03 Apr 2019
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:
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.
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.”
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.
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.
Goodin says that the franchisees do not hire self storage managers. They hire sales and marketing professionals to manage their facilities.
Another interesting aspect about the operations is the company’s “Guarantee” with its customers:
On March 28, 2019, Storage Authority announced the opening of two new self storage franchises; one in Houston, Texas and one in Mulberry, Florida.
Goodin currently owns and operates two Storage Authority franchises in Connecticut that he designed and built, as well as one in Canada.
In 2019, Goodin expects to sign up one new facility every month.
