Jan-Pro founder Jacques Lapointe keeps his hand in
By: Eddy Goldberg | 10 Shares 4,036 Reads
Jacques Lapointe founded Jan-Pro in 1991, and over the next 15 years grew the commercial cleaning company to more than 75 master franchisees and 4,500 unit franchisees. He had a solid business model, continuous and solid growth, and was looking for a way to take the company to the next level. But the day-to-day details, which were no longer challenging but still required his attention, kept him from focusing on strategic growth.
Approached by a business broker who asked him to consider finding an equity partner, Lapointe said no...for a while. Eventually, he began to see how the right partner could help propel the company to new heights--and allow him to focus his energies where he wanted.
Lapointe says choosing an investment partner to diversify and grow in new directions was "a life choice, rather than a need choice." He simply could have sold Jan-Pro to the highest bidder and moved on, set for life. But he wasn't ready to retire, and he had a few ideas for the future of Jan-Pro--and its master franchisees, all of whom he'd signed personally. But he couldn't do it without help.
After narrowing the field, Lapointe weighed half a dozen serious offers from private equity firms before casting his lot with Stamford, Conn.-based JHW Greentree Capital--mainly, he says, because of their interest in building the company, not milking it. He said it was the firm's "How can we help your company diversify and grow?" attitude that made Greentree stand out.
Not that Jan-Pro was doing badly. Quite the opposite, in fact: $76 in million revenues in the year before the deal. But just one year afterward, sales rose to more than $100 million. Lapointe is confident that the company will reach $200 million within three years--and he'll surely have a hand in achieving that. His arrangement is to stay on as chairman of the board for three years.
"Picking the right partner was critical, not only for me," says Lapointe. "I also thought about my master franchisees, and I said, 'What kind of a fit am I looking for here?' These are all downsized guys who came to me, many of whom gave up their career, or lost their career through mergers and acquisitions. This is their last ride, they're putting in a lot of their assets. Some of them had to mortgage their house to get into this business. If they're going to put out their assets and give you everything that they have, you'd better give it back. And that was a critical part for me s."
With Greentree's resources behind him, Jan-Pro could attract top-level executive talent. "Our current CEO was running a company doing a billion dollars a year," says Lapointe. "But when you say, 'Not only is the opportunity there for you to drive Jan-Pro, but we're going to buy this company, and do this and do this,' it really gets you a different-level person. And that's going to make a lot of difference to our bottom line."
Lapointe insists that without the partnership, he would not have been able to attract someone of that caliber, or at least not easily. "You bring people like that, they drive the day-to-day business. As a founder, I could do other things," he says. "I wanted to give our master franchisees a shot in the arm to grow beyond where we were, and it takes that kind of talent."
Greentree provides financial resources and high-level advice, but it is still Lapointe's company and he remains the largest individual shareholder. "I'm driving the business. They're not in my pockets anywhere," he says. Lapointe's years of building relationships with his master franchisees makes him an invaluable player as the company ramps up for growth, and he still decides on new master franchisees.
Jan-Pro is now considering acquisitions to diversify the business. There, too, the new partnership is helping. "The only thing I was ever going to do was keep growing the commercial cleaning side," he says.
"Imagine now being able to bring in diversity and allow different models to be tied in to us, and allow our masters to be able to say to our customers, 'Not only can we do this for you now, but we can do this and we can do that.'" Potential targets include paper shredding and plant care.
The key to successful diversification, he says, is the track record his franchisees build with their commercial cleaning customers. Since the purchasing agent who awards the cleaning contract is often the same one who awards other office building service contracts, diversification opens new doors. Providing quality cleaning can lead to plant or shredding contracts; and providing quality shredding or plant care can lead to a cleaning contract.
Since Jan-Pro's master franchisees all are former C-level corporate executive, they'll be able to manage a more complex operation. "Those kinds of people, with the kinds of business experience they bring in to us, can expand their base," he says. "Isn't that wonderful? That's what they [Greentree] can do that I could not have done myself."
One more ace in the hole for Lapointe's expansion vision: In the commercial cleaning business, contract churn for non-franchised firms runs as high as 50 percent annually--opportunity for Jan-Pro and its franchisees, he says. This is because employee turnover is so high at non-franchised competitors.
"They're paid minimum wage, so the companies have a 30 percent no-show by employees. They'll send fill-in employees who don't know what they're doing because they're new to the building, and they miss things," says Lapointe. "After awhile, the facility manager says, 'Look, enough of this. My building isn't as crisp any more,' and they'll put the contract up for sale."
On the other hand, he says, "When it's franchising, the [unit] franchisee pays us a fee to get into the franchise. It's their little business under the master, so they pay a lot of attention. We have offices that don't turn 1 percent, and that's because for the unit franchisees it's supplementary income. They have their day work, and at night they clean buildings. Most of our unit franchisees are families--husband and wife, father and son--working two or three hours a night collectively, making another $20,000 a year instead of just a minimum wage person."
As a result, they do a better job, and when a contract for another service comes up, the unit franchisee has the inside track. "And we're hoping that will take us to the next level," says Lapointe.
International growth is also now part of the big picture, with Jan-Pro looking to award master franchise licenses at the country level. "We'd love to do that now. Instead of doing a city master, where on the average we get $150,000 to $200,000 for a master license, in Europe we're going to get a million bucks."
The first targets are the U.K. and Australia, English-speaking countries. Even though Lapointe is bilingual (French), the system's documentation is not, and navigating laws and regulations overseas is tricky enough. "We want to make sure that our model is followed and we don't have to redo everything," he says.
Jan-Pro uses brokers to scout for new master franchisees, and Lapointe takes pride in how the company is rated by brokers such as FranNet and Franchoice. "Last year FranNet gave us an award because of the hundred or some-odd franchises they represent, we validated the best--meaning our masters say wonderful things about us," he says.
"That's something you earn over time. I think maybe it's because we go after those downsized corporate guys who have been in the trenches, and built themselves up to a VP of sales or marketing. So by the time they come to us, they're seasoned executives, and they take it to the next level."
Although Lapointe says the usual "We're in the people business here," he really seems to mean it. And in terms of track record, he has good reason. "I didn't get to where I am because I did it alone, believe me. It was all these people. Maybe that's the reason we don't have a failure. We're very careful who we bring into the system."
As a consequence of his partnership with Greentree, Lapointe says he's now doing something for his masters that brings him a newfound pleasure, one he didn't expect when he founded the company 15 years ago. "I didn't go into business to give back, but boy it felt pretty good knowing I could. And I knew when I made this decision it was an unselfish one because I was giving back, giving them a chance to go to the next level."
Lapointe thinks that if he'd waited a few more years to find a partner, he might have made a bit more, "but I'd have been gone. I didn't want to be gone. And who knows, if they diversify, I may stay around for some more beyond that point. It depends on how it all plays out. Not everything in life is about money. If I learned anything, I've learned that, in franchising."
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