Super-regional aims to increase RMR with sprinklers

LANCASTER, Pa.—Select Security, a super-regional based here, has done something out of the ordinary: It recently acquired a fire sprinkler company and turned it into Select Security's new sprinkler division.

Company president Patrick Egan said Select Security's purchase of Fire Systems Inc. of Ephrata, Pa. is unusual for a security company, but makes good business sense. It will lead to new sprinkler and alarm customers for Select Security, and generate additional RMR as the company takes over the annual inspections required for sprinkler systems, Egan said.

“We expect it to create significant installation and service volume and contribute a significant amount of RMR in 2011,” he said.

The sprinkler company is now renamed Fire Systems Integrated and its former owner, C. Thomas Perry, who has 36 years of fire sprinkler business experience, is the general manager of the new, independent division, Egan said.

“We're going to sell his customers alarms, we're going to sell my customers sprinkler stuff, and were going to convert his business style into more RMR,” Egan told Security Systems News.

Select Security, which closed on the sprinkler company purchase in September, formally announced the acquisition on Dec. 2, noting it made Select Security one of the first security alarm sales, service, and monitoring companies to operate a fire sprinkler division. The sprinkler firm's employees will join Select Security and four to six employees will be added in the next 12 months, bringing Select Security's total workforce to 110, Egan said.

“This vertical integration is the next natural step in continuing to progress our company and make it a single source provider for all security and fire protection needs,” Egan said in a written statement.

His company already has been servicing sprinkler systems on national accounts in Pennsylvania that include Wal-Mart, Home Depot, and Cracker Barrel. The new division will offer sprinkler installation to homes and light commercial properties, and inspection, testing, and service to all types of residential and business customers throughout the state, Egan said.

In an interview with SSN, he noted, “In a traditional sense, a sprinkler company is not a recurring revenue model company.”

But he said sprinkler companies do “RMR-like work” in inspecting sprinkler systems once a year and certifying that they meet NFPA fire code standards.

 “We're going to contact [sprinkler] customers, we're going to sell them [five-year] service inspection contracts and we're going to guarantee them a service rate and all that stuff, and we'll bill that to them probably quarterly, and we're going to turn the sprinkler division into a traditional RMR-style business,” Egan said.

Then, he said, “the next thing we're going to do is reach out to all his hundreds and hundreds of sprinkler customers and talk to them about alarm service.”

Also, he said, Select Security is in the process of contacting its own customers, who number more than 3,000, “to let them know we're in the sprinkler business and to try and get their sprinkler business.”

“We believe there's a lot of pull-through RMR opportunity,” Egan said. He calculated that in the short time Select Security has owned the new company, “we've probably added over a $1,000 a month of RMR.”

Also, he said, the acquisition of the company comes just before a new building code in Pennsylvania takes effect on Jan 1., requiring all new single- and two-family homes to have sprinkler systems.

“That's going to be a great opportunity for our salesmen,” Egan said.

Select Security also is going to train its field service technicians to do emergency repairs on sprinklers from the company's six offices throughout the state in Lancaster, Altoona, Stroudsburg, Sayre, Williamsport, and Franklin, he said.

Another security company, Safeguard Security in Scottsdale, Ariz., bought a small sprinkler company earlier this year. CEO John Jennings told SSN in December that business is “going great.” Safeguard provides service, inspection and repairs, but not installation of sprinkler systems, he said.

When asked why more security companies haven't gone the sprinkler route like Safeguard and Select Security, Jennings replied, “Maybe we're a little more forward-thinking than the rest of the industry.”

He continued: “When you lose accounts to a sprinkler company because they walk in and do an inspection and say, 'We can do your monitoring too,' it's sort of defensive move for me, where we can maintain the accounts, and go after the accounts of sprinkler companies.”