FDD Talk 2019: ZIPS Dry Cleaners 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 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 2019 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 2019 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 2016, 2017, and 2018, based on Item 20 of the company’s 2019 FDD

• Section V – Presentation and analysis of ZIPS Dry Cleaners’ financial performance representations, based on Item 19 of the company’s 2019 FDD, including information on the:

• 2018 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 24-month period January 1, 2017 to December 31, 2018

Section I – Background Information

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

Appoints New VP of Franchise Sales and Development

1.  At the end of April 2019, ZIPS Dry Cleaners announced that it had named franchise industry veteran Sam Wong as its new vice president of franchise sales and development. Armed with nearly 20 years of experience in the franchise space, Wong will be responsible for implementing new strategies and campaigns to further accelerate the brand’s expansion momentum across key U.S. markets.

2.  Drew Ritger, CEO of ZIPS Dry Cleaners, said, “Sam not only brings great franchise development experience and expertise to our leadership team, but has a proven track record of growth and success in each of his past roles. As we continue to execute our most aggressive franchise growth strategy to date, Sam’s broad experience and wealth of knowledge will play an integral role in helping lead our brand into the next phase of its strategic growth and performance.”

3.  Prior to joining ZIPS, Wong worked as the senior director of franchise development at Sonic Drive-In where he led the more than 3,600-unit brand’s expansion efforts in various new and existing markets nationwide. Wong also previously managed franchise development for such brands as Dairy Queen and Popeyes Louisiana Chicken.

4.  Wong said, “The opportunity to work with ZIPS at this stage of its growing franchise program is energizing. ZIPS is heavily focused on growth and this aligns with my own values and passion for franchising. I look forward to making significant contributions to the company’s ambitious development plans and helping propel the brand far ahead of its competitors.”

Announces Major Expansion Plans for Atlanta Area

5.  In late March 2019, ZIPS Dry Cleaners signed a development deal for 20 locations set to open throughout Atlanta over the next five years. The stores will be owned and operated by business partners Allan Boomer and Tiffany Hawkins. Both entrepreneurs have positions at Momentum Advisors, a company founded by Allan Boomer. No strangers to franchising, the business partners own multiple ZIPS locations, as well as other businesses.

6.  Tiffany Hawkins said, “I have lived in Atlanta on two occasions in my adult life and I love the area for so many reasons. After opening a few locations in ZIPS’ home market of Maryland-D.C.-Virginia, we were ready to break ground in a new market and there was no question that Atlanta was our first choice. I know Atlanta. Again, I love Atlanta; and the people of this city deserve a one-price, high-capacity dry cleaner that is modern, service-oriented and focused on cutting costs – without cutting the quality.”

7.  Allan Boomer added, “Since becoming a ZIPS franchisee in April 2016, my partners and I have been involved in some of the most successful new dry cleaning stores in the company. We are extremely excited about the opportunity to bring ZIPS to a thriving new market. In analyzing the competitive landscape, Atlanta was the No. 1 market on our radar. It is a great market with great people. Our team has long ties to the region and we are really looking forward to building a significant presence in Atlanta.”

8.  According to the press release, ZIPS has more than 50 locations open and operating throughout the Mid-Atlantic and as far as Texas and California. The company also has a total active franchise pipeline that stands at more than 250 stores, all of which are slated to open over the next several years.

9.  Drew Ritger, CEO of ZIPS Dry Cleaners, said, “ZIPS is pleased to announce that Franklin Morgan Capital has agreed to introduce ZIPS Dry Cleaners to the Atlanta Market. The managing partners, Tiffany Hawkins and Allan Boomer, are excited to introduce this new investment into the Atlanta market. Atlanta is one of the top markets targeted for growth by ZIPS Franchising LLC. ZIPS expects new stores to open in the near future in Portland, Oregon, Chicago, Cincinnati, Mechanicsburg, Pennsylvania and Indianapolis. We’ll see continued growth in California, Florida, Maryland, Texas and Virginia. The company is dedicated to becoming a national garment care brand and No. 1 in market share in each of the markets it serves.”

Company History

10.  ZIPS Dry Cleaners was founded in 2002 when eight independent dry cleaners in the Baltimore, Maryland–Washington, D.C. area decided to pool their businesses together. The group’s goal was to offer high-quality dry cleaning services at an affordable price for any garment. The concept was a success and the original owners opened additional ZIPS Dry Cleaners stores in the area before franchising the concept in 2006.

11.  In 2013, the founders of ZIPS Dry Cleaners sold a majority share of the company to JPB Capital Partners of Columbia, Maryland. Under the leadership of JPB Capital, ZIPS Dry Cleaners has expanded its footprint around the United States. The company has a goal of reaching 350 stores across the country within the next few years.

Entrepreneur’s Franchise 500

12.  ZIPS Dry Cleaners ranked No. 305 on Entrepreneur’s 2019 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 2019 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 2019 FDD.

Section IV – Number of Franchised and Company-Owned Outlets

Franchised

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

2018

• Outlets at the Start of the Year:  51
• Outlets at the End of the Year:  55
• Net Change:  +4

Company-Owned

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

2018

• Outlets at the Start of the Year:  2
• Outlets at the End of the Year:  2
• Net Change:  0

Section V – Financial Performance Representations (Item 19, 2019 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, 2018.

• All 43 Franchised Businesses were open and operating during the 24-month period January 1, 2017 to December 31, 2018. These Franchised Businesses are located in the District of Columbia, Maryland, Pennsylvania, and Virginia.

• Ten Franchised Businesses are not included because they were not in operation for the entire period 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 trash/dumpster and charges for water, gas, and electric. The charges for water and trash/dumpster 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, 2018 to December 31, 2018)