The Maids Franchise Startup Failure

Summary

Last Revision  12-31-15

Time spent reading information presented herein could be the most important personal investment of your life!  It has been in place for two years without even a hint of rebuttal.  Now, if it wasn't factual don't you think defensive action would have occurred?

 

Let's start with the really short version.  After performing due diligence on Molly Maids, I learned that all franchises in the state of Texas had been sold.  A broker told me paraphrasing  "The Maids franchises are available and they are just like Molly Maids" and I believed what he said.  That was a big mistake because it led me to examine The Maids with far less vigor than that expended on looking at Molly Maids.  After committing to the agreement and sinking a bunch of money in the business to my surprise when the phone would ring and we answered cheerfully "The Maids" often the response was "Isn't this Molly Maids".  About a sentence and half into explaining that The Maids was actually a better choice, a dial tone was heard.  When people did listen and I repeated the franchise name, many said "never heard of you".  If you think that was conducive to success I can tell you from first hand experience and a loss of half a million dollars it was not!  Think I am just a "sore loser" who doesn't know what he is talking about well keep reading then give me a call at 281-685-4930, ask for Ron and I will share our experience with you then you can decide.

 

During the late spring of 2012, Marlene met a lady at a networking luncheon who described success with a franchise that was almost unbelievable.  The business had opened almost 10 years ago and weathered the recession with minimal interruption.  Everything about the business sounded positive so we began investigation into investment possibilities.

When we discovered that all Molly Maids franchises in the entire state of Texas had been sold, our broker suggested investigating The Maids saying they were close to equivalent.  Assuming that The Maids was equivalent to Molly Maids (in our opinion a big mistake) we purchased essentially all of Fort Bend County in the southwest Houston area and began operation during September of 2012.

Since we were experienced with startup of a franchise in a totally different industry during 2006, we did not enter the exercise without an appreciation of what was involved.  Our other business has been operating almost 8 years and is the most successful in that  franchise system providing some credibility for our expertise.  When we began startup of The Maids, the same principals were applied as with our other business.  We systematically tested all available marketing techniques, carefully tracked results, identified the most effective of the approaches and funded those methods to the limit of economic ability. 

If you are exploring purchasing a franchise and mention us to The Maids or the primary broker selling their franchises, who is also their employee, you will be told that we are "mavericks" who deviated from their system which lead to failure.  In reality, our  most significant deviation involved spending about $20,000 on a build out (if clicking on link doesn't start video then right click the link and select "save target as or "Save Link As" or to download to your local computer where it can be played) to allow us to have comfortable office space rather than using a warehouse space without air conditioning as they recommend.  During training, we were told to provide a breakfast area and simple foods for employees which was part of the justification for the build out.  When operating with more than one Team, having a staging area is mandatory.  Anyway, the total difference in our approach and the "bare bones" approach was less than $20,000 so that was not the cause of failure.   In second place was spending slightly more on marketing than recommended.  Those deviations surely failure does not make.  Before you discount us as a "nut case" who "has an ax to grind", read all information provided here.  You may buy a franchise and become successful beyond your greatest dreams and your may fall flat on your butt, end up with half a million dollars gone and facing bankruptcy.  Time invested in digesting our experience could be the most rewarding of your life.

Things progressed as expected for about 5 months.  We systematically tested every available marketing approach by using tracking phone numbers and established effectiveness ranking.  Clearly use of the internet and two forms of customer direct mail were the most cost effective approaches so we focused on those approaches.  Our revenue “flat lined” and remained in that state for 9 months.  The approach to growing revenue involves signing customers identified each month using marketing approaches for regular maid service.  The concept is similar to putting money into a savings account.  Total revenue is composed of Regular Maid Service revenue plus Occasional Maid Service revenue.  Each month OMS is a direct function of the effectiveness of the marketing program but it only happens once.  Obviously, once an RMS customer has been obtained, keeping that customer is highly desirable.  In our case, we were  losing them as fast as we got them and could not stop the loss process.   We were confident that quality was as it should be because Marlene became our Field Manager starting in November.  She personally talked  to customers and checked work quality.  During the last week of January 2014 while inspecting a home, a customer told Marlene “I almost skipped service this week to spend the money on Botox but when I thought about how good I feel after the girls finish with my home I decided the Botox could wait."  That is a pretty strong indicator that our quality is where it should be.

Another RMS loss variable is customer interaction.  Marlene personally met every customer when we performed a First Time Clean.  She literally has a photographic memory so once she meets customers she is able to call them by name going forward.  I really don’t think anything further can be done to eliminate any negative contribution.

If quality and customer familiarity is as it should be, what was causing RMS loss?  Based on my personal discussions with customers when providing quotes, I believe our business is a “commodity” in our marketing area.  People only care about costs.  What you tell them about quality of the clean you deliver doesn’t mean anything to most.  I do not think that growing a customer base in our marketing area is possible using prices that would allow us to be profitable.  Put another way, we have been trying to accomplish the impossible.

A very successful The Maids Franchise which opened for business 10 years ago is operating less than 20 miles from the location of our office.   If making the business work is so difficult, how are they succeeding?  The answer seems simple to me.  There is a lot of difference is operating an existing business and starting a new franchise.  When a large customer base is in place, it provides cash flow for funding marketing over a long period to encourage growth.  Perhaps competition composition was different 10 years ago making market penetration easier.  Without having detailed information about the franchise, it is impossible to know anything about their current growth rate.  Of course another option exists.  Maybe the owner of that franchise is simple better at running the business than we.  We are in no way saying that opening a franchise and becoming very successful today is impossible.  We are saying that assuming that success is essentially guaranteed if you  invest adequate money and effort would be a huge mistake.  Just ensure that the situation has been thoroughly investigated and that all assumptions are evaluated several times to ensure validity.

Two other Houston Area franchises were sold around the same time we purchased Fort Bend County.  In both cases, the owners opened with both husband and wife working on their franchise startup.  Today (May 2014) both guys are back in the workforce to help support their businesses and in at least one franchise the lady is frequently required to work as a cleaning team member because of manpower difficulties.  Apparently we were not alone in the workforce recruiting area.

One would think that if a franchise startup fails and other successful franchises exist in the area selling the business might be feasible.  While it is possible to dispose of the business, selling is a misnomer unless you expand the concept to include "fire sale".  If you find yourself running out of money, you better begin your exit early because borrowing money late in the game is next to impossible.

While we were performing investigation of advisability of investing in a The Maids Franchise, we didn't see a lot of examples of failed attempts.  Now we think we understand the reason for that situation.  The disappearance of The Maids Of SW Houston which was our business name will never appear anywhere.  Because we desperately needed money we "gave" the rights to Fort Bend County to an existing franchisee along with all operating equipment and supplies for $30,000.  The only change that will occur in company statistics is significant growth of the existing franchise.  This is conjecture but I suspect there have been many other situations precisely like ours where a franchise just disappeared when in reality it failed dismally.  When one looks at the configuration of the mechanism for "selling" a franchise, it appears that the procedure was designed to significantly favor current operating franchises.  In my humble opinion, this is a "sick" situation.  Franchises are offered for sale when the people extending the opportunity know full well that the probability of failure is very high but the company stands to profit from failures because existing franchises grow exponentially.  In the case of the existing franchise who bought our business, they received 80 RMS customers, over 700 customers, equipment, supplies and a huge territory for $30,000.  We paid almost $90,000 just for the territory.  For a meager $30,000 they received the end result of 18 months of hard work and investment of half a million dollars.  Did TMI lose at all because of our failure?  Hardly, they never missed a royalty payment because the people who bought our operation immediately began servicing those who had been our customers.  It seems to me that failure attempts are actually desirable for the corporation because of the growth potential generated.

One might conclude that we made the decision to sell the business for $30,000 so if we didn't like the price why did we proceed?  The Franchise Agreement stipulates that if a franchise discontinues business a copy of the customer database must be provided TMI.  Now, I wonder what would have happened if we decided not to sell and simply shutdown the business.  The Maids must feel an obligation to continue providing service for our past customers, they have a copy of our customer database and a franchise is operating in the area so how can the objective be accomplished.   Well, if they provide our database to the existing franchise then they can immediately begin servicing the customers.  Summarizing, we think that if we had simply shutdown the customer information would have been provided the existing franchise free of charge.  IF that is true, I guess we were lucky getting $30,000.

There are situations of failure like Scott who closed his Florida operation around the time we shutdown after opening for business about a 15 months before our beginning.  Surely that situation must appear as a failed franchise but if it does it will be of little consequence because Scott bought a terrible territory.  It was small and fragmented and from the first time he described it to me I wondered why he invested in that area.  It will be easy for TMI to say "well he bought a bad territory".  If our failure appeared, explaining it away wouldn't be as easy.  We bought all of Fort Bend County in Southwest Houston which is huge and one of the fastest growing areas in the city.  How do you "explain away" investors purchasing a viable territory, having plenty of money, education and experience and still failing?  It won't be quite as easy as justifying poor ole Scott's failure.

When we went to Discover Day before purchasing the franchise, I asked a question about what happens if you fail and I heard Dan Kirwan say “oh we will buy it from you”.  I haven’t been able to located my notes from the day but Marlene agrees that he made the statement.  When I asked about TMI buying the territory from me Dan said “I never made that statement”.   My wife Marlene was sitting next to me at Discovery Day and she confirmed that she heard the same thing so something is wrong?

Having an exit strategy (we thought TMI buying the territory back on failure provided the basis) would have been nice.  We would have still lost over $250,000 of our money but would have been able to pay off a $140,000 SBA loan using the TMI funds and some personal money.  We closed the doors having spent almost half a million dollars and 18 months of the hardest work of our lives and will be paying that SBA loan for 7 years.  If you want to burn a lot of money and work your butt off, The Maids is (on the basis of our experience) an excellent choice.

If we were uneducated novices with limited experience, perhaps our failure would be easier to understand but that is not the case.  Marlene has a degree in Management Information Services and my degree is in Chemical Engineering and I worked in the oil industry for 40 years.  If you consider those credentials along with the successful startup and continued operation of a different franchise, you should wonder “what happened with The Maids franchise startup”.  I will provide detailed information, a wealth of data, conclusions reached on the basis of the data and a supported opinion about our failure and you can draw your own conclusion.

 

Ron

 

 

To learn more about our first hand experience with starting up a The Maids (TMI) franchise, write to me at ronslujones@gmail.com.

Revised 5_29_14

Home Page

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"

 

Friendly Fire

 

Need Money - Find An Angel

 

Selling The Business

 

Owner Qualifications


Success Motivation



















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