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

• Section I – Background information on The Cleaning Authority franchise opportunity, including relevant news updates

• Section II – Estimated initial investment for The Cleaning Authority franchise, based on Item 7 of the company’s 2020 FDD

• Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for The Cleaning Authority franchise, based on Items 5 and 6 of the company’s 2020 FDD

• Section IV – Number of franchised and company-owned The Cleaning Authority outlets at the start of the year and the end of the year for 2017, 2018, and 2019, based on Item 20 of the company’s 2020 FDD

• Section V – Presentation and analysis of The Cleaning Authority’s financial performance representations, based on Item 19 of the company’s 2020 FDD, including information on the:

• 2019 total actual gross revenue; average gross revenue; total number of customers; average price per clean; total number of cleans performed; average cost of goods sold; average customer loss; total estimate leads and total estimate appointments, and conversion percentages; estimated total number of employees; and average Territory size for the period December 31, 2018 through December 31, 2019, the franchisor’s 2019 fiscal year (the “Accounting Period”) for the top third, middle third, and bottom third of the 209 franchised Cleaning Authority businesses that were operating for the entire period December 31, 2018 through December 31, 2019

• 2019 average, median, high, and low gross revenue for the 209 franchised Cleaning Authority businesses that were operating for the entire period December 31, 2018 through December 31, 2019

• 2018 average, median, high, and low gross revenue for the 202 franchised Cleaning Authority businesses that were operating for the entire period December 31, 2017 through December 31, 2018

Section I – Background Information

18 Things You Need to Know About The Cleaning Authority Franchise

Parent Company Forms Partnership with Ally Lenders

1.  Near the end of October 2020, Ally Financial, one of the 25 biggest finance companies in the United States, announced that it has entered the home services market. The Detroit-based creditor announced a partnership between Authority Brands, one of the largest home services franchisors, and its Ally Lending subsidiary. Ally started out as the finance arm of General Motors. It grew into a major mortgage lender before being sold to a private equity firm and then turned into a bank holding company during the financial crisis.

2.  Today, Ally is a publicly-traded company that has specialized in auto finance and online bank accounts with generous interest rates. In 2016, the company started to expand its financial offerings by getting back into the mortgage business. Lately, it’s been entering the point-of-sale business, offering financing for health care, retail sales, and, now, home improvement.

3.  Ally Lending offers a no-credit-impact consumer pre-qualification. The application process is paperless, a reflection of Ally’s digital-focused model.

4.  Authority Brands includes more than 1,000 franchisees under eight brands, including The Cleaning Authority and One Hour Heating and Air Conditioning. Authority Brands was in need of a new finance source after one company it worked with exited the market. It happened that several of those executives joined Ally and they contacted Authority’s management about this new opportunity.

5.  One of those executives was Greg Cicatelli, who now serves as head of enterprise home improvement sales at Ally Lending. Cicatelli said teaming up with Authority provided a national footprint for Ally Lending right away. “It’s been an exciting partnership and really, really strategic for us,” he said. “The brands definitely pair up with each other very well.”

6.  Mark Dawson, chief operating officer of One Hour Heating and Air Conditioning, said bringing Authority Brand’s large group of franchisees to the table streamlined the roll out for Ally Lending. So far, more than 250 Authority Brands franchisees have signed up.

7.  For Authority Brands, financing has become essential to the sales process. “Offering financing to your customers today is a critical component that you have to have,” Dawson said. “If you’re not able to offer that, you’re not even in the game.” Offering financing also allows One Hour Heating and Air Conditioning franchisees to offer more easily the types of high-end HVAC products consumers have been shopping for in the past six months.

8.  Another advantage of adding Ally as a lender is the company’s high profile. “Any time you can partner with a brand name, it’s important,” he said. “Most people are more at ease selecting names they are familiar with.” This helps attract potential franchisees as well as potential customers. Being able to offer something special, such as a national finance source, helps when selling a brand to a franchisee, Dawson said.

9.  This has long been true for Ally in the auto finance space. This experience in auto finance gives Ally some useful perspective when entering the home improvement space, said Hans Zandhuis, president of Ally Lending. In both fields, Ally serves a very diversified market. Zandhuis said the company knows how to manage relationships with small and mid-sized businesses. Ally management also understands the special needs of business-to-business-to-consumer financing. “We walk into our business partners and say, ‘How do we help you continue to grow while always doing right for the consumer?,’” Zandhuis said.

Parent Company Says All Brands Are Open and Recruiting as COVID-19 Pandemic Continues

10.  In mid-July 2020, franchising.com asked Mike Pearce, chief development officer of Authority Brands, how Covid-19 has changed his company’s franchise development strategy for its seven home service brands: The Cleaning Authority, Homewatch CareGivers, Mosquito Squad, America’s Swimming Pool Co., Benjamin Franklin Plumbing, One Hour Heating and Air Conditioning, and Mister Sparky Electric. All were declared essential businesses.

11.  According to Pearce, “Covid-19 has been an important factor in changing our strategy for franchise development. The extraordinary time we are living through has created a unique circumstance that opens up opportunities for the dream of business ownership. Essential services have taken on a new meaning as a result of the pandemic, especially as businesses were forced to temporarily shut their doors for the safety of their employees, customers, and communities. Tens of millions of Americans are out of work, which has created an environment where people are asking themselves the question, ‘Should I consider doing something different?’ For companies like Authority Brands, with a portfolio of seven home service brands, the field looks ready to harvest. We essentially have an opportunity for anyone.”

12.  He continued, “Our services have been deemed essential and, for the most part, our brands and franchisees have remained open and operating the entire duration of the pandemic. Our trade brands are essential: people will not hesitate to call a plumber or an electrician if they need one. If your air conditioning is not functional, you will get that fixed as well. Mosquito Squad and America’s Swimming Pool Co. are focused on outdoor service and have minimal customer interaction. With people staying at home, their desire to use their outdoor living space is greater than before. And Covid-19 has completely changed the perception of assisted living facilities, which makes in-home care a more likely solution.”

13.  “I was asked by our board of directors if we should pull back on investment in franchise development or move forward, and what strategy would we take if we moved forward. The strategy I pitched was to move forward in a bold way. This is a point in time when many are considering a change in their professional lives, and we needed to take advantage of that. We updated our messaging, invested in marketing, and created a prospecting outreach program to invite people to consider the opportunities of a low-cost investment in an essential service business,” said Pearce.

14.  He continued, “We also undertook a franchise broker outreach program. Our goal was to speak with as many franchise brokers as possible (on the phone!) and let them know that our brands were open and operating. Our franchise development process had to change as well. We developed virtual ‘Meet Your Team’ days for each brand and sought out new lending sources that understood the new environment. The franchise development team also took the lead in providing essential information to our franchisees and prospects on the SBA lending environment, including individual phone consultations and daily communication on PPP loan acquisition and forgiveness, and capital availability through other programs and new loans.”

15.  Pearce concluded, “The outcome: Lead flow is strong, we have a growing pipeline, and we are closing on new franchise license agreements each week. We are on track to grow a number of our brands at a pace not previously met.”

Company History

16.  The Cleaning Authority was founded in 1977 in the Baltimore-Washington area and was one of the first whole home cleaning services in the region. After successfully growing over the next decade, The Cleaning Authority was acquired by Steve Robinson and Tim Evankovich in 1989. Robinson and Evankovich wanted to expand the brand even further and serve more clients. Over the next few years, The Cleaning Authority continued to grow and franchising was launched in 1996.

17.  The Cleaning Authority expanded further around the United States and in 2014, the company announced a majority acquisition by PNC Riverarch Capital. A few years later, in 2017, The Cleaning Authority became the flagship brand of Authority Brands, the nation’s leading home services franchisor. Authority Brands, owned by private equity firm Apax Partners since 2018, is the parent company of The Cleaning Authority. Today, The Cleaning Authority has locations across the United States and Canada.

Entrepreneur’s Franchise 500

18.  The Cleaning Authority ranked No. 214 on Entrepreneur’s 2020 Franchise 500 list.

Section II – Estimated Costs

• Please click here for detailed estimates of The Cleaning Authority franchise costs, based on Item 7 of the company’s 2020 FDD.

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

• Please click here for detailed information on The Cleaning Authority’s initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2020 FDD.

Section IV – Number of Franchised and Company-Owned Outlets

Franchised

2017

• Outlets at the Start of the Year:  201
• Outlets at the End of the Year:  211
• Net Change:  +10

2018

• Outlets at the Start of the Year:  211
• Outlets at the End of the Year:  211
• Net Change:  0

2019

• Outlets at the Start of the Year:  211
• Outlets at the End of the Year:  215
• Net Change:  +4

Company-Owned

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:  3
• Net Change:  +1

2019

• Outlets at the Start of the Year:  3
• Outlets at the End of the Year:  3
• Net Change:  0

Section V – Financial Performance Representations (Item 19, 2020 FDD) and Analysis

Part 1 – Franchised Businesses Operating From December 31, 2018 to December 31, 2019

• Part 1 provides information for the 209 Franchised Businesses (the “Reporting Businesses”) that were operating for the entire 2019 fiscal year (“Accounting Period”). The Reporting Businesses cover 6 Hometown Markets and 203 Enterprise Markets.

• The franchisor excluded 6 Franchised Businesses that opened and 2 Franchised Businesses that closed during the Accounting Period. Of the 2 Franchised Businesses that closed during the fiscal year 2019, 1 business closed after being open for less than 12 months.

• Part 1 presents information based upon the top, middle, and lower performing Reporting Businesses. The franchisor determined the top, middle, and lower performing Reporting Businesses by comparing the actual Gross Revenue achieved by each Reporting Business during the Accounting Period.

Top Third of Reporting Businesses by Revenue