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

                                 FORM 10-QSB/A



(Mark One)
 X    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
---   EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996.


     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 IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)   
 


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


                                (817)  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 July 31, 1996
------------------------------                     ----------------------------
Common stock, $.10 par value                                          7,113,127


TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (CHECK ONE):   Yes      No  X
                                                                  ---    ---
<PAGE>
 
                             THE DWYER GROUP, INC.

                                     INDEX

PART I  -  FINANCIAL INFORMATION                                        PAGE NO.
  
  Item 1. Financial Statements
  ------

          Consolidated Balance Sheets as of June 30, 1996 (unaudited)
          and December 31, 1995.......................................    3 - 4
                                                                          
          Consolidated Statements of Income for the Three Months and      
          Six Months Ended June 30, 1996 and 1995 (unaudited).........        5
                                                                          
          Consolidated Statements of Cash Flows for the Six Months        
          Ended June 30, 1996 and 1995 (unaudited)....................    6 - 7
                                                                          
          Notes to Consolidated Financial Statements..................    8 - 9
 
  Item 2. Management's Discussion and Analysis
  ------ 
          of Financial Condition and Results of Operations............  10 - 12
 
 
PART II  -  OTHER INFORMATION
 
  Item 1. Legal Proceedings...........................................       13
  ------ 

  Item 2. Changes in Securities.......................................       13
  ------ 

  Item 3. Defaults Upon Senior Securities.............................       13
  ------ 

  Item 4. Submission of Matters to a Vote of Security Holders.........       13
  ------
 
  Item 5. Other Information...........................................       13
  ------
 
  Item 6. Exhibits and Reports on Form 8-K............................       13
  ------ 

                                       2
<PAGE>
 
                     THE DWYER GROUP, INC. AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
                                     ASSETS
<TABLE>
<CAPTION>
                                                                             DECEMBER 31,
                                                                (UNAUDITED)      1995    
                                                                 JUNE 30,      RESTATED 
                                                                   1996         NOTE 4
                                                                -----------  ------------
<S>                                                             <C>          <C>
       CURRENT ASSETS:
        Cash and cash equivalents                               $ 3,118,189   $ 3,446,166
        Short-term investments                                    1,000,000     1,000,000
        Trade accounts receivable, net of allowance for
            doubtful accounts of $566,874 and $491,613,
            respectively                                            724,981       696,389
        Accounts receivable from related parties                    862,994       825,029
        Accrued interest receivable                                 211,739       150,748
        Trade notes receivable, current portion                     916,873       826,418
        Inventories                                                 164,740       136,728
        Prepaid expenses                                            308,978       148,854
        Federal income tax receivable                               150,754       646,641
                                                                -----------   -----------
       TOTAL CURRENT ASSETS                                       7,459,248     7,876,973

       ACCOUNTS RECEIVABLE FROM
       RELATED PARTIES, long term portion                            95,416        97,916

       PROPERTY AND EQUIPMENT, at cost less
         accumulated depreciation                                 1,522,033     1,472,863

       ASSETS HELD FOR SALE                                         121,565       398,651

       TRADE NOTES RECEIVABLE, long-term portion,
         net of allowance for doubtful notes of $919,271 and
         $855,849,  respectively                                  4,859,526     4,478,071

       PURCHASED FRANCHISE RIGHTS, at cost less
         accumulated amortization of $406,930 and $331,466,
         respectively                                             1,262,054     1,306,456

       PATENTS AND TRADEMARKS, at cost less
         accumulated amortization of $28,914 and $24,150,
         respectively                                               141,903       139,160
 
       NOTES RECEIVABLE FROM RELATED PARTIES                        649,412       653,403

       INVESTMENT, equity method                                    391,599       428,423

       NET DEFERRED TAX ASSET                                       217,005       217,005

       OTHER ASSETS                                                 252,902       199,778
                                                                -----------   -----------
       TOTAL ASSETS                                             $16,972,663   $17,268,699
                                                                ===========   ===========
</TABLE>
   The accompanying notes are an integral part of the consolidated financial
                                  statements.

                                       3
<PAGE>
 
                     THE DWYER GROUP, INC. AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
                                  (CONTINUED)
                      LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
                                                                                    DECEMBER 31,
                                                                       (UNAUDITED)      1995    
                                                                        JUNE 30,      RESTATED
                                                                          1996         NOTE 4
                                                                      ------------  -------------
<S>                                                                   <C>           <C>
 
       CURRENT LIABILITIES:
 
          Trade accounts payable                                      $   821,424    $   883,307
          Accounts payable to related parties                              46,300        222,227
          Accrued liabilities                                           1,089,798      1,208,409
          Other payables                                                   47,523         67,759
          Current portion of notes payable and capital
            lease obligations                                             128,282        252,289
                                                                      -----------    -----------
 
       TOTAL CURRENT LIABILITIES                                        2,133,327      2,633,991

       NOTES PAYABLE, less current portion                                261,478        276,677

       DEFERRED FRANCHISE SALES REVENUE                                 2,394,051      2,652,057
 
       FRANCHISE FUNDS HELD FOR ADVERTISING                               259,550        318,447
                                                                      -----------    -----------
 
       TOTAL LIABILITIES                                                5,048,406      5,881,172

       STOCKHOLDERS' EQUITY:
          Preferred stock, $1 par value - shares authorized,
            500,000; outstanding, none                                          -              -
          Common stock, authorized 15,000,000 shares of
            $.10 par value; issued 7,235,552 shares at
            June 30, 1996 and December 31, 1995, respectively             723,556        723,556
          Additional paid-in capital                                    8,941,029      8,941,029
          Retained earnings                                             2,774,689      2,237,959
          Note receivable from shareholder                               (418,896)      (418,896)
          Treasury stock, at cost (122,425 shares at June 30, 1996
            and December 31, 1995, respectively)                          (96,121)       (96,121)
                                                                      -----------    -----------
       TOTAL STOCKHOLDERS' EQUITY                                      11,924,257     11,387,527
                                                                      -----------    -----------
 
       TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                     $16,972,663    $17,268,699
                                                                      ===========    ===========
 
</TABLE>

   The accompanying notes are an integral part of the consolidated financial
                                  statements.

                                       4
<PAGE>
 
                     THE DWYER GROUP, INC. AND SUBSIDIARIES
                       CONSOLIDATED STATEMENTS OF INCOME
                                  (UNAUDITED)


<TABLE>
<CAPTION>
                                                        SIX MONTHS ENDED JUNE 30,    THREE MONTHS ENDED JUNE 30,
                                                           1996            1995          1996          1995
                                                     -----------------  -----------  ------------  ------------
<S>                                                  <C>                <C>          <C>           <C>
 
REVENUES:
  Royalty income                                           $3,560,281    3,130,097    $1,825,895    $1,693,989
  Franchise sales                                           2,180,718    2,495,364     1,082,870     1,144,496
  Tax services                                                528,188      502,230       194,602       200,658
  Product sales                                               448,001      340,807       197,014       122,354
  Interest and other, net                                     640,597      604,757       279,056       307,891
                                                           ----------   ----------    ----------    ----------
                                                            7,357,785    7,073,255     3,579,437    $3,469,388
 
COSTS AND EXPENSES:
  Cost of product sales                                       247,832      128,903       117,771        59,134
  Cost of tax services                                        521,682      713,649       241,928       347,320
  General, administrative, selling                          5,484,272    5,116,174     2,710,911     2,691,025
  Depreciation and amortization                               254,365      190,124       131,133       102,042
  Interest                                                     28,904       27,286        11,197        11,430
                                                           ----------   ----------    ----------    ----------
                                                            6,537,055    6,176,136     3,212,940     3,210,951
 
Income before provision for  federal income taxes             820,730      897,119       366,497       258,437
Provision for federal  income taxes                           284,000      269,136       124,609        58,233
                                                           ----------   ----------    ----------    ----------
 
Net income                                                 $  536,730   $  627,983    $  241,888       200,204
                                                           ==========   ==========    ==========    ==========
 
 
Income per common and dilutive share:
Income before federal income taxes                          $     .11    $     .12    $      .05    $      .04
Provision for federal  income taxes                              (.04)        (.04)         (.02)         (.01)
                                                           ----------   ----------    ----------    ----------
 
Net income per share                                       $      .07   $      .08    $      .03    $      .03
                                                           ==========   ==========    ==========    ==========
 
Weighted average common and dilutive common
   equivalent shares outstanding:
    Primary                                                 7,334,666    7,366,340     7,334,951     7,371,983
                                                           ==========   ==========    ==========    ==========
    Fully Dilutive                                          7,335,882    7,374,316     7,377,384     7,387,935
                                                           ==========   ==========    ==========    ==========
 
</TABLE>
   The accompanying notes are an integral part of the consolidated financial
                                  statements.
                                        

                                       5
<PAGE>
 
                     THE DWYER GROUP, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                                 SIX MONTHS ENDED JUNE 30,
                                                                 -------------------------
                                                                     1996          1995
                                                                  ----------    ----------
<S>                                                               <C>          <C>
       CASH FLOWS FROM OPERATING ACTIVITIES:
 
       Net income                                                 $  536,730    $  627,984
         Adjustments to reconcile net income to net
         cash provided by operating activities:
           Depreciation and amortization                             253,276       190,124
           Provision for doubtful accounts and notes
             receivable                                              181,927      (110,783)
           Notes receivable written off                              170,047       303,037
           Income recognized from sales previously deferred         (394,594)      (46,812)
           Sales of franchises for installment notes receivable   (1,230,792)   (1,343,889)
           Payments received on notes receivable                     661,954       706,678
           Sales of franchises on which revenues were deferred       136,589        71,871
           Equity in earnings of investment                           36,824        29,456
       Change in assets and liabilities:
           Accounts receivable                                       (28,592)       35,321
           Accrued interest receivable                               (60,991)       31,238
           Inventories                                               (28,012)      (17,183)
           Prepaid expenses                                         (160,124)     (217,269)
           Federal income tax receivable                             495,887          -
           Other assets                                              (53,124)     (205,523)
           Deferred tax asset and liability                             -           61,618
           Accounts payable and accrued liabilities                 (234,832)     (221,538)
           Accounts payable to related parties                      (175,927)         -
           Income tax payable                                           -         (333,915)
           Other payables                                            (20,236)       (3,811)
           Loss on disposal of assets held for sale                    5,001          -
           Franchisee funds held for advertising                     (58,897)      132,169
                                                                   ---------    ----------
       Net cash provided by (used in) operating activities            32,114      (311,227)
                                                                   ---------    ----------

       CASH FLOWS FROM INVESTING ACTIVITIES:

         Purchases of property and equipment                        (210,097)     (251,587)
         Payments for patents and trademarks                         (38,569)      (20,071)
         Net change in notes and accounts receivable
           from related parties                                      (31,474)     (262,618)
         Acquisition of assets held for sale                         (37,983)     (690,584)
         Proceeds from disposal of assets held for sale               42,900          -
         Franchise resale liabilities                                   -          447,077
         Purchase franchise rights                                      -           19,651
                                                                   ---------    ----------
       Net cash provided by (used in) investing activities          (275,223)     (758,132)
                                                                   ---------    ----------
</TABLE>


   The accompanying notes are an integral part of the consolidated financial
                                  statements.

                                       6
<PAGE>
 
                     THE DWYER GROUP INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (UNAUDITED)
                                  (CONTINUED)

<TABLE> 
<CAPTION> 
                                                                  SIX MONTHS ENDED JUNE 30,
                                                                  -------------------------
                                                                     1996           1995
                                                                  ----------     ----------
<S>                                                               <C>          <C>
       CASH FLOWS FROM FINANCING ACTIVITIES:
          Proceeds from debt issued                                  330,118           -
          Principal payments of debt                                (414,986)       (87,097)
          Sale of treasury stock                                        -            55,590
          Sale of stock                                                 -               100
                                                                  ----------     ----------
              Net cash provided by (used in) financing activities    (84,868)       (31,407)
                                                                  ----------     ----------

       Net decrease in cash and cash equivalents                    (327,977)    (1,100,766)
                                                                   
       Cash and cash equivalents, at beginning of year             3,446,166      4,819,795
                                                                  ----------     ----------
 
       Cash and cash equivalents, at June 30                      $3,118,189     $3,719,029
                                                                  ==========     ==========
 
       Supplemental schedule of non cash investing activities:

       Additions to notes receivable from sales of assets held    $  253,000           -
        for sale                                                    
</TABLE>


   The accompanying notes are an integral part of the consolidated financial
                                  statements.

                                       7
<PAGE>
      
                     THE DWYER GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 NOTE 1.    BASIS OF PRESENTATION

 A.         ORGANIZATION
            ------------

 The Dwyer Group, Inc. (the "Parent") 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").  All material
 intercompany accounts and transactions have been eliminated in consolidation.

 The Company was incorporated in 1970 in the State of Oklahoma under the name
 Mr. Rooter Corporation of America, Inc.  The Company's name was changed to Mr.
 Rooter Corporation in 1972, and 1986 it was reincorporated as a Delaware
 corporation.  Until May 1, 1993, the Company operated in two segments:
 franchising plumbing repair and sewer and drain cleaning services as well as
 manufacturing and selling sewer and drain cleaning equipment and supplies.  On
 May 1, 1993, substantially all of the assets of the manufacturing operations
 were sold.

 On March 1, 1993, the Company, through Rooter's wholly-owned subsidiary Aire
 Serv Heating and Air Conditioning, Inc. ("Aire Serv"), began to grant licenses
 to operate air conditioning and heating repair services under the trade name
 Aire Serv.

 On June 1, 1993, the Company acquired all of the shares of common stock of
 Rainbow International Carpet Dyeing & Cleaning Co. ("Rainbow"), and General
 Business Services, Inc. ("GBS") from its majority stockholder for 8,070,000
 shares (4,035,000 shares after reverse split) of common stock.  With the
 acquisition of GBS, the Company began operating in another segment, tax
 services, through GBS's wholly-owned subsidiary, General Tax Services, Inc.
 ("GTS").  These acquisitions have been accounted for similar to a pooling of
 interests because all companies were under common control.

 Following the acquisition of Rainbow and GBS, the Board of Directors approved a
 plan to convert the Company into a holding company and to form a new subsidiary
 to operate the Mr. Rooter business.  On July 30, 1993, this new subsidiary was
 incorporated in Texas under the name Mr. Rooter Corporation and the Company was
 renamed The Dwyer Group, Inc.

 Effective May 1, 1994, the Company acquired Edwin K. Williams & Co. ("EKW"), a
 wholly-owned subsidiary of Ekwill Acquisition Corporation ("Ekwill"), a
 California corporation, for approximately $1,150,000 cash by purchasing all of
 the outstanding capital stock of Ekwill from Ekwill's two shareholders.  The
 acquisition of Ekwill has been accounted for using the purchase method of
 accounting; accordingly, assets acquired and liabilities assumed were recorded
 at their estimated fair values.

 Effective September 1, 1994, EKW purchased 33 1/3% of the capital stock of
 Service Station Computer Systems, Inc. ("SSCS") for $500,000 cash. The
 investment in SSCS has been accounted for under the equity method.

 On September 6, 1994, the Company formed a new wholly-owned subsidiary.  Mr.
 Electric Corp. ("Electric"), is a Texas corporation engaged in franchising
 electrical contracting service businesses.

 B.  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.

 C.  INTERIM DISCLOSURES
     -------------------

 The information as of June 30, 1996 and for the six months ended June 30, 1996
 and 1995 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 and results of operations for the interim
 periods.  The accompanying 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, 1995.

                                       8
<PAGE>
 
 The results of operations for the six months ended June 30, 1996 are not
 necessarily indicative of the results to be expected for the fiscal year ending
 December 31, 1996.

 D.  RECLASSIFICATIONS
     -----------------

 Certain reclassifications have been made to the 1995 consolidated financial
 statements to conform to the presentation used in the 1996 consolidated
 financial statements.  These reclassifications had no effect on stockholders'
 equity or net income.

 NOTE 2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 A.  EARNINGS PER COMMON SHARE
     -------------------------

 Earnings per share of common stock is computed by dividing net income by the
 weighted average number of shares and common equivalent shares outstanding
 during each of the periods.  Earnings per share include the dilutive effect of
 unexercised stock options and warrants.


 NOTE 3.   RECENT ACCOUNTING STANDARDS

 Statement of Financial Accounting Standards No. 121, "Accounting for the
 Impairment of Long-lived Assets and for Long-lived Assets to be Disposed Of" is
 required to be implemented for fiscal years beginning after December 15, 1995.
 Accordingly, the Company is implementing this pronouncement during the fiscal
 year ending December 31, 1996.  The effect of this pronouncement on the
 Company's consolidated financial condition and results of operations is not
 considered to be material.


 NOTE 4.   PRIOR PERIOD ADJUSTMENT AND RESTATEMENT OF PREVIOUSLY ISSUED 
           RESULTS


 In connection with the December 31, 1996 year end accounting closing and
 subsequent analyses performed, it was determined that an error had been made
 relating to the carrying value of certain nonoperating individual franchises
 and regional franchises held for sale at December 31, 1995 and at June 30,
 1996. Accordingly, the Company has restated its previously issued consolidated
 financial statements for the year ended December 31, 1995 to correct the error.
 The adjustments to these assets reduced previously reported total assets at
 December 31, 1995 by $571,445, reduced assets held for resale by $788,450,
 reduced liabilities by $58,147, reduced retained earnings by $513,298 and
 increased the previously reported net loss for the year ended December 31, 1995
 by $513,298. The net loss per share for the year ended December 31, 1995
 increased by $.07 per share.

 The Company has amended its previously issued June 30, 1996 10-QSB to
 incorporate the restated consolidated balance sheet for the year ended December
 31, 1995 and to correct the Company's previously reported consolidated
 financial statements for the quarter and six months ended June 30, 1996 and to
 correct the aforementioned error, which also applied to the carrying values of
 certain nonoperating franchises held for sale during fiscal 1996.

 The effect of the adjustments relating to the activities and results for the
 quarter ended June 30, 1996 (subsequent to the restated balance sheet
 adjustments at December 31, 1995, as stated in the first paragraph above)
 reduced previously reported assets by $80,313, reduced liabilities by $12,000
 and reduced previously reported net income for the quarter ended June 30, 1996
 by $68,313. The net income per share for the quarter ended June 30, 1996
 decreased by $.01 per share.

 In total, the effect of these adjustments for the six months ended June 30,
 1996 (subsequent to the restated balance sheet adjustments December 31, 1995,
 as stated in the first paragraph above) reduced previously reported assets by
 $229,001, reduced liabilities by $138,632 and reduced previously reported net
 income by $90,369. The net income per share for the six months ended June 30,
 1996 decreased by $.01 per share.


                                       9
<PAGE>
 
 THE DWYER GROUP, INC. AND SUBSIDIARIES

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

 LIQUIDITY AND CAPITAL RESOURCES
 -------------------------------

 The Company's working capital ratio was approximately 3.5 to 1 at June 30, 1996
 as compared to 3.0 to 1 at December 31, 1995.  In addition, the Company had
 working capital of approximately $5,326,000 at June 30, 1996 as compared to
 approximately $5,243,000 at December 31, 1995.  For the remainder of fiscal
 1996 management expects to fund working capital requirements primarily through
 operating cash flow.  At June 30, 1996 and December 31, 1995, the Company had
 cash and cash equivalents of $3,118,000 and $3,446,000, respectively.

 Net trade accounts receivable increased approximately $29,000 from December 31,
 1995 to June 30, 1996.  Allowance for doubtful accounts increased approximately
 $75,000 from December 31,1995, to June 30, 1996.

 Trade notes receivable increased approximately $472,000 (8.9%) coinciding with
 approximately $2,100,000 in  franchise sales for the first six months of 1996.
 The Company will finance a portion of franchise sales if the buyer is
 qualified.

 Federal income tax receivable decreased $496,000 due to the receipt of
 approximately $212,000 in federal income tax refunds from the Internal Revenue
 Service and the federal income tax provision of approximately $284,000 for the
 six months ended June 30, 1996.

 Accounts receivable from related parties increased $35,000, whereas accounts
 payable to related parties decreased $176,000.  Related party receivables
 relate to shared expenses and administrative fees billed to related parties by
 the Company during the first six months of 1996.

 RESULTS OF OPERATIONS
 ---------------------

 For the six months ended June 30, 1996, compared to the six months ended June
 -----------------------------------------------------------------------------
 30, 1995.
 ---------

 Total revenues increased $285,000 (4.0%) to $7,358,000 for the six months ended
 June 30, 1996, from revenues of $7,073,000 for the six months ended June 30,
 1995.  The increase in revenues is mainly attributable to increases in royalty
 income of $430,000 (13.7%) and product sales of $107,000 (31.5%).  These
 increases were partially offset by a decrease in franchise sales of $315,000
 (12.6%) for the six months ended June 30, 1996, when compared to the first six
 months of 1995.

 Royalty income of Mr. Rooter accounted for $270,000 (28.8% increase) of the
 total $430,000 increase in royalty income for the six months ended June 30,
 1996, as compared to the first six months of 1995.  Aire Serv, Mr. Electric,
 Rainbow, and GBS/EKW continued to grow throughout the six months ended June 30,
 1996, and contributed approximately $71,000 (91.4% increase), $35,000 (952.2%
 increase), $26,000 (2.4% increase), and $30,000 (3.0% increase), respectively,
 in increased royalty income when compared to the same period in 1995.

 For the six months ended June 30, 1996, Mr. Rooter produced increased franchise
 sales of $363,000 (100.3%) when compared to the same period in 1995.  In
 addition, Rainbow and Mr. Electric produced franchise sales increases of
 $61,000 (30.1%) and $33,000 (16.0%), respectively for the same time period.
 These franchise sales increases were offset by franchise sales decreases in GBS
 of $477,000 (36.2%) and Aire Serv of $295,000 (72.5%).  The GBS decrease in
 franchise sales is attributable to the strategic decision by the Company to
 minimize the sale of GBS regional franchises during 1996.  Whereas the decline
 in Aire Serv franchise sales is

                                       10
<PAGE>
 
 THE DWYER GROUP, INC. AND SUBSIDIARIES

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

 RESULTS OF OPERATIONS (CONTINUED)
 ---------------------------------

 primarily attributable to the 1995 reorganization and restructure of the Aire
 Serv franchise sales department which has yet to recognize the efficiencies of
 the reorganization unlike Mr. Rooter and Mr. Electric, whose franchise sales
 advances were detailed above.

 GBS and E.K. Williams added approximately $448,000 in product sales for the six
 months ended June 30, 1996, when compared to $341,000 in product sales for the
 six months ended June 30, 1995.  GBS and EKW sell products such as record
 keeping systems and forms to their franchisees.

 Costs and expenses increased $361,000 (5.8%) to $6,537,000 for the six months
 ended June 30, 1996, from $6,176,000 for the first six months of 1995.  The
 major contributors to these increased expenses: is the increased employee costs
 as a result of the 1995 restructuring of the administrative, franchise sales,
 and franchise management functions of the operating subsidiaries and the 1995
 creation of several new corporate departments; and increased accounts and notes
 receivable bad debt expense.

 For the six months ended June 30, 1996, the Company achieved net income of
 $537,000 or 7 cents per share as compared to $628,000 or 8 cents per share for
 the six months ended June 30, 1995.  Income before federal income taxes for the
 first six months of 1996, decreased to $821,000 or 11 cents per share from
 $897,000 or 12 cents per share for the first six months of 1995, an 8.5%
 decrease.


 For the three months ended June 30, 1996, compared to the three months ended
 ----------------------------------------------------------------------------
 June 30, 1995.
 --------------

 Revenues increased approximately $110,000 (3.2%) for the quarter ended June 30,
 1996, when compared to the second quarter of 1995.  The increase in revenues is
 mainly attributable to increases in royalty income of $132,000 (7.8%) and
 product sales of $75,000 (61.0%).  These revenue increases were partially
 offset by decreased franchise sales of approximately $62,000 (5.4%) and
 decreased interest and other income of approximately $29,000 (9.4%).

 Rainbow, Mr. Rooter, Aire Serv, Mr. Electric and GBS/EKW produced royalty
 income increases of $41,000 (6.9%), $35,000 (7.1%), $34,000 (91.4%), $20,000
 (694.8%), and $19,000 (3.5%), respectively.

 For the quarter ended June 30, 1996, when compared to the second quarter of
 1995, Aire Serv, GBS and Mr. Electric reported franchise sales decreases of
 $282,000 (88.7%), $204,000 (37.3%), and $40,000 (30,7%), respectively.  These
 franchise sales decreases were partially offset by franchise sales increases
 from Mr. Rooter of $422,000 (530.1%) and from Rainbow of $41,000 (57.0%).

 Costs and expenses increased approximately $2,000 (.1%) in the second
 quarter of 1996 compared to the second quarter of 1995.  This decrease is
 primarily due to a downsizing of employees at General Tax Services, a wholly-
 owned subsidiary of GBS, and the nonrecurring losses recognized during the
 second quarter of 1995 relating the repurchase of several Aire Serv franchises.
 These decreases were offset by increased employee costs as a result of the 1995
 creation of several corporate departments and additional bad debt expense 
 relating the write off of the costs to repurchase certain franchises.

 Income before provision for federal income taxes increased approximately
 $108,000 (41.9%) for the quarter ended June 30, 1996 to $366,000 as compared to
 $258,000 for the same period in 1995. Net income increased approximately
 $42,000 (20.9%) for the quarter ended June 30, 1996 as compared to the same
 period in 1995.

 IMPACT OF INFLATION
 -------------------

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

                                       11
<PAGE>
 
 THE DWYER GROUP, INC. AND SUBSIDIARIES

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


 FOREIGN OPERATIONS
 ------------------

 The Company and its subsidiaries operate in fourteen (14) countries.  Income
 from master licenses is recorded as received due to the difficulty sometimes
 experienced in foreign countries when attempting to remove income generated
 from royalties.  The Company does not depend on foreign operations to have a
 significant impact on its cash flow.  Typically, foreign franchises are sold
 and managed by a master licensee in that country.  During the remainder of
 1996, 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.


 OTHER DISCLOSURES
 -----------------

 Weighted average common and dilutive common equivalent shares outstanding have
 continued to increase as outstanding stock options held by management and
 employees are exercised or become dilutive.  This trend could continue when the
 Company's stock price rises.



                   THIS PORTION IS INTENTIONALLY LEFT BLANK.

                                       12
<PAGE>
 
                                    PART II
                               OTHER INFORMATION


 THE DWYER GROUP, INC. AND SUBSIDIARIES

 LEGAL PROCEEDINGS

      NONE


 CHANGES IN SECURITIES

      (a)  NONE

      (b)  Not applicable.

 DEFAULTS UPON SENIOR SECURITIES

      NONE

 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

      NONE

 OTHER INFORMATION

      NONE

 EXHIBITS AND REPORTS ON FORM 8-K

      (a)  NONE

      (b)  Reports on Form 8-K

           NONE

                                       13
<PAGE>
 
                                   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.


                       The Dwyer Group, Inc.


                       By: \s\ Robert Tunmire
                          -------------------------------------
                          Robert Tunmire
                          President and Chief Executive Officer



 Date:  July 15, 1997               \s\  Robert Tunmire
        --------------              ---------------------------------
                                    Robert Tunmire, President and
                                    Chief Executive Officer
                                    (Principal Executive Officer)



 Date:  July 15, 1997               \s\  Stephen E. Beatty
        --------------              --------------------------------- 
                                    Stephen E. Beatty, Treasurer and
                                    Chief Financial Officer
                                    (Principal Financial and Accounting Officer)

                                       14