Irvine, CA, Nov. 20--The nesting craze has been a boon to franchisees in business to help homeowners with projects, as mortgage refinancings keep the money flowing into repairs and improvements, according to Entrepreneur.com.
On a cold morning in January, California Closets franchisee Lisa Cote is talking closets with Nicki Mancini. For two years, Mancini, her husband, and two children have lived in a 100-year-old-house in Evanston, IL, with charming arches, elegant moldings--and almost no closets. Her husband, a physician, stored his suits and ties in a closet in the downstairs den, and daughter Mallory, six, made do with a dresser and wardrobe. Now, as part of an extensive remodeling, Mancini has three new closets and was looking at $4,500 worth of hanging systems, cedar-lined sweater drawers and customized tie racks to finish them off.
That's what's driving what the Census Bureau calls a $158 billion home-improvement industry and is fueling the success of 100 or more home-improvement franchises who refinish kitchen cabinets, redo bathrooms or redecorate entire homes.
"People are nesting," says Dennis Carroll, 46, president of The Ryan Group in Hawthorn Woods, IL, a company that produces home-improvement shows. "They're thinking about changing things around the house, whether it's a new kitchen or just replacing that leaking window in the family room."
Money for improvements has never been so available. Mortgage rates are at their lowest in 30 years and the appreciation in home values means that homeowners who refinance can take out extra money for $30,000 kitchens with granite countertops, $15,000 bathrooms with sunken tubs--or $2,000 closets with special racks for a six-year-old's fancy dresses.
Home-improvement franchisees also sell into the new-home market. According to the National Association of Home Builders (NAHB) in Washington, D.C., 942,000 new houses will go up in 2003. In the first 12 months after purchasing a newly built home, owners spend an average of $8,900 to furnish, decorate and improve it, the NAHB reports.
Nationwide Floor & Window Coverings in Milwaukee is among the franchise companies benefiting from the trend. It started franchising in 1992 and has grown to 100 units from 33 in 2000.
Jeff Stewart of Hinsdale, IL bought his Nationwide franchise 18 months ago after the metals mill where he'd been an operations manager closed down. In 2002, Stewart's average customer spent $2,500, and he did three floor installations a week. But so far, he's not making a profit from his $100,000 investment ($33,900 of that is the franchise fee).
Part of the problem might be his own fault, he says, laughing. Franchisees estimate the cost of each installation themselves, based on guidelines provided by their franchiser. "We target 35% margins," Stewart says, "but sometimes, when you've been selling someone draperies for 3 ½ hours and it's quarter to ten in the evening, you can make a mistake. I used to brag about my math skills. Now my wife will pull out a folder and say, 'How could you make $3.15 on a $1,200 job?'"
Because most of his customers come through referrals, 70% of them order something from the hundreds of samples of carpeting, laminate, ceramic tile and window treatments that line his mobile, shop-at-home van. Stewart plans to buy more sample-equipped vans and hire dedicated salespeople to run them. Greg Schmich, president of Nationwide, says that for franchisees that have more than one van, each van should bring in sales of $1 million a year.
