FDD Talk 2021: 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 2021 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 2021 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 2018, 2019, and 2020, based on Item 20 of the company’s 2021 FDD

• Section V – Presentation and analysis of Property Management Inc.’s financial performance representations, based on Item 19 of the company’s 2021 FDD, including information on the:

• 2019 and 2020 average, median, high, and low income per door for eligible Property Management Inc. franchisees offering residential and/or commercial property management services, grouped by length of time in operation (more than 12 months and less than 3 years, more than 3 years, and more than 12 months)

• 2019 and 2020 average, median, high, and low income per unit for eligible Property Management Inc. franchisees offering association management services, grouped by length of time in operation (more than 12 months and less than 3 years, more than 3 years, and more than 12 months)

• 2019 and 2020 average, median, high, and low income per key for eligible Property Management Inc. franchisees offering short-term rental services, grouped by length of time in operation (more than 12 months and less than 3 years, more than 3 years, and more than 12 months)

• 2020 average number of units and income per unit (association), and average number of doors and income per door (residential) for Property Management Inc. corporate-owned franchises

Section I – Background Information

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

Crosses 300-Unit Milestone in Q1 of 2021

1.  In late May 2021, Property Management Inc. announced that it has continued its strong growth, closing out Q1 by crossing the 300-unit milestone. The brand added 9 new franchises to its system in the first quarter, opening new locations in Minnesota, Texas, and more. That’s in addition to the 67 new locations PMI added in 2020, a 31% increase over the previous year. Marianne Heder, director of Property Management Inc.’s new Short-Term Rentals Division, said, “We’re proud of our accomplishments during a difficult year. Our model is at the heart of our success as well as our franchisees’ success.”

2.  Founded in 2008 at the start of one of the most dramatic real estate downturns in United States history, part of PMI’s history of success can be attributed to its four-pillar model that allows franchisees to gain expertise in one area and expand into others if and when they’re ready. The company also offers franchisees the support of an expert team of franchisors and a large network of fellow franchisees.

3.  For Albany, New York-based Jeffrey O’Shea, who became a PMI franchisee in Q1 of 2021, PMI’s thorough training and support system has been invaluable. O’Shea said, “They’ve been great so far, and our business coach has been extremely helpful. Besides coaches, you have marketing managers, blog writers and hundreds of years of property management expertise at your fingertips. I can’t say enough great things about the people at PMI.”

4.  In 2021, PMI has plans to grow beyond just property management. By the second quarter of this year, the company will introduce a PMI brokerage service to give franchise owners better training, support, and systems to manage property listings. This will bring added value to PMI’s services because they can not only manage the property for an investor, but they can also help sell the property when the time comes. And now, after entering multiple new territories in 2020, from Minnesota to Maine and from Georgia to Texas, PMI has plans to make deeper inroads to markets across the country.

5.  Danessa Itaya, president of PMI, said, “Because of the way our franchise territories are crafted, we still have attractive territory in top tier development markets. We are entering a new, exciting phase this year as we cross the 300-unit mark milestone. We not only expect that trend to continue into Q2; we are forecasting another year of phenomenal growth for our brand and our franchise partners.”

Introduces New Management Software to Help Its Franchisees Succeed

6.  In early June 2021, Property Management Inc. introduced a new association management software called CINC – an all-in-one integrated banking, accounting, and association management solution that’s streamlining the process of property management and making operations more efficient and effective than ever before.

7.  Kent Grothe, a PMI franchisee in Northeast Atlanta, was the one who introduced the idea of integrating CINC’s software into the brand’s operations model. Now, he says the switch has been one of the more beneficial moves the franchise has made. According to Grothe, “We had a previous system, but it wasn’t a great set-up. It was functional, but it was expensive and not terribly efficient. I like [CINC]’s cloud-based design, it works really well. I went first and converted my business before other franchisees, and it was every bit as good as I thought it would be.”

8.  Grothe is excited about the multitude of benefits that CINC’s software provides to his business and franchisees across the board. From things as little as sending reminders to integrated banking technologies, CINC has simplified the management experience. He added, “Everything is integrated into a single system – all correspondence, violations and payments. And it’s all in one place. The automation gives you a more efficient customer experience. The system is doing a lot more remembering. It also makes my people more efficient. They can manage more communities with the same number of employees. And more efficiency means more profitability.”

9.  But CINC isn’t just supporting the franchisee experience, it’s also impressing clients, according to Grothe. “When you’re bringing clients on, you can show them this fully integrated platform, and they can see the reporting that it does. HOA boards really care about that kind of stuff,” said Grothe. “The old software didn’t really demonstrate that. Now I’m more than happy to show them how it works. It’s a serious selling point.”

10.  Grothe agrees that CINC is moving PMI and its franchisees in the right direction, and he’s hopeful those who are looking to invest in the brand will recognize CINC as a reason to sign on.

Company History

11.  Property Management Inc. was founded in 2008 by Steve Hart in Lehi, Utah. Hart created Property Management Inc. to offer a full real estate management program that services the residential, commercial, association management, and short-term vacation rental pillars of the property management industry. These services help ease the burden of property owners and allow them to enjoy their property investments.

12.  Before starting Property Management Inc., Hart worked in the real estate industry in land development, construction, and sales. He realized that the only stable sector in the real estate market is property management and he shifted gears in that direction.

13.  From the start, Hart launched a franchising program for Property Management Inc. Growth was strong and by 2018, the company had grown to 200 locations in the United States. To help fuel the growth of Property Management Inc., the company acquired a competitor, Book by Owner, and converted units into PMI franchises in 2018.

Entrepreneur’s Franchise 500

14.  Property Management Inc. ranked No. 265 on Entrepreneur’s 2021 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 2021 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 2021 FDD.

Section IV – Number of Franchised and Company-Owned Outlets

Franchised

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:  257
• Net Change:  +26

2020

• Outlets at the Start of the Year:  257
• Outlets at the End of the Year:  292
• Net Change:  +35

Company-Owned

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

2020

• 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, 2021 FDD) and Analysis

• As of December 31, 2019, Property Management Inc. had 259 franchised locations and as of December 31, 2020, it had 296 franchised locations (including company-owned outlets).

• Based upon data and information for the 2019 and 2020 calendar years, 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 full calendar year of both 2019 and 2020;

• Data from 36 franchises is not included in the 2019 data, and 9 franchises are not included in the 2020 data because the franchise either failed to provide Property Management Inc. with data or the data was incomplete or insufficient;

• There were 67 franchises for 2019 and 103 franchises for 2020 whose data related to Doors is 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 147 franchises for 2019 and 204 franchises for 2020 whose data related to Units is not included because the franchises did not manage any Units, were less than 12 months old, did not participate in the Association Pillar, or the data was incomplete or insufficient;

• There were 192 franchises for 2019 and 246 franchises for 2020 whose data related to Keys is not included because the franchises did not manage any Keys, were less than 12 months old, did not participate in the Short-Term Pillar, 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 and 2020 calendar years is 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.

• Company-owned outlets are reported separately in Part 4 and not included in Parts 1-3.

• In the month of April and May 2020, franchisees reported an average of 95% of rent collected, versus the standard 97% in previous and pre-COVID-19 months.

Part 1 – Residential and/or Commercial Property Management

• Part 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 for both 2019 (pre-COVID-19 year) and 2020.

• 156 franchised locations are included for 2019 and 184 for 2020. This represents 61% of the 257 franchised locations open as of year-end 2019 and 62% of the 294 franchised locations open as of year-end 2020.