Dwyer Group Sold to Private Equity Firm

Dina Dwyer-Owens and TZP's Sam Katz and officers, photo/dwyer

WACO, Texas. – Home services franchisor The Dwyer Group, Inc. is being bought out by New York-based private equity firm TZP Group LLC.

  Dwyer’s previous private investor,The Riverside Co., announced on Thursday that it has agreed to sell the franchisor of seven brands for approximately $150 million.  Based out of Waco, Texas, The Dwyer Group has 37 company-owned glass service stores and 1,500 franchised units. All account for nearly $800 million in annual system-wide revenues.

“The partnership with the Dwyer management lasted almost eight years and, during this time, the management-owners transformed the business in scale and capabilities; from the Board work, to the ultimate financial returns, to lifelong relationships we hope to retain with this very special team of executives. We feel very fortunate to have participated in this partnership,” said Riverside Principal Chip Walker. The Dwyer Group now represents seven brands: Aire Serv, Glass Doctor, The Grounds Guys, Mr. Appliance, Mr. Electric, Mr. Rooter and Rainbow International. Recently, Dwyer launched the Ground Guys lawn care brand.

Riverside’s outside director is the former chair of the International Franchise Association, a lobbying group that largely represents the interests of franchising firms. . After purchasing Dwyer in 2003, Riverside grew Dwyer’s existing auto glass business and grew the number of franchisees from 1,000 to over 1,500.

Dwyer-Owens echoed Walker’s remarks.

“We are thrilled about joining forces with TZP Group,” said Dina Dwyer-Owens, Chairwoman and CEO of The Dwyer Group and a second-generation franchisor. TZP has agreed to have Dwyer-Owens remain in place along with the entire executive team. Company officers, including brand presidents, will reacquire shares in the new business. “We’re incredibly proud of the job our team has done to grow The Dwyer Group year after year.  And the opportunity exists to do even more. TZP will be a strong partner and will be a big help in getting us to that next level.  Together we have ambitious goals for the support and expansion of our growing network, and the common interest to find complementary businesses to add to our franchise lineup.”

Dwyer CEO and Chairperson Dina Dwyer-Owens also has led the International Franchise Association. She was its chairwoman in 2009. 

That IFA connection was helpful for this deal. Sam Katz approached Michael Bidwell, COO of the Dwyer Group at an International Franchise Association multi-unit conference in the spring about a potential buyout. Dwyer-Owens was scheduled to speak at that conference but had to pull out at the last minute.

“We’re extremely excited to welcome The Dwyer Group to the TZP family and become involved with a group of franchisees and associates dedicated to a unique Code of Values,” said Sam Katz, managing partner of TZP Group LLC.  “As a leader in the service industry, The Dwyer Group’s brands complete over two million service calls a year and are well positioned for expansion.  Equally important to our investment philosophy and our support for growing companies, Dwyer’s executives remain fully committed to the business. Dwyer is the perfect complement to our portfolio.”

A spokesperson for the company said that the franchisor immediately notified franchisees when the definitive agreement to purchase the company and its brands had been finalized. A video from Dwyer-Owens and new owner Katz was sent out before press releases were provided to the public.

Managing Partners Stuart Baxter and Loren Schlachet worked with Walker on the transaction for Riverside, along with Vice President Scott Bogard. Harris Williams & Co. advised Riverside on the pending sale of Dwyer to TZP Group, Madison Capital was the agent for senior financing for TZP, and Madison Capital and Babson Capital provided senior and mezzanine financing, respectively, on the original transaction.  Jones Day provided legal counsel on the deal.

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"Buyout of America"

Above is example of the damage created by Private Equity firms on not only franchising but the economy both nationally and internationally is enormous.
What is Private Equity???
In a word, it's looting. Private Equity firms are looters, predators, symptoms of overly concentrated wealth. What they do is buy existing companies, sell off their assets and load them up with debt to make a quick profit. What they don't do is make things, create jobs or contribute to the "real" economy. The only thing they make is money for their owners and investors. This is something to keep in mind the next time you hear a Republican touting Mitt Romney's business experience.
I knew a little about PE firms from reading newspaper and magazine articles. I knew that Mitt made his fortune with a PE firm called Bain Capital. I remember reading in Road & Driver that a firm called Cerberus had taken Chrysler private and I had read about a conflict of interest issue involving a politically connected firm called the Carlyle Group. What I didn't have was an understanding of how Private Equity firms operate. So I read a book I will share what I found out.
The book I read was The Buyout of America: How Private Equity Will Cause the Next Great Credit Crisis by Josh Kosman, published in '09 by Penguin, NY. Mr. Kosman is a business reporter at the New York Post and has been covering the financial industry for 12 years. We'll get to that scary subtitle in a bit. First the basics.
It turns out that Private Equity is a new name for an old game: Leveraged Buyouts or LBOs. Remember those ? The most infamous was the buyout of RJR/Nabisco by Kohlberg Kravis Roberts (KKR) in 1989. This one is still No.4 on the list of the 10 biggest buyouts of all time. It inspired a book, Barbarians at the Gate: The Fall of RJR/ Nabisco by Bryon Burrough and John Helyar, and a movie with the same title. There was a boom in LBOs during the '80s set off by KKR's innovative exploitation of a tax loophole. Since interest paid on loans is deductible from corporate income taxes, the money that would have been paid in taxes could be used to pay off loans more rapidly. The financing for the 80s boom came from S&Ls and junk bonds.
Here's how they do it these days. The PE firm (or firms, they often team up) puts up some of its own money and then solicits investors in order to get up a fund. The investors could be anybody, individuals, banks or hedge funds. During the recent LBO boom it was mainly state pension funds looking for high returns after the dot.com bubble popped. The investors usually agree to invest for a period of time, not a set amount, and they can be required to put up more money if the firm needs it. Once they've got a fund together, they look for a company to buy out.

well yeah

"The only thing they make is money for their owners and investors."

Well yeah, that's the whole point of ya know, INVESTING money.

If you want to donate to charity, donate some of your investment profits.

<i>In a word, it's

<i>In a word, it's looting.</i>

Why don't you stop reading hyperbole books and try running  a business into something other than the ground?     Your comments are offensive to Capitalism as a whole and to every entreprenuer that bought  a non-performing company and righted the ship then sold it at a profit.     M&A that occur when you can gain market share and eliminate duplicate functions are overly beneficial, providing the labor can be productively employed elsewhere.

You know earleir this summer there was this 10 year old capitalist bastard selling lemonade down the street.  I bet that bastard marked-up the lemonade instead of selling it at cost.    We should do something about those rat kids and their lemonade stands too, right after we take care of there private equity bastards.


Unfettered greed is the best


Your comments are revealing.

It is my experience that contempt for self is often projected onto vulnerable populations du jour.

Good morning, Les. Fuwa's kid with lemonade stand model is

iconic in a free market society. The kid has no competition. There is not another kid two doors down undercutting his price or giving away cookies in order to move more lemonade. This is, however, not always typical of a free market situation.

In many free market situations, the business operator signed an agreement that limits her options about how the business can be run, sometimes even imposing requirements that no kid with good sense would ever adopt at his lemonade stand.

The lemonade stand kid gets his mom to pick up some lemonade mix packets while she is grocery shopping, along with maybe a lemon or two for the sake of appearances. His mom does not have to pay his dad a commission for the privilege of providing little Johnny or Jane with lemonade mix, so she does not have to pass on that surcharge to the stand operator. Since in most instances, the lemonade stand operator doesn't even pay mommy for the supplies, his gross revenue equals his net revenue. This makes the kid think he is John D. Rockefeller incarnate, and he carries such and similar notions with him to college where he takes up business administration.

He excels at college and goes to Dartmouth to get an MBA. He then goes to work for some large company until he is made redundant and sent off. Anxious for something constructive to do with his life, he recalls how fantastic he was at operating that lemonade stand. Since by then his mom and dad have passed on to their great reward, he turns for guidance to a fast food franchisor - say Quiznos, for example. At a franchise fair celebration he signs on the dotted line and goes home dreaming about being his own boss for a change.

You can substitute almost any other food franchise company for Quiznos and the story will develop along similar lines, some with less drama than others. I have a feeling that most of you already know the ending of this story, so I won't bore you with it.

Monopoly legal service provider opinion: Ex.Implicit

Richwa, (Fuhard?)

I had always wondered why Richard used two names. 

An argument built on a foundation myth called "the free market".

The best comedy writing in franchsing, bar none.

Speaking of two names, Les, your pal Seamus Muldoon just

published an article about Vladimir Putin that you might enjoy. It is on www.SeamusMuldoon.com

Mitt did not make his fortune at Bain Capital. He inherited his

fortune and was "provided" a position at Bain Capital with blessings from his father, former president of American Motors Corp and former governor of Michigan.

Left to his own devices, Mitt could not run a lemonade stand. He has never even had to go buy a toothbrush.

Private Equity and Franchising

@Fuwa and GB;

Pretty much guarantee that reading Josh Kosman's book will be an eye-opener on tactics.

You buy, and don't like it, then I will purchase it from you at 50% higher than the price you paid, including shipping to my office.

Will trust both of you to say that you didn't like it and not game the situation.

Michael: Appreciate the


Appreciate the sincere offer, but I am already familiar with the work.  And in the context only of bad actors I agree with  the commentary.  But the problem is and remains, just because nasty forms of private equity investment occurs does not mean all private equity investment is bad.   The model is simple enough.  It i s essentially what peopel do when they buy real estate, put 20-30% down and finace the rest.  If the price rises and they sell as a % the make off well on their equity using other people's money. So the principel is well established.  The issue is with the tactics related to teh spin-off no private equity in and of itself. 

I hope that is clear.

Fuwa, Michael

In Australia we have experienced a noticeable growth in the number of private equity investors. There is everything right with the principle I’m just not sure how many of the ‘spin-off no private equity in’ we can expect since franchising has the potential to be such a lucrative market.

What I’m wondering is if franchising attracts an abnormal level of private equity investors that maximize revenue through reduced franchisee margins or alternatively, short cut straight to franchisees to maximize franchisor bottom line.

Our recent experience with Allied Brands was not a great insight as those amateurs let the power testosterone get to them and the whole deal blew up in their face.

What I&rsquo;m wondering is

What I’m wondering is if franchising attracts an abnormal level of private equity investors that maximize revenue through reduced franchisee margins or alternatively, short cut straight to franchisees to maximize franchisor bottom line.

I can only offer you my opinion and experience.    In the past 2 years I was considering an option for Certified Investors that was a private equity LLC aimed at acquiring regional franchises for exactly the reason you slated.  I.E. there was money to shake out via the UFOC (at that time).   I stayed my hand for reasons of personal ethics, but I tell you, it is darn attractive.  People are stupid enough to enter these asinine, lopsided agreements, and the allure is pretty great.  Here is the reality.  With the Fed keeping interest rates artificially low, it is pretty easy to see the advantage to buying out company at a low rate when you can cover 3-8 times the interest simply by juicing the zees.  

So, my opinion is, you have it right.  Franchises are an attractive hunting ground.  For instance go take a look at the FDD for Smoothie King.    Reading it I hear, I am gonna sodomize you and your children, I am not going to use lube, you will like it, and you will thank me for it.    If you could figure a way to pick that up on the cheap, well only personal morality is the reason not to.    That FA is a license to BLANK the franchisee.   No wonder PE firms are examining franchises.

That aside, PE is the big current bogeyman.  Sure there is abuse but it would not happen if companies had responsible CFOs in the first place.   I still blame, as I always do, the SBA, to me they are the great Satan.  Average Joes with delusions of grandeur would not be getting fleeced if their Government was not helping the pillagers by giving out SBA backing to marginal to not viable concepts or minority set asides. 

Speak your mind Fuwa

Personally I predict many serious private equity investors refining the franchising process but more than likely we will see some copy cat would-be ultra capitalists embarrass themselves.  From that investor perspective perhaps it is either full steam ahead or watch out for the franchisees. They can be a real drag.

Either way I wonder how many franchisees will be drained and what that will cost anyone within reach and that taxpayer over there.

Fuwa, I know a lot of very successful business people who rarely make it to headline status but they have very nice parties. Fuwa; you must be as popular as dog poo on a shoe at really successful business people’s parties. You need to step up and lose the ethics. I’m sure Michael or Bob would agree ..

with one of us.

Fuwa Writes

Fuwa writes: "Appreciate the sincere offer, but I am already familiar with the work.

And in the context only of bad actors I agree with the commentary.

But the problem is and remains, just because nasty forms of private equity investment occurs does not mean all private equity investment is bad.

The model is simple enough.

It is essentially what people do when they buy real estate, put 20-30% down and finace the rest,  If the price rises and they sell as a % the make off well on their equity using other people's money.

So the principle is well established.

The issue is with the tactics related to the spin-off  and no private equity in and of itself."

I agree with this general point - but many franchisee leaders need to understand that when their franchisor is sold to private equity, those new owners are looking directly at the franchisees for "other people's money".

Many franchisees live in a dream world in which the purchase of their own franchisor is not relevant - why not demand that the assignability of those franchise contracts be subject to a franchisee vote?

Many franchisees live in a

Many franchisees live in a dream world in which the purchase of their own franchisor is not relevant - why not demand that the assignability of those franchise contracts be subject to a franchisee vote?

Now that I like, like very much. 

PE cakewalk cash grab

Hell yeah but over here we have struggled to just get the concept of good faith considered so I’m sure there would be a huge fighting fund to exclude franchisees from any vote.

In Australia we’ve seen what PE investors such as Allied Brands did for franchising and now Retail Food Group are heading toward similar relationship problems with franchisees for similar reasons. 

Lazard’s were sucked into Midas Aus only to find franchisees had already been drained from almost every angle by the previous investor franchisor. Franchisee also Krispy Kreme falls into the category of morons not doing their homework but these are only examples.

Governments get excited at the prospects for growth of PE investors in franchising but governments, like many PE investors, do not understand what makes franchising work. Selling franchises makes franchising work.

Most of what Michael points out regarding what PE investors look for in an investment suggests a seemingly understandable approach to increasing their return.

The problem I have here in Australia is that we are seeing some of these PE investors crash after wringing the lifeblood out of a brand and when they crash it isn’t just franchisees that get burned.

Many of these investors ignore the influence their strategies will have on network growth and franchisee turnover i.e. ‘selling franchises’. When franchisees are not realizing a worthwhile investment return then PE investors will absolutely have a problem replacing franchisees. In extreme cases we see brands implode to virtually zero value. The moron PE investor just doesn’t seem to appreciate the potential for failure.

We’ve seen them attempt to optimize short term revenue potential only to create dispute management hell and then lose in the long term when they acquire ex-franchisee assets that cannot be sold. Some of the questionable PE investors didn’t crash out entirely but they were unknowingly creating a ceiling and the initial revenue growth turned into a freefall and then a fire sale. Crikey; any franchisor can fail and we are seeing a growth trend in this country with more and more franchisors ending in ‘voluntary administration’.

These are the investors who don’t appreciate win/win balance as necessary to long term return but that seems to be at the heart of the real problem with a growing element of PE investors. Most PE investors do not have any interest in long term investing.

I cannot see much chance of reasonable treatment for franchisees with a PE operated franchise if the targeted return is set too high and too short but it would be a game man to tell any investor to be careful of heights.

Whatever the franchisee financial model that existed at signup if a PE investor becomes franchisor the financial model will not change for the better but it will change so how the hell does the novice prospective franchisee work out if their financial projections make a gamble worthwhile with any franchisor?.

It would help if no PE investor came into franchising believing it was just a cakewalk cash grab. Franchising’s simple formulae gets to be bloody hard work when a brand is attacked from within and that is where it gets real dangerous for a whole lot of people.

"Buyout of the world"

FuwaFuwaUsagi "Never underestimate the power of a stupid person in small numbers." .If you didn't have your head up your butt you would find the tremendous damage PI has worldwide. Tipically when they buy a company they don't care what they pay for it as they make big $ on the commission they receive from the purchase and then make additional commissions selling off any subsequent assets sales. The true looting is usually not mentioned. You must be a PI guy

Changes in ownership of franchisor companies

This is an interesting stream. While I admit to not understanding some of what is written by my peers, I'd like to comment on the issue of changes in franchisor ownership - where it started.

I have been concerned about this for some time from the point of view of organisational culture, defned as "how things are done in the organization". Most franchisees buy into a culture as much as a business - they enjoy the cammeraderie of peers and the sense of identity of being part of a brand that is respected in the community. As long as the business model works this is not niave - it's what makes for a great franchise system - respect for people and collaboration between people for the betterment of the brand and business.

Culture comes from top leadership. So when the leadership focus changes from a founder wanting to build something of worth to a private equity firm wanting to get a quick return on its capital, a previously healthy culture can quickly get annilated. What seems to matter most in the creation of a cuture is the person running things - their values and how they are remunerated. Making franchisee satisfaction ratings part of a leader's KPI remuneration measure is a useful tool for helping to keep a culture on track after a change in ownership. When the culture does go pear shaped the business quickly follows, as has been observed by others above. It's a topic deserving much more research and discussion.

Greg, welcome

Greg, welcome to the pier with the most visiting franchisees and ex-franchisees and some serious riff raff all ready to jump.

I absolutely agree on all points however I would add to your thoughts on satisfaction ratings where they seem to be one of the most sought after commodities in franchising.

The influences of satisfaction ratings on franchise sales are worth an investment and it often seems the highest bidder wins. It does seem those without a budget or those not prepared to re-invest either never get mentioned or they get dumped.

I agree in principle with satisfaction ratings.  I admit I have 'trust' issues but only superficial concerns because franchisors pay for virtually all franchising surveys?  I do like a franchisee satisfaction survey paid for by franchisees but the only one I've ever read came out of the US.

On culture I would just add that after many investor takeovers if they know what they are doing the bonding typically begins with about 10% of the network being softballed.

The quality of any ongoing or enhanced culture is typically determined by the time frame set by the investor franchisor.