FDD Talk 2021: Storm Guard Roofing and Construction 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 Storm Guard Roofing and Construction franchise opportunity, including relevant news updates

• Section II – Estimated initial investment for a Storm Guard Roofing and Construction franchise, based on Item 7 of the company’s 2021 FDD

• Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for a Storm Guard Roofing and Construction franchise, based on Items 5 and 6 of the company’s 2021 FDD

• Section IV – Number of franchised and company-owned Storm Guard Roofing and Construction 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 Storm Guard Roofing and Construction’s financial performance representations, based on Item 19 of the company’s 2021 FDD, including information on the:

• 2020 average total income, cost of goods sold, gross profit, total expenses, and EBITDA plus owner compensation for the top 10%, bottom 10%, and all 31 franchised Storm Guard businesses that were open and in operation throughout the entire Reporting Period (January 1, 2020 to December 31, 2020) and provided the financial information requested by Storm Guard and required for inclusion in Item 19

• 2020 highest, lowest, and median total income and EBITDA plus owner compensation for the 31 franchised Storm Guard businesses that were open and in operation throughout the entire Reporting Period (January 1, 2020 to December 31, 2020) and provided the financial information requested by Storm Guard and required for inclusion in Item 19

Section I – Background Information

19 Things You Need to Know About the Storm Guard Roofing and Construction Franchise

Benefits of Owning a Roofing Franchise

1.  Storm Guard Roofing and Construction’s blog provided several reasons why owning a roofing franchise is a wise investment choice. These benefits include:

2.  High Growth and Recession-Resistant Industry – The roofing industry is booming, expected to reach nearly $20 billion in 2021. Growing an average of 2.7% per year for the last five years, all signs point to continued expansion as demand for new construction continues to exceed expectations. Among service-oriented industries, you will be hard-pressed to find one positioned for more stability and growth than the roofing industry. It is highly resistant to economic recessions, as the past year has demonstrated. Despite a global pandemic and mass unemployment, demand for roofing services has never been higher. Such demand is expected to continue well into the next few years, creating great new opportunities for those ready to own their own successful roofing franchise business.

3.  Support and Training – One of the first things that attracts people to a franchise is that most offer a proven business model, support, and training. Rather than build a business through trial-and-error, franchise business owners are given the information and training needed to ensure that their hard work will pay off faster – and lead to more opportunities – than may otherwise be possible. Due to the franchise roadmap provided, no previous experience in roofing or construction is necessary. Additionally, in many states there isn’t a licensing requirement.

4.  Brand Power and Marketing – Despite strong demand for roofing services, the industry itself is very fragmented. In most areas, roofing businesses are small, mom and pop businesses with limited resources and personnel. Roofing franchise businesses are relatively rare, leading to inconsistencies in service and quality of the workmanship. Storm Guard is unique in that it is the largest roofing franchise in the industry. What this means is that Storm Guard’s franchise business owners can leverage the same brand power and marketing capabilities that big, national companies have access to. But the advantages of owning a roofing franchise don’t end there. While each franchise company is a small business, being part of a franchise offers a range of benefits that most small businesses simply can’t afford. For example, brand power is an extremely valuable asset for any business, since name recognition and a proven track record can help make finding new customers easier.

5.  Cutting-Edge Technology and Proven Systems – Another critical benefit of owning a franchise is having access to new technologies and systems that can make business ownership more efficient and more profitable. With a streamlined process and the advantages of technology, franchise business owners usually have more time to work on growing their business instead of being stuck working in it. In this way, the growth potential is far greater with a roofing franchise than with other roofing business models.

6.  Great Work-Life Balance and Freedom – Few business opportunities can offer the kind of work-life balance that franchise roofing business owners have. For any potential franchisee, a Storm Guard roofing franchise offers the freedom to structure their time and work schedule to meet their needs, rather than accommodating their life according to someone else’s plans. Storm Guard franchise business owners will be working on their business day-to-day and building their own future with each successfully completed project.

7.  Low Investment with High ROI Potential – Among franchise businesses, roofing businesses stand out for the relatively low initial investment needed to get started. With a comparatively low capital investment, most Storm Guard franchise businesses are up and running faster than many other types of franchises. What is more, strong nationwide demand for roofing services means that new franchise owners have great potential to see high returns on that initial investment.

8.  Low Staff Requirements – A roofing franchise business is also one of the few opportunities around that can offer those high returns without requiring a large staff. In fact, a Storm Guard franchise has low staff requirements, helping franchise owners keep costs down and their business streamlined. Being able to operate with minimal staff comes with the added benefit of reducing risk in uncertain economic times. Because the business will be fully operational without needing to spend copious amounts of time hiring and training staff, franchisees can focus on providing high-quality services to the people in their service area.

9.  Low Percentage of Bad Debt – Another unique advantage that a Storm Guard franchise provides is a higher chance of getting paid in full and on time for every job. This is because the roofing jobs the company focuses on are almost always paid for by a client’s insurance companies. Because Storm Guard does not need to rely on homeowners for payment, there is very little bad debt to worry about, not to mention no need to spend time and resources on collections.

10.  Being Part of a Strong Culture – Still, one of the biggest reasons that entrepreneurs choose a Storm Guard franchise is because of its values-based approach to business. As a brand, Storm Guard cultivates a franchisee-friendly culture that recognizes how important each one of its business owners is to the brand’s collective success. Further, Storm Guard promotes and lives a set of strong core values that guides everything it does. In this way, new franchise owners are joining not just a company, but an entire way of living and working together to bring quality roofing services to the people in communities everywhere.

New Location

11.  Although the past year devastated many industries, home service companies, including roofing, have been thriving, and Storm Guard Roofing and Construction has continued to open new locations. One of the brand’s newest locations opened in Rochester Hills, Michigan during spring 2021. The new location is owned and operated by Chris Parker of Oakland Township.

12.  Parker said, “I chose Storm Guard because they are the industry leaders in this space. Storm Guard has been helping homeowners identify damage and navigate insurance for decades. From across the country, they’ve seen everything, and we get tremendous benefits from our corporate support staff and from a community of almost 40 franchise owners.”

13.  Parker received his MBA from Michigan State in 2011 and he holds a certificate in Marketing Management and Digital Strategy from Harvard. He spent 20 years in marketing and advertising with big names from the Detroit area including General Motors and Fiat Chrysler. When it was time for a change, Parker researched and evaluated over 30 franchise opportunities and found that Storm Guard was the best match. Parker lives in Oakland Township with his wife, and his two daughters who attend Rochester Community Schools.

14.  Michigan homeowners have one year to file a wind or hail damage claim. That means time is running out if they had storm damage in 2020. Storm Guard offers free evaluations, even if the homeowner only suspects storm damage. Storm Guard will recommend the next steps and a peace of mind path moving forward. They deal with all insurance companies and their roofing crews make sure the work is done right, the first time, on time, and with a trusted warranty.

15.  Parker added, “Michigan homeowners aren’t acutely aware of the damage Mother Nature does to their roof. While we don’t have hurricanes or massive tornadoes, significant storms impact our area each and every year. Our goal is to help homeowners identify storm damage and get the coverage they deserve from their homeowners policy instead of paying entirely out of their own pocket.”

16.  Storm Guard of Rochester Hills covers all of the North Detroit Communities. If a homeowner suspects storm damage, Storm Guard will come out to perform a free inspection with insurance companies on behalf of the homeowner, and if damage exists, Storm Guard will work to restore the home. They take the time to explain the process, select the best crew and materials, and meet the needs of the homeowner.

Company History

17.  Storm Guard Roofing and Construction was founded in 2003 in Minnesota. In the beginning, Storm Guard focused on residential roofing and insurance restoration services. However, over the years, Storm Guard has expanded its offerings to include siding, windows, doors, painting, drywall, garage doors, and both commercial and new construction projects.

18.  After a decade in business, Storm Guard Roofing and Construction consulted with Francorp Inc., the world’s leading franchise development firm, to develop a national franchising program. The first franchise opened in 2013. A year later, Storm Guard Roofing and Construction was acquired by Glenn Lynch and Bobby Cox. Today, there are more than 30 Storm Guard Roofing and Construction businesses in the United States.

Entrepreneur’s Franchise 500

19.  Storm Guard Roofing and Construction did not rank on Entrepreneur’s 2021 Franchise 500 list.

Section II – Estimated Costs

• Please click here for detailed estimates of Storm Guard Roofing and Construction 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 Storm Guard Roofing and Construction’s 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:  34
• Outlets at the End of the Year:  33
• Net Change:  -1

2019

• Outlets at the Start of the Year:  33
• Outlets at the End of the Year:  34
• Net Change:  +1

2020

• Outlets at the Start of the Year:  34
• Outlets at the End of the Year:  33
• Net Change:  -1

Company-Owned

2018

• Outlets at the Start of the Year:  1
• Outlets at the End of the Year:  1
• Net Change:  0

2019

• Outlets at the Start of the Year:  1
• Outlets at the End of the Year:  1
• Net Change:  0

2020

• Outlets at the Start of the Year:  1
• Outlets at the End of the Year:  1
• Net Change:  0

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

Average Income, Operating Expenses, and EBITDA Plus Owner Compensation for Franchisees Open Throughout the Entire Reporting Period (January 1, 2020 to December 31, 2020)

• This Item 19 presents historical information regarding the actual operating results for the franchised Storm Guard businesses that were open and operating throughout the entire period from January 1, 2020 through December 31, 2020 (the “Reporting Period”). Any franchisees that were terminated or ceased to operate for other reasons at any point during the Reporting Period are not included in this Item 19.

• This Item 19 does not include information for the company-owned Storm Guard business or the franchised Storm Guard businesses that were not open and operating throughout the entire Reporting Period.

• During the Reporting Period, 2 franchisees closed and are therefore excluded from the table.

• As of December 31, 2020 (i.e. the end of the Reporting Period), there were 33 Storm Guard franchisees in operation, but only 32 franchised Storm Guard locations were open and in operation throughout the entire Reporting Period as 1 franchisee first began operating during the Reporting Period.

• Of the 32 franchisees that were in operation for the entire Reporting Period, 31 provided the financial information requested by Storm Guard and required for inclusion in this Item 19; while 1 franchisee was not able to provide financial information by the applicable deadline (despite Storm Guard’s extension of the deadline and repeated requests for the required financial information). Therefore, Storm Guard was unable to include that franchisee’s financial information in this Item 19.

• As a result, this Item 19 is comprised of the operating results for 31 of the 32 Storm Guard franchisees that were in operation throughout the entire Reporting Period.

• Storm Guard derived all of the figures shown in the tables below from information provided by, and in the possession of, its franchisees. This information is unaudited, but Storm Guard believes it is accurate and reliable.

Average

• Total Income:  $2,108,752 (100.0%)
• Cost of Goods Sold:  $1,061,566 (50.3%)
• Gross Profit:  $1,047,186 (49.7%)
• Total Expenses:  $868,815 (41.2%)
• EBITDA Plus Owner Compensation:  $365,350 (17.3%)

• Highest Total Income:  $6,063,382
• Lowest Total Income:  $353,408
• 13 of the 31 (42%) Storm Guard businesses included in the average attained or surpassed the average Total Income.

• Highest EBITDA Plus Owner Compensation:  $2,154,907
• Lowest EBITDA Plus Owner Compensation:  $(80,951)
• 11 of the 31 (35%) Storm Guard businesses included in the average attained or surpassed the average EBITDA Plus Owner Compensation.

Top 10%

• Total Income:  $5,069,829 (100.0%)
• Cost of Goods Sold:  $1,977,372 (39.0%)
• Gross Profit:  $3,092,457 (61.0%)
• Total Expenses:  $1,920,828 (37.9%)
• EBITDA Plus Owner Compensation:  $1,503,062 (29.6%)

Bottom 10%

• Total Income:  $546,898 (100.0%)
• Cost of Goods Sold:  $323,968 (59.2%)
• Gross Profit:  $222,930 (40.8%)
• Total Expenses:  $324,084 (59.3%)
• EBITDA Plus Owner Compensation:  $(69,125) (-12.6%)

Median

• Total Income:  $1,684,310 (100.0%)
• Cost of Goods Sold:  $950,682 (56.4%)
• Gross Profit:  $777,556 (46.2%)
• Total Expenses:  $635,011 (37.7%)
• EBITDA Plus Owner Compensation:  $211,434 (12.6%)

• The “Average” column is comprised of the average operating numbers for all of the franchised Storm Guard businesses that were in operation throughout the entire Reporting Period, except for the franchisee located in Boston, Massachusetts, who did not provide financials by the deadline (or extended deadlines) to be included in this Item 19.

• The “Top 10%” column is comprised of the average operating numbers for the top 10% of Storm Guard businesses (three franchisees) as determined by EBITDA Plus Owner Compensation during the Reporting Period. The Storm Guard businesses included in the Top 10% column are located in: Morrisville, NC; Northglenn, CO; and Arden, NC.

• The “Bottom 10%” column is comprised of the average operating numbers for the bottom 10% of Storm Guard businesses (three franchisees) as determined by EBITDA Plus Owner Compensation during the Reporting Period. The Storm Guard businesses included in the Bottom 10% column are located in: Leland, NC; Spring, TX; and Austin, TX.

• The term “Total Income,” as reflected in the first line item of this Item 19, includes all revenue and income received from operations from January 1, 2020 through December 31, 2020. This may include revenue received for jobs completed prior to January 1, 2020, but for which payment was received, in whole or in part, during the Reporting Period.

• The term “EBITDA,” as used in the table, means earnings before interest, taxes, depreciation, and amortization.

• The term “Cost of Goods Sold” means the total costs of materials and labor used to complete services provided by the applicable Storm Guard Businesses.

• The term “Gross Profit” means Total Income minus Cost of Goods Sold.

• The term “Total Expenses” means the expenses attributable to operating the applicable Storm Guard Businesses other than Cost of Goods Sold.

• From time to time, Storm Guard is able to secure rebates from material suppliers and manufacturers that are paid back to its franchisees. The figures shown in the table above may include rebates for some franchisees. Franchisees are encouraged to, but do not always, include rebates in their P&Ls. No rebates are guaranteed and Storm Guard is under no obligation to secure such rebates on behalf of its franchisees.

• For purposes of this Item 19, two types of compensation paid to owners were added back for the EBITDA Plus Owner Compensation line: (a) compensation paid to owners who categorized themselves as general managers; and (b) compensation paid to owners’ spouses in excess of $50,000. For both a and b, compensation includes the actual compensation paid to such owners plus directly related expenses such as payroll processing fees and taxes, as well as the cost of medical and other benefits that were paid on behalf of the franchise owners working as general managers.

• Some Storm Guard businesses have achieved these results. Your individual results may differ. There is no assurance you’ll earn as much.

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