FDD Talk 2021: ShelfGenie 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 ShelfGenie franchise opportunity, including relevant news updates

• Section II – Estimated initial investment for a ShelfGenie 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 ShelfGenie franchise, based on Items 5 and 6 of the company’s 2021 FDD

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

• 2020 average, median, high, and low gross sales per order for the 42 ShelfGenie franchisees, operating 241 franchised businesses each with a territory of approximately 125,000 households and open during the 2020 Reporting Period (January 1, 2020 through December 31, 2020), that had orders that were not excluded orders

• 2020 percentage of appointments resulting in a closed order for the 42 ShelfGenie franchisees, operating 241 franchised businesses each with a territory of approximately 125,000 households and open during the 2020 Reporting Period, that had orders that were not excluded orders

• 2019 and 2020 average, median, high, and low gross sales for the franchised ShelfGenie businesses that were open and operating for the entire 2019 Reporting Period and the entire 2020 Reporting Period

• 2020 average gross sales, cost of goods sold, gross margin, and annual rebates for the 42 ShelfGenie franchisees, operating 241 franchised businesses each with a territory of approximately 125,000 households and open during the 2020 Reporting Period

Section I – Background Information

17 Things You Need to Know About the ShelfGenie Franchise

Appoints New Director of Franchise Development

1.  In mid-June 2020, ShelfGenie named David Mihalic as director of franchise development. Mihalic brings a long history and deep experience in the franchise industry to Shelf Genie. He was a franchise owner himself for more than 14 years before shifting into the role of franchise development director at PuroClean, UNITS Moving and Portable Storage, and Service Team of Professionals.

2.  Andy Pittman, CEO of ShelfGenie, said, “David is exactly the kind of person we were looking for to fill this role. His vast experience in the franchise world brings a level of expertise that will benefit the company and every franchisee. His passion for helping people fulfill their dreams of business ownership and ability to understand the needs of prospects, brokers, and franchise owners is a rare find. A good day for David is when everyone else has a good day, and we are beyond excited to have him on our team.”

3.  Mihalic is equally impressed with the ShelfGenie organization, its dedication to the company’s purpose, and its top-notch support for franchise owners. He said, “Andy loves this brand and has built a team which is just as dedicated as he is, and I’m honored to be a part of it. Coming from a franchise development and franchise development consulting background, I look for people who have an honest, vested interest in their product, and I look forward to bringing those people into the ShelfGenie family.”

Acquired by Neighborly

4.  In early October 2020, Neighborly, the world’s largest franchisor of home service brands, announced the acquisition of ShelfGenie, a custom glide-out shelving solutions franchise headquartered in Atlanta, Georgia. Boxwood Partners, a Richmond, Virginia middle market investment bank, served as sell-side advisor to ShelfGenie for the transaction.

5.  Mike Bidwell, president and CEO of Neighborly, said, “The acquisition of ShelfGenie – the only nationwide franchise known for designing, building and installing custom pull-out shelving solutions into existing cabinets – furthers our strategy to ‘Own the Home’ through Neighborly’s home services. ShelfGenie’s high-quality service offerings and proven commitment to customer service make it an excellent complement to our existing portfolio of home service brands, providing an ideal opportunity for continued growth of the ShelfGenie franchise network and the Neighborly organization at-large.”

6.  Andy Pittman, president of ShelfGenie, added, “As part of our organization’s Noble Purpose, our ShelfGenie franchise owners are committed to turning the frustration and pain points homeowners have throughout their homes into sources of joy and comfort. It is through this dedication to our customers that we are projecting a record year in 2020 despite the challenges of an ongoing pandemic. Joining the Neighborly network will maximize our potential to achieve success in the years to come. I expect great things are in store for our franchise owners and their clients.”

7.  As a result of this acquisition, ShelfGenie will now benefit from new tools for growth and enhanced exposure to Neighborly’s 10 million customers who rely on Neighborly brands for their home service needs.

8.  Barry J. Falcon, board chairman and co-founder of ShelfGenie, said, “Since we began franchising ShelfGenie 12 years ago, our goals have always revolved around franchise profitability and continued growth. Now under the Neighborly umbrella, our opportunity to exceed those goals is better than ever before. Through the continued leadership of Andy Pittman and now Mike Bidwell, the future looks bright for the entire ShelfGenie system.”

New Location

9.  In late October 2020, ShelfGenie announced the opening of ShelfGenie of Metro DC. The Metro DC location is owned and operated by business entrepreneur Jeff Yoder. Before joining ShelfGenie, Yoder spent 20 years working as a federal government contractor with various organizations, spending most of his time supporting the U.S. Department of Education. Most recently, he was the COO of a Service-Disabled Veteran-Owned Small Business (SDVOSB) consulting firm.

10.  Yoder and his family give back to their community through the non-profit organization, Alice’s Kids. The group provides short-term financial relief to students and families with immediate needs. Proceeds of each sale at ShelfGenie of Metro DC will be donated to this charitable cause.

11.  Yoder said, “My experienced team is excited to bring the ShelfGenie brand to the Metro DC area. This is a rich and vibrant region where people put down roots and want to stay in their homes, and more seniors choose to age in place. We’re excited to provide quality solutions that help homeowners remodel their current homes to fit their needs.”

12.  Andy Pittman, brand president of ShelfGenie, is confident Yoder will be an excellent ShelfGenie franchise owner. Pittman said, “ShelfGenie is committed to building a best-in-class team and developing an industry-leading experience for all of our clients. Jeff has a solid business background and understands the needs of his community. I’m confident he can take on any challenge that comes his way. We’re excited to have him as part of the ShelfGenie team.”

13.  Yoder’s team includes Marketing Manager Asfandyar Ludin, who joins ShelfGenie of Metro DC with an impressive list of professional experience ranging from sales to franchise management. According to Yoder, “Asfandyar and I clicked right away. He’s a passionate and motivated businessperson who connects well with customers and employees. Part of my vision for the success of this business is assembling the best team to drive sales and growth right from the start. Asfandyar is a key part of that team.”

Company History

14.  ShelfGenie was originally founded as Shelf Conversions in 2000 by Andrew Kerwin in Richmond, Virginia. Kerwin was inspired to start a custom shelving and storage solutions business after he installed some new kitchen shelving for his parents and their neighbors. After seeing how happy better shelving made his parents and their friends, Kerwin knew that this was the type of business he wanted to start.

15.  After a few years, Kerwin hired business consultant Allan Young to figure out how to grow the business. Young helped Kerwin build a dealer model that expanded Shelf Conversions across the U.S. and into Canada. In 2006, Young became a partner in the company and two years later, a franchising system called ShelfGenie was launched. Young eventually became ShelfGenie’s CEO and under his leadership, the franchise continued to grow around North America.

16.  In 2018, Andy Pittman was appointed as ShelfGenie’s CEO. Pittman had previously served as the company’s COO and was one of the brand’s top-performing franchisees. In late 2020, ShelfGenie was acquired by Neighborly. Today, there are ShelfGenie locations across the United States and a few locations in Canada.

Entrepreneur’s Franchise 500

17.  ShelfGenie ranked No. 343 on Entrepreneur’s 2021 Franchise 500 list.

Section II – Estimated Costs

• Please click here for detailed estimates of ShelfGenie 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 ShelfGenie’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:  96
• Outlets at the End of the Year:  120
• Net Change:  +24

2019

• Outlets at the Start of the Year:  120
• Outlets at the End of the Year:  143
• Net Change:  +23

2020

• Outlets at the Start of the Year:  143
• Outlets at the End of the Year:  178
• Net Change:  +35

Company-Owned

2018

• Outlets at the Start of the Year:  48
• Outlets at the End of the Year:  54
• Net Change:  +6

2019

• Outlets at the Start of the Year:  54
• Outlets at the End of the Year:  21
• Net Change:  -33

2020

• Outlets at the Start of the Year:  21
• Outlets at the End of the Year:  18
• Net Change:  -3

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

• In the early months of 2020, the COVID-19 virus pandemic impacted local, regional, and national economies. New laws, rules, and governmental orders were issued in response to the virus outbreak. These governmental orders also imposed operational restrictions on certain non-essential businesses and ShelfGenie businesses were, in certain jurisdictions, deemed to be non-essential.

• No state, county, or city in which ShelfGenie franchisees are located imposed exactly the same shut-down requirements or operational restrictions, however, and as a result, ShelfGenie businesses may have shut down entirely or operated only to the extent permitted by law, and each for varying time periods during the year 2020.

• As of December 31, 2020, there were a total of 178 ShelfGenie franchised businesses. Such total of 178 franchised businesses consisted of 77 franchised businesses with approximately 250,000 household territories and 103 franchised businesses with approximately 125,000 household territories.

• For purposes of consistency, ShelfGenie has reported the number of businesses for purposes of this Item 19 such that each of the 77 franchised businesses (with 250,000-household territories) were treated as two businesses (each business with a 125,000-household territory), resulting in a total of 257 franchised businesses each with a territory of approximately 125,000 households.

• Of these 257 businesses, 241 were open during the reporting period of January 1, 2020 through December 31, 2020 (the “2020 Reporting Businesses” and collectively with the 2019 Reporting Businesses, the “Reporting Businesses”). Excluded from this Item 19 are 4 franchisees (operating 22 franchised businesses) who did not have at least one franchised business open for the entire 2020 Reporting Period.

• As of December 31, 2019, there were a total of 143 ShelfGenie franchised businesses. This Item 19 includes data for 98 of such businesses operated by 28 franchisees who had one or more franchised businesses open from January 1, 2019 through December 31, 2019 (the “2019 Reporting Businesses”). Excluded from this Item 19 are 13 franchisees (operating 58 franchised businesses) who did not have at least one franchised business open for the entire reporting period.

• As noted above with respect to the 2020 Reporting Period, for purposes of consistency in this Item 19, for the 2019 Reporting Period, ShelfGenie also converted the 98 reporting franchised businesses (some of whom had territories of 125,000 households and others had territories of 250,000 households) into 186 businesses, each with a territory of 125,000 households.

• Businesses that closed during the 2019 Reporting Period or the 2020 Reporting Period are excluded from the data reported for the 2019 Reporting Period or the 2020 Reporting Period, respectively. Eleven ShelfGenie franchise businesses closed during 2019. Of the 11 businesses that closed, 4 businesses closed after being open for less than 12 months. Four ShelfGenie franchised businesses closed during 2020. Of the 4 businesses that closed, no business closed after being open for less than 12 months.

• The following tables present information regarding the (a) average and median Gross Sales per Order for the 2020 Reporting Period, (b) systemwide percentage of Appointments Resulting in a Closed Order for the 2020 Reporting Period, (c) the average and median annual Gross Sales for the 2020 Reporting Period and the 2019 Reporting Period, and (d) the average gross sales, cost of goods sold, gross margin, and annual rebate amount for each franchisee (by market) for the 2020 Reporting Period.

• The following tables also include the number of ShelfGenie businesses (i.e., 125,000-household territories) owned by those franchisees included in the data for each applicable chart; however, the average and median Gross Sales per Order amounts and the systemwide Percentage of Appointments Resulting in a Closed Order include Gross Sales, orders, and appointments from adjacent territories operated by the franchisees where the franchisee does not own the territory but has the right to offer and provide services in the additional territory under an “Out of Area” Amendment to its Franchise Agreement. Not all franchisees operate in additional territories under an Out of Area Amendment, however, those that do, report Gross Sales per order and appointment information to ShelfGenie, which is included in the financial disclosures in this Item 19.

• The franchisor’s predecessor obtained the data included in these tables from information provided to the predecessor by ShelfGenie franchisees through the company’s software program for the 2019 Reporting Period and the 2020 Reporting Period. Neither the franchisor, its predecessor, nor its independent certified public accountants have audited or verified any of the sales and other figures reported to ShelfGenue. Franchisees are not required to use generally accepted accounting principles when reporting these figures.

• For purposes of this Item 19, (i) the “2020 Reporting Period” means the 12-month period from January 1, 2020 to December 31, 2020 and (ii) the “2019 Reporting Period” means the 12-month period from January 1, 2019 to December 31, 2019.

Part 1 – Average and Median Gross Sales Per Order for System During 2020 Reporting Period

All ShelfGenie Franchisees Operating for All of 2020 That Had Orders That Were Not Excluded Orders