Average Initial Investment and what this covers: Between $45,800 and $141,300 depending on type of franchise (standard vs. conversion) and desired operational model. Covers the first three months of operation and includes the franchise fee; initial marketing plan; training costs; deposits and payments for facility, truck, trailer and equipment and additional operating capital.
Royalty Fee: Begins at 6% of gross monthly sales and declines to 5% and then 4% as certain revenue thresholds are achieved.
Franchise Fee: Initial franchise fee is $34,0000 – discounts are available for existing landscape business operators looking to convert their business.
Total Investment: Same as average initial investment listed above
Number of North American Locations: 250
Services offered: Core services includes maintenance, tree trimming; fertilization, lawn care and shrub and tree insect and disease control, lawn and ornamental consultation; irrigation services; installation of landscape materials; arborist services; and snow management and other snow-related services
Franchising since: In Canada in 1976 and expanded to offer franchising to the United States in 1996.
Average Initial Investment and what this covers: $69,490 - $86,550. Initial franchise fee, training expenses, travel, real estate improvements, equipment and fixtures, truck and spray package lease, computer hardware and software, insurance, miscellaneous operating costs and additional funds for three months.
Royalty Fee: $12,558.98 annually for each of the first two production vehicles; $8,791.29 annually for the third production vehicle; and $6,279.49 annually for each subsequent production vehicle used during the year. Each year, these amounts may be adjusted for inflation, according to the Consumer Price index. The Base Year is Nov. 1, 1995. The amounts stated are for 2020.
Franchise Fee: Single territory (population up to 150,000): $20,000; double territory (population up to 300,000): $33,750
Total Investment: $69,490 to $86,550
Number of North American Locations: 306 License Agreements & 683 Territory Counts
Average Initial Investment and what this covers: $81,220 - $200,070. This includes the initial franchise fee, software, vehicle(s), equipment, supplies, inventory, insurance, local marketing and promotions, training, travel, lodging, deposits, permits licenses, real estate. The Grounds Guys estimated initial investment range includes the franchise fee; however, the initial franchise fee may vary depending on the size of the territory purchased.
Royalty Fee: 5-6%
Franchise Fee: $35,000 (minimum initial)
Total investment: Not available
Number of North American Locations: 213
Services offered: Residential and commercial services include: lawn and bed maintenance; landscape and hardscape; pest, weed and fertilization, irrigation, outdoor lighting, snow and ice management; gutter cleaning
Hours of Training: 110 hours over a 12-13 week onboarding process from signing to opening. Ongoing learning opportunities: 48-plus annual training opportunities, all day training events, weekly webinars and more.
Average Initial Investment and what this covers: Ranges from $45,000 - $60,000 excluding franchise fee. This includes vehicle, spray unit, computer software program, miscellaneous equipment, training, marketing, customized website, paper supplies, start-up product, insurance licensing.
Royalty Fee: 6% - Also offers franchise owners an incentive program for reducing their monthly royalty based on annual growth.
Franchise Fee: $15,000 - $25,000 based on territory
Total Investment: $60,000 - $70,000
Number of North American Locations: 11
States/Provinces with at least 1 franchise: 4
Services offered: Organic based lawn care, plant health care, natural mosquito control, many other optional lawn care services.
Closures in the last three fiscal years: 1
Hours of Training: 2 weeks- 80 hours- training is conducted at the corporate office and on franchise site
Average Initial Investment and what this covers: $87,424 – Franchise fee, down payment on vehicle and equipment, technology and software, opening supplies, initial marketing campaign, initial data fee, three months working capital.
Royalty Fee: 10-8% (5-3% first season for qualifying green industry business)
Franchise Fee: $25,000 with qualifying green industry business; ($40,000 without)
Total Investment: $89,982-$106,262
Number of North American Locations: 126 independently operated locations, plus 26 company owned locations
States/Provinces with at least 1 franchise: 26
Services offered: Lawn fertilization and weed control, lime treatment, lawn disease control, brown patch control, aeration and overseed, core aeration, grassy weed control, ornamental bed weed control, irrigation maintenance, moss control, root feeding, specialty injections, two-step tree program, perimeter pest control, mosquito mitigation, fire ant, control, flea and tick control, crane fly control, grub/subsurface insect control, surface feeding insect control (services may vary by region)
Average Initial Investment and what this covers: First 90 days - $81,800 - $102,250 covers territory fee, travel for training, tools and equipment, computer hardware and software, inventory, storage, vehicle, vehicle signage, marketing investment and additional funds
Royalty Fee: Tiered 8%, 7%, 6%, 5%
Franchise Fee: First territory - $49,500; Second territory - $40,000
Total Investment: Initial investment (first 90 days) - $81,800 - $102,250; Total Capital (first year) $150,000 - $200,000.
Number of North American Locations: 105
Services offered: For residential and commercial properties: Irrigation system installation, irrigation service and repair, irrigation annual/seasonal maintenance packages, annual inspection of backflow devices, government water rebate incentives, upgrading and retrofitting irrigation systems, system inspections and assessments, drainage solutions
Closures in the last three fiscal years: 4 franchisees, 7 territories.
Hours of Training: 10 days of training – 80 hours. 5 days in person; 5 days virtual
Average Initial Investment and what this covers: N/A
Royalty fee: 6%
Franchise fee: $20,000
Total Investment: $80,000 in working capital which is applied to start-up costs, marketing and equipment
Number of North American Locations: 30
Services offered: Lawn fertilization and weed control with additional services including overseeding, lawn renovation, irrigation; insect control – turf insects and mosquito, ticks; perimeter pest control
Closures in the last three fiscal years: 0
Hours of Training: 120 hours start up training plus ongoing e-training and support
In 2016, we surveyed homeowners about all things landscaping to get inside the customer’s mind. Well, we did it again five years later, and the timing couldn’t have been better.
I keep hearing from landscapers who had a great 2020. They partially attribute that to people working from home due to COVID-19 and taking notice of their shoddy landscaping. So, I added a question about COVID-19 into the survey to see if that was the case, along with the other valuable homeowner information we collect. Here are a few takeaways that didn’t make the report.
• Regarding that COVID-19 question, we asked, “Thinking about your yard and the increased amount of time you have spent at home due to COVID-19, with which of these statements do you agree?” About 30% said they had become more aware than in the past, while 21% said they are investing in their yard more than before. Only about 7% said they have hired a professional since being at home more, while 19% said they are doing more yard work themselves.
• If you were fired, it was most likely due to the quality of your work than the cost. Second on the list was dissatisfaction with timeliness of the job. Next was “felt I was being taken advantage of/overcharged,” then “found a less expensive contractor. Last on the list was “decided to do the work myself.”
“Only about 7% said they have hired a professional since being at home more, while 19% said they are doing more yard work themselves.”
• Consumers’ interest in organic lawn care has made a giant leap in five years. Current results show 35% said all of the fertilizer, weed killer and insect control are organic. Only 10% answered the same way in 2016. 21% said none were organic in the current study while 33% answered the same way in 2016.
You can read the full report on page 26. I hope the information provided in the report gives you a better understanding of your residential customers and, overall, how consumers view the work you perform. – Brian Horn
Travels with Jim follows Jim Huston around the country as he visits with landscapers and helps them understand their numbers to make smarter decisions.
Walter had a full-service landscape company in Nebraska. Business was good, but he couldn’t figure out why his margins were as low as they were. He thought he should have more money in the bank as he ended the year and headed into winter.
He operated with two, three-man residential install crews and four, two-man residential mowing and maintenance crews. All crews worked a 45-hour week for approximately nine months. Install and maintenance crews would sometimes cross over a bit, but the amount of doing so was insignificant.
Walter calculated his labor rate at $55 per man-hour. He’d aim to bill $1,000 per day for his two-man maintenance crews and $1,500 per day for his three-man landscape install crews. The margin added to install materials, he thought, would bolster his bottom line. It was charging the same man-hour rate for both install and maintenance crews that caused a serious problem and eroded his bottom line.
The big mistake.
One of the most common mistakes that I see landscape entrepreneurs make is charging the same labor man-hour rate for their maintenance crews as for their landscape installation crews. In most cases, they are charging a reasonably accurate rate for maintenance, but they’re underpricing their installation rate. There are a number of reasons why this is often so and why a contractor should be charging $10 to $20 more per man-hour for the install crew.
Different crews and rates.
The first reason why an install crew is more expensive per man-hour is because install crew members usually are paid a couple dollars more per man-hour. The amount isn’t much, but it does account for some of the variance.
The second reason is because the general and administrative (G&A) overhead cost per man-hour for an installation crew member is significantly higher than it is for maintenance crew members. While the G&A overhead costs, as a percentage of sales, are usually the same for a maintenance division as they are for an installation one, it isn’t on a man-hour basis. Let me provide an illustration:
Two different companies – one exclusively maintenance and the other exclusively installation – do $1 million in revenue each. The G&A overhead costs for each run 25% of revenue or $250,000. (This equal amount of G&A overhead cost at 25% of sales is an accurate figure and is one I’ve seen in hundreds of companies.) It requires approximately eight full-time field crew members working roughly nine months at 45 man-hours per week to complete $1 million in installation work. It takes about 16 similar full-time field crew members to accomplish $1 million in maintenance work. The G&A overhead per man-hour (OPH) calculates as follows:
Installation Company G&A Overhead per Man-hour
$1 million x .25 = $250,000 G&A overhead costs
45.0 MHRs per week x 4.333 weeks per month x 9.0 months x 8.0 crew members = 14,039 man-hours
$250,000 ÷ 14,039 = $17.81
Mowing and Maintenance Company G&A Overhead per Man-hour
$1 million x .25 = $250,000 G&A overhead costs
45.0 MHRs per week x 4.333 weeks per month x 9.0 months x 16.0 crew members = 28,078 man-hours
$250,000 ÷ 28,078 = $8.90
As you can see, the G&A OPH for installation work is much higher than it is for maintenance work.
Additionally, the installation man-hour rate should be higher than it is for maintenance because it commands a higher net profit margin. Commercial installation work usually warrants a 12-15% net profit margin. Residential installation work, especially in today’s robust economy, warrants a 20% net profit margin. The net profit margin applied to maintenance work usually ranges from 10-12%.
If you review the two MS Excel worksheets accompanying this article on the Lawn & Landscape website, you will see the $11.63 difference in the two labor rates.
Walter’s average rate of $55 per man-hour was actually $3.64 high for his maintenance crews. However, since his customers were already paying it, there was no reason to change it. On the other hand, his installation rate was $7.99 too low ($62.99 - $55). He should increase it accordingly. Such an increase would add to his bottom line. It could add as much as $84,128 (10,529 man-hours x $7.99). I would encourage Walter to make such a change.
Words of Wilson features a rotating panel of consultants from Bruce Wilson & Company, a landscape consulting firm.
Customers no longer seek landscape companies to execute tasks or simply be good at what they do. There’s a post-pandemic, pent-up demand for not only re-connecting at a relationship level, but customers are expecting their service partners to serve up a winning return on investment. Landscape businesses that cling to their tactically-driven past could lose out to smart and fast-thinking companies that place strategy at the core of their game.
When the coronavirus disrupted business last spring, agile CEOs were building flexible ‘what if’ scenarios that allowed them to scale, shift or pivot with their customers in real time. It was a smart approach that prevented upheaval and they emerged stronger and better, and with a sharper, savvier focus on their customer’s hierarchy of needs.
An analysis of some firms’ 2020 financials showed that many landscape companies made tactical gains and hit or got close to short-term targets. On closer inspection, they had little or no strategic growth in their core maintenance business. This is not to say that tactics aren’t important, but to generate real growth, strategy is the only way to get there.
Think about strategy as a critical leverage point for profitability in developing new business, for example. Identify the types of customers you want to serve in the future and the opportunities that will bring you success. You should know what your customers want from you that’s different from the past and how you can optimize your platform around new paradigms.
Strategy, in this case, should be based on selling profitable work. To do that, you must know what work is the most profitable for your business model and who your ideal customers are since loyalty and retention is important. Also, it’s important to know how to make referrals more profitable.
Referrals drive sales for most landscape maintenance business; however, when they are a result of untargeted selling instead of proactive relationship-building, they can be low-hanging fruit for your salespeople. While referrals can be an important byproduct of excellent work, it’s also true that referrals can lead to less desirable jobs. When you fill your pipeline with low-hanging leads, you run out of room for high-quality leads and your time and resources are spent following up on jobs that may negatively affect other areas of your business.
Prioritizing sales strategies can help you attract better clients in the future and boost your bottom line.
Most landscape companies attract abundant referrals through excellent customer service. But do they capture their fair share of the business that potentially comes from those leads? Sadly, too many of these opportunities are lost due to the transactional nature of some sales teams.
To work leads well, look at the opportunities they present through a strategic lens. Will it be challenging to implement? Does it offer opportunities for scaling, for cross-selling or upselling? Does it align with density goals, have retention potential or align with your mix?
Get as much information as possible. What are the lead’s broad objectives, wants and needs? What was their history and experience with other service providers? How do they feel about landscape value, and what role does sustainability play in their strategic plan?
Most importantly, why would they benefit from what you offer?
CEO involvement in the proposal process can help sales teams win the right kind of business. Proposals can be complex documents, with technical data and supporting information. But the bulk of the proposal should be devoted to what the potential new customer is interested in: his/her return on investment, landscaping and site infrastructure objectives and how your practices and approach can help them achieve a new level of success. Putting their strategy and objectives first will show that you have done your homework and ensure you don’t go home empty-handed.