Founding Partner Mike Esposito Sees Big Potential in the Home Services Industry
The investment firm Franchise Equity Partners (FEP) has acquired a franchisee owning three Precision Garage Door Service units. That franchisee group, called Rapp Operations, has been renamed to operate as Reliable Residential HoldCo. Reliable Residential HoldCo is made up of Precision Garage Door units in Clearwater, Fla.; Columbus, Ohio; and Oklahoma City. FEP will nurture expansion of Precision Garage Door in those states and in other U.S. cities, according to an FEP news release.
FEP has outlined a mission of building long-term partnerships with franchisees and franchisors. Precision Garage Door, which repairs and installs garage doors and garage door openers, is one of the 30-plus brands within the Neighborly franchisor portfolio. Franchise Times reported that under terms of the acquisition, FEP will open a Precision Garage Door location in Tulsa, Oklahoma.
Why Precision Garage Door?
Mike Esposito, founding partner of Franchise Equity Partners, sees a wide-open opportunity in home services. “More men and women are working so they have less time for home repairs, the same reason they’re eating out more and picking up prepared meals. As people get wealthier, they do these things,” Esposito said in a telephone interview with FranchiseWire.
Esposito also pointed out that “competition in home services is mainly mom-and-pop businesses.” Strong brand marketing by Neighborly and by local franchisees “keeps home services brands like Precision Garage Door present in people’s minds,” giving franchisees an advantage over mom-and-pops.
Precision Garage Door also benefits from being a recession-resistant brand, he said. “It’s not doing cosmetic repairs. These are functional repairs. Garage doors and openers today are complicated with computerization and seeing eyes as compared to 20 years ago when you just went out and pulled up the door manually. People have got to get to work, and they’ve got to get their cars out of the garage. Its services are a necessity.”
In the news release, Esposito stated that FEP will “partner with management at Reliable Residential and work with Neighborly to continue expanding the Precision Garage Door Service franchise. We look forward to supporting management and Neighborly as they implement a growth strategy that will help build the presence of Precision Garage Door Service and other Neighborly brands in attractive markets across the U.S.”
Esposito said FEP had studied the home services industry and Neighborly in particular before it decided to invest in Precision Garage Door, which has more than 100 locations across the United States. The home-services industry has “$350 billion in revenue… probably bigger than the fast-food sector,” Esposito, co-owner of three Jersey Mike’s locations in Massachusetts, told Franchise Times. “It’s an industry that is growing more quickly than the GDP.”
Neighborly Grew Precision Garage Door
Neighborly acquired Precision Garage Door in 2020, boosting its growth via the umbrella franchisor’s wide-ranging resources. The FEP news release praised Precision Garage Door Service as having a competitive advantage because of superior lead generation, technology, inventory, sales techniques and fast turnaround in serving customers.
Jon Shell, Neighborly’s interim CEO, said a core pillar of his company’s strategy “is finding the right owners for our brands to grow with us, and we’ve done just that with the FEP team. Its acquisition of our largest franchisee within one of our largest brands reaffirms the strength of our system and growth potential across our entire Neighborly portfolio.”
FEP’s Franchise Focus
Since New York City-based FEP was established in November 2021, it has made eight acquisitions including this one, which marks its entry in the home services industry. This acquisition aligns with FEP’s philosophy of providing capital and other resources to franchise operators so they can scale up and optimize efficiency.
“We like franchising as an economic model,” Esposito told FranchiseWire. “The brand does advertising and promoting, and the local operator has skin in the game and is following the model and killing it. Franchising is a large [economic] sector that’s under-penetrated by institutional capital. We take comfort in having a second set of eyes, the franchisor, on each franchise brand.
“We are diverse by design and focus on franchises. We like investing in restaurants, auto dealerships, heavy equipment, beverages (including beer) and a category we call ‘other.’ The ‘other’ category includes health-beauty-wellness, home services and restoration, veterinary practices, health clinics, sports, tax preparation, real estate and a whole lot of other things. We generally invest with a minority stake with families.” The Precision Garage Door acquisition is the firm’s first majority ownership transaction in franchising, according to Franchise Times, with previous investments including auto dealerships, Taco Bell franchises and the fitness space.
Staying the Course with Reliable Residential
Carlos Morales, president of the three Precision Garage Door units acquired by FEP, said that “FEP understands franchise businesses and the unique challenges and opportunities. We’ve set a solid foundation and now look forward to FEP’s partnership with management as we continue to grow the business.”
Esposito said FEP doesn’t plan to change leadership at Reliable Residential HoldCo because its three Precision Garage Door units were all performing well, Franchise Times reported. Tim Miller, a 20-plus-year veteran of the franchise services industry and former chief financial officer of TBC Corp., will serve as non-executive chairman of Reliable Residential.
What’s Next for FEP?
FEP may well be announcing more investments in franchises this year and in 2024. “We’ve got a very active pipeline of potential investments. Some are new and some are bolt-ons to investments we already have.”
And are Neighborly brands in that pipeline and likely to be among FEP’s future stakes? “We definitely hope to do more with Neighborly in our pipeline,” Esposito predicted.
About FEP and Neighborly
FEP, which has about two dozen employees, specializes in providing capital to franchise businesses and their owners. It has a $1 billion portfolio available for use in investing in companies and helping them prosper.
Neighborly has more than 5,000 franchises operating in six countries. It handles repairs, maintenance and other services for homes and businesses. Some of its brands include Dryer Vent Wizard, Five Star Painting, Molly Maid, Mosquito Joe, Mr. Appliance, Mr. Electric, Mr. Rooter, Rainbow International and Window Genie.