Service crew

Why home service brands are hot products | Focus on the franchise

Scott Abbott launched Five Star Painting in 2004, when he was 18, and sold it to Neighborly in 2015, when it became the eighth brand under the home services franchiser’s umbrella. Today, Neighborly is owned by mega private equity firm KKR and has 29 home service brands and more than 4,800 franchises in nine countries.

And Abbott himself, now 46, launched his own holding company, Five Star Franchising, in November after luring Princeton Equity Group as an investor and buying Joe Homebuyer, Gotcha Covered and Bio-One. . Five Star Franchising brands include nearly 300 franchise owners and 350 territories across the United States and Canada.

Yes, investors are hot for the once lonely home services sector. (See box for six recent deals that illustrate the trend.)

Reason #1: “Neighborly kind of pioneered this idea of ​​rolling out brands on a platform. They didn’t get nearly the ratings 15 years ago, 20 years ago,” Abbott said. In July 2021, “Neighborly sold to KKR at a very high valuation. They show the market, private equity gives them a premium. There are only a limited number of home service businesses to buy from.

Reason #2: “In general, people who own homes today are much less able to repair those homes than they were 20 years ago. It’s a generational thing, and millennials prefer to outsource everything,” he said.

Reason #3: Many founders think “now is a good time to sell,” he said, in part because the pandemic has shown how unexpected risks can torpedo their plans. “If I have 98% of my wealth tied to one company, I’m exposed to things beyond my control. It could wipe out 10, 15 years of work. I’m giving owners a way to take some chips off the table .

He did not name his own company’s sale price, saying only, “Since 2015, and now six years later, multiples are increasing,” from about three times EBITDA or cash flow to the era. “The market will pay 10 times, sometimes eight, sometimes 12, sometimes 15” today, he said.

And does he aspire to create the next Neighborly? “Uh, my eyes are probably bigger than my belly. I would never put myself in that category today. It’s an incredible company with an incredible management team,” said Abbott. “I don’t see it as a race. I see it as an aspiration, to one day become as good as them.


Bio-One, which cleans up crime scenes, is now under the Five Star Franchising umbrella.

A buyer’s and a seller’s point of view

“Here we go again. I feel very lucky. There is a lot of action to be taken,” said Paul Flick, CEO of Premium Service Brands, which added House Doctors and Grout Medic to the family at the fall 2021, and had two more acquisitions expected to close in the fourth quarter.

Many deals these days have valuations “above our pay grade,” Flick said. “Some of them are 10, 12, 14 times EBITDA. Some of the ones we’ve done recently were 8 to 10. I think the average is probably around 12 to 14.”

It is much higher than before. “Back then, damn it, we were picking them up for two or three times the EBITDA, and that was recently, that was three, four, five years ago. Private equity definitely changed our industry at for sure.

It has learned a few lessons since the beginning of its acquisition wave. “Once we’ve done a few, you learn from your mistakes and you want to make sure you flip all the rocks to make sure you get what you pay for, No. 1,” Flick said.

And number 2? “Whether it’s a small or a big deal, it’s the same amount of time and effort, and getting something with a bit more volume has a lot more impact. important to our business right from the start.”


Kathleen Kuhn

Kathleen Kuhn, former CEO of HouseMaster, decided to sell to Neighborly in July 2020, after presenting numerous offers from private equity firms. “There was so much interest. In fact, Neighborly was one of many. Sure, they were one of the highest bidders, so the price was right,” she said.

“I don’t know if the term is comforting, but it’s nice to see that the equity world sees value in A, the franchise model, and B, the home service model. I’ve never seen so much interest in space in the past three years, and it’s exciting.

Kuhn stayed on as an executive at Neighborly for about six months, then left to help raise a Series C investment round for MooveGuru, of which she is president. MooveGuru is launching a new franchise called YourHomeHub, which is a technology platform that helps consumers manage their home from move-in to day-to-day life to sale.

“They’re in the real estate seller space and they’re going to franchise, and it’s tech and it’s very entrepreneurial,” she said of YourHomeHub, which has sold 13 territories. “It really ticked all the boxes for me.”

Her advice to potential sellers: “I think someone who’s ready to sell has to be ready to move on,” she said. “They have to be willing to let go, and that’s really the biggest challenge.”


Ryan Carpenter, right, is the founder of Plumbing Heating Paramedics.

The essentials of home services

Scott Sutton is Director of Growth for Threshold Brands, a platform company created in April 2021 by private equity firm The Riverside Company to acquire and operate home service franchises. It has seven brands under the umbrella, and counting.

“We would expect to have a lot more brands in the portfolio. We have a long way to go. We’ve had a lot of interest inside our brands, especially our franchisees, not just to become multi-unit franchisees and multi-brand, but also to become multi-unit and multi-brand franchisees,” Sutton said.

Riverside is not new to the business; he bought and sold Neighborly, formerly called the Dwyer Group, on two separate occasions. Sutton is also a franchise M&A veteran, leading acquisitions for Safeguard, a business-to-business franchise. But his new concert is different.

“When you do a lot of acquisition work, you work on one side of the table to get through the components of the deal, to get through the due diligence, and then you work to hand that business over to the group that’s going to lead the group is moving forward,” he said. “Well guess what, now I’m part of this group that’s going to push things forward!”

There’s another unexpected side to the home service franchise, one he learns from brands like Pestmaster, FlyFoe and Threshold’s latest acquisition, Sir Grout.

Reached at a conference in Las Vegas for pest control services, he said he had a new perspective when visiting the restroom. “Now I look at the grout. Oh my God, that grout is disgusting! he thought, illustrating on a micro level why the home service space is exploding.


Stellar’s Gary Findley

Exceptional home service offers in 2021

#1 Home Based Franchise Conceptsa subsidiary of JM Family Enterprises, in September added Two Maids & A Mop to its portfolio, which also includes Budget Blinds, Tailored Living, Concrete Craft, AdvantaClean, Kitchen Tune-Up and Bath Tune-Up.

#2 MidOcean Partners and its Lynx franchise platform in September invested in Outdoor Living Brands, adding Archadeck, Outdoor Lighting Perspectives and Conserva Irrigation to the family.

#3 Threshold markscreated in April as a platform for home service franchises and backed by The Riverside Company, bought Sir Grout in September, adding it to MaidPro, FlyFoe, Men In Kilts, Pestmaster Services, USA Insulation and Plumbing Heating Paramedics.

#4 Stellar Marks debuted in April as an umbrella company for Restoration 1, Bluefrog Plumbing + Drain and future acquisitions, and purchased The Driveway Co. MPK Equity Partners is the investor.

#5 Premium Service Brands in April attracted Susquehanna Private Capital as an investor, then acquired Grout Medic and House Doctors, among others. The company operates seven home service brands: 360° Painting, Maid Right, ProLift Garage Doors, Handyman Pro, Kitchen Wise, Rubbish Works and Renew Crew.

#6 Authority Marks in March bought DoodyCalls, its eighth brand addition since October 2018 and the company’s tenth brand in its home services portfolio. Others include: The Cleaning Authority, America’s Swimming Pool Company, Mosquito Squad, Monster Tree Service, and STOP Restoration.