My previous two columns explored several issues that developed while negotiating a deck installation program with a big-box home improvement chain. Hopefully readers who are considering a relationship with a big-box retailer will pick up a few ideas from my experiences. By the end of my last column, I had outlined most of a relationship that would work for both parties, but there are just a few more items to discuss. Warranty claims. Our franchisees would retain all obligations for their workmanship, but since most claims are for defects in materials -- and the retailer would be the supplier -- we would need a crystal-clear agreement on their obligations.
Ownership of intellectual property. Since our firm would be providing the designs, structural plans, takeoffs, pricing forms, and artwork, we would retain ownership rights. This raised the question of what the retailer intended to do in areas where we did not have a franchise. One possibility would be for us to license the rights to use our materials to a local contractor until such time as we awarded a franchise in that area.
Labor rates. Given the variety of labor rates in different markets, our pricing would have to reflect local costs. This obviously isn’t an issue if your organization operates in a single market.
Other costs. There can be differences in requirements within a single metropolitan area. Beyond the building permits, some jobs may require a Dumpster, portable toilet, zoning and health department fees, and so on. The county where we had planned to pilot the program, for example, required a contractor to have a personal interview at the building department before a condo or townhouse deck project could even be sold. Clear procedures to price special requirements were critical.
Sales staff. Our company had previous experience working with a national retailer on a similar program where the store’s personnel were responsible for sales. The challenges we discovered were:
Over-promising the performance/quality of the building material
Promising additional features/work outside the scope of the designs and contract
Inability to answer technical questions
Mistakes in communicating design changes or special customer requests
To avoid these kinds of issues from occurring, we would have to develop and deliver appropriate policies and training, as well as procedures to deal with unexpected costs from a salesperson’s representations. We also asked for the following standards of materials and performance from the retailer:
Accurate selection (we would fax or e-mail computer-generated purchase orders)
Excess materials/culls picked up and restocked
Ability to accommodate written drop location instructions and special conditions
Given the difficulty of coordinating policy among multiple stores in a single market area, I proposed that one store in an area be the supplier, and that we facilitate a personal relationship between the franchisee and the manager of the lumber department.
After three stages of negotiation, it became clear that my approach of describing the devil by its details was more than the installed sales manager had bargained for. It wasn’t long before I received a “Thanks, but we’re going to use a local contractor for this program” letter. No surprise, because there will always be contractors willing to work for little more than the cost of their labor and who will deal with problems after they occur rather than beforehand. We’ll never know how successful the program could have been with a reliable, professional delivery partner that had an investment in the outcome. --Rick Provost has over 20 years experience helping to build the country’s largest design/build franchise network specializing in exterior home improvement. Formerly the president and CEO of Archadeck, Rick is now a principal in SMI Safety, a safety consulting and staffing business that specializes in industrial construction. He also consults with emerging franchise companies to help them develop growth strategies and business systems. He can be reached at firstname.lastname@example.org.