FEATURE ARTICLE, DECEMBER 2005

FRANCHISING A FORMULA
By franchising its unique design, Epcon Communities is changing the face of residential real estate development.
Lara Fuller

The word ‘franchise' is often associated with fast-food restaurants, retail stores and chain hotels. However, two Ohio-based builders have given the word a whole new meaning with the creation of Epcon Communities. Dublin, Ohio-based Epcon Communities has created a development template for residential neighborhoods aimed at the aging baby boomer population. The company is now granting licenses to build these communities all across the United States.

Because the baby boomer age group is such a large and influential one, companies have long looked for ways to tap into the group's buying power, and the real estate industry is no different. As baby boomers continue to age, there is an increasing demand for a new type of housing. Many people in this age group are looking to downsize from their existing homes, though a high-rise condominium or apartment complex doesn't quite fulfill their needs. Many are looking for something that feels like their existing homes, though on a smaller scale. And most aren't ready for retirement communities.

In 1986, after finding that there was no community designed specifically for active adults in Columbus, Ohio, developers Philip Fankhauser and Edward Bacome decided to create one. “After conducting extensive market research into the needs and preferences of the baby boomer generation and older, Fankhauser and Bacome developed a condominium design that would consist of attached homes (four dwellings) that looked and lived like separate residences, designed in a pinwheel pattern,” says Thomas Rothrauff, vice president and general manager of Epcon Communities Franchising Inc. “They would add to these communities the amenities and lifestyle conveniences that would appeal to this demographic and finally offer these consumers the style of living they were searching for.”

Soon after completing their development, Fankhauser and Bacome were approached by a Youngstown, Ohio, developer looking to duplicate what they had created. Before long the company began to grow as other developers expressed interest in developing these communities. By the time the company's franchising arm was created in 1995, Epcon Communities had granted 18 licenses to developers in various parts of the country.

What makes the Epcon Communities concept so unique, in addition to the original idea, is that experience in the real estate industry is not a requirement for developing one of the communities. In fact, 45 percent of those that have obtained a license from Epcon do not have any background in the real estate industry. “These people may be physicians, attorneys, investment bankers or other professionals who have demonstrated an ability to succeed in business and who have a desire to either broaden their investment portfolios or have a strong inclination to begin a second career in homebuilding,” says Rothrauff. “They also benefit from becoming an Epcon franchisee, as they lack experience and know-how. They need the support, direction and training that Epcon offers in order to get their projects off the ground.”

The support that Epcon offers franchisees includes training the sales team, identifying and securing construction partners, and helping in the hiring of staff and contractors. Epcon will give as much or as little help as the franchisee wants. “Often, a franchisee's needs will change as they move on from their first community to multiple projects,” explains Rothrauff. “The need goes from ‘How do I complete my first project?' to ‘How do I manage multiple projects?'”

The company has many examples of successful franchisees that formerly worked outside of the real estate industry. One franchisee, Brian Koenig, who now has communities in Findlay, Marion and Pickerington, Ohio, used to own a chain of sporting goods stores with his brother. Roger and Barb Thomas, who used to own a hardware store in Ohio, are now franchisees in the Atlanta area. Epcon also has a former NFL football player as a franchisee in North Carolina.

And while the company is a great fit for those with little or no experience, it is also a great concept for those that do know the real estate industry, such as homebuilders and real estate agents. “They know it takes time to develop a residential project from scratch, to build the development team, address the zoning challenges, finalize a concept, and they know that it is extremely difficult to be profitable with one's first foray into the development arena,” says Rothrauff. “By becoming an Epcon franchisee, they immediately have the means, the concept, the business structure and support to develop a high-quality community to meet the demands of today's consumers and be profitable with the first project.”

Experienced developers are also interested in the concept because it helps simplify some of the building process, especially when building a development with multiple components. “Developers of multi-use projects can greatly benefit from incorporating an Epcon Community into a given project,” says Rothrauff. “As these developers enter into contracts with builders, they sometimes find that the builder cannot meet the complex commitments of the residential piece, and this can negatively impact the forward progress of the entire project. As an Epcon franchisee, the developer can move the project forward by using the proven concept and wealth of resources that Epcon offers, leaving nothing to chance and minimizing risk.”

Because of the advantages the company offers all its franchisees, regardless of background, more and more communities are being developed across the United States. The developments follow the Epcon Communities template, with groupings of four ranch-style condominiums clustered together. Though the four homes are attached, each residence appears to be a single-family home with its own walkway and front door, separated by a two-car garage. The developments are like condominiums in that the exterior of the homes and the communal grounds are maintained by a property management team. Many of the communities also feature a clubhouse, pool, exercise room and community center.

In the Northeast, Jay Wegman of Rochester, New York, developed The Villas at Fieldstone in Hilton, New York. The Village at Parkwood Estates in Pittsburgh, Pennsylvania, was developed by Paul Scarmazzi, an investment banker that was previously a lender to Epcon. The East/West Development Company is composed of partners that live on opposite coasts, though they are developing a community in Massachusetts and looking for an opportunity to develop in California.

Over the next few years, Epcon hopes to continue to expand its idea and keep making real estate available to those who are interested, regardless of the industry. In 5 years, the company expects to have franchisees in all 48 continental states and be the leader of attached active-adult living communities. “The trend that Fankhauser and Bacome identified years ago will only continue — America continues to gray, and baby boomers will continue to demand higher quality of life, more amenities, and a more leisurely lifestyle than what most communities have to offer,” says Rothrauff. And while the communities are a great fit for the baby boomer generation, Epcon has also seen interest in developing the concept for other groups, including young professionals that are interested in the benefits of homeownership but don't have the time to maintain a single-family home. “They want the amenities of community living, but also want a back yard,” says Rothrauff. “Especially true in larger metropolitan communities, this segment of the market will only expand.”

©2005 France Publications, Inc. Duplication or reproduction of this article not permitted without authorization from France Publications, Inc. For information on reprints of this article contact Barbara Sherer at (630) 554-6054.