Franchising: Cleaning up in cleanups

Written by Eleanor Beaton

Canada’s property-damage restoration business (think: cleanup and repair after fires or floods) is worth $10 billion and growing steadily, says Gordon Gamble, director of Canadian development for Tamarac, Fla.-based PuroClean, which has 300 U.S. franchisees. Gamble is leading a big push to sign franchisees in Canada, where the sector has only a few major players. PuroClean has nine franchisees here, up from four a year ago. Its target: 40 within four years.

PuroClean is landing clients — insurance firms that need properties cleaned up — in large part by promising to save them money. Insurers face intense pressure to cut costs as claims payouts rise faster than premium revenue. Canadian Insurance magazine reports that Canadian firms paid out 60% more on personal-property claims in 2008 than 2004, while premiums grew by just 28%.

Gamble highlights two ways in which PuroClean cuts costs. One derives from focusing on repair rather than reconstruction. Most rival firms focus primarily on reconstructing damaged assets such as homes, stores or warehouses — even though it’s usually cheaper for insurers to salvage property than to build anew. PuroClean sticks to cleaning up the mess and salvaging what can be repaired, although it subcontracts construction jobs where necessary.

PuroClean’s state-of-the-art restoration equipment is the other money-saver for insurers. For instance, its drying machines can dry walls, floors and cabinetry that rival firms might have to tear out.

Joining PuroClean’s network requires at least $150,000 for startup costs, including equipment and a $49,000 franchise fee. Franchisees pay royalties of 10% of their gross profits, declining to 8% as sales grow. In return, PuroClean offers a call centre that directs calls to the nearest franchisee, mentoring, a training academy and national marketing support targeting insurers who prefer dealing with a cross-Canada network.

Yet franchisees still have to hustle to land clients. “This business is all about building relationships with insurance companies,” says Joel Nelson, who opened a PuroClean franchise in Oakville, Ont., last July. “If you’re not into making cold calls, networking and putting in face time with potential clients, it’s going to be hard for you.”

Nelson landed his first job six weeks after opening when a major insurance firm he’d been courting hired him to clean up a house after a sewer backup. He says new contracts continue to come in but he could be busier, so he’s pounding the pavement. PuroClean handles marketing to insurers’ head offices, but franchisees still need to promote themselves to local agents — often the ones who decide who to hire for a cleanup.

Here’s another prerequisite: “Without solid project-management skills, it would be tough to run this franchise,” says Gary Prenevost, president of Mississauga-based FranNet of Southern Ontario, which matches aspiring franchisees with available franchises. “You’re assessing damage, assigning duties to employees, working with subcontractors and communicating with insurance companies.”

Franchisees are likely to have to do much of the grunt work themselves, so it also helps to be physically fit. And, given that they wade in after a sewer backup or crime scene, they’ll need one other attribute: a strong stomach.

Puroclean (Purosystems Inc.)
Head office: Tamarac, Fla.
Line of business: Post-disaster property cleanups for insurance companies
Founded: 1990
U.S. franchisees: 300
Canadian franchisees: 9
Approximate launch cost: $150,000

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