Launching in the U.S. during the financial crisis, however, where home sales were at rock bottom prices, proved to be a greater challenge. As a result, Mr. Redfern to look elsewhere to continue his growth.Pilin_Petunyia/Getty Images/iStockphoto
THE CHALLENGE
With dreams of building the most trusted home inspection company in the industry, Bill Redfern started A Buyer's Choice Home Inspections in 2007.
Initial success came easily for the Halifax-based company as Canadian realtors and buyers sought a higher level of professionalism with home inspectors.
Launching in the U.S. during the financial crisis, however, where home sales were at rock bottom prices, proved to be a greater challenge. As a result, Mr. Redfern had to look elsewhere to continue his growth.
THE BACKGROUND
Mr. Redfern had been in the real estate market since 1987, working his way from agent to broker and then investor – amassing over 300 rental units.
"Throughout my years in real estate I experienced home buyers walking away from a home purchase at the 11th hour because of an opinion from a self-identified home inspector chosen because he or she was the lowest priced service provider," says Mr. Redfern.
In sharing his experiences with many of his realtor associates he realized they too had similar experiences.
So for an entire year, starting in 2004, Mr. Redfern played 'mystery shopper,' calling hundreds of home inspectors in over 30 cities in North America and researching the industry in terms of home inspection utilization rates.
During his investigation, he learned about what most home inspectors were doing, and more importantly, what they weren't. He found that while 75 per cent of home sales included home inspections, there was pent up demand for credible, reliable and consistent home inspections.
With that knowledge, Mr. Redfern decided to start a franchise-based home inspection company called A Buyer's Choice Home Inspections.
He decided upon the name A Buyer's Choice Home Inspections for three reasons:
- It focused on the customer and their perspective;
- It was was easy to remember – which made it easier to capitalize on word of mouth;
- It was alphabetically first in business listings of home inspectors. E.g. Yellow Pages.
In 2006, he tried to figure out how to franchise his home inspection business and allow it to be scaled in multiple geographies. Mr. Redfern chose the master franchise model, which grants regional master franchise owners the right to sell unit franchises to individual franchisees, because he believed that master franchisees could better train and develop unit franchises.
In 2007, Mr. Redfern completed the legal process of creating a franchise and began selling franchises across Canada.
The initial franchise was purchased by a recent immigrant to Dartmouth, N.S., and the second franchise was sold to a local real estate salesperson in his 30s who was looking to leverage his relationships and the business experience he had gained by purchasing, running, and then selling a small business. Then a number of other realtors who worked for RE/MAX and Century 21 became franchise owners because they were familiar with the master franchise model.
By the end of 2009, A Buyer's Choice Home Inspections had 15 master franchises and 69 unit franchises in Canada and had representation in every province but Quebec. It was at this time that Mr. Redfern started eyeing the U.S. to facilitate his growth. The initial attempt to enter the States began with the sale of two master franchises, but they didn't do well because of the financial crisis.
THE SOLUTION
In 2010, Mr. Redfern decided it was time to venture outside of the U.S. and consider international expansion.
"We waited out the financial crisis and until we had a healthy cash flow before taking on international expansion. We could have taken out a bank loan or taken on investors but I believe the fastest way to lose money is to start with too much," says Mr. Redfern.
He began with months of travel across Europe looking for a destination location that was easily accessible and could become a central training hub that would encourage franchisees to bring their spouses with them when they did the training.
Mr. Redfern's research led him to the Czech Republic which he felt would be the ideal location to open a European office.
"We chose the Czech Republic because it was one of the emerging democracies in central and Eastern Europe, it had one of the most developed industrialized economies and it was one of the most stable and prosperous of the post-Communist states of Europe," says Mr. Redfern.
"It was had fantastic transportation hubs that made is easy for people to get in and out for meetings and training. It also had upwardly mobile consumers who were starting to become aware of services such as home inspections services and there was thirst for entrepreneurial opportunities like the one that owning a franchise brings," continues Mr. Redfern.
Selling international franchises required significant modification in language and context when preparing franchise documents.
Training also needed to be modified to meet the needs of the local markets and the structure of the building in those markets. For example, in the Czech Republic, many of the buildings are older masonry structures.
Because home inspections were not common in the Czech Republic at the time Mr. Redfern talked to local building experts, real estate people, engineers, home builders, general engineers, contractors, mortgage folks, appraisers, and evaluators. This helped him understand how the local market perceived value and what would make a home inspection company valuable to them.
He was then able to position the value of professional home inspections through local real estate communities.
THE RESULT
While setting up the Czech Republic office, Mr. Redfern met a Century 21 franchise owner who expressed interest in purchasing a master franchise for that country.
Mr. Redfern sold his first and second international franchises to this Century 21 franchise owner who purchased the franchises for both the Czech Republic and Slovakia. After that, international franchises were sold in New Zealand and South America.
In 2012, a Florida office was opened to facilitate U.S. growth. The following year, when the U.S. economy came around, one master franchise and 29 unit franchises were sold.
A Buyers Choice Home Inspections now has master franchisees in six countries and conducts almost 2,000 home inspections a month.
"We have unit 125 franchises in Canada with home inspectors in every province but Quebec, where there are more home inspection related law suits than the rest of the country combined. We are now applying what we learned in our internationalization efforts to help home owners and real estate agents in Quebec find more professional home inspection services and avoid potential law suits," says Mr. Redfern.
Craig Elias is the founder of Shift Selling Inc. and an entrepreneurship instructor at the Haskayne School of Business at the University of Calgary. This is the latest in a regular series of case studies by a rotating group of business professors from across the country. They appear every Friday on the Small Business website.
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