In this FDD Talk post, you’ll learn the following:
- Section I – Background information on the HouseMaster franchise opportunity, including relevant news updates
- Section II – Estimated initial investment for a HouseMaster 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 HouseMaster franchise, based on Items 5 and 6 of the company’s 2020 FDD
- Section IV – Number of franchised and company-owned HouseMaster 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 HouseMaster’s financial performance representations, based on Item 19 of the company’s 2020 FDD, including information on the:
- 2019 average, median, highest, and lowest gross sales for the (i) 55 HouseMaster franchisees operating a single franchised business; (ii) 27 HouseMaster franchisees operating two franchised businesses; (iii) 10 HouseMaster franchisees operating three franchised businesses; (iv) 4 HouseMaster franchisees operating four franchised businesses; and (v) 7 HouseMaster franchisees operating five to eight franchised businesses (collectively, the “Reporting Franchisees”), operating a total of 199 franchised businesses
Section I – Background Information
17 Things You Need to Know About the HouseMaster Home Inspections Franchise
Acquired by Neighborly
1. At the beginning of June 2020, Neighborly, the world’s largest franchisor of home services brands, announced the acquisition of HouseMaster Home Inspections, a professional home inspection franchise headquartered in Somerville, N.J. The addition becomes the 25th brand under the Neighborly umbrella and officially expands the organization to more than 4,000 franchise owners around the world.
2. “Our vision is to ‘Own the Home’ and provide the very best services to homeowners, and this now includes HouseMaster’s premier home inspection network with a stellar reputation that more customers can call upon,” said Mike Bidwell, president and CEO of Neighborly. “HouseMaster is a perfect complement to our existing Neighborly brands and presents a tremendous opportunity to grow more franchise locations.”
3. Now as part of Neighborly, the brand that pioneered the home inspection business will operate alongside Neighborly’s many home service brands that repair, maintain, and enhance the home. The combined reach that results from this acquisition will continue to help more than 10 million customers across the Neighborly organization find and utilize the best home service professionals in the world.
4. Kathleen Austin Kuhn, president of HouseMaster and a charter member of the American Home Inspection Association (AHIA), said, “Having grown up in this business, I recognize that joining the larger Neighborly organization marks a historic moment for HouseMaster as a launching point for growth like we’ve never seen before. We look forward to expanding our presence, serving more customers by being all things Neighborly to residential and commercial real estate buyers and sellers.”
Launches Financing Program
5. At the end of October 2020, HouseMaster Home Inspections announced that it was offering up to 50 percent financing toward its initial franchise fee for the first time in company history. The company is looking to grow rapidly in several key markets, with major growth opportunities in San Diego, Portland, Houston, Las Vegas, and Salt Lake City. These expansion plans and the attractive financing offer position HouseMaster to add to the 325-plus markets it currently services. For as little as $20,000, a new franchisee can qualify for financing, leaving more capital to help launch the business.
6. In addition to financing offered by HM Services, LLC, the parent company of HouseMaster, HouseMaster partners with Benetrends, a leader in 401K rollovers and SBA loans with a full suite of small business funding products. Benetrends also offers financing to HouseMaster’s sister company PatchMaster, a drywall specialty repair franchise.
7. According to Kathleen Kuhn, president and CEO of HouseMaster, “We are proud to have the highest average gross sales of any franchise company in the home inspection industry as documented in our Franchise Disclosure Document. We have proven our system works when the right candidate follows our system. These new financing options will bring our opportunity to even more of those candidates.”
8. “A home inspection business can be an excellent opportunity for anyone looking to start a home-based business, or who has an interest in houses or real estate,” Kuhn added. “It is a great investment that can be both financially and personally rewarding.”
Making Use of Technology in Home Inspections During COVID-19 Pandemic
9. April is National Home Inspection month, and in 2020 the industry saw shifts in ways home inspections are conducted. With the COVID-19 threat facing everyone, industries including the home inspection industry are adapting to reduce the spread of the virus while still serving their communities. HouseMaster, the first and original national home inspection organization with franchises throughout North America, has been on the frontlines as its offices adjust in the areas where they are permitted to continue to operate.
10. HouseMaster President and CEO Kathleen Kuhn, a 35-year veteran of the industry, said, “Our number one priority is to help keep our families and our communities safe. Fortunately, a home inspection does not require face-to-face contact. Prior to the pandemic, we would encourage buyers to participate in the home inspection process to help them better understand the condition of the home. Today, for the most part we are going solo. If the home is not vacant, we ask home sellers to stay secluded in a part of the home away from the inspector. Our inspectors are taking care to follow all CDC and Health Canada recommendations.”
11. In addition to conducting a home inspection without any attendees, HouseMaster is using technology to assist real estate professionals and their customers in a number of ways, including:
- Virtual Report Reviews: Inspectors are offering customers the ability to review the report findings either by video conferencing or phone to ensure customers get all their questions addressed. Some inspectors are even offering to check in with customers via video while on the inspection to explain different findings.
- Online Report Deliveries: HouseMaster franchisees distribute their inspection reports through the company’s proprietary home maintenance portal, the HouseMaster Cloud. Both customers and real estate professionals have access to the final inspection report, which includes detailed digital images and videos allowing all parties to keep the deal moving along without any face-to-face interaction.
- Repair List Generators: To further keep the process moving along, customers can create a list of repairs they request the seller fix. They can collaborate on this list with their agents online and distribute the list directly from their HouseMaster Cloud account to the appropriate parties.
12. Kuhn added, “In our more than 40 years franchising, we’ve witnessed economic downturns, natural disasters and major events that test all of us. I’m amazed by and grateful for the resilience and attitude of our franchise owners. Through these tough times, we always come out stronger as a community.”
13. Ken Austin, the founder of HouseMaster Home Inspections, became an independent home inspector in 1971 after he saw an ad for a company attempting to launch a home inspection franchise system nationwide. At the time, home inspection services were new and pretty much unheard of, but Austin felt that it was something that would gain momentum. Austin launched AMC Property Evaluations, Inc. in Central New Jersey and grew the business to a large multi-inspector firm serving the tri-state area – this was the beginning of HouseMaster Home Inspections.
14. In 1976, Austin saw the need for the fledgling home inspection industry to create unifying standards and a clear scope of services. He contacted the few other home inspection companies in existence and suggested they meet to form an industry association. Austin and the other home inspection companies started the American Society of Home Inspectors (ASHI), which was the first industry organization to set standards for home inspectors.
15. As Austin’s business continued to grow, he created HouseMaster Home Inspections in 1979 to franchise his home inspection business. Over the next few decades, HouseMaster continued to grow around the United States. HouseMaster and Austin continued to act as leaders in the home inspection industry and implemented what are now standard practices, including formalizing training procedures for home inspectors; starting The National Institute of Building Inspectors school; and introducing the concept of pre-inspections before home owners put their homes on the market or accept an offer.
16. In 2020, HouseMaster was acquired by Neighborly. Today, HouseMaster Home Inspections has locations all across the United States and Canada.
Entrepreneur’s Franchise 500
17. HouseMaster Home Inspections ranked No. 464 on Entrepreneur’s 2021 Franchise 500 list.
Section II – Estimated Costs
- Please click here for detailed estimates of HouseMaster 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 HouseMaster’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
- Outlets at the Start of the Year: 278
- Outlets at the End of the Year: 260
- Net Change: -18
- Outlets at the Start of the Year: 260
- Outlets at the End of the Year: 265
- Net Change: +5
- Outlets at the Start of the Year: 265
- Outlets at the End of the Year: 272
- Net Change: +7
- Outlets at the Start of the Year: 5
- Outlets at the End of the Year: 6
- Net Change: +1
- Outlets at the Start of the Year: 6
- Outlets at the End of the Year: 6
- Net Change: 0
- Outlets at the Start of the Year: 6
- Outlets at the End of the Year: 6
- Net Change: 0
Section V – Financial Performance Representations (Item 19, 2020 FDD) and Analysis
- The sales figures listed below are average and median data derived from historical operating results of the HouseMaster franchised businesses indicated for the time periods covered.
- HouseMaster obtained these sales figures from information provided to it by its franchisees for the period from January 1, 2019 through December 31, 2019 (the “2019 Reporting Period”).
- Neither HouseMaster nor its independent certified public accountants have audited or verified any of the sales figures reported to it. Franchisees are not required to use generally accepted accounting principles when reporting these figures.
- All of the businesses for which sales results are reported below were operated by franchisees. All of the franchised businesses are comparable to the franchised businesses offered by the disclosure document and offered substantially the same services to the public.
- As of December 31, 2019, HouseMaster had 272 franchised businesses in operation in the United States. This Item 19 includes data from 199 businesses (operated by a total of 103 franchisees) which were all in operation and reporting sales for the entire 2019 Reporting Period (the “2019 Reporting Businesses”).
- The information provided in Item 19 does not include data from 13 franchised businesses (operated by a total of 7 franchisees) that opened during the year 2019 and therefore were not in operation for the entire 2019 Reporting Period. In addition, 49 franchised businesses are excluded from this Item 19 because they did not report data to HouseMaster for the entire 2019 Reporting Period.
- Six franchised businesses closed in 2019 and therefore their data is also excluded from this Item 19. Of the six businesses that closed during the year 2019, zero businesses closed after being open for less than 12 months.
- Excluded from this Item 19 is data reported by 11 franchised businesses (operated by a total of 7 franchisees) that were granted exclusive territory rights (referred to as either a Limited Area Franchise Territory or a Reciprocal Opportunity Franchise Territory). HouseMaster no longer grants any exclusive territory rights.
- Because HouseMaster franchisees have historically reported data to HouseMaster aggregated by franchisee (rather than by a franchised business) and a number of HouseMaster franchisees operate multiple HouseMaster franchised businesses, HouseMaster has separated the data reported in this Item 19 by the number of franchised businesses that the franchisees own – i.e., separately showing average and median data for franchisees that own one franchised business/unit, franchisees that own two franchised businesses/units, franchisees that own three franchised businesses/units, franchisees that own four franchised businesses/units, and franchisees that own five to eight franchised businesses.
- No adjustments, including adjustments for geographic location, have been made to these reported sales. This report does not include information about previous periods or any future periods.
- Also, because these are Gross Sales results only, no costs or expenses are taken into account.
- Some outlets have earned this amount. Your individual results may differ. There is no assurance you will earn as much.
- “Gross Sales” means the total revenues and receipts from whatever source (whether in the form of cash, credit, agreement to pay, barter, trade, or other consideration) that arise, directly or indirectly, from the operation of – or in connection with – your Business whether under any of the Marks or otherwise.
- Gross Sales exclude sales taxes collected from customers and paid to the appropriate taxing authority and any other bona fide refunds, rebates, or discounts that HouseMaster authorizes in writing.
- Gross Sales also exclude sales from any Excluded Services (as defined in a mutually executed Excluded Services Addendum).
Average and Median Gross Sales for Franchised Businesses for the Period January 1, 2019 to December 31, 2019 (2019 Reporting Period)
- This table shows separately the average and median annual Gross Sales data for the 2019 Reporting Period for (i) 55 franchisees operating a single franchised business; (ii) 27 franchisees operating two franchised businesses; (iii) 10 franchisees operating three franchised businesses; (iv) 4 franchisees operating four franchised businesses; and (v) 7 franchisees operating five to eight franchised businesses (collectively, the “Reporting Franchisees”), operating a total of 199 franchised businesses.
Single-Unit Franchisees Group