FDD Talk: Chem-Dry Franchise Review (Financial Performance Analysis, Costs, Fees, and More)

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

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

• Section II – Estimated initial investment for a Chem-Dry 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 Chem-Dry franchise, based on Items 5 and 6 of the company’s 2018 FDD

• Section IV – Number of franchised and company-owned Chem-Dry 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 Chem-Dry’s financial performance representations, based on Item 19 of the company’s 2018 FDD, including information on the:

• 2017 number of owner groups, number of franchise licenses, average and median revenue per owner, average and median revenue per franchise, average and median revenue per job, percentage of owners exceeding average revenue per owner, and solutions as a percentage of revenue for the top 5%, first quartile, second quartile, third quartile, fourth quartile, bottom 5%, and all 247 Chem-Dry franchise owners who submitted complete 2017 financial information to the franchisor, have owned their businesses at least 2 years, and operated those franchises throughout 2017

Section I – Background Information

17 Things You Need to Know About the Chem-Dry Franchise

Adds Commercial VCT Cleaning to Franchise Capabilities

1.  In early October 2018, Chem-Dry added commercial vinyl composition tile, or VCT, cleaning to its roster of services for commercial clients. That means every Chem-Dry floor cleaning franchise owner now has the opportunity to bid on, and win, lucrative commercial work. Doug Smith, senior vice president of franchise development, said, “Our goal with the VCT cleaning and burnishing service is simple: help franchise owners make more money. This is an entire service line that was built to do just that.”

2.  Chem-Dry has always had a solid foothold in the commercial space. That, however, has in many cases been limited to office space where carpets, or more traditional tile or laminate flooring, has been installed. With the rise of new industrial construction, the opportunity for VCT work was just too good to pass up, Smith says. He added, “Warehouses and similar industrial space means that there’s a lot of VCT being put down now, and Chem-Dry franchise owners should be out there bidding on cleaning it. But that requires specific equipment and products for cleaning and burnishing. We didn’t have those, and now we do.”

3.  The whole-home cleaning model that Chem-Dry carpet cleaning franchise owners offer their customers is a valuable service because it means a single, trusted vendor for carpets, floors, upholstery, and more. Now the same can be offered to commercial clients. According to Smith, “Chem-Dry franchise owners in many markets have relationships with industrial sites, because they already clean the carpets and floors in their office areas. Now they can offer VCT as an extension of that work, which clients will appreciate. And for new clients, VCT cleaning and burnishing may get them in the door, and then they can talk about our other services as well. It’s a great opportunity either way.”

Celebrates First Anniversary of ‘Cleaning for the Paws’ Campaign

4.  At the end of August 2018, Chem-Dry celebrated its first year of collaboration with Best Friends Animal Society. In its first year, the “Cleaning for the Paws” campaign, which encourages pet adoption in the United States, raised more than $28,000 through fundraising activities and community events. That was well beyond the $25,000 goal set and has led to a second year of teamwork.

5.  Dan Tarantin, president of Chem-Dry, said, “We couldn’t be more thrilled with the effort and passion that our franchise owners invested in this program and the outcome we achieved — it was a rewarding experience from every perspective, but mostly with the impact we are having with Best Friends toward such an important cause. We are confident our second year of the partnership will build on the network participation and success we had this past year as we help even more rescue pets find homes.”

6.  Since Chem-Dry’s mission is to help people live more healthfully through its wide array of services, encouraging people to adopt rescue pets and helping families create a happy and healthy home for their families and pets is a perfect fit, Tarantin notes. Almost 85 percent of Chem-Dry carpet cleaning franchise customers own pets, so the partnership made good sense.

7.  During the first year, funds were raised through multiple methods, including the sale of specially marked cans of Chem-Dry World Famous Spot Remover — with each can generating a $1 donation to Best Friends — plus customer add-on donations, local promotional offers with a built-in donation, participation in Best Friends’ “Strut your Mutt” events around the country, and direct online donations at Chem-Dry Cares. Chem-Dry franchise owners from throughout 40 states participated in the program and accounted for the roughly 20,000 promotional cans that were sold.

8.  In the campaign’s second year, Chem-Dry has set a fundraising goal of $30,000. To achieve this goal, Chem-Dry had two major promotional pushes this year, one completed over the summer and one held in the fall. In addition, the company has continued its promotional can program and has printed up special Cleaning for the Paws T-shirts for franchisees who participate. Chem-Dry also expects to gain more involvement and support for local events, including Best Friends-organized “Strut Your Mutt” events, taking place in numerous cities across the country.

Announces Growth Plans for Ohio

9.  In mid-June 2018, Chem-Dry announced plans to add 10 new locations throughout Ohio. At the time of the announcement, Chem-Dry already had seven locations in the state. Chem-Dry said that it was focused on identifying ambitious entrepreneurs and franchise partners to accelerate its growth and open the new locations over the next year.

10.  The key impetus behind these aggressive growth plans is the increasing customer demand for Chem-Dry’s services and the untapped potential the category’s leading brand has across the state’s four metro areas. Kickstarting these developments are new franchisees Jordan and Tyler Tucci, who recently opened their Chem-Dry business in Licking County earlier this spring.

11.  Further fueling the company’s growth in the state and across the country are trends toward increased consumer spending on home services and the rising popularity of environmentally-friendly businesses. Cities being targeted for growth include Columbus, Cleveland, Dayton, and Cincinnati.

12.  Dan Tarantin, president and CEO of Harris Research, Inc., parent company of Chem-Dry, said, “Chem-Dry is a low-cost franchise that is capitalizing on the growing consumer demand for environmentally-friendly home maintenance and home improvement services, which has fueled the continued success of our franchisees in their local communities. We look forward to expanding our presence throughout Ohio as we welcome community-minded entrepreneurs and franchise partners to our system.”

13.  Also in the same announcement, Chem-Dry said it had plans to accelerate the growth of its franchise network in 2018 with the opening of over 110 new locations throughout the United States and Canada. Nearly 40 percent of Chem-Dry’s new units are coming from existing franchisees expanding their business. At the same time, the company is also looking for new individuals who are eager to pursue their dream of establishing and running their own business, and who want to partner with an industry-leading brand in a large and growing category with world-class training and support.

Company History

14.  Chem-Dry was founded in 1977 by Robert Harris in California. Prior to starting Chem-Dry, Harris was in law school at Brigham Young University in Utah and worked as a carpet cleaner for someone else. Harris was unsatisfied with the performance of the cleaning products he had to use and began to look for a better solution. Harris spent the next few years researching and studying the chemical properties of cleaning formulas. He also spent years testing the formulas he came up with on dirty carpets.

15.  Eventually, Harris developed a carbonated solution that not only cleaned beautifully, but was also safe and non-toxic. Chem-Dry and Harris’s cleaning solution were well-received and he began franchising the Chem-Dry concept in 1978. Over the next few decades, Harris continued to grow the company and in 2006, Chem-Dry was sold to Home Depot. A few years later, in 2011, Chem-Dry was sold to Baird Capital Partners, which is based out of Chicago.

16.  Today, Chem-Dry is one of the largest carpeting cleaning franchises in the world, with locations across the United States, Canada, Japan, Australia, New Zealand, Denmark, Ireland, The Netherlands, Serbia, Slovenia, Portugal, Thailand, Malaysia, Kuwait, India, Kazakhstan, Cambodia, and the United Kingdom.

Entrepreneur’s Franchise 500

17.  Chem-Dry ranked No. 137 on Entrepreneur’s 2018 Franchise 500 list.

Section II – Estimated Costs

• Please click here for detailed estimates of Chem-Dry 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 Chem-Dry’s 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:  2,096
• Outlets at the End of the Year:  2,098
• Net Change:  +2

2016

• Outlets at the Start of the Year:  2,098
• Outlets at the End of the Year:  2,103
• Net Change:  +5

2017

• Outlets at the Start of the Year:  2,103
• Outlets at the End of the Year:  2,050
• Net Change:  -53

Company-Owned

2015

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

2016

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

2017

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

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

• The franchisor does not currently require all Chem-Dry business franchise owners to provide periodic revenue and other financial reports concerning their franchises.

• In February 2018, the franchisor conducted a system-wide survey requesting that all franchise owners provide certain financial and other information relating to the operation of their Chem-Dry business franchises during 2017.

• As of December 31, 2017, Chem-Dry had 951 franchise owners who operated 2,103 Chem-Dry business franchises.

• The franchisor received 2017 financial information from 247 franchise owners (the “Responding Franchise Owners”), who collectively own 783 Chem-Dry business franchises (the “Responding Franchises”), who have owned their businesses at least 2 years, and operated those franchises throughout all of 2017.

• Chem-Dry believes that the Responding Franchise Owners offer the same products and services that it authorizes new Chem-Dry business franchises to sell. Responding Franchisees have been in business for an average of 18 years in their markets.

• The Responding Franchises operate in a mix of urban, suburban, and rural areas, and they are disbursed geographically throughout the U.S.

• Listed below are the Number of Owners, Number of Franchises, Average Revenue Per Job, Median Revenue Per Job, Annual Revenue Per Owner, Annual Revenue Per Franchise, Median Revenue Per Owner, Median Revenue Per Franchise, Owners Exceeding Average Revenue Per Owner, and the Cost of Cleaning Solution as a Percent of Revenue Per Franchise as those terms are defined in the notes below, for the Responding Franchise Owners and Responding Franchises during the period from January 1, 2017 until December 31, 2017.

2017 Franchise Data (Groups Ranked by Average Revenue)

Top 5%