FDD Talk 2020: Property Management Inc. Franchise Review (Financial Performance Analysis, Costs, Fees, and More)

In this FDD Talk post, you’ll learn the following:

• Section I – Background information on the Property Management Inc. franchise opportunity, including relevant news updates

• Section II – Estimated initial investment for a Property Management Inc. franchise, based on Item 7 of the company’s 2020 FDD

• Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for a Property Management Inc. franchise, based on Items 5 and 6 of the company’s 2020 FDD

• Section IV – Number of franchised and company-owned Property Management Inc. outlets at the start of the year and the end of the year for 2017, 2018, and 2019, based on Item 20 of the company’s 2020 FDD

• Section V – Presentation and analysis of Property Management Inc.’s financial performance representations, based on Item 19 of the company’s 2020 FDD, including information on the:

• 2019 average, median, high, and low annual income per door and annual door count for Property Management Inc. franchised locations at least 12 months old that offer residential and/or commercial property management services

• 2019 average, median, high, and low annual income per unit, annual income per association, and unit count for Property Management Inc. franchised locations at least 12 months old that offer association management services

• 2019 average, median, high, and low annual income per key and key count for Property Management Inc. franchised locations at least 12 months old that offer short-term rental management services

Section I – Background Information

23 Things You Need to Know About the Property Management Inc. Franchise

Announces Leadership Promotions at Annual Franchise Conference

1.  In late September 2019, Property Management Inc. promoted Danessa Itaya, formerly senior vice president, to the role of president. Itaya succeeds PMI co-founder Steve Hart, who has now been promoted to CEO. The announcements were made at PMI’s most recent annual franchise conference in September. The promotions will allow PMI to take the business to the next level. The real estate management brand is specifically looking to focus on larger projects, including forming national partnerships, with Hart at the helm.

2.  According to Hart, “I’ve been running PMI for 11 years, and the company just finally got to the point where we’re big enough where it’s important to think on a bigger scale. At PMI, we’ve been growing the franchise and selling franchises and helping those franchisees grow. Now we want to step outside of that path we’ve been on and think bigger picture. The PMI team loves Danessa and we know she’ll be great in the role of president.”

3.  In her new role, Itaya will oversee day-to-day operations, which will allow Hart to focus on projects related to the company’s vision and goals. “I think that, as a brand, we’re perfectly situated to be able to really divide off and have Steve focus more on the strategic piece and growing PMI and taking us to the next level,” Itaya said.

4.  PMI plans to help franchisees become more independent and provide them with the best resources possible to grow their businesses. “We’re a leader in our category, but we still have a lot of growing to do and so far to go. We are excited about the larger long-term vision and helping our franchisees grow every step of the way,” Hart said.

5.  Like Hart, Itaya is thrilled with what PMI is doing today and shares her vision about what the brand is capable of. Itaya added, “We’re 11 years old and have 275-plus franchises, so now we are at the perfect time to leverage that wide footprint and tap into national brands.”

Offering Strong Support to Franchisees During COVID-19 Crisis

6.  In late April 2020, as the COVID-19 pandemic continues, Property Management Inc. highlighted how the brand has continued to support its franchisees in these uncertain times. In addition to communicating often with franchisees, the biggest factor that Property Management Inc. prepared for was the inevitability of residential and commercial tenants being unable to pay their rent. However, according to brand president Danessa Itaya, there are already several elements working in the brand’s favor.

7.  Itaya said, “The great news is that banks are being proactive – they’re reaching out to property owners to talk about deferments and SBA lending options. There are so many resources available right now, which allows our franchisees and their property owners the opportunity to stay ahead of the game.”

8.  In addition to guiding franchisees on their finances, Property Management Inc. is actively taking steps to help franchisees diversify their portfolios. One of the biggest advantages that comes with being a Property Management Inc. franchisee is the fact that there are four pillars of the business: residential, commercial, association, and short-term rental. Now, franchisees have the opportunity to add an additional pillar to their business without an additional cost.

9.  “Normally, there’s a fee for franchisees who want to expand their business and break into another pillar, but we’ve waived that for now,” Itaya said. “If franchisees want to expand and pick up another type of business, we’ll offer virtual training to get them up and running as soon as possible.”

10.  That’s not the only form of financial relief that Property Management Inc. is providing its franchisees. The brand also gave every one of its franchise partners a $100 credit toward their April invoice. Some of the owners in Property Management Inc. are even taking this a step further and paying that money forward to others.

11.  “By the end of our Zoom conference when we announced this initiative, there were already larger, more established franchisees messaging us to say that they’d donate their $100 back to newer franchisees who need the help,” Itaya said. “It’s really been amazing to see the sense of community across our system. We truly are all in this together.”

12.  That strong sense of community is also evident through Property Management Inc.’s Franchise Advisory Council (FAC). Itaya added, “We recently had a call with our franchise advisory council to discuss what we can be doing to continue helping franchisees. We want to make sure we’re keeping franchisees engaged and our communications strong. During this crisis, we need to be transparent throughout the entire process. Together with our franchise advisory council, we’re creating clear processes and procedures to make sure we’re all on the same page and not wasting anyone’s time.”

13.  Despite the fact that Property Management Inc.’s FAC is newly formed, it’s already bringing a lot of value to the table. This includes giving franchisees the opportunity to collaborate and brainstorm ways to emerge stronger on the other side of the economic downturn. Itaya said, “One of the things the FAC wants to help us with is the coordination of national partners and vendors across our network. They’re checking in with franchisees to see if there are any partnerships that are being used locally that could turn into bigger relationships to help generate referral and lead sources.”

14.  As the coronavirus crisis continues to impact businesses and more information is made available, Property Management Inc. is committed to staying close to its franchisees in order to best position them for success on the other side of this when the economy levels out. “The most important thing right now is the health and wellbeing of our franchisees, their property owners and tenants,” Itaya said. “We’ll be with them every step of the way as the COVID-19 crisis continues to unfold, and we’re preparing to help them ramp back up as soon as it’s safe.”

Launches Webinar Series for Independent Property Management Business Owners on Common Industry Mistakes

15.  In late June 2020, Property Management Inc. announced that it would be holding a three-part webinar series to help independent property management business owners examine the top mistakes industry professionals make and how to overcome them. The webinars were scheduled to take place on July 1 at 1 p.m. ET, July 8 at 1 p.m. MT, and July 11 at 1 p.m. CT, and were hosted by Jamie Harris, executive director of conversions for Property Management Inc. The webinars dove into topics such as business mistakes, commingling funds, using security deposits to pay owner invoices, accounting, and more.

16.  Harris has been with PMI for five years and has worked with both franchisees who joined the brand via the traditional franchise route and those who already had property management businesses and converted to the PMI model. “I’ve seen some of the most common mistakes people make that can really put their business in jeopardy if they were audited,” Harris said. “I’ve also helped people become compliant throughout my career and help them pass their audits. I’ve never failed an audit. I can help business owners really identify what they’re doing wrong and help them grow from the experience.”

17.  When Harris joined the brand five years ago, she headed up the accounting department and helped develop a program called PMI Books. She noted that, often, franchisees are not accountants, so they run the risk of doing certain things incorrectly without the appropriate support or guidance.

18.  According to Harris, “For this reason, the leadership team developed a program called PMI Books, where we step in and take over the accounting for franchises when it is related to trust accounts and owner and tenant money. Essentially, it takes that particular workload off of the franchisees and allows them to focus on growing their business. Today, we have 20 full-time PMI Books employees who do the accounting for our 130 franchisees.”

19.  In addition to accounting support, other benefits for PMI franchisees include vendor negotiation support. The corporate team works directly with vendors and negotiates with them in order to ensure franchisees get the best possible rate. Thanks to the brand’s four pillars of business, PMI franchisees also benefit from multiple revenue streams, which can be a boon in any market during any economic climate.

20.  Harris has seen many success stories of business owners who switched to the PMI model. Harris noted that the brand even developed a system to help business owners convert their existing property management company software into that of PMI. “PMI can help business owners who convert with automation, processes and cutting costs while also helping them boost revenue,” Harris said. “The leadership team does this by studying how their existing business model works and what processes are in place and then giving them new processes to improve the business.”

Company History

21.  Property Management Inc. was founded in 2008 by Steve Hart in Lehi, Utah. Hart’s vision was to create the nation’s largest residential, commercial, and association management franchise network. Through his research and experience in the real estate industry in land development, construction, and sales, Hart learned that no matter what the real estate market is doing, the property management sector of the industry remains stable. With this in mind, he built the PMI model for a consistent revenue-generating property management business.

22.  Hart started franchising Property Management Inc. from the beginning and launched an aggressive national growth plan. By the following decade (2018), Property Management Inc. had grown to over 200 locations around the U.S. That same year, to fuel the company’s growth, Property Management Inc. acquired a competitor, Book by Owner, and converted units into PMI franchises.

Entrepreneur’s Franchise 500

23.  Property Management Inc. ranked No. 281 on Entrepreneur’s 2020 Franchise 500 list.

Section II – Estimated Costs

• Please click here for detailed estimates of Property Management Inc. franchise costs, based on Item 7 of the company’s 2020 FDD.

Section III – Initial Franchise Fee, Royalty Fee, Marketing Fee, and Other Fees

• Please click here for detailed information on Property Management Inc.’s initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2020 FDD.

Section IV – Number of Franchised and Company-Owned Outlets

Franchised

2017

• Outlets at the Start of the Year:  158
• Outlets at the End of the Year:  202
• Net Change:  +44

2018

• Outlets at the Start of the Year:  202
• Outlets at the End of the Year:  231
• Net Change:  +29

2019

• Outlets at the Start of the Year:  231
• Outlets at the End of the Year:  255
• Net Change:  +24

Company-Owned

2017

• Outlets at the Start of the Year:  2
• Outlets at the End of the Year:  1
• Net Change:  -1

2018

• Outlets at the Start of the Year:  1
• Outlets at the End of the Year:  2
• Net Change:  +1

2019

• Outlets at the Start of the Year:  2
• Outlets at the End of the Year:  2
• Net Change:  0

Section V – Financial Performance Representations (Item 19, 2020 FDD) and Analysis

• As of December 31, 2019, Property Management Inc. had 257 franchised locations (including company-owned outlets).

• Based upon data and information for the 2019 calendar year, Property Management Inc. has created the financial performance representations made in this Item 19, detailed in the tables below.

• The material bases for such representations are as follows:

• Property Management Inc. used only actual historical financial figures, provided from either (i) unaudited financial and operating reports submitted to it by its franchises or (ii) Property Management Inc.’s accounting software, for the month ending December 31, 2019, annual figures are annualized in this data;

• Data from 77 franchises was not included because the franchise either failed to provide Property Management Inc. with data or the data was incomplete or insufficient;

• There were 24 franchises whose data related to Doors was not included because the franchises did not manage any Doors, were less than 12 months old, or the data was incomplete or insufficient;

• There were 121 franchises whose data related to Units was not included because the franchises did not manage any Units, were less than 12 months old, or the data was incomplete or insufficient;

• There were 151 franchises whose data related to Keys was not included because the franchises did not manage any Keys, were less than 12 months old, or the data was incomplete or insufficient;

• Other than as listed above, the data from all franchises (including company-owned outlets) for the full 2019 calendar year was included in the financial representations made in this Item 19. The characteristics of the franchised locations included in the financial representations made in this Item 19 do not differ materially from the franchises that may be offered to prospective franchisees.

Part 1 – Residential and/or Commercial Property Management

• Table 1 shows the actual numbers for High-Average-Median-Low annual income (“income” meaning total revenue generated by franchisees (excluding company-owned) before any costs or expenses, i.e. royalty fees, advertising fees, etc. have been subtracted) per Door for eligible franchises that use Property Management Inc.’s accounting software or otherwise regularly report their financial and operational information.

• There are 154 franchised locations represented in Table 1 below. This represents 60% of the 257 franchised locations open as of year-end 2019.

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