Franchisor PIRTEK poised to grow with new locations around nation

(Franchise Buy) - By . Updated Apr 1, 2013

Franchisor PIRTEK poised to grow with new locations around nation

by Ken Datzman

ROCKLEDGE — In the conference room at PIRTEK USA’s corporate headquarters, the company’s large territorial franchise map on the wall clearly pinpoints the franchisor’s growth, from Boston to Seattle and a host of Metropolitan Statistical Areas in–between.

New Zealander Gwyn O’Kane, an engineer who started with PIRTEK 25 years ago in the United Kingdom and also worked in Australia, where the firm was founded, says he is excited about his company’s growth potential in America and the unique entrepreneurial franchise opportunity it presents to businesspeople.

“We are in a perfect position to grow in the years ahead. We have built a solid foundation. PIRTEK is a different kind of franchise model. We are industrial– based, business–to–business,” said O’Kane, whose company is recognized in the latest “Entrepreneur Magazine Franchise 500 Rankings.”

O’Kane, the vice president of franchise development for PIRTEK USA, said a growing number of non–traditional business–to–business franchises are coming from abroad to America. “PIRTEK is a proven model. We’ve been in the arena for three decades and are in 22 countries (more than 350 locations).”

PIRTEK expanded to the U.S. in 1996. Its corporate campus at Rockledge Business Park includes a more than 20,000–square–foot warehouse and training facility. PIRTEK supplies all of its locations in the U.S. from Rockledge.

The administrative offices house information technology, finance, marketing, and other operations. Thirty–five people work here. While there is currently a fairly wide PIRTEK footprint of exclusive franchise territories around the nation under ownership, the company seems to have only begun to grow in the business–to–business segment, where it has reshaped the way the market is serviced with its model for on–site hydraulic–hose replacement and fittings.

PIRTEK’s mobile–service vans go directly to the customer, conveniently providing on–site replacement for quality hoses and fittings. It saves the client money and downtime on the job, said O’Kane.

“You can imagine a big bulldozer on a construction site that is idle because of a hose breakdown. It’s costing the company serious money. We work on machines that cost $500,000,” he said.

PIRTEK’s customers are businesses that use hydraulic hose, pneumatic hose, or other kinds of hoses. These companies are involved in a range of industries, from construction and manufacturing to transportation and aerospace.

“Hydraulics is everywhere,” said O’Kane, adding that the industry is characterized by labor–intensive processes.

The three largest segments of the fluid–power industry are mobile hydraulic, industrial hydraulic, and pneumatic, according to the National Fluid Power Association.

Historically, mobile–hydraulic applications have accounted for about 50 percent of fluid–power sales, while the other two segments each have held roughly 25 percent of the market.

Today, PIRTEK touts itself as the “world’s leader” for on–site hose replacement. Two aspiring service–minded entrepreneurs in Australia have seen their idea sprout into a full–fledged global franchise system.

“The founders of PIRTEK (Peter Duncan and Wally Davis), who are still with the company today, changed the way the hose–fittings market was serviced,” said O’Kane, who joined PIRTEK as a mobile sales and service technician and later was named director of training before heading up franchise development in 2002.

“They started the business with a couple of vans visiting job sites. When hydraulic hosing breaks down, lly you have to go to the OEM (original equipment manufacturer). We changed that.”

PIRTEK’s trained technician goes to the job site with all the tools to do the work, said O’Kane. “He takes the hose off and manufacturers a new custom–built high–pressure hose assembly. Some of these are 2, 3, 4 and 5 psi (pounds per–square inch). It’s not something you can buy from a big–box home–improvement store. This is very specialized equipment.”

PIRTEK franchise operators run their business from a 2,500– to 3,500–square–foot Hose Service and Supply Center. The industrial space also supports a fleet of vans, said O’Kane. “We are usually located close to industrial– supply businesses such as W.W. Grainger or Fastenal.”

The franchise owner starts his business with three vans and a leased building. The company’s “turnkey system” provides them the opportunity to open their doors on the first day of business with a fully equipped hose service center, mobile–service units, and trained employees, said O’Kane.

“The owner has everything to launch the venture, including business cards in their pocket.”

The five–person team includes an operations manager who works alongside an administrator, who handles receivables and payables. “We tell the franchise owners they are going into business for themselves, but not by themselves,” he said.

The total PIRTEK investment is around $500,000.

“There are franchises you can buy for $5,000 and you can anticipate getting a return based on that amount of investment. We are not the most expensive franchise and we are not the cheapest.”

O’Kane said the majority of PIRTEK owners are “age 45–plus” and have worked as middle to senior corporate executives and managers. “They have sound business– management, people–management, and financial– management skills. They want to build an enterprise, build equity in a business.”

He said the type of individual who is attracted to PIRTEK is the “franchise entrepreneur,” as opposed to someone who embraces the business–startup undertaking.

“They are looking for a proven system and do not want to create a business from scratch. And this is what we offer. As a franchise owner, you have a building, your sign is on the door, your shop is outfitted, your office space is outfitted, you have marketing materials, vans ready, and people hired and trained.”

New franchisees receive three weeks of training at the Rockledge facility. PIRTEK also provides several weeks of on–site support when a center is opened, in addition to ongoing assistance from the company’s regional franchise– support representatives.

In early March, PIRTEK owners from around the nation came to Brevard County. The company hosted its 15th annual Franchise Owner Conference and Vendor Expo at the Crowne Plaza Oceanfront Resort & Spa in Indialantic.

“We had 100 percent attendance among the franchise owners,” said Karin Ferretti, PIRTEK’s franchise– development administrator. “We start off each franchise conference with a vendor showcase. It’s a huge opportunity for the vendors to get in front of all of our franchise owners at one place and one time.”

The conference included roundtable sessions and meetings, and an awards dinner, she said. “The format presents a great opportunity to share ideas. The takeaways include the learning experiences gained from colleagues.”

As a franchisor, O’Kane said PIRTEK looks for businesspeople who want to build a team and not “stand behind a counter. We want our franchise owners to focus on their community and the potential for business. So more than anything else, they are going to be out networking and building relationships, and nurturing their employees.”

PIRTEK is not positioned in a high–visibility franchise business but offers wide opportunity to build wealth, he said.

“The hose and fittings business is not glamorous. But you can be home on weekends with your family and enjoy vacations. It’s about quality of life. And, you can actually influence how big you grow the enterprise. This is a repeat–business venture.

An expanding number of PIRTEK owners have more than one franchise location, he said.

Businessman Jim Lager of Dallas, Texas, recently started with one PIRTEK franchise and now owns five in that region of the country. He was a top producer with a national tool franchise and had a fleet of trucks before his association with PIRTEK.

“Jim came across us selling to one of our franchises in Dallas,” said O’Kane. “He joined us in 2010. By the end of 2012, he had 10 trucks and opened his second PIRTEK store. He now has 14 trucks on the road providing service in the Dallas–Fort Worth region.”

In the U.S., PIRTEK has grown to 41 individually owned locations.

“With the population size and geography that we are dealing with in the U.S., we are probably looking at 300 to 400 locations over the long–term development of the company. So there is much untapped territory for us,” said O’Kane.

PIRTEK stands for Pirelli Technology. Pirelli of Italy manufactures PIRTEK’s products but has no ownership or involvement in the company, said O’Kane, adding that PIRTEK also has no ownership or investment in Pirelli.

“It’s strictly a value proposition. There is no ownership in either direction. There is no other relationship except for the fact that they supply our product. To this day, our product still comes out of Italy. Even though PRITEK was started in Australia, it went all the way to Italy to source Pirelli. Everybody knows the Pirelli name is synonymous with quality,” said O’Kane.

His company typically targets a population base of 500,000 people per PIRTEK franchise.

“For example, in the Atlanta MSA of 4 million people, we have three locations. But we could ultimately end up with seven or eight locations there. Jacksonville’s MSA is 1.2 million people. We have one location and are looking for another. In general, we have a lot of territory to grow the franchise in Florida. We’re not in West Palm Beach, Fort Lauderdale, or Miami.”

MSAs, regions of 500,000 or more people, are defined by the U.S. Office of Management and Budget and used by the U.S. Census Bureau for statistical purposes. In Brevard County, where more than a half–million people live, PIRTEK has one location.

“In Brevard, the name is known because we have been here for 15 years offering service. Most of the companies that deal with hose or hydraulics know our brand.”

PIRTEK, a private, 33–year–old company, is “a household name in Australia,” he said. The company started franchising in 1985. “In Australia and the UK you cannot buy a PIRTEK franchise unless it’s an existing one. We are sold out. And that will happen in the U.S., but it’s going to take some time,” said O’Kane, whose company competes in the British Touring Car Championship with its Honda Civic NGTC entry.

The company’s growth is detailed in the 34th annual 2013 “Entrepreneur Magazine Franchise 500 Rankings.”

PIRTEK made a substantial climb, to the No. 260 spot on the list. In 2011, the company was No. 389. PIRTEK has jumped 129 spots in three years. Only companies that supply full franchise–disclosure documents verified by “Entrepreneur” are eligible for listing consideration. The magazine uses a mathematical formula that considers financial strength, stability, growth, and size of the franchise system.

“While reviewing the Franchise 500 listings, I noticed that many systems, including some very well–known brands, had lost many franchise or company–owned units during the difficult years,” said O’Kane.

“For PIRTEK, the light started to shine through in 2011 and our system was able to enjoy a very strong 2012. We are now seeing candidates who are interested in franchising, having confidence again knowing it’s a great time to start a business. Lending is becoming more available to new entrepreneurs, which will help us focus again on unit growth and building the PIRTEK brand.”

PIRTEK USA is listed on the U.S. Small Business Administration registry and has relationships with “preferred” status SBA lenders.

O’Kane said the recession forced his franchise owners to look beyond the construction industry, “which has always been low–hanging fruit for us.”

“One of the things we really stress to our owners is work hard to diversify the business in order to have heavy vables spread across hundreds of companies.” He said PIRTEK franchise owners pursued that goal during the five–year downturn. “They really did a fantastic job getting into municipalities, manufacturing facilities, and other industries. As the construction pie got smaller and smaller, the other industries started to grow for us. Now, construction is starting to come back in many communities. We are looking forward to that growth engine again. We’re upbeat. We think it’s going to be a very good year for PIRTEK franchise owners,” said O’Kane.