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As the consumer solar market grows, so will ideas for building a solar retail empire. Solar Universe certainly has that goal in mind, and it’s announcing Tuesday a $7 million equity investment to expand its franchise network.
The company, founded in 2007 and based in Livermore, Calif., has built a network of 21 franchisees in six states, including California, Nevada, Pennsylvania and New Jersey, said CEO Joe Bono. The company plans to use the new, second-round funding, led by Rockport Capital Partners, to broaden its network. By the end of this year, Bono wants to add 30 franchisees and expand to regions such as Ontario, Canada.
The company became profitable last year, Bono said, but it needs more cash to carry out the expansion plan. Solar Universe raised a $1 million round previously. The company’s franchise network began installing solar electric systems in 2009, starting with 2.5 MW. The installer network erected 5 MW in 2010 and should more than double that amount in 2011, Bono said.
The idea of building a franchise in solar isn’t novel. But the model contrasts with others like SolarCity, for example, which is building a fleet of in-house sales representatives and technicians. Sungevity is one firm that subcontracts its installation work. SunWize Technologies launched a franchise program but discontinued it about a year ago.
SolarCity has grown quickly with its model. On Monday it announced it had bought Clean Currents Solar, an installer, in order to set up a base in Maryland to serve that state and the District of Columbia.
Solar Universe has 20 employees, and its franchisees collectively employee hundreds of people who do sales and installation using Solar Universe’s brand, software and customer referrals.
Solar Universe’s major selling point is the training and marketing program it offers to electricians, roofers or contractors who want to get into the solar market but don’t know the best way to start. The solar market is new and has yet to standardize certain rules and practices that are common in other home improvement sectors. Aside from learning to install solar energy equipment, installers also need to learn about local building and fire codes, as well as local, state and federal programs that offer rebates and tax incentives for erecting solar electric systems.
“A lot of people want to be involved in the green business, and they just want to be taught how,” Bono said. “They go through a six-week recruiting phase (with Solar Universe) by putting together a business plan and meeting with our management team.”
Solar Universe collects a franchise fee of $0.10 per person per service territory. So a franchisee that wants to do business in a city of 250,000 people will pay $25,000. Solar Universe also takes 3 percent of the gross sales from each franchisee, Bono said.
Solar Universe markets the installation service and generates sales leads that are then passed on to the franchisees, who send people to visit home and business owners to talk about costs and designs to fit solar equipment on their roofs. The company also gets better pricing through bulk purchasing of equipment for its franchisees. Solar Universe also offers software for marketing, invoicing, permitting and other administrative tasks.
Because solar electric systems remain expensive without incentives and financing options, companies such as Solar Universe, SolarCity and Sungevity all have to offer debt financing choices to attract a wider set of customers.
SolarCity and Sungevity have raised funds from U.S. Bank and others to offer zero-down financing options to consumers. Solar Universe doesn’t do that and instead connects customers to those who can. Referrals go to banks such as Bank of America or Suntech Power, a solar panel maker that offers leases, Bono said.
Although the company right now directs consumers to third-party financing products, it might start to offer its own soon or at least some sort of financing mechanism. That’s what Bono hinted at and said he plans to announce something like that in a few weeks.
About 70-75 percent of Solar Universe’s customers now pay for their solar electric systems outright, while the rest pay them by borrowing money.
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Photo courtesy of Suntech Power