Why are the Profit Margins So Important?
Vendor relationships, estimating system, detailed financial tracking help kitchen and bath franchise owners maintain strong margins
Professional industry standards suggest that remodelers should maintain a margin of about 40% — and up to 50% for specialized remodeling — in order to maintain a strong operation. The fact that most remodelers have smaller profit margins is one reason that independent remodelers sometimes struggle to properly serve customers — without the money to hire the best help, independent remodelers generally work extremely long hours and are stretched beyond their limits. They may do good work, and they may have great intentions, but the customer service experience can suffer, which is why building contractors overall have a reputation that is barely a notch above lawyers.
DreamMaker’s reputation is sterling. GuildQuality, a third-party customer survey firm that interviews customers in a variety of fields, reports that 96% of the customers who hire a DreamMaker franchise would recommend the business.
As you can see from the Item 19 section of our Franchise Disclosure Document, in 2015, the average profit margin was 45.5%.
We have designed our systems with margins that can help our franchisees have the ability to provide great customer service while also allowing our franchisees the ability to pay themselves the salary deserved for the work they do — with a respectable return on their investment, a net profit, and equity growth.
Efficient business systems, approach make big difference
So, maintaining a solid margin is important. Here is how we do it while staying competitive:
- DreamMaker leverages its group buying and preferred vendor relationships to buy materials for much less than most independent contractors would pay. Independent remodelers often pay near retail cost for materials; DreamMaker is able to buy at wholesale prices.
- DreamMaker provides a sophisticated estimating system that helps franchise owners price jobs accurately, so they don’t incur unexpected costs while serving customers.
- DreamMaker’s sales system emphasizes quality and custom design. While price is a factor, it’s not the only factor. We are not the cheapest remodeling company in the marketplace. We’re also not the most expensive. We aim for customers who are willing to pay for great advice, as well as a remodeling company that will handle all aspects of the job with minimal disruption to the customer’s life.
- DreamMaker’s pricing system accounts for all the costs of doing business — equipment, production labor, workers compensation insurance, vehicle and fuel, materials and freight, permits, subcontractors, small tools and equipment, debris removal, etc. All aspects of the business should be built into the price you charge for your work. Too many remodelers only pay themselves for the actual act of removing the old kitchen or bath and installing the new one. They don’t pay themselves for the planning, management and general business costs — and that cuts into their margin, hurts their ability to hire quality help and leaves them doing nearly everything themselves. They’re working for the worst boss in the world — someone who demands a ton of extra work that is completely uncompensated!
Our philosophy enables higher profit margins; our systems help ensure them. For each job, we look at the profit margins earned on the materials, the labor and the project management. By monitoring each facet of the business, franchisees can quickly spot issues that may be eating into profit margins. Perhaps the estimates have been off because the system isn’t being followed perfectly; perhaps labor costs are coming in above estimates. Whatever issues may emerge, you’ll have the data you need to guide your business properly, and coaching and support to help you find solutions.