Self-Storage Franchising

Does It Work?

By Marc Goodin

We know franchising works for many businesses like hotels, restaurants, coffee shops, and others, because we spend our money with them on a regular basis. A new franchise opens every eight minutes of every business day. Franchises generate $2.3 trillion a year in the U.S. But you may be asking yourself, “Will it work for self-storage?” You’re not alone. Many industries throughout time have questioned the concept of franchising; even motel and restaurant owners had the same question: Will it work for my industry. But, as you drive down any main street, you can see they became believers.

The emergence of large self-storage corporate operators, including REITs, present risks to the independent owner as large experience operators are expanding rapidly in every region in the U.S., taking market share from their less sophisticated independent operators. A franchise will bring large operator systems and technologies without taking control from the owner. Brand identity in all sectors of retail (hotel, restaurant, self-storage, etc.) is becoming the dominant driving force in marketing your product to the public, with the customer demanding consistency, purchasing power, reward systems, reservation systems, and more—all of which are identified with brand identity that a franchise can provide.

Independent owner/operators, in many cases, are not the day-to-day managers and, therefore, depend on the store’s manager to market, maintain, and expand their business. Unfortunately, owners are discovering that the managers are ill equipped with little to no operational, marketing, sales, or customer service experience. And they cannot keep up with the ever-changing technology. A franchise would provide that owner and manager with the systems and technologies necessary to not only capture higher market share at premium rates but also be part of a scalable platform to compete with and even surpass the competition.

In The Beginning
Franchising began over 40 years ago with companies like Holliday Inn and McDonald’s. They realized that franchising allowed owners time to build their business much faster, because they do not have to reinvent the wheel. Quickly, it was clear that by joining a team, the economy of scale, support systems, branding, training, and increased profits (that are impossible to obtain for most individuals) could be obtained by owning a franchise. This was the birth of modern franchising! There are nearly one million franchises in the U.S. This number grows every year as more individuals seek business ownership offering benefits often not available by starting their own venture.

Due to the very high sales price of existing self-storage facilities, most new developers are choosing to build their own self-storage, so they can reap larger rewards and profits. With a franchise, the new developer will have an experienced partner during construction and lease-up. Not only will this partnership save them from costly development mistakes, it will typically reduce the development time as well. Another added benefit is the fact that lenders prefer to lend money to franchise operations versus independents who have never built or owned self-storage before. What’s more, you will still qualify for an SBA loan with a franchise, which is not the case with many management companies.

Franchising Stats
Did you know that 41 cents of every retail dollar are spent at a franchise? By far, franchising is the most successful business model ever introduced to business. Franchising is the fabric of many people’s success. It has changed the lives and fortunes for many who may have never started a business otherwise. Studies claim that franchise businesses enjoy a success rate up to three times greater than that of independent businesses. Whatever the true number, it is certain franchising affords benefits that provide greater business advantages to owners of franchised businesses. Typically, a self-storage franchise owner will own 100 percent of their self-storage business and operate it under a licensing agreement with the franchisor. With franchising, “you are in business for yourself but not by yourself”.

Once upon a time, the self-storage industry’s motto was build it and they will come. This is no longer true. While self-storage is still the greatest business on planet earth, there are minefields and traps that must be avoided. They include the right property; determining the existing competition and understanding their impact; and full feasibility reviews, zoning, site plan design, building design, unit layout, banking, and construction. And that’s just before you open your doors. Post-opening minefields are growing as there is more competition and a growing vast difference between the average self-storage business and a premier facility. A few simple mistakes during the development process can cost you hundreds of thousands of dollars. The difference between the average operation and an experienced sales and marketing operation can double your profits.

Most of the new self-storages are being built by very experienced self-storage companies or developers due to the complexity of new development and ownership. Franchising provides you the experience, knowledge, and ability to compete with and surpass the REITs and big players. It is hard to beat the combination of a franchisor’s systems, platforms, knowledge, and an owner’s excitement and commitment! A good self-storage franchise will provide written step-by-step development guidelines, check lists, and regular one-on-one communications and guidance to save you both time and money and help ensure your facility has the state of technology and that “just feels right” feeling that savvy renters require. Too many owners believe they rent space between four walls. The facilities making the oversized profits know that what is outside of the four walls is what makes their facility different and is the key to success. Even with well-paid designers, a new developer is likely to end up with a limited portion of the items that can make a facility special and permit it to charge more than its competition. Having an experienced franchisor (one who has designed, built, owns, and manages multiple facilities) on your team will make a substantial difference. Imagine having experts, who gained their experiences in the self-storage trenches, ready to personally help you succeed.

A New Option
Until recently, many owners had no choice but to turn their facility over to a management company. A management company is an option for an independent owner if they do not want any part of running their business and are willing to accept reduced profits. Franchising is a great alternative to a management company for owners who want to take part in running their business. With a management company, owners lose control of their business and they miss out on the opportunity to make oversized profits from the combination of their own hard work, experience, enthusiasm, and partnering with a franchise. There is no one who is going to watch your financial bottom line closer than you, the owner, to maximize your profits.

It is only natural to compare franchise fees to the added value provided by owning a franchise. The bottom line is a franchisor will typically help entrepreneurs make profits they could not make on their own, reduce their risks, save them time, and make life more enjoyable. A good franchisor with a high-end sales and marketing platform would set your rates 10 percent higher than you would set them on your own, making their services free.

Not only will you be able to charge more per unit with the help of the franchisor’s experience and guidance, you will also rent more units. It only takes approximately six extra units per 100 units rented to again pay the franchise fee a second time. Once you’ve done some of your own research, I am sure you will agree that even before you complete your first month of business you will have rented many more than a dozen extra units due to the training, guidance, sales, and marketing platforms provided by a franchisor. And that it only gets better month after month.

There are five key steps to becoming a self-storage franchise owner:

1. Apply for a franchise by completing the online application (15 minutes; no fee or commitments required).

2. Once approved, you will get the Franchise Disclosure Documents (FDD). They include the Franchise Agreement and several other documents for your review.

3. Review the FDD with your Franchise Director.

4. Have multiple conversations/meetings with the Franchisor over the next 30 to 45 days to make sure you are a good fit for each other.

5. Sign up and get started.

It is that easy!

There is nothing more powerful than an idea whose time has come: self-storage and franchising! 

You can do it!

Marc Goodin is president of Storage Authority Franchising, www.StorageAuthorityFranchise.com. He owns three self-storages that he designed, built, and manages. He has been helping others in the self-storage industry for over 25 years. He can be reached at marc@StorageAuthority.com or directly at (860) 830-6764 to answer your franchising, development, marketing, sales, and operations questions. His best-selling self-storage books are available at Amazon.