Inland Focuses on Partners, Process

Inland Homes Group builds mainstream housing with an average sale price of $210,000 and uses franchising agreements to define a business relationship, but Jack Suarez's business model is far removed from Rutenberg's and Epmark's more conventional franchising operations.

"We really don't want to sell individual franchises one at a time," says Suarez, whose Tampa, Fla.-based network closed 542 homes for $105 million in 2002. "We want to find entrepreneurial business partners who may have no experience in the building business but may eventually develop multiple franchises. Our equity partners do not operate the franchises. We help them staff the operating companies, and we have all the systems, processes, metrics and culture to operate those building businesses successfully."

Suarez says he does not focus on the product, as that could change if and when he reaches his goal of expanding Inland's network from six Florida partnerships to multiple markets and multiple states. "I envy Epmark's ‘hamburger' because they have a product that will work everywhere," he says. "But there's as much difference between us and Epmark or even Rutenberg as there is between Outback Steakhouse and Subway. Outback focuses not on the product but on the operating model, on processes, systems and disciplines, rather than on selling franchises and collecting fees. I'm an equity investor in all of our partnerships, not just a franchiser."

Suarez staffs each franchised operating company with experienced managers as president, sales director and director of construction. An administrative team of a production planner and a process director serves under the leadership team, and every project has the requisite number of sales professionals and construction managers.

"We basically license them to do business in a specific way," Suarez says. "Our brand is more about culture than product. They're structured as franchise agreements, but they embody all of our culture in great detail, right down to when and how they pay their bills and the financial and measurement metrics. And each operating company is limited to doing six communities at a time and 240 units a year. If a guy wants do 380, the answer is no."

Jeff Huenink, who sold his equipment-leasing business six years ago and has become Suarez's franchisee/partner in Orlando, describes how the relationship works: "IHG tells us how to run every aspect of the home building business, and we do it that way because we know it works. If you have a McDonald's franchise, you prepare the hamburgers the way they tell you. You can't deviate from it. This is no different.

"I have no home building experience, but I don't need that. In the Inland model, I have seven home building professionals who operate the business so I can concentrate on land acquisition and building the brand in the marketplace. It's very structured. I just fill in the boxes that Inland set up, so I don't waste a lot of time looking at deals that don't fit our formula."

Huenink's Orlando operating company launched in January with rear-loaded townhouses in traditional neighborhood design. The average sale price is about $225,000. "Our next project will be more of a traditional Florida homes development," Huenink says. "Then we'll do another TND townhouse project.

"Jack is a great tutor," Huenink adds. "He's my professor of home building. But he also has an equity position in this operation. I like a partner with skin in the game."