The new-home market is not in very good shape.
In July, the national press reported U.S. builders were constructing just 413,000 homes annually as compared to the 1.6 million homes a decade ago and less than the 1.2 million homes per year considered to be the hallmark of a sustainable, healthy housing market.
This depressing news made me think of the two ways homes get built today: either by large builders such as DR Horton and KB Home, or by the myriad small builders that dot the local landscape. Since the onset of the recession, neither group appears to be doing well.
So, when I stumbled across a business model that is thriving in Australia, New Zealand and the United States, I decided to see what was up.
What I learned was that the overlay of the classic franchise formula onto a traditional homebuilding model was not only a new growth path, but small builders who converted over were now out-constructing even large builders in select markets.
A homebuilder franchise company is so new a model that the total universe of such firms can be counted on the fingers of one hand. One example is GJ Gardner Homes and it was founded not here in the U.S., but in Australia 16 years ago by Gregory John Gardner. The home office is in the tongue-twisting town of Mooloolaba, Queensland.
GJ Gardner has built more than 30,000 homes worldwide including in the U.S. (it first began operating here in 2005). Today, GJ Gardner’s U.S. operations include 10 franchises in California, eight in Colorado, and the company is gearing up to open franchises in five more states.
The California franchise is run by Greg Dettwiler, a native Australian.
Considering the fact that GJ Gardner broke ground on its first California homes in 2006, just in time to see a recession blowing across the landscape, one would think, "Uh-oh — could Dettwiler’s timing be any worse?"
The question makes Dettwiler laugh because things only got better for him.
"We are happy with the timing," he said. "All the doom and gloom that hit the market enabled us to get a foothold in the state of California. When we first started in the state, the biggest problem was there was no land available. That situation was resolved by the recession."
My second question was even more obvious: Is getting a GJ Gardner Homes franchise much different from getting a Subway franchise?
Not really, Dettwiler said. "You get the same franchising benefits, brand recognition, centralized marketing and advertising, buying power, established systems and procedures, training and franchise and peer support."
In the same way that with a burger franchise operation you are actually buying a territory, you do the same with GJ Gardner. For $70,000, you get the territory rights to a piece of a state or a large city.
In my mind, small homebuilders have always been seat-of-the-pants, entrepreneurial types with a hard-to-satisfy independent streak — just the type who would never join a bigger organization that would hamper their inherent "maverickness."
"That’s the beauty of franchising," Dettwiler said. "Small builders maintain their independence completely. They maintain their own business, their own profits. The only difference is that they may have a (‘doing business as Gardner Homes’) attached to their names. But they want that because it is the power of the brand.
"If you do a Google search for Bob Smith Builder on the Internet, you won’t find him. You do a search for GJ Gardner and you are going to come out on top of the Google rankings. Small builders are still independent — they just attached themselves to a very large organization to help them grow their business."
After 19 years as small contractor in the Selma-Kingsburg area south of Fresno, Calif., Jeff Kreiter decided to become a franchisee with GJ Gardner Homes. That was six years ago. He has never looked back.
Asked why he made the jump to be a franchisee, Kreiter said: "When you are on your own, you wear a lot of hats. You just can’t do everything as well as if you had a team. I was getting tired of designing houses, being the bill collector, running all the jobs and being totally involved from beginning to end. I was also worried about the bigger companies coming in."
He added, "GJ Gardner came along and I realized you can be part of a bigger company and still be an individual builder in your local area. That’s what appealed to me."
The recession has hit the Central Valley of California extremely hard and Kreiter admits to some tough years when his output was just two homes, but he said he has come back more quickly than some.
As a small contractor, before he joined GJ Gardner, Kreiter’s business usually accomplished the construction of three to four homes a year. These days he’s building 15 to 20 homes a year, which is a major number for his rural area.
"The local guys aren’t doing anything," he said. "We are pretty much the dominant builder in the area."
Kreiter said the marketing, including television advertising, software programs, technical assistance and pricing, all gives him an advantage in the marketplace. However, the associated social factors are just as important, he noted.
One of the more recent GJ Gardner offices to open is in Sacramento, about three hours to the north of Kreiter’s venues. The offices have already referred clients back and forth.
"When you are on your own as a contractor, you can’t call the other contractors to ask, ‘What are you paying for this or that?’ They aren’t going to give you those numbers," Kreiter said. "Now, as a franchisee, I can call the other franchisees; we can help one another. It’s a huge benefit."