Central Ohio is a test kitchen for Ed Bacome and Phil Fankhauser. Their company, Epcon Communities Franchising Inc., builds maintenance-free communities targeted at baby boomers.
After extensive market research, Epcon learns what it takes to build each design, discovering the costs and flaws like any other builder.
“Most of the time our batting average has been excellent; if you design something, it turns out pretty well,” says Bacome, founder and principal. “But you don’t know until the market tells you (that) you hit a home run.”
Then, franchisees can step in.
Fankhauser, founder and principal, says their franchisees, who operate in 19 states, always ask how Epcon provides a competitive advantage.
“And we say — half serious, half joking — that, ‘We’re going to share with them 30 years of mistakes that they don’t need to make because we’ve made them before,’” he says. “Just as important as what we coach them to do is what we coach them not to do.
It’s unusual for a homebuilder to franchise, but that’s exactly what Bacome and Fankhauser did 20 years ago to grow their brand geographically. Today, Epcon still has two divisions: Epcon Communities for its own communities and Epcon Franchising for franchise builders to take advantage of Epcon’s designs, resources and brand.
“Neither of us were enamored with the possibilities of spending a majority of our time on an airplane, traveling to projects that we were doing,” Fankhauser says.
Bacome and Fankhauser also drew on their experience to plan for tough times and survive the Great Recession when over half of the builders in America went out of business.
And now Epcon is in its most vigorous ramp-up ever, which is a fresh challenge for the two housing veterans.
Invest for the future
Homebuilders have a long business life cycle. A ramp up cannot happen with the flip of a switch. And in this recovery period, Epcon is no longer building its own communities just in Ohio, but also in Raleigh and Charlotte, North Carolina.
From the initial land purchase through the approval process and build, it’s easily two years of significant investment, Bacome says. At the same time, you need the final sale within two to three years to make it as profitable as you expect.
Forecasting is critical, and so is speed, which means investing in good people who enable you to meet all your objectives, Fankhauser says.
“The housing industry was so (demolished) by the recession that large numbers of professionals in housing left the industry altogether,” he says. “And so we’re recruiting from a pool of experience that is much less than it was five years ago.”
Despite the shallower recruiting pool, Epcon is still being particular with its hires, and Fankhauser hopes the industry will soon begin to attract people back or bring in others for the first time.
In the upswing
For 20 years, Epcon closed about four homes per month. That velocity gradually went down to one or two a month, and then stayed there for six years. It was several years beyond what Bacome and Fankhauser hoped.
Bacome says their thinking has adjusted so much that today, as they’ve come up to two or three closings a month, it’s hard to believe four was normal.
Fankhauser says they read about the economic recovery before they actually felt it — when not only did buyers come in larger numbers, but the banking industry also looked at housing as an investment opportunity once again.
Bacome felt the upswing was finally here about a year and a half ago.
