Wednesday, June 24, 2015

Lack of Training Could be the Downfall of the Modular Housing Industry

As I drive around town I notice a lot of new stores opening selling everything from cheap, inexpensive merchandise like Dollar Tree, to organic makeup and even stores selling imported  beads and trinkets. New food stores are popping up. Pizza, sandwich shops and even a couple of Thai Noodle places are filling empty store fronts.

What is interesting about most of these small stores is that they are franchised. I’ve talked to a couple of franchisees and learned that many of them are owned by people that were downsized, couldn’t find employment that would pay near what they needed to live on and decided to buy a franchise.

I started to investigate why someone who was in management at Capital One or in Engineering at JLG would suddenly give up those professions and sell organic makeup or make sandwiches. The answer is quite simple.

You find a franchise that appeals to your interest, locate a storefront, pay your franchise fee, store fixtures and opening inventory, a couple of weeks training, marketing and advertising your business with the franchisor’s help and you get to work for yourself and be independent and wealthy. What could possibly go wrong?

Now let’s compare that to someone that lost their job, has $200,000 in the their 401K and wants to build modular homes as a business.

First, there are no franchisors offering custom modular homes dealerships. There is nobody that will help select the right location for either a model home or design center. Nobody to give advice on what your model home or design center should include and definitely nobody is out there that will give a “new to modular” builder any kind of intensive two week training. And as we all know, there is no help with marketing and sales.

At best, a factory rep will give you a sample kit to stock your display room with enough crap to maybe fill one wall and out of date literature books. They will also give you a tour of the factory and possibly introduce you to some management people but don’t count on it. You will definitely be introduced to the factory Chief Financial Officer who will require you to fill out an intensive credit application and make sure you understand their payment terms that always favor the factory and what will happen if you fail to meet any financial obligation to the factory. As for marketing and sales training, it is non-existent.

One does not need a construction background to be a successful modular home builder. You can buy that expertise. What it does require is a good solid working knowledge of the entire process from birth to death. That comes with proper training and continuing education.

Now let’s go back to the person that bought the organic makeup franchise.  

For her $100,000 investment she got two weeks of training with 7 other people in California with hotel and meals included. She met every single management person. She sat in on several roundtable discussions about marketing and closing sales along with help from her regional franchise representative in choosing the right location based on demographics of the people in the area. Opening Inventory was included in the franchise fee as were a basic fixture setup. She told me it took 78 days from the time she inquired about the franchise until she was ready to open her doors. Business has been slowly gaining traction and she is confident that she will be in the black by Christmas. She is completely happy with her life choice and told me she couldn’t have done it without the franchiser’s help.

Looking back at all my Builder Breakfasts, all the conferences I have attended over the years and all the modular home builders I met while working at factories across the Mid-Atlantic states, very few of them were under 35 years old. And those that were came from a home building family or construction background.

Today finding a young new home builder is like looking for real chicken in a vegan restaurant. There just aren’t any to be found.

We all talk about the future of single family modular housing but without the things a franchiser can give a “new to modular” home builder, why would anyone in their right mind put their life savings on the line to become a modular home builder?

Will anyone step up and take this huge bull by the horns and wrestle it to the ground? Let's hope so.

1 comment:

Anonymous said...


The on-lot building community has been offering franchise opportunities for years. The manufactured side of the business with dealers are akin to franchises. Andy may have an easier time reaching out to new converts with a franchise overlay to his plan for expansion.