Independent home cleaning businesses aren’t scaleable because operators lack the tools needed to effectively and efficiently manage over 25 employees and 50 assignments per day. Top flight maid service franchises have developed the tools needed for managing such volumes but, because they favor penetration, over scale, most of their deals also are not scaleable.
The house cleaning industry has evolved so that the benefits of being associated by name with a major maid service company have become overshadowed by the poor service stigmas earned by even a few poorly run franchisees. And no matter that a certain franchisee may not even be related by name, because too many consumers fail to distinguish among the similar m-m-m-maid service sounding names. The result is that the reputation of one exceptionally good, conscientiously well-run Marmy Maids franchise located in Mid-South-East-Central-Mid Atlantis City is adversely affected by the shoddily-run Mornimy Maids franchise located in Mid-North-Central-West-Mid Atlantis City.
Just because the “M’s” have organized the market this way in the past, doesn’t mean this is the way it will be organized tomorrow . . .
|Outside the box:
non-conformal, creative thinking.
The term “outside the box” is derived
Similar, older terms include blue
“M” Service Zones–Designed for Optimal Penetration & Franchise Fees
If you’ve shopped for “M” house cleaning franchises, you’ll find that the first thing you’ll receive after a UFOC is a load of maps depicting available service zones, and tables of “qualified households.” The “M” house cleaning franchises are asking you to believe that any household with a garden hose is a potential buyer of home cleaning services. We’re skeptical. The M’s have organized the market in this way to obtain, for every metro area, maximum penetration, revenue and franchise fees, without regard to what profits can be earned by the individual franchisees.
Most cities have some really nice neighborhoods which are chock-a-block full of very profitable maid service customers, other pretty nice neighborhoods from which can be cherry-picked some profitable maid service customers, and then some other interesting, but difficult-to-identify areas of the city which are poised for significant growth. While the major franchises continue to prove that maid service customers can be eked out of almost any service zone, for those franchisees stuck with the worst zones, profits may be elusive and growth rates uninteresting.
Predicting the amount and quality of business in the city’s next hi-growth neighborhood is important for top-flight franchisors, because it is their best remaining chance to offer additional attractive service areas to new franchisees. But guessing the ultimate success of residential real estate developments and population growth rates is risky, particularly for the new franchisee. The problem is that other franchisees may have chosen the best neighborhoods ahead of you, leaving you with an adverse selection of less attractive neighborhoods. This problem of adverse selection is not trivial. If you buy a typical maid service franchise, your ultimate success may be doomed from the outset based solely on which service zone you are stuck with. While “location, location, location” always applies to retail stores, and restaurants, why must it ever apply to maid service franchises?
A New Paradigm for the Industry
We believe it should be possible to dispense with service zones altogether by organizing franchises by entire Major Metro Markets, and selling, for example a maximum of two licenses per each million population. Each franchise would be entitled to one office, and each office would be free to service any customer within a half day’s drive. For example, for the Greater Denver Metro Area which, according to the latest census, has a population of over 2 million, a franchisor could sell a maximum of 4 franchises. By comparison, to date, the largest “M” franchisor has sold 8 franchises in the equivalent market and is still offering new franchises in Denver today. Under such a concept, if a new franchisee were to miscalculate and discover that her original target neighborhood of really nice, expensive houses is filled with homeowners who have overbought, are mortgaged to their eyeballs and can’t afford living room furniture, let alone premium-priced maid services, then her mistake will not have been fatal. She could refocus her marketing efforts on more attractive neighborhoods, and pursue growth where it finds her throughout the entire metro area (because under such a system franchisees would keep their own referrals).
We have proven in Denver that significant profits can be earned by snatching in a flash a large volume of business from well-entrenched companies. We’ve done this by combining an acquisition strategy with a low customer churn rate based on our reputation for exceptional service. We believe that it should be possible to sell a franchise based on the concept of each franchisee selecting, as a member of an Alliance, its own name and paying a flat periodic fee. Under such a system, the franchisor would be able to forego almost all monitoring, and dispense with many of the other standard spending requirements and restrictions levied by other franchisors, such as those relating to advertising, signs, vehicles, office location, and most importantly, service areas. By offering quality service, franchisees would build their own brands, earn their own referrals, influence their own churn rates, buy competitors as opportunities present themselves, and ultimately profit based on the operating, marketing, and acquisition decisions each made for itself. The Franchisor would provide marketing expertise, operating systems and expert advice, without all those rules.
Look Before Leaping
Before you head down this potentially one-way street called entrepreneurship, and before you buy yourself a job as a franchisee or small business owner, ask yourself a few questions. What kind of salary are you seeking? Is the business prospect on offer scaleable? How much do you really expect to pay yourself if you run some dinky little business? What kind of cash out can you expect? When? Are you ultimately going to be able to retire on, or finance your next venture with, the proceeds from the sale of such a business? The “M” franchises use a low bankruptcy rate as a proxy for success rate. But can a small venture which has avoided bankruptcy really call itself a success if it has grown to generate only $20,000 or $30,000 net per year?
|House Cleaning Franchise for Sale|
|Number of Employees||6|
|Reason for Sale||Other Commitments|
|Description||House cleaning for mid to upper income families|
This entrepreneur deal is not binary–the most likely outcome for any small business venture is that the owner pays himself an insufficient amount to live on and simply becomes worn out and bled of cash before the business reaches sufficient scale to pay a reasonable salary, and allow for the hiring of a professional management team. House cleaning customers of formerly surrendered markets are regularly transferred to contiguous “M” franchisees for a fee to the “M” franchisor (and none to the former “M” franchisee), and such fire-sale liquidations may not be counted in “M” failure rates.
Before buying a maid service franchise, consider the following:monthly take-home pay of existing co-franchisees (especially for years 3 onwards); reputations of existing co-franchisees throughout the entire metro area; attractiveness of remaining service zones; penetration assumptions implied by service zone population tables; any restrictions placed on reselling a franchise; and alternative uses of franchise fees, if you were to instead apply the same funds in opening an independent maid service.