times being what they are, bad credit won’t necessarily keep someone out of the program.
“We’re looking for good people with great furniture,” Bezik says. And furniture is key. Not only does there need to be enough of it, it needs to be in good condition. He’s looking for some pop, but also the appropriate style. Country and western just wouldn’t have the right appeal in a Victorian setting, after all.
Ding says they’ve interviewed more than 700 candidates for home manager since opening the business. The challenge has been matching qualified candidates with the right houses. So far, the Armsteads are the first. Although their older son has shown a tendency to line up his stuffed animals in order by height, his parents say they’ve been tidy but not fanatical before.
“Now,” Nichole says, “I have a reason to be a neat freak.”
Carla Cheifetz, owner of Showhomes-Priceton, NJ, emailed me these photos of an amazing $3.9 Million mansion she recently staged. Showhomes is mostly known for using live-in home stagers but we occasionally do traditional staging with just furniture as we did in this case.
Take a look at her excellent work:
This home, like many vacant houses on the market, had been sitting for some time. Despite being a gorgeous home, its large rooms make it difficult for buyers to visualize their furniture in.
What a difference staging makes!
Instead of low-ball offers for $2 an2.5 million, this home is far more likely to sell near the list price with staging. For the homeowner, this is a really large potenial return on the staging investment.
Thanks to Princeton NJ photographer Paul Bartholomew for taking these excellent pics.
Here is some Realtor and Home Stager feedback on this home:
- The ceiling in the master in incredible. She did a beautiful job! Thanks for sharing. Cathy Lee ASP, IAHSP, RESA Danville, CA (CL Design Services Home Staging)
- Wow! Impressive Thomas! Karen Otto, Home Stager, Plano, TX
- This is incredible! How many square feet is this? I’ve never staged a mansion. I don’t even think I’d know where to start! Love the tasteful furnishings. Sally Weatherley – Exit Stage Right-Vancouver
- What a FANTASTIC job. There is no doubt that this professional job will be a huge help in bringing the seller top dollar. Well done! Tom Priester (Keller Williams Realty)
- WOW! Gorgeous results! Janice Ankrett ASP
- Awesome job, the furnishings really make this home stand out. MARY LOU TEAGUE HOME STYLE AND STAGING KNOXVILLE, TN
When you buy a franchise, you are really not buying a business.
You are buying a system for operating a business.
One of the most overlooked pieces of evaluating a franchise is how well the system is documented, how often is it updated and equally important, how accessible is the documentation.
Why is this important?
Most franchise companies use paper manuals – enormous 3-ring binders – that help you get your business off the ground. They may be broken into several smaller binders and labeled Operations, Marketing, Accounting or Grand Opening. These critical documents explain in detail how you open an office, ramp it up, generate revenue and at the end of the day, turn a profit. Following the ‘system’ in a franchise company is the quickest path to becoming a Top Performer.
Not following the system is almost always the quickest path to becoming an Under Performer. Remember, a franchisor doesn’t make money if you don’t so they have a vested interest in making sure you have a well documented, step-by-step procedure to becoming profitable.
Or at least they should. The truth is how do you know before you buy?
At Showhomes Home Staging, my company, we stopped using paper manuals all together. We use a very sophisticated and secure online manual that serves out information in the way you want – always accessible, searchable and secure. Our franchisees can use keyword searches to get basic questions answered, can access documents and can even suggest changes when they come across a hole so our documentation stays sharp 100% of the time. When we add new content, our franchisees get notification emails and have to check off they’ve read the new content so no one gets left behind.
On the franchisor side, we track how often every user accesses the manual, have metrics for how many pages they access and understand how long they spend on each page. This way we know what our franchisees want to learn and what parts are in use so we can always adapt. It also helps us understand what questions franchisees are interested in so we can develop more of what they want and need.
When I ask other franchise executives what percentage of their franchisees access their manual on a regular basis, the number is always shockingly low: 5-10% or less. That means a stunning 95% are not using the system documentation to help them make better decisions day-to-day. Think about it – a huge 3-ring binder is likely to sit on a shelf, gathering dust. Most franchisees have a need to access it but the format makes it difficult. As a result, they ask other owners or call their operations staffer with basic questions, over and over.
Does this hurt the franchisee? You better believe it! When that operations person – the most important person on the corporate team – is answering basic questions, they are not thinking proactively about how to help you grow. Face it – there are only so many hours in a day.
Because we pay attention to this, we know that 35-40% of our franchisees access and use our online manual on a regular basis. We know who does and who doesn’t and this helps our operations and field staff help franchisees grow. It makes for more specific conversations and because our documentation is online, it allows us to leverage the content whenever and wherever we are. Most importantly, it gives our franchisees the ability to help themselves 24 / 7. We’d like that number to rise and because we measure it, it will.
Whatever franchise you look at, make sure to ask about the system documentation. Go beyond looking at the table of contents in the FDD. Ask franchisees if they use it on a regular basis and if it helps them run a better performing business.
Ask if it is online – in today’s online world, it should be.
VP Marketing and Systems Development
Showhomes Home Staging
We used Kit Vinson from www.franman.com to help author our manual and port it online.
A vacant house is like a vacant stare. Something is just not right.
Trying to sell a vacant house adds obstacles and depresses the sales price, says Showhomes, a nationally franchised home staging company. Showhomes uses live-in home stagers to lower the cost of staging and produce faster home sales. Take a look at its top five reasons why selling a vacant house is often a mistake in today’s market:
1. People don’t simply buy houses; they buy the next chapter of their lives.
This is an emotional experience and emotion influences what people buy and how much they will pay. Vacant houses are devoid of life, and the chance to make an emotional connection is lost.
2. Vacancy distracts buyers from looking at the house itself.
They wonder: “Is this a divorce? Why did they move out? Are they selling because they have money problems? Is this home hard to sell?” They’ll make a low-ball offer, thinking the owner is desperate.
3. When a house is vacant, buyers focus on flaws.
They look at nail holes, carpet wear and gaps in the molding rather than how the space works. In a vacant house, floors, walls and ceilings are all buyers see. This drives the price down.
4. People can’t visualize how furniture fits.
An empty bedroom might appear awkward or a living room might seem cavernous. Some spaces might confuse buyers because a use is not obvious. Buyers are derailed and move on to the next house.
5. Vacant houses don’t show as well as staged and occupied homes.
Without people, even the best home quickly looks and smells vacant. Dust settles, leaves scatter, and stale smell spreads. These cues often shorten the showing time, leading to fewer sales.
“Home owners don’t realize how much harder a vacant home is to sell. In today’s market, you have to win the beauty contest,” says Thomas Scott, VP of Marketing at Showhomes. “Vacant houses simply underperform staged homes and the increased sales price provides an excellent return on what staging costs. Choosing to stage your home should be an easy decision in today’s market.”
Showhomes is a home staging business with a twist: the company uses live-in home stagers to manage vacant houses while they are on the market for sale and offset a home owner’s expense to stage the home. The innovative marketing strategy has been producing results since 1986 and the company has helped over 25,000 home owners sell vacant houses valued at over $8 billion. For franchise opportunities and more information, please visit www.showhomes.com and www.showhomesfranchise.com.
The Great Recession has made some would-be entrepreneurs skittish about starting a business from scratch.
For them, it may make sense to buy a business franchise. While franchises have taken a hit, PricewaterhouseCoopers (PWC) forecasts that the number of franchises will expand 2% from 883,292 last year to 901,093 in 2010.
“Franchising lets people get into business for themselves, but not by themselves,” says Alisa Harrison, vice president of communications and marketing at the International Franchise Association in Washington. Here are a few things to keep in mind when considering becoming a franchisee.
Advantages over entrepreneurship: Unlike a typical startup, a franchise comes with automatic brand recognition, meaning the franchisee doesn’t have to invest in getting the word out. Franchisees also receive operational assistance and management support from headquarters.
“Becoming a franchisee is a natural for someone willing to let other people make mistakes on their behalf in advance,” says Jason Earle, founder of 1-800-GOT-MOLD, a mold-detection company best known for the mold-sniffing Labrador retrievers it employs. Founded in 2003, the company recently secured its first franchisee and is looking for more. (Earle, incidentally, holds a Guinness record for acquiring his stockbroker’s license at age 17.)
“We’ve really built something that’s turn-key,” Earle says. “You walk through the door, and you get a four-legged partner who becomes your calling card.” Disadvantages compared with entrepreneurship: The difference between starting a business and buying a franchise is analogous to the difference between building a house and buying a condo. Much as condo owners must adhere to the rules of the condo board, franchisees are required to operate their franchises according to a franchisor’s preexisting restrictions and procedures. Thus, the franchise model doesn’t leave much room for creativity, which may rankle entrepreneurs who are used to making and breaking their own rules. In the franchise model, they are required to play by the rules of the brand.
“You don’t buy a McDonald’s and decide you want to sell hot dogs,” says Alisa Harrison, vice president of communications and marketing at the International Franchise Association in Washington. “You have to follow the system that has been laid out. Veterans make awesome franchisees because they’re very disciplined and are used to following a system.”
Investment requirements: The initial investment that franchisors require depends on overhead and the complexity of running the business. The commercial cleaning company Jani-King, which boasts more than 12,000 franchise owners worldwide, offers investment opportunities for as little as $3,000. McDonald’s, on the other hand, requires a minimum of $500,000 in non-borrowed assets before it will consider a potential restaurant franchisee.
What to look for before you leap: All franchisors are legally required to provide a disclosure statement, also known as the Franchise Disclosure Document (FDD) at least 10 days before the signing of a franchise agreement. Potential franchisees should read through the document for basic information such as additional fees, designated sales territories and available training programs. But they should also look for red flags such as litigation and bankruptcy histories. It makes sense to scour the Web for chat group discussions about any given franchises. “If a group of franchisees isn’t happy, they’re going to talk about it,” Harrison says.
Best bets: The fastest-growing franchise fields include quick-service restaurants, real estate and retail food, according to PricewaterhouseCoopers. Franchisors in these fields include Great American Cookies, which requires an investment between $170,000 and $300,000; the home-staging company Showhomes, which requires an investment of $43,800 to $74,000; and the drive-through coffee franchise Mountain Mudd Espresso, which requires an investment of $105,000 to $1.9 million.
For more information, visit www.showhomesfranchise.com