Multi-brand franchisors think strategically to maximize ROI
Grounds Guys, a landscaping and lawn care service brand, joined Neighborly in 2010 and has grown to more than 200 locations in the United States and Canada.
The home and outdoor services franchising sector continues to attract investors, resulting in a surge of acquisition activity that’s expected to continue.
“Private equity companies are beginning to realize that franchises can deliver a steady volume of recurring revenue, so things really came to a steam in 2018,” says Kevin Wilson, CEO of Buzz Franchise Brands, which has Pool Scouts and Home Clean Heroes under its umbrella.
Apax Partners, a large private equity firm, bought Authority Brands last fall and Neighborly (formerly Dwyer Group), a portfolio company of Harvest Partners, swallowed a few into its system as well, for a whopping 21 service brands under its belt.
While taking notice of all this recent movement, the trend itself was not a primary motivation for Home Franchise Concepts to expand its footprint in the sector, says CEO Shirin Behzadi. Starting with Budget Blinds 27 years ago, Home Franchise Concepts also now includes Tailored Living, Concrete Craft and AdvantaClean, its most recent buy. “We’re not just reacting to the marketplace,” says Behzadi. “We have put a lot of vision into our plan and we only partner with franchises that make sense to be under our umbrella.”
The unifying thread that weaves through Home Franchise Concepts’ companies is they’re all based on a design and consultation approach.
The company created brand bios for each of its concepts to ensure a uniform voice and decided that a rebranding was called for. Tailored Living, for example, started off by merging Closet Tailors and Premier Garage, both focused on organization, into one broader franchise bringing the same level of organization to the home. Similarly, All American Decorative Concrete morphed into HFC’s Concrete Craft after some branding exercises.
The lesson for HFC from such growth was not just about rebranding, Behzadi says. “Every one of our franchises has its own unique requirements because each one is in a different stage in the lifespan of a franchising system, so the lesson for us was to identify those and execute on strategic plans for each.”
Chris Grandpre, CEO of Outdoor Living Brands, understands this adjustment period well. The company went through a reboot with two of its four franchises: Renew Crew and Conserva Irrigation.
Renew Crew started out as Wood Renew before being bought by Outdoor Living Brands, which looked to broaden its service offering because simply sticking to wood limited the franchise’s impact.
“The strategy we needed was to dramatically increase top-line offerings so that franchisees were able to generate greater ROI on their investment to launch the business,” Grandpre says. The takeaway: cleaning a variety of exterior surfaces, instead of just the wood deck, was the way to go.
Outdoor Living later seeded the concept for Conserva Irrigation with a few early adopters in Minneapolis who had a background in commercial irrigation. The company started small with the intention of franchising in the long term and after the pilot showed success, officially made Conserva a franchise. The early testers had their franchise fees waived, and per the pilot license agreements would have the right to convert the business to a Conserva irrigation franchise. Grandpre says such a test drive helped Outdoor Living figure out the viability of a franchise, measuring metrics such as unit economics and ROI.
Pool Scouts is under the Buzz Franchise Brands flag, along with Home Clean Heroes.
An adjustment period in the wake of an acquisition is to be expected and maybe even a healthy bit of rivalry between brands. Grandpre says bruised egos were kept to a minimum by keeping all processes transparent, especially with Wood Renew. “We explained our vision and how it would involve massive changes to the business model, to the brand name, advertising, technology platform,” he says, admitting it was a difficult process, but worth it. “You’re essentially changing human behavior and we’re asking a franchise system that invested in a business focused on the cleaning and sealing of wood to fundamentally change their business.
Changing that management aspect and figuring out the field operational procedures is the hardest part of it all.”
Outdoor Living also had brand management relocate to headquarters in Richmond, Virginia, which led to some loss of talent but the move was necessary to preserve the company culture, Grandpre says.
Challenges can present themselves in other ways. In Neighborly’s case, does having 21 different franchises under one umbrella have each vying for the parent’s attention? Not really, says CEO Mike Bidwell. “We put a brand president in charge of each brand and they make sure they are fully committed to operating that business with the care it deserves and ensuring franchisee growth,” he says.
Neighborly is working on its online platform, www.getneighborly.com, whereby franchise brands under its umbrella can stand to gain from referrals from each other.
While this might work for franchises with mutually exclusive concepts, it has the potential to lead to conflict when concepts compete for the same piece of pie.
“We don’t have an overlap between our core verticals, but in the case of fringe services,” such as appliance and plumbing repair, “there might be a little, in which case we educate our franchisees that there’s a long-term collective benefit for this initiative for everyone,” Bidwell says.
The growth potential
While challenges develop initially, the advantages in an acquisition are many. One of the biggest lies in the economies of scale, HFC’s Behzadi says.
“Every marketing initiative, technology, product placement and positioning, internal systems, we have worked on tailoring these to each brand while still keeping it all brand-agnostic,” she says. HFC has worked for three years on a complete overhaul of internal processes to make them seamless and scalable. This positions the company to execute an effective rinse-and-repeat for each new acquisition in the future, a prospect Behzadi does not rule out.
“Our guiding principle is making sure our franchisees are as successful as they want to be,” Behzadi says. “At the same time, our goal is to acquire additional brands that would work with our existing ones in a synergistic way to help lift all of them across the board.”