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Should you buy a handyman franchise?

Sarah Stowe

We all need a handyman or a tradesperson to build, paint or fix something around the home or garden. But is it a good business to invest in?

If striking out on your own as a handyman is a secret passion, then consider this – revenue for this sector is estimated at $943.1m this year. This brings in profits of $105.6m for the 3,629 businesses operating across Australia.

Annual growth for the five years to 2016 has been 3.3 percent, with the upcoming period to 2021 estimated to see 2.4 percent growth. That means the sector will be worth $1.1bn in five years’ time.

As more and more of us are time-challenged (and frankly, we don’t have the skills) the opportunities increase for tradespeople to step in and help us improve our homes.

According to the IbisWorld report Tradesman and Handyman Franchises in Australia, May 2016, the sector is boosted as more Australians either move home and require alterations, or choose to invest in improving their existing home; capital expenditure is forecast to increase.

With growing demand comes increased competition and this is where the value of a franchise really shines.

Report author Alen Allday writes “The franchise business model has become more prevalent over the past decade. This has largely been due to increasing competition, as franchise businesses are more effective in collectively marketing and promoting tradesmen and handymen. As a result, more tradesmen and handymen have been joining franchise businesses to boost exposure and increase their competitiveness.”

Collective marketing and economies of scale are great strengths of the franchise model. Strong brand recognition sets apart franchised operators (often sole traders themselves) from independent sole traders.

What’s driving the business?

  • Capital expenditure on homes
  • The number of households
  • Real household discretionary income
  • The number of houses bought and sold
  • Consumer sentiment index

The challenges

Franchisees in this sector will need to broaden their skill base to ensure they can compete with stiffer competition from an increased number of operators and franchise networks. 

Competition will also have an impact on high profit margins.

An expected decline in the volume in real estate sales is likely to have an impact on the business. Fewer unit and townhouses are lined up for construction, and high prices are deterring new buyers.

But these trends are countered by a refocused householder looking to maximise their investment in their home with maintenance and renovation projects.

How to win as a handyman business

Quality of service and price will underpin success for operators in this sector.

It is expected that the larger franchised networks will help with skills training to give their franchisees a competitive edge.

The highly competitive nature of the sector will encourage a greater spend on marketing and advertising to reinforce the brand – this will almost certainly be passed on to franchisees in the form of increased marketing levy fees, possibly increased franchise fees.

An established business may not find value in the branding benefits associated with a franchise, so there is unlikely to be a rush of existing tradespeople looking to convert their businesses to a franchise, particularly those who are in regional or rural areas where word of mouth is king. 

But could a franchised option make sense for a newcomer to the sector? Absolutely. 

The power of the brand, the opportunity to upskill, and network support are all benefits.

Who are the clients?

  • Households
  • Residential builders and property managers
  • Small and mid-sized businesses

Who are the major brands?

Jim’s Group

Estimated market share: 36.1% 

A privately owned Australian proprietary company which started in 1982 with Jim’s Mowing. Franchising began seven years later, and the company is now in New Zealand, Canada and the UK. It now has about 3000 franchisees across its more than 30 divisions, and a predicted industry-specific revenue of $340.7m – an annualised 3.6 percent rise over five years. 

IbisWorld projects franchisees earn an average annual salary at $115,000.

VIP Home Services

Estimated market share: 13.9% 

An Australian owned proprietary company established in 1972 with a focus on garden maintenance and cleaning. The business now has more 1100 franchises in Australia and New Zealand. Revenue is expected to have increased at an annualised 3.3 percent over five years to reach $131.1m this year. 

While the business has “somewhat saturated” the market across its current service offer, diversification into other segments is expected.

Hire A Hubby

Estimated market share: 5% 

A 20 year old business with about 400 franchises. This year revenue is expected to reach $46.9m, an annualised increase of 7.6 percent over five years.  

The skills-focus is broad, with franchisees providing general handyman services.

Unlike its major two competitors, the business has increased market share since 2011. 

Grey Army

Estimated market share: less than 5%

Founded in 1997, the business includes handyman and gardening services. Its point of difference is experienced, mature franchisees.

Laser Group

Estimated market share: less than 3%

A New Zealand business which started in 1983, it how has more than 220 franchises across Australia and its domestic market. It includes Laser Plumbing and Laser Electrical.

A mark of the other businesses in the sector is locality – many franchises operate within one state or within a small region.

Competition means it is unlikely that new franchises will be able to achieve a national presence and a high proportion of market share.

What it takes to succeed in a handyman business

  • A good reputation
  • A clear market position
  • A skilled workforce
  • The ability to compete on tender
  • Aligning the business to market demand  

Franchisees in this sector will need to broaden their skill base to ensure they can compete with stiffer competition from an increased number of operators and franchise networks