CertaPro's
motto should be: "CertaPro Painters:
We put the pain in painting"
Let's
look at some of the myths you may be
led to believe about a CertaPro franchise:
It's
Not The Franchisor-Franchisee Arrangement I Expected
I didn't understand,
or pay any attention to CertaPro's structure prior to purchasing
a franchise.
.
I had thought it was a "traditional" franchisor/franchisee
structure:
Franchisor <==> Franchisee
This is not the case.
CertaPro is owned by a company called The Franchise Company, which
is owned by First Service Corporation (NASDAQ symbol FSRV).
First Service <==> Franchise
Co. <==> CertaPro <==> Franchisee
Thus, CertaPro appears
to be a profit center for The Franchise Corporation which appears
to be a profit center for First Service Corporation.
CertaPro is the small fish in a three-fish food chain. It can certainly
lead one to wonder about what (and who) drives CertaPro's
decision-making.
"Franchises
Have A Much Better Chance of Success"
That's a myth which
has been promulgated for years but which some have recently
disputed. Some say franchise survival rate is no better than
a non-franchise business, and maybe even worse..
The following is
excerpted from a 1995
study byTimothy Bates, a professor at Wayne State University,
who studied Census Bureau data on 20,000 new enterprises and
found that 38 percent of franchises failed within four years
of opening their doors, vs. 32 percent of independent start-ups
that went belly-up.
A recent ad
in Business Week succinctly states the conventional wisdom
on the risk involved in entering self-employment by purchasing
a franchise: "A franchisee has a four times greater chance
to succeed than an entrepreneur who launches a new independent
business."
The franchise,
we are told, is a safe bet. However, findings of this study
indicate that young franchise startups
exhibit both higher rates of firm discontinuance and lower
mean profitability than cohort independent business
startups. When owner and firm traits are controlled for statistically
in logistic regression, the franchise
characteristic is found to be negatively related to firm survival
prospects. These findings are based upon analyses
of approximately 20,000 young small businesses, utilizing
nationwide data compiled by the U.S. Bureau of the Census.
A
report
from the Small Business Administration
says:
Although some have
maintained that a franchise affords a franchisee a greater chance
of success than starting a completely independent business,
not all studies support that conclusion.
...Despite
the popular view that franchises are much more successful
than non-franchises, SBA's experience with defaulted loans
does not support this. For
example, the loans identified by SBA as franchise loans that
originated from FY 1991 to FY 2000 actually performed slightly
worse than non-franchise loans.
Based on my review
of some CertaPro franchises (here
and here),
the failure
rate may possibly exceed the normal failure rate for any
startup business--franchise or non-franchise
Don't
Have Any Painting Experience? No Problem.
False:Knowing how to prep. surfaces is critical. Knowing what paint
to apply is critical. Make a mistake, and it could cost you thousands
of dollars--not to mention a very disgruntled customer.
Be prepared to learn "on
the job", and it may be expensive.
Most people believe there's little involved with painting--you just
brush on the paint. Far from it; there's more involved with painting
than you may realize.
Yes, CertaPro offers
training. Based on my experience, it may help you learn the basics
but may also give you a false sense of confidence. You will encounter
situations for which you're not prepared, and they may prove costly.
For example: What happens
when on your first job your painter waters down the paint? What
happens when your customer demands he be kicked off the job? What
happens when you find out he's on drugs? (This all actually happened
to me--on my first job. Was CertaPro onsite to help with startup?
No.)
For example: What happens
when you've quoted a job for $4,800 and it ends up costing you $6,400
because of worthless painters? (Yes, it actually happened to me.
You won't make a profit if your painters are worthless.)
For example: What happens
when a customer calls you a year after you painted his house to
tell you he's got black mildew growing on all the windows you glazed?
(Yes, you guessed it. This is called "learning as you go"--and
it can be costly.)
You should also read
this
brochure published by the California Department of Corporations.
Pay particular attention to page 5 ("V. Before You Buy A Franchise").
It discusses the importance of knowing the business and knowing
the industry.
Why
Doesn't CertaPro Focus On Experienced Painters?
CertaPro appears
to focus on selling franchises to white-collar
workers who have no painting experience. From CertaPro's
website:
I do not know how to paint. In fact, I don’t like to paint.
Good. We seek assertive individuals who possess leadership,
tenacity, attainment, introspection, and precision. This opportunity
is about brand building and generating revenue of a million
dollars or more with in a 3 year time period.
In my opinion, this is
pure hype: "...generating revenue of a million dollars or
more in a 3 year time period". In my opinion, It plants
one of many subliminal seeds scattered throughout CertaPro's marketing.
It would be interesting to see what percentage of CertaPro franchisees
actually generate revenue of "a million dollars or more"
within 3 years.
And the marketing tells you that you don't need painting experience.
If
this franchise represents such a great opportunity, why doesn't
CertaPro aggressively market to existing painters?
Why not start with franchisees
who already know something about the painting business? For
example, CertaPro's website also says:
What if my area has pages and pages of painters in the
phone book?
That is good. This means you have a very strong market with
a lot of demand. Remember, you are taking market share from
your competition when you begin your franchise. The more fragmentation
that exists, the more opportunity for you..
Why not go into that
"fragmented market", recruit an experienced painter,
and sell him a franchise? My guess: Experienced painters might seriously
doubt CertaPro's claims (such as revenue of "a million dollars
or more" within 3 years).
Fact:
The more competitive ("fragmented", as CertaPro calls
it) the market, the more price is going to be a factor. Fact:
For some customers, pricing is an important consideration, maybe
the primary consideration. Fact:
A CertaPro franchisee may very well be unable to match other painters'
painting quotes (remember: The CertaPro franchisee has to cover
an extra expense--his/her franchise fee). Fact:
Many of the existing painters in this "fragmented" market
may provide excellent service and quality work, and they may have
an established base of satisfied customers. Why would those satisfied
customers want to switch to CertaPro?
The downside of "fragmented
market":
In my opinion a new franchisee can kiss off the "price conscious"
customers as well as the customers who are perfectly pleased with
their existing painter. What market share does that leave? Who knows?
It depends on the local market. In my opinion, herein lies a significant
fallacy in CertaPro's marketing and "the plan": Not all
markets are the same. One size does not fit all. Maybe CertaPro
will work in some markets, in others it may be a failure precisely
because of that "fragmented market" which CertaPro
touts as a positive factor!
There is one multiple-location
painting company out there which DOES recruit experienced painters:
The Painting Company, which has locations in Atlanta, Birmingham
and Arizona (there may also be a location in Texas). The Painting
Company hires people who are experienced painters or trains them
by working them up the ladder, from painter to salesperson. Qualified,
and experienced, people than have an opportunity to open their own
branch location (I believe The Painting Company calls it a "branchise").
CertaPro calls itself a nationwide painting company (or words to that
effect).
See for yourself how well-known the name is,
after nearly 20 years of franchising.
Pick 20 or 25 people at random and ask them if they've ever heard
of CertaPro Painters.
You
Don't Paint - You Manage People Who Do
Utterly
Foolish: If you don't do some painting, you will
never fully appreciate what's required, and it may impact your estimates.
And when you're in a rush to get a job done, or when you're strapped
for cash, or when your painters don't show up, be prepared to pick
up a brush and paint.
"Recession
Resistant"
I've seen
that phrase in some of CertaPro's advertising: "Recession resistant".
Don't believe it.
Call a couple of paint stores and ask them if they know of painters
who have gone out of business.
Or search for "Coleman Publishing franchise failure". Its
2009 report on franchise financing by the SBA says, "Franchise
failures for SBA 7(a) and 504 borrowers increased 43%"
Startup
Costs
Based on my experience
and that of other franchisees I've heard from, CertaPro's estimated
startup costs (capitalization) are seriously understated. Moreover,
there's this: "This table estimates your initial
start up expenses for the first three months of operation".
THREE months?
Then what?
And there's this: "CertaPro
does not list living expenses" (income for you).
Training
Inadequate:
CertaPro's training is, in my experienced opinion, rudimentary.
A substantial part of it is spent teaching you how to use CertaPro's
"proprietary software" (which, in my opinion, was seriously
limited and which actually serves CertaPro).
CertaPro's "training" does not prepare you for everything
you will encounter. And if you need help, it's unlikely you will
get a fast response from CertaPro (my opinion, based on my experience).
They may very well simply tell you to contact the Sherwin Williams
paint rep.
If a Sherwin Williams
paint rep. is your source for technical support, why pay tens of
thousands for a franchise? Why not just contact the Sherwin Williams
rep. for help in starting a painting company?
From a forum
about Costco:
- Homeowner hired CertaPro via Costco
for an exterior paint job.
- The paint peeled "the same day"!
(There are photos.)
- This was, presumably, a "trained"
CertaPro franchisee.
- He/she (or somebody) had to spend
three+ days and buy 15 more
gallons of paint to
repair it.
How much profit
do you suppose was earned on that job?
And, btw, CertaPro's franchisee fee comes off the gross--it
doesn't matter if your jobs are profitable or not.
Startup
Assistance
Based
on my experience: Don't count on it.
Ongoing
Support
Don't
Count On It: You may find that ongoing "support"
revolves mostly around asking you "How much did you book this
week?" "How much will you produce?"
Here's an excerpt from
one of CertaPro's ads:
We
work with you "Shoulder to Shoulder" We are there to support
you every step of the way. CertaPro offers a comprehensive initial
training program that covers all aspects of building a successful
home-based franchise that will quickly scale to something much
bigger over time. In addition, support is available to help
market, recruit and train your key staff members in your efforts
to scale. Some examples of these key staff positions would be:
Office management, sales management and Production management.
With CertaPro residential and commercial painting, you're working
on the business...not in it.
When they say they "are
there to support you every step of the way", it sounds
reassuring, doesn't it? If they truly are there "every
step of the way", why do you suppose so many franchisees have
failed? From my own experience, I certainly didn't find CertaPro
there "every step of the way".
When you are stuggling
to get started, when your revenue is less than you'd hoped, or when
you watching your life savings disappear, you will not even be thinking
about hiring "Office management, sales management and Production
management"!
This is, in my opinion,
another example of creative marketing (another of those subliminal
seeds), using the power of suggestion. You see, they want you to
think you're going to be a success. Look at that wording:
"building a successful home-based franchise that will quickly
scale to something much bigger over
time."! (Emphasis is mine.) You'll probably hear the same
sort of talk from the franchise salesman.
Mentor program: I believe
CertaPro has established a "mentor program"--franchisees
assisting other franchisees. I have no idea how well this program
has worked, but I have to ask myself a few questions:
1. If a franchisee is paying handsome sums of
money to CertaPro
for training and support,
why is CertaPro asking franchisees to
assume what should be,
in my opinion, CertaPro's responsibility?
2. If a franchisee needs help from a mentor and
it's springtime
(often the busiest painting
season), how well does that work?
If the mentor is up to
his eyeballs in work, will he be able to
properly assist the new
franchisee?
3. Geography and availability: Some franchises
are geographically
close, some are quite
far apart. What impact does that have on
the mentor/franchisee
effectiveness and availability?
4. What's the depth of the mentor's knowledge
and experience and
how might this impact
CertaPro's assertion of "uniformity"? I
believe different
franchisees may develop different practices.
Are franchisees
in different areas learning different practices?
5. If this mentor program is effective, has it
reduced the failure rate?
6. Depending on the mentor's experience and knowledge,
could it be
a case of "the
blind leading the blind"?
Marketing
Are
You Prepared To Spend Your Life Savings?
CertaPro's marketing methods for new franchisees can be EXPENSIVE!
I believe CertaPro quite meaningfully understates the amount
of capital required to successfully establish a CertaPro painting
business. It can take years to establish a reputation good enough
to bring in regular business. Until then, be prepared to spend thousands,
or tens of thousands, of dollars on marketing.
While CertaPro touts
its "national" presence and "national marketing",
that may or may not mean anything in your territory. Test before
you buy: Approach 40 or 50 people when you're out and about and
ask them, "Are you familiar with CertaPro Painters?" If
the majority of responses are "no", that probably means
you'll have to spend more on local advertising.
If your revenue is low,
CertaPro's suggested solution may be to advise you to spend more
on marketing. After all, it's your money, not theirs. It may cost
you several hundred dollars for each lead you obtain, and you probably
will land only some of those.
From CertaPro's marketing:.
How will I attract customers?
The main method in a first year franchise is through the
CertaPro direct mail program.
Don't stop at "the
first year"! Based on my experience, it will take a new
painting contractor 3 to 5 years to establish a regular customer
base (if you have decent painters). Based on my experience
and in my opinion, this direct mail mailing method will be required
for years! And let me tell you: It is not cheap! A rough estimate
might be 45 to 55 cents per letter. If you send 10,000 letters,
that's $4,500 to $5,500 per mailing. According to some direct-mailing
articles, a "normal" response rate might be 2.5%...it
may actually be 0.5% or less. Based on my experience, a franchisee
might send 3 to 6 mailings per year to try to get business. Direct
mailings can be a big reason for cash drain, especially if the franchisee's
net income doesn't support it. It might mean you spend $200 to $300
(or more) for every job you land.
You can find yourself in a Catch-22:
"I need more work to try to make more money" and
"I need to send out more mailings to get more work" and
"I need more money to pay for the mailings".
(Been there, done that...with
3 or 4 credit card companies.).
Minimum
Sales/Royalties
CertaPro
demands you meet certain sales goals.
If you don't, you're still obligated to pay the minimum royalty on
those goals:
You must achieve minimum Gross Sales of
$250,000 or pay $12,500 of royalty in the first twelve
months of operation which starts upon completion of Training
Session A; $400,000 in the second twelve months of operation
or pay $20,000 of royalty; and thereafter must increase
the Gross Sales at a minimum of $100,000 per year or pay
the equivalent amount of Royalty (5%) corresponding to
that year''s Gross Sales requirements.
Are those reasonable
sales goals?
Based on
my experience and CertaPro's
own numbers, I don't believe so
These minimums guarantee only one thing: Money for CertaPro.
According to the UFOC:
"To offset the cost of maintaining brand consistency and
compliance with standards, Certa Pro may require that approved vendors
pay a licensing fee of up to five percent of franchisee sales from
such approved vendors"
(CertaPro gets a cut).
"Certa Pro''s
total revenue for the sale of these goods and services, as well
commissions earned on franchisee purchases from approved suppliers,
for the fiscal year ending December 31, 2007, was $1,977,540"
Almost $2 million...from
suppliers to its franchisees.
Not too shabby, eh?
Want to buy your business
cards cheap online?
Want to find a lower cost direct-mail supplier?
Fuhgeddaboudit.
I can understand, for
example, McDonald's requiring its franchisees buy french fries or
buns from certain suppliers. That's a quality and uniformity issue.
But business cards?
Signs?
Stationary?
Mailed letters?
C'mon.
You
Hire Painters or Subcontractors
Learn
How Bad It Can Really Be:
You will either be hiring
painters or, quite likely, hiring
subcontractors to paint.
Based on my experience and what I've heard from others, expect it
to be worse than you can possibly imagine: Theft, absenteeism, shoddy
workmanship and drug use are among the issues you may certainly
face.
All the while trying
to promote "certainty"...when you may not even
be certain your painters will show up for work. And if you use subcontractors,
mention that to your customers and see how well it goes over.
Here's a complaint about
CertaPro I found on the web. THIS had to be a subcontractor, and
this is the sort of thing you may face with subcontractors.
The painters came out without the owner who quoted the
job. They damaged the walls with the spray gun (I had
to fix). Painted the walls the wrong color. Painted the
door trim on one door, painted half the trim on another
and just did not paint the 3rd door at all. Painted over
switches and fixtures.. I am so disapointed. I was charged
more then $2000 for 3 rooms that all need more painting
and priming to fix. Buyer beware..Certapro painters in
Windsor Colorado is a rip off.
This sure sounds to me
like it was a subcontractor.
Here's another:
It was alright. I didn't like the fact, they hired a
subcontractor to paint my house. I was not informed that
they were goint to subcontract my painting job. They were
not certapro painters. The people who painted my house,
while at my house, covered the name on their business
truck with a sheet of poster board. I called the owner,
of certapro, to return to paint a part of my house that
was covered by weeds. He said he would send someone over
within a week to fix it. That was 3 to 4 weeks ago, and
I haven't heard from him.
Many people just don't
like to hear that you are using subcontractors ("They were
not certapro painters").
So if CertaPro tells you that you hire subcontractors and get a
guaranteed profit, you should also know you will get guaranteed
problems. And some customers don't like to learn you use subcontractors.
"The
Country's Largest Painting Company": Double-Edged Sword
You'll see
that in CertaPro ads and at websites.
It can be a double-edged sword.
If you search the web for "CertaPro complaints", you'll
find a number of complaint sites containing customer complaints about
CertaPro. Some of those complaints may not identify the place where
the customer lives, just "CertaPro".
There may be more customer compaints about "CertaPro"
precisely because it is "North America's largest painting
company".
Competition
Cometh
In recent years other
painting company franchises have sprung up. Companies like Five
Star Painting, Fresh Coat, The Painting Pros, ProTect Painters,
and others.
It will undoubtedly happen,
if it hasn't already: Competing painting company franchisees in
the same territory, each of which may make the same claims in its
marketing material.
I have learned of -- or suspect there have been -- a number of failed
or failing franchises in Alabama, Minnesota, New York, Michigan,
Illinois, Louisiana, Florida, New York, Texas and Missouri. I'm
sure there are others. Chances are good that CertaPro will not tell
you about the failures. If asked, they will probably blame the franchisee:
"He/she didn't follow the plan". I heard that several
times from Mark Titcomb. The same Mark Titcomb who told me that
if I bought a franchise, "You won't regret it." In my
opinion, Mark Titcomb possesses the greatest quality a salesman
can have: Master bullshitter. Maybe he truly believes his own bullshit--in
which case he is not, in my opinion, paying attention or doesn't
really understand the world of a today's CertaPro franchisee. Remember:
His pay isn't based on your success--his job is to sell you the
franchise.
If "the plan"
worked, there wouldn't be so many failures.
So when you hear Mark Titcomb or some other franchise salesperson
blame franchisee failure on "not following the plan",
ask him exactly how many franchisees have gone out of business in
the past five years and if it was because all of them "didn't
follow the plan".
And think about this:
If, as they say, CertaPro is there with you "shoulder to shoulder",
why would so many franchisees fail? Perhaps "the plan"
is deficient because if they were there "shoulder to
shoulder" as all those franchisees went under, what else could
it be other than a deficient plan? Well, it could be that the franchisee
ran out of money--perhaps CertaPro's startup figures aren't reliable.
Where
Are They Now?
I've compared franchise listings from CertaPro's website from
2007 with 2009 for 4 States. Of 52 franchises, 40% no longer
appear and 11.5% show what appears to be a change in owner (some
of those could have failed).
Getting
Out
What happens if you find
it's not working and you want out?
If you're lucky, you
might find somebody who's interested in buying your franchise. If
you're struggling, don't plan to get all your money back--you may
only recoup a fraction of what you've spent. I recall that Mark
Titcomb offered to sell my franchise with an asking price of $40,000.
How much would I get? $0.
If you're not lucky, bend
over: If you get to the point, as many have, where
you've spent all your money and are deep in debt, be prepared for
CertaPro to demand tens of thousands (or more) to allow you to escape
from the franchise agreement. And they might also demand that you
sign a non-disclosure agreement. A non-disclosure agreement helps
keep people from talking. That's probably why you will find precious
little about failed CertaPro franchisees from a web search.
Settlements
With Failed Franchisees
Carefully
Record EVERYTHING CertaPro and Mark Titcomb Tell You!
I
believe there may have have been settlements by CertaPro with failed
franchisees--financial reimbursements, possibly for misrepresentations.
If you are talking to
CertaPro about buying a franchise, be sure to document everything
you are told. If possible, get it in writing (e-mail works well).
Your attorney may later be able to put it to good use in a "misrepresentation"
action...and possibly get some of your money back.
Lawsuits
Against Franchisees Who Fail
Let's say you operate
your franchise for several years and realize it's a loser. You're
not making any money--or certainly not as much as you'd been led
to believe you would--and you may be sinking deeper into debt each
day.
You're broke.
You decide to get out.
What's it going to cost you?
Your franchise agreement
may hold you responsible for minimum franchise payments for the
years remaining on your franchise agreement. $100,000? $200,000?
So there you are: Broke, disillusioned, despondent and possibly
finding CertaPro demanding as much as $100,000 or more (number of
years remaining in franchise agreement multiplied by minimum annual
franchise fee).
CertaPro may not care
that you've spent every cent and are deep in debt.
CertaPro just might file a lawsuit demanding the money.
You may find yourself "standing shoulder to shoulder"
with CertaPro in court.
If you don't show up on the court date, there will probably be a
default judgment.
So then not only are
you broke; CertaPro has a default judgment against you. Maybe they'll
try to collect, maybe they won't, maybe they'll sell it to a collection
agency for pennies on the dollar...and if that happens you might
find yourself hounded by a collection agency.
Has it happened? Sure.
Could it happen? Sure.
Read the franchise agreement.
BTW, your franchise agreement
will probably include an arbitration clause.
IMHO, arbitration
sucks.
So, be sure to seriously
consider:
"what happens if it doesn't work?"
If it doesn't work, it could be the most costly mistake of a franchisee's
life..
You
Will Go Ahead And Buy The Franchise
I've seen it, and I've
heard it from other franchisees or former franchisees:
"I talked to him/her/them about the problems I was having but
they went ahead and bought a franchise anyway."
If you are considering
buying a CertaPro Painters franchise, chances are good that you
have, or will, buy the marketing pitch. The pitch is good -- they've
had nearly 20 years to perfect it. And you have become infatuated
with the "be your own boss" concept (which really isn't
true). Do yourself a favor and ask them one question before you
buy: What percentage of CertaPro Painters franchisees fail within
five years?
If you do buy, and if
it doesn't work out for you, send me an
email.
I'd like to hear about your experience before you sign the non-disclosure
agreement.
We
work with you "Shoulder to Shoulder" We are there to support
you every step of the way. CertaPro offers a comprehensive initial
training program that covers all aspects of building a successful
home-based franchise that will quickly scale to something much
bigger over time. In addition, support is available to help
market, recruit and train your key staff members in your efforts
to scale. Some examples of these key staff positions would be:
Office management, sales management and Production management.
With CertaPro residential and commercial painting, you're working
on the business...not in it.
