Fred Buys a Recession-Resistant Business During The Last Recession

Adam: Welcome to another edition of the franchise consultant podcast. I’m so excited to be here and talking to Fred Arthur is a franchisee with 100 water damage. Welcome to the show, Fred. Thanks. Good morning. Fred. Tell us a little bit more about what 800 Water Damage does.

Fred: So we’re in the restoration business and we are a full-service restoration company. So we do water, fire, mold, smoke, and then actually rebuilding of homes after, you know, after we’re done remediating things.

Adam: And how did you get started with the business? Talk a little bit about what your background is before you decided to become a franchise business owner.

Fred: Okay, so I started in information technology. I was a computer programmer at a place called allied Bendix aerospace, working in the newsroom nuclear industrial complex, then went back to school and got an MBA in finance from the University of Notre Dame. And then I spent about 23 years selling software working for Compuware, IBM, and some startup companies. And, you know, just got tired of the, you know, the corporate world and, you know, you know, I work for several managers that do is you My career progressed, you know, it seemed as though there was such a push for micromanaging and, and just, you know, just constantly being on top of all the different employees, it wasn’t just me it was, it was everybody and I had a manager that just started was pushing so hard and because his, his management was pushing are too.

And I just started thinking, gosh, I can’t do this for another 10 years. And I wanted to have more control over my life. And so at 50, my wife and I started looking at franchise opportunities, and primarily because we always wanted to start a business of our own. But you know, there was such a high rate of success for franchisees because there’s a system already in place, and we didn’t have to reinvent the wheel. So we started working with a franchise consultant, and this was in 2010. So the recession was going on. No cause by the way financial challenges from 2008 and nine. And so we were looking for something that was, you know, wasn’t, you know, tied to the economy.

You know, we didn’t, you know, I didn’t want to sell, you know, how many cups of coffee or how many sandwiches, you know, do you have to sell, you know, to, you know, to make a living, you know, when they’re, you know, two three or $4. And so we’ve looked at many different franchise systems, but we just kept coming back to, to 100 water damage, and, and this industry and mostly because, you know, this stuff happens every day. And then they’re in there’s just nothing you can do about it. And it’s almost always covered by insurance.

You know, there’s a high ticket dollar amount per job, you know, our average, according to our Franchise Disclosure Document was around $3,000, you know, per job. So that’s a lot better than $3 or $4, you know, per you know, per sale, so that in Pre Gus, you know, and we thought we could, you know, kind of get the same kind of money that I was used to making. So that was important. My wife and I have five kids. At the time we were looking for our oldest three were in college. So it was challenging and a little scary, you know, at times. You know, we thought this was our best opportunity to get back to the kind of money that we had been making. But now 10 years into it. I think what drives us the most is we do well, what drives us the most is the fact that we get to save the day and, and help people and we just get to make a difference in people’s lives.

Adam: That’s wonderful. That’s wonderful. And you took the plunge right after the last great recession.

Fred: Correct.

And it was kind of scary. My wife is a she’s a master’s degree in education, but she was primarily raising our kids and doing tutoring on the side. And so I was the primary breadwinner. So we just, we risked it all and You know, took some of our 401k money and went through Rob’s program, which I’m sure you’re familiar with, you know, where we could fund it, you know, without taking any kind of a tax consequence or penalty associated with using our 401k. And, and it was just a great move. You know, it was risky, but we believed in ourselves. And my wife and I worked together on it and now after 10 years, you know, we’ve been the lead the largest franchise in our system for the last three or four years so on it’s been a great, a great adventure for us.

Adam: Congratulations. Could you also talk about what your day to day is like, what it was like when you first started? And what your day to day is, like 10 years in?

Fred: That’s a great question. You know, I and everybody’s done it differently, you know, in terms of franchisees, and including all some of the most successful ones, you know, we’ve all had a different path. You know, for me, I kind of like to be the expert on something. And, and when you first start, you know, I had to do everything. I, you know, I was, you know, I was marketing I was, you know, actually doing jobs, I, you know, I know every single thing in the business I was doing, but when we first started, you know, you have to let people know you’re here, you know, and so we, you know, we’d spent about a month and a half, two months getting everything ready our van or equipment or office, but then nobody knew we were here.

And so we’re sitting around, like, well, how are we going to make this phone ring? And so we, you know, we just, you know, my wife and I jumped in our car and, and started driving around and meeting the insurance agents and, and, and plumbers and anybody we could that you know, that could, you know, help send us business. But there’s an unbelievable amount of, you know, competition in this field. So, you know, so it took a while to get any business it took about, you know, 60 almost six weeks before we got our first job.

And so, you know, so back then 10 years ago, you know, you know, we would drive around knock on doors. And when that first call comes in, and you know, came in I, you know, I get grabbed one of we had a part-time technician, you know, I grabbed him we went to the job and we did the job. And always remember that first job that guy was a customer was a former IBM sales rep. So we had something in common and, and so we hit it off right away, he loved our job and he was one of our you know, he referred us several times.

But, you know, we were doing everything I’m hauling in equipment, I’m tearing out drywall, tearing out carpet, I’m, I’m scanning and horrible things and there were many times where I was, you know, standing in, you know, four inches of your raw sewage, and in protective equipment and things like that and wondering, oh my gosh, how did my life go so wrong? And, and so it was, it was a lot of fun, but it was hard. I mean, I finished working in marketing, and then they come back and work on invoicing until one or two in the morning.

And so it transitioned more, you know, you know, to where I’m at now, which is I don’t do jobs at all. I still am involved with customers. But I learned early on that if I wanted to grow the business, I had to get out of it. And I had to work on the business instead of working in the business. And, and so you know, that’s how we hired our first guy. But we always had the idea that we wanted somebody that could move into a more important role, you know, and it couldn’t be just somebody making $10 an hour and we have to find somebody that’s good that can take over your business. So you can step back and that’s what I’ve continued to Do is step back and, and spread out the responsibilities to more and more people.

That’s allowed me to, you know, grow the business bigger and get into more areas, hire more people. And we started with my wife and I end up part-time technician and now we have our last payroll, we had 29 people on the payroll.

Adam: Wow. And so walk us through, you’re an essential business, correct?

Fred: Correct.

Adam: How are things going in the past 60 days or so for you?

Fred: So, you know, we’re somewhat steady, but you know, things like water mitigation, you know, so any kind of a water loss where you might have a sewer backup or a burst pipe or a toilet overflow or anything like that. You have to take care of that. You know, so plumbers are also essential. And we get a lot of business from, you know, from 20 companies, but they, you know, if something like that happens at home, you know, the homeowner has to call a plumber to get that water stopped or get a green to unclog or whatever, and you can just leave that stuff because then you’ll create an even bigger problem.

Because after three days, no without doing anything, you know, mold can start to grow and that can create a significant health hazard in your home as well. So, we have continued to do those kinds of jobs, we have to be careful with our guys, you know, they’re wearing masks and all the homes. But, you know, we’re our mold, our mold business has, has kind of slowed down a lot. You know, and that’s, you know, mold is an important thing to take care of. But you also have to remember that it took a long time for that mold to develop and create a problem in a house.

So people are kind of Yeah, they’ve got the problem but it’s been going on a while and they’re, they’re more likely just kind of hold off a little bit, or rebuild business is going down dramatically. You know, because we’re in Michigan and we have a stay at home order so you know, painting and flooring and things like that are not, you know, essential we go pieces of it and so so we’re doing fine and we’re your guys are your are down, we haven’t laid anybody off, our guys are dialing in hours, but we’re looking at different, you know different avenues for revenue we’ve chosen not to go into COVID positive homes and businesses you know to clean up after that.

But we are doing precautionary you know, cleaning you know, as businesses get ready to open up so we’ve got a pretty good campaign right now going to any business or essentially any home you know, could have us come in and, and fog with a disinfectant or things like that. So we’re, we’re adding additional services to help with that. So…

Adam: Okay, sounds like you’re adapting.

Fred: Absolutely.

Adam: And how do you see the business evolve? In the next few months or so, after the stay at home order goes away and in things kind of returned to a new normal.

Fred: Well, we expect things too, you know, to pick back up to our normal. But we always have to adapt. I mean, you there’s no, for instance, this year, we’ve been lucky to benefit the last three or four years from like a polar vortex, you know, an extreme cold front that comes through. And you know, being in Michigan, you know, with the cold weather, we’ll get lots of broken pipes and burst pipes, and things like that. This is the first year we haven’t had that. So we’re always having to adapt. And this will be great, it just won’t be a short-term thing.

No, I know from everything we’ve heard, you know, this, we’re going to have the effects of COVID-19 for probably a year or two. So we expect that a lot of businesses will want to have us regularly come in and just do a quick fogging once a month or once every couple of weeks. So But we’re always looking, you know, for things like that, you know, we’ve, we started with just water, you know, water mitigation work to clean up. So we, you know, remove the water, tear out things that can’t be saved, we disinfect, and then we were dry.

And that was, you know, that’s the vast majority of our business. Once we were good at that. We started adding more, you know, then we started adding, you know, fire and smoke, you know, clean up. And then in the last several months, we added a build that the company needed to put it all back together. So we’ve always been adapting, but we like to be experts at what we do. And I as opposed to trying to do everything and not very well. So it’s been a very controlled growth. But, you know, it’s been a great ride so far.

Adam: So you’ve gone through a long journey. If someone’s new to franchising What advice do you have for them at stage one, when They’re with a coach potentially, and they’re investigating different options about finding the right one.

Fred: Yeah, that’s a great question. It’s also a very personal question. You know, everybody has different needs, and, and also different amounts of money and, you know, to invest in different a different skill set, you know, the, you know, we had it, my wife and I had a very unique skill set, and, you know, with almost 27 years in it, and having an MBA and understanding, you know, numbers and, you know, being an enterprise sales, you know, I, I was able to go out and sell myself and sell my business.

Not everybody has that skill, but I think that’s, you know, for me, you know, you’ve got to find a business that that just fits you. Not everybody wants to be in a 24 seven support role. You know, some people are You want to manage from afar and just, you know, maybe you’re you’ve got a bunch of ice cream stores and you have people manage them and you’re not active.

I mean, there are all different kinds of things. You know, for us, we really what drove us to this was we were looking at a business during a recession. So it was, it was, you know, pretty much front and center that we wanted something that was, it was not tied to the economy. So, you know, it’s what I would suggest, though, one of the best things we ever did was work with a franchise consultant, you know, that was able to introduce us to, you know, many different franchise opportunities. I did find out as if I was looking on the internet, for example, and, you know, maybe I wanted to look at a taco bell.

You know, you can click Send me info on the Taco Bell website, but I don’t think I ever received anything from anything I ever clicked on. Do you know what I said? There are just too many people, you know that that is requesting information and most of them aren’t serious. But the minute we started working with a franchise consultant, and she interviewed us, we took some tests. And we kind of came up with a half a dozen, you know, things that were interesting to us, you know, based on our skillset. The minute we wanted to talk to someone, one of those franchises franchise, ORS.

We were within a day, we were speaking with the Vice President of franchise consulting. So that’s the advantage of working with, you know, a franchise consultant because they have the relationships. You know, our friend, our consultant never pushed us anyway to any particular one, you know, she just provided us information and got us all the information we needed to make a good decision. And for us, it was an awesome decision.

Adam: And what other advice would you have for someone that has decided on a brand or a concept and got it got started? I mean, what else What would you tell yourself at the very beginning, if you could do it all over again,

Fred: The thing we found is that I always work hard before I was pretty driven, I was a type a salesperson, and always put a lot of pressure on myself. What I find now is that in the last 10 years, I’ve worked harder than I’ve ever worked. You know, you just love what you’re working for yourself and you don’t mind that but you just have to get out there and do it. I, you know, even I have a sales background. So, you know, I feel strongly about this, but it’s all selling, you have to put your head down and get out there and do it every single day.

You have to mark it every single day. And it doesn’t matter what business and what I found also is that sales solve problems, and you can’t cut your way to profitability. And you have to get out there and sell and if you’re selling a lot of revenue coming in. You don’t, you’re not as concerned about the expenses going out. But it’s just again, it’s hard work. It’s you’re having people turn you down and say no, and you just have to get back up every single day. And work for us. We have referral sources.

So it’s a company or, or an individual or an insurance agency or whatever. And what I tell people that starting our franchise system is, is just get that first referral source, find one person and get out there and get that one and then get the next one. But I think what makes us successful is years ago, I had an acronym that I used to drive, my selling, and just the way my work ethic and everything and it was called wise as WHIC and it stands for work hard, always integrity Above all, superior service, and exceed your customer’s expectations.

When we work with a new perspectives referral source for us, you know, I can look him in the eye and just say I, you know, I’ll do everything I say we’ll do. You know, we’re not perfect. You know, we do make mistakes every once a while, but we always stand by them, you immediately take care of it. Never an argument, well, that wasn’t what I said or have a there’s never anything like that.

You’ll always do what we say. And people trust us. And that’s really what it’s all about in any business, you know, having integrity and working hard and doing the right thing. And, you know, most things are right or wrong, and there’s not a lot of gray areas. There are some, but most things are right or wrong and just do the right thing.

Adam: Have you gotten good value from 100 water damage when it comes to paying your royalties and your franchise fee?

Fred: So originally? That’s a great question. Originally, when we first bought the franchise, there wasn’t as much of a system as we thought. thought, you know, when we first got into it, and in six months into it, we kind of realized that our office, our franchisor was out on the west coast, we kind of realized that, you know, there’s no help coming, you know, we’re kind of on our own, you know, they told us what they could, and then we just kind of had to do it. And of all the franchisees that were originally a part of that system.

Everybody kind of did their own thing, whatever they could, you know, to be successful. And then some people did, you know, build back at that time, some people did more mold, some people did a lot of carpet cleaning, or, you know, whatever, and everybody did sort of different things, okay, whatever you could do in your region to be successful. And so, there was a lot of frustration that we weren’t getting much for our royalties, and that caused a lot of friction.

About five years ago, however, a bell for franchise group bought our old franchise org, and, and it’s been, you know, an extraordinary ride. You know, we were within 30 seconds of them announcing it, my wife and I high five and we were so excited because being a part of Belfour, you know, they’re the largest restoration company in the world.

And so they know this business they had the wherewithal to invest in and when we first started, you know, 10 years ago, we were given a, you know, an operations manual and a binder and that was it. And then we had two months to go out and buy a used van go out, you know, I don’t think we had official wraps, you know, for our vehicles back then.

But you know, everything was, you know, here just do this and we had to do it all on our own. You know, today when you buy a franchise from you know, Belfour franchise group, I mean, you go to a two-week training, and when you’re done, you’ve got you to know uniforms, you walk away with it with a $70,000. You know, either a Ford Transit or a Dodge, Promaster, or whatever do they back and forth sometimes, but You’re completely wrapped filled with equipment filled to the truck-mounted extractor.

I mean, you walk out the door ready to do a job. And I mean, it’s, you know, our website presence is incredible. I mean, we’re, we’re known now. I mean, we’ve, you know, probably tripled in size. So it’s been an enormously positive, you know, positive experience. You know, before back five years ago, or 10 years ago, we didn’t have many options. And with three kids in college, you know, failure wasn’t an option, as they say. And so we just had to make it work and we did whatever we could.

But again, since you know, Belfour Franchise took over, it’s been, you know, it’s been an amazing help I’m you still have to do it. They’re not driving, you know, our business or driving some of your, you know, maybe 5% to 10% is and that’s awesome. But I think sometimes people come into a franchise and you think, oh, you’re just gonna walk in And now all of a sudden, all this business is going to be there. And it’s just going to be easy it isn’t. You have to work your butt off all the time. And, but I love it. I mean, we get to, we’re our boss, we get to make our own decisions, we control our own life. And we’ve been going to Italy for the last several years, you know, for a week in January or whatever night, we’ve got a great team. And we can do that now. You know, because of all the great people that have been with us.

Adam: That’s great. That’s great. And so let me ask you another question, Fred. How does one know and this might be a question that there’s no answer to but someone’s investigating, right? They’re investigating different concepts, they have a coach, but to understand whether or not the franchise or has a good system in place, how do you know, what’s the best way to do validation, in your opinion?

Fred: Well, you’ve got to talk to other franchisees, and, you know, I get a lot of franchise you know, validation calls, you know, it’s and there’s let people do it differently. Some people want to call everybody I approached it a little bit differently. When I first started 10 years ago, I asked for the Give me the top three franchises because I’m gonna be one of them. And, and that’s who I want to talk to. I wasn’t interested in talking to people that have failed, because I’m, I wasn’t going to fail.

So if somebody fails, and most of the time, I would say they just weren’t a good fit. And, you know, it’s kind of on you. And so, you know, talk to people ask them that, you know, the kind of money they’re making, you know, with the kind of revenues that are that they’re bringing in, you know, ask them what no franchisor is perfect. You know, what, what do they like about the franchisee? What don’t they or franchise or what don’t they like? And just ask lots of questions, you know, but talk to people that have done it, and are and are successful. I think most of them are gonna be pretty honest.

I mean, I’m not you know, you’ll be isn’t perfect, you know, I’m happy to tell people what, what I think they could be doing better or what they do great. You know, I think that’s the key and ask people, you know, what, what their life is like, what their day is like, and what are their biggest struggles and challenges?

Adam:

That’s great, great stuff. So your franchise is located in the Detroit metropolitan area, correct? It is. And if someone’s in Detroit, and they need some sort of help with water restoration, how would they get ahold of you?

Fred: So, we have the main number. So 248-412-4030 that we advertise all over the place, they go to our website 1800waterdamage.com. We’re the Southeast Michigan franchise. So it’s 1800waterdamageofSoutheast Michigan. And that’s that, you know, that’s pretty much Yeah.

Adam: Thank you so much for being on the show today, Fred. I appreciate your insight and best of luck to you, your family.

Fred: Thanks, Adam. I appreciate it.

Talking with Jeremy Jenson of Encore Search Partners