The Maids Franchise Startup Failure
Molly Maids Compared To The Maids
Molly Maids Due Diligence
Early in our investigation of this general line of business, we established contact with a very success Molly Maids Franchise owner. He began operation during 2006, grew through the recession period and was very pleased with his investment. P&L information was provided from 2006 through 2011 and the information was used as our basis for growth expectations. When we discovered that Molly Maids wasn’t an option, I made a significant error in assuming that performance of a franchise from The Maids should be comparable to one from Molly Maids. At least in our experience, it was not.
In retrospect, the outcome should have been anticipated. The Maids uses a 4 person team while Molly Maids uses 2 people on their teams. The smaller teams allows them to work on job much smaller than we could afford to quote. Another and perhaps the most important difference is in the way employees are paid. At The Maids, employees are paid an hourly rate. Molly Maids pays employees a percentage of the amount received for a clean. The important point about this approach is that a lot of “risks” are passed on to the employee. If a job is underbid and significantly more time is required for the clean than estimated, the employees “take a hit” because their pay suffers along with decreased cash flow for the business. Use of the percentage approach probably also encourages employees to work harder than when receiving an hourly rate.
During our “flat line” period, If we had used 2 person Teams, we would have had the ability to “ratchet down” quotes and compete more effectively. During the Spring of 2014, one of The Maids Franchise owners shared that he too experienced a difficult 4th quarter of 2013. As a result, he was adopting an approach implemented by a more senior owner where in some cases 2 person Teams were used. They called the approach “Maid Lite” or something close. Apparently I was not the only person making the observation about two person teams being more effective at least in some situations.
Performance data provided by the franchise owner from Molly Maids was very impressive. Gross in thousands of dollars is plotted against time below:
With this kind of growth, reaching profitability quickly is feasible. This data was the basis of our due diligence with respect to performance and we now know that it was ill founded. If The Maids had delivered growth comparable to that David experienced we would have an operating, profitable and viable business today.
During the early months of operation, our performance wasn’t as strong as that reported for Molly Maids but “tracked” well. After much thought, I concluded that our early testing of Marketing approaches which involved funding every known approach gave the business a “kick” during the first 5 months. When we backed off to a Marketing expenditure rate we could afford, business started drying up.
If I had realized that The Maids and Molly Maids are totally different approaches to the same service provision, I would have spent more time looking at data from The Maids. When I received real data from a franchisee of The Maids during the summer of 2013, the differences became readily apparent. The franchise had been in operation several years without impressive growth then the owner began spending full time on the business and things changed. He was able to stimulate growth through cost cutting and Marketing changes but did not achieve anything close to the rate of growth reported by Molly Maids.
To look at the two cases, I selected data from a currently operating successful The Maids franchise starting and compared it to startup data provided by David P. of Molly Maids. Results are displayed below:
Even casual observation reveals that growth enjoyed by Molly Maids franchises was drastically different that than observed with The Maids. Granted, the cases compared are not identical but they should provide similar results.
My personal belief is the difference in the two companies goes well beyond the business model. Before they were mentioned to us by our broker when he told us that Molly Maids franchises were not available, I had never heard of “The Maids”. Essentially everyone knows about Molly Maids. They are just accepted as being well entrenched in the residential janitorial business but many times when talking to potential new customers repeating The Maids several times was necessary before they understood the name.
Summary of experience
The Saga - Detailed Account Of Franchise Startup Failure
Is Molly Maids Equivalent To The Maids?
Demands of Managing Operation
Hourly Manpower Problems
Professional Manpower Difficulties - Field Managers
Franchises Do Not Fail - They Just "Go Away"
Need Money - Find An Angel
Selling The Business
Owner QualificationsSuccess Motivation