The pandemic decimated many retail, restaurant and hotel service businesses, but for some, covid-19 has catapulted growth.
In early April, PE-backed Restoration 1 started receiving calls to disinfect police departments, hospitals, management companies and grocery stores. While traditionally focused on providing emergency services such as sewer cleanup, pipe repairs and fire, water and mold damage, the home services company pivoted – adding cleaning services to the list.
“We created the Keep It Clean program,” said Gary Findley, CEO of Restoration 1 and sister company bluefrog Plumbing + Drain. The program aimed to bring uniformity in the operations of almost 300 Restoration 1 franchises that were using different cleaning methods, products and protocols.
“We had Zoom calls and emails on what you need to do when you are asked to do covid cleaning from wipe-downs to the fogging machine,” Findley said, pointing to the best practices suggested by the Centers for Disease Control and Prevention and the World Health Organization.
Restoration 1, a property restoration company, and its sister brand bluefrog, a plumbing franchise, were acquired by MPK Equity Partners this April. The investment was made alongside Suzanne Perot McGee Family, a family investment office, and Mays Family. The three entities together hold a 98 percent stake and Findley is an investor.
Part of what attracted the Dallas, Texas, PE firm was the essential nature of the business.
“We do fire, water and mold repair and those are things that happen every day,” Findley said. “A pipe break is not an appointment; these things are usually emergencies,” said Findley, whose Waco, Texas, home was flooded earlier this year after a sink tap was left on for days.
All steam ahead
All but a couple of Maryland-based Restoration 1 franchises operated through covid-19. From a business standpoint, the company remains an unintended beneficiary of hurricanes and natural disasters across the nation, said MPK’s co-founder Patrick McGee.
In 2020, “we expect Restoration 1 to add 40 to 50 [franchise] locations,” Findley said. Systemwide sales are estimated to hit $110 million this year, up from $85 million in 2019.
According to Findley, investment for a Restoration 1 franchise ranges from $84,500 to $193,125, including the franchise fee of about $54,900.
Besides growing the number of franchises, the group of investors also intends to “aggressively go out and acquire some other home services businesses,” McGee said.
To support those plans, the investor added, “we are now creating a holding company, which will acquire other brands in the home services space.” The holding company will include the existing Restoration 1 and Blue Frog franchises among the new targets.
The franchise model is also attractive because operators typically embody a feeling of ownership, explained McGee. “Lots of mom-and-pop store employees want to be their own bosses,” McGee said. “Some of them have been laid off or faced reduction in salaries; we want to have brands where we can place these new entrepreneurs.”
The broader holding company aims to place entrepreneurs in the new franchise location of brands acquired.
For example, “Gary [Findley] has a relationship with other entrepreneurs that need help growing from 5 to 10 locations to 300 location brands,” explained McGee.
The target investment size for additional brands will likely fall between $5 million and $25 million in enterprise value, although McGee said there is no real upper limit.
The existing investors are in conversation with other founders and aim to close a couple of deals by the end of this year. The holding company’s name is being withheld for trademark reasons.
Action Item: Check out the deal story spotlighting Restoration 1’s acquisition.
Correction: This report was updated with a more accurate figure for the company’s franchise fee and clarifies that Suzanne Perot McGee Family is a family office.