<PAGE>   1
                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB


(Mark One)
[X]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998.



[ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
                                                   ----------------


COMMISSION FILE NUMBER.......................................0-15227


                              THE DWYER GROUP, INC.
--------------------------------------------------------------------------------
        (EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)


Delaware                                                            73-0941783
--------                                                            ----------
(STATE OR OTHER JURISDICTION OF                               (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION)                              IDENTIFICATION NO.)


                  1010 N. University Parks Dr., Waco, TX 76707
                  --------------------------------------------
              (ADDRESS AND ZIP CODE OF PRINCIPAL EXECUTIVE OFFICES)


                                 (254) 745-2400
                                 --------------
                (ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE)


--------------------------------------------------------------------------------
              (FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
                         IF CHANGED SINCE LAST REPORT)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.

          Class                                  Outstanding at April 30, 1998
----------------------------                     -----------------------------
Common stock, $.10 par value                                         6,775,427


    TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (CHECK ONE): Yes [ ] No [X]


<PAGE>   2

                              THE DWYER GROUP, INC.

                                      INDEX

<TABLE>
<CAPTION>
PART I  -  FINANCIAL INFORMATION                                                                              PAGE NO.
<S>                                                                                                           <C>
     Item 1.    Financial Statements

                Condensed Consolidated Balance Sheets as of March 31, 1998 (unaudited)
                and December 31, 1997.............................................................................3

                Consolidated Statements of Income for the Three Months Ended
                March 31, 1998 and 1997 (unaudited)...............................................................4

                Condensed Consolidated Statements of Cash Flows for the Three Months
                Ended March 31, 1998 and 1997 (unaudited).........................................................5

                Notes to Condensed Consolidated Financial Statements............................................6-7

     Item 2.    Management's Discussion and Analysis of Financial
                Condition and Results of Operations.............................................................8-9


PART II  -  OTHER INFORMATION

     Item 1.    Legal Proceedings................................................................................10

     Item 2.    Changes in Securities............................................................................10

     Item 3.    Defaults Upon Senior Securities..................................................................10

     Item 4.    Submission of Matters to a Vote of Security Holders..............................................10

     Item 5.    Other Information................................................................................10

     Item 6.    Exhibits and Reports on Form 8-K.................................................................10
</TABLE>



                                       2
<PAGE>   3

                     THE DWYER GROUP, INC. AND SUBSIDIARIES
                     CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
        ASSETS                                                                 MARCH 31, 1998    DECEMBER 31, 1997
                                                                               --------------    -----------------
                                                                                (Unaudited)
<S>                                                                             <C>               <C>         
Current assets:
       Cash and cash equivalents                                                $  1,040,523      $  1,568,187
       Marketable securities, available-for-sale                                   2,519,778         2,327,090
       Trade accounts receivable, net of allowance for doubtful
             accounts of $248,472 and $265,923, respectively                       1,127,743         1,070,573
       Accounts and interest receivable from related parties                         744,721           844,256
       Accrued interest receivable                                                    29,510            14,133
       Trade notes receivable, current portion                                     1,084,920         1,115,707
       Inventories                                                                   342,500           306,751
       Prepaid expenses                                                              489,988           376,556
       Notes receivable from related parties, current portion                         47,348           142,723
                                                                                ------------      ------------
          Total current assets                                                     7,427,031         7,765,976

Property and equipment, net                                                        1,116,940         1,070,375
Notes and accounts receivable from related parties                                 1,187,628         1,268,015
Assets held for sale                                                                 166,575           166,575
Trade notes receivable, net of allowance for doubtful notes of
             $825,768 and $816,054, respectively                                   3,604,824         3,760,824
Purchased franchise rights, net                                                    2,218,876         1,446,251
Investment, equity method                                                            410,930           418,117
Net deferred tax asset                                                               419,473           429,779
Other assets                                                                         210,863           212,124
                                                                                ------------      ------------

TOTAL ASSETS                                                                    $ 16,763,140      $ 16,538,036
                                                                                ============      ============

        LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
       Accounts payable, trade                                                  $    826,371      $    774,197
       Accounts payable to related parties                                            40,887            44,237
       Accrued liabilities                                                         1,323,041         1,235,101
       Current portion of notes payable and capital lease obligations                195,262           224,963
                                                                                ------------      ------------
          Total current liabilities                                                2,385,561         2,278,498

Long-term debt, less current portion                                                 541,441           487,116
Deferred franchise sales revenue                                                   1,424,785         1,539,085

Commitments and contingencies

Stockholders' equity:
       Preferred stock                                                                    --                --
       Common stock                                                                  689,526           689,526
       Additional paid-in capital                                                  9,020,358         9,020,358
       Retained earnings                                                           2,663,772         2,543,612
       Unrealized gain on available-for-sale securities                              131,868            74,012
       Treasury stock, at cost                                                       (94,171)          (94,171)
                                                                                ------------      ------------
          Total stockholders' equity                                              12,411,353        12,233,337
                                                                                ------------      ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                      $ 16,763,140      $ 16,538,036
                                                                                ============      ============
</TABLE>

      See notes to condensed consolidated financial statements (unaudited).


                                        3
<PAGE>   4

                     THE DWYER GROUP, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                             THREE MONTHS ENDED MARCH 31,
                                                            ----------------------------
                                                                1998             1997
                                                            -----------      -----------
<S>                                                         <C>              <C>        
REVENUES:
     Royalties                                              $ 1,853,863      $ 1,843,675
     Franchise fees                                             621,479          910,205
     Sales of products and services                             724,329          165,231
     Tax services                                               419,120          352,280
     Interest                                                   166,619          176,050
     Other                                                      287,181          217,490
                                                            -----------      -----------

        TOTAL REVENUES                                        4,072,591        3,664,931

COSTS AND EXPENSES:
     General, administrative and selling                      2,914,611        2,937,198
     Costs of product and service sales                         539,312          110,705
     Cost of tax services                                       268,312          316,743
     Depreciation and amortization                              153,618          131,340
     Interest                                                    14,633           10,613
                                                            -----------      -----------

        TOTAL COSTS AND EXPENSES                              3,890,486        3,506,599

Income before income taxes                                      182,104          158,332
Income taxes                                                    (61,944)         (53,834)
                                                            -----------      -----------

NET INCOME                                                  $   120,160      $   104,498
                                                            ===========      ===========

EARNINGS (LOSS) PER SHARE - BASIC                           $      0.02      $      0.01
                                                            ===========      ===========

EARNINGS (LOSS) PER SHARE - DILUTED                         $      0.02      $      0.01
                                                            ===========      ===========

WEIGHTED AVERAGE COMMON SHARES                                6,775,427        7,113,127
                                                            ===========      ===========

WEIGHTED AVERAGE COMMON SHARES AND POTENTIAL
         DILUTIVE COMMON SHARES                               6,910,540        7,231,517
                                                            ===========      ===========
</TABLE>


     See notes to condensed consolidated financial statements (unaudited).


                                       4
<PAGE>   5

                     THE DWYER GROUP, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                THREE MONTHS ENDED MARCH 31,
                                                                                ----------------------------
                                                                                   1998             1997
                                                                                -----------      -----------
<S>                                                                             <C>              <C>        
Operating activities:
     Net income for the period                                                  $   120,160      $   104,498
     Adjustments to reconcile net income to
                  net cash used in operating activities:
        Depreciation and amortization                                               155,903          131,339
        Provision for doubtful accounts                                             (54,794)          33,263
        Notes received for franchise sales                                         (354,212)        (469,290)
        Change in deferred tax asset                                                 10,306           10,662
        Other adjustments                                                               (52)           7,545
    Changes in assets and liabilities:
        Accounts and interest receivable                                            (72,547)        (225,903)
        Net change in receivables / payables to related parties                      (2,903)          40,955
        Inventories                                                                 (35,749)         (47,325)
        Prepaid expenses                                                           (113,432)        (151,906)
        Federal income tax receivable                                                    --          184,714
        Accounts payable and accrued liabilities                                    140,114          138,764
        Deferred franchise sales revenue                                           (114,300)           1,020
        Other assets                                                                     --           98,586
        Other                                                                        19,812              680
                                                                                -----------      -----------
  Net cash used in operating activities                                            (301,694)        (142,398)
                                                                                -----------      -----------

Investing activities:
    Collections of notes receivable                                                 575,981          166,425
    Proceeds from sale of notes receivable                                               --           31,100
    Purchases of property and equipment                                            (138,023)         (57,364)
    Purchases of franchise rights                                                  (586,564)              --
    Acquisition of other assets                                                      (3,007)          (5,025)
    Net increase in marketable securities                                          (192,688)              --
    Unrealized gain on marketable securities                                         57,856           11,975
    Collections on notes receivable from related parties                             35,851           35,651
    Other                                                                                --          (24,333)
                                                                                -----------      -----------
  Net cash provided by (used in) investing activities                              (250,594)         158,429
                                                                                -----------      -----------

Financing activities:
    Proceeds from borrowings                                                         62,465               --
    Payments on borrowings                                                          (37,842)         (57,461)
                                                                                -----------      -----------
  Net cash provided by (used in) financing activities                                24,623          (57,461)
                                                                                -----------      -----------

Net decrease in cash and cash equivalents                                          (527,664)         (41,430)
Cash and cash equivalents, beginning of period                                    1,568,187        1,820,167
                                                                                -----------      -----------

Cash and cash equivalents, end of period                                        $ 1,040,523      $ 1,778,737
                                                                                ===========      ===========
</TABLE>


      See notes to condensed consolidated financial statements (unaudited).


                                       5
<PAGE>   6

                     THE DWYER GROUP, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE 1.  ORGANIZATION

The Dwyer Group, Inc. is a holding company for service-based businesses
providing specialty services internationally through franchising. The
consolidated financial statements include the accounts of The Dwyer Group, Inc.
and its wholly-owned subsidiaries (the "Company") which include the following:

     o         Rainbow International Carpet Dyeing and Cleaning Co. ("Rainbow")
               is a franchisor of carpet cleaning, dyeing, air duct cleaning,
               and restoration services.

     o         Mr. Rooter Corporation ("Mr. Rooter") is a franchisor of plumbing
               repair and drain cleaning services under the service mark "Mr.
               Rooter"(R).

     o         General Business Services, Inc. ("GBS") is a franchisor of
               business management service to small businesses. Such business
               management services include, among others, business counseling,
               tax counseling, accounting services and products, financial
               counseling and personnel services.

     o         Edwin K. Williams & Co. ("EKW") is a franchisor of information
               systems and financial management services, specifically designed
               to meet the special needs of small businesses. Its financial
               management services include, among others, accounting and
               bookkeeping services and systems, financial management analysis,
               payroll processing, and tax preparation and planning services.

     o         Aire Serv Heating & Air Conditioning, Inc. ("Aire Serv") is a
               franchisor of heating, ventilating and air conditioning service
               businesses.

     o         Mr. Electric Corp. ("Mr. Electric") is a franchisor of electrical
               repair and service businesses under the service mark "Mr.
               Electric"(R).

     o         Mr. Appliance Corp. ("Mr. Appliance") is a franchisor of major
               household appliance service and repair businesses.

     o         The Dwyer Group National Accounts, Inc. ("National Accounts")
               solicits national account customers who can call a toll-free
               phone number for their general repair and 24-hour emergency
               service needs. The order is filled through the Company's network
               of franchisees or qualified subcontractors.

     o         The Dwyer Group Canada, Inc. ("TDG Canada") was incorporated in
               January 1998 in order to market and service certain of the
               Company's franchise concepts in Canada. Currently, those concepts
               are: Mr. Rooter, Mr. Electric, Rainbow International and Aire
               Serv.

NOTE 2.  BASIS OF PRESENTATION

A.       PRINCIPLES OF CONSOLIDATION

The accompanying consolidated financial statements include The Dwyer Group, Inc.
and its subsidiaries (the "Company"). All significant intercompany balances and
transactions have been eliminated.

B.       INTERIM DISCLOSURES

The information as of March 31, 1998 and for the three months ended March 31,
1998 and 1997 is unaudited, but in the opinion of management, reflects all
adjustments, which are of a normal recurring nature, necessary for a fair
presentation of financial position


                                       6
<PAGE>   7

and results of operations for the interim periods. The accompanying condensed
consolidated financial statements should be read in conjunction with the
consolidated financial statements and notes thereto contained in the Company's
Annual Report on Form 10-KSB for the fiscal year ended December 31, 1997.

The results of operations for the three months ended March 31, 1998 are not
necessarily indicative of the results to be expected for the fiscal year ending
December 31, 1998.

C.       RECLASSIFICATIONS

Certain reclassifications have been made to the 1997 consolidated financial
statements to conform to the presentation used in the 1998 consolidated
financial statements. These reclassifications had no effect on stockholders'
equity or net income.


NOTE 3.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

EARNINGS PER COMMON SHARE

Basic earnings per share is computed based on the weighted average number of
shares outstanding during each of the periods. Diluted earnings per share
include the dilutive effect of unexercised stock options and warrants.

Effective December 31, 1997, the Company adopted the provisions of SFAS No. 128,
"Earnings Per Share". This statement establishes standards for computing and
presenting earnings per share and applies to entities with publicly held common
stock or potential common stock. There was no material impact on the Company's
financial statements resulting from the adoption of SFAS No. 128.


NOTE 4.  PURCHASED FRANCHISE RIGHTS

In February 1998, the Company repurchased all Canadian franchise rights for its
Mr. Rooter and Mr. Electric franchise concepts from its Canadian master
licensee. The purchase price of approximately $600,000 was capitalized as
Purchased Franchise Rights. The purchase is expected to generate additional
revenues to the Company of approximately $250,000 per year.

In March 1998, the Company repurchased Canadian franchise rights for its Rainbow
International franchise concept from a related party. The purchase price of
approximately $250,000 was capitalized as Purchased Franchise Rights. The
purchase is expected to generate additional revenues to the Company of
approximately $50,000 per year.


NOTE 5.  SUBSEQUENT EVENTS

In April 1998, the Company announced the signing of a preliminary agreement for
the sale of two of its franchising subsidiaries, GBS and EKW, to Century
Business Services, Inc. ("Century"), a leading provider of outsourced business
services to medium sized companies throughout the United States. The completion
of the transaction is subject to due diligence by Century and to the signing of
a definitive agreement. Upon completion, the Company would receive $3.8 million
in cash and up to $800,000 in Century stock.

Also in April 1998, the Company announced the signing of a preliminary agreement
to acquire Glass Doctor Corporation ("Glass Doctor"), a national franchisor of
service centers whose business is the replacement of automobile, residential and
commercial glass. Glass Doctor's franchise system is currently comprised of 26
franchisees that generate over $33 million per year in system-wide sales. On a
pro forma basis, Glass Doctor would add approximately $1.5 million to the
Company's revenues. The acquisition would be funded by a combination of cash and
notes, and the issuance of 333,333 shares of the Company's common stock.  The
acquisition is subject to due diligence by the Company and to the signing of a
definitive agreement.


                                       7
<PAGE>   8

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

Unless otherwise noted, all dollar amounts are rounded to the nearest thousand.

LIQUIDITY AND CAPITAL RESOURCES

The Company's working capital ratio was approximately 3.1 to 1 at March 31, 1998
as compared to 3.4 to 1 at December 31, 1997. The Company had working capital of
approximately $5.0 million at March 31, 1998 as compared to approximately $5.5
million at December 31, 1997. For the remainder of fiscal 1998 management
expects to fund working capital requirements primarily through operating cash
flow. At March 31, 1998 and December 31, 1997, the Company had cash and cash
equivalents of approximately $1.0 million and $1.6 million, respectively, and
marketable securities of approximately $2.5 million and $2.3 million,
respectively.

Cash flow used in operating activities increased from $142,000 for the first
three months of 1997 to $302,000 for the same period in 1998, primarily due to
net changes in current assets and liabilities, partially offset by a reduction
in notes received from franchise sales. In the first three months of 1997, the
Company generated $158,000 in cash from investing activities and used $251,000
in cash for such activities for the same period in 1998, a difference of
$409,000. The difference is due primarily to net purchases of marketable
securities ($193,000), the purchase of franchise rights ($587,000) and an
increase in purchases of property and equipment ($81,000). The above increases
were partially offset by an increase in collections on notes receivable
($410,000). The Company used $57,000 in financing activities for the first three
months of 1997 and generated $25,000 from such activities for the same period in
1998, a difference of $82,000. The difference is due primarily to proceeds from
borrowing in 1998.

As described in Note 5 - "Subsequent Events", the Company has signed agreements
for the sale of two of its subsidiaries and for the purchase of a franchising
business. The Company plans to use the cash proceeds from the sale to fund the
cash portion of the purchase price. Should such proceeds from the sale not be
available at the time of the purchase, the Company plans to use a combination of
cash on hand, proceeds from the sale of marketable securities and proceeds from
additional borrowings to complete the transaction. The Company is currently
negotiating to secure a line of credit sufficient enough to cover such
borrowings, if needed. However, there is no assurance that such funds will be
available on a timely basis.

The Company is not aware of any trend or event which would potentially affect
its liquidity. In the event such a trend would develop, management believes that
the Company has sufficient funds available to satisfy the working capital needs
of the business.

RESULTS OF OPERATIONS

For the three months ended March 31, 1998, compared to the three months ended
March 31, 1997.

Total revenues increased $408,000 (11.2%) to $4,073,000 in 1998, from $3,665,000
for 1997. This increase is due primarily to increases in the sale of products
and services of $559,000 (338.4%), in tax service revenues of $67,000 (19.0%),
and other revenues of $70,000 (32.0%), partially offset by a decrease in
franchise fees of $289,000 (31.7%).

The sale of products and services increased significantly due to the growth of
the Company's National Accounts program which began operating in late 1996. Tax
service revenues increased due to increased demand for such services by the
Company's franchisees. Other revenues increased primarily due to a gain on the
sale of marketable securities in 1998. Franchise sales revenues decreased
primarily due to a decrease of $172,000 (66.3%) in the sale of GBS franchises
and a decrease of $142,000 (49.1%) in the sale of Mr. Rooter franchises. These
decreases were partially offset by an increase of $66,000 (50.5%) in the sale of
Mr. Electric franchises.

The cost of product and service sales increased by $429,000 (387.2%) due to
increased revenues from National Accounts.

The cost of tax services decreased by $48,000 (15.3%) although revenues from tax
service increased. This improvement in profitability was due to efficiencies
implemented by management in late 1997.

Net income was $120,000 for the quarter ended March 31, 1998 as compared to
$104,000 for the same period in 1997.



                                       8
<PAGE>   9

IMPACT OF INFLATION

Inflation has not had a material impact on the operations of the Company.

FOREIGN OPERATIONS

The Company and its subsidiaries operate in 17 foreign countries. Typically,
foreign franchises are sold and managed by a master licensee in that country.
Royalty revenues from master licenses are recorded as received due to the
difficulty sometimes experienced in foreign countries when attempting to
transfer such funds to the United States. The Company does not depend on foreign
operations, and such operations do not have a material impact on its cash flow.
During the remainder of 1998, the Company may produce additional master license
sales which could result in each case in a one time, lump sum payment from the
master licensee to the Company.

FORWARD-LOOKING STATEMENTS

The Company cautions readers that various factors could cause the actual results
of the Company to differ materially from those indicated by forward-looking
statements made from time to time in news releases, reports, proxy statements,
registration statements and other written communications (including the
preceding sections of this Management's Discussion and Analysis), as well as
oral statements made from time to time by representatives of the Company. Except
for historical information, matters discussed in such oral and written
communications are forward-looking statements that involve risks and
uncertainties, including but not limited to completion of the transactions
described in Note 5 - "Subsequent Events", general business conditions, the
impact of competition, taxes, inflation, and governmental regulations.




                                       9
<PAGE>   10

                                     PART II
                                OTHER INFORMATION


THE DWYER GROUP, INC. AND SUBSIDIARIES

ITEM 1 - LEGAL PROCEEDINGS

         NONE

ITEM 2 - CHANGES IN SECURITIES

         (a) NONE

         (b) Not applicable.

ITEM 3 - DEFAULTS UPON SENIOR SECURITIES

         NONE

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         NONE

ITEM 5 - OTHER INFORMATION

         NONE

ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K

         (a)      Exhibits:

                  Financial Data Schedule

         (b)      NONE




                                       10
<PAGE>   11

                                   SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.


Date: May 8, 1998              The Dwyer Group, Inc.


                               By: \s\ Thomas Buckley
                                   ------------------
                                   Thomas Buckley
                                   Vice President and Chief Financial Officer

                                       11
<PAGE>   12

                               INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBITS NO.                       DESCRIPTION
------------                       -----------
<S>                      <C>
    27                   Financial Data Schedule
</TABLE>