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Earnings Claims of Top Franchises Revealed

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Franchise Costs: Detailed Estimates of California Closets Franchise Costs (2016 FDD)

by Franchise Chatter on October 29, 2016

in Franchise Costs, Storage Franchise

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Detailed Estimates of California Closets Franchise Costs Based on Item 7 (Estimated Initial Investment) of California Closets’ 2016 Franchise Disclosure Document

For a Showroom

1.  Initial Franchise Fee:  $40,000

  • The Initial Franchise Fee for a Showroom is $40,000.

2.  Initial Training Fee:  $6,000

  • This fee covers the cost for you and up to 2 additional persons with initial Showroom training.
  • The initial training program consists of: (i) completion of the basic training program; and (ii) 5 days with a mentoring franchisee in the mentor’s Marketing Area.
  • You are responsible for your and your employees’ travel, meal, and lodging expenses associated with attending training.

3.  Showroom Rent:  $12,000 to $50,000

  • Showrooms are typically centrally-located within the Marketing Area, in close proximity to residential areas within a shopping district of like businesses, including a mix of high end retail businesses, and close to or on a main throughway. Strip malls or retail improvement/design centers are preferred.
  • The estimate shown in the chart is for a Showroom of 1,000 to 2,500 square feet.
  • The estimate does not include lease deposit, taxes, or insurance.
  • Rental rates vary considerably depending upon the type of location and the market conditions affecting commercial property in your area.
  • In addition to the display area, you will need office space to accommodate the owner, manager, and design consultants’ offices.
  • The franchisor anticipates the initial investment period to be 6 months.

4.  Showroom Improvements:  $25,000 to $125,000

  • Leasehold improvements include permanent construction items such as drywall, flooring, cabinets, countertops, and electric.
  • Your cost for leasehold improvements to an existing building will vary depending upon the size of your Showroom and its geographic location.
  • If you are converting an existing business into a Showroom, your costs may be higher or lower depending on the available assets, fixtures, and conversion costs.
  • Construction costs in some areas of the country may exceed these estimates.
  • Your landlord may provide many or all of these tenant improvements at no additional cost to you.

5.  Inventory and Supplies to Commence Operations:  $2,500 to $5,000

  • This estimate includes the cost of inventory items such as door and drawer inserts, home and home office hardware and accessories, magnetic locks, and acrylic parts.

6.  Equipment, Tools, and Furnishings:  $5,000 to $10,000

  • The estimated range is for a typical Showroom. For the Showroom, you will need office equipment, display racks, desks and chairs, furniture for a reception area, and furniture for additional client meeting spaces.
  • The franchisor will provide you with a list of equipment and approved vendors after you sign the Franchise Agreement.

7.  Technology Platform:  $7,500 to $15,000

  • You must subscribe to CC Dashboard and use CAD software in your franchised business.
  • CC Dashboard is a web-based, full-cycle customer relationship management software database application. The estimate in the chart includes the cost of CC Dashboard for one user ($541 per user per year).
  • The estimate also includes three computers for the franchised operations – one back office/production user, one front office/customer liaison user, and one design consultant.
  • You must have a broadband Internet connection for access to the franchisor’s extranet and other programs.
  • Renewing franchisees and buyers of existing California Closets businesses will also incur a one-time charge to convert their existing customer database to the CC Dashboard application. The franchisor estimates that this conversion will cost from $500 to $3,000. The owner of the source code for CC Dashboard will bill you directly for the conversion charge.
  • The estimate assumes that you purchased the CAD Software for two users.

8.  Motor Vehicle:  $3,000 to $30,000 per van

  • You will need at least one van for the franchised business. The van must bear decals and be equipped and designed in accordance with the franchisor’s standards and specifications.
  • If you elect to lease rather than purchase the van, your initial costs will likely be less than shown in the chart.

9.  Utility Deposits – Other Prepaid Expenses:  $500 to $5,000

10.  Pre-Opening Employee Wages:  $10,000 to $36,000

  • You will need to bring on staff to help you prepare for opening. The estimate is for three full-time staff members’ wages for three months.

11.  Advertising/Promotion:  $20,000 to $40,000

  • The amount spent on initial advertising will depend on the size of your market area and may include yellow pages ads, billboards, search marketing programs, direct mail, local print, radio and television, an initial supply of marketing materials, and a Showroom event.

12.  Sales Support Items:  $2,000 to $5,000

  • You will need a variety of materials for sales presentations to prospective customers, such as presentation folders, brochures, proposal forms and contract forms, and business cards and stationery.

13.  Travel and Lodging for Training:  $4,000 to $10,000

14.  Insurance:  $10,000 to $16,000

  • The estimate in the chart is the first year’s premium for liability insurance only. The franchisor also requires other types of insurance, but it does not have adequate data from franchisees to provide a meaningful estimate of the cost.
  • The cost of workers’ compensation insurance will vary according to the number of employees of the franchised business and may vary widely from state to state.
  • The franchisor also encourages you to secure employment practices insurance but have not included an estimate in this Item as it varies widely from state to state and based upon the number of employees.

15.  Legal and Accounting:  $1,000 to $10,000

16.  Additional Funds – 3 Months:  $10,000 to $30,000

  • This is an estimate of additional funds you will need before opening and during the initial period of operation, which the franchisor defines as 3 months from the opening of the franchise.
  • You will have ongoing expenses for rent, utilities, materials, advertising and promotion, payroll, taxes, and benefits for employees.
  • The estimate does not include any finance charges and related costs of such financing if you obtain financing for the initial investment.
  • You should not expect to draw income from the franchised business during the initial phase.
  • The franchisor based this estimate in part on information reported to it by its existing franchisees. It cannot guarantee that you will not incur additional expenses.
  • Your actual costs will depend on factors such as your conformance with the franchisor’s recommended methods of doing business; the demographics and economic conditions in your Marketing Area; competition; your management skill, experience, and business acumen; the prevailing wage rate in your area; and sales levels reached by the franchised business during the initial period.

17.  Total:  $158,500 to $433,000

For a Manufacturing Facility

  • The total estimated initial investment necessary to begin operation of a California Closets manufacturing facility ranges from $288,500 to $927,000.

For a Design and Sell Model

  • The total estimated initial investment necessary to begin operation of a California Closets design and sell model ranges from $96,500 to $185,000.

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