Expanding through a franchise
December 21, 2009 | 6:00 pm CST

Small business owners Dan and Corbin Johnson were in the midst of an identity crisis. In the custom closet industry, image is everything. The Polaroid pictures of completed projects, handwritten references and homemade brochures were handicapping the company's growth, especially when compared to the competition's slick marketing materials.

"Classic Closets, our former company, had grown into the largest independent closet company in the Denver area, but there was a huge discrepancy between the bigger companies' marketing materials and ours and it was costing us jobs," says Dan Johnson. "We sat down and figured out we needed to come up with a lot of money for brochures and fresh, integrated marketing materials to compete."

But, after taking a hard look at the market, the Johnsons decided purchasing a franchise would be the best way to take the company to the next level. "We needed to do something to take on the closet companies that had the lion's share of the business in Denver," Dan says.

Since joining the franchise nine years ago, Denver Closets by Design, Dan and Corbin's new company, has grown more than 600 percent.

Becoming a franchise

After researching several closet franchises, the Johnson brothers knew what they didn't want.

"Some are set up as more of a dealership, for example, companies buy finished products and sell them," says Dan. "We've seen those types of closet companies come and go because that model is difficult to grow with."

In March 1999, Classic Closets traded its independence and purchased the territories of Denver and Northern Colorado to become part of the franchise, Closets by Design, which provides custom closet design, manufacturing and installation.

"In our business, the franchise model takes care of almost everything," says Dan. "The marketing for us is huge because the entire business starts with advertising and sales. It doesn't really matter how well you build a product if you don't have the orders."

Because the franchise builds the brand and coordinates marketing materials, all franchises share one Web site, www.closetsbydesign.com. Web leads are distributed by zip code and according to Dan, a new Web-based advertising campaign is providing the company with lots of new business.

Dan has learned after weathering past economic down cycles that aggressive marketing is the only way to capture new business. "You can't pull back," says Dan. "When new construction starts are down, we do more remodeling work. The business is there, it's just a matter of what type of business it is."

Being associated with a national brand allows access to more closet accessories, such as rods in any color, finish or shape, which are now at Johnson's fingertips. "The industry has really grown and the accessories and finishes a client chooses impacts the cost of the closet," says Dan.

Vendor discounts on hardware and advertising are another perk. "Discounts can be as much as 50 percent less than what we were paying as an independent company," says Dan. "When you're buying on a national level, vendors take more interest in the pricing they offer you."

Manufacturing it right

Even though the Johnsons ran a successful independent closet company, they've always found the franchise's methods and procedures invaluable. "The franchise offers advice on how to lay out a facility and the best way to do things," says Dan. "You're still free to do it your own way, but why reinvent what's been successful?"

All closet systems are produced in the company's 18,000-square-foot Denver manufacturing facility with the exception of raised panel thermofoil doors. "We do as much of the cutting and finishing as possible in the factory to produce made-to-order closet systems that are ready for construction and final fitting on site by company installers," says Dan.

While the manufacturing process hasn't changed much since becoming a franchise, the company has increased its volume and improved quality. "The franchise kept us from making similar mistakes smaller companies can make, such as overbuying machinery or over hiring," says Corbin Johnson, Co-owner Denver Closets by Design. "Having defined parameters for efficiencies is like finding a big pile of money. For smaller companies defining efficiencies is a very expensive and time consuming process."

Once the design and sales processes are complete, the order moves to the production department. Cut lists are generated and special items are taken into account.

Material is then cut-to-plan on a Holzma beam saw and is edgebanded on one of the company's Holz-Her or Brandt edgebanders. The parts are then bored or machined on its Gannomat or Biesse point-to-point machine. Quality control stations are located throughout the production line to make sure customers receive the best product possible, comments Corbin.

"The franchise helped us plan for growth with machinery acquisitions and avoid big mistakes," says Corbin. "We were thinking about purchasing nested-based machinery and the franchise helped us see how this would have been a costly mistake."

The closet company does produce some solid wood systems but subcontracts the finishing. "We don't process much solid wood, which is normally used in very high-end closets," says Dan. "The manufacturing process for solid wood is very different from what we normally produce, which is panel processing."

While closets are the biggest percentage of the bottom line, garage systems and home offices are quickly becoming larger revenue generators. "We provide organization systems for any room in a house, such as laundry rooms, pantries, wall units, ski rooms and mudrooms," says Dan. "People want a change from stationary shelves and rods that don't maximize space. We offer customers organization that adapts to their changing lifestyle."

To start the process, a designer visits the home to take measurements and creates a design based on the customer's lifestyle. After joining the franchise, Johnson streamlined the company's sales process. "One of our franchise goals is to meet with a customer, create a design that works for their needs and set up an installation date in one meeting," says Dan. "We used to design a system for a client after the meeting and follow up with them a week later."

Thinking big

Giving up some control wasn't easy at first for Dan or Corbin. "We control the manufacturing and installation processes," Dan says. "The franchise is helping us grow without the big brother' feeling."

However, Closets by Design corporate office is monitoring the company's progress. "I have someone to report to who is interested in our success and is pushing us to succeed," says Dan. "It can be frustrating when you're not performing up to your expectations or theirs."

"It's nice to have someone right here to help you move past any obstacles that may arise and there are obstacles," adds Dan. "Growing a business is difficult for different reasons at every stage."

Networking with other franchise owners also has been an asset. "You can see the potential for growth after talking with other closet companies that are massively bigger compared to our operation," says Dan. "It gives you permission to think big."

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About the author
Kathleen McClaughlin

Kathleen McLaughlin was an associate editor and contributor to CabinetMaker and FDM magazines for a number of years. She is currently social media/SEO editor and custom publications editor at WATT Global Media.