The #1 Buyer of Ugly Homes – David Hicks of HomeVestors of America

David Hicks, CEO of HomeVestors of America

David Hicks, the CEO of HomeVestors of America, grew his company’s revenue from $34.6 million in 2014 to $78.8 million in 2017, a 128% increase, and another 35% YoY in 2018.  

HomeVestors of America are the “We Buy Ugly Houses®” people who are the #1 buyers of houses in the U.S.  

In this interview with Eversprint‘s Malcolm Lui, David shares how he and his team accelerated their high value sales by:  

  • Steadily adding franchisees each year — 120 were added last year.  
  • Helping franchisee increase their same store sales by over 20%.  
  • Providing vendors and lenders who give their franchisees attractive pricing.  
  • Providing advertising and loans to franchisees.  

Computer generated transcript - HomeVestors of America Interview (transcribed by Sonix)

Download the "Computer generated transcript - HomeVestors of America Interview" audio file directly from here. It was automatically transcribed by below:

Malcolm Lui: Welcome to the High Value Sales Show of I'm Malcolm Lui, the Managing Member of Eversprint, and today we're speaking with David Hicks, the CEO of HomeVestors of America, the "We Buy Ugly Houses®" people who are also the #1 buyers of houses in the U.S. Welcome to the call David.

David Hicks: Thank you Malcolm. Thank you for having me on the call.

Malcolm Lui: David, you grew your company's revenue from $34.6 million in 2014 to $78.8 million in 2017, a 128% increase, and in 2018 you grew your business another 35%. Before we talk about how you grew your company so fast, can you briefly share what your company does beyond my quick intro, and how your company differs from the competition?

David Hicks: I sure can. Malcolm we are we're a franchise company we are have franchise all over the United States. In fact we're in 170 different markets and as you heard on the slogan people don't know home masters but they know the billboard we buy ugly houses and that's what our franchisees are known for is. We buy that Ugliest House in the neighborhood fix it up and sell the prettiest house. And so that's kind of what what we do. Again we're in one hundred and seventy different cities and 46 different states all over the US.

Malcolm Lui: All right investing now. Are there other companies that do what you do and if so how do you do it differently.

David Hicks: We are. There is no franchise company does what we do. There's really no competition to do what we do nationwide. Our competitors are the guys that buy houses locally in the market that have a pickup and a ladder in the back and they go buy houses locally. That's who our competitors are. There's no organized competitor. So. So the way we differentiate is our franchisees. They have kind of the best of both worlds. They want to own their own business. They're each in independently owned and operated so they have their own business but they have this support and the backing of the training of a nationwide company. So that's what sets us apart.

Malcolm Lui: All right fantastic. Next year the details of what support you provide your franchisees

David Hicks: The absolutely and new franchisees coming in. Malcolm we literally help them learn how to buy how to price the houses. We have all the technology to support and back them. We have for example an iPad app that we call value check that the franchisee can go in and they can input or bring in the all the details of a house from square foot two bedrooms two bathrooms. Then when they look at the house they go click on that it needs a new roof and it needs painting and needs whatever and it helps them come up with a repair estimate what's going to take to estimate to repair the house and bring it up to standards and then it gives them a recommended number that to buy the house had. And so that's part of what we supply them is just the technology tools to do that. The second thing we supply is the training just how to to get started how to run their business then more advanced training on how to they learn from other franchises how to we have better how to go all the different intricacies of our business. The third thing we supply them is a mentor. We they. Every franchise that comes in gets a coach what we call development agent that helps them develop their business and build their business. These are more experienced franchises that work there that just really walk him through the whole process. And then the fourth thing is just the marketing and the advertisers who support the we buy ugly houses trademark and we own those. We have 22 trademarks round ugly houses and we have all the proven advertising that helps generate leads that helps them find the houses to buy

Malcolm Lui: The leads are for people who want to sell the homes or also for people who want to buy the rehabbed homes.

David Hicks: Ads to sell and then we also have all the sites to help them sell it. Although in today's market that's easy. There are a lot of people want to buy houses but we have the processes to help them sell to but that's for the sellers. The reality is we say we make our money when buy the house because finding the houses is where the tough part is right now.

Malcolm Lui: Yeah. Now the franchisees who are buying these homes are they also the ones who are going through and doing the rehab themselves and a providing the capital to do all that themselves

David Hicks: That. Yes that they're the ones now the capital. First of all we do the training on how do we have most of us subcontracted we have you know somebody is going to buy a one or two houses a year they can absolutely go do that themselves. But our franchisees don't do that. Most of them will buy like our top ones last year a bottom 150 houses for the year. You can't rehab 150 house just so they have crews they have. So we teach them how to do that. So so that process. Yes. Then we also will lend them the money to buy the house. Well in the mind to repair the house if they also qualify the House would qualify. We also Malcolm that's one of the ways our franchises love us and what we do. For example we just create a lending portal that we have seven lenders in that portal. So when a franchise has a house to to buy it they can input it in that lending portal and we help them find the best rate from lenders to help them find the money to buy the house

Malcolm Lui: And this is separate from your company providing capital as well.

David Hicks: Correct. Yeah

Malcolm Lui: Okay.

David Hicks: We were an eighth lender but we got seven other lenders that will help them find the money

Malcolm Lui: Right. Okay great. Now can you share some details of that how much it costs for a franchisee to buy a franchise license or franchise territory

David Hicks: Yeah absolutely. And they're their territory. They become part of an ad council the territory the franchise. We have two levels of franchise we have. Most people start to what we call an associate franchise and that franchise twenty seven thousand dollars to buy to get the franchise and the full franchise is sixty five thousand. But most people start to associate and they can upgrade anytime so should have a little bit lower fees cost the bit less upfront and then they can upgrade in time they want to

Malcolm Lui: And what do they get for the additional forty thousand or so to become a full franchisee.

David Hicks: It they get there. Their fees are less ongoing so the associate franchise is a lower entry price a little bit higher fees and that's why most people start there because they have. Yeah. Again we we want them to be able to have the money to go do advertising do other stuff. And so most people start at that level they go buy a few houses and then whenever they are ready they can upgrade their fees go down.

Malcolm Lui: Okay. What are the ongoing fees where they associate in the full franchise programs.

David Hicks: They vary it goes somewhere from 5 percent down 2.8 percent based on their sales. The more

Malcolm Lui: Okay

David Hicks: They sell all the lower the fees go

Malcolm Lui: Okay. So that 5 percent is based on the buying price or

David Hicks: The

Malcolm Lui: Selling

David Hicks: Sales points. The sales price.

Malcolm Lui: So after they rehab the home in a cell

David Hicks: That's right.

Malcolm Lui: Then it's

David Hicks: That's

Malcolm Lui: Like

David Hicks: Correct.

Malcolm Lui: Ok.

David Hicks: And reality is that when they had the money and so they they pay a minimal fee when they buy it. And but most of their pay when they sell the house which is when they had their money

Malcolm Lui: Ok now how many territories are have you've offered it already or that are already taken

David Hicks: Were in one hundred and seventy different cities but they're not they're not exclusive territories. We have a franchise for example we have 44 franchises in Houston. You know we have and they all work together because they're too big. We we target an advertising level. They can spend within a city. And so we. But they they work together and the leads we have a very. When they pool their money advertising wise the leads are separated based on how much money they spent

Malcolm Lui: So the franchisees are paying for their own advertising

David Hicks: Correct. That's

Malcolm Lui: Look.

David Hicks: Correct. Yeah.

Malcolm Lui: It has a tie into the advertising that you're doing or is that separate or is together

David Hicks: Well we do advertising for franchise and stuff on top that the franchisees all do their own advertising for their four sellers that want to sell their house to them and they. What happens in Ad Council Malcolm like if we were in the same ad council and you want you can advertise whatever level you want to and advertise the level I want to and we have a sophisticated rotation system. So if we we pull our advertising we place it together and for if you put five thousand in and not put one thousand and then you would get five leads for every one I get. And they just rotate to you. So Liege are pretty much exclusive

Malcolm Lui: The

David Hicks: But they the advertising we have everything from direct mail to billboards to TV advertising to radio advertising to online people click and FCO and it's all handled through our ad agency.

Malcolm Lui: Right. Right. Okay got it. Now you share some of the success rates. Like you know 100 you sign up 100 franchisees. People with no experience at all to start with in real estate. A year later how many of them are still going ahead with the program.

David Hicks: We have a very low rate. We lose. Now. I'll tell you Malcolm of all the ones that we do for example we've got thousand franchises and I think we lost 44 last year or something like that total for every reason which a very small right to lose. And they of those most of them were buying their first when they buy on to they bought two hours or less. They just never got started doing it. We lose very few franchises after they buy more than two houses. It just hasn't happened. It's not very often

Malcolm Lui: And when you screen your franchisees What expectations do you give them in you know realistic expectations you give them about how long is it take for you to find your first home to buy. How long will it take for you to rehabilitate rehabilitate them in and how long it takes for them to sell it.

David Hicks: A great question. And Malcolm we like every franchise or we're regulated by the Federal Trade Commission and we do not do any earnings claims.

Malcolm Lui: Eddie.

David Hicks: We don't do anything we cannot legally. When somebody wants to come in first thing they do is they fill out what we call a request for consideration

Malcolm Lui: You

David Hicks: And we. That tells us a little bit about him and we send them that franchise disclosure document. It is over 300 pages long. And so it's going to take a moment or you know if they print it more than almost you know one half a ream of paper to put it out but it tells him everything about us. And it tells him the success rate it tells them. Have they left the system. It tells them everything. They have our whole financials for the last three years and everything in it.

Malcolm Lui: You

David Hicks: So we cannot and we do not hide anything but

Malcolm Lui: Ok.

David Hicks: There. And it shows some how many you know what the average I mean total Hemi House robot everything. But the reality is our franchise is that the expectations depends on what their goals are. We have some people that are happy by three or four houses a year and you know what. So happy buying that mean we are two. We have some to buy a hundred and fifty pounds a year. And of course we're we're excited for them

Malcolm Lui: Yeah.

David Hicks: That they can do the level of business they want to do whatever.

Malcolm Lui: Ok OK.

David Hicks: So

Malcolm Lui: Can you share with us today about the success rates of people who joined the program from scratch

David Hicks: Now. Well well that's one of the best things about it. First of all again we cannot give anything is going to come to an earnings claim because

Malcolm Lui: Like

David Hicks: That's illegal to do that.

Malcolm Lui: Yet

David Hicks: Now I will tell you when the new franchise comes in after they send the FTD. It has every franchise in the market that's there and it has that they can literally when they're ready they can contact franchise and ask them their numbers and

Malcolm Lui: E

David Hicks: They can do that. So it is absolutely fine to do that. I will tell you probably the tourists and the people around us it's a great example my son just graduate from college and I am supporting him buying a franchise. And so he is a new franchisee just coming at college. We are and one of the quotes you probably ask is who we're looking for in franchises. And I will I will tell you Malcolm the we prefer people that in fact 80 percent of our award winners never bought a house before they joined us.

Malcolm Lui: Ok.

David Hicks: 80 percent of our top franchises never bought a house. We prefer those that are coming in and learn our processes follow our processes and we can teach them how to do it they'll go do the effort we can give them the knowledge to learn and be successful in our business both them succeeding is up to them. They have to be willing to put their effort in

Malcolm Lui: Ok so you know what are your minimum requirements to consider a franchisee

David Hicks: We do. Great question. We do on every franchise. First of all we go do a background check. We want to make sure they represent us and represent the company. They're entirely owned operated but they they're representing our good name. And so we do a background check and make sure that they're a credit check on them and just make sure they're good citizens. We they have to have a minimum of 70000 liquid assets to do that. From there we're really looking for somebody that has some experience you know that or something to show they've been they're willing to go do the work and do that. And I tell what a great example we have an awful lot of ex athletes that do go well with us because they're used to go and put in the effort it takes to succeed something we're more interested in somebody that that really wants to learn the real estate business and wants to is coachable and is willing to go you know learn and go through what it takes to learn to run their own business. That's what we're looking for our company and our best franchises. They had that entrepreneurial spirit of having their own thing but they also are willing to work within a system and work within to be coachable to be able learn something. That's what we're looking for

Malcolm Lui: Right. OK. And how would your franchisees perform when the real estate market is not so great and prices are trending down as it was trending up

David Hicks: Yeah great question. We've uh we started franchising in nineteen ninety six so we've been through up markets we've been through down markets and the franchisees are whole model. Malcolm as I sell the houses within 90 to 120 days when they buy. And as long as they're selling the house in the same market they buy it which which is within that 90 120 days they will do well with it. And we had franchises through the Great Recession of 2008 that went all the way through they did great. And so they were you know that so they can do well in any market. I will tell you right now there's a lot of heated markets in the country. Real estate law for a lot of our franchise we'd like them to slow down just a little bit but they need to learn different things. We find in today's market the tough part is finding houses not selling them when the market slows down sometimes it's easier find them than to sell them. So they had to be a little bit pickier making sure they that they buy houses that they can in neighborhoods they can sell more quickly.

Malcolm Lui: Right.

David Hicks: There are our franchisees customers fall into two groups. One is first time homebuyers and second is investors. That's the two biggest groups because we're not bomb big house we're buying the smaller houses under the median price and there I don't care what kind of market there is there are always first time homebuyers and they're always investors looking to buy houses. But so when the market slows down our franchisees have to learn to find the houses of first time homebuyers looking for and make sure that in every neighborhood there are always houses selling. There just may be more for sale. And so if the markets those down they need to price their houses a little bit so that price it in such a way that it's going to be the next one to sell in that neighborhood.

Malcolm Lui: Right. OK.

David Hicks: And if there if it's priced that way and if it looks that way. So they have to make it to where the when they we have a house it is we have to the standards of the neighborhood or slightly above and priced slightly below. And if they do that it'll always sell

Malcolm Lui: Right. And I guess the key is making sure that when you buy the home initially that your margin is still big enough adequate enough to cover your costs

David Hicks: At

Malcolm Lui: And make

David Hicks: Exactly

Malcolm Lui: It worth

David Hicks: When people get in trouble is when they push the price that they're paying for a house and now they are they skimp on the rehab and they try to price it the top of the market and that house may not sell

Malcolm Lui: Right.

David Hicks: If you buy it right. And the new rehab it to where it is at or slightly above the market standards and then you price it below it you're going to sell it

Malcolm Lui: Now the homes that typically aren't looking so great. Where are they in general. Are they going to be in the markets that aren't as attractive in general. Or can we find them even in the high end luxury spaces.

David Hicks: Yeah to what we get you find ugly houses are everywhere And they really are because what makes an ugly house is a house that the homeowner has neglected and or not been able to do repairs those houses Malcolm that we buy that 80 percent of were built in nineteen eighty five and before and 80 percent of or under 14 her square feet. So they're not the big houses although we do buy some of those but they're the houses that that maybe it's in fact a big percentage and we buy our inherited houses the three you know they inherited from the parents when they passed away and maybe the house they grew up in sort of 30 40 50 year old house and it needs all the repairs that 30 40 50 year old house needs

Malcolm Lui: Right.

David Hicks: And that the people that own it now they don't have the money or sometimes the energy because sometimes it's somebody that is you know they're getting up in age and they just don't have the money to rehab it to

Malcolm Lui: Yet

David Hicks: Repair it and sometimes they've taken real good care of the house and they're not damaged houses sometimes they're just aged houses and you know the I remember my mother's house that I grew up in. You know the problem is that those that harvest gold appliances just don't sell today.

Malcolm Lui: We're Hey.

David Hicks: And

Malcolm Lui: Okay

David Hicks: You know the butcher bought countertop that was real popular when I grew up just isn't popular today.

Malcolm Lui: Right.

David Hicks: And so even though it's in perfect shape this shed the tan shag carpet has to go. And so and the wallpaper that hasn't been updated and so that's a lot of what we buy is those houses that is going to take 20 and 30 or 40 thousand dollars to fix it up to today's standards. And the people just don't have the money or the effort to do that.

Malcolm Lui: Sure. Now. To what degree are you able to help on the rehab side. Or is it the franchisees are left to their own devices to find the contractors to do the work for them.

David Hicks: Yeah we help our development agents and the other franchises in the market. Also really help with that because the new franchise coming in they'll find there they're joining a team of other franchises in all of them. They'll share with each other you know which painters to the best ones so which ones in most the franchises they'll get to where they have a few painters and a few rehabs. Sometimes the general contractors that does all the they the managers all over form this don't know which ones are the best ones. And though as a group sometimes I mean they kind of team up on who is good. And so our local franchise and development agents will really help a new franchise get started and how to do that. And they'll walk them through that process.

Malcolm Lui: Now why would a your fellow franchisors in your area. And again you mentioned the territory is not exclusive right. I mean is it is it. Why do they have this team and team mentality and being able to help out other folks when in some perspective you could think that you might be competing against each other as well.

David Hicks: The boy that's Malcolm that's a great question and that is the perception of independent investors during their own but they're going to find when they join home busters part of our culture is a team mentality and our franchise all understand that when they're part of home busters they want them to succeed. And the reason is because you know local market. They understand that if we all when we pool our money advertising was and were not just send direct mail but we got billboards and I got TV it all works together. And so I think part of it is that we should just create that culture that is a team culture and that our franchise really do want the others to be successful and they want to help them be successful. And

Malcolm Lui: In

David Hicks: They absolutely do help them. You go find the two events that are. We have two annual meetings that are nationwide meetings that our franchisees come to. We just this past December and San Antonio had over a thousand people there. Most of the training is franchisees training other franchisees. We have breakout sessions on rehab and we have breakout sessions on on all different aspects of our business. And most of those breakout sessions are either a panel or a franchise is doing some really work in this doing well that they're trained other franchises. So part of us just our culture that that they're not competing with others. It's it's a team mentality and teen culture.

Malcolm Lui: Now if it turns out one of your franchisees are not being a team player that grounds for revoking their their territory their license.

David Hicks: We don't I don't know that we could terminate for that but you gotta find the people one that once they do their due diligence the company and they start to find out. Most of them that aren't team players don't don't join us. And if they do they very quickly figure out that that isn't the way we do business and others in the ad council help them with that or they they find out that we do have some that come in that aren't a fit and we very quickly encourage and sell the franchise and move on.

Malcolm Lui: Right. Okay so how much you said before like the associate folks right there spending twenty seven thousand or something where the

David Hicks: That's

Malcolm Lui: Two.

David Hicks: Correct.

Malcolm Lui: That every year they spend that much you're just the first and one

David Hicks: No

Malcolm Lui: Time

David Hicks: Less just about the future. One time

Malcolm Lui: One time and then after

David Hicks: At

Malcolm Lui: That it's just the percentage of sales

David Hicks: That's correct. And it's they have a five year agreement and then they can renew it after five years. And we you know it sets in there we cannot. I mean they as long as they are doing you know fit the deal. We virtually most ever do. So

Malcolm Lui: Right. OK. And any issue. What assurances do you give your franchisees that you're not going to introduce a thousand people in the same area. Right. And then there are that many leads to go round.

David Hicks: Yeah. But again the leads as they do more advertising they generate more leads and so that pitch. But we do. Once we get to a certain point and of level of advertising they're done. Then we do not add more franchise that area. We have probably 10 or so cities that we're not adding franchises now.

Malcolm Lui: Okay.

David Hicks: And they say we we do it. No level. Malcolm that gives them room to grow stale. So the current franchises can grow. And so we we try to manage that and again we're we're a culture that that the franchises understand and we try to really work together with them on how it is to all of our benefit that our franchisees are successful.

Malcolm Lui: Right

David Hicks: And so it does not help us to put to me franchise a market where they're there you know less like to be successful because

Malcolm Lui: Course.

David Hicks: We know we want them all to succeed.

Malcolm Lui: Now is their website list which with which 10 cities are not open for new franchisees.

David Hicks: No it doesn't. I don't think that's a good question. We did it when we have even those that aren't adding franchises. They can still inquire because occasionally we have franchises that are ready retire or you know maybe for health reasons they need to sell the franchises. So if somebody really has an interest in a great example we're not adding them now in Houston but we are adamant on the markets around Houston and so they they can still inquire at that point and maybe we can by the time they're ready to buy then we help them match up somebody that wants to sell if there is somebody or put him on a wait list and when they're available we have no

Malcolm Lui: Yeah. And when a gentleman sells a franchise. But how do you help with the pricing for that. How does that work.

David Hicks: That is between the buyer and the seller

Malcolm Lui: Okay

David Hicks: So they can sell whatever level they want to. And part of it depends on what they're selling. Because some of them have creative staff and business that they're done and they're buying a level business just like any business is. In some of them are just buy the license and so so we but we don't. That's between them.

Malcolm Lui: Ok. But typically I guess if the market is not accepting new franchisees I imagine the price should be over but your normal fees would be

David Hicks: That's why it happens

Malcolm Lui: Yeah.

David Hicks: The most time is first. Absolutely.

Malcolm Lui: Okay. Good to know. All right. Thanks for sharing how your franchise model works and maybe going back again to how you grew your revenue so rapidly. Thirty five million in 2014 to almost 80 million in 2017. A hundred twenty percent increase. And then in 2018 we grew the business. Again another 35 percent year on year. What were the three drivers behind that sales growth for

David Hicks: There's

Malcolm Lui: You

David Hicks: Several great question several drivers that go in that Malcolm. One of them is just the franchise growth because we've got grown. You know I think we go on. Last year one hundred and twenty franchises or so that we added. So that's part of it. Just adding more franchises. And I will tell you where most of our franchises come in. This shows the strength of our brand and the strength of our franchise and the teamwork of Malcolm over half our new franchises came from referrals of other franchises. So there's a franchise

Malcolm Lui: It

David Hicks: And that he they refer their brother or their best friend or somebody else when they see how well they're doing. So that again shows the strength of our brand and the strength of our franchise network. So that's one thing is the franchise growth. The second thing is the same store sales we had our state same store sales increase. So the same stores go in this year over last year for Ito last three years have been over 20 percent a year

Malcolm Lui: My same store sales you need the percentage

David Hicks: Same franchise

Malcolm Lui: Of the revenue from that you're getting from the franchise

David Hicks: That

Malcolm Lui: To

David Hicks: Not

Malcolm Lui: The gross

David Hicks: Revenue we're getting the franchise. What we're tracking on there because our concern is to help the franchise. So we're tracking the franchises sales of properties. Are they

Malcolm Lui: Okay.

David Hicks: Selling more properties this year than last year and they're growing by over 20 percent a year. And they have for several years so

Malcolm Lui: Right.

David Hicks: Which that again we have found Malcolm before concerned about how well our franchise is doing our revenue take care of itself.

Malcolm Lui: Right. Daphne

David Hicks: And so. So that is the second thing that's come up this third thing that's happened that is impacting it is big as our franchise base is growing. We we also have a real focus on helping our franchise find vendors that to the best vendors to give them the best supplies. And but as a franchise base have grown we have more vendors wanting access to our franchises. So we have a pretty robust vendor program for example with lenders. We have the portal where you have seven different lenders when a franchise wants to borrow money for a house. It's sent out to all the lenders that fit you know that that this franchise fits their criteria and they kind of compete for their business. So the lenders are paying us to be on that portal. And so the lenders we have a lot of lenders that want to come to our meetings and so we are creating pretty good revenue source of lenders coming out. So that's the third. And then the fourth growth is just you know all the other peripheral revenue around the franchise because as franchises do well they advertise more and advertising comes to us as franchises do better they borrow more money. We are lending more. And so just all the things that support the franchise network so that all those together is where our revenue growth is come from

Malcolm Lui: Ok. Now before you said helping franchisees number three to find vendors who give the best supplies. Let the supply of capital is one of them lenders. What other sort of vendors are you talking about.

David Hicks: While everything from home depot lowe's we have a great program with Home Depot has been a vendor. Probably our oldest vendor and our program with them has grown a lot and we have a franchise coming in. They automatically get a great discount for Home Depot and a rebate. So where everything they buy once they get over a certain level Home Depot gives them a rebate.

Malcolm Lui: No.

David Hicks: So it's better than they can get locally. We have an insurance company was one of the things to franchise when they buy a house they need insurance on the house. And so

Malcolm Lui: Hey

David Hicks: We have a program that company that Arcadia that Leah that does insurance for franchises that they give better rates to our franchise than anybody else. They give

Malcolm Lui: Need

David Hicks: Those they know the history of it and not only that but they have a better product than anybody else can get with them

Malcolm Lui: Right

David Hicks: Because their franchises for example our franchises have the policy they get literally they can go online and they can bind it themselves. Nobody has to see the property. So we have we're trying to find the best product for our franchises and the best service for our franchise with our vendors and things they need to help them be to make more money to do better but also to make doing their business of buying or selling houses simply for

Malcolm Lui: Right. So just to recap the drivers of your sales growth. Now that I look at the list that you gave me. All of them really seem to be hinging on on your company doing the best that they can to ensure the success of the franchisees. Right. And that in turn has increased the growth of our franchise of your franchise.

David Hicks: Absolute

Malcolm Lui: This coming on it's helping them buy and sell more properties or at least number to the over 20 percent same store sales growth. Your helping them find vendors so that you get better pricing and get and ultimately get better margin. And as you're doing all that it's helping you on the advertising side and on the margin that you're making on your lending through your own capital that you provide them

David Hicks: That's exactly right. And I think the bottom line is the health and the success of our franchises we know if our franchisees do better and that they are doing well that they will not only do they put more effort into their business but they also were to others and that's why we're real proud of the fact that our franchise growth is coming from referrals because

Malcolm Lui: Yep

David Hicks: That tells how happy our franchisees are

Malcolm Lui: Right. Now what's your take on having this franchise model which for you it's fantastic in a sense that it doesn't require a lot of capital requirement on your end because the franchise. These are the ones that are borrowing the money and take care of everything in terms of executing the buying rehabbing and selling as opposed to you just hiring people across the nation to do this for you

David Hicks: Choirboy.

Malcolm Lui: Having

David Hicks: Great question. And some of you know you've heard about all the people that are buying houses the thing Malcolm that makes our business work is the reality. I if I'm to believe that a person from Wall Street or Dallas Texas where we are could buy a house in Des Moines Iowa and fix it up and sell it any better than a guy that lives in Des Moines Iowa is just a I mean I don't think there's any way we could do that.

Malcolm Lui: Right.

David Hicks: The

Malcolm Lui: But why not hire someone to be your employee in Des Moines Iowa to do it for you.

David Hicks: Because doing that long distance the reality is if the guy lives in Des Moines Iowa it's his own business and he is putting his own effort into it. And and he has the opportunity for the upside. He is going to be a lot more successful doing it.

Malcolm Lui: In

David Hicks: And I just don't. I have seen a lot of people tried to do rental properties long distance. I have never seen a buy long term be successful. I

Malcolm Lui: Right

David Hicks: Have seen a whole lot of people manage rentals in buying or selling properties themselves and they do real well at it. I would rather if if I would rather make a smaller piece of the pie and have the pie be a whole lot bigger and a whole lot more successful than try to two for the company to manage it all. And I just you know part of the concept is I just really believe in the entrepreneurial spirit of people and how that and I'm watching my son and I know he is going to be a whole lot better during that than I could do long distance hard

Malcolm Lui: Yeah

David Hicks: Some

Malcolm Lui: Yeah definitely

David Hicks: But knowing that you get a different quality person is if they're buying their own thing and they're doing their own thing that attracts different people. If you're hiring somebody to do it you just don't have the same level of person

Malcolm Lui: Yeah definitely. For 2019 What do you see as your biggest sales and marketing opportunity.

David Hicks: I think our biggest opportunity for us is expanding in areas that we are under under performing now. We don't have growing more into areas that we have. We've identified a dozen cities that are that we're doing well at their franchises are doing well but we just are underrepresented there and that's a lot in the Midwest. In fact I just got back from Cleveland to Columbus Seattle just up to Seattle. A lot down in Florida. Orlando area New York New Jersey those areas to where there's a great opportunity for us to grow that that we are we're real strong. What we find about come is we get. Once we get to 10 to 15 franchises we go to 20 or 30 real quick just because they work so good together and work as a team.

Malcolm Lui: Ok.

David Hicks: And so we're focusing on those those cities that that are have that real opportunity for growth.

Malcolm Lui: Okay. So when you say under the cities that are underperforming the metric there is that there aren't that many franchisees in those cities. That's the rhetoric

David Hicks: We just it's not they're underperforming it's just that we're underrepresented there.

Malcolm Lui: Underrepresented

David Hicks: We don't have

Malcolm Lui: Represented

David Hicks: Enough

Malcolm Lui: Right

David Hicks: People there and we're finding in fact we've got a dozen of that were the growth has been good and so we just we think they're poised to grow.

Malcolm Lui: Okay

David Hicks: That's what we're defining

Malcolm Lui: And what are your plans to can you share with us of one city for example and share how many franchisees you currently have and how many you want to increase it over the next year.

David Hicks: Yeah. Good example we're just in Seattle. I think Seattle's got I think 8 or so and they need to have 25

Malcolm Lui: Twenty five

David Hicks: And

Malcolm Lui: Ok.

David Hicks: So it's a great opportunity for growth there. Twenty five or thirty based on their level. Cleveland I was just

Malcolm Lui: Ok.

David Hicks: In Cleveland I think they got eight or 10 and again I think they go to 25 25 or 30 Orlando's another good one. New York New Jersey that whole area there I mean we could have you we could have you know 150 franchises there we probably got 25 or 30 now doing well would just in Chicago. Chicago's another great area that we could have 100 franchise in Chicago. We've got probably in all the Chicago land we've probably got 20 and that's grown almost doubled in the last year and a half. But we need to double again next year and maybe

Malcolm Lui: Ok

David Hicks: Triple. And because her just such those those are markets all doing well. The franchisees there are doing well. So the model works well there. We just need time and people to help us good people to help us grow the markets.

Malcolm Lui: Ok. So what's the plan to get to those targets and I use machine time in people to other markets. How are you going to find the people. How are you going to find the right franchisees that come on board

David Hicks: We are. And that's why we've been visiting those markets and talking to our current franchisees and getting referrals there we also have some great development agents in those areas that are helping build the markets that go through com yet but it almost always comes from the referrals or the car franchises there and we find once we get to a certain level there are referrals and other people see and there's successes. It just builds on each other.

Malcolm Lui: Yeah. How about outright marketing putting an ad up for people. Are you interested in becoming a real estate investor. That's

David Hicks: You

Malcolm Lui: Something

David Hicks: Know we

Malcolm Lui: To that

David Hicks: Did that.

Malcolm Lui: Effect. This idea that

David Hicks: You know we do that. We have ads and entrepreneur and all the big the magazines. We do a lot of people clicks and we're trying to target those now in certain areas based on it.

Malcolm Lui: Yeah. How are

David Hicks: And

Malcolm Lui: Those

David Hicks: We

Malcolm Lui: Campaigns

David Hicks: Have

Malcolm Lui: Working are they generating enough franchisees that it makes

David Hicks: Yeah

Malcolm Lui: Sense the

David Hicks: That's

Malcolm Lui: Scale

David Hicks: What it

Malcolm Lui: To

David Hicks: Will

Malcolm Lui: Further

David Hicks: Go on. We'll going fast. We just one of the things we spent just developed or not developed just Well we've been spend a lot of time on a Web site home Buster franchise dot com that is aimed at those that want to find out about the franchise. We spend a lot of effort building that and especially doing an NCO for those specific areas that we're looking at. So we are now doing a lot of NCO work targeting those areas. We did some the last couple of years on a couple areas that have had great success with us. Now we're expanding it to the areas that were identified. Our next

Malcolm Lui: Okay. Have you found that your your cost of franchisee acquisition is looking pretty good from your paper click ad campaigns

David Hicks: Yet is people click is probably the the best area again is referrals. That's where

Malcolm Lui: Yet.

David Hicks: We focus and we ask. We encourage our current franchises to do that and we recognize those to do a lot. That's by far the best most the best. As far as equities because there's very little cost to that. The the other areas that people click and advertising all of it's important because part of it build our brand and as we've grown we spent more in there we have more to spend to do that. And I think that's part of what's fueling our growth and that that we're able to do the paperclip. Do the all the stuff to do that sell

Malcolm Lui: Have you worked out the numbers to say yeah we're in this campaign and it's costing us ten thousand dollars to acquire new franchisees from a paper campaign or something to that effect.

David Hicks: Now we have it's less than that we have. We have in fact we in the last year and a half we've hired a lady that's helped them manage it. And we're looking at that where in fact she is managing Hemy Leach we've gotten from which different campaign and which advertising deal and how many have turned to results and we're trying to more manage that before the last couple years. You know just it was a guess. Now we're really trying to use the same metrics we do for selling leads and generate franchise leads. And we've had pretty good success with

Malcolm Lui: Yeah I'm just saying you know you're spending less than ten thousand. Much less than ten thousand on paper click ads to acquire a new franchisee. And if the franchisees are paying you minimum twenty seven thousand time you're ahead of the game right

David Hicks: Yep absolutely.

Malcolm Lui: There. And even then you think of the lifetime value of the Miami. Very few of them drop off. They continue doing business for themselves and you can keep earning fees in that. I mean it's the hour why you're getting is tremendous on that

David Hicks: Yeah. And I think part of it is Malcolm the reason what really pays off for us is not just the leads but when they come when we do get a lead and they find out and they start checking out to it. We have a pretty good success ratio of them join us because when they see the success of the current franchises and a six they and they start talking to some franchises I think the conversion rate is real indicative of what kind of opportunity that franchise really is

Malcolm Lui: Right. Two three last questions for you.

David Hicks: Looking at

Malcolm Lui: If you if you were to have a billboard up to attract potential franchisees to your business what would be your six second message on that billboard. Because people typically when they drive by a billboard on the freeway they only have six seconds to see it and read it

David Hicks: Great questions. In fact we have done some of that and really are billboards. We buy ugly houses when we put the billboards up in markets that we've had we just simply had a trailer franchise available and it's amazing how that has generated activity when they see it there are we buy ugly houses slogan is so unique

Malcolm Lui: Yet is

David Hicks: And the trademark is very memorable and it's amazed how people start coming out of the woodwork looking at that. And

Malcolm Lui: Right.

David Hicks: So

Malcolm Lui: It is good

David Hicks: I think it's tagging on to our current advertising is what has been some success for us.

Malcolm Lui: Yeah definitely. And can share with me and and I know we've talked about this quite a bit already in our conversation and a recap again. Who your ideal franchisees are in the best way for them to be pretty

David Hicks: Question Are our ideal makeovers. We call them corporate refugees. It's people that have are used to support of a company of a big company but they're tired of working for somebody else. They want their own deal. So they have that entrepreneurial spirit but they want to have the support. So that's probably our ideal person could be almost any age. I mean we have franchises that from the low 20s like my son is all the way up to the elderly. Sorry about that. So

Malcolm Lui: No trouble

David Hicks: It could be any any any level in between. We have male female. We have them every you know every thing you can imagine. They can be and they've all been done well with us. The the thing that we're looking for more than anything is we're looking for somebody that desire to go learn to be a real estate investor

Malcolm Lui: Right

David Hicks: And they have that desire we can help them with the knowledge of Janet

Malcolm Lui: Fantastic in the best way for them to reach.

David Hicks: The best way is just simply go to Home Lester's franchise dot com. They can on there they can read about see Abbas and say when they want more information just ask for more information and we will absolutely follow up on

Malcolm Lui: And for those who are listening to this interview can you spell out home investors franchise dot com because it's

David Hicks: That

Malcolm Lui: Not

David Hicks: Troy

Malcolm Lui: A typical spelling

David Hicks: Yeah H O N G. The e s t o r s dot com just home Vestas dot com. They can also go to we buy ugly houses dot com down at the bottom and has a link that goes there to take them all for home Vestas HL women BSE or that also has a link that takes them to the whole western franchise that come to

Malcolm Lui: Right. Fantastic. Thanks for joining us today David in Shanghai you accelerated your company's high value sales

David Hicks: Forget. Thank you very much. Malcolm thank you for having me on your show.

Malcolm Lui: We've been speaking with David Hicks, the CEO of HomeVestors of America, about his company's rapid growth. For interviews with other fast growing, high value sales companies, or to learn how we can accelerate your firm's high value sales through automation, visit

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