Becoming a franchisor

Australian home building franchise rockets up US franchise growth list

Oliver Milman /

G.J. Gardner Homes has been ranked third-fastest-growing company in the latest Franchise Times top 200 franchise companies operating in the US – even without Donald Trump’s help.

 

With $503 million in worldwide sales, the third place came from a 48% sales growth for the group, which began in Queensland in 1983.

 

G.J. Gardner Homes is the 12th largest homebuilder in Australia with 1,176 homes built in 2010-11, according to HIA statistics. It is the largest franchised homebuilder in Australia.

 

CEO Darren Wallis is modest about his company’s success. It expanded into the US market in 2006 under the direction of Wallis, who moved to the US to oversee the expansion.

 

“We quietly get on and do what we do. We enjoy it and a lot of our franchisees are very successful,” Wallis says.

 

Wallis says the sales growth figure is partially inflated by the downturn of the US dollar but that growth was still strong in 2010.

 

In the last six months the company has opened master franchises in Indiana and New England, and there are plans afoot to expand into Texas and Minnesota.

 

“I started some fairly aggressive strategies [as company director],” he says.

 

“At the end of 1995 we started to franchise. We had six regional offices in southeast Queensland and in 1996 those six became franchises. Then we opened offices in New Zealand in 1997.

And then in ’98-’99 we first looked at New South Wales.”

 

The 2010 growth had been planned for 2008 before the global financial crisis intervened.

 

“2008 was an interesting time. It was meant to be a big expansion year. We were going to expand into more American states but midway through the year people started getting scared of what was happening,” Wallis says.

 

“2008 was more of a stabilising year, as were 2009 and 2010.”

 

Despite the restrained period, the company has grown every year since it first expanded out of Queensland in 1997, but Wallis does expect a slight reduction for this financial year.

 

“This will be the first year we’ll drop over. It’s a slight drop back, a correction from the GFC,” he says.

 

“Queensland has dropped off a bit, but Victoria is still going well.

 

“We’re still seeing growth across America as some of those markets start to recover. We’ve doubled our sales in Colorado.”

 

The company ranks at 125 on the list of greatest global sales, which were listed at US$503 million. The list was topped by McDonald’s with global sales worth US$77.38 billion.

 

Wallis says G.J. Gardner is the only Australian residential building company operating in America.

 

“Diversifying overseas helps build momentum, it shows you are an expanding model,” he says.

 

“A lot of companies are going backwards right now. Expanding builds the brand internationally, which is a massive benefit for both us as at a corporate level and for franchisees.”

 

In 2007 the company was due to develop a series of homes in California in a deal with Donald Trump. G.J. Gardner would have built up to 750 homes under the scheme but Trump failed to come through with money when the financial crisis hit.

 

“It just fizzled out,” says Wallis.

 

Franchisees pay a “small” joining fee and then pay royalties when they sell a house.

 

“We supply the resources and skills to help take them from being a small builder to a large builder, hopefully the largest builder in their particular area.”

 

“We tell them we’re not successful until you’re successful.”

 

The survey builds a list of the top 200 franchise companies by consolidating data from companies’ self-reported data, Securities and Exchange Commission documents, the franchises’ franchise disclosure documents and other publicly available documents.

 

G.J. Gardner first entered the list of top franchise by total sales in 2008 at $365 million. In 2009 sales went up to $410 million. In 2010 the company did not feature because the survey requires 15% of offices to be in the US and expansion in Australia put G.J. Gardner just under the threshold.

 

In this year’s list it sat behind US-based Real Living Real Estate at 71.2% sales growth and Express Employment Professionals at 86.3% sales growth.

 

This article first appeared on Property Observer.

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