Continuing Franchise Fee on a 125000 Initial Investment

In this FDD Talk post, you'll learn the following:

• Section I – Estimated initial investment (franchise costs) for a ShelfGenie franchise, based on Item 7 of the company's 2022 FDD

• Section II – Initial franchise fee, royalty fee, and marketing fee for a ShelfGenie franchise, based on Items 5 and 6 of the company's 2022 FDD

• Section III – Number of franchised and company-owned ShelfGenie outlets at the start of the year and the end of the year for 2019, 2020, and 2021, based on Item 20 of the company's 2022 FDD

• Section IV – Background information on the ShelfGenie franchise opportunity, including relevant news updates

• Section V – Presentation and analysis of ShelfGenie's financial performance representations (average revenues and/or profits), based on Item 19 of the company's 2022 FDD, including information on the:

• 2021 average, median, high, and low gross sales per order for the 43 ShelfGenie franchisees, operating 248 franchised businesses each with a territory of approximately 125,000 households and open during the 2021 Reporting Period (January 1, 2021 through December 31, 2021), that had orders that were not excluded orders

• 2021 percentage of appointments resulting in a closed order for the 43 ShelfGenie franchisees, operating 248 franchised businesses each with a territory of approximately 125,000 households and open during the 2021 Reporting Period, that had orders that were not excluded orders

• 2021 average gross sales, cost of goods sold, gross margin, and annual rebates for the 43 ShelfGenie franchisees, operating 248 franchised businesses each with a territory of approximately 125,000 households and open during the 2021 Reporting Period, that had orders that were not excluded orders

• Section VI – Key ratios, comparables, computations, and analyses for the ShelfGenie franchise opportunity (exclusive content for Platinum subscribers)

Section I – ShelfGenie Franchise Costs

• ShelfGenie franchise costs (Executive Franchise), based on Item 7 of the company's 2022 FDD:

• Initial Franchise Fee:  $69,500 + $200 per 1,000 additional households over 250,000 up to a total of 375,000 households
• Leasehold Improvements:  $0 to $1,000
• Vehicles:  $0 to $1,500
• Furniture, Home Show Display, and Fixtures:  $0 to $20,000
• Technology and Office Equipment; Supplies:  $500 to $2,000
• Insurance:  $2,000 to $4,500
• Advertising & Promotional and Local Marketing Spending for First Three Months:  $12,500
• Training, Travel, Lodging, and Food:  $1,000 to $3,500
• Business Licenses and Permits:   $100 to $1,000
• Professional Fees:  $0 to $5,000
• Additional Funds for 3 Months:  $5,000 to $15,000
• Total Estimated ShelfGenie Franchise Costs:  $90,600 to $135,500 (plus any additional franchise fee)

Section II – ShelfGenie's Initial Franchise Fee, Royalty Fee, and Marketing Fee

• ShelfGenie's initial franchise fee, royalty fee, and marketing fee, based on Items 5 and 6 of the company's 2022 FDD:

• Initial Franchise Fee:  Executive Franchise – $69,500; Owner/Operator Franchise – $29,500
  

• License Fee:  Executive Franchise – the greater of $400 per month (minimum license fee) or 5% of Gross Sales; Owner/Operator Franchise – the greater of $200 per month (minimum license fee) or 5% of Gross Sales

• Marketing, Advertising, and Promotion (MAP) Fund Fee:  2% of Gross Sales, in addition to Minimum Local Marketing Spending

• Digital Marketing Fees:  currently, $750 per month per franchisee, plus $150 per month per territory (i.e., per each approximately 125,000-household territory)

• Local Marketing Groups (LMGs):  not to exceed 3% of Gross Sales. Your contribution to the LMG will count towards any required Minimum Local Marketing Spending but any required Minimum Local Marketing Spending will not represent a limit on your LMG contributions.

• Minimum Local Marketing Spending:  Executive Franchise: during the first 2 months in operation you must spend a minimum of $10,000, then for the next 10 months you must spend a minimum of $2,500 per month per territory (on a rolling 3-month average). For each month after the first year of operations, you must spend a minimum of $1,625 per month per territory (on a rolling 3-month average). Owner/Operator Franchise: during the first 2 months in operation you must spend a minimum of $5,000, then for the next 10 months you must spend a minimum of $1,250 per month (on a rolling 3-month average). For each month after the first year of operations, you must spend a minimum of $625 per month (on a rolling 3-month average).

Section III – Number of Franchised and Company-Owned ShelfGenie Outlets

Franchised

2019

• Outlets at the Start of the Year:  120
• Outlets at the End of the Year:  143
• Net Change:  +23

2020

• Outlets at the Start of the Year:  143
• Outlets at the End of the Year:  178
• Net Change:  +35

2021

• Outlets at the Start of the Year:  178
• Outlets at the End of the Year:  227
• Net Change:  +49

Company-Owned

2019

• Outlets at the Start of the Year:  54
• Outlets at the End of the Year:  21
• Net Change:  -33

2020

• Outlets at the Start of the Year:  21
• Outlets at the End of the Year:  18
• Net Change:  -3

2021

• Outlets at the Start of the Year:  18
• Outlets at the End of the Year:  16
• Net Change:  -2

Section IV – Background Information on the ShelfGenie Franchise

12 Things You Need to Know About the ShelfGenie Franchise

Parent Company Targets Canada for Significant Expansion

1.  In late June 2022, Neighborly announced its plans for massive expansion across five Canadian markets, including Toronto, Kitchener/Waterloo, Ottawa, Calgary, and Vancouver. Over the next several years, Neighborly looks to establish 100+ new franchise units within these five markets across 11 of the organization's trusted brands.

2.  According to Brad Stevenson, chief development officer of Neighborly, "With home improvement industry sales reaching approximately 52.5 billion Canadian dollars in 2020 and the sales value projected to continue growing in the coming years, there's no better time to break into the home service space in Canada than now. Homeowners in Canada are in search of the professional services we offer as the desire to repair, maintain and enhance their homes is increasing given the current state of the housing market, making our five target markets ripe with potential for aspiring entrepreneurs to franchise with Neighborly."

3.  The following 11 Neighborly brands are actively seeking both multi-unit and single-unit prospective owners across all the identified available Canadian markets, with the bulk of these new franchise ownership opportunities present in Toronto and Vancouver:

• Aire Serv
• Dryer Vent Wizard
• Five Star Painting
• The Grounds Guys
• Glass Doctor
• HouseMaster
• Mr. Appliance
• Mr. Electric
• Mr. Handyman
• Rainbow International
• ShelfGenie

4.  As a member of the Canadian Franchise Association (CFA), Neighborly is regularly involved in the country's biggest franchise candidate shows, such as the Toronto show that took place earlier this year as well as the upcoming Fall Show in downtown Toronto.

5.  Stevenson added, "Our increased involvement with the Canadian Franchise Association has opened new doors to inclusion in franchise opportunities across Canada, and as we continue pursuing our growth initiatives, we are excited to share our values and business goals with prospective franchise owners who believe in our business model just as much as we do. We look forward to forming partnerships with new franchise owners looking to give back to their neighborhoods by teaming up with a trustworthy, values-driven brand offering home services."

Ranked Among Top Franchises in Entrepreneur's Franchise 500 Along with 14 Other Neighborly Brands

6.  In early February 2022, Neighborly brands ShelfGenie, Aire Serv, Five Star Painting, The Grounds Guys, HouseMaster, Glass Doctor, Molly Maid, Mosquito Joe, Mr. Appliance, Mr. Electric, Mr. Handyman, Mr. Rooter, Precision Door Service, Rainbow International, and Real Property Management were all included among the top 500 franchises in Entrepreneur's Franchise 500, the world's first, best, and most comprehensive franchise ranking.

7.  Brad Stevenson, chief development officer of Neighborly, said, "I am filled with pride at the significant presence our deserving Neighborly brands have in this year's Franchise 500 ranking, especially when positioned alongside so many other impressive franchise organizations. Our global franchise network has worked tirelessly in spite of the various challenges brought on by the pandemic to deliver the best we can to the communities we serve while also continuously adding value of the franchise opportunities we provide and achieving this recognition on behalf of so many of our brands is a testament to the positive impacts we're making as a result of this collective dedication."

9.  The 43rd annual Entrepreneur Franchise 500 is a highly sought-after honor in the franchise industry. Recognized as an invaluable resource for potential franchise owners, the 2022 Franchise 500 ranks these 15 Neighborly brands for their outstanding performance in areas including unit growth, financial strength and stability, and brand power:

• ShelfGenie: #303
• Molly Maid: #69
• Mr. Rooter: #131
• Rainbow International: #139
• Mr. Appliance: #154
• Real Property Management: #196, Ranked #1 in Category
• Mosquito Joe: #207, Ranked #1 in Category
• Aire Serv: #231, Ranked #1 in Category
• Glass Doctor: #232, Ranked #1 in Category
• Five Star Painting: #237
• Mr. Electric: #240, Ranked #1 in Category
• HouseMaster: #275
• Mr. Handyman: #286
• Precision Door Service: #323, Ranked #1 in Category
• The Grounds Guys: #400

9.  Jason Feifer, editor-in-chief of Entrepreneur, said, "The past year has been one of the most challenging for businesses in recent memory, which made putting together our 43rd annual Franchise 500 list more enlightening than ever. The companies named to this year's list showed us how being resilient, supportive, and nimble can help navigate extraordinary challenges and also underscore the grit and innovation that define entrepreneurship."

Company History

10.  ShelfGenie was originally founded as Shelf Conversions in 2000 by Andrew Kerwin in Richmond, Virginia. Kerwin dropped out of college and started his own business. After installing some shelving for his parents and neighbors, Kerwin developed the idea for ShelfGenie to offer custom shelving and storage solutions. After a few years, Kerwin hired business consultant Allan Young to figure out how to grow the business. Young helped Kerwin build a dealer model that expanded Shelf Conversions across the U.S. and into Canada.

11.  Young became a partner in the company and ShelfGenie began franchising in 2007. Over the next few years, ShelfGenie continued to grow and Young became the company's CEO. Young's leadership fueled ShelfGenie's growth. In 2018, Andy Pittman was appointed as ShelfGenie's CEO. Pittman was one of ShelfGenie's first franchisees and eventually served as the company's COO.

12.  After a few more years of success, ShelfGenie was acquired by Neighborly in October 2020. Neighborly's portfolio includes 27 service brands and 4,300 franchises serving 10 million customers in nine countries. As part of the acquisition, Pittman became ShelfGenie's president.

Entrepreneur's 2022 Franchise 500 List

13.  ShelfGenie ranked No. 303 on Entrepreneur's 2022 Franchise 500 list.

Section V – Financial Performance Representations (Average Revenues and/or Profits) for the ShelfGenie Franchise (Item 19, 2022 FDD)

• As of December 31, 2021, there were a total of 227 ShelfGenie franchised businesses. Such total of 227 franchised businesses consisted of 45 franchised businesses with approximately 250,000 household territories and 182 franchised businesses with approximately 125,000 household territories.

• For purposes of consistency, ShelfGenie has reported the number of businesses for purposes of this Item 19 such that each of the 45 franchised businesses (with 250,000-household territories) were treated as two businesses (each business with a 125,000-household territory), resulting in a total of 272 franchised businesses each with a territory of approximately 125,000 households.

• Of these 272 businesses, 248 businesses (the "Reporting Businesses") were open during the reporting period of January 1, 2021 through December 31, 2021 (the "Reporting Period"). Excluded from this Item 19 are 7 franchisees (operating a total of 24 franchised businesses) who did not have at least one franchised business open for the entire Reporting Period.

• Businesses that closed during the Reporting Period are excluded from the data reported in this Item 19. Seven ShelfGenie franchised businesses closed during 2021. Of the 7 businesses that closed, no business closed after being open for less than 12 months.

• The following tables present information regarding the (a) average and median Gross Sales per Order for the Reporting Period, (b) systemwide percentage of Appointments Resulting in a Closed Order for the Reporting Period, and (c) the average gross sales, cost of goods sold, sales per territory, gross margin, and annual rebate amount for each franchisee (by market) for the Reporting Period.

• The following tables also include the number of ShelfGenie businesses (i.e., 125,000-household territories) owned by those franchisees included in the data for each applicable chart; however, the average and median Gross Sales per Order amounts and the systemwide Percentage of Appointments Resulting in a Closed Order include Gross Sales, orders, and appointments from adjacent territories operated by the franchisees where the franchisee does not own the territory but has the right to offer and provide services in the additional territory under an "Out of Area" Amendment to its Franchise Agreement. Not all franchisees operate in additional territories under an Outside Assigned Territory Amendment; however, those that do, report Gross Sales per order and appointment information to ShelfGenie, which is included in the financial disclosures in this Item 19.

• ShelfGenie obtained the data included in these tables from information provided to it by its franchisees through the company's software program for the Reporting Period. Neither ShelfGenie nor its independent certified public accountants have audited or verified any of the sales and other figures reported to ShelfGenue. Franchisees are not required to use generally accepted accounting principles when reporting these figures.

Part 1 – Average and Median Gross Sales Per Order for System During 2021 Reporting Period

All ShelfGenie Franchisees Operating for All of 2021 That Had Orders That Were Not Excluded Orders

• Number of Reporting Franchisees:  43
• Number of ShelfGenie Businesses (i.e., 125,000-Household Territories) Owned by Reporting Franchisees:  248
• High Gross Sales Per Order:  $5,329
• Average Gross Sales Per Order:  $4,121
• Median Gross Sales Per Order:  $4,044
• Low Gross Sales Per Order:  $3,120

• "Franchisee" refers to an individual or entity that is ShelfGenie's franchisee that operated at least one ShelfGenie Business for the Reporting Period. Several of ShelfGenie's Franchisees own and operate multiple ShelfGenie Businesses which are typically for territories that share common borders in the same region.

• If a franchisee operates multiple ShelfGenie Businesses in the same metropolitan area (each a "Market"), such franchisee is counted in the definition of Franchisees only once for such Market, and if a franchisee operates ShelfGenie Businesses in multiple Markets, such franchisee is counted in the definition of Franchisee once for each such Market.

• The chart reflects Franchisees that were open for 12 full months throughout the Reporting Period. However, for some Franchisees with multiple Businesses/territories, some of the multiple Businesses or territories may not have been open for the entire Reporting Period.

• In calculating the Average Gross Sales per Order for the System, ShelfGenie excluded all Excluded Orders. Average Order for the System does not include any sales taxes that were collected or paid in connection with the orders.

• "Excluded Orders" refers to orders that were for friends or family, charitable events, and employees involving a discount of 80% or more off the franchisee's suggested retail price and were not a true representation of an actual customer order. An order having a discount of 80% or more off the Franchisee's suggested retail price indicates or suggests (a) the order was a reorder of products, (b) the order was for personal or display usage, and/or (c) the order was not an arms-length sales transaction.

• For repeat customers, each order for a project placed by a customer is treated as a separate order.

Part 2 – Percentage of Customer Appointments That Resulted in a Closed Customer Order During 2021 Reporting Period

All Reporting Franchisees for All of 2021 That Had Orders That Were Not Excluded Orders

• Number of Reporting Franchisees:  43
• Number of ShelfGenie Businesses (i.e., 125,000-Household Territories) Owned by Reporting Franchisees:  248
• Total Number of Appointments for the System (not including Excluded Orders):  17,508
• Total Number of Closed Orders for the System Resulting from Appointments (not including Excluded Orders):  9,984
• Percentage of Appointments Resulting in a Closed Order (not including Excluded Orders):  57.0%

• An "Appointment" is viewed as an initial meeting at a customer's home or business where the work will be performed.

• A "Closed Order" is an order where a Franchisee reported a sale to a customer. A Closed Order may involve more than one meeting with the same customer to close the sale.

• In the event of a new order by a customer, the new order is treated as an additional Closed Order with an additional Appointment.

Part 3 – 2021 Franchisee Average Gross Sales, Cost of Goods Sold, Gross Margin, and Annual Rebate Amount

• Included in the chart below is data for the Reporting Period for 43 Franchisees who owned and operated a total of 248 ShelfGenie Businesses during the Reporting Period.

• If a franchisee operates multiple ShelfGenie Businesses in the same metropolitan area (each a "Market"), such franchisee is counted in the definition of Franchisees only once for such Market, and if a franchisee operates ShelfGenie Businesses in multiple Markets, such franchisee is counted in the definition of Franchisee once for each such Market.

• Number of Reporting Franchisees:  43
• Number of ShelfGenie Businesses (i.e., 125,000-Household Territories) Owned by Reporting Franchisees:  248
• Average Gross Sales:  $950,470
• Average Gross Sales Per Territory:  $189,539
• Average Cost of Goods Sold:  $265,002
• Average Gross Margin:  71.7%
• Average Annual Rebates:  $18,132

• Cost of Goods Sold ("COGS") means the cost of the Core Products (e.g., shelving, cabinets, etc.) sold by the franchisee to the customer as well as freight costs.

• COGS does not include (i) miscellaneous items like clips, spacers, and other supplies that may be necessary to install the Core Products, (ii) insurance, shipping, freight, and delivery charges for the Core Products, and (iii) any sales tax, use tax, or other taxes that may be due in connection with franchisee purchases of Core Products.

• COGS does not include any additional manufacturing rebates that Manufacturing or Manufacturing's predecessor (as applicable) may have offered during the Reporting Period.

• The term "Gross Sales" includes the total revenues and receipts from whatever source (whether in the form of cash, credit, agreement to pay, barter, trade, or other consideration) that arise, directly or indirectly, from the operation of or in connection with a ShelfGenie business whether under any of the Marks or otherwise.

• Gross Sales exclude sales taxes collected from customers and paid to the appropriate taxing authority and any other bona fide refunds, rebates, or discounts that ShelfGenie authorizes in writing. Gross Sales also exclude sales from any Excluded Services (as defined in a mutually executed Excluded Services Addendum).

• "Gross Sales Per Territory" were calculated by taking the total Gross Sales number for the applicable Market (as defined in the above table) and dividing the number by the number of territories included in the Market.

• "Gross Margin" is the proportion, expressed as a percentage, that each Franchisee's total Gross Sales, excluding COGS, represents in relation to each Franchisee's total Gross Sales before deducting COGS.

• The Rebate amounts included in the above chart are rebates that Franchisees received during the Reporting Period from G-O Manufacturing, L.L.C. (Manufacturing's predecessor) and/or Manufacturing, as applicable, based on purchases the Franchisees made from G-O Manufacturing, L.L.C. and/or Manufacturing. Rebates begin only after a Franchisee meets a minimum quarterly purchase threshold, imposed per franchised business.

• Each territory for purposes of the above table includes approximately 125,000 houses or households. The table is broken up by Market (defined above) (or portion thereof if multiple Franchisees operate within a single Market), such that there may be some Franchisees represented more than once if they operate in multiple separate Markets.

• Some have sold this amount. Your individual results may differ. There is no assurance that you'll earn as much.

Section VI – ShelfGenie Franchise Ratios, Comparables, Computations, and Analyses (Exclusive Content for Platinum Subscribers) ⬇️

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Source: https://www.franchisechatter.com/2022/07/25/fdd-talk-shelfgenie-franchise-costs-fees-average-revenues-and-or-profits-2022-review/

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