We are all familiar with what a franchise is. In some instances, some of you may even own one. However, franchising has not existed in the self storage industry until recently. In fact, many third-party management firms may explain their business model as comparable to franchising. Yet, there are some key differences.
A management (third-party) contract is a service contract; an arrangement under which operational control of a business is vested by contract in a separate enterprise that performs the necessary managerial functions in return for a fee. Management contracts involve not just selling a method of how to do things but involve actually doing them. These functions can include operations, management of personnel, accounting, marketing and training.
A franchise contract is a licensing contract. A franchisee owns a business, pays an initial fee and then a proportion of profits, and conducts certain business operations in an agreed upon manner, in exchange for the permission to use the franchisor's business model and intellectual property. The franchise company would provide training and assistance to a franchisee to learn and carry out the systems set forth by the franchise.
There are also similarities between the two:
- Brand name, brand power.
- Not having to start a business from scratch.
- A proven system for operation and training.
- Market and competition research.
- Strength in numbers. You'll gain from economies of scale in buying materials, supplies and services, such as advertising, as well as in negotiating for locations.
Ultimately, the differentiator is whether the self storage owner would like to be hands-on or hands-off and how the business is run.
In 2014, Scott House, a franchise veteran working in the hotel franchise industry for 20 years, noticed many similarities between hotels and self storage.
“The hotel industry had benefited greatly from franchising; allowing the little guy to compete with large operators such as Holiday Inn, Marriott and Hilton. It also allowed large operators to expand market share quicker with less capital outlay.”
-Scott House, co-founder, Storage Authority
House had learned of Marc Goodin, a self storage owner and operator for over 25 years, and decided to reach out to him. They met and discussed an idea House had in developing a first of its kind self storage franchise in the U.S.
At the meeting, House asked Goodin a simple question, could the self storage industry benefit from franchising? Goodin said yes, and Storage Authority was formed.
According to AZFranchises.com, there are an estimated 3,000 different franchisers operating in the U.S. today that accounts for approximately 50 percent of all retail sales in the U.S.
Approximately one out of every 12 businesses in the U.S. is a franchise business.
And the only one that exists in the self storage industry is Storage Authority LLC.
Goodin explains that for many years, it was "build it and they will come”. This is no longer true.
“Now, it’s build it in the right location, make sure you have a high-end operation, sales and marketing platform, the right unit mix, and they will come.”
The Business Model
Storage Authority’s business model starts by guiding and assisting the franchise owner on how to identify land, design a premier facility, obtain approvals and build their facility. Once they open the facility, the owners oversee the operations of a manager-driven system based upon the Storage Authority systems and platforms.
In fact, Goodin explains that his system is something that could allow an owner to maintain their current job while building both a six-figure income and a nest egg for retirement.
“Our franchisees are in business for themselves, but not by themselves. Our system provides all the necessary resources and best practices to empower an entrepreneur to get started in the business properly. You’re given the business plan, sales, marketing and operational resources, and that will save them time and money by avoiding costly mistakes.”
-Marc Goodin, co-founder, Storage Authority
Storage Authority offers a “3 Tier Platform”:
- New Development: finding land, planning and design, construction
- Operations: manager-driven systems, brand support, multiple proprietary systems
- Sales, Marketing and Customer Service
Storage Authority provides development guidance including planning, design and construction dynamic ease. Goodin, a civil engineer by trade, explains that in order to make larger profits with a smaller investment, the Storage Authority approach is typically to develop versus acquire, and estimates an 18-month timetable to be open for business once land is identified.
The average development is 60,000 rentable square feet on five acres of land for single-story and one and a half to two acres for multi-story.
“We charge a one-time franchise fee of $35,000,” explains Goodin. “The fee for Storage Authority’s guidance and assistance for planning, land review, design and construction guidance is $4,000, which is worth significantly more than the franchise fee and will typically save our franchisees multiple times this fee.”
Goodin says that Small Business Administration (SBA) loans are much more attractive to the franchisee, with as little as 10 to 15 percent cash capital required, and that these loans would not be made available to them typically if their facility was run by a third-party management company since the SBA administration is looking for the owner to be hands-on and must hire and be responsible for the employees.
Once doors open, franchisees pay a royalty of six percent of gross income and a 2.5 percent website and marketing fee of their gross income.
“We estimate our franchisees can set their rates at least 10 percent higher than if they were to try and do it on their own, and this alone more than pays for the fees,” says Goodin.
Operations, Sales and Marketing
Goodin says that the franchisees do not hire self storage managers. They hire sales and marketing professionals to manage their facilities.
“We start with very efficient operations systems and training so the manager has time for sales and marketing. We have form letters, collateral, business cards, newsletter, etc., ready for their use. We set up a month-by-month marketing budget and calendar with each franchise and provide detailed rental scripts and scripts for typical concerns that must be used.”
Part of the marketing efforts are to teach community guerilla marketing and how to help the facility manager to implement. Goodin says this tactic is much more cost-effective than other marketing methods.
The Storage Authority Guarantee
Another interesting aspect about the operations is the company’s “Guarantee” with its customers:
- Rent Online or on the Phone Peace of Mind Guarantee: We know you are going to love what you find! In the unlikely event you are not 100% satisfied when you arrive at our facility, we will refund your money.
- Rate Lock Guarantee: We promise your rate will not increase for at least one full year.
- Never a Late Fee Guarantee: There is never a late fee if you are on our auto payment plan.
- 30 Day Perfect Fit Guarantee: We guarantee you will love our service and our super clean facility. If you are not 100% satisfied with us in your first 30 days and we do not correct the problem to your satisfaction, we will refund your first month’s rent.
- Ready When You’re Ready Guarantee: If you have a reservation or online rental and the unit is not available when you arrive, we will provide you the next larger size at no additional cost.
“Most of our franchisees would not have done self storage without us because they do not have the time or energy to learn the business. Most of our franchisees are business owners, executives or professionals. They understand that experts make more money. They are experts at what they do and want to be experts day one at self storage as well, and that's the service we provided.”
-Marc Goodin, co-founder, Storage Authority
On March 28, 2019, Storage Authority announced the opening of two new self storage franchises; one in Houston, Texas and one in Mulberry, Florida.
Owners Ed and Jenny Orkand completed a phase one, 30,000 square foot facility with traditional and climate control units on Walters Road in North Houston. Phase two is slated for construction this fall.
“Storage Authority is exceeding my expectations. Their guidance saved us both time and money during the development phase and now we are renting up at a fast pace in the crowded Houston Market.”
-Ed Orkand, franchisee, Storage Authority
The second location in Mulberry, Florida consists of 69,500 rentable square feet and comprises traditional, as well as climate-controlled units and RV/boat storage. A second phase of an additional 19,000 square feet is slated to begin this fall.
Goodin currently owns and operates two Storage Authority franchises in Connecticut that he designed and built, as well as one in Canada.
Storage Authority recently broke ground on a franchise facility in New Jersey and will break ground on another franchise facility in Florida this spring. The company has 12 additional franchises in the development phase.
In 2019, Goodin expects to sign up one new facility every month.