FDD Talk: Batteries Plus 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 Batteries Plus franchise opportunity, including relevant news updates

• Section II – Estimated initial investment for a Batteries Plus franchise, based on Item 7 of the company’s 2020 FDD

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

• Section IV – Number of franchised and company-owned Batteries Plus 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 Batteries Plus’ financial performance representations, based on Item 19 of the company’s 2020 FDD, including information on the:

• 2019 average net revenue and merchandise margin for the 627 franchised Batteries Plus Stores that were in operation for the entire 12-month period ended December 31, 2019

• 2019 average annual net revenue percentage increase for the 627 franchised Batteries Plus Stores that were in operation for the entire 12-month period ended December 31, 2019

• 2019 average merchandise margin for retail and commercial customers for the 641 franchised Batteries Plus Stores in operation as of December 31, 2019

• 2019 average retail and commercial revenue as a percentage of total revenue for the 641 franchised Batteries Plus Stores in operation as of December 31, 2019

• average net revenue, average retail percentage and average commercial percentage of net revenue for the franchised Batteries Plus Stores that were in operation for at least 12 full months as of December 31, 2019 (Year 1 to Years 10+ franchised Stores)

• 2019 average net revenue, expenses, and EBITDA for the 72 company-owned Batteries Plus Stores that were open as of December 31, 2019 and that Batteries Plus or its affiliates owned and operated the entire 2019 calendar year

Section I – Background Information

22 Things You Need to Know About the Batteries Plus Franchise

Appoints New Director of Franchise Development

1.  In mid-May 2020, Batteries Plus announced the addition of Joe Malmuth as director of franchise development. Malmuth joined the Batteries Plus team on May 11. In his new role, Malmuth is responsible for overseeing all aspects of franchise development. In addition to working with new owners and franchise consultants to expand the system, he is also managing programs focused on helping current owners develop their territory and facilitate transactions. Malmuth reports directly to Jon Sica, chief strategy officer of Batteries Plus.

2.  Sica said, “We are thrilled to welcome Joe Malmuth into the Batteries Plus family. With his extensive experience in franchise development and growth strategy, he is well-positioned to help lead Batteries Plus as we aggressively pursue our expansion goals. We have major franchise development plans in store for 2020 and beyond, and having Joe on the team will be fundamental to our success.”

3.  Malmuth joined Batteries Plus at a crucial time in the company’s history. With more than 720 stores across the U.S., Batteries Plus was set for major growth as an essential retailer in 2020. The brand opened 14 new franchise stores and four new corporate-owned stores in 2019 and planned to open an additional 12 units in 2020. Despite COVID-19, Batteries Plus signed two new deals in March for three units, one of which was for the brand’s first location in Vermont.

4.  Batteries Plus businesses across the country have remained open for both retail and commercial customers in an effort to help individuals, communities, and organizations keep their devices and electronic equipment (including medical devices like EKG machines, respirators, and ventilators) running as smoothly as possible. By providing essential products that customers will always want to have on hand and by offering franchisee support and communication during the coronavirus pandemic, Batteries Plus ensured that it remains a profitable opportunity for franchisees.

5.  Malmuth added, “Throughout COVID-19, Batteries Plus has done a world-class job in providing ongoing support, resources and assistance in every way. In a post COVID-19 world, business is going to change, and candidates are going to look for the brands that have shown the ability to not just survive tough times, but thrive. Batteries Plus has pivoted and met the customer where they are in order to continue to provide an invaluable service to communities in need. I was a volunteer firefighter for a long time, and I know the importance of having those live-saving tools charged and ready to go.”

6.  Prior to joining Batteries Plus, Malmuth most recently served as vice president of franchise relations at My Eyelab, the fastest-growing optical retail franchise in the country. Malmuth’s responsibilities included strategic development of lead generation, franchise development, content development, branding, strategic positioning, FDD curation, operations manual curation, training program development, and budgeting. He led advancements across many areas and reconstructed the entire franchise network with an emphasis on growth, creating and implementing franchise development strategies that increased the number of executed franchise agreements by 186% and the number of operating units by 125%.

7.  Before My Eyelab, Malmuth worked for six years at United Franchise Group, which consists of a number of award-winning business-to-business brands and franchise development services, including some of the world’s largest industry-leading names. At United Franchise Group, Malmuth served as the regional vice president of the Carolinas, where he developed tours throughout the region, increasing the number of new units by 21%.

8.  Malmuth was thrilled to join the Batteries Plus brand and bring his industry expertise to help grow the franchise system, create jobs, and provide batteries for life-saving equipment in the communities that the brand serves. Malmuth said, “Batteries Plus is a legacy brand with a proven model that’s been around for more than 30 years. I’m excited to help grow the system with new franchisees, existing owners expanding their portfolio and equity groups looking for sound investments. Some franchise candidates tend to overlook culture, but a franchisor’s culture is what produces results. Batteries Plus has seen continued success and economic growth through a winning culture, proven support infrastructure and mission to keep the brand moving in the right direction – I’m proud to join the team.”

Joins Other National Brands in Highlighting Available Career Opportunities

9.  In early September 2020, Batteries Plus joined Red Wing Shoes’ #LaborDayOn campaign to highlight available career opportunities during Labor Day weekend. The campaign was meant to help the 25 million unemployed Americans (at the time of the announcement) connect with employers who were looking to hire.

10.  Batteries Plus understood that many people looking for work were hoping to serve their local communities. The retailer had over 700 stores in 47 states. Many of the stores are independently-owned franchises and operate as small, local businesses. Open positions at Batteries Plus Bulbs included warehouse associates, store managers, repair technicians, and sales and customer service roles at its corporate headquarters.

11.  Carole Witkowski, vice president of human resources for Batteries Plus, said, “We know there are many dedicated Americans looking for jobs right now, and through #LaborDayOn we want to help them find jobs in our stores, distribution centers and corporate headquarters. If you’re interested in a company that invests in the success of its individual employees and thrives on collaboration, Batteries Plus Bulbs might be what you’re looking for.”

12.  The retailer offers essential items such as thermometer batteries and laptop chargers as well as phone repair services that help people stay connected with loved ones while they remain safely distant. Because of its essential status, Batteries Plus stores have remained open throughout the COVID-19 pandemic, providing reliable jobs for associates.

Poised for Expansion Due to Essential Demand for Batteries, Lights, and Repairs

13.  As a result of the ongoing pandemic and the ever-increasing demand for essential products that fill consumers’ immediate needs, Batteries Plus announced in mid-September 2020 that the brand was experiencing unprecedented growth. Batteries Plus, the nation’s largest and fastest-growing battery, light bulb, key fob, and repair franchise, had generated 12 new franchise agreements thus far in 2020 and was on track to sign over 20 new franchise agreements by the end of the year.

14.  Batteries Plus businesses across the country have remained open to help individuals, communities, and organizations keep their devices and electronic equipment (including laptops, hearing aids, medical devices like infusion pumps, monitors, carts on wheels, and more) running as smoothly as possible. The needs-based nature of the business provided reliable income to franchisees and resulted in the brand’s best sales and comp growth month on record in the 30-plus year history of Batteries Plus. Part of the recent development for the specialty retailer included the company’s largest multi-unit deal to open four locations throughout Boise and Western, Idaho.

15.  According to Scott Williams, CEO of Batteries Plus, “At the outset of the pandemic, we braced for the impact on the retail sector but are extremely pleased to see our performance remain stable with double-digit growth in e-commerce. It’s been a steady upward climb with strong numbers starting mid-to-late April with July being our best July ever and our 8th best sales month in company history. The dedication and grit our franchise stores have shown throughout this tough economic time has been impressive and now new candidates are taking notice of our strong business model.”

16.  While the brand’s core offerings are fundamental to people’s lives and are built on multi-billion-dollar industries (Batteries, $32B; Bulbs, $22B; Device Repair, $4B; Key Fobs, $2B; Smart Home Technology, $90.9M) – the pandemic realities shined a brighter light on the value of the Batteries Plus franchise opportunity. The COVID-19 impacts that led to the immediate offering of contact-less curbside delivery included: the rise of the remote workforce, first-responders, and hospitals in need of reliable batteries; virtual learning; consumers powering up outdoor toys (RV cars and boats); and Smart Home technology. Many franchisees of the 723-unit, omni-channel retailer had to add staff and expand hours to meet the needs throughout last year.

17.  Joe Malmuth, managing director of franchise development for Batteries Plus, added, “As customer behavior shifts, a quick-service retail model will remain prominent and a nonnegotiable. Batteries Plus was proactive and has a plan for the ‘next normal’ retail environment. Our new franchise owners are eager to be a part of the solution-driven based business concept that always places customer satisfaction at the top.”

18.  Batteries Plus has multiple revenue streams to serve every individual and the needs of a variety of sectors including schools, contractors, churches, municipalities, healthcare, manufacturing, hospitality, property managers. and assisted living centers. Batteries Plus has a franchisee-first mentality that is the cornerstone to its world-class franchisee support and proprietary technology advancements built within the model.

19.  “Our brand fills a much-needed niche in communities across the country, especially in times of economic uncertainty,” said Jon Sica, chief strategy officer of Batteries Plus. “We performed well both through 9/11 and the downturn in 2008, because most often customers opt to repair instead of replacing cars, devices and other home electronics. Now with the omni-channel technology we’ve built and our growing team of franchise owners, we’ve never been in a better position to serve customers and continue expanding nationwide.”

Company History

20. Batteries Plus (also known as Batteries Plus Bulbs) was founded in 1988 by Ron Rezetko in Green Bay, Wisconsin. Rezetko started that store in response to the growing need for different types of batteries for various electronic devices. After a few years of growing the business, Rezetko started franchising the Batteries Plus concept in 1992 and the first franchised store was opened in Wayne, Indiana. Over the next decade, Batteries Plus’ growth was fueled by the increasing demand for specialty and replacement batteries for personal technology devices.

21.  In 2007, Batteries Plus was acquired by Roark Capital Group. A few years later, Batteries Plus refined the model of the all-battery franchise concept by adding light bulbs to its product line. Batteries Plus expanded its services again in 2014 when it launched smartphone and tablet repair services nationwide, providing in-store repairs for cracked screens, battery replacements, and more. In 2016, Los Angeles-based private equity firm Freeman Spogli & Co. acquired Batteries Plus from Roark. Today, there are Batteries Plus locations all across the United States.

Entrepreneur’s Franchise 500

22.  Batteries Plus ranked No. 473 on Entrepreneur’s 2021 Franchise 500 list.

Section II – Estimated Costs

• Please click here for detailed estimates of Batteries Plus 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 Batteries Plus’ 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:  648
• Outlets at the End of the Year:  663
• Net Change:  +15

2018

• Outlets at the Start of the Year:  663
• Outlets at the End of the Year:  662
• Net Change:  -1

2019

• Outlets at the Start of the Year:  662
• Outlets at the End of the Year:  643
• Net Change:  -19

Company-Owned

2017

• Outlets at the Start of the Year:  48
• Outlets at the End of the Year:  57
• Net Change:  +9

2018

• Outlets at the Start of the Year:  57
• Outlets at the End of the Year:  78
• Net Change:  +21

2019

• Outlets at the Start of the Year:  78
• Outlets at the End of the Year:  85
• Net Change:  +7

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

• Under Part 1, the franchisor has provided an unaudited statement of average net revenue, merchandise margin, and percentage of net revenue in total and by customer type based on franchised Stores operating as of December 31, 2019.

• Under Part 2, the franchisor has provided an unaudited statement of net revenue, expenses, and EBITDA for company-owned Stores.

• Information for franchised Stores has been taken from their respective Retail Store Management systems. The franchisor has not audited or verified these reports.

Part 1 – Unaudited Statement of Average Net Revenue, Merchandise Margin, and Percentage of Net Revenue by Customer Type of Franchised Stores

• Except for where specifically noted in Part 1D, the following statements are based on information reported by all franchised Stores in operation as of December 31, 2019.

• There were 643 total Stores open as of December 31, 2019. Of these Stores, 2 are small market test stores that the franchisor currently does not offer under the current Disclosure Document.

• The remaining 641 Stores are referred to as “All Stores”. Of All Stores, there were 627 Stores that were in operation for the entire 12-month period ended December 31, 2019 (referred to as “Same Stores”), and 14 Stores opened during 2019.

• As noted, each category included in this statement specifies whether Same Stores or All Stores are included.

A.  Statement of Average Annual Net Revenue and Merchandise Margin

• This statement includes average Net Revenue and Merchandise Margin for Same Stores for the 12-month period ended December 31, 2019.

• In addition, each group of Stores is divided into quartiles, with the range of and average Net Revenue in each quartile identified.

• This statement includes information from Same Stores only.

• For purposes of this statement, the term “Net Revenue” means all revenues received from the sale of goods and services, whether for cash or by check, credit card, or trade, in connection with the Store, less sales tax, discounts, and customer refunds and returns.

• For purposes of this statement, the term “Merchandise Margin” is Net Revenue less product cost. Product cost is the cost of the product only and does not include other cost of goods sold such as freight, warranty expense, or inventory shrinkage.

• “Merchandise Margin Percentage” is Merchandise Margin divided by Net Revenue multiplied by 100.

2019 Same Store Net Revenue and Margin Performance