Amy Arnold, left, with Card My Yard co-founder Jessica Stanley.
Friends for 20 years and sometimes investing partners, Doug Kennealey and Jim Waskovich decided to strike out on their own three years ago. They formed Princeton Equity Group, raised a $350 million fund and began investing solely in a segment of franchising that didn’t get much love—emerging, high-growth service businesses, deliberately not including restaurants.
They went on a tear, acquiring seven franchisors since July 1, 2020, for more than $175 million of enterprise value. Although the individual deals were small relative to others profiled in this package, they provided lifeblood for the founder-led franchises on the receiving end.
Scott Abbott, CEO of Five Star Franchising, got a second chance to build a franchise operation when Princeton backed him last year. Abbott started Five Star Painting in 2004, when he was 18, and sold it in 2015 to Neighborly, when it became the eighth brand under the home service franchisor’s umbrella. Today, Neighborly has more than 5,000 franchises.
Abbott himself, now in his 40s, launched his own portfolio company after attracting Princeton as an investor and purchasing Joe Homebuyer, Gotcha Covered and Bio-One, among others.
“Through our networks and through some data-scraping, we identified Scott. He was not looking to be a CEO again,” said Kennealey; rather Abbott was consulting and investing in other franchise owners to help them build their businesses. The pair convinced Abbott: “If I’m advising all these other brands and helping them build, why not do this for myself with a financial partner that really knows franchising?” The result is Abbott’s back in the game, and growing fast. This March, Five Star bought 1-800-Packouts and launched its sister company, 1-800-Textiles.
Doug Kennealey
Card My Yard, which installs celebratory greetings in people’s front yards, is perhaps Princeton’s biggest coup yet, bought in October 2020 just as sales exploded during the height of the pandemic. Co-founder Amy Arnold said business was bonkers. “The growth we had at the peak of COVID was almost unsustainable. Many of our owners were running themselves ragged,” she said. “This year we have seen a healthy return to normal. It’s been wonderful.” Unit count for Card My Yard was 250 when Princeton invested; today it’s 500.
Princeton encouraged the four co-founders, including Arnold’s husband and Jessica Stanley and her husband, to beef up staff at corporate—now with 15 employees up from three—and give each of them defined roles. “Before we were just co-owner, co-owner, co-owner. We have official titles and roles now,” she said, which helps employees know whom to ask for what. However, all four are acting co-CEOs. “That’s a unique structure, but it works for us.”
The two Princeton partners said they source deals themselves using a technology platform called Fusion Point, plus legwork. “We spend time looking at lots and lots of companies,” Waskovich said, and talk to many franchisees in the system before pursuing a deal. At Card My Yard they found “extraordinarily energized, dedicated franchisees, they love the brand.”
Princeton always encourages founders to return the favor. “You should feel free to call anyone you want,” and ask “do we do what we say we will,” Kennealey said.
The pair doesn’t touch restaurants, mostly because so many other firms do, and they don’t mind paying hefty multiples of cash flow. “For high-growth, high-quality businesses, certainly a double-digit EBITDA. Many of them trade well north of that,” said Kennealey. “We pay fair valuations. We are not a bottom feeder kind of firm.”
Being 10 percent off on valuation up or down doesn’t matter much in their world. “We make our return through organic growth, and we pay for that. We’re happy to pay for that.”