FDD Talk: Nextaff 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 Nextaff franchise opportunity, including relevant news updates

• Section II – Estimated initial investment for a Nextaff 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 Nextaff franchise, based on Items 5 and 6 of the company’s 2019 FDD

• Section IV – Number of franchised and company-owned Nextaff 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 Nextaff’s financial performance representations, based on Item 19 of the company’s 2019 FDD, including information on the:

• 2018 average, median, highest, and lowest gross revenue, gross wages, and gross profit (in dollars and as a percentage of gross revenue) for the 5 franchised, traditional Nextaff offices open and operating during the entire 12-month period ending December 31, 2018

• average and median number of months to break-even for the 3 franchised, traditional Nextaff offices that responded to a survey sent by the company to traditional Nextaff offices that have opened since 2017

Section I – Background Information

12 Things You Need to Know About the Nextaff Franchise

Opens Newest Location

1.  In recent years, Nextaff has been opening more franchised locations around the United States. One of its most recent offices opened in January 2020 in Peoria, Illinois. This Nextaff location is owned and operated by Tom Moreland.

2.  The new office provides healthcare and nurse staffing solutions to healthcare facilities in Peoria and throughout Illinois. Moreland brings a master’s in health services administration and 21 years of long-term care experience to Nextaff Peoria.

3.  Moreland said, “After I opened Nextaff Des Moines in 2018, our reputation for long-term nurse staffing quickly spread across the Mississippi River, and employers and healthcare professionals in the Peoria market began reaching out to us for help. We’re thrilled to now have a dedicated office in Illinois that leverages the Nextaff method in connecting leading healthcare employers with talented nurses, allied healthcare professionals and administrative talent.”

4.  “Nextaff’s operating model provides everything my team needs to run a successful staffing franchise, while fueling success for our clients and candidates,” continued Moreland. “Whether you’re an employer with an urgent need for licensed, screened nurses, or a healthcare professional looking for high-paying opportunities to flourish, one call to Nextaff does it all.”

5.  Nextaff offers a proprietary recruiting method called X-FACTOR™, which combines hiring methodologies that are statistically proven to outperform what typical staffing agency competitors and HR departments traditionally do. This methodology, combined with a robust back-office support structure, allows a staffing franchise office many distinct advantages over someone looking to start their own staffing agency.

6.  According to Cary Daniel, co-founder and CEO of Nextaff, “The fact that organic growth fueled this expansion speaks volumes about Tom’s experience and work ethic, as well as the Nextaff system. Relying on decades of healthcare experience, tremendous staffing success in Des Moines, and Nextaff’s unique methodology, Tom and the Peoria office will create a win-win for all parties in the employment equation.”

Unique Staffing Franchise Program

7.  Nextaff has developed a staffing franchise program specifically for professionals, B2B sales people, executives, and established staffing firms. Through its staffing franchise program, Nextaff will enable franchisees to offer proprietary services and open doors to more business opportunities. Here’s what Nextaff offers in its staffing franchise program:

• Exclusive Products and Services – With the Nextaff franchise program, franchise owners can provide proprietary staffing and recruiting services. Nextaff also provides franchisees the ability to offer expanded services, usually only found with payroll and PEO providers.

• Extensive Training – Nextaff franchisees have full access to the company’s extensive supporting materials and knowledge base and its thorough training program to execute Nextaff’s X-FACTOR and Workforce Strategies processes. Franchisees will have access to Nextaff’s LMS (Learning Management System) for areas in management, sales, and recruiting.

• National Marketing and Sales Support – Nextaff’s staffing franchise program provides world-class marketing to help franchise owners generate more leads and sell more effectively and efficiently. Nextaff franchises have access to web and social media marketing, direct mail, email, blog, sales collateral, and other marketing support.

• State-of-the-Art Technology – Nextaff provides fully integrated, all-access software and servers, web portals for employee access and customer support, and resumé management software dedicated to an owner’s business to help them track, manage, and project their business status and growth.

• Back Office Services – With Nextaff, franchisees have more freedom to focus on sales, recruiting, and service. Nextaff takes responsibility for all the paperwork and other back office administration so franchise owners don’t have to. Some of the key components include: processing of payroll taxes, workman’s compensation, unemployment claims, and payroll financing. Nextaff also processes all client deposits daily – remitting an owner’s gross margin (net of fees) back to them on a weekly basis.

• National Purchasing Power – Nextaff negotiates national rates for insurance coverage, benefits, job posting resources, employee assessments, testing and training, background checks, profile testing, office supplies, and more.

• National Membership in Top Industry Associations – Nextaff franchisees become members of the leading organizations in staffing, recruiting, PEO services, and human resources, including ASA, SIA, SHRM, US Chamber of Commerce, and others.

Company History

8.  Nextaff was founded in 1998 by Cary T. Daniel and James Windmiller and is based out of Louisville, Kentucky. Daniel, who had several years of experience in employment services, and Windmiller, who was a veteran of the employment services industry, founded Nextaff as a traditional temporary staffing company.

9.  The two business partners had previously founded Human Resource, LLC, a temporary staffing and recruiting firm based in Kansas City, Missouri. They used this experience to develop Nextaff. In 2004, Daniel and Windmiller began franchising the Nextaff concept.

10.  Nextaff was acquired by Malone Workforce Solutions in 2016 for an undisclosed sum. Under the terms of the acquisition, Nextaff continues under its own brand and franchise business model as a division of Malone Workforce Solutions.

11.  Today, Nextaff primarily operates company-owned locations, but there are franchises around the United States. Daniel continues to serve as Nextaff’s CEO, while Windmiller has remained as the company’s COO.

Entrepreneur’s Franchise 500

12.  Nextaff did not rank on Entrepreneur’s 2020 Franchise 500 list.

Section II – Estimated Costs

• Please click here for detailed estimates of Nextaff franchise costs, based on Item 7 of the company’s 2019 FDD. (coming June 7, 2020)

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

• Please click here for detailed information on Nextaff’s initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2019 FDD. (coming June 6, 2020)

Section IV – Number of Franchised and Company-Owned Outlets

Franchised

2016

• Outlets at the Start of the Year:  8
• Outlets at the End of the Year:  7
• Net Change:  -1

2017

• Outlets at the Start of the Year:  7
• Outlets at the End of the Year:  10
• Net Change:  +3

2018

• Outlets at the Start of the Year:  10
• Outlets at the End of the Year:  14
• Net Change:  +4

Company-Owned

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:  29
• Outlets at the End of the Year:  29
• Net Change:  0

2018

• Outlets at the Start of the Year:  29
• Outlets at the End of the Year:  52
• Net Change:  +23

Section V – Financial Performance Representations (Item 19, 2019 FDD) and Analysis

• This financial performance representation discloses historical information regarding the average and median Gross Revenue, Gross Wages, Gross Profit, and Gross Profit Percentage (all terms defined below) for 5 Offices open and operating during the entire 12-month period ending December 31, 2018 (the “Measurement Period”).

• These include 5 franchisee-owned Offices (“Traditional Offices”) that are substantially similar to the Nextaff Offices that you will operate under the Franchise Agreement.

• These results exclude Offices that either (1) did not operate for the entire Measurement Period or (2) operate a “Non-Traditional Office” which Nextaff defines as an Office with (a) a part-time operator, (b) an operator with another business outside of their Nextaff Offices, (c) an operator that uses its Nextaff Office as a supplement to another business, or (d) a location located on a client’s premises, commonly known as an “on-site” location.

• For purposes of this Item 19, Nextaff uses the following defined terms:

• “Gross Revenue” is all money and other consideration paid for the Services provided to Clients of a Nextaff Office.

• “Gross Wages” includes all wages paid to an Associate based upon the work hours reported.

• “Gross Profit $ (Dollar)” for a Nextaff Office equals Gross Revenue minus Direct Payroll Costs, expressed as a dollar amount.

• “Gross Profit % (Percentage)” for a Nextaff Office equals Gross Profit $ divided by Gross Revenue, expressed as a percentage.

Part 1 – Average Gross Revenue, Gross Wages, and Gross Profit for Traditional Offices During the Measurement Period

Gross Revenue