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

• Section I – Background information on the ZIPS Dry Cleaners franchise opportunity, including relevant news updates

• Section II – Estimated initial investment for a ZIPS Dry Cleaners franchise, based on Item 7 of the company’s 2018 FDD

• Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for a ZIPS Dry Cleaners franchise, based on Items 5 and 6 of the company’s 2018 FDD

• Section IV – Number of franchised and company-owned ZIPS Dry Cleaners outlets at the start of the year and the end of the year for 2015, 2016, and 2017, based on Item 20 of the company’s 2018 FDD

• Section V – Presentation and analysis of ZIPS Dry Cleaners’ financial performance representations, based on Item 19 of the company’s 2018 FDD, including information on the:

• 2017 average revenue, cost of production supplies, gross margin, labor, rent, repairs and maintenance, utilities, and income before general and administrative expenses for the 43 ZIPS Dry Cleaners Businesses operated by franchisees during the period January 1, 2017 through December 31, 2017

Section I – Background Information

18 Things You Need to Know About the ZIPS Dry Cleaners Franchise

Aggressively Pursuing Growth

1.  Around the end of June 2018, ZIPS Dry Cleaners said that it had been on a recent roll and was “growing with gusto.” According to a press release, ZIPS has a burgeoning development pipeline and recently signed franchise deals for more than 200 locations, with plans to make its presence known in 10 states by the end of next year, and double that number in 2020.

2.  Drew Ritger, CEO of ZIPS Dry Cleaners, said, “ZIPS has received phenomenal interest during the past year from potential investors and the concept is considered the best in the garment care business by a number of franchise publications. We are humbled by the recognition and investment, and believe the brand is well positioned for growth to provide superior returns to our franchisees in the days ahead. We expect ZIPS to be a recognizable and profitable national brand by 2030 with sales approaching $1 billion annually.”

3.  Ritger added that in the past year, ZIPS has entered the new markets of Texas and California, with Florida, Indiana, Oregon, and Ohio on deck. Along with existing market expansion, target markets for future new growth include Atlanta, Raleigh, and Charlotte, North Carolina; Nashville, Tennessee; Dallas, Texas; Denver, Colorado; Chicago, Illinois; and Minneapolis, Minnesota.

4.  Over the next few years, Ritger expects to build ZIPS into a national brand, with a $1 billion future. Other goals that Ritger outlined include: 100 stores and $150 million in annual sales; store count growth that exceeds 25 percent after 2021; a development pipeline of over 350 stores; and No.1 market share in each market.

5.  To reach these goals, ZIPS is expanding with existing franchisees and new, seasoned multi-unit operators. Ritger said, “This is encouraging, as it expresses faith in the business, brand, and market segment going forward. We are also pleased that our current franchise base is reinvesting in the brand in our core markets. ZIPS is a market disruptor that is well positioned to gain market share in the markets where we invest. It is exciting to see other experienced multi-unit franchisees accept our strategy and invest in the brand.”

Receives Platinum Award for Website Redesign

6.  At the end of September 2018, ZIPS Dry Cleaners’ newly-redesigned website (www.321zips.com) won the Platinum Award for “Best Website Redesign” from the prestigious 2018 dotCOMM Awards, an international competition honoring excellence in web creativity and digital communication.

7.  The company’s redesigned, mobile-friendly website gives visitors a comprehensive understanding of the brand’s services and also provides “ZIPS Tips” for keeping clothes fresh at home. The website even answers the question of how ZIPS is able to offer such high-quality services at the low price of $2.29 per garment.

8.  The redesign comes just a few months after ZIPS rebranded in an effort to strengthen its online presence, keep up with digital trends, and target a younger demographic: millennials. The responsive, thoughtfully-designed website was created by franchise marketing agency Wheat Creative.

9.  Enid Traub, vice president of marketing for ZIPS Dry Cleaners, said, “It’s been nearly a decade since we’ve redone our website. We know our customers will appreciate the sleek, modern design and ease of navigation and now we have a website that is as one-of-a-kind as our one-price, same-day business model.”

CEO Retirement and New Appointment

10.  In late 2017, ZIPS Dry Cleaners announced that Reid Bechtle would retire as chief executive officer and that the board of directors had elected Andrew Ritger, Jr. (“Drew”) to be the company’s next CEO.

11.  Bechtle had served as CEO of ZIPS since April 2013, when he was brought on to move the company through its next phase of growth, including improved execution of the existing system and further geographic expansion of the concept. Under Bechtle’s leadership, ZIPS has grown from 36 to 52 locations across the country, and today has a total active franchise pipeline that stands at more than 250 stores.

12.  Jim Bolduc, senior managing director for JPB Capital Partners, the majority owner of ZIPS, said, “We are grateful for the accomplishments and results that ZIPS has achieved under Reid’s leadership and we wish him well in his retirement and the next phases of his life. He has put a solid foundation in place on which to build the next level of ZIPS’ success.”

13.  Ritger came to ZIPS after spending nearly 22 years with Sonic Corporation. In his most recent role as the senior vice president for development, Ritger led Sonic in adding over 1,850 new stores, increasing revenue by 95%, and improving operational performance by focusing on key customer performance measures.

14.  Bolduc added, “We are excited about Drew joining ZIPS as our next CEO. Drew is a proven leader in the franchise world. His experience and expertise in opening stores, leading operations, growing profits and revenue, and forming strong, long-term employee, franchisee, vendor, and community relationships will be a tremendous asset in making ZIPS a national brand and a market leader in its segment.”

Company History

15.  ZIPS Dry Cleaners started out as eight separate dry cleaners in the Baltimore-Washington, D.C. area. In 2002, the group of independent dry cleaners came together to establish ZIPS with the goal of providing a dry cleaning experience that maintains high-quality services at one low price for any garment. ZIPS started franchising in 2006 and the concept was a success.

16.  Although the original 14 owners of ZIPS were able to grow the brand without outside help for a while, JPB Capital Partners of Columbia, Maryland bought a large share of the company in 2013. JPB Capital brought in a full-time CEO, Reid Bechtle, who helped push ZIPS’ growth even further.

17.  Today, ZIPS Dry Cleaners is led by its new CEO Drew Ritger and continues to grow across the country.

Entrepreneur’s Franchise 500

18.  ZIPS Dry Cleaners ranked No. 135 on Entrepreneur’s 2018 Franchise 500 list.

Section II – Estimated Costs

• Please click here for detailed estimates of ZIPS Dry Cleaners franchise costs, based on Item 7 of the company’s 2018 FDD.

Section III – Initial Franchise Fee, Royalty Fee, Marketing Fee, and Other Fees

• Please click here for detailed information on ZIPS Dry Cleaners’ initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2018 FDD.

Section IV – Number of Franchised and Company-Owned Outlets

Franchised

2015

• Outlets at the Start of the Year:  37
• Outlets at the End of the Year:  41
• Net Change:  +4

2016

• Outlets at the Start of the Year:  41
• Outlets at the End of the Year:  45
• Net Change:  +4

2017

• Outlets at the Start of the Year:  45
• Outlets at the End of the Year:  51
• Net Change:  +6

Company-Owned

2015

• Outlets at the Start of the Year:  1
• Outlets at the End of the Year:  1
• Net Change:  0

2016

• Outlets at the Start of the Year:  1
• Outlets at the End of the Year:  1
• Net Change:  0

2017

• Outlets at the Start of the Year:  1
• Outlets at the End of the Year:  2
• Net Change:  +1

Section V – Financial Performance Representations (Item 19, 2018 FDD) and Analysis

• Presented below are the average total revenue, average total cost of goods, average total gross margin, and average cost of labor, rent, repairs and maintenance, and utilities data for 43 ZIPS Dry Cleaners Businesses operated by franchisees during the period January 1, 2017 through December 31, 2017.

• All 43 Franchised Businesses were open and operating during the 12-month period January 1, 2017 to December 31, 2017. These Franchised Businesses are located in the District of Columbia, Maryland, Pennsylvania, and Virginia.

• Six Franchised Businesses are not included because they were not in operation for the entire year and two Franchised Businesses are not included because they did not provide financial detail for the entire year.

• This data was compiled from unaudited financial statements submitted to the franchisor by the Franchised Businesses. The franchisor believes the information is accurate, but it has not audited or verified the information and cannot verify that the information was compiled using consistently applied accounting principles.

• Revenue – This figure is an average of all income and revenue from the sale of all services and products to customers less refunds to customers, discounts, and store value gift cards and gift certificates.

• Production Supplies – The average Production Supplies includes the total costs of all services and products sold at ZIPS Dry Cleaners Businesses (such as alterations, supplies, leather costs, dry cleaning and laundry supplies, and waste disposal). These costs may vary from year to year, or within a year, due to fluctuations in the prices of supplies and/or materials, transportation costs, and/or shipping costs.

• Gross Margin – This figure represents the Revenue minus the Production Supplies.

• Labor – Labor includes salary, payroll taxes, wages, or benefits (including vacation pay) for management personnel and employees. Each ZIPS Dry Cleaners Business compensates its managers differently and may use varied formulas. Franchisees may compensate managers differently or may compensate one or more individual owners in lieu of one or more managers.

• Rent – This includes rent, property taxes, and miscellaneous items. Rent consists of minimum rents, percentage rents, common area maintenance charges, and any sales or other taxes. Property taxes are real estate taxes and assessments levied against the property upon which the business is located.

• Repairs and Maintenance – This includes equipment and facility repair and maintenance.

• Utilities – This includes alarm system monitoring, satellite, telephone, internet and cable costs, and charges for water, gas, and electric. The charges for water are included in either the Utilities category or the Rent category, depending upon whether such charges are payable under the terms of the lease for the particular ZIPS Dry Cleaners Business.

• Income Before General and Administrative Expenses – This figure represents the Gross Margin minus Labor, Rent, Repairs and Maintenance, and Utilities, as defined above.

System-wide ZIPS Dry Cleaners Businesses – Statement of Average Total Revenue, Total Cost of Goods, Total Gross Profit, and Total Certain Costs (During Period January 1, 2017 to December 31, 2017)