We are in an interesting time in the restoration industry. The chasm between contractors and carriers continues to be a pain point, and more contractors are veering away from program/TPA work. Today, there is an entire franchise that has chosen that route and is finding amazing success with their unique model.
This week, I had the pleasure of making a quick trip to the Restoration 1 Convention in Fort Worth, Tex. It was a full house. Every session was standing room only, receptions were well-attended, and the overall atmosphere was celebratory. Immediately, it was evident R1 is a tight-knit group with massive respect for each other, and also inclusive and welcoming of others.
A Record Year
- R1 grew by 47% last year.
- The number of franchises doing more than $1 million in revenue doubled year over year.
- They completed a historic number of large projects.
During the awards ceremony, a staggering number of R1 owners were recognized for passing that $1 million mark. Plus, there were four franchisees recognized for doing more than $5 million in revenue – up from just one the year prior.
Violand Management Associate’s Principal Chuck Violand shared during his breakout that only about 4% of all small businesses in the U.S. ever exceed the $1 million mark. He imparted his knowledge on helping companies stepping into what he calls stage two.
Stage one includes companies doing less than $1 million in revenue; stage two is the next step up and goes all the way to $50 million.
He emphasized the big changes that come with stage two: hiring more people, departmentalization, entrepreneurs needing to relinquish control of certain aspects of the business to others, and more.
According to Violand, the three strongest motivators for growth are:
R1’s leadership is each of those three C’s, in addition to passionate and energetic. They’re also listening to their franchisees, and not keeping secrets. It’s clear Gissler and Stellar Brands (parent company to R1) CEO Sherry Rose are well-connected with owners, and just a call away to share successes – and pain points.
Rose shared the results of their company-wide survey which showed very high levels of satisfaction among owners. She also recognized weak areas that need improvement – like slowing down on implementing new things in the company. She admitted she and Gissler run fast, and are committed to pushing the franchise forward to stay ahead of the competition – but also understood franchisee frustration. As a result, the executive team really dialed in on their strategic plan this year.
“We have the heart of a small business,” Rose said during the convention’s opening session. “We are together, and not alone.”
She emphasized that life is a journey, and “the highs are so lovely, but the lows have purpose.” While we are all on a journey to a similar destination, just like the pioneers who headed West, we each have a different purpose for our journey. But traveling together, like the pioneers with wagon trains, we will all get there safer and faster – it’s people first. This was echoed in Stellar Brands values:
- We Are Learners: We study the business to best serve those who rely on us.
- We Solve Problems: We move forward by simplifying the complex, leading by example, and challenging the status quo.
- We Put People First: We listen first, speak the truth, encourage often, and help create solutions for others.
- We Create Opportunity: We are creating new pathways for people to grow healthy businesses and prosperous futures.
Peers Educating Peers
There are several R1 franchisees who are challenging the status quo in their own markets, and in turn among the franchise. R1 isn’t afraid to let their contractors take the stage and share what they are doing, and likewise, the franchisees aren’t secretive about their secret sauces. Several franchisees held breakout sessions on topics like getting more fire damage jobs and how to get paid faster.
Scott Whitaker, owner of R1 of Spokane, held a breakout session to train fellow owners on how to use the S500 to increase their revenue. It is rooted in contractors needing to understand the scope, purpose, and application of the Standard.
With an audience spilling out into the hallway, Whitaker educated fellow franchisees on snippets of the S500 they should be using to bring in experts like IEPs, backing up work that needs to be done on a loss, writing accurate estimates, refusing to back down to adjuster pressure, and more. His franchise is the top performer in the system, and his commitment to training his team and understanding how to best serve the customer are clear. Be on the lookout for more from him on a future episode of C&R’s Restoration Today Podcast.
Firehouse Education’s Kevin and Annissa Coy also held a breakout session that further outlined what the relationship with adjusters can look like when you handle your jobs a certain way. Their belief is that adjuster relationships can be healthy and fruitful – but you need solid communication and documentation. The Coys have worked hand-in-hand with several R1 franchisees to create and expand thriving contents cleaning divisions.
The Restoration Lawyer Ed Cross was also in attendance, giving a very well-received keynote on 10 steps to overcome challenges with collections.
- Powerful contracts and assignment of benefits.
- Document file to be lucrative.
- Stay in the loop with every adjuster communication.
- Defeat use of standardized prices.
- Make your own price list.
- Overcome issues with third party consultants.
- Keep insurance proceeds away from mortgage companies.
- Proper timing of collections escalation.
- Proper leveraging of mechanic’s liens.
- When to litigate.
Cross implored R1 owners to let customers be in charge of projects. Have customers sign a contract for the work, based on a fixed price (not T&M), and allow them to decide and approve each proceeding step – signing change orders when necessary. By doing so, contractors are able to show adjusters approval by the property owner for the work – and their commitment to pay the set price.
Also on the topic of customers, Cross suggests forming an alliance with the property owner and be involved in any and all communication between them and the adjuster and/or carrier. For more on how to come to a fixed price, I’d suggest checking out some of Ed’s articles and videos with C&R, and on his website: www.therestorationlawyer.com.
When it comes to documentation, Cross encouraged restorers to do more than take a bunch of photos. Job files need to be complete, moisture maps should be utilized, and pictures should sometimes be taken at different angles to give perspective and location of the damage on the job site instead of just a close-up. To boil it down, job files must reflect what you did, why you did it, and who did it.
Perhaps one of the most important pieces of information to be shared across the industry in the last few years is that Xactimate pricing is not meant to be the final word. Pricing varies; Xactimate is a guideline, but even Xactware President Mike Fulton has said on record on multiple occasions, echoing the Xactware License Agreement, that Xactimate prices are not the “Bible” – and contractors can and should adjust accordingly.
“If an adjuster is arguing with you about your labor charge and saying no, Xactimate is the industry standard, but you’re able to go into the industry trend reports in Xactanalysis and see that that price has been completely flat for a bunch of years and hasn’t been updated, you’ve got increased labor costs,” Cross said. “The carrier’s responsibility is not necessarily related to Xactimate prices; the policy doesn’t say they’re only responsible for paying Xactimate prices. It’s set by the market. What is the fair market value of your service?”
Cross also emphasized adjusters should not be asking contractors to remove things from invoices. Contractors are not clients of the adjuster; contractors didn’t hire the adjuster or carrier.
“One of the big problems we have in this industry is people don’t stay in their lanes,” Cross emphasized. “Your contractual obligation is with your customer. Period. The insurance company’s contractual relationship is with the policy holder. The insurance company and their consultants cannot tell you what to do.”
On the Move
As someone who has attended dozens of conferences since joining the industry in 2015, I can tell you the energy here cannot be ignored. I am looking forward to continuing to watch R1 take their unique path forward, and having ongoing conversations with their leadership and franchisees about what they are doing to challenge the status quo and embrace exponential growth.
Also, as a final parting note, R1 is also making rounds on the TV waves! Just last week, Stellar Brand’s Founder and Chairman of the Board Gary Findley appeared on Undercover Boss, and check out the pipes on Shetawn Baker from Restoration 1 of Phoenix! Be on the lookout for her later this year on The Voice!