A Look Inside the Home Improvement Franchise Business with Tom Wood of Floor Coverings International

Welcome to another episode of Atlanta Franchise Today with host Leslie Kuban, expert franchise consultant and owner of FranNet Atlanta. Atlanta Franchise Today is dedicated to bringing entrepreneurs and business owners the best practices and tips for their franchise goals. The boom in the home improvement industry over the last year has been staggering. If you’re a homeowner, you likely understand. People being at home because of COVID has certainly been a huge driver, but some people are starting to ask, is this trend in home improvement sustainable?

On today’s show, Leslie is joined by Tom Wood, CEO of Floor Coverings International, a nationwide flooring provider franchise headquartered right here in Atlanta. Wood shares some very interesting data to share indicating that the home improvement industry has a lot of wind in its sails for many years to come.

Transcription: 

Leslie Kuban:
Tom, welcome to the show.

Tom Wood:
Thank you, Leslie.

Leslie Kuban:
It’s great to have you.

Tom Wood:
It’s great to be here.

Leslie Kuban:
You and I have something in common. We have our franchising roots that go back to college.

Tom Wood:
We do and you and I have both been in the franchising industry for a long time.

Leslie Kuban:
Would you just tell us a little bit about your journey, how you got started and where you are today?

Tom Wood:
I sure will. I think the year was 1985, I was a college student at Boston University. Believe it or not, I was a trombone major getting a music degree. At that point in my life, there’s not a lot of money that you make in music. That’s not really a big secret, but it was something that I was learning while I was in school. I had to find something that was going to make as much money as possible so that I could pay my way through school. And I found a painting franchise, believe it or not. Would’ve never guessed that that little summer business that I got involved in would really launch me into a career of both franchising and home improvement. It’s been a great ride since.

Leslie Kuban:
Well, that’s fantastic. Tell us about, for our viewers who don’t know who Floor Coverings International is, tell us a little bit about the company and who your franchisees’ customers are and what you guys do for them.

Tom Wood:
I sure will. I couldn’t be more proud of Floor Coverings International. One of the things that we have going for us right now is, we are recognized as the number one rated flooring franchise in all of North America. And that’s based on customer reviews and feedback and net promoter score. What Floor Coverings International does, is we are really a specialist at residential retail replacement, if you will. What I mean by that is single family homeowners looking to replace their floors. We like to say, “If you walk on it, that’s what we specialize in.” We are what I would describe as a premium brand. We do great work with outstanding products and services and our franchisees do everything from sourcing the product, to doing the install and hauling everything away to leave you with a beautiful floor at the end.

Leslie Kuban:
Even though we might be at home, we’re certainly not less busy and the convenience factor of that is critical.

Tom Wood:
Yeah, no kidding. And certainly COVID has helped in the last year and a half with respect to consumer buying habits. Fewer of us are going to stores than even the trends were indicating before COVID and certainly a shop at home, retail based home improvement company like Floor Coverings International has been very well positioned for this type of situation with COVID.

Leslie Kuban:
Tom, a few weeks ago, you were generous enough to give a very interesting presentation to the FranNet group just about the home improvement industry in general. Flooring is certainly one part of that, but it’s really speaking to some more macro trends out there that are driving growth. And people are questioning, COVID’s not going to keep people at home forever. Is this a short life, this big boom in the home improvement industry? But the data you shared was pretty interesting, suggesting there’s a lot of growth ahead. I’d love for you to tell our viewers.

Tom Wood:
Yeah, absolutely. And certainly just as you indicated, all of the data right now is suggesting that this home improvement boom and surge that we are seeing is going to have a sustainable, minimum two year run, likely three to five year run. There’s a couple of underlying factors that are really fueling this. Certainly the first one is something that we were seeing before the pandemic even started, and that is the millennials are entering the home ownership group for the very first time. As we all know, the millennial group is a large group of consumers. For them to be entering into any one category in force is certainly going to put pressure in that market. What we’re seeing is before the pandemic started, there was roughly 2.6 million single family homes short for the demand at that point. That has surged to over four million homes short today.

Tom Wood:
What that means is there’s not enough housing stock for people that are looking for homes. Now, anytime we have a shortage in housing stock, what that does is put pressure on the home improvement industry as a whole. Flooring, for example, there’s flooring that’s put in homes roughly 54% of the time when a home is transacted. Then in addition to that, when people are staying at home and when they can’t actually sell their homes or they’re deciding because the home market is so hot, they’re just going to stay in their existing home for a while, they start to do home improvement. That’s the first factor.

Tom Wood:
The second factor is there really isn’t any indication that this pandemic is going to end anytime soon. Certainly when we are looking at the low inoculation rates here in North America, the United States in particular, what that means is, is we’re going to continue to see surges likely for the next 18 months is what the data is suggesting right now. And these surges only prolong the home shortage in the real estate market and the home improvement boom that is continuing right along. Those are the two biggest underlying factors.

Tom Wood:
One of the things that we like to say about the pandemic, the pandemic is terrible for people, and I don’t think anybody would suggest otherwise, but at the same token, it’s a boom for the home improvement industry. And the awkward position that those of us that are in the home improvement industry are in, is we really have to recognize both sides of that. It would be irresponsible of us on one hand to suggest that the pandemic is not real and people aren’t getting harmed. But on the other hand, it’s equally as irresponsible if we’re not leading our businesses to take advantage of this opportunity that’s there.

Leslie Kuban:
Of course, of course. When this all started a year and a half ago, I’m sure it took everybody surprised. Probably you guys as well, at Floor Coverings. I mean, did you find that you had to pivot in a certain way? But that pivot has resulted in something really positive for your brand. I’ve seen that with a lot of franchises. It forced some new innovations, new developments that are going to be carried forward into that franchise operating model. How did that translate in your business?

Tom Wood:
Well, as many of us would say, certainly those of us in business, there was no warning that this pandemic was coming. Certainly there were warning signs, but I’ll say largely we, I, was ignoring them here in North America. Then all of a sudden, it seems like in about a 48 hour period of time, we realized we’ve got a problem in front of us and this problem is not going to be a little one. If I roll back to the beginning of March 2020, we went from the hottest start that we have ever had at Floor Coverings International. Our first two months, we were up over 30% to start 2020. Then over the course of 48 hours, we’re faced with we’re going to have massive business shutdowns.

Tom Wood:
Now, when I look back to the recession in 2008, there was some hard lessons that were learned. And one of the lessons we learned at Floor Coverings International is we can’t just push through difficult times like that. Certainly we can lead through it, but you really have to be prudent with the moves that you make and you have to be swift in certain areas. We acted very, very quickly. When we knew that the pandemic was upon us and we knew it was going to be difficult, we led all of our franchisees to reduce their overhead, reduce their inventory, reduce their expenses. The things that we were all saying within our organization, were we have to make sure every franchisee is able to survive this pandemic, no matter how long it goes.

Tom Wood:
Now, what that meant was, our franchisees got incredibly shrewd with their financial leadership of their business. They learned how to lead a business with very little overhead. Now, simultaneously the thing that we would’ve never been able to predict is that home improvement actually surged and boomed. I’ve been in home improvement 35 years, I absolutely missed that as a prediction. Now, we were on it really quickly, but we got that wrong. Now, what happened was we were leading our franchisees to reduce their overhead and things like that. Certainly middle of March to middle of April was rough on everybody. But while everybody was staying at home, watching the news, reading the terrible things that the pandemic was doing, the secret that was out there, was homeowners were actually calling contractors simultaneously to come in, do their fences, do their painting, do their roofs and do their flooring. So we very quickly pivoted and were able to surge by the time that we got into May.

Tom Wood:
Now to come back to your original question, the pandemic forced us to have better financial leadership and management. By the end of 2020, our franchisees were at profit levels that we would’ve likely never been able to sustain under normal circumstances. What it’s a result of is just better leadership, better management, better financial acumen.

Leslie Kuban:
That’s incredible. Congratulations to you, your team and your franchisees.

Tom Wood:
To our franchisees-

Leslie Kuban:
Tell us about your franchisees. What do they look like? What attracts them to a flooring franchise amidst the sea of other possibilities that are out there?

Tom Wood:
Well, that’s another interesting change in the world of franchising and certainly at Floor Coverings International. You referenced you and I started in franchising back when we were in school. I found my way to a painting franchise back in 1985. At that point, it was very difficult to attract what I would call really well educated, smart business people into the home improvement industry. But that has certainly changed in the last 35 years. I would describe our typical franchisee is middle to senior level executives, many of which have gotten to that middle stage in their career, realize that they have incredible strengths and talents that they believe are underutilized working for somebody else. So they are looking for a business opportunity that will really give them that ability to lead a team, go into a marketplace that they can, for lack of a better way to put it, dominate and it provides them that opportunity.

Tom Wood:
You asked what is our typical franchisee. Shrewd executives from many different types of industries. We’ve got manufacturing, we’ve got people from legal backgrounds and accounting and things like that. But all of them have one thing in common; a drive to lead a business, a drive to find a category that they can be an industry leader, and a drive to be in their local marketplace, where they can be proud of that business that they have. That’s what our franchisees are.

Leslie Kuban:
I think something that’s unique about your business, is that someone can drive a really large business with very little infrastructure, very little headcount. What does the makeup of your larger franchisees’ businesses look like? Who are the staff, what does their org chart look like?

Tom Wood:
Great question. We actually just got back from a meeting with the leadership of our franchisees and this was one of the topics, as our franchisees are scaling like they never have before. In our businesses, the average franchise does roughly a half a million dollars of revenue for each full-time employee that they have in their business. For example, if a franchisee is a $2 million dollar operator, they typically have four full-time people in the business, including themselves. If they’re a $4 million dollar business, they typically have eight full-time people in their business, including themselves. Now, what that doesn’t include is the subcontracted labor force that we use for the actual installation. That group is fluid, if you will. But in terms of a full-time staff, it’s roughly $500,000 for a full-time person.

Leslie Kuban:
That’s amazing because there’s a lot of businesses where at that level of revenue, you’re going to have multitudes of people on your payroll. I think that’s something that’s really special about your business model.

Tom Wood:
It is one of the things that really attracts people to our business because they don’t have to come in and lead a huge team.

Leslie Kuban:
Tom, what advice would you give those folks who maybe they’re working now, they’ve always had the itch to own their own business. Times are crazy right now, but they need some advice on how to go about this, how to think about it. What advice might you give to that target clientele for Floor Coverings International franchisees? Just how they should approach thinking about business ownership?

Tom Wood:
It’s a really common question and it’s a good question. Oftentimes really getting to the root of that in my opinion, is the difference between someone having tremendous success with whatever business they find or longterm struggles. I generally look at it there’s three points. The first one is, is finding a category that you have some passion around. Now it doesn’t have to be something that you’ve got a skillset around, but it’s something that you can wrap your mind around. It’s something that you can feel confident with and be proud of and something that over the length of time, you’re just not going to get bored with it essentially, if you will. That’s one key thing.

Tom Wood:
The second one is the team and the culture of the organization. Oftentimes that’s one that I would describe as being really underutilized when somebody is searching for a business. Here’s what I mean by that. First of all, you’re looking for a team that’s going to be able to lead during really good times and lead during really lean times. What I mean by that is, it’s a franchisor that’s going to staff their organization properly and is going to have resources available for you no matter whether things are good or things are bad. But there’s another piece as well, and this is one of our core values at Floor Coverings International, is being involved in that franchise community, but also enjoying doing it. Do you like the people that you are around, do you respond to them? Are they going to be able to motivate you?

Tom Wood:
Then the third thing is, is ensuring that you actually have a vision and a plan for the medium and the longterm. Because anytime you get into a business, there’s a euphoria of getting started and then there’s the reality of what you just bought and what you just got up and started. At that point, it stops being what I would call just day to day, everyday fun and there’s an element of it that it starts to become a job again. When it gets to that point, you’ve got to like the people that you’re working with, you have to have a vision for where you’re going to be in three years, and five years, because if you’re stuck in the weeds in that early stages, it’s just not any fun.

Tom Wood:
So finding a business you have a passion for, finding an organization that you like to be around, and ensuring you’ve got a vision for where you’re going to get.

Leslie Kuban:
What a great advantage is for people today, beginning an exploration process is they now know to ask questions about how does this franchise organization operate during a major trauma like a pandemic? Which nobody alive has ever lived through before.

Tom Wood:
That’s right.

Leslie Kuban:
Two years ago, that word wasn’t on anybody’s mind at all and wouldn’t think to ask questions like that.

Tom Wood:
No kidding.

Leslie Kuban:
That’s a real plus for people who are working through their exploration now. And I totally agree with what you’re saying about having a North star, because there’s that honeymoon phase of I’m a business owner now. But everybody goes through a learning curve and not all the learning is easy and fun. There is a bit of that grind aspect of that first year of business and to carry it through is that culture, is that skill match fit, and the team that you’re working with, and having that thing that you’re working towards.

Tom Wood:
I absolutely agree.

Leslie Kuban:
It’s like our friend Steven Covey talks about; begin with the end in mind.

Tom Wood:
That’s right and certainly when you have something like a pandemic, we really don’t even know what’s going to be written about and how this is going to be viewed yet, because we’re still likely in the middle stages of it at best. But we will be able to look back at this and you’ll be able to ask yourself about the different franchisors or business models, when the pandemic started, did the franchisor lead with the franchisees in mind in ensuring that their wellbeing was cared for and respected and watched out for? Or did that franchisor worry about themselves first and their franchisees second? There’s a lot of great franchisors that you can look at right now and say, “They clearly demonstrated in one of the worst situations any of us have ever had to lead through, that their franchisees came first.” I think that is just so important when you’re looking for the right business model.

Leslie Kuban:
Yep. I’d love to end on a success story, Tom. Tell us an inspiring story about a franchisee. Anything that they’ve experienced. Does anybody come to mind that you’d like to share about?

Tom Wood:
Gosh, what a great question. Looking back on the last year, we are very fortunate and blessed that we’ve had a lot of tremendous success stories. We’re going to grow this year, 64% is what we’re looking at. In that, there’s a lot of success stories. But the person that comes to mind for me probably first and foremost, is a franchisee of ours that’s in San Antonio, Texas. He decided four years ago, five years ago that he was going to move his family from a very difficult situation in Venezuela. Tough political situations, very difficult family situations, if you know anything about that country. To the United States, essentially on a wing and a prayer.

Tom Wood:
When you decide to come to the United States and open a business from another country, certainly there’s obstacles to go through to get here. But then one of the challenges that you have coming into the United States is you’re not going to be afforded credit essentially. You have got to be able to sustain your business on the resources that you bring with you. And this particular franchisee, I have just been so proud of watching how he and his family have led through one challenge after another. Then just when their business was starting to emerge, COVID certainly had brought some very difficult family situations. But he led his business through it, led a tremendous team. He’s going to be a $2 million dollar business this year with a very bright future in front of them. That’s one of the ones that comes to mind very quickly.

Leslie Kuban:
Well, that is a very inspiring success story and I know you have many others as well. Tom, thank you so much for joining today. It’s been a pleasure to have you and congratulations on your success, your franchisees’ success, and for many years to come.

Tom Wood:
Thank you, Leslie. I really appreciate that.

Leslie Kuban:
Folks, thanks for joining me on another episode of Atlanta Franchise Today. Look forward to seeing you next week.

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