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FDD Talk: Average Monthly Gross Margin and Net Profits for Reporting Welcomemat Services Franchisees (2013 FDD)

by Franchise Chatter on February 28, 2014

in Direct Mail Franchise, Franchise Earnings



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Highlights of Welcomemat Services’ Item 19 Financial Performance Representations (2013 FDD) – Part 1

  • Welcomemat Services offers qualified sales professionals the right to offer local businesses the ability to participate in its personalized monthly direct mail marketing campaigns directed to new movers in a defined area under the “Welcomemat Services” mark.
  • Welcomemat franchisees use the franchisor’s proprietary barcode tracking technology to offer local businesses the ability to track and monitor the success of their Welcomemat mailing campaigns.
  • The total investment necessary to begin operation of a home-based Welcomemat Services business ranges from $51,900 to $79,550. This includes the $37,700 to $39,000 in fees that must be paid to the franchisor or its affiliates prior to opening.

Preliminary Notes

  • WelcomeMat ServicesThis Item sets forth certain historical performance information reported by Welcomemat Services franchisees during the 2012 calendar year.
  • Specifically, Part I of this Item sets forth the average gross margin and average net profit for each of the franchisees 4th and subsequent monthly mailers sent between January 1, 2012 and December 31, 2012 (the “Measurement Period”).
  • Part II of this Item discloses the average number of certificates per zip code per month for each franchisee during the Measurement Period.
  • Part III of this Item sets forth the average set-up fee charged by franchisees to a new Welcomemat Client as well as the average cost to the Welcomemat Client per household in a franchisee’s Territory during the Measurement Period.
  • Part IV of this Item illustrates the gross margin and net profit earned by franchisees in connection with their first and second mailings during the Measurement Period.
  • This Item includes information for the 9 franchisees who were:
  • (i) open and actively operating during any portion of the 2012 calendar year; and
  • (ii) sent at least 3 mailings during the Measurement Period (the “Reporting Franchisees”)
  • Measurements for Part I begin after each franchisee’s third mailing, and measurements for Parts II-IV include all mailings sent during the Measurement Period
  • Excluded from all Parts of this Item 19 is information from one of its franchisees who was not actively operating their Welcomemat Business during the Measurement Period, and information from three of its franchisees that did not send 3 mailings during the Measurement Period.

Explanatory Notes for Part I – Average Monthly Gross Margin and Net Profits for Reporting Franchisees

  • Part I of this Item presents average monthly gross sales data and average monthly net sales data for the 4th and subsequent mailings during the Measurement Period of 8 Reporting Franchisees.
  • In Part I, the franchisor excluded the financial performance information for 1 Reporting Franchisee because this franchisee purchased a pre-developed market and was paying a special royalty that is different from the royalty rate paid by franchisees who purchase the franchisor’s standard offering.
  • The franchisor also excluded partial-year data from a second Reporting Franchisee who purchased a partially developed market and was paying a special royalty for 2 months during the Measurement Period. Accordingly, the franchisor excluded the data from those 2 months and included the remaining data from this Reporting Franchisee.
  • The system-wide “Average Monthly Gross Margin” was calculated by taking the sum of all of the Reporting Franchisees’ average monthly Gross Margin during the Measurement Period, and dividing it by the total number of Reporting Franchisees.
  • “Monthly Gross Margin” equals the “Monthly Gross Profit” divided by “Monthly Gross Income.”
  • Each Reporting Franchisee’s average Monthly Gross Margin was calculated by taking the sum of the Reporting Franchisee’s Monthly Gross Margin during the month and dividing it by the total number of months the Reporting Franchisee was in operation after its first Cycle during the Measurement Period.
  • “Monthly Gross Income” includes all income derived by a Reporting Franchisee during a month, including mailing revenues billed, shipping and handling billings, Punchpoints mobile revenue, and graphic design work.
  • “Monthly Gross Profit” is calculated by subtracting the cost of product/mailing, shipping and handling, bounceback printing, scan, mobile expenses, and graphic design work from the Reporting Franchisee’s Monthly Gross Income. Monthly Gross Profit does not include royalty and advertising fees due to the franchisor, labor expenses, costs of sales, or start-up costs associated with a Welcomemat Business.
  • The system-wide “Average Monthly Net Profit” was calculated by taking the sum of all of the Reporting Franchisees’ average monthly Net Profits during the Measurement Period, and dividing it by the total number of Reporting Franchisees.
  • “Monthly Net Profit” equals the Reporting Franchisee’s “Monthly Net Income” divided by the Reporting Franchisee’s “Monthly Gross Income.”
  • Each Reporting Franchisee’s average Monthly Net Profit was calculated by taking the sum of the Reporting Franchisee’s Net Profits during the Measurement Period and dividing it by the total number of months the Reporting Franchisee was in operation after its first Cycle during the Measurement Period.
  • “Monthly Net Income” equals the Reporting Franchisee’s Monthly Gross Profit during the Measurement Period less the Reporting Franchisee’s system marketing expenses, merchant fees for payment processing, invoicing fees, cancellation fees, royalty fees, and technology fees.

Part I – Average Monthly Gross Margin and Net Profits for Reporting Franchisees (Between January 1, 2012 and December 31, 2012)



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