This Australian company’s unique franchising model aims to give both builders and customers the best of both worlds.
Written by Penelope Barker
Hotondo Homes became a franchise network after almost 15 years as a home building business. Starting out in the rural New South Wales town of Deniliquin in 1953, the successful building business started by Kevin Renwick moved to Melbourne in 1986 and evolved into a franchise business model in 1993. Taking over the business from his father, Michael Renwick decided to really commit to the franchising model, putting in place business systems that would support a successful and growing franchising network.
Today, Hotondo Homes has 100 franchisees around Australia, with total annual sales of around $AU250 million. In 2008, Hotondo Homes built more than 900 homes across metropolitan and regional Australia through its franchise network. And Michael Renwick is on a mission – to see Hotondo Homes become a leading force in Australia’s building industry through franchising.
Unique franchise model
Franchising as a business model in the building industry is a unique concept in Australia. While building industry juggernauts are making their presence felt in the marketplace, Renwick is proving the alternative model in the building industry is just as successful, while giving local Australian builders a competitive edge in a tough business.
Renwick began expanding the franchising model about 10 years ago, putting in place business systems that would support a successful franchising network. He developed new fee structures and agreements for franchisees across Australia and set about recruiting the right people who would live the vision. “My aim was to create a quality service where all stakeholders benefited,” says Renwick.
As a franchising pioneer in the building industry, Renwick concedes the journey has not been easy. He also knows he must be flexible enough to constantly evolve and adjust his franchising model to the changing economic climate and growth of his business.
“We offer an alternative to other major building companies,” says Renwick. “The system works so that the real profits go to the best operators, which provides an incentive for franchisees to do well. In addition, it gives builders the opportunity to build their business where they want to, so builders can choose to stay in their local area or perhaps operate in the place they grew up.”
Renwick explains that, as a rule, traditional franchising models that work for retail and service industries do not adequately suit the business of building homes. He had to forge new and innovative ways of making franchising work in the building environment.
“We have had to create our own franchising model that is completely different to other franchised industries. A retailing/service franchise model doesn’t work for our business because the building industry is so different to these fast turnover industries. We are in the business of creating a product – houses – that often take more than a year to prepare and build, and we do it under full public scrutiny. The customer transaction, the communication process, the customer service, the support levels and the timeframe make franchising in the building industry so extremely unique. No other franchise system has the challenges that we face. All of this means that our model has to take into account very different ways of operating,” Renwick says.
Renwick plans to grow the business in areas where Hotondo Homes does not yet have significant market share, including Adelaide, Brisbane and regional centers around the country.
Providing support
“Although builders may be great at their trade, they often need managerial, marketing and administrative support to help make their business really successful,” says Renwick. “On the other side of the coin, customers feel more secure knowing their local builder is backed by a big company.”
Hotondo Homes provides its builders with strong resources and a support base, including access to plans, business tools, training opportunities and leads that result from national marketing activity. Builders can also use company sub-contractors, as well as combine their resources to tender for bigger and better projects.
Franchisees also benefit from a number of financial advantages that they may not otherwise have access to as independent builders. These include better buying power for building materials, financial advice (including benchmarks in comparison to others in the network), and savings in general business costs.
“Hotondo Homes gives local builders the ability to be competitive against the bigger builders when they come to town,” says Renwick. “As a small, independent builder, it’s difficult to match what the big home builders are offering, but with our support and all the resources provided, local builders can compete on a similar level and even offer their customers more than the bigger builders.”
For Hotondo Homes’ customers, the rewards are also evident. By having a local builder backed by a big company, customers benefit from the personal service afforded by a local builder, yet they still get a quality home at an affordable price.
“Our customers really see the value in this,” says Renwick. “They like having a builder who will work for them throughout the entire home building process and who understands the local area. They also like having someone they can deal with every day and who will build them the home they want, not just the cheapest model off the shelf.”
Surviving the recession
Businesses need to the flexibility to adapt to industry changes as well as the economic client. With a downturn in the economy foreseen 12 months ago, Renwick says the past year has been “about refining”, with a revised strategy and complete revision of company structure. “We adopted an ‘improve or remove’ strategy as it is paramount that you have good people around you, people that inspire you and give you the confidence to make decisions. I cannot run this business alone; it is the key people that help me constantly improve our offering.”
For Renwick, “What’s important is that you can’t just do cost cutting to survive a downturn. You have to have a clear vision of what you want to be and trim the frills you don’t really need. You have to show people you are going to tackle this and set a good example to your members, and I think we have done that.”
Looking ahead
For the coming year Hotondo Homes’ focus will be to stick to core messages and improve on how they are delivered. “All our marketing is based on extensive research,” says Renwick. “You need to respond to industry changes quickly, being flexible with your message but never losing sight of your core brand values. We know our marketing program is successful as our enquiry level is at record levels.”
“To be a good franchisor you have to have a passion for the franchisees,” adds Renwick. “For our members, it’s all about being in business for yourself, but not by yourself. “
Renwick is justifiably proud Hotondo Homes was this year awarded Franchisor of the Year in the Service category by the Franchise Council of Australia.
“Our constant challenge,” concludes Renwick, “is to be always looking at better ways to run a franchise. We look at things in a lateral sense to help members expand their business. It’s important that we benchmark ourselves again and again against the best. After all, we have to justify those judges giving us an award!”
View Digital Corporate Profile of Hotondo Homes in Construction Digital July 2009