|Copyright 2014 by Virgo Publishing.|
|By: Kimberly Hundley|
|Posted on: 10/19/2006|
The convenience of mobile storage has finally seduced the public. While some self-storage operators ignore the elephant in the room, others are jumping on her massive back and hoping for one heck of a ride.
Reach back in your memory banks and try to recall your skepticism about mobile storage: A proven business model hadn’t emerged; nobody was sure if it would work; potential customers didn’t know what it was; interstate moves were unfeasible; boxes were dissimilar and didn’t last; blah, blah, blah.
PODS changed the mobile landscape with its national massive marketing. Today’s potential customers call self-storage facilities and ask about PODS. Usually they’re referring to containers and mobile-storage services, not specifically the $200 million-a-year company Portable On Demand Storage.
What’s good for the goose is good for the gander. Many self-storage operators have decided it’s financial genius to piggy-back on PODS’ success. “For a long time, none of us were sure whether mobile storage was going to stay or not. But now I think we’re all in agreement,” says Chuck Helms, president of North Carolina-based Kontane Inc. “Mobile storage is really just the next step in the evolution of the storage business.”
Mobile-storage suppliers say their phones are ringing like never before. Most callers are investors and entrepreneurs investigating a mobile-storage only business. They say it’s a little surprising a flood of self-storage types aren’t jumping on board. Though more are starting to realize it’s the perfect marriage, says Bill Norris, who founded Go Mini’s, the oldest mobile-storage company after PODS.
“Self-storage is a popular and crowded industry,” Norris says. “What catches the self-storage guys by surprise when they start looking at portable is they can extend their business beyond a 5 to 10 mile radius.” Norris is referring to cross-town moves, which account for 75 to 80 percent of all relocations. Rather than pay premium rates for a moving company, people are content to load their own boxes at home and have a mobile-storage company pick up their packed containers, which are then delivered to the new residence.
In instances where a home is sold but not yet ready for move-in, once again, mobile storage has an edge over a rented unit. People prefer to load and unload only once, eliminating the facility pit stop.
How Small Can You Go?
Self-storage owners looking to take the plunge have three distinct options. They can buy a dealership, a franchise, or go independent. Inside Self-Storage spoke with a sampling of four companies representing diverse opportunities for investors. Units and Mobile Attic offer franchises in which clients purchase equipment and exclusive territories. Go Mini’s sells dealerships, and Kontane Inc. supplies containers for those on the independent path.
Startup costs and break-even points run the gamut—with some thresholds surprisingly kind to smaller operators who want to go slow.
Units supplies its clients with containers, operating software, marketing support, training, and a heavy-duty delivery truck with a rollback body. The company manufactures a galvanized metal container, which protects stored items from mold and mildew, says Michael McAlhany, president of South Carolina-based Units.
“We give our franchises full control of their operations,” he says. “There are no call centers; everything is handled on a local level ... We are very competitive on the startup end; another advantage is state-to-state moves.”
McAlhany estimates startup costs at close to half a million dollars, which includes 20 containers and the initial franchise fee of $40,000 to $60,000 to cover a population territory of 400,000. The sturdy containers may be stored outdoors; and are stackable to three high, allowing operators to maximize warehouse space.
Because Units containers are weatherproof, they may be left for onsite outdoor storage at residential or commercial sites, a popular feature. However, as McAlhany points out, many urban communities prohibit people from storing visible containers on their property for more than 30 days.
Mobile Attic Franchise
Mobile Attic “does things a little different than everybody else,” says Ben Terrell, vice president of logistics. The Alabama-based company mainly works with small businesses. The $35,000 to $50,000 franchise fee buys protected territory and marketing support that includes a professional TV commercial that can be tagged with a local phone number.
Terrell says the company’s all-weather, aluminum container is meant to be stored outside, eliminating the need for a warehouse or a forklift. In fact, about 70 percent of Mobile Attic customers keep the containers onsite. Commercial clients include hospitals using them for records storage, restaurants for dry inventory, and construction companies storing supplies.
“Our equipment isn’t customized,” Terrell says. “Our trucks are standard roll-back trucks and our containers have wheels on the bottom. With our system, you can use an old truck, then upgrade later.”
Franchises must buy a minimum of 30 containers to start, but can grow in smaller increments, adding as few as 15 at a time. Average container cost is $3,000. Terrell estimates it could take 1.5 to 3 years to pay off a container, depending on whether rent was $100 or $200 monthly, as the market allows. “Our containers are probably two- to three-times the size of some of the other ones,” he adds.
Startup costs can be as low as $150,000 (not including franchise fee) for 30 containers and equipment, assuming a self-storage facility already has staff, land and workable software. “Most of our franchisees are the drivers and also manage the financial,” Terrell explains. “It can be a one-man deal, or four or five guys can be working the thing.”
If an operator gets to the point where he has 200 to 300 containers within the first two years, “he’s doing a great job with our model,” Terrell says.
Go Mini’s Dealership
A dealership from Florida-based Go Mini’s is priced at $23,000 for a territory of about 400,000 people. “There are no ongoing royalties and fees that you would normally associate with a franchise,” says Norris.
Go Mini’s first clients were predominately moving companies, but in the last six months alone, 35 self-storage operators signed on for dealerships, according to Norris. “We are now in 182 markets in 46 states and Canada, and about to venture into the U.K. and Alaska and probably Puerto Rico.”
Operators should budget a half-million dollars to get up and running the first year, Norris advises. As dealers, they must purchase a minimum of 36 galvanized-steel containers and a transport truck. Containers, which may be stacked three high, are weatherproof and won’t sweat regardless of rain or humidity, according to the company. Go Mini’s provides guidance and marketing assistance such as TV ads, and an interstate program is in the works.
“Typically, one transport truck will grow a dealership to 100 containers,” Norris says. “What dealers find at the 100- to 150-container level is, if they don’t take money out of the business, they can buy four to 10 containers a month out of cash flow. Then it really starts rolling well. The secret is getting up to the 125 to 150 level.”
Kontane Inc. makes and sells HomePak, a portable-storage container system. The units are constructed of exterior-grade plywood and a moisture-proof base; they must be stored inside and can be stacked three high.
“Franchising isn’t for everybody,” Helms says. “There are lots of very successful people in the storage industry who know how to run a business. They just want someone to provide the pieces so they can put the total package together. That’s where we are the logical alternative.”
Some customers start with as few as 10 containers and add more as they grow the business. “A lot of franchises won’t talk to small operators. We’ll sell whatever a customer wants to buy,” says Helms.
Though Kontane is a container manufacturer, staff counsels clients on getting their mobile business started, pointing them in the right direction for forklift and truck purchases. “The delivery system is still one of the biggest decisions an operator has to make,” Helms says. “The preferred method is a flatbed truck with a truck-mounted forklift.”
Wooden containers are less expensive than metal versions yet durable. “A wooden box with a tarp on it should have an indefinite shelf life,” says Helms, explaining tarps protect containers when they’re sent out to residences. The ratio of covers to boxes is about 1-to-4.
Container quality has come a long way since the early days of mobile storage. Numerous long-lasting options are now available to operators. The viability of one-way moves has also evolved through collaborations between franchise members and others. Check with the Mobile Self-Storage Association (www.ms-sa.org) for updates on its efforts to foster communication and education within the industry.
Other portable-storage factors to consider include container sizes, pricing structures, and the royalty fees and minimums a franchise may require. And no one should underestimate the importance of marketing to this industry niche.
“You can’t rest on your laurels with this thing,” Terrell says. “You’ve got to get around town and out to the local businesses, get the containers in people’s yards where they can be seen, and run the commercials.”