HireQuest’s business model is so unique that it helps the individual agencies overcome all of those barriers. 

The way a big staffing company usually operates is that it will be vertically integrated, meaning that it will “own” the whole value chain, from the CEO to the agents in the stores; everyone is an employee.

Then there’s the “raw material”, the daily or weekly workers. These guys aren’t employees of the company. They are typically paid by the day or week. But the final client will take 30 to 50 days, on average, to pay for the services rendered.

This causes a mismatch between inflows and outflows of cash which is all the more pronounced in the spring and summer months when seasonal staffing requirements are higher (think outdoor events).

So, these staffing companies need to hold significant and stable amounts of working capital, more specifically they’ll need a high level of Accounts Receivable.

A lot of the companies in this space will fund those Accounts Receivable with debt, be it traditional bank debt or factoring (a specific financial instrument that allows you to sell your Accounts Receivable). 

But as I’ve mentioned in the beginning of this write-up, while this funding is available to the big companies, not so much for the smaller ones. At least, not at acceptable rates. 

This keeps a lot of the staffing agencies from growing because, as they grow their revenue, they’ll need to fund the corresponding Accounts Receivable. 

HERE’S AN EXAMPLE

Let’s say that you own one of these agencies and you’re about to sign a new contract worth, say, $100K. 

You’ll be finding the workers and you’ll be paying them at the end of each day or week. But you’ll only be getting the cash from your client 4 weeks from now. You’ll need to raise that cash somehow.

That’s where HireQuest comes in.

By adopting a franchising model, HireQuest brings a very seductive proposition for the store operators.

HireQuest will finance the Accounts Receivable of its franchisees, meaning that it will pay the workers. The franchisees don’t need to bother with that.

It will also provide the software needed, the workers compensation insurance and the initial funding to set up the business.

This way it allows the franchisees to focus on what makes them money: finding customers who need a job done and getting the workers to do the job.

The next thing that comes to mind is “Buying a franchisee can be expensive. It can run up to a few hundred thousand dollars for famous brands.“

Not with HireQuest. 

HireQuest will finance the franchisees. Yes, you’ve heard me right. 

Unlike many other franchises, there’s virtually no upfront costs to open a HireQuest agency. I can’t think of any other company where this happens.

But of course, there’s no such thing as a free lunch.

Franchisees will pay back the ramp-up costs over the period of 5 years (which coincides with the typical franchise agreement term) with added interest (6% per year).

It’s not often that I find such a powerful model.

The company aligns the incentives of its workers with its own by turning them into business owners instead of employees. They won’t be just another employee looking at the clock waiting to go home to watch TV.

And once they become franchisees, HireQuest will also incentivize them to open more stores in their territories by giving them credits on the royalty fees they pay in their existing offices. Brilliant!

By doing all of this, HireQuest is cutting a big chunk of the General & Administrative expenses in the business: the regional managers.

You see, in a traditional staffing agency, someone has to keep an eye on all the store employees. That job is typically performed by an army of regional managers. 

These managers are expensive. By having highly motivated individuals inside its agencies, HireQuest doesn’t need to keep an eye on them.