Interview With Dick Rennick

Sunday, January 10, 1999

Dick Rennick, founder and CEO of American Leak Detection in Palm Springs, Calif., started from humble beginnings. His father ran a small plumbing business in Riverside County, Calif. When his farther died, Rennick managed, then sold the business to become a police officer.

Eventually, he found his way back to the plumbing industry by starting a leak detection business that yielded results far superior to the old "bash and crash" method. He sold his first franchise in 1984. Between 1992 and 1996, the company doubled in size, with gross sales reaching approximately $19 million.

Today, American Leak Detection has 290 franchises in 37 states and 13 foreign countries. Rennick was awarded the 1997 "Entrepreneur of the Year" by the International Franchise Association. Previous winners in franchising include J. Willard Marriott of Marriott Hotel Corporation, Thomas Monaghan of Domino's Pizza, and John Brown, Jr., of Kentucky Fried Chicken.

American Leak Detection does everything from locating leaks in swimming pools to city streets, industrial buildings to patios, fuel lines to sewer lines. The company also has a leak-seeking system that Rennick claims is so accurate that even the smallest leaks can be isolated from as far away as 20 feet underground.

Reeves Journal conducted an interview with Rennick on issues ranging from the state of technology in the leak detection business to working with insurance companies.

Reeves Journal: What was it about the leak detection business that first attracted you? Rennick: Back in the early days, I was a plumbing contractor. My dad used to say to me, 'Son, we've got a leak. Here's a hammer and a chisel. Go out and start digging.' I knew there had to be a better way.

I sold my first franchise in 1984. Throughout it all, I continued to hire research scientists and electronic listening device. The toughest thing was getting these guys to listen to me. Just because it worked on the workbench didn't mean it was practical in real life. We had to change the filtration, the microphones, pretty much everything so it would be a kind of service we could offer our customers.

Reeves Journal: And today? How big is the leak detection business? Rennick: Our business started out just in Southern California. But now, leaks are a huge problem all over the world. We find leaks in multiple pipe systems, doesn't make a difference what they're transmitting. One of the toughest hurdles has been educating people as to the types of services we offer. It's no longer the bash and dig method, where eleven holes later maybe you've found one leak. Today it's more streamlined. Everybody is pushing for 'customer service.' This is one way to do it.

Reeves Journal: Clearly the art of leak detection has come a long way from listening with your ear.

Rennick: I compare it to computers. Remember how cumbersome computers used to be? Look at computer technology today. Same thing has happened in leak finding technology. Back in the old days we would have to have circuitry the size of a football to find one simple leak. Today, circuitry the size of your little fingernail will do the same job, and maybe a thousand times more.

Reeves Journal: How important is training for contractors interested in getting in the leak detection business? Rennick: Unless plumbing contractors are willing to make a commitment to hiring someone full-time to do leak detection work, don't waste your time. Like anything else, you can buy the finest machine and read the "how-to" book, but unless you've got the experience, not even the most sophisticated device will help you. It's a significant investment to get involved in leak detection.

Reeves Journal: Should contractors by their own equipment or hire a specialist? Rennick: I don't know if I can really answer that question. If they're not willing to make the commitment to learn the cutting-edge technology, don't take the gamble. I'm not saying you can't get into the business for a few thousand dollars, but there are a lot of hidden costs you don't think about. Those contractors who are getting into the business today will have to go through the same aches and pains that we went through.

Reeves Journal: But aren't there some marketing benefits to owning your own equipment? For example, hoping to get the full repair work? Rennick: You have to be careful that you're doing a reputable job, and not just using the equipment as a tool to convince someone that he needs to reroute or reline. There are reputable plumbers who want to make sure their customers are getting the best service possible. Then there are service persons who will poke a hole here and there, and then say they've found the leak. But they haven't.

Reeves Journal: You've been successful at developing a network of referrals from local plumbers and swimming pool operators. Do you suggest your franchises recommend plumbers? Rennick: Our phone rings all the time, asking us to change water heaters and fix leak faucets. But typically we don't take those calls. We're strictly a leak detection business. So we've got to have somebody to call.

A lot of times, plumbing contractors call us to find the leak. Once we've found the leak, we turn it back over to the plumber. Reeves Journal: Yes. And building contractors, engineers, whatever. A lot of them do, in fact, try to initiate small leak repairs. But we typically don't repipe or reroute or do anything that cuts into the plumber's services. Sure, we do have a couple of operators who will do more. But quite frankly we don't have the time.

One of our toughest hurdles has been trying to convince the industry that we're not competitors. We don't do what plumbers do, and they don't need to do what we do. The people who give us work; we like to give it back to them. We augment their services.

Reeves Journal: Is franchising good for the plumbing industry? Rennick: I'm extremely surprised that more people haven't jumped on board. I believe in it because it puts everyone on a level playing field and you're not in business by yourself. I would hope that one day the plumbing industry would find more people who want to get involved in franchising. I think it would enhance the entire industry. Reeves Journal: How difficult is it working with insurance companies? Rennick: Working with insurance companies has been good for our company. But the insurance industry is a touch nut to crack. It takes a lot of work, a lot of money, and a huge commitment. Dealing with the guys in the field doesn't help you. You have to deal with the decision makers.

Reeves Journal: How can contractors make sure they get paid? Rennick: System wide, our collectables are the same as the average industry professional. Like most plumbing contractors, we like to work COD. But it doesn't always work out, that way. When you're working with property management companies or insurance companies, sometimes it takes 60 or 90 days to work through the system. It hasn't been a problem for us. It's a process of educating the customer and making sure the job is done in a satisfactory manner so when you complete the job, the person gives you a cup of tea along with your check.

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American Leak Detection
888 Research Dr., #100
Palm Springs, CA

Phone: (760)320-9991
Toll Free: (800)755-6697
Fax: (760)320-1288

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