Strategic Shift for Neighborly as Private Equity Money Flows to Franchisee Level
For Neighborly, 2023 will be remembered as a year of both historic milestones and tragedy. The largest home services franchise platform surpassed $4 billion in systemwide sales and 5,500 franchises globally last year.
NEW YORK, March 6, 2024 /Franchise Times/ -- Neighborly, which owns more than 30 brands and sold a company record 468 franchises in 2023, also lost its longtime leader. Mike Bidwell, who served as president and CEO of the umbrella company since 2014 and led the brand through its rebrand from Dwyer Group to Neighborly in 2017 and the acquisition by KKR & Company in 2021, died in September at the age of 65 after a fall at his home.
Interim CEO Jon Shell said Bidwell would’ve been proud to see how the organization rallied and worked with franchisees to secure five significant deals with private equity firms. Investments by Eagle Merchant Partners, Franchise Equity Partners, CPC, SBJ Capital and Main Post Partners into multi-unit operators of Mr. Rooter, Mr. Electric and Precision Garage Door Service totaled more than $400 million, the company said.
The private equity money that poured into the system represented a new strategy for Neighborly. Up until 2022, the Waco, Texas-based company mostly steered away from outside investors entering at the franchisee level.
“It was probably 18 months ago that we started thinking differently about private equity and the opportunity of looking at private equity in a whole new light, as an exit strategy for some of our larger-scale operators,” Neighborly Chief Development Officer Brad Stevenson said.
“We thought long and hard about what the benefits would be, not just for Neighborly, but also for our end users, the customers, and for our franchise partners,” he said.
Stevenson pointed out Neighborly and its franchisees had a lot of success growing the home services platform without private equity firms. He said the executive team eventually warmed up to the investment strategy after “understanding that these new partnerships were going to be able to help feed that success even more” and allow the company to grow its brands faster and smarter, he said.
“There’s a lot of interest in home services. It’s an incredibly hot sector,” Stevenson said. “But, at the same time, we’re going to remain very purposeful of what private equity firms we partner with. We need to know that they understand franchising, that they align with our company principles and that they can help take us to the next level at the unit level. It really has to be a culture fit for us.”
Stevenson also said while it’s too early to measure the success of the new private equity partnerships franchisees signed last year, he pointed out, “We are seeing all our new partners making early investments to drive growth,” including hiring additional technicians to increase capacity and depth of coverage in the marketplace.
He also noted the new private equity partners are investing in leadership hires and company structure, with some franchisees creating new chief financial, marketing and human resources roles in their organizations.
“Each group has added de novo markets and filling in available white space, which is driving new customers acquisition,” also making “significant incremental investment in local and digital marketing to drive customer lead flow,” Stevenson later said in an email.
Neighborly’s noteworthy developments in 2023 went beyond its private equity deals. Stevenson pointed to the latest version of the Neighborly App, aimed at providing customers with a frictionless experience beyond big search platforms by making it easier to find and schedule services specific to their needs. He said the addition of new brands such as Junk King, which it acquired in 2022, will create more cross-branding opportunities and drive more leads for franchisees.
He also highlighted the accelerated adoption of new recruiting and retention platforms, new partnerships and tools for franchise owners, and the brand refresh for Window Genie.
