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Floored by High Profit

[ 0 ] Apr. 1, 2007 | SBO Editor

The early 1990s were a boom time for Floor Coverings International. Established in 1988 as the first mobile, shop-at-home floor-covering franchise, the company expanded rapidly, growing to more than 250 franchises and taking in $60 million in annual revenue by its sixth year.

But the outwardly robust company was headed toward failing health. Its franchise model —a low-investment, work-from-home opportunity—offered little incentive for franchisees to grow and nurture their businesses. The result was a “mom and pop” franchise network rife with high turnover.

With FCI poised to crumble, former franchisees Thomas and Cynthia Gandee bought the company in 1998 and bandaged the bleeding. Five years later, The Franchise Company—an Ontario, Canada-based operator of franchise systems that serves more than 250,000 customers through a network of more than 1,700 franchisees—acquired FCI and today has it positioned to become a leader in the estimated $60 billion-plus floor coverings industry.

“The company was in desperate need of a transition,” said Tom Wood, FCI’s president and CEO.While it remains a mobile, shop-at-home floor covering retailer, FCI has transitioned from its “mom and pop” roots into a world-class merchandiser of flooring products whose professional Design Associates bring product and design knowledge to customers that isn’t common in the industry. In addition, a new network of boutique design showrooms will soon support FCI’s mobile showrooms.

Whereas before FCI competed with big-box stores and smaller retailers on price-point selling, its new “total price selling” combines value and superior service to offer customers competitive pricing on its selection of more than 3,000 flooring options. FCI’s target audience is what Wood terms the “upper quartile” of consumers, typically with household incomes of $100,000 or more and home values of $250,000-plus.

FCI targets busy consumers who take pride in their homes and want professional, expert advice on floor covering options that fit their lifestyle, décor and furniture.

We’ve rebranded the company,” said Wood, who has been with The Franchise Company for 20 years and held a number of executive positions before becoming FCI’s CEO in January 2005. “We’ve essentially moved FCI out of the price-driven market sector and into the design and fashion part of the industry.”

With 65 franchisees in about 30 states and Canada, FCI had systemwide revenue of $23 million in 2005, when it added 15 new franchises. Wood expects to add 20 to 25 franchisees in 2006, but his emphasis is not on franchisee counts but attracting top-notch talent that can serve the demanding client base and have the ability
to operate a management layered multi-million-dollar franchise operation.

“I don’t want 500 franchisees who will each do $500,000 in annual sales. I want 200 franchisees who will each eventually achieve $2 million in annual sales,” Wood said. “We are more focused on same-store sales than numbers of franchisees,” he said.

To reach such goals, FCI has abandoned its work-from home model in favor of one that can easily be scaled to support continuous growth. New franchisees must operate from a commercial space, typically an office park, and within three years are required to add a design showroom for customer consultations.

FCI’s franchisees are individuals who have the drive to develop a strong operations team and oversee a progression into a large-scale business. A franchisee with $2 million in annual sales would likely oversee a staff of five Design Associates who handle in-home consultations and sales, two Project Coordinators who overseeinstallations and an office manager.

“These are franchisees who are not interested in a small-business opportunity,” Wood said. “These are individuals who aren’t simply motivated by how much money they can make next year but how much equity value they’ll have in their business in five years.”

The Franchise Company sees vast opportunities for FCI in the highly fragmented floor coverings market. The Franchise Company is already firmly entrenched in the residential services market, directly owning or controlling several other recognized franchise systems including California Closets, Paul Davis Restoration, CertaPro Painters, College Pro Painters, Action Window Cleaners and Pillar to Post.

According to industry estimates, the floor covering industry’s top 50 companies, including big-box home improvement retailers, combine for less than a 10 percent market share. Many of them compete only on price-point selling. By building its brand around outstanding products, strong marketing and superior customer service, FCI believes it is positioned to capture a strong market share. Industry estimates point to floor coverings becoming a $100 billion industry by 2010.

“By positioning ourselves correctly and having our franchisees embrace our philosophy, we have a tremendous opportunity,” Wood said.

Wood’s ties to The Franchise Company go back to his college years in Boston, where he worked as a painter for College Pro Painters before later becoming a franchise owner. He was one of the U.S. founders of CertaPro Painters in 1992. According to Wood, The Franchise Company is unique because all members of its upper-level management team have previously owned and operated franchised businesses. •

Tom Wood is the President and CEO of Floor Coverings International, the first mobile, shop-at-home floor covering franchise. Wood says part of the tremendous success of the company is that FCI understands and has empathy for franchisees. “We know what motivates and drives them. We know how to make the phone ring and work with customers to deliver an end product that satisfies their needs,” said the exec.

Category: Magazine, Start Your Own Business, Start Your Own Business Spring 2007