ORGANIZED FOR PROFIT

Helping folks get their garages in order is key to $6 million success.

Concept:
High-end garage organization system for residential Consumers.

Market Position:
GarageTek is the first national brand of garage organization products sold as a professionally designed, clearly identifiable, integrated system. The company is creating the market category and expects to maintain its position as brand leader. While other companies (such as Rubbermaid and ClosetMaid) manufacture garage organization products which are marketed through home improvement store retail outlets, these items lack the integration, flexibility and clear brand identity of GarageTek.

Historical Data:
GarageTek is the brainchild of Marc Shuman and Skip Barrett. While working for International Visual Corporation (IVC), a 52-year-old manufacturer of store fixtures and visual merchandising equipment, the two (Shuman was president and Barrett national sales manager) began exploring alternative uses for the company's innovative TekPanel. Ideas were considered and discarded, then Shuman started thinking about garage organization, and GarageTek was born. After intense market research, careful product development and thorough business planning, the company was incorporated in January 2001. Franchise sales began in March 2001.

Growth Projections/Strategy:
GarageTek closed its first year with sales of $2 million and 2002 sales are expected to top $6 million. By 2005, sales are forecasted to reach $50-60 million. Currently, 21 franchises are operating, primarily on the East coast. The company is starting to expand to the Midwest and Southwest, and has just launched a national campaign to recruit franchisees.

Franchise Facts:
Estimated initial investment is $178,100-$206,700, which includes a franchise fee of $50,000 and build-out of a commercial location.

Franchisees are required to have an office/showroom space with inventory/storage area totaling 2,500-3,000 square feet. Initial staffing includes the owner/franchisee, who will handle the sales and marketing, one lead installer, one assistant installer, and an administrative assistant/receptionist.

Training and Support:
A comprehensive multi-phase training program covers selling and installing the system. Ongoing support includes sales and promotion materials, advertising, accounting procedures, inventory systems, technical and product support.

When savvy entrepreneurs hear opportunity knocking, they know to open the door. GarageTek is looking for qualified franchiseeswho want to cash in on a booming market with virtually no competition.

The first and only national brand in its market category, GarageTek offers custom garage organization systems for upscale residential customers. The patented system uses design techniques that evolved from the retail merchandising field and respond to the contemporary needs of today's busy, multifaceted homeowner.

"Garages are no longer just a messy afterthought, a place to toss your junk," says Marc A. Shuman, the company's founder and president. "People are spending more time in their garages, they want them to be attractive, comfortable and functional. We make that happen."

Shuman expects the garage organization market category to follow the same path as the closet organization category has done. "I expect GarageTek to easily reach $50-$60 million in sales by 2005," he says.

GarageTek has two basic markets: the existing homeowner who wants to organize and renovate, and the luxury homebuilder. Shuman says a number of nationally recognized homebuilders are offering the GarageTek system as a pre-close option. Those builders include Toll Brothers in Pennsylvania, Spectrum Skanska in New York and Engle Homes in Florida.

"We are seeing a tremendous response from both homeowners and builders," Shuman says. "Our market is upscale homes, and when people put that much money into a home, they don't want cheap wire shelves on the walls in the garage. We offer a custom-designed system with attractive, maintenance-free components, and our customers love the product."

After careful test-marketing and a cautious initial roll-out, the company is confident of its product and systems, and is launching an aggressive national expansion through franchising. Prospective franchisees should be marketing-savvy, says Shuman.

"The installation is not an issue, because this is an easy product to install and we teach the installers what to do. We provide all the necessary product and technical support. What we want in a franchisee is a strong marketing and business background, and the financial wherewithal to carry themselves through the first six months of operation."

The typical cost of a GarageTek system is $1,500-$2,000 per wall, with the average sale at $4,500. The company has installed systems up to $17,000, though Shuman notes that sales of that amount are not typical. Much of the business is referral-driven.

"Our customers invite their friends and neighbors to see their garages," Shuman says. "Then those people call us, then they show off their new garages, and it keeps going. People are paying more attention to their garages, and they are spending more money accessorizing them. And that's good news for us."

Unlike many home improvement items, GarageTek is not a one-time sale. "We have an integrated system that works together beautifully, and we are constantly introducing new items. That means once the initial sale is made, our franchisees have the opportunity for additional revenue from that customer later on," Shuman says.

All the products sold through GarageTek franchises are patented 0 and proprietary. They are branded with GarageTek logos and colors. "You will always make more money with a branded product than with a generic product," says Shuman.

"We are committed to protecting the integrity of our brand through clear identification, quality materials and installation and outstanding customer service. Our goal is for GarageTek to not only be a noun and a brand name, but also a verb. We want people to say, 'I want to GarageTek my garage.'"

We put a few questions to Marc Schman on the origin of GarageTek and the future of the firm. Here are his answers.

Q. How did you develop the GarageTek product?

After college, I went to work for the family business, International Visual Corporation. We built store interiors for high-end retailers such as Saks, Nordstrom, and Lord & Taylor. The cornerstone of the GarageTek system is the TekPanel which is a white wall panel that was originally developed at IVC for use in the retail market. Skip Barrett, who was IVC's national sales manager and is now GarageTek's director of franchise development, and I began to explore alternative uses for the panel, and the GarageTek concept was born.

Q. A GarageTek systems costs $1,500-$2,000 per wall, or $4,000-$6,000 for a typical garage. Are you getting any price resistance in the market?

We introduce the price very early in our sales conversations. This is a high-end product, and we don't apologize for that. In our first telephone conversation with a prospective customer, we tell them the approximate cost. When we do that, we get one of two basic reactions. The first is, "Are you out of your mind? I can get shelves and cabinets at Home Depot for $600." Those people are clearly not our market. The second response is, "Okay, I'm still listening. When can you get out here?" That's our customer, and when they see the system, they buy. We don't get much in between.

What's important to remember is that garages are becoming an integrated part of a home. People are putting so much money into their homes today. Look at the kitchens and bathrooms. You can spend $800 on a shower faucet. You can buy an island barbeque for $5,000-$6,000. Why would you spend this much money on the rest of your house and ignore your garage? People are building their dream homes, and the garage has become an integral part of the home and part of the dream.

Q. What is the biggest challenge your franchisees face?

Right now, the biggest challenge is explaining to people what GarageTek is. This is a new product, a new market category-we don't even have a Yellow Page category yet. So the biggest challenge our franchisees have is educating the people in their territories that we exist and getting through that first three to six months until they have made some sales and have developed a referral base.

Q. What market trends are helping you?

Garages are getting larger. In terms of square feet, they're the fastest-growing element in the home. People are doing more with their garages; they want them to be more stylish and functional. And we offer a way to do that.

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