Franchising and Retail Numbers - Ep.33

Hey everyone, this is Mike Andes and you're listening to Landscape business course episode three three thirty three. And today we're talking about franchising and we're talking about retail operations. The reason we're talking about retail today is on my Instagram someone made a comment and they asked if I could share more information about the retail side of my business for landscaping and how that integrates with the services and share some of the numbers. So. So I'm usually pretty transparent about what we make and all that if you listen to interviews. So I wanted to share more breakdown as far as the retail is concerned. So first of all, the reason we do retail is because it complements the services so well and the services complement the product so well. So what that means is yes, we do lawn care. That's kind of our recurring revenue base. We talk about this all the time. If you listen to the podcast, we talk about creating that recurring revenue where every single week, you know, you have a certain amount of clients that you're going to be going out there mowing their lawn and making a certain amount of money. And you can essentially count on that money in your budgeting and all of that and your forecasting, knowing that that money's going to come in because you have X amount of clients and you're going to reap X amount of dollars. So for us right now we're sitting at I think it's right around 150 residential mowing clients that we have on a weekly or bi weekly schedule.

We have commercial, but not nothing close to that. And so I actually don't even know how many properties but for residential, I know that because it's more of a weekly and bi weekly service, whereas the commercial is on a monthly 12 month schedule that they pay those and we just amortize all their services over 12 months. However, we have that recurring revenue base, whether it be the commercial maintenance or the residential maintenance that we are servicing on a weekly or bi weekly basis. And that's like that we know is going to come in no matter what. Then on top of that there's landscaping. And landscaping for us is really where we make our profit. But you need the recurring revenue in order to keep guys busy and know that you're going to be able to keep a crew busy full time and be able to hire people and give them 40 hours a week and all of that. And we know it's going to cover our expenses. So I know that our mowing alone will at least break us even and make a little bit of Profit every, you know, pay all the bills, pay the rent, pay the insurance, pay for the truck, like all of that stuff. And then if we get landscaping jobs, everything on top of that is gravy. And so that really opens it up so that once you create that recurring revenue base and you can start focusing on landscaping jobs, that's when you really can start generating a profit. Like not a profit, but like more profitable work. And the reason for that really just because economies of scale and the size of the jobs. Because if you're getting 10 and $15,000 landscaping jobs, which is really kind of our sweet spot, if you're getting those.

On that, you're gonna make 4,000, $5,000 in comparison to lawn care, that's gonna take quite a few clients every month to match that. Then thinking though about the recurring revenue is it happens again and again and again, and a lifetime value of customer can be pretty high. Whereas with landscaping it's a one time deal, usually unless you convert them to a recurring maintenance contract afterwards. But usually, you know, it's a one and done installation of their lawn or creating retaining walls and all that stuff. So there's that fine balance. Now this is the thing, this is a third category of our business that we've added and that's, this is what really makes our company, Augusta Lawn Care Services, a little bit unique. Well, very unique, especially in our area of what most landscaping companies would do. So usually you get kind of these different areas. As a company matures, it kind of hits the past, the half million dollar marker. It kind of starts choosing a direction. It's going to go either a, it's going to go lawn care and maintenance and two, it's gonna go commercial maintenance or three, usually it goes landscaping. There's kind of three different routes. You know, obviously sometimes they'll go into tree care, tree, you know, tree care and tree service and all those other things. But usually when it comes to lawn care, landscaping, when as a company grows, it kind of chooses its niche and goes down that. So what we've decided to do is do all of them in one regard and go after the jobs that are higher profit margins. So not going after the really small stuff that people are penning, trying to scrape pennies together, but not going after the massive government and commercial jobs where you have to have a huge amount of labor force and you're not making as much per hour and you can't mark it up and you're running on a thinner profit margin. So we kind of find that medium sweet spot and so what we've done is we've created a retail branch of our business. And why would you add retail? And when I would say retail, essentially all it means is we have an actual physical location where, where people can come and buy mulch, soil, gravel, different types of rock, all of that stuff. I think we have like, I think right now we're like at 16 or 17 different types of products. It might be more, I mean 18, 18 products or so that people can buy different types of lime, you know, everything from limestone to, you know, crushed rock, clear crush with fine, like all that stuff, different types of lawn mix soil versus, you know, garden blend soil with compost, stuff like that. And so we have all these different products, we have those in bulk. And then we can a load people up with their truck. So if they pull in, we can load them up with a yard or two of soil or mulch or gravel or whatever, or we can deliver it. So we have a dump truck and we can deliver that. We have dump trailer too, if smaller load, and can go deliver those to their house. And usually, you know, 90% of our deliveries are within about three to five miles of our shop, which makes it super profitable because we're charging $35 per delivery and it might take us 20 minutes. And so that's, you know, a profit center. So obviously for the retail end of things, we make pretty good money. This is the distinction I want to make. And if you're on the course, you know all about this because we talk about where to put your retail location, we don't put it in the middle of the city. There's a lot of reasons why, but in short, it's like if I'm in the middle of city and I'm doing a high volume business, usually it also means I have competitors. I'm going to have to bring my prices down. My profit margins are a lot thinner. And so when we talk about these products, for instance, I know that I can get mulch for say $21 a yard and I can sell it for 35, whereas my competitor in a much more densely populated area will get it for $21 and sell it for 26 or 27. So their margins are literally 20 to 30% of what my margins are. So they make six or seven dollars per yard. I make, you know, 15, $20 per yard. And so the, and that, that's kind of a generalization of all our products. We usually make between 12 and 25 do per yard of material profit, gross profit, you know, certain types of products as high as like $40 per yard or you know, 35 per yard for certain types of like more rare products that we don't sell as much of. Heavier, harder to get with the skid steer, stuff like that, like more expensive stuff. And. But our lowest, our lowest profit margin per yard I think is 12 or 15 bucks. So like very high profit margin. Compare in comparison to these other, like where densely populated areas maybe 34 minutes drive from where we're at, they would do five times the volume that we would. As far as revenue. However, you know, per. On a monthly basis, for instance, they might do five times more in revenue, but yet their profit margins are way less than ours. And I would just rather be in an area that I don't have competitors. I can charge a premium so that people have to drive into town and it's also cheaper for rent, so my overhead is going to be less. And so we add this retail branch and the reason for that is because it complements the service end of things. So people are coming to get retail product. They are also potential people that we can upsell to the services and people on services we can upsell if they want to do it themselves to the product side of things. So. And also just it really helps our supply chain. So when we're doing landscaping jobs and we're a little bit short on a product, we can just come back and get it. Like we don't have to depend on suppliers as much. So, so we can really become much more competitive in our pricing yet maintain our profit margin on these landscaping jobs because we've cut out the middleman of a supplier as far as numbers. Like our best months are around $25,000 in revenue for the retail end of things in the winter, that goes down to basically nothing for December, January, even November is a little bit low. But your best month, March, April, May, May is your best month. And then June, July and August, it's really hot. So it goes down a little bit. But like that's the numbers that we go for. And I know, I know beyond the shadow of a doubt, If I moved 30 minutes from where we are, a 30 minute drive from where we're at now, I could easily quadruple my sales every month. But I know I'd also have to bring my prices down quite a bit in order to compete because there's at least two or three other companies that do the same thing within that town or city. So really that's, that's all about kind of retail. The question came from on the instagram by the way, if you want to follow it, just do Landscape Business on Instagram. You can follow everything I do. But that question came in, wanted to know more about the numbers and a little bit more of that retail and a thing. So that's that number two thing I want to talk about today, and that's franchising. And I'm not talking about franchising your business as far as, like, versus being independent. I'm talking about an announcement that I want to make. And if you're listening, you probably. And you listen from Business Bootcamp Podcast, and you're like, you told us on Business Bootcamp Podcast that there's gonna be an announcement. Well, here it comes. And so if you haven't listened to Business Bootcamp Podcast, you're like, what in the world he's saying? But on Business Bootcamp Podcast, I said, hey, if you want to listen to an announcement, you gotta listen to it on Landscape Business Course podcast. So here it comes. And this is the announcement. And it might be for you, it might be for someone you know, and that is that this, this year.

Especially the course members, you guys know I'm one scale up our business and create more locations and things like that, and really taking an aggressive approach to our growth strategy. Now, this has been a long, long kind of decision or long decision process. I've been thinking about it, strategizing, running numbers, all that things. And I've decided instead of growing locations independently, we're going to franchise the business. And so we're going to become a franchisor. And we will start selling franchisees, the license to use our, our, our our logo, and they will become a franchisee, get all access to our systems and how we do things, and they'll get consultation and become a franchise. So, like McDonald's, Subway, Anytime Fitness, all these franchises, we're gonna do the same thing for Augusta Lawn Care. And so what that's gonna do is like, yes, I have the course right now, and I'm able to get a lot of interaction with the course members from landscapebusinesscourse.com and be able to share a lot of the same business ethos and a lot of those things with those members and the people. And yes, you're more than welcome to go to landscapebusinesscourse.com and click Enroll and see exactly what that course entails. But those business strategies and all of that is great and everything. And I'm able to talk with the course numbers and email and answer questions about the business model of how we do things. How to integrate the retail, how to use a three year plan, like all of that stuff. But the thing is, the hard thing about it is I don't get actually set.

Because, you know, the course isn't really that expensive when it comes down to it. I don't have enough, you know, funds or resources to go travel to these places and actually set boots on, you know, on the ground, you might say, on these locations where with these business owners, talk to them face to face, look at their equipment, look at their trucks, see what their market's like, get a feel of their city. Like I don't get to do that. And so that's what I wanted to do with this whole franchising thing. Really use our branding and really make this a national brand long term. And so it's been a big decision. I didn't know if I wanted to even be in this space for more than five or 10 years. And so this is kind of a, more of a long term commitment to what we're doing. And it's, I'm excited now. This is, this is the thing and I hope no one's turned me off now to email me and talk about, you know, their, their big idea of becoming a franchisee. Because there's some caveats. Caveats, however you want to say it. And that is the first, probably five franchisees will only be in Washington and Oregon. And it's because of that one thing, those first five or 10 franchisees, I want to be able to be where I personally come and I'm there on a regular basis. I don't mean every day, but I mean like I want to make sure that this is like an extension of our brand and our company and I want to make that them super successful. And I'll be so invested in that because I know that that's. If the franchisee isn't successful, it doesn't matter how much money the franchisor is getting and royalties and all that stuff, the long term growth of that company is gonna be wasted if the franchisees aren't successful. That's why Subway's and McDonald's are so, so profitable and so the franchisor is doing so well is because they've created a brand and their franchisees do amazing. And that's what I want to do. And so those first five or 10 people, this is the caveat, will only be so 2018 is when we're planning to sell.

And we're gonna, we're going through the legal process. Well, I'm starting it right now. And so 2018 is when I wanted to be doing it and starting it. And it's only gonna be in Washington and maybe Oregon for 2018. And so if you're interested, if you are interested in getting, becoming one of those first few franchisees or you know, someone in Washington, Oregon, or you want to move or whatever, to be in Washington or Oregon, that's the only way that I would do it. And really you're gonna get preeminence, you're gonna get like top ranked quality order. Like, you're gonna get, you're picking rights if you're closer to the north part of Washington. Because I want to, I want to be, you know, with you. I want to be kind of really guiding the first few franchisees through this process of building a business. And so the whole, the whole idea of the franchise is essentially to walk people through the business model that I teach on landscape business course, walk them right through it. And I, and like I said, I can give the pointers and all of that, but I want to be able to have the resources and me be attached because like, if I'm giving my brand away, I want to make sure it succeeds. And so I'm going to be invested in it financially and just from a brand standpoint. And I will be able to have the resources because franchising royalties and things like that, it's in my best interest to make sure the franchisees succeed. And that's what I want. I want to be, actually be able to boots on the ground and actually help these people go get clients, teach them face to face. Like that's what I want to do. And so if you're interested in getting kind of like the first few people to get in, you're, you have to be, you absolutely have to be in Washington state if you're going to start in 2018, maybe Oregon. But I want to be able to be within driving distance and be able to come and see where you're at, be close enough to where like we, we have a connection. And really like if you're in Mount Vernon in Washington or you're like in Skagit county, if you're in King County, Washington, like those are going to be the ones that I want to get out first because they're close to me, I can be there pretty quickly. And so that's the big announcement and that's the thing that I'm going to be committing myself to this coming year. Yes, I could spend like the reason this is a throw up yet I could build another location in Bellingham, which is like 34 minutes away, do the exact same thing that we're doing now. Start off with retail, like full fledged, you know, but it's going to cost by the time we get the land and all of that. And if we really want to do it right, it's gonna be over $300,000. To get that started. I would much rather put maybe a little bit more into getting a franchise franchising the business, creating the model, getting all the systems in place, setting up legally and all that good stuff with FDD and all that Franchise disclosure, discreet franchise disclosure agreement, fda. And so like all that stuff has got to be taken care of. And so yeah, 2018 is what we'll be doing it. If you're interested in and you're in Washington or in Oregon, let me know. If you're not, you know, send me an email, that's fine. But just realize that you're not going to be able to. The first year, we're not going to be able to handle people around the nation because I want to make sure that we really get personal with the first five to 10 people. And we're only going to keep it from Washington, work our way down south because I'm familiar with these markets the most on the Pacific Northwest and then the west coast and then as we grow will go east. So that's the big announcement. Let me know guys, what you guys think about that. I know a lot of you like I like the landscape business course podcast is because so many of you are actually in landscaping is a very concentrated number of people who listen to this. I think like right now each episode gets around to only like 2000 listens, which isn't huge. Like we just started a few months ago. But those 2,000 people are basically all landscaping business owners and lawn care business owners. Very contrary. I get a lot of feedback, a lot of emails and people talking. And so like I'm doing lots of calls with you guys. So I really, it's a lot of fun and I like it so much that I think this franchising thing is gonna be a great outlet for me to really do more for you, more for the business owner by really, really getting involved. And that's what I wanna do. I wanna get my hands dirty. I'm kind of tired. I'm not tired of it. Like, I still love it, but I'm kind of tired of being like far away and emailing my advice. Instead of being like on the ground being like, tell people like, hey, this is probably the, you know, what you should be doing, this is what we did, and be able to really see things firsthand. And so, yeah, it's, it's, it's gonna be fun. It's gonna be a wild ride. And I think I will pretty much share everything that goes on that kind of document the whole journey here on Landscape Business course podcast. So it's gonna be fun. 2017 will be finding those first three, two to three people in Washington that want to jump on in 2018, getting them set up, getting ready to go, getting everything legally set up, and, you know, get the website and the systems all on the software, things like that, all set up, which will all be working like crazy, which, which will be fun. So that's it for today. Landscape businesscourse.com if you want to get on the course, you can enroll right from there. It'll tell you everything. That includes. And that's sort of the business model that we'll be following when I franchise this thing out. So it's going to be a lot of fun. Landscapebusinesscourse. Com. Mike Andy's episode. Episode. What is it? 33. And we'll see you on 34. Yes, have a good one.