How to Franchise Your HVAC Business: Cost, Strategy and More
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It’s no secret that essential home services, especially indoor air quality, are in demand now more than ever. If you’ve met with success as you’ve grown your HVAC business, strategic expansion through an HVAC franchise might be the right move for you.
At its most basic, franchising allows the sale of franchise rights of your company’s name and business model to independent investors, usually within a certain territory. Those who buy a franchise pay your company an initial fee, and then ongoing royalties.
The benefits of an HVAC franchise model include:
Larger geographical service area
Fast-paced growth, and
But how do you know if an HVAC franchise is right for you? How much does it cost to franchise your business? We’ve gathered expert information to give you a step-by-step guide on how to turn your business into a franchise.
How to Franchise Your HVAC Business
Decide what you want to achieve
Develop your HVAC franchise framework
Sell to franchisees
Invest in systems and support
How Much Does It Cost to Franchise Your Business?
Costs to start an HVAC franchise include:
Franchise Disclosure Document
Legal and state fees
The cost of franchising your business depends on a lot of factors, but legal franchising experts suggest an initial startup budget ranging from $42,500 to $60,000 (or more) to franchise your business.
These costs cover trademark registration, assembling a franchise agreement and disclosure document, legal and state fees, and accounting for audited financial statements. Franchise experts say it’s also important to remember to budget for recruiting franchise talent and advertising to franchisees, because creating a franchise isn’t something you do alone.
Keep in mind, these costs differ from franchise fees—fees paid to franchisors by franchisees. Experts warn you shouldn’t rely on those fees as income in the early stages of setting up your HVAC franchise.
Decide What You Want from Your HVAC Franchise
To decide if an HVAC franchise is right for you, first ask yourself what you want to achieve by franchising your business, then strategize how you’re going to reach those goals.
No matter the trade—whether HVAC, plumbing, or electrical—the business principles of starting a franchise remain the same.
“The ultimate question as a consultant and business owner is: What do you want?” says Ellen Rohr, a long-time business consultant and Chief Operating Officer of ZOOM DRAIN Franchising, which has grown to 18 locations across the U.S.
Rohr is a company member, along with Senior Partner Al Levi and Jim Criniti, owner of the first ZOOM DRAIN franchise and model center.
“Your business serves as the vehicle to drive you in the direction of your dreams,” Rohr says. “What do you really, really want? Creating a franchise is one option. If you’re looking forward to a way to create wealth, to not do everything yourself, to be of service to other people, creating a franchise may be a good vehicle.”
A simple definition of a franchise: collecting money for systems and an established brand.
“We’re going to sell you a brand and systems, and hold you accountable, so you can grow an empire with us,” Rohr says of the franchise concept.
Once you’ve created a plan to reach your franchise business goals, surround yourself with a team of like-minded people who can help you reach them.
Develop Your HVAC Franchise
Set up a legal framework
Create a franchise operation manual
Starting an HVAC franchise is legally complicated, so you’re going to need experts to help you put the proper framework in place.
HVAC franchises, like all franchises, are subject to Federal Trade Commission and state regulations. The Federal Trade Commission’s Franchise Rule gives prospective franchise buyers the information they need to weigh the risks and benefits of the investment.
Franchisors must give prospective franchisees background information on the franchisor, costs of entering into the business, legal obligations of both parties, statistics, and audited financial information, according to the FTC rule compliance guide.
The Franchise Disclosure Document is given to prospective franchisees, which encompasses audited financial statements from the franchisors, the franchise agreement, and personal guaranty to sign, and the operations manual table of contents.
Also, different states follow varied franchise laws, so it’s important to have someone with legal franchise experience by your side as you navigate the franchising process.
The franchise operations manual is also key in HVAC franchise development. It details franchise operation processes, including how to provide the company’s services, how to manage effectively, and other confidential information.
Additional considerations for starting an HVAC franchise include procedures and systems, applicant approval process, and a marketing and business growth plan.
Sell HVAC Franchises
If you’ve already developed a successful business model before you create your HVAC franchise, expansion to a franchise is smoother. Your systems are already in place, proven to work, and potential franchisees can see how you operate.
“Get your systems in at one location, so you get the kinks out,” Rohr says. “My encouragement is to prove out systems at the model center. … Whether you franchise or go multi-shop, Al (Levi) taught me you want to be red-hot right at that model center for it to be lukewarm at the next location.”
Franchisors offer ongoing support and training to franchisees, and typically perform marketing and advertising as well.
Franchise fees and royalty payments make up a key component of a franchising structure. A franchise fee amounts to the initial cost of joining the franchise system. Royalty payments produce ongoing profits, paid for a certain period, such as monthly or quarterly.
Each franchise maintains their own system for royalty fees, and some require a fixed percentage or set dollar amount. Others may use an increasing or decreasing percentage based on sales, and some require none. If the royalty fee is based on a percentage of gross sales, it could range between 5 and 9 percent, according to franchise business experts.
Invest in Systems and Field-Management Software
As an HVAC franchise, you’ll want to make sure your company operates efficiently at every level. ServiceTitan HVAC software allows all of your franchises to be on the same system, so you can manage across several locations.
Among other features, ServiceTitan’s comprehensive field-management software system allows you to automate:
“You’ve got to have systems translatable from all locations,” Rohr says. “What’s cool about it, because of ServiceTitan’s tenets and permissions, I can see how everyone’s doing every day for sales, average ticket, close rate, and implementation use features. I can see what’s happening.”
Scott’s One Hour Air Conditioning & Heating and Benjamin Franklin Plumbing in Tampa, Fla., one of the larger franchisees in that franchise network, used ServiceTitan software to grow into a multi-million-dollar revenue company.
“Software can be either something that just gets you by or something that really enables you to drill down, to be able to really pin down and say, ‘This line of revenue is actually extremely profitable,’ versus, ‘We’re putting a lot of effort into this and we’re not really making that much money,’” says Melissa Fair, who works in the company’s human resources and risk management department.
“It’s being able to understand, ‘OK, here’s this dataset. Let me see where it’s all coming from and where it's all going.’ With this software, we are actually able to do that,” Fair says.
Automating the customer experience process allows HVAC companies to target marketing to the local audience, which shows that even though you operate a franchise with a national or regional brand, you’re a local business providing HVAC services for customers in the nearby area.
Buying into HVAC Franchise Opportunities
If starting your own HVAC franchise or AC franchise isn’t right for you, but you want to join an existing business structure, buying an HVAC franchise instead might be the right move.
Benefits of buying an established HVAC franchise include:
Brand name recognition
Stability in an established business
Support in training and marketing
In the HVAC business, buying a franchise might be a way to create a salable asset for the future, but it’s important to consider the advantages and disadvantages. Choosing to build an independent business or join a franchise must be a decision that aligns with your goals.
Some choose HVAC franchise opportunities because they still own their own business, but enjoy the benefit of tried-and-true processes already in place. If you own an AireServ franchise, the company takes into account several factors for territory size, including where your current customers are located, if you have an existing business.
If you decide to buy an HVAC franchise, do your research so you fully understand the process. Before you invest in any franchise, obtain a copy of the franchisor’s Franchise Disclosure Document. Potential franchisees must receive that document at least 14 days before you are asked to sign any contract or pay any money to the franchisor.
Steps to buying a franchise include:
Franchisors are very selective of their franchisees, because they seek a good fit and an applicant who meets their requirements. Different businesses establish different startup requirements. To find HVAC business opportunities, research companies of interest. Franchises offer contact information for franchising opportunities, or prospective franchisees can fill out an online form so a franchise development manager can contact them directly.
Whether you choose to create your own HVAC franchise or decide to buy an existing HVAC franchise, automating the systems for your residential services franchises provides an easier way to prove to your local customers that you can give them efficient, quality service no matter how many locations you manage — which in turn, grows HVAC leads and boosts overall revenue.
ServiceTitan is a comprehensive HVAC business software solution built specifically to help service companies streamline their operations, boost revenue, and achieve growth. Our award-winning, cloud-based platform is trusted by more than 100,000+ contractors across the country.Learn More