Home builders join the growing franchise crowd
The ''franchise era'' has finally caught up with the home builder. First it was the fast-food business, then the car wash, tune-up centers, doughnut shops, medical clinics, and real estate brokerage firms. Now, in 1984, home building is caught up in the franchiser web as well.
Actually, emergence of franchised home building is a good development for small- to medium-sized building firms as well as home buyers. Smaller home-builder firms have been having an increasingly hard time competing with the major firms. Small firms do not have the buying power or clout for obtaining the best financing packages.
Small firms also lack the resources to gain maximum marketing impact, and they do not have the visibility or public recognition that the major firms possess.
Franchising solves most of those problems for the small builder. Collectively , these builders have buying power, financing clout, and marketing leverage, which give them the resources to be viable competitors in the total housing market.
This is good news to the buyer because it makes it possible to build and deliver more house for the money, despite the added cost of franchise membership fees.
The consumer may be able to buy his ''dream house'' a lot sooner than he thought.
Building costs can be less and financing terms better. Further, as builder franchise groups emerge, consumers will become familiar with the areas of specialization of the individual franchises.
Simply put, the public will get to know the policies and reputation of the franchise.
Typically, when a builder joins a franchise he must first meet the criteria for membership established by the fran-chiser. After his application is approved , he must comply with the organization's rules and regulations; and he may advertise his affiliation.
When joining, the builder pays a membership fee. His continuing franchise costs are usually based on a small percentage of his annual gross dollar volume.
Here are two examples of the new breed of builder franchises:
* Custom One is a Minneapolis-based company. To date, it has franchised about 100 builders in and around Minneapolis, Kansas City, Denver, Dallas, Houston, and Phoenix.
Charles C. Cudd, president and co-owner of Custom One, in association with Control Data Corporation, has spent most of his working life in construction and real estate. His venture into franchising grew out of his recognition that most smaller builders didn't have access to the sophisticated operating and managing systems necessary for real efficiency.
''I was just a medium-sized builder myself,'' says Mr. Cudd, ''and I saw that what I needed was what the big guys had: controls, systems, things like that. So I developed them, and then I realized that an organization that could bring these benefits to a lot of other good smaller builders would be a terrific thing.''
* Scholz Master Builders, a recently formed franchise company, is actually a reincarnation of what was once the country's best-known luxury-home manufacturer , Scholz Homes.
Founded in Toledo, Ohio, in 1946, Scholz spread all across the United States during the 1960s and was then bought by Inland Steel. But during the 1973-74 recession, Scholz reduced operations to one plant; and then a few months ago Inland Steel decided to sell.
Joseph C. Grasso, now president of Scholz Master Builders, is an architect by training, but has spent most of his 30 years in home building on the sales, marketing, and management level of a number of major housing companies.
''I knew that Scholz Homes' original success wasn't due to its manufacturing operations,'' says Grasso, ''but rather to its design and marketing, which were outstanding. I realized that a combination of these assets coupled with national advertising, plus a sound package of services for the builder, would make a good franchise program.''
The future now looks very positive for builder franchising. Many housing-industry leaders say there will probably be thousands of franchised builders operating in every major market of the country within a few years.
In a sense, the entrance of franchising into the home-building field is a classic example of free enterprise in action. It makes it possible for small builders to compete with major builders, for example, and the resulting competition and collective buying power tends to bring down the cost of a new house to the consumer.