Engineering the stone age - Granit Transformations

Granite Transformations' Mark Johnson

By Nancy Weingartner

As published in: Franchise Times - March 2012

Not many franchises can claim to manufacture, sell and install their proprietary product, but Granite Transformations has engineered a way to be environmentally friendly, as well as a customer magnet.

To get from Point A, Granite Transformations’ headquarters in Miami, to Point B, its factory in Sebring, Florida, one has to drive past a lot of orange groves (seen one, seen ’em all) and through endless miles of nondescript Everglades and non-coastal views.

In other words, the two-hour drive would be boring if you weren’t sitting in the passenger seat of a black Range Rover being driven by the manufacturer/franchisor’s CEO Mark Johnson.

A worker ensures the automated process of dropping tiles into a template is uniform. The machine shakes the tiles into square holes, before being backed with netting.

I had originally lobbied FT’s Publisher to interview Johnson at the parent company’s headquarters in a historic, refurbished villa in Vicenza, Italy. However, since I was already slated to attend an expo in Miami, I reluctantly agreed that visiting Sebring was the wiser decision. And had I gone to Italy, I would only have seen the end results—all those beautiful glass mosaics decorating every surface of the villa’s interior and spilling outdoors. I would have missed how the tiles are made, since the factory that services the world is in Florida.

Most reporters would have used the drive time to pepper their subject with pointed business questions.

I was prepared to do this very thing until I saw the license plate holder: “My Jack Russell is smarter than your honor student.” So first we had to discuss Gumbo and Sweet Pea’s antics in comparison to my two Jack Russells. Johnson won: Gumbo, the male, survived being run over by a car, which left a permanent tire track on his stomach, plus eating a poison toad. The cost of a Granite Transformations franchise paled in comparison to Gumbo’s medical bills. Johnson also parents a Yorkie, two potty-mouthed birds and various feral cats that somehow always show up at his door in need of medical care.

The car, by the way, belongs to his wife. “My BMW does not express an opinion on the bumper or frame. I like to avoid potential road rage, while my five-foot wife seems to embrace the joys of sign language,” he says.

The phrase “twinkle in his eye” is perhaps the worst kind of cliché, but in Johnson’s case, it aptly describes his mischievous expression. He’s the class clown, all grown up and running a $160 million business—when you combine the U.S. business with the Australian and U.K. divisions.

Mark Johnson, CEO of Granite Transformations, gave Franchise Times a tour of the manufacturing plant in Sebring, Florida. The 90,000-square-foot factory is preparing to open its second production line to keep up the demand for its engineered stone products.

Mother’s little helper

Johnson is the oldest of nine children, which he says explains why he chose not to have his own children. His father was a salesman with a commission-only job and his mother was tired. Like Johnson, his father had a great sense of humor. “My mother was his best audience,” Johnson says. But for some reason, Johnson complains, what she found funny when his father said it, she didn’t find quite as humorous coming from him.

When he was 12, his mother sat him down to explain the facts of life: She was going back to work and he had to help out with his younger siblings. Two days later, he asked her if he could spank his brothers because they wouldn’t listen to him. His mother gave him his first business lesson, which is still part of his management skill set. She explained rather than treat them all the same, he needed to motivate each brother: For instance, use a loud voice for the youngest, ask for buy-in from the fair-minded one and convince the stubborn one what you wanted him to do was his idea. Sisters had a whole different set of motivating criteria.

While babysitting had its occasional downsides, one of the perks of being the oldest was spending time alone with his mother, who carried on adult conversations with him.

When he was 5, he tricked her into revealing the truth about Santa Claus—and, in turn, the Easter Bunny, Tooth Fairy and Sandman. She made him promise never to tell his siblings about Santa not being real, so he told the 4-year-old across the street. The boy’s mother never did forgive him, he says, laughing.

Money was always tight, so to earn the things he wanted, Johnson did a variety of odd jobs, including delivering newspapers. He spent one entire paycheck on a pair of 501 Levis—his attempt to be cool.

Carl Griffenkranz, vp of marketing, lives his brand, day in and day out. Mainly because it is installed in his kitchen at home.

He washed them before he wore them, not realizing the jeans were designed to shrink two sizes. “I had to lie down on the floor to pull them on,” he says, grimacing at the memory. “By Friday they were comfortable and then I had to wash them and start all over.” His younger sister volunteered to take them off his hands, but as anyone with multiple siblings knows, that wasn’t an option.

Before his present position, Johnson worked for Good Earth Vitamins and 1-800-Flowers. He still takes a handful of vitamins every day and married a woman who owned a flower shop—he would never sell anything he doesn’t believe in, he contends.

His mentor, Erwin Keup, author of “The Franchise Bible,” suggested he take the job with Granite Transformations. The company was founded in Australia and after selling-out the six states in that country, the founders decided the logical move was to the U.S.

Transforming granite into franchises

In 1996, Colin Mackenzie and Bob Smith founded Granite Transformations in Perth, Australia. They had run across a thin composite from Italy—“engineered stone”—that was being used for floor tiles. The two decided it would be a good material to overlay on countertops, or benchtops as they’re called in Australia, and convinced the manufacturer to become their supplier. “They thought it was funny that we’d do benchtops instead of floors,” Mackenzie says, but at the time there was an abundance of flooring companies in Australia, and money to be made in kitchen remodels.

The thinness and durability of the product made it possible for the 10-foot-long slabs of manufactured stone to be installed over the existing countertops, without seams or grout.

“What sets us apart,” says Nicole Neesen, a franchisee in Nebraska, “is we’re the only ones to master a veneer that’s superior in strength” and beauty.

The kitchen install usually can be done in a day, since the old countertops don’t have to be torn out—an attractive option as opposed to being banned from cooking for days at a time.

Counter Surveillance

Recycled glass and stone are stored in outdoor bins.

Blue glass, likely from Absolute bottles, is ground to different sizes depending on the slab’s “recipe.”

Livio Magni, production manager, runs the entire process, using computers and robots.

After multiple steps, including spreading the resin, glass and stone mix into a thin slab and baking it, the slabs enter the yellow train-looking chambers where recycled water aids in the polishing process.

One of their first employees was Daniel Hanlon, who now heads up the U.K. division. Smith convinced Hanlon, who had been trained as a cabinet maker to join the company on a sub-contractor basis. The only downside, Hanlon says, was he had to buy his own van and furnish his own tools—a $10,000 investment. To see what kind of ROI he might expect, he checked out the operations’ board for the jobs that had been sold. “There were two names on it,” he says. “And one was Bob’s.”

A more risk-adverse man would have taken his tools and gone home, but Hanlon saw a future. “Right from the beginning they had a vision of where it was going to go,” he says.

Because black-and-white newspaper ads couldn’t show the product to its full advantage—“People thought it was a spray-on,” Mackenzie says—they had to come up with alternative ways to advertise the product.

Their first big breakthrough came when they signed “casual leases”(renting out an inline space for a week at a time) at malls. Engineered stone is a product you need to view and touch to understand and people lined up to see the product in action and to admire the before-and-after pictures.

Unfortunately when they brought the product to the U.S., shopping malls didn’t do casual leasing and they had to go the more costly and more restrictive way of renting kiosks by the month.

Other avenues to get the countertops in front of the public were through home shows and franchise shows. “At franchise shows, we’d get prospects who wanted to buy the product (for their homes),” Mackenzie says—an added benefit.

Not only did they have a product people seemed to want, they had a pretty good sales pitch: “No one else is doing this,” Hanlon says. “You’re buying into a franchise with no competition.” Although, there is competition from other products, such as granite, Formica and Corian. But no one is franchising its own manufactured product.

Why no competition? For one thing, Johnson says, it requires a 90,000 square-foot factory that costs millions of dollars to build.

Johnson signed on as CEO of the U.S. division and then 9/11 happened. His first reaction was: “Well, that was a short career.”

To his relief, he says, the industry did well because people wanted to stay close to home, and, therefore, holidays couldn’t be spent entertaining in a kitchen that badly needed a facelift. Ironically, the sluggish economy is helping out the remodeling industry as well, because people can’t flip houses easily. Rather than live with a neutral color with resale value, or the previous owners’ bad taste, homeowners have begun to add color to their countertops and backsplashes. Bathrooms, fireplaces and pools are other opportunities waiting to be tiled.

Granite Transformations started with six colors, and now offers 60, Mackenzie says. Each of the three major markets has its preferential palette, however. Americans lean toward brown tones; Australians favor white; and in the U.K., 50 percent are installing black countertops, or worktops as they’re called there. “Australians would be happy with 11 colors, but Americans want to see 80,” Johnson says.

“They’ll still buy the same five, but they want to see 80.” As in a lot of systems, the best-sellers come from the front line. “All our popular colors have come from franchisees,” Johnson says.

At the factory by a racetrack

Granite Transformations originally bought the product from Trend, an Italian company that engineered the tile in its factory. The manufacturing plant uses European standards, because they’re more stringent than U.S., Johnson says. As the Granite Transformations grew, Trend became a major equity partner in all three divisions. Trend products are available to any home-improvement company, while the product Granite Transformations sells and installs is proprietary to franchisees. Their franchisees make a living on selling and installing the product, while Trend concentrates on wall mosaics and research and development. “We have to stay at the forefront of innovation,” Mackenzie says.

“It’s Italian engineering and creativity, and American-made,” Johnson says about the engineered stone slabs.

The manufacturing plant was built in the U.S., because the majority of the market will be U.S. customers. And yes, it’s expensive to ship, but not as expensive as building a factory on three continents.

The first U.S. store opened in California. Johnson says he knew they had a winner when a woman from Palm Springs drove all the way to the showroom in Mira Loma—over an hour drive—on the off chance she could catch someone in the shop, since the showroom was closed.

Florida was chosen as the site for the factory, to be closer to the Trend headquarters there. The city of Sebring was chosen because of economic incentives. The Formula One race track there is both a big draw for franchisee visits and a detriment. Johnson remembers the first time they held a franchisee meeting to show off the new factory. Every time he was a about to make a point, the noise from the Indy drivers finessing the hairpin curve drowned him out. They finally had to dismiss the group and reconvene at a quieter time.

Sebring may be out in the middle of nowhere, but Carl Griffenkranz, vice president of marketing, says they once had a Midwest franchisee whose two kids thought a tour of the factory was more fun than their trip to Disney World.

Leading the frontline

Johnson believes in franchisee participation. “Mark leads from the front,” Mackenzie says. “He launches good relationships with franchisees.”Neesen, who runs two units with her husband, agrees. “Mark has been instrumental in growing it worldwide, and making it a known name.”

One of the first things he did was set up a Best Practices Panel and a Product Advisory Council. Before rolling out a new color to the marketplace, the company manufactures 100 slabs and then ships a small number to franchisees to see if they will sell.

“We look at the smart people coming into our system and say, ‘Let’s listen to them,” he explains. “Some franchisors say, ‘This is the box, live in the box or get out. We’re still entrepreneurial... We let franchisees have Facebook pages, we trust them.”

Franchisees are investing significant money, the estimated initial investment ranges from $135,00 to $351,000, but franchisees need large areas to lease. In addition to the shop, where the slabs are cut to fit the job’s template, they need an office and a showroom. They also need to have some inventory on hand, since the product has to be shipped from Florida.

The international company has the best of three worlds. Hanlon in the U.K. and Mackenzie in Australia are COOs of their divisions. Johnson, as the leader of the largest territory, is the CEO. The three have monthly video-conferencing calls with the 10-person team. The call is 5 a.m. for Johnson; 9 p.m. for Mackenzie and in the middle of the day for the Europeans.

Time zones always play a part. When the U.S. first started franchising, the only existing franchisees who could be called were in Australia. “Franchisees in Australia would take calls in the middle of the night, and they were kind enough to answer the questions,” Johnson says. Good thing they liked the product so nothing but the stone had to be manufactured.

Franchisors should focus on survival of the system