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FDD Talk 2016: The California Closets Franchise Opportunity (Financial Performance Analysis, Estimated Costs, and Other Important Stuff You Need to Know)

by Franchise Chatter on November 17, 2016

in FDD Talk 2017: Home-Related Franchises, Franchise Earnings, Storage Franchise



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In this FDD Talk 2016 post, you’ll learn the following:

  • Section I – Background information on the California Closets franchise opportunity, including relevant news updates
  • Section II – Estimated initial investment for a California Closets franchise, based on Item 7 of the company’s 2016 FDD
  • Section III – Presentation and analysis of California Closets’ financial performance representations, based on Item 19 of the company’s 2016 FDD, including information on the:
  • 2015 average and median gross revenue for the first quartile, second quartile, third quartile, fourth quartile, and all 48 California Closets franchisees operating 67 franchised outlets that were open and operating for more than 12 months as of December 31, 2015 for whom California Closets has complete sales data
  • 2015 average closing rate and gross revenue per job for all California Closets franchisees, including those operating nationally and internationally

Section I – Background Information

California Closets was started back in 1978-1979 with a firm belief that exceptional design transforms people’s lives. The philosophy behind the franchise is that people’s homes need to be functional, but they also need to be more than that. If a person’s home is going to serve as a place of refuge and comfort, of celebration and connection, it needs to work. A good starting place is custom storage solutions because when your stuff is organized, then you have more headspace to focus on the things that matter most.

This is not about installing a few shelves in a closet – the company offers premium and luxury space management services. Customers meet with designers in a California Closets showroom to discuss needs and the designers come up with a proposal. The workshop then puts together the needed materials that are then installed in the customer’s home.

Here’s how California Closets helps customers make the most of the space they have in the storage management segment:



Franchising Began in 1982

The number of locations dropped steadily from a high of 120 in 2006 down to a low of 87 in 2010. From there, the number has slowly climbed back up and is just over 100 franchises today, comprised of 120 showrooms and 700 designers, and includes offering services in parts of Canada, the Dominican Republic, Mexico, and Puerto Rico.

More Than Closets

The company’s main focus may be closets, but they’ll tackle a variety of spaces that need help, including utility rooms, garages, home offices, entertainment rooms, and other parts of the home.

And tackling those organization issues with California Closets can begin with a free consultation so you can find out what you’re really up against. Using CAD software, the designer can immediately bring ideas to life and show you what their plans look like.

Ambitious Growth Plans

Given the company’s decline in terms of number of locations from 2006 to 2010, it’s surprising to learn that it plans on growing to 300 showrooms and 1,600 designers within five years. Then again, the company has added more than 20 locations in recent years, so there is some upward momentum to build upon.

The company did set a new record for annual sales in 2014, and the website mentions it is “…currently building the next generation of automated, lean manufacturing facilities and exploring moves into complementary merchandise lines, distribution channels, and geographic markets.”

Focusing on the Customer Experience

Custom storage solutions are the new must-have luxury among the 21st century people who are constantly on the go and continually connected. These trends are making people think of their homes as places of retreat from the hustle and bustle of life more than ever.

California Closets positions itself as a high-end service, and makes sure the customer experience matches, with white glove installation service performed by trained California Closets installers and never contracted out.

Sustainability

A new focus for the company is making many of its products more sustainable, including California Air Resources Board-certified pieces (items made from recycled and reclaimed wood) that meet LEED-Platinum standards, which is no small feat.

Section II – Estimated Costs

  • Please click here for detailed estimates of California Closets franchise costs, based on Item 7 of the company’s 2016 FDD.

Section III – Financial Performance Representations (Item 19, 2016 FDD) and Analysis



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