To the Rescue: Restoration franchises enjoy steady growth

In June 2008, heavy rains caused flooding that filled the basement and rose two feet high on the first floor of Columbus Regional Hospital in Columbus, Indiana. The flooding closed the hospital, forcing the evacuation of 157 patients and causing an estimated $125 million in damages. Paul Davis National (PDN) was soon on the scene, part of the team brought in to mitigate the damage and allow the regional health care facility to reopen as quickly as possible.

In August 2005, Hurricane Katrina struck the Gulf Coast, damaging or destroying 275,000 homes and causing estimated insured property losses of between $40 billion and $60 billion. Paul Davis was on the scene there too -- first, in response to an emergency call to help restore the 28,000 sq. ft. commissary at the Naval Construction Battalion Center in Gulfport, Miss.; then repairing flood damage at the University of New Orleans and getting the city's FOX television station back on the air.

PDN even made it to national television itself in New Orleans, appearing on the Dr. Phil Show and the DIY Network's "DIY to the Rescue" program soon after Katrina. Collaborating with Dr. Phil and the DIY network, PDN and its parent company donated time and resources to rebuild a 78-year-old New Orleans woman's ruined house from the ground up in just 11 days.

PDN, an offshoot of Florida-based Paul Davis Restoration Inc. (PDRI), was formed in January 2005, only seven months before Katrina struck. PDRI, founded in 1966 and franchising since 1971, has 230 units and is a pioneer in the emergency mitigation and insurance restoration industry.

PDN operates as a separate division, focusing on large losses and commercial business nationally (in contrast to the individual franchisees who operate within a territory and generally work on smaller jobs). After Katrina, PDN also became a franchisee: when the Paul Davis Restoration franchisee in New Orleans was flooded out, PDN bought the franchise and still operates it today.

Nationwide, the restoration business is booming -- in part because of the ongoing natural disasters that seem to be sweeping the country. But over the past 20 years, residential losses have averaged nearly $30 billion annually, and commercial losses about half that on a fairly consistent basis.

Although Paul Davis Restoration was recognized for its residential business, it was mostly known as a smaller loss restorer -- even though several franchisees were highly successful at large jobs, says Howland "Howdy" Russell, director of marketing at PDN, and one of its four founding partners. PDN was created to focus on larger jobs, both residential and commercial, and to pool resources nationally to back up local franchisees who require additional support to capitalize on opportunities -- Southeast hurricanes, Midwest floods, or California fires, for example.

Rather than competing with the company's franchisees, PDN markets to a national audience, acting as "a resource franchisees can use to handle more work," says Russell. In addition to bringing its own equipment and people to a job, he says, "We will use as many local resources as possible."

PDN's staff consists of project managers, marketers, and administrators, about 20 people in all -- plus subcontracted staff hired locally through staffing and temp agencies. The local franchisees help by having pre-established relationships in place with insurance agents and adjusters in their area, as well a knowledge of the local regulatory environment.

Natural disasters make the headlines and provide boom times for this industry, but there's more to the residential and commercial restoration business than cleaning up after these events. While fires, floods, and windstorms always occur, "We try not to be dependent on the weather," says Russell, who worked at PDRI before moving to PDN.

Restoration projects, he says, present an opportunity to upgrade a home or business. For example, while making an estimate on a home repair job, a franchisee can also provide an estimate on remodeling the kitchen or bathroom. In recent years, Paul Davis Restoration has added remodeling to its offerings, either as a standalone job or piggybacking on a repair project.

The insurance restoration industry is not for "a guy with a tool belt and a pickup truck," says Russell. Instead, it's best run by someone with a business-owner mentality and a track record: "someone who has seen what success is and will drive the business," he says. "It's a true business."

While Russell says the business is not for someone leaving a salaried position and trying to buy a job, he has seen several current franchisees who began as estimators and later partnered or bought in to become franchise owners. In fact, two of the four partners in PDN began as Paul Davis employees.

Candidates should have strengths in marketing, administration, and operations -- or hire that expertise, says Russell, as the work involves estimating complex projects and working closely with insurance companies, as well as performing the actual repair and restoration of a property to its pre-loss state.

The downside includes being available around the clock, usually at the worst of times for a region or an individual. A call can come any time of day, and franchisees must be available. "You have to be ready to respond," says Russell -- not personally, but at least with people on board who can. And it often is messy, difficult work with people and organizations under emotional and financial duress.

The potential rewards, however, can be great, he says. The restoration and remodeling business is virtually recession-proof, says Russell, and average unit sales exceed more than $1.6 million. Startup costs (including franchise fee) range from just over $100,000 to $165,000 or more, depending on the size of the territory. "You're buying a business, a concept, and a geographic territory -- and the capabilities and brand of 230 offices across the U.S.," says Russell.

Then there's the joy of approaching a customer with a home or business that's been burned, flooded, or blown to pieces, and working with them (and the insurance companies) to restore it to its original condition -- often better. Just ask Marion Camp, the 78-year-old longtime New Orleans resident who lives in a home rebuilt with the help of the folks at Paul Davis.