FDD Talk 2021: The Maids 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 Maids franchise opportunity, including relevant news updates

• Section II – Estimated initial investment for The Maids franchise, based on Item 7 of the company’s 2021 FDD

• Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for The Maids franchise, based on Items 5 and 6 of the company’s 2021 FDD

• Section IV – Number of franchised and company-owned The Maids outlets at the start of the year and the end of the year for 2018, 2019, and 2020, based on Item 20 of the company’s 2021 FDD

• Section V – Presentation and analysis of The Maids’ financial performance representations, based on Item 19 of the company’s 2021 FDD, including information on the:

• fiscal year 2020 average revenue per clean, average annual revenue per recurring customer, and average percentage of cleans derived from regular maid service and special projects (one-time cleaning) for the 98 franchisees representing 1,202 territories that were in operation for the 12-month period from October 1, 2019 until September 30, 2020

• fiscal year 2020 high, low, average, and median revenue for the 98 franchisees representing 1,202 territories that were in operation for the 12-month period from October 1, 2019 until September 30, 2020

• fiscal year 2020 total revenue, service expenses, operating margin, administrative expenses, and net income for the 10 company stores representing 174 territories that were in operation for the full 12-month period from October 1, 2019 until September 30, 2020

Section I – Background Information

16 Things You Need to Know About The Maids Franchise

Acquired by Gladstone Investment Corporation

1.  In early March 2020, Gladstone Investment Corporation announced that it had partnered with Dan Kirwan in the acquisition of The Maids International, LLC. Gladstone Investment provided the equity and senior secured debt to complete the transaction. Dan Kirwan is a long-time executive of The Maids and would assume the role of president and chief executive officer at closing. Gladstone Investment is a publicly-traded business development company that seeks to make equity and secured debt investments in lower middle market businesses in the U. S. in connection with acquisitions, changes in control, and recapitalizations.

2.  Erika Highland, managing director of Gladstone Investment, said, “The Maids is a brand with an outstanding legacy, established in 1979, and reputation in its market. We look forward to working with the management team and our investment partner, Dan Kirwan, to build on that foundation as The Maids enters its next phase of growth.”

3.  David Dullum, president of Gladstone Investment, added, “With our recent successes of portfolio company exits, we are extremely excited to be adding another quality portfolio company to Gladstone Investment’s assets through this acquisition, as we expect it to produce both income for dividends to shareholders and longer term capital appreciation for capital gains.”

4.  D.A. Davidson & Co. served as exclusive financial advisor to The Maids International, LLC during the sale. Eric Rindahl, managing director of investment banking at D.A. Davidson, said, “We were pleased to work with The Maids and look forward to following the company’s ongoing success as a leading residential cleaning franchisor. This is an exciting transaction for the company, which is partnering with a financial sponsor that has tremendous experience and a proven track record growing companies in the middle market.”

5.  Kirwan added, “Having been with The Maids for 20 years, I am truly excited to partner with Gladstone Investment for this next chapter of growth. The team at Davidson did a great job understanding our brand and positioning the company based on the quality we bring to not only our customers but our franchisee partners as well.”

Continues Partnership with Mr. Clean

6.  In mid-February 2021, The Maids announced that it was continuing its exclusive partnership with Mr. Clean to ensure customers receive the highest quality cleaning services available across the United States and Canada. Originators of the home cleaning industry in 1979, The Maids is proud to partner with Procter & Gamble (P&G) through its iconic Mr. Clean brand.

7.  The exclusive brand partnership began in 2018 and continues to provide innovation, learning, product development, and training opportunities to the front lines of The Maids’ operations. A legendary cleaner has joined a legendary cleaning team; and no one can match the combined cleaning power and level of service provided by The Ultimate Clean Team, according to the two companies.

8.  Customers benefit from the cleaning expertise of The Maids and P&G’s extensive research and product development teams. With over 120 years of combined experience, the two companies each bring unique insights into how people want to maintain a clean and healthy home. Innovation has been a cornerstone to success as both brands seek to provide first-to-the-market solutions to help solve problems, fulfill consumer needs, and overall improve lives.

9.  According to Dan Kirwan, president and CEO of The Maids International, “The Maids team members spend over three million hours in customers’ homes each year and are the experts in providing cleaner, healthier homes for our customers. With the Mr. Clean partnership, customers can now be reassured we are using industry-leading products along with our innovative and detailed, proprietary 22-step cleaning process that’s now been certified by Mr. Clean.”

10.  When cleaning customers’ homes, The Maids franchisees have access to the powerful P&G professional line of products, the versatile Mr. Clean Magic Eraser, and Microban 24, the disinfectant that keeps killing bacteria in your home for 24 hours. The Maids’ approach to cleaning homes is a trifecta – trained employees working together in teams using professional products and equipment, and a systematic, detailed cleaning process.

11.  Beyond the brand partnership between The Maids and Mr. Clean, the corporate office for The Maids franchise network works closely with P&G on market insights, product testing and feedback, and home cleaning trends to ensure The Maids’ customers receive the very latest innovations and highest quality clean available to keep families happy and healthy.

12.  In a crowded home services industry, it can be hard to know who to trust. The Maids’ customers get an added benefit of enjoying a certified level of clean. Through the co-brand partnership, current and future customers have confidence in using The Maids because they were hand-selected to be the exclusive home cleaning partners of the very meticulous Mr. Clean. The Maids has always been about convenience; that’s why they offer so many different cleaning services. Mr. Clean’s trust has ensured every service offered gets customers’ homes cleaner and healthier than ever before.

13.  Kevin Wenzel, brand vice president, P&G North America Surface Care, said, “We spent decades building the Mr. Clean brand and we didn’t want to trust it with just anyone. We did research into the brands in the home cleaning space and The Maids really stood out. The Maids were our number one choice to approach as a partner. We found The Maids has a great national presence, an outstanding brand and a dedication to quality service. We also really like that The Maids is known for genuinely caring for their employees and customers.”

Company History

14.  The Maids was founded in 1979 by Daniel J. Bishop in his hometown of Omaha, Nebraska. Before he turned 21, Bishop had already started another successful business, Bishop Building Services, which was a janitorial company. Bishop started The Maids to provide residential deep cleaning services to everyone. He researched the cleaning process before starting The Maids and came up with a system based on four primary functions: dusting, bathroom cleaning, kitchen cleaning, and vacuuming. Bishop found that with this method, the cleaning teams were able to clean quickly and efficiently. Additionally, Bishop started using yellow company cars, which are now a signature feature of The Maids.

15.  The Maids was an instant success and Bishop began franchising the concept a year later. In 1995, The Maids became the first home cleaning business to clean for health. This was accomplished by using environmentally-preferable cleaning products and a state-of-the-art backpack vacuum. The vacuum was developed especially for The Maids. This resulted in the development of The Maids’ unique 22-Step Healthy Touch Deep Cleaning System, which set new standards for quality deep cleaning and revolutionized the industry. Today, The Maids is one of the largest home cleaning companies in the United States.

Entrepreneur’s Franchise 500

16.  The Maids ranked No. 51 on Entrepreneur’s 2021 Franchise 500 list.

Section II – Estimated Costs

• Please click here for detailed estimates of The Maids franchise costs, based on Item 7 of the company’s 2021 FDD.

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

• Please click here for detailed information on The Maids’ initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2021 FDD.

Section IV – Number of Franchised and Company-Owned Outlets

Franchised

2018

• Outlets at the Start of the Year:  1,240
• Outlets at the End of the Year:  1,255
• Net Change:  +15

2019

• Outlets at the Start of the Year:  1,255
• Outlets at the End of the Year:  1,299
• Net Change:  +44

2020

• Outlets at the Start of the Year:  1,299
• Outlets at the End of the Year:  1,364
• Net Change:  +65

Company-Owned

2018

• Outlets at the Start of the Year:  111
• Outlets at the End of the Year:  142
• Net Change:  +31

2019

• Outlets at the Start of the Year:  142
• Outlets at the End of the Year:  174
• Net Change:  +32

2020

• Outlets at the Start of the Year:  174
• Outlets at the End of the Year:  174
• Net Change:  0

Section V – Financial Performance Representations (Item 19, 2021 FDD) and Analysis

• Below is certain historic financial information regarding The Maids businesses operated by franchisees (“Franchisees”) or company-owned stores (“Company Stores”) that operated within the United States and Canada from October 1, 2019 through September 30, 2020.

• Canadian Franchisees submitted information in Canadian dollars and The Maids converted that information to U.S. dollars using the exchange rate in place at the time the information was submitted.

• The Maids has not presented any information for Franchisees that were not in operation for the full period.

• As of September 30, 2020, there were a total of 1,538 franchised and company-owned territories. A total of 122 Franchisees licensed and operated 1,364 of the 1,538 territories. The Maids operated the remaining 174 territories.

• A The Maids territory generally consists of approximately 10,000 Potential Customers, although some territories may be larger.

• The information presented in this report does not distinguish between Franchisees that purchased a large number of territories and those that did not purchase a large number of territories.

• The basis for the Franchisee information presented is weekly reports submitted to The Maids by its Franchisees and Company Stores operating throughout the periods represented, that form the basis for royalty payments.

• Of the 6,006 total weekly reports required from Franchisees, 3.0% or 179 were not received in time for the preparation of this statement and, therefore, could not be included in calculating the information presented.

Part 1 – Statement of Average Revenue Per Clean, Average Revenue Per Customer, and Percentage of Clean by Service by Franchisee and Territory

• The following statements are based on information reported by Franchisees that were in operation for the 12-month period from October 1, 2019 until September 30, 2020.

• There were 122 Franchisees operating in 1,364 territories as of September 30, 2020. Of those Franchisees, 109 operating in 1,266 territories were in operation for the entire 12-month period ended September 30, 2020.

• The Maids did not include information for the 13 Franchisees operating in 98 territories that were not in operation for the entire 12-month period ending September 30, 2020, or for the 11 Franchisees operating in 64 territories who did not submit complete reports.

• The statement includes the average revenue per clean, the average annual revenue per customer, and the percentage of total cleans by service for a regular maid service or special projects.

Regular Maid Service