Starting past scratch: homebuilding franchises 101

Could it get any tougher for homebuilders?

On one hand, housing demand is high. Like, really high. We’re facing a massive shortage in affordable housing, with middle-income buyers faring the worst.

On the other, builders face skyrocketing materials costs, huge labor shortages, and long build times that mean fewer capital turns.  

It’s no wonder, then, why new builders in the construction industry face tougher survival rates than many other industries.

What’s the solution?

Franchising has emerged as one way for builders to mitigate risks and hit higher profits. They may not be on every corner like your local Big Mac dispenser, but homebuilding franchises have gained traction in recent years.

And across all industries, franchises usually enjoy both higher profits and survival rates than business owners going it alone.

Business models vary. Some franchisors specialize in new housing communities, upscale developments, or homes geared toward first-time buyers, empty-nesters, or the over-55 crowd.

What’s the catch?

The trade-offs for going the franchise route start first with cash. There’s usually a sizable initiation fee and annual licensing, royalty, or per-home fees paid to the franchisor. 

But after that, most franchisees get to keep all their profits, and some franchisors guarantee territory exclusivity for your business.

Also, franchisees often must adopt the company’s brand, policies, and operating guidelines. 

Potential franchisees should definitely give the required Franchise Disclosure Document a good look. This contains info about fees, expenses, performance expectations, and other details.

Skip the starting point

Specifics vary from one franchisor to the next, but here’s a round-up of common benefits for franchisees.

You get to hurdle the building-a-business-from-scratch headaches and risks. 

You’ll leverage the skills, insight, and experience of the franchisor’s industry veterans to help navigate lead generation, planning, permitting, and construction.

You benefit from established branding that has already done the heavy-lifting around name-recognition and reputation. 

You get marketing and accounting support so you can focus on what got you into the business—building homes.

You remain an independent business owner, free to hire your own staff and subcontractors without franchisor approval. But you also have access to the franchisor’s established network of reputable vendors and tradespeople.

Grab the good stuff

You get access to the franchisor’s streamlined business model with its built-in efficiencies, and their time-saving production capabilities. 

This could mean their library of designs, blueprints, models, or factory-cut panelized products that have already been tested, proven, and optimized in the field.  

Franchisors often use cutting-edge technology that’s ahead of the stodgy construction industry curve, that uses modern analytics for easier and more efficient ordering, tracking, building and more.

Some franchisors provide ongoing trainings and support such as an on-site guide experienced in the franchisor’s products and building processes to help you build your first home

Now you know the 101

For entrepreneurs wanting to break into the construction market, or builders wanting to take their business to the next level, finding a franchisor could be the right next step.

Franchising is really based on the simple premise that you can find support and join something larger than yourself. And tap into expertise, resources, and support that you couldn’t get all on your own.

Feel free to check out our partnership program for builders looking to offset inflation-driven material and labor costs, cut timeline risk, and triple your capital efficiency.

Cheers,

Mike

Mike McAllister is head of story for Momo Homes.