FDD Talk 2021: Ace Handyman Services 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 Ace Handyman Services franchise opportunity, including relevant news updates

• Section II – Estimated initial investment for an Ace Handyman Services franchise, based on Item 7 of the company’s 2021 FDD

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

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

• 2020 average gross revenues (labor, material, service charge, trash, rental, etc.), cost of goods sold (craftsmen, material, service charge), gross profit, expenses (royalty, National Brand Fund, local marketing, office staff, professional fees, rent, utilities, software fees, general and administrative), and net profit for the 6 single-territory Ace Handyman Services franchise operators who were open between 8 and 11 months as of December 31, 2020

• 2020 average gross revenues (labor, material, service charge, trash, rental, etc.), cost of goods sold (craftsmen, material, service charge), gross profit, expenses (royalty, National Brand Fund, local marketing, office staff, professional fees, rent, utilities, software fees, general and administrative), and net profit for the 25 single-territory Ace Handyman Services franchise operators who were open for 12 months or more as of December 31, 2020

Section I – Background Information

17 Things You Need to Know About the Ace Handyman Services Franchise

Franchisee Earns 2020 Angie’s List Super Service Award for 15th Consecutive Year

1.  At the end of January 2021, Ace Handyman Services South Pittsburgh announced that it had earned the home service industry’s coveted Angie’s List Super Service Award, reflecting another year of exemplary customer service. This is the highest honor given by the leading online review platform and only awarded to an elite group of businesses that have gone above and beyond to satisfy their customers. It also happens to be the 15th consecutive year that Ace Handyman Services South Pittsburgh has earned the Super Service Award for its consistently high level of customer service.

2.  Angie’s List Super Service Award 2020 winners have met strict eligibility requirements. This includes maintaining an “A” rating in overall grade, recent grade, and review period grade. Angie’s List companies are graded on an A through F scale in multiple fields, such as price, professionalism, punctuality, and others. The winners must also be in good standing with Angie’s List, pass a background check, and abide by Angie’s List operational guidelines.

3.  Brian, the owner of Ace Handyman Services South Pittsburgh, said, “It’s a great honor to be recognized by Angie’s List once again. This is not an award based on ego, but pride, confirming we’re doing our part to earn customers’ trust, exceed expectations and become a trusted home ally.”

4.  Customer service is undoubtedly a top focus of Ace Handyman Services South Pittsburgh’s mission as a home repair and remodeling business. The company aims to deliver a full menu of effective, long-term solutions for residential and commercial customers throughout the Washington/Canonsburg communities, the South Hills of Pittsburgh, and the Mon Valley area. This includes over 1,100 different home repairs including, but not limited to, drywall, plumbing, carpentry, electrical, flooring, windows, doors, painting, caulking, and so much more. They also provide remodels of bathrooms, kitchens, and basements.

New Location

5.  In mid-May 2021, Ace Handyman Services opened one of its newest locations in Kitty Hawk, North Carolina, which is in the Outer Banks area. Owners Patrick “Packy” and Joanne Regan have lived on the Outer Banks for more than a decade. Both volunteer with the Beach Food Pantry, where Packy served as a board member. Joanne has been a Guardian ad Litem for more than 12 years and is still active in that capacity for Dare County. Packy serves as treasurer of the Outer Banks Community Foundation and is active with the Southern Shores Fire Department as a real estate and financial advisor.

6.  Packy said, “After owning multiple rental and personal properties on the Outer Banks, we became disenchanted with the lack of high quality service providers. This was especially true in the non-licensed trades. We saw an opportunity to change the dynamic by launching Ace Handyman Services.”

7.  Communication is key for the Regans. “The idea is to communicate at an exceptionally high level before, during and after projects,” Packy said. The business leverages technology to keep projects on track and on the client’s schedule. Ace Handyman Services also offers a 12-month warranty on all of the work its teams do.

8.  The Regans’ clients include permanent local residents, as well as homes in rental programs, such as AirBnB and VRBO. The team’s primary work includes carpentry, painting, flooring installations, decking repairs, windows, and doors. “There are more than 1,100 projects that we do,” Packy added.

Takes Measures to Work Safely in Customers’ Homes

9.  Once customers began feeling safe to have people enter their homes again, following the initial phases of the COVID-19 pandemic, Ace Handyman Services updated its practices to ensure the safety of its employees and customers. As rules vary state by state, Ace Handyman Services said that it is following local mandates and orders as well as the general guidelines set out by the CDC.

10.  Customers are encouraged to get in touch with Ace Handyman Services by phone or online. Ace Handyman Services will confirm the health of the Craftsman assigned to a job. Then the franchise will review its safety protocols to ensure that customers know how Craftsmen will enter their home to do the work. (When the Craftsman enters a home, they will confirm the work to be completed and either get a verbal agreement on a customer’s estimate or confirmation via email).

11.  All Ace Handyman Services Craftsmen will don safety equipment and follow best practice health protocols set forth by the CDC that include:

• Wearing a new face mask;
• Wearing new shoe covers;
• Wearing a new pair of disposable gloves;
• Applying hand sanitizer at the front door, and throughout the job;
• Following CDC social distancing standards while in a client’s home; and
• Using disinfectant solution to clean the area prior to the work.

12.  Once the work is complete, the Craftsman will get the client’s approval on the work completed and:

• Gather tools and parts to clear the work area;
• Don a second pair of disposable gloves to disinfect the work area; and
• Thank the client for letting Ace Handyman Services make life a little better.

Company History

13.  Ace Handyman Services was founded as Handyman Matters in 1998 by Andy Bell and Mark Douglass in Denver, Colorado. Bell had spent a decade working as a stockbroker, followed by work in the food and beverage industry. When he wanted to start a family, Bell decided to move back home to Colorado and find a job that required less hours.

14.  While deciding what he wanted to do next, Bell started a small business of his own repairing swamp coolers, a skill that had been necessary to learn because the coolers atop many of the restaurants he’d managed broke down regularly. The business was successful from the start and Bell realized there was a vastly underserved market in the home repair field. He began doing more research to expand his business.

15.  Over the next few years, Bell, with help from Mark Douglass, continued to expand Handyman Matters. They began franchising the concept in 2001. After more than a decade of success, Ace Hardware Corporation acquired Handyman Matters in 2019 and changed the company’s name to Ace Handyman Services.

16.  Ace Handyman Services continues to operate as a stand-alone subsidiary of Ace Hardware Corporation and Bell continues to serve as the company’s CEO. Today, there are Ace Handyman Services locations in more than 23 states.

Entrepreneur’s Franchise 500

17.  Ace Handyman Services did not rank on Entrepreneur’s 2021 Franchise 500 list.

Section II – Estimated Costs

• Please click here for detailed estimates of Ace Handyman Services 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 Ace Handyman Services’ 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:  127
• Outlets at the End of the Year:  115
• Net Change:  -12

2019

• Outlets at the Start of the Year:  115
• Outlets at the End of the Year:  115
• Net Change:  0

2020

• Outlets at the Start of the Year:  115
• Outlets at the End of the Year:  123
• Net Change:  +8

Company-Owned

2018

• Outlets at the Start of the Year:  4
• Outlets at the End of the Year:  7
• Net Change:  +3

2019

• Outlets at the Start of the Year:  7
• Outlets at the End of the Year:  7
• Net Change:  0

2020

• Outlets at the Start of the Year:  7
• Outlets at the End of the Year:  7
• Net Change:  0

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

• As of December 31, 2020, there were 123 franchised Ace Handyman Services Businesses and seven affiliated Ace Handyman Services Businesses in operation, which are referred to as “Units” in this Item 19.

• In addition, 34 franchise owners representing 42 Territories have purchased Ace Handyman Services Businesses that are expected to be opened in 2021.

• The 123 franchised Units are owned and operated by 63 different franchise owners, referred to in this Item 19 as the “Operators.”

• Of the 63 Operators as of December 31, 2020, 20 Operators own and operate in two or more Territories, yet report a combined Gross Revenues for all of their Territories. Ace Handyman Services considers these Operators to be multi-Territory Operators. Because multi-Territory Operators’ results may vary significantly from a single-Territory Operator, Ace Handyman Services is not showing the results of these 20 Operators in this Item 19.

• There are 43 single-Territory Operators who operated as of December 31, 2020. Of the 43 single-Territory Operators, as of December 31, 2020 there were 12 Operators who had not been open for at least 8 months and are not reported in the tables below, six Operators who were open between 8 and 11 months and their results are shown in Part 1 below, and 25 Operators who were open for 12 months or more whose results are shown in Part 2 below. The 31 Operators who are shown in the tables below shall be referred to as the “Reporting Operators.”

• There were also five Operators with six Units that closed during the year 2020, one of which had been open for less than 12 months before closing. None of these closed Operators are included in this Item 19.

• The seven outlets operated by Ace Handyman Services’ affiliate are also not included in this Item 19

Part 1 – All Single-Territory Operators Who Were Opened 8-11 Months as of December 31, 2020 (Averages)

6 Reporting Operators

Gross Revenues

• Labor Revenue:  $213,030 (85.6%)
• Material Revenue:  $25,876 (10.4%)
• Service Charge Revenue:  $8,914 (3.6%)
• Trash, Rental, Etc. Revenue:  $941 (0.4%)
• Total Gross Revenues:  $248,761 (100.0%)

Less: Cost of Goods Sold (COGS)

• Craftsmen COGS:  $80,267 (32.3%)
• Material COGS:  $28,826 (11.6%)
• Service Charge COGS:  $3,314 (1.3%)
• Total COGS:  $112,407 (45.2%)

Gross Profit:  $136,354 (54.8%)

Less: Expenses

• Royalty:  $14,926 (6.0%)
• National Brand Fund:  $4,975 (2.0%)
• Local Marketing:  $19,930 (8.0%)
• Office Staff:  $30,837 (12.4%)
• Professional Fees:  $2,863 (1.2%)
• Rent:  $4,569 (1.8%)
• Utilities:  $881 (0.4%)
• Software Fees:  $4,491 (1.8%)
• General and Administrative:  $11,919 (4.8%)
• Total Expenses:  $95,391 (38.3%)

Net Profit:  $40,963 (16.5%)

Part 2 – All Single-Territory Operators Who Were Opened 12 Months or Longer as of December 31, 2020 (Averages)

Top Quartile (6 Reporting Operators)

Gross Revenues

• Labor Revenue:  $568,809
• Material Revenue:  $144,040
• Service Charge Revenue:  $33,833
• Trash, Rental, Etc. Revenue:  $6,997
• Total Gross Revenues:  $753,679

Less: Cost of Goods Sold (COGS)

• Craftsmen COGS:  $303,978
• Material COGS:  $29,893
• Service Charge COGS:  $9,543
• Total COGS:  $343,413

Gross Profit:  $410,265

Less: Expenses

• Royalty:  $45,221
• National Brand Fund:  $15,074
• Local Marketing:  $50,193
• Office Staff:  $94,783
• Professional Fees:  $5,377
• Rent:  $8,256
• Utilities:  $1,352
• Software Fees:  $5,988
• General and Administrative:  $33,574
• Total Expenses:  $259,817

Net Profit:  $150,449

Second Quartile (7 Reporting Operators)

Gross Revenues

• Labor Revenue:  $396,063
• Material Revenue:  $56,490
• Service Charge Revenue:  $27,967
• Trash, Rental, Etc. Revenue:  $14,349
• Total Gross Revenues:  $494,869

Less: Cost of Goods Sold (COGS)

• Craftsmen COGS:  $210,050
• Material COGS:  $5,763
• Service Charge COGS:  $13,550
• Total COGS:  $229,363

Gross Profit:  $265,506

Less: Expenses

• Royalty:  $29,692
• National Brand Fund:  $9,897
• Local Marketing:  $43,757
• Office Staff:  $63,369
• Professional Fees:  $5,381
• Rent:  $7,384
• Utilities:  $1,402
• Software Fees:  $5,988
• General and Administrative:  $23,691
• Total Expenses:  $190,563

Net Profit:  $74,943 (15%)

Third Quartile (6 Reporting Operators)

Gross Revenues

• Labor Revenue:  $239,374
• Material Revenue:  $51,427
• Service Charge Revenue:  $37,888
• Trash, Rental, Etc. Revenue:  $1,626
• Total Gross Revenues:  $330,314

Less: Cost of Goods Sold (COGS)

• Craftsmen COGS:  $139,252
• Material COGS:  $3,438
• Service Charge COGS:  $7,076
• Total COGS:  $149,766

Gross Profit:  $180,548

Less: Expenses

• Royalty:  $19,819
• National Brand Fund:  $6,606
• Local Marketing:  $32,676
• Office Staff:  $50,338
• Professional Fees:  $6,044
• Rent:  $5,777
• Utilities:  $39
• Software Fees:  $5,988
• General and Administrative:  $15,817
• Total Expenses:  $143,105

Net Profit:  $37,443 (11%)

Bottom Quartile (6 Reporting Operators)

Gross Revenues

• Labor Revenue:  $118,719
• Material Revenue:  $19,494
• Service Charge Revenue:  $8,669
• Trash, Rental, Etc. Revenue:  $902
• Total Gross Revenues:  $147,784

Less: Cost of Goods Sold (COGS)

• Craftsmen COGS:  $52,701
• Material COGS:  $1,961
• Service Charge COGS:  $3,348
• Total COGS:  $58,010

Gross Profit:  $89,774

Less: Expenses

• Royalty:  $8,867
• National Brand Fund:  $2,956
• Local Marketing:  $24,186
• Office Staff:  $28,208
• Professional Fees:  $3,727
• Rent:  $4,910
• Utilities:  $1,045
• Software Fees:  $5,988
• General and Administrative:  $10,442
• Total Expenses:  $90,329

Net Profit:  -$555 (0%)

Average

Gross Revenues

• Labor Revenue:  $330,741.25 (76.6%)
• Material Revenue:  $67,862.75 (15.7%)
• Service Charge Revenue:  $27,089.25 (6.3%)
• Trash, Rental, Etc. Revenue:  $5,968.50 (1.4%)
• Total Gross Revenues:  $431,661.75 (100.0%)

Less: Cost of Goods Sold (COGS)

• Craftsmen COGS:  $176,495.25 (40.9%)
• Material COGS:  $10,263.75 (2.4%)
• Service Charge COGS:  $8,379.25 (1.9%)
• Total COGS:  $195,138.25 (45.2%)

Gross Profit:  $236,523.50 (54.8%)

Less: Expenses

• Royalty:  $25,899.75 (6.0%)
• National Brand Fund:  $8,633.25 (2.0%)
• Local Marketing:  $37,703.00 (8.7%)
• Office Staff:  $59,174.50 (13.7%)
• Professional Fees:  $5,132.25 (1.2%)
• Rent:  $6,581.75 (1.5%)
• Utilities:  $959.50 (0.2%)
• Software Fees:  $5,988.00 (1.4%)
• General and Administrative:  $20,881.00 (4.8%)
• Total Expenses:  $170,953.00 (39.6%)

Net Profit:  $65,570.50 (15.2%)

• Each of the Reporting Operators operates one Ace Handyman Services Business in one Territory.

• “Gross Revenues” means all revenue derived from the Reporting Operators’ Ace Handyman Services Businesses, excluding sales tax and discounts.

• “Gross Profit” was computed using the “Gross Revenue” less the costs for craftsmen personnel, service charges, and material expenses (which expenses collectively represent the “Cost of Goods Sold” in these tables), in calendar year 2020.

• “General and Administrative Expenses” include office supplies, software, internet, phone, dues and subscriptions, charitable expenses, postage, business licenses, bank service charges, and insurance expenses.

• “Net Profit” was computed using the Gross Profit less the other additional expenses identified in each table, including the Royalty Fees and National Brand Fees paid by the Reporting Operators to Ace Handyman Services.

• The information in Parts 1 and 2 were prepared from data obtained from the unaudited reports submitted by the Reporting Operators shown in each table to Ace Handyman Services from their QuickBooks software for calendar year 2020.

• Ace Handyman Services removed owner salary/draws and other personal benefits that were listed as expenses, but otherwise has not altered the data in those reports. Ace Handyman Services has not audited these reports and cannot guarantee their accuracy.

• Some Ace Handyman Services Businesses have sold and earned these amounts. Your individual results may differ. There is no assurance that you will sell or earn as much.

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