Larry Green had been building patios and driveways with interlocking stones in South Africa for 14 years when he relocated his family to Orange County< in 1992.

"This material had been popular in Europe for a long time, but the United States was way behind. This was an opportunity in an industry I knew," he says.

At first, he considered buying an existing company and then decided to start from scratch. He asked local industry veteran Doug Lueck to be his partner in Systems Paving in Newport Beach.

Although annual sales growth has been double-digit from the start in 1992, Green and Lueck have expanded cautiously, making sure to have the right systems, employee training and measurement tools in place before taking the next step.

That step was franchising, starting in 2001. But without a system in place, the pair insist, franchising leads to disaster, not growth.

"You should make sure you have something real in place so you don't have to sell franchises to survive," Green says.

In fact, franchise income was about 10 percent of Systems Paving's $30 million revenue last year.

"We started slow because we wanted to learn this business," Lueck says, "and we proceeded slowly with franchising to figure that out, too."

They decided, for example, that franchisees need to be better at sales and management than building, Lueck says.

Illinois franchisee Rod Bell was a consultant with PriceWaterhouseCooper, and his son and partner, Meredith, was in sales and marketing. They are businessmen who can hire people to do construction.

"We wanted a family business, something in the home improvement sector, where growth is good," Bell says. "What sold me on Systems Paving was that they set the gold standard in installation technique, their training is very strong, and it's a dynamite sales organization as well."

All those elements didn't happen by chance. Green and Lueck were big on establishing systems from the start.

Even before franchising, they started Systems Paving University for sales personnel and later added training for field supervisors and construction managers. They developed a direct-mail campaign model that could be duplicated in any market. They created proprietary software to track each job and to give homeowners a simulated three-dimensional look at what paving stones would look like on their property.

Franchisees have access to all the corporate systems, training and proprietary software, along with group buying power and marketing, if they choose. But those tools initially were designed to make the company operate efficiently and manage growth through corporate-owned satellite offices.

"We gave managers of those offices a lot of autonomy and when we looked at (the structure and operation) down the road, they looked a lot like franchises," Green says.

In fact, it's better for a company to open more than one corporate location before eyeing franchising, Lueck says. "One success might be luck. Can you do it a second time? Each time you learn more."

In 2001, Systems Paving started testing franchising in several carefully selected locations, such as Massachusetts.

"We don't need the money from franchising to survive, so we don't have to grow at the speed of light," Green says.

The slow pace has enabled Systems Paving to refine its franchise strategy, based on the experiences of the first franchises, Green says. One modification is the size of a territory.

Each territory needs to have enough homes for the franchisee to make a good income, Green says, but if it's too large, it takes one franchisee too long to establish the Systems Paving brand in the area. It's better to have several offices in a major metropolitan area.

Bell says Systems Paving is considering adding more franchisees near him in the greater Chicago area. "This territory is so huge, more franchises will get better coverage to get the brand known and service more customers."

By Jan Norman, The Orange County Register
Monday, August 23, 2004