Rules of Engagement
New Technologies and Tactics Form the Basis of Success for One Replacement Business
by Ellen Rogers

Every industry has a few secrets. But Ed Kalaher, president and CEO of Clear Choice USA can’t keep a secret secret.

“This is the dirty little secret of the window business: is there a big discrepancy between the cost to make [a $500 window and a $1200 window]? No. It’s that people buy windows once or twice in a lifetime so they are dependent on that [sales] person to educate them and unfortunately there are still a ton of companies that … prey upon that.”

Kalaher calls it as he sees it. The brunt of his career has been spent on the manufacturing side, including 10 years with Vista Window Co., and two as its president. So it may have been a surprise to some when, a little more than a year ago, he decided it was time for a change. In January 2011 he left the manufacturing side and stepped into the replacement segment as president and CEO of Clear Choice USA in Canfield, Ohio.

Clear Choice itself is also a young company, having started around 2004, but still one with a bit of history. Kalaher explains both it and Window Depot (also started around 2004) were franchise-type businesses modeled after Window World. But around 2010, Clear Choice [which was then headquartered in Atlanta], the central entity, made some errors in judgment, which ultimately lead to a bankruptcy, explains Kalaher.

“All the partners in the field were independently run businesses so they did not know what would happen. During the course of the bankruptcy an investment group purchased the company and I came on board to run it,” he says. “That’s when we rebuilt the staff, relocated the headquarters and began actively rebuilding the company.”

"It’s our partners in the field. They are the ones who had to fight the hardest. They’re the ones on the front lines; if they don’t sell a window then I don’t have a job."
—Ed Kalaher,
president, Clear Choice

Less than a year into the job, Kalaher made his first major move with the acquisition of Little Rock, Ark.-based Window Depot last November (see sidebar at top for more on the companies).

“They were a similar company that wasn’t in distress, it was just a really good strategic fit to add dealers to our group and take them in the direction that we are now taking the Clear Choice group,” says Kalaher.

And that direction is similar to the traditional franchise model (i.e., Window World). But Kalaher says what he and his team are doing is like nothing what the industry has seen before.

“The reason I got involved in this company is because I think franchise companies are here to stay and I think they will dominate our industry on the retail-retro side,” says Kalaher. “But I think the Window World type of model is completely unsustainable.” He says when he came on board at Clear Choice he set out to build a certain staff, provide certain services, and take the company in a direction he believes will be sustainable, will keep up with technology and the rules of doing business with people and provide a fair value to the consumer and an adequate margin to the franchise so that they are there for the long term.

“When we talk about history, Clear Choice and Window Depot were both born of that mentality that Window World became famous for, but our aim is significantly different than the price-only/volume-only approach.”

Seven people are responsible for the corporate activities of Clear Choice USA, which are spread across to nearly 90 individual locations throughout the United States. Kalaher estimates the company’s retail sales volume ranges between $20 million-$40 million.

Individuality
While the business may have been born of the franchise model, Kalaher stresses the individual locations are all actually licensed operators.

“It’s technically a license program. [The businesses] license our trademarks, our support services, everything we produce for them, from training to collateral, and they buy the product we specify for that [area],” says Kalaher. “I use the word ‘franchise’ because people are familiar with that word, but [these shops] are very much independently owned businesses.”

Depending on a variety of factors, such as whether the company is a fresh start up or if it’s a company already in the business now seeking to partner with Clear Choice, the start up costs can vary. Kalaher says there have been those that start up with a $20,000 investment and others that start with a $100,000 investment.

“It varies market by market and partner by partner,” he says.

With a licensing program, Kalaher says there are a number of differences compared to a franchise.

“By licensing our trademarks and support we require they conduct their businesses in a manner that protects them, but we do not have access to their customer records or control their business in any way,” he says. “We have no ownership stake or any operating purview. We just require that they conduct their business in a way that maintains the integrity of the trademark.”

Kalaher explains that in a franchise operation there is typically more control over how the individual locations operate, but he believes that model does not work for home improvement.

“Home improvement is not a one-size-fits-all product and a licensing business model makes more sense in this industry,” he says
“This allows individual businesses to operate in a manner that best satisfies their local markets.”

Kalaher adds, “We don’t want field stores owned by us centrally. We want good people in that area who know it [the area].

“As cliché as it sounds, we have to find the right people. You need a good product, but if you don’t have a person with your logo on a truck in that driveway—a good and honest person who wants to conduct business and have good craftsmanship, ethically—you can’t do anything in this business. The product doesn’t carry you through,” he says. “If you have an unethical local McDonald’s operator, as long as he’s making a great Big Mac it’s gonna carry him through. Not in our business. You need good people.”

Easier said than done.

“It’s tough because there is so much skepticism and I think that’s one of the big reasons I wanted to come to the retail side,” he says. “There are so many good people but our industry is very behind, particularly on the technology side. There are those who are great craftsmen, great salespeople, great at making that local customer happy and having pride in local business, but they may not be quite up to speed on what it takes to generate leads … in 10 years or what it takes to have a customer relationship through technology and that’s very much [our] focus.”

That difficulty, according to Kalaher, ties into the persona surrounding a certain idea that many already have about franchises.

“Skepticism grew out of the fact that in our industry the only real franchises—or at least those known—are very much traditionally based: ‘here’s an ad slick, here’s two days of training, the bigger we get the more we can do for you on maybe a price or advertising,’ and that was about it,” says Kalaher.

Different Directions
Ad slicks and flyers may be the norm for some, but not for Clear Choice. The company instead has an eye on what’s happening now, what consumers are looking at and what they need to purchase replacement windows. This includes everything from Facebook to You Tube. These efforts, Kalaher says, are providing tangible value and service support, as well as technology services.

“There is no smoke and mirrors. Our staff is working on stuff that 99.9 percent of the home improvement contractors in this country are not working on. If they’re not working on it they are thinking about it and these are things that are critical; things that if you’re a home improvement professional and you’re not working on these to some degree you will be left behind,” he says.

Daniel McCarthy, CEO of Vista Window Co., says, yes, technology has always been a big focus area for Kalaher.

“Ed always had a passion for supporting Vista dealers with retail endeavors, especially on the technology front, so I would assume he is doing those same things with [Clear Choice],” says McCarthy. “[He] had a passion for technology and a knack for staying on the forefront in that arena.”

Some of these technology areas include social media, a polished online presence filled with content and message delivery to the homeowner through technology.

"Consumers are becoming more and more educated because of the Internet and I think the days of salesmen going to the house [to sell a window] will die out."
—Jim Venable,
previous owner, Window Depot

“We provide our partners with local websites, we maintain two or three central sites here, [we provide] blogging and article marketing, as well as search marketing with local directories,” says Kalaher. “All of that complements [traditional marketing] the local business is doing. But it’s quickly not going to be the complement; it will be what dominates.”

Jeremy Ryan, owner of Clear Choice USA of SE Wisconsin, has been a part of the organization for about three years and has experienced first-hand the benefits of these resources. Ryan had been on board with Clear Choice prior to the bankruptcy and acquisition and says what they had then compared to now is “like hot air compared to real ideas with substance.”

As Ryan explains, “One of the things they did was recommend we have our customers do reviews on the Yahoo and Google search engines. So we went back and contacted our last 12 customers and asked them to go online and give us reviews. Within just a couple of weeks we were contacted by a large investment firm to bid a job for one of their locations and if we get it, it will be our largest project to date,” he says. “But when [that firm] contacted us they said specifically it was because we had good ratings with the Better Business Bureau and because of the reviews we had on Yahoo.”

Jim Venable, who was the previous owner of Window Depot and now serves on an advisory board, agrees that Kalaher’s business philosophy is the wave of the future.

"For the industry, I think flat will be awesome and I think flat will absolutely happen. Everybody will be fine with flat."
—Ed Kalaher,
president, Clear Choice

“Consumers are becoming more and more educated because of the Internet and I think the days of sales“Consumers are becoming more and more educated because of the Internet and I think the days of salesmen going to the house [to sell a window] will die out,” says Venable. “The program of being able to market a high-end, high quality product at a competitive price that’s available to everyone is the future.”

Survival Tactics
While social media may be here to stay, there’s still an even bigger matter that’s engaged the attention of so many: the economy. Speaking of the last three years, Kalaher doesn’t hold back. “It’s been an atomic bomb on our business,” he says. “I think every single player in our business is down 30-40 percent … it’s the worse they’ve ever seen.”

Surviving the tough economy, though, has been anything but easy, and a lot of credit goes to the branches throughout the country.

“It’s our partners in the field. They are the ones who had to fight the hardest. They’re the ones on the front lines; if they don’t sell a window then I don’t have a job,” says Kalaher.

And a decent-priced window has helped, too.

In fact, Kalaher says both Clear Choice and Window Depot have always sold a product that is attractively priced to the homeowner—even a little bit beyond fair, he admits.

“When you do that you always have a chance to stay in the game and get business as the wallets tighten up,” he says.

But it takes more than a fair price to make it.

“My goal is to provide [our owners] with the tools, training and support, education, brainstorming … out of this office that will get them through it. There are ways to have better margins in your products, to forecast better, to run budgets in your business—these are things that a lot of home improvement contractors never had to pay attention to, let alone can they or will they.”

Selling Points
Some will tell you the energy-efficiency tax credit was a saving grace for the window industry. Kalaher is not one of them.

“The tax credit was a crutch,” he says.

So how do you sell energy efficiency to a homeowner?

“You sell it on facts and what’s real. You go back to what sold replacement windows before there was a tax credit. Back then it was still a booming business that grew every year because there was a real, tangible benefit—you absolutely saved on your heating and cooling costs.”

Kalaher points out that energy efficiency is nothing new for the replacement window industry; the tax credit simply allowed consumers to buy windows basically for half price.

“That meant salespeople did not have to sell and companies did not have to educate,” says Kalaher. “I want to get back to homeowners wanting to buy a product from a company that’s going to educate them, give them a fair price, and be there to service them. If it’s just about a tax credit anyone can compete.”

But Kalaher explains that when a homeowner decides it’s time for a remodel, everyone, from the window supplier to the kitchen remodeler, is working to convince the homeowner to go with their product over another. It brings the consumer’s decision down to a matter of want versus need.

“Windows, at the right price, there is no comparison on cost value [to granite countertops, for example],” says Kalaher. “When you replace windows, you’re replacing, say, 12 windows that were cold before or hot before and you’ve picked up 12 windows times 20 square feet of living space where no one ever wanted to sit before. WIndows are a great product; they are the most important energy-saving appliance in your home.”

Sustainable Measures
It’s been more than a year since Kalaher stepped away from life on the manufacturing side and entered the replacement market. It’s not necessarily been an easy trip thus far, given the state of the economy, but things are looking up.

“For the industry, I think flat will be awesome and I think flat will absolutely happen. Everybody will be fine with flat,” he says.

That’s the industry. It’s a different view, though, of what he expects for his company.

“I expect explosive growth and that’s not a wish list,” he says. This is due to all the many things they are tackling from that small office in Canfield, Ohio. From social media to video commercials to simply growing an online presence, all of this, he says, will help with that growth.

But the most important detail still goes back the franchise model, which believes will dominate the industry.

“But what Clear Choice and Window Depot represent is a far cry from the perception [people] might have,” he says.

Ellen Rogers is the assistant editor of DWM/Shelter magazine.

DWM
© Copyright 2012 Key Communications Inc. All rights reserved.
No reproduction of any type without expressed written permission.