Patrick: Patrick Findaro here, co-founder at Vetted Biz. Today, I’m very excited to have Dan Glaser as well as Mark Elson, both executives at HouseMaster Home Inspection. They’re the market leader in this industry. They’ve been at it for 42 years. Cut that. For 42 years, HouseMasters has been leading the home inspection business with over 300 locations throughout the United States. So today we’re going to have a conversation with Dan and Mark to go over this industry as a whole and the home inspection business, as well as the HouseMaster brand, key insights for those that might want to be a franchisee or those that are just looking to get into the home inspection industry at large. Mark and Dan, thanks so much for joining today.
Mark: Thank you, Patrick. Really appreciate you having us here today.
Dan: Yeah. Thanks, Patrick.
Patrick: Maybe we could start with how you two entered in the home inspection or even just the franchising industry at large.
Mark: Dan, why don’t you lead that off?
Dan: Sure. Yeah. So, Dan Glaser, I’m the vice president of franchise development at Neighborly, which is actually the parent company of HouseMaster Home Inspection. So Neighborly brands is a collective group of home service franchise companies. Neighborly has been in business almost as long as HouseMaster, not quite. We’ve been in business. This is our 40th anniversary this year. We started in 1979. Started franchising in ’81 officially, but Neighborly now has 17 brands domestically in North America, almost 30 if you include all of our international companies. Mark and I just sat through a company-wide meeting yesterday where we found out we are no longer a $2.8 billion company. We’ve just crossed the $3 billion mark as an organization. We just hired our 1000th corporate employee on staff last year. And we own brands like HouseMaster Home Inspection, Mr. Rooter Plumbing, Molly Maid, Mr. Handyman, and 17 other brands that are all in the home service space. So when I came to Neighborly 14 and a half years ago, we had 6 or 7 brands back then and we’ve grown in those years to the suite of companies that we have today. So that’s a little bit about my background and kind of how HouseMaster fits into the overall Neighborly concept.
Patrick: And how about you, Mark?
Mark: Yeah. Thanks for asking. So I’ve spent a career in franchising. Started out as a franchisee, became a franchisor. Worked with dozens of different brands and systems in different coaching models that I’ve been able to work through. But I sort of developed a passion for home service industries. And as I looked at this industry, I started to see that the ongoing need for home services, the simplicity of the service models were really appealing, and so I sort of sought a brand that I could get excited about and I found HouseMaster which because of its success rate, because of its longevity, because of its simplicity was really appealing to me just to be in there as an owner even. But I had the opportunity to join as the director of development, and I have been here for quite some time. Found a home and happy to be at the organization with both HouseMaster and Neighborly.
Patrick: What initially picked your interest, Mark, in the home inspection business?
Mark: So, you know, a home inspection is one of those things that’s always needed. It’s just a very consistent business.
About 85% of homes that trade hands privately are going to get a home inspection.
And so we talk about sellers’ markets, buyers’ markets, but in both of those, houses sell and we get a home inspection. The other thing that I found appealing is just this is an industry that tends to be pretty fragmented. It’s still really dominated by a guy with a truck… And not to knock guy with a truck. Some of those guys are super talented.
Patrick: Guy with a truck can be full of capacity, and what does he do with those leads? Hey, we’ll do the inspection in 45 days.
Mark: That’s for sure. They get booked up. And, you know, the other thing about a guy with a truck, usually people who get into this as a guy with a truck, they do it because they are super talented at construction, you know. They did wallboard for 26 years. Their shoulders get sore. They become a home inspector. And that’s great, you know. They know their way around a house, but it’s hard to compete, you know. It’s hard to compete with a company like HouseMaster that has a full-time marketing department, an IT team, 42 years of systems and processes. We’ve had the opportunity to try things, figure out what works and deliver that, you know, and so becoming a home inspector tomorrow as a guy with a truck, it becomes a little bit hard to compete with our momentum.
Patrick: I used to work at JP Morgan right out of college and I know that we were doing some jumbo mortgages, and I think there were, like, very few home inspectors that you could call to basically that were like on the list. I imagine that benefits HouseMaster where there are some providers at your preferred home inspector and it’s just a lot easier getting jobs booked.
Mark: Well, so the name recognition, for sure. You know, we do some things that are a little unique in the industry. We’ve really taken a look at what people who are buying a home need, and the weird thing we learned after doing this for a long time is that it’s not a home inspection. And that sounds a little counterintuitive, but what it is…
…what they need is that feeling of confidence in the home, the understanding of what it is that they’re buying and getting into.
It’s a really stressful time buying a home, and most of our competition, you know, kind of goes, “Hey, I’m Bob,” and they start checking outlets and flushing toilets, but we want to slow that process down. We want to sit down with them. And so, you know, by slowing that process down and giving them a feeling of confidence and comfort, we relate very well to the entire buying process, realtors, referrals. So exactly what you’re saying, Patrick. We get on the list of referrals more often than really our competition. Because we get on that list of referrals, you know, we do tend to get the calls. So, yes, absolutely. It’s nice to be a company.
Patrick: So in terms of how a franchisee gets leads, gets sales, it’s a lot of referrals from realtors. Are there any other primary referral sources?
Mark: For sure. So as a company, as HouseMaster and Neighborly, we’re going to build out their website. That website gets the huge search engine optimization treatment. It’s going to get a pay per click campaign that’s going to drive leads directly into a franchisee’s calendar right into their scheduling system. We have a scrappy little PR firm that’s going to get impressed anywhere they can find it. And then we also do social media. So our group will get out there and push new content out for our franchisees. So they always have kind of fresh content on all the major platforms. And then we do some tricks that are beyond my comprehension that put it in front of realtors and out in front of end-users. And then, of course, you know, for folks who are good at social media, they do more.
We can buy leads directly. We have some really strong relationships with vendors that will have direct leads that they can just, you know, go, “Hey, I’m a little light tomorrow on home inspections. Let me just buy a couple of those leads.” But you’re right, Patrick, most of this stuff is a referral. Real estate professionals refer us, realtors refer us. And so part of what we need to do is build relationships with realtors, to be out there and shaking hands and getting to know realtors.
Patrick: Yeah. I mean, you could add just one realtor that gives you like 50 home inspections a year.
Mark: It’s true. And that one realtor, they’ll not only give us the 50 home inspections, they’re going to drag us into their office. We’ll do a lunch and learn. All the other realtors in that office start to use us. One of those realtors goes to another office then that office uses us and it just exponentially grows. The flywheel starts to spin. And we have seen that time and time again.
Patrick: So there’s a guy with the truck, and then on the other side of the spectrum is there like a publicly-traded company that’s like all corporate and not franchise-owned that’s also doing this?
Mark: The closest thing to it is us. I mean, we do have other organized competitions out there. There are other franchises also that we compete with, and, you know, some good competition, but most home inspections are still actually done by that guy with a truck. And that for us coming into a new market allows us to grab little chunks of market share, you know, pretty quickly and build that business up. There isn’t like the corporate company that does home inspections. It’s us.
Patrick: So you mentioned the contractor that may be throughout his back and he understands the home construction space, contracting space and he’s moving into home inspection, but someone that has no experience in this space, like, what are you looking for? What’s a successful franchisee’s background? Do they come from the industry or outside the industry?
Mark: Yeah. Great question. Most of our franchisees are second career guys and girls out of corporate America or out of business ownership or something related. Most of our franchisees, we’re about 15% veteran-owned too.
Patrick: Oh, cool.
But most of our franchisees don’t come from a super-strong technical background.
We do have franchisees, they’re engineers or folks around construction companies or were in construction for sure. More important to us is the ability to communicate. More important to us is the ability to build relationships, the ability to show up and run that business. We can teach home inspection. We have a home inspection school.
Patrick: You can teach the product.
Mark: We can.
Patrick: But the soft skills, you know. If someone doesn’t have soft skills at age 40 or 50, it might be tough.
Mark: That’s absolutely true. We do have a training school in New Jersey that we founded back in 1987, a sister company of ours, and that training school is recognized in some 42 or 46 states at this point. Yeah, so, I mean, we can teach home inspection. The licensing issues are not difficult. Most states don’t have licensing issues. They come through training. They’re good to go. Even the ones that do, you’re looking at two or three months. So, it’s fairly easy. That’s not true.
We have a path to teach people to become a home inspector. You know, I will say if you’ve never picked up a hammer in your own home, you know, sometimes it can be hard to learn the technical side of what we do, but we really don’t need construction guys.
Patrick: Okay. And are most HouseMaster franchisees working full time in the business, or is this something that you can do on the side and keep your day job?
Mark: So the most common path for us is to learn the craft of being a home inspector. Go out, do the marketing, build a business, build a little following, get good at it, bring another home inspector on, split it with them, bring a third, maybe bring a marketing person on and build yourself out. And, you know, some of our franchisees, they never actually do that. In other words, what they do is they start day one, they become home inspectors, they love doing it. They run a tidy little business and that’s fine. Sixty percent or so of them build bigger businesses. We have guys who are running 1.8 million home inspections. So you can build a big business if you want to. A certain number of our franchisees will start day one with employees. I don’t want to learn home inspection. I don’t want to do a home inspection, and they’ll start it that way. That’s a little less common than saying I’d like to learn the craft, get good at it, bring people on as I go.
Patrick: I imagine…I mean, from an owner, it’s good to roll up your sleeves and whether it’s just for 6 months, 12 months, 18 months, do it well so you can then educate and train other people to do the craft.
Mark: I agree. I think it’s a lot easier to hire and train and manage people once you’ve done it yourself.
Patrick: You can also push back to your employees, but if you don’t fully understand what they’re doing, I mean, it’s hard to correct them with certain items.
Mark: It is a credibility issue as well and just the confidence to know that you’re not beholden to anyone employee. But some franchisees have done it and done it well.
Patrick: So I imagine the franchisees that are clearing a million, do they have multiple territories? You had mentioned 300 locations. I imagine some of those are multi-unit operators.
Mark: That is true. So if you look at our item 19, you know, we do have a guy who’s doing almost $1 million out of a single territory. I think it’s an outlier, you know. I think that’s more unusual than common, but yeah, most of those franchisees that are running the bigger shops will do somewhere between three and five territories. And, you know, we like our franchisees to add on a territory as they learn the area. Start with one. Hey, I’m getting a lot of business off the north side, then they go up there for their second territory and they kind of grow the business as the business calls for growth, if you will.
Patrick: And then if someone is interested in getting into this space, what’s, like, a general investment range for opening up a HouseMaster franchise?
Mark: We publish an investment range that ranges between 61 and 107. I see pretty consistently people are getting into this for just about $75,000 all in total investment, and that’s to start the business and get it to break even. I mean, that’s everything you need to run this business including your training, your licensing. And, you know, certainly, we’re well respected with the SBA. There are other ways, you know, to fund this that you don’t walk up to the table with 75 grand in the pocket.