ChemStation’s franchise model offers high rewards
to motivated entrepreneurs across North America.
By Jim Harris, Knighthouse Media Senior Writer
ChemStation’s approach to franchising favors quality over quantity. “We are not in the franchise-selling business; we earn our money by partnering with our franchises and helping them succeed,” says Jeff Purks, president of the Dayton, Ohio-based cleaning products manufacturer.
The company offers its franchisees a number of start-up and ongoing services including a central data processing department, site selection and facility design assistance, technical support, and inventory and quality control systems. ChemStation also hosts regular regional and national owners and operations meetings.
In addition, the recently established ChemStation Buyers’ Association is a member-owned buying group which negotiates price reductions and contracts with vendors for corporate and franchise-owned locations.
ChemStation typically sells two new locations annually. Each ChemStation Manufacturing Center utilizes an H-700, which is a patented automated manufacturing machine used to produce custom cleaning solutions. Franchise owners are provided with chemical concentrates used in the formulation of the company’s products. “You simply enter the formula code, tell the machine how much you need and it produces a customized product for each client,” Purks says.
ChemStation’s localized manufacturing model sets it apart from competitors in the industrial cleaning products industry. Most chemical companies have a centralized manufacturing plant and ship products nationally, often via distribution centers. ChemStation franchisees, on the other hand, act as individual manufacturing centers, which ensures local delivery, sales and service for every single customer. ChemStation provides franchisees with proprietary operations software to track customer deliveries, salesperson commissions, inventory and associated regulatory information, Purks adds.
“In our industry, chemical suppliers typically deliver product in drums, buckets, or totes. These containers are not made for reuse and ultimately wind up in landfills. Instead, ChemStation delivers product into refillable containers, which eliminates waste and gives our customers a lot more control over their inventory,” Purks explains. ”Last year, our group delivered more than 18 million gallons of customized detergents, which kept more than 300,000 drums from being manufactured and disposed into our country’s landfills.”
ChemStation franchises load each customer formulation into totes on their delivery truck. Products are then pumped from those totes into the customer’s container, which range in size from 120 to 5,000 gallons. Each tank can be equipped with a telemetry unit that texts or e-mail franchisees when the tank level is low. “We fill the tank just before it runs dry, the telemetry technology gives us a precise way to do that.” Purks says. “Our customers do not run out of soap.”
A number of ChemStation’s products meet the Environmental Protection Agency’s Safer Choice product standards.
Room to Grow
Founded in 1977, ChemStation has been a franchisor since 1984. Today, the company has 51 franchise and 10 company-owned units across North America.
Each location provides high-quality, environmentally friendly cleaning products to markets including food processing, automotive and transportation, which make up a large portion of ChemStation’s customer base. The company also serves distribution and manufacturing plants. “Our target customer is anyone who buys cleaning products in 55-gallon drums or larger who would benefit from a refillable container,” Purks says.
ChemStation’s biggest growth market is the craft brewery industry. The company’s products are used to clean breweries, brewery equipment and kegs in more than 600 breweries across the United States. “Chances are if you drink a craft beer today, ChemStation’s products were used to clean the brewery in which they brewed the beer,” he adds.
New ChemStation franchises typically pay between $205,000 and $295,000 in startup costs, which include the cost of purchasing or leasing machines. The franchise fee also covers the cost of training, which takes place in the company’s corporate headquarters in Dayton. The company recently added an additional 14,000 square feet of warehouse and manufacturing capacity at that location to keep up with growth.
Purks estimates the amount of working capital needed to staff and maintain a new franchise to be between $500,000 and $700,000.
The company seeks new franchisees who are not only entrepreneurial but also knowledgeable in B2B sales. “The gross margin at the franchise level is very high, but our customers don’t come to us, we have to find them,” Purks says. “Our franchisees need to know how to hire and motivate a team of outside salespeople.”
ChemStation franchises are highly scalable and a number of the have transitioned to second-generation owners, he adds.
Each franchise location operates in a large, exclusive territory that includes local, regional and national accounts. Today, National Accounts are responsible for about 1/3 of the company’s revenue. ChemStation has 15 territories available in the United States. The company’s franchise activity outside of the country includes a newly opened location in Toronto, as well as a franchise in Mexico City.
“Our long-term goal is to sell the rest of North America and then look overseas,” Purks adds.
ChemStation participates in many industry events and organizations relevant to the markets it serves. This includes exhibiting at trade shows such as the International Production and Processing Expo, Process Expo, World of Asphalt, Craft Brewers Conference and ConExpo.
The company is a member of the Refrigerated Foods Association, Food Processing Suppliers Association, U.S. Poultry & Egg Association, the International Sanitary Supply Association, the North American Meat Institute and the Craft Brewers Association.