How Five Guys From California Laid The Foundation For A $670M Home Improvement Business by Forbes – Entrepreneurs

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In 1992, just a week before launching a brand new window treatment installation company, Budget Blinds, Chad Hallock broke his foot while water-skiing.

The five founders of Budget Blinds and Home Franchise Concepts, circa 1995. (clockwise from top left: Brent Hallock, Chad Hallock, Tony Forbes, Dave Lewis and Todd Jackson.)courtesy of Chad Hallock

The stroke of bad luck had an upside, though, because his disability kept him immobile, manning the phones, as his four co-founders – his brother Brent, Todd Jackson, David Lewis and Tony Forbes – pounded the pavement going door to door in Orange County to drum up business. “I booked all the appointments, booked all the installations, booked all the sales calls and did all the filings,” says Hallock, now 52. “Those guys went out and did the installations and the canvassing.”   

Today Budget Blinds is the flagship franchise for the multi-brand home improvement and décor organization Home Franchise Concepts – founded by the five lads in 2006 – which closed out 2018 with more than $670 million in system-wide sales under the leadership of CEO Shirin Behzadi. Budget Blinds 1,000 plus locations represent about 30% of outlets in the franchised home decor category, making it the largest player in the space by far, says Jeff Lefler, CEO of franchise industry research firm FranchiseGrade. It’s also a good buy for first-time franchisees, he adds. “Budget Blinds provides a ton of training and support, they’ve got good infrastructure for that and they’ve got a solid , reputable, recognized brand,” he explains. “And they have limited turnover.”

The company’s five founders — Jackson, Lewis, Forbes and the Hallock brothers —sold their stakes three years ago when the enterprise was acquired by Trilantic Capital Partners for an undisclosed sum.

The group of guys – all in their 20s when they began Budget Blinds – learned about the window treatment business while working for the home office of another such franchise, Mr. Miniblind, but struck out on their own in 1992 to form their own brand. “We all put $5,000 in the bank—I had to borrow five grand from my parents,” Jackson, now 53, remembers. “We made up a bunch of flyers and brochures, set up accounts, and we went out and started knocking on doors.”   

In less than a year of operation, Budget Blinds was generating six-figure monthly sales figures.

To streamline their fledgling operation, each of the five founders took on a different responsibility: Jackson headed operations, Forbes and Brent Hallock handled support, Lewis focused on IT, and Chad Hallock – the CEO – did marketing and sales. They launched as a franchise in 1994, initially charging new franchisees $7,500 in sign-on fees—a relatively minute charge. “We thought it would be great for a person just getting out of college who wants to have their own business but doesn’t have $100,000 to get into a typical franchise,” Hallock explains. “We were looking to cater to people kind of like us.”

They sold a handful of franchises in short order, largely by word of mouth, in their home territory southeast of Los Angeles, as well as in Utah—then a hot market for window treatments. Franchisees, most of whom worked out of their homes, would visit clients, takes measurements, then install the chosen products.

In 1995, to spur growth, Budget Blinds raised its franchise fee to $25,000 in order to incentivize franchise brokers, whose job was to lead prospective franchisees to the brand in exchange for a cut of the franchise fee. By 1998, Budget Blinds had sold 50 locations, and the following four years saw another 150 added to the tally. By the late 2000s, the company was selling locations at a healthy clip and Home Franchise Concepts (HFC) was launched as an umbrella company under which several home improvement brands could operate. The company subsequently grew its roster of companies by launching home storage and organization franchise, Tailored Living, and acquiring Concrete Craft, a flooring business. Home Franchise Concepts most recently added AdvantaClean, a cleaning franchise, to the mix.

 Along the way, the organization adopted a slightly different approach to collecting advertising and marketing fees from its franchisees. Many franchises collect a small percentage of a franchisee’s sales to add to a regional or national ad fund. HFC collected a set dollar amount, based on the total number of franchisees in the system, initially collecting $100 per month, then $500, then $1,000, as unit counts grew. The reasoning, Hallock says, was that more money could buy more internet, magazine and TV promotion for the greater number of franchisees. “It was all part of this vision to say ‘I’m going to teach how to do business right now with a small advertising fund, but look what it’s going to be when we reach larger numbers,’” Hallock explains. “Sure enough, we reached the larger numbers.”

The strategy also motivated franchisees to work to make the ad fund payments, Jackson says. The response to owners who complained they could not afford the up-charge was, “you either need to sell your business or go sell some blinds today—and we can help you do either.”

The decision to sell to a private equity firm stemmed from a realization that a home improvement network like HFC could be an attractive target, and the idea of exiting for a healthy sum appealed to the five guys, each of whom had been toiling at the business for more than 20 years. “There was definitely some burnout,” Hallock says, looking back. “The business had now gotten so big and the next step to make it bigger was over most people’s heads.” Growth, they figured, would come through acquiring and building new brands, which they had little experience with, as well as an upgrade to the technology systems with which it tracked and supported its franchisees. “The business needed a remodel,” Jackson concurs.

When Trilantic acquired the firm in 2015, Jackson, Lewis, Forbes and the Hallock brothers sold all but 10% of the company, which they split five ways. Behzadi, who had been the company’s CFO since 1999, came away with 1% ownership and stayed on to assume the CEO position. All of the five original founders retired, though Chad Hallock maintained a spot on the board. “The five of us had worked so hard and so long and put our hearts, sweat and tears into the business,” Hallock says. “It was time to cash in.”

April 16, 2019 at 02:09PM
https://www.forbes.com/sites/karstenstrauss/2019/04/16/how-five-guys-from-california-laid-the-foundation-for-a-670m-home-improvement-business/
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