The construction industry is the second-largest industry in the United States after the computer industry. The construction industry is projected to generate annual revenues of about $1.17 trillion in 2007 (Census Bureau, July, 2007). In addition, the U.S. Commerce Department reports expenditures for residential improvements and repairs approximated $1 billion in 2006.

Evidence of the size and growth of the construction and remodeling industry is the fact that there are over 100 franchise systems operating in these industries. These franchises are varied. They run the gamut from providing services for homeowners to the repair of concrete foundations. The size of the construction and remodeling industries enables prospective franchisees the ability to operate in a large and vibrant sector of the U.S. economy.

Franchising lends itself to developing a system and method of operation for various types of businesses. This feature enables various types of businesses to be franchised. In the case of the construction and remodeling industry, there are a number of businesses that lend themselves to a franchise model. However, despite the advantages that a franchise can offer to a person, certain franchise opportunities require particular skills.

After launching a rather complex franchise opportunity in the construction/remodeling industry a number of years ago, I was able to gain insight regarding qualifying franchisees. I found that unlike other franchise programs that I had operated, this particular franchise required its franchisees to possess certain skills unique to that franchise. Despite the fact that we provided a very good training program, comprehensive operations and marketing manuals and strong support, it was clear this was not a franchise for everyone.

There is a good deal of information available in print, on the Internet and other venues that provides competent advice on the subject of selecting and evaluating a franchise opportunity. I would suggest that prospective franchisees gather as much of this information as possible and utilize the services of a franchise attorney when evaluating various franchises.

The objective of this article is to supplement the information you gather and the advice you obtain within the specific area of the construction/remodeling industry, which I’ll refer to as the "C/R" industry.

First of all, you must use objectivity when selecting a C/R franchise. Avoid the tendency to choose a franchise based upon sizzle or glamour. Some franchises are heavily promoted, but that doesn’t mean they are good franchise opportunities.

Be sure that the franchise is a business you can operate. The majority of franchises in the C/R industry focus on specific products or services. These franchises also require sales and customer service acumen.

If you are comfortable in that kind of environment and enjoy interacting with people and selling, this is a good starting point. It’s important to have confidence in your ability to operate the franchise you acquire.

Second, make sure you have the experience and knowledge needed to operate the franchise. Despite the fact that many franchises are "cookie-cutter" in design, operating a C/R franchise may require special skills or knowledge. Since many of these franchises provide specialized services or products, a franchisee should have the proper skills.

Some C/R services require licensing or certification. As an example, there are a number of home repair service or handyman franchises. A number of states have statutes pertaining to home repair services. This could include the requirement of a license to perform certain repairs.

Be sure that you discuss these needs with the franchisor so that you are familiar with any regulatory requirements that may exist in the state or locale where your franchise will be operated. In addition, the Franchise Disclosure Document should provide information regarding this subject.

A number of C/R franchises require the use of special tools or equipment. Although a franchisee may utilize someone else to operate these tools, it is important that the franchisee have a basic understanding of the process.

If you don’t have the proper knowledge to operate the franchise, you may be forced to depend upon someone else. When you depend upon someone else, there could be a point in time when this person becomes so important to the operation of the franchise that he or she could literally hold you hostage.

Third, make sure you have the working capital required to invest in the franchise . You need to have the right amount of capital to start up and operate the franchise. Unlike most franchises, which generally involve straightforward transactions (i.e. the customer pays when they receive the product or services), the C/R industry often involves an initial deposit and subsequent payments.

Since the collection of payments in a C/R franchise could interrupt cash flow, having sufficient capital to deal with this possibility is important. I would always suggest to prospective franchisees that no matter what their cash flow model shows, they should put in a risk factor of 10% or more for unexpected contingencies.

Some cash flow statements are overly optimistic and don’t allow for a margin of error. In the C/R industry, unanticipated events happen, and one must be prepared for these events.

Fourth, understand your obligations as a franchisee. A number of C/R franchises provide a warranty for services or products. In those cases franchisees, have a contractual obligation to honor all or a portion of those warranties. Be sure that you and your attorney fully understand your obligations under warranties.

In addition to warranties, franchise agreements carry an indemnification provision, which protects the franchisor from monetary losses from franchisee actions. In the case of the C/R industry, the possibility of a customer taking legal action for poor work or damages exists. Although each franchisee must have adequate insurance coverage, it is important that you understand the obligations you have under the franchise agreement. This is an area your franchise attorney should review.

When you interview current franchisees, be sure to ask the right questions, including the following:

During the Discovery Day visit to the franchisor, you should determine the following:

A franchise in the construction or remodeling industry can present a significant opportunity for a prospective franchisee.