Back when Dick Rennick was starting out in his father’s Riverside, CA, plumbing business, his dad routinely handed him a “leak detection kit” — a sledgehammer and chisel.
“He’d just tell me, ‘Go find the leak,’” Rennick says. “A couple of hours later my knuckles were raw and my hands were bloody. Sometimes I found the leak, sometimes I didn’t. I figured there had to be a better way.”
Rennick’s pursuit even persisted after he eventually sold the family business and became a police officer. Over the years, he supplemented his income by operating a plumbing repair business. Off and on, he continued to experiment with improving leak detection equipment, finally teaming up with an electronics engineer for help.
Better Mousetrap: Rennick must have found his better mousetrap because last year American Leak Detection, his Palm Springs, CA, worldwide franchise business, reported $21 million in systemwide sales — a figure that’s averaged 21 percent growth for each of the past five years. Rennick quit the police force in 1974, founded ALD and began selling “management consultant agreements.” He switched to franchises in 1984. Currently, 130 “Leak Buster” franchisees operate more than 270 locations in 35 states, as well as in such foreign countries as Australia, Spain and Saudi Arabia.
Several ALD locations gross more than $1 million a year. According to company figures, the average franchisee that had been operating for about three years reported gross revenues of $200,000, with some reporting net pretax profits as high as 30 percent.
Instead of hammers and chisels, ALD’s leak sleuths use a proprietary system that combines radio, sound and video camera technology to accurately pinpoint the source of a hidden leak. Basically, ALD franchisees inject inert gas into a closed piping system and then electronically “listen” for the otherwise imperceptible sound of the gas escaping from the leak.
The system is so accurate it can locate even the smallest leak within an area of not more than 15 square inches, and determine the depth of the leaking pipes to 20 feet or more. The result is that only one hole needs to be made and often only a single floor tile or brick removed. This saves thousands of dollars compared to the old-fashioned, search-and-destroy methods, not to mention the additional dollars spent on restoration.
According to Rennick, his franchisees have accumulated an impressive 98.5 percent success rate. And if a leak exists, and the Leak Busters don’t find it, customers pay nothing. Residential customers pay a flat rate of between $150-$250 for locating the leak. Obviously, water leaks aren’t limited to homes; the Leak Busters also market to commercial businesses.
Much of the same principles used to uncover water leaks also apply to gas leaks. And the methods used to locate leaks can be used to find long-lost drain, waste and sewer lines and buried septic tanks as well. For a lot of franchisees, however, finding residential water leaks remains the best source of business.
Admittedly, Rennick just figured he’d do a good business locating leaks in pools and spas that were literally in his own backyard. “But then I found out there were leaks outside of the Sunbelt, in colder climates and across the globe.”
ALD isn’t the only game in town. National Leak Detection, for example, is another franchise operation with 48 franchises in five states. Rennick also says there are a number of other “mom and pop” businesses that attempt to find leaks, too.
Water Savers: As a result of the inroads Rennick’s already made, however, ALD does have a key position in one of the most important industries of the nation — water conservation. Pundits conservatively estimate that 10 percent of all potable water is now lost because of leaks, mostly in homes and other residential buildings.
“There is a staggering amount of good, usable water being literally thrown away.” Rennick adds.
Consider that water lost through an undetected leak the size of a pinhead can waste 360,000 gallons a year, enough to fill about 12,000 bathtubs. Internationally, the matter’s even worse with authorities taking actions that would cause riots in our streets. Rennick says that in some parts of Spain, for example, water is shut off from 11 p.m. to 6 a.m.
Saving water is already a powerful concept in those parts of our country where any number of factors — pollution, economic growth, regulations — restrict available supplies. And the idea will only continue to grow as consumers get used to the notion of saving water in much the same way they got used to saving gas in the 1970s by trading in the Buick for a Toyota. After all, although the government’s forcing the issue, isn’t going from a 3.5 gpf water closet to a 1.6 gpf essentially the same thing?
ALD’s already raised consciousness levels on the subject of water conversation. A few years ago, for example, in cooperation with the American Water Works Association, ALD began a public relations campaign to promote Detect-A-Leak Week. Franchisees use the press releases to garner local coverage for their services, and mail out brochures with various hints to detect water leaks.
In addition, ALD’s gone right to the source, working with local governments to find leaks in municipal supply lines. “The municipal market is relatively new for us,” Rennick says. “But we anticipate some tremendous opportunities for growth in that segment. Plus, we receive the added benefit of being identified by government officials as leaders on the issue of water conservation.”
Opportunity Or Not: Is this an opportunity for plumbing contractors? Well, yes and no. Yes, if you’re looking for a profitable change of pace while still using your mechanical skills. But no, if it means giving up your existing business.
“You can’t be a part-time Leak Buster,” Rennick says. Still, ALD has attracted some plumbing contractors into the fold. The few we talked to gladly left their businesses behind for the chance to stay relatively independent in a more specialized, and, therefore, less price-resistant business.
“I got tired of competing against the guys who worked out of the back of a ’65 station wagon with a couple of pliers and wrenches,” says Ron Woodfield, who ran a third-generation plumbing business in Southeast Arkansas. “It just seemed like this was the only job these guys could find that month — and there just got to be too many of them.” In 1988, Woodfield left family and friends behind to open a franchise in Albuquerque, NM.
Fred Grutzmacher worked a number of years for a plumbing contractor, and always felt the itch to go into business for himself. “But I didn’t want to reinvent the wheel. With plumbing, customers always say how much less the guy down the street will do for the same work. That just gets to be too much.”
He says he rarely gets any price objections for the work he does with his Colorado Springs, CO, franchise. “And if someone does say I charge too much money, then they usually call me the next week after somebody ripped up their yard and still couldn’t find the leak.” Gary Crossan says he started helping out his father’s plumbing business at the age of 10. Four years ago, he started an ALD franchise, and recently added a second, covering Northwest and Western Los Angeles County. All told, his business does about 80 service calls a month.“The opportunity is 10 times better than I thought.”
Franchisees pay a relatively steep initial fee of $49,500. However, around half of the ALD fee is actually a licensing fee. The remainder includes the purchase of a basic equipment package and also underwrites the cost of the training franchisees receive before starting out. After signing on, franchisees spend six weeks at ALD headquarters in classroom and on-the-job training, followed by management, sales and marketing sessions. Finally, franchisees return home with an additional 90-day self-study course designed to improve technical and marketing expertise.
Once in business, franchisees pay royalties on a descending scale, beginning at 10 percent of the first $5,000 of monthly gross volume, declining to 9 percent of the second $5,000, and further declining to 8 percent of all gross dollars past $10,000 a month.
“Apart from the franchise fees and royalties, we are independent businessmen,” Woodfield says. “I think of the royalties just like insurance premiums; it just another expense of doing business that pays the expenses of services you need.”
Plumber or not, Rennick continues to attract plenty of franchisees. “Our goal is to have between 750 and 800 franchise units worldwide by the year 2005. Our growth is only limited by the time and extent of our training.”
For more information regarding American Leak Detection, call 800/755-6697. In addition, National Leak Detection can be reached at 310/377-2699.