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Franchise Development HomeExecutive Profiles
Finding, founding and funding a franchise: Dick Rennick and American Leak Detection
April 7, 2004
JP Fozo
© Honeycomb Worldwide Inc.
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Dick RennickBack when he was floating between law enforcement and fire fighting, Richard (Dick) Rennick never thought he’d be the Chairman of the IFA, let alone the CEO of a major international franchise like American Leak Detection (ALD).

But after finding technology to detect leaks in the 60s, founding ALD in 1974, establishing it as a franchise in 1984, and becoming the IFA Entrepreneur of the Year in 1997, franchising has become a way of life as the current Chairman of the IFA Educational Foundation prepares to become the Chairman of the IFA in February 2005.

In 1963, Rennick’s father passed away, leaving him the family plumbing business, which he worked at part-time, during the downtime awarded to him with his crime- and fire-fighting gigs.

”My father graduated from MIT,” Rennick says. “He told me that he couldn’t leave me any money, but he could leave me something nobody will ever take: the plumbing trade.”

By the time Rennick was 18, he was an expert at using a six-pound maul to “beat the heck out of concrete floors, driveways and any paved areas to find that elusive thing called a leak.” He’d often end the day with bloody hands and a smile, thinking how tough he was. But he always thought there had to be a better way.

In the early 60s, he ran across a company with an amplification device that detected leaks. Rennick and his father would hire them on contract and a man in a fancy Porsche would drive up, take a suitcase out of the back, do 15 minutes of work and drive away—as young Rennick stood in the driveway dumbfounded, thinking, “man, I gotta figure out how to do that.”

Thankfully, that company wouldn’t franchise their business to Rennick, only offering licenses which he couldn’t afford. So for several years he toiled as a cop, fire fighter and part-time leak detector. But the memory of the door-to-door leakman never escaped him.

After convincing someone to teach him how to fiddle with electronic listening devices, he found an engineer to help him design a tool. In 1974, American Leak Detection was born, and still has the patent on its device, with another on the way.

Fast forward to 1984—from father-and-son to franchising

American Leak DetectionRennick wanted to franchise but also wanted to be sure. So the future Chairman of the IFA attended his first IFA event in 1984, and conducted his own unscientific, but telling, poll.

“I wanted to see what I’d get for my buck,” he says. “So I went down to the IFA Convention in New Orleans and thought I’d find out if it was worth doing. I asked people leaving the show if they were going to buy a franchise. Out of about 120 people, probably 80 percent left going home to seriously review material. Of them, 50 percent were certain they’d buy a franchise!”

Rennick already had management consultant agreements with 12 partners—who were like franchisees, but couldn’t use the logo and some other business tools—and 11 of the 12 agreed to franchise the system, thus becoming “grandfathers” in the organization, franchisees who didn’t have to live by the royalty rules everyone else did.

He also ended up giving away 30 percent of his stock (to attorneys and other individuals) to afford becoming a franchise, but was able to buy it all back after selling several franchises and became a wholly owned company in 1990.

“When I started, I didn’t study franchises that were a success; I studied franchises that were a failure,” noted Rennick. “I didn’t want to make the same damn mistakes.”

American Leak Detection now has 231 owners (which includes consortiums made up of partners, husbands, wives, corporations, etc.) with over 340 franchise units in 44 states and 10 countries, charging $57,000 for a franchisee investment license and earning Rennick the IFA’s award for Entrepreneur of the Year in 1997 in the process. It’s a long way from having to spend $2 on a suit at the Goodwill for his high school graduation.

The state of franchising

Rennick says that most of his franchisees don’t come from the trades, as might be expected for a plumbing franchise. Instead, he says that most investors are bankers, attorneys, ex-military officers and other professionals that want to go into business for themselves (and the fact that they can wear shorts on the job doesn’t hurt).

This trend is not isolated to ALD, but rather extends across the entire franchise industry.

“There have been some big changes in franchising over the last several years,” he says. “For one, professionals are coming out of corporate life and the military [looking to be a franchise owner]. And the brand has become very important.”

Branding has become important in all industries. But for franchising, it’s twofold: you need good branding to attract consumers, but you also need to be a household name to attract potential franchisees. Investors who are thinking franchising will research those brands that they see and hear about first.

“The brand is the brand, you don’t distinguish who you’re branding for [consumers or potential franchisees],” says Rennick. But he adds that while the brand remains the same, marketing efforts can be funneled and then focused to getting new consumers or new franchisees.

Having good infrastructure, training and communication in place is key to keeping franchisees happy and productive—and it also shows future investors they won’t be left out in the cold.

“Most franchise companies that are forward thinking are very into communication [across the system] through things like intranets and extranets,” adds Rennick. “Before, you had to pick up the phone and call individual franchisees. Now, there’s constant communication, and you can be in touch instantly [with all franchisees].”

The industry is not only thriving, but it is also leading North American out of recent rough economic times.

"While the number of businesses that use franchising as a method of distributing their products and services has steadily increased since the 1950s, there has been very little broad-scale economic research about this phenomenon," says Rennick, who oversaw the economic impact study conducted by Price Waterhouse Cooper for the IFA. “The numbers are staggering: 400,000 franchise units owned by 1,200 franchisors employ 9.7 million people and account for $1.7 trillion! $0.12 out of every dollar goes to a franchise establishment.”

Rennick’s passion for franchising extends to the point that it even adorns his walls.

“I’m a collector of American antiques, specifically trademarked, lighted franchise signs (A&W, Burger King, Pizza Hut, McDonald’s, Meineke), that I display on my Franchise Wall of Fame” he says. “I have a barn, and about one third of it is the antiques gallery, and the other two thirds are my hot rods [which include a ‘50 Oldsmobile Bubbletop, a ’56 Plymouth Fury and a ’54 Chevrolet Fire Truck].”

Rennick has built a franchise system that extends all over the globe, allowing him to indulge in things like antiques and hot rods. But hearing him talk about his prized franchise signs, the industry in general and everything it has taught him shows where his passion lies—and that he’s not done learning from his peers.

“There’s never a time when you’ve mastered it all. When you run into people who think they have, don’t believe it,” he advises. “Those are the kind of people I just smile and walk away from.”

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Rennick and other Honeycomb Connect Executive Members will trade expertise discussing the IFA Economic Impact of Franchised Businesses study in April.

 
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