Rick Lierz grew up around the lumber business. His father worked for Boise Cascade before starting Franklin Building Supply almost 42 years ago.
Lierz practiced law for 12 years in Boise before moving to Franklin in 1997. In those days, Franklin had six locations in Boise, Caldwell, McCall, Bellevue and Elko, Nev., as well a store called Boise Supply Co. and about 150 workers in all.
Lierz handled credit, collections and insurance while he learned the business, and after about a year he started running the Boise operation. From 1997 to 2003, Franklin doubled in size adding two truss plants, two door shops, and a Pocatello store.
Now Lierz is CEO and the company has about 600 employees and about 100 delivery trucks. Last year, the company became 100 percent employee-owned through an ESOP, or Employee Stock Ownership Plan.
When he’s not running Franklin Building Supply, Lierz is working as chairman of the National Lumber and Building Material Dealers Association, the national association for lumber dealers. He spent some time telling Idaho Business Review about his company’s place in the Idaho construction industry. The interview has been edited for length and clarity.
How much of Franklin’s business is housing?
About 90 percent is housing, and that’s almost all single-family residential.
Our sweet spot, if you will, is helping the homebuilder build a house for a family, or a buyer. Giving them all the aid and comfort they need through that process, from the initial estimate on the plans to working with them to make plans, to make a decision about the structure itself, working with the builders and homeowners to make selections on things they care about.
When it comes to home owners, we’re a retail business. We have a lot of people who walk in the door and we help them. Our focus in that area is the serious do-it-yourself-ers.
We’re not contractors. We get a lot of referrals from Home Depot and Lowe’s saying, “Franklin can do that.” And we also provide a lot of referrals.
So how do you manage to compete with giants like Home Depot and Lowe’s?
Home Depot is a cash business and we’re a credit business. Almost all their sales are cash. What they don’t do well is what we do. We help a builder. We help them cash flow their project, because they buy materials from us, and we deliver those materials all month long and we send a statement that allows them to continue to operate. The builder has ways to finance that aren’t like cash.
The customer here is, generally speaking, working on bigger projects, or works with professionals in our company like our lumber salesman or our door salesman to make decisions about what is needed on a project. And then he turns that over to our folks to create the order and make the delivery, and place the material where it’s needed, and then he can return unused material for credit after that phase of the project is done. We’ll help them manage the logistics of distributing the product, and they’ll trust us to deliver the right stuff at the right time at the right place.
Although we compete in everyone’s mind, we don’t compete much with Home Depot. We’re in different markets. They’re the big boy in the industry.
Ninety percent of what we do is helping builders with the logistics of their project decisions and delivery, and Home Depot really doesn’t play in that. They have a truck, and for $50 you can get something delivered in a week. If you need it today, we’re the ones you call.
Why are construction material prices rising?
It seems like everything we sell, manufacturers are saying, “it’s more expensive.” The costs across the board of building a house have increased a lot in the last two years.
China is having a big impact on steel prices, because they control a lot of the steel in the world, and steel is important in housing construction for rebar. But the biggest issue with building materials is commodity lumber, for the foreseeable future.
One thing is the ongoing dispute with softwood producers in Canada. We’ve become increasingly dependent on softwood lumber from Canada. The issue, whether it’s accurate or not, is Americans believe that the Canadian government subsidizes the production of softwood in Canada so it makes that wood cheaper and too competitive for Pacific Northwest producers. Also, right now we have a restricted supply from Canada because of tariffs, and because of the fires in British Columbia this summer. So prices have gone up.
We as an industry worked harder to get commodity lumber to our yards this year than we ever have. It’s more expensive, and it’s not going to cheaper for a while.
Any petroleum-based products also had increases over the last year because of things that happened in the world of gas and oil. Those prices went up, they also stopped producing. Glass is really expensive right now.
What’s the most important issue for Franklin right now?
Workers are the biggest focus we have. We don’t have enough labor in our industry. One of my builders told me a couple weeks ago … we’re missing 8,000 people that we need on job sites in this valley, from framers to plumber.
We recruit nonstop from friends and family. We give referral bonuses to employees. And we’re an employee-owned company, and that’s something we’re using as a recruiting tool and retention tool. But it takes more than that; it takes focusing on employees.
The other big issue is trucking. There aren’t enough truck drivers out there; it’s one of the real labor pinch points.
Like most companies in our industry, we have a lot of grey hair. The average age in our company is a lot higher than I’d like it to be, about 50. In management and sales it’s higher than that. We’re all going to retire at the same time. We want people to make a career of Franklin Building Supply and grow personally and have successes and become the next generation of leaders, so we’re working on leadership development all the time. We’re mentoring people and identifying talent within our company, and looking for talent outside of our company.
Does raising pay help?
We work really hard to figure out what is competitive. Pay is important, but it’s not the only thing.
There are positions like truck drivers where they’re at a premium, so we make sure they’re competitive. But a lot of the positions we have in our company are production. They’re building trusses, building cabinets and doors, good honest hard-working jobs, but I can’t tell you that just offering more money in any of those jobs brings in a flood of applications. We need to make sure we’re competitive and doing the right thing by our team members.
What else can you do to find workers?
An uphill battle for us is trying to figure out how to connect with kids who are coming out of high school who maybe aren’t on a college track. They’re good kids, they want an honest job, and they’re just going at life in a different direction but they need a job. We find them randomly, through friends and family, we don’t have a real good method to get in front of those folks or tell our story.
We’re trying to figure out continually how to bridge that gap.
Is construction activity still rising?
In 2005, I think our housing starts in the U.S. were in the range of 2.2 million. We’ve always accepted that natural absorption is about 1.5 million, and we’ll hit 1.2 million this year.
So we haven’t approached natural absorption yet. And it feels like we’re as busy as we were in 2005, but we aren’t. There are less houses being built now in Idaho and in the U.S.
We have less people in the industry to build, so it feels like we’re at capacity because we kind of are. And there are less people buying houses right now than normal absorption, even though it feels like there is a ton of demand. This is a healthy housing market, other than the fact that things are getting more expensive and at some point that will have a more severe effect on the ability of people to afford housing, and that will restrict housing. We’re not there yet; people can still afford it, money is cheap.