In this FDD Talk post, you’ll learn the following:

• Section I – Background information on the Kitchen Tune-Up franchise opportunity, including relevant news updates

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

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

• 2019 and 2020 average and median gross sales for Kitchen Tune-Up franchisees with a single territory and with multiple territories, that were in business throughout the applicable calendar year

• number of months Kitchen Tune-Up businesses were shut down due to COVID-19, among the 99 Kitchen Tune-Up franchisees that responded to the franchisor’s survey

• average cost of goods sold (that is, the cost to franchisees of Kitchen Improvements products and consumables sold by the franchisees) as a percentage of the price at which the franchisees sold those products and consumables to their customers, for the 99 Kitchen Tune-Up franchisees that responded to the franchisor’s survey

• average sale amount and gross profit by service line for the 99 Kitchen Tune-Up franchisees that responded to the franchisor’s survey

• percentage of volume by service line for the 99 Kitchen Tune-Up franchisees that responded to the franchisor’s survey
  

• percentage of sales calls that led to a sale for the 99 Kitchen Tune-Up franchisees that responded to the franchisor’s survey

• number of employees and the positions they occupied for the 99 Kitchen Tune-Up franchisees that responded to the franchisor’s survey

• number of years in business for the 99 Kitchen Tune-Up franchisees that responded to the franchisor’s survey
  

• percentage of Kitchen Tune-Up franchisees that operated their business from home who maintained a space outside of their home to store or receive product such as a storage facility or warehouse

• type of commercial space used by those Kitchen Tune-Up franchisees that operated from a commercial space

Section I – Background Information

18 Things You Need to Know About the Kitchen Tune-Up Franchise

Acquired by Home Franchise Concepts

1.  In mid-December 2020, Home Franchise Concepts, a subsidiary of JM Family Enterprises, entered into an agreement to acquire Kitchen Tune-Up, an impressive and growing franchise company specializing in affordable kitchen updates through its network of 135 individual franchisees in 202 territories across the U.S. JM Family and Home Franchise Concepts are focused on empowering the experienced team at Kitchen Tune-Up to continue to grow and provide value to its franchise network.

2.  This sale will provide Kitchen Tune-Up with additional resources such as expanded operational, technology, and marketing support to continue to grow its reach while surpassing customer expectations. Kitchen Tune-Up becomes the fifth brand in the Home Franchise Concepts portfolio, joining Budget Blinds, Tailored Living featuring PremierGarage, Concrete Craft, and AdvantaClean.

3.  Brent Burns, president and CEO of JM Family, said, “In adding Kitchen Tune-Up to our portfolio, we are strategically leveraging the strong culture and core competencies we’ve developed in our 50-year history working directly with the franchise model. We feel there is great synergy between our companies and look forward to utilizing our combined talents to ensure continued success and growth for the franchisees.”

4.  Founded in 1988 by David and Cindy Haglund in Aberdeen, South Dakota, Kitchen Tune-Up is a family-operated business with Haglund currently in the role of chairman and his daughter Heidi Morrissey as president since 2017. Morrissey, who was named one of Franchise Dictionary Magazine’s “Woman of Wonder” in 2019 and 2020, will retain her role as president following the acquisition.

5.  Morrisey said Kitchen Tune-up prides itself on listening and understanding the needs of franchisees and ensuring that “fun is part of every remodel. Homeowners generally don’t think remodeling a kitchen is fun, so our franchisees do what they can to make the experience enjoyable for customers and one they will want to tell their friends about.”

Gears Up for Robust Growth

6.  At the beginning of February 2021, Kitchen Tune-Up reflected on 2020 and announced plans for the year ahead. It is clear that the adjustments to implement new programs and protocols positioned the brand to better support franchise owners and reach new heights for franchise growth during a roller-coaster of a year.

7.  To ensure that during the onset of the pandemic there was “No Tunie Left Behind,” Kitchen Tune-Up forgave minimum royalty fees for any franchise owner (also known as a “Tunie”) affected by the mandated government shutdown. The company also implemented virtual project estimates in place of in-person consultations.

8.  According to Heidi Morrissey, president of Kitchen Tune-Up, “2020 was definitely full of surprises, but despite Covid-19 restrictions, our team was able to make strategic decisions to ensure our franchise owners not only survived the pandemic, but emerged stronger. Without our incredible Tunies and their teams, our growth and success this year wouldn’t have been possible. We look forward to keeping up the momentum and reaching our growth goals for 2021.”

9.  More time at home in 2020 meant more home projects arising. As people were cooking more and using the kitchen as a multi-purpose space, they often realized a kitchen update could help accommodate the usage.

10.  Kitchen Tune-Up services include the company’s Tune-Up, a proprietary wood reconditioning process, as well as cabinet painting, redooring, cabinet refacing, and custom cabinets. While many kitchen remodeling services can take weeks, leaving kitchens inaccessible, Kitchen Tune-Up can finish its work in as little time as one to five days.

11.  Last year, the brand added 62 franchise locations in 39 new markets including Atlanta, Georgia; Nashville, Tennessee; Farmington Hills, Michigan; and Tucson and Phoenix, Arizona.

Celebrates Growth and New Sister Company

12.  In early August 2021, Kitchen Tune-Up announced that it had signed franchise agreements to enter new markets and also launched a sister company, Bath Tune-Up. “We are thrilled with the year Kitchen Tune-Up is having as our family-focused franchise brands continue to grow,” said Heidi Morrissey, brand president for Kitchen Tune-Up. “The demand for kitchen remodeling remains very high and we look forward to continuing to add members to our franchise family.”

13.  Kitchen Tune-Up has secured 32 signed agreements across 22 new markets since January of this year and has a year-to-date sales increase of 84%. The company is also on track to open in 15 additional markets by the end of 2021.

14.  As the latest addition to the Tune-Up brand, Bath Tune-Up launched in January 2021 and has signed 24 agreements. With a focus on curated collections to ease the selection process during bathroom remodeling, the brand is on track to expand in 15 new markets by the end of this year.

Company History

15.  Kitchen Tune-Up was founded in 1988 by David and Cindy Haglund in Aberdeen, South Dakota. Dave Haglund had successfully owned and operated a cabinet store since 1977. He began creating a checklist of items that you could do to make a kitchen “look and run like new,” because not all kitchens need new cabinets. This was the start of the Kitchen Tune-Up concept and Haglund’s new idea turned out to be another success. Demand for Kitchen Tune-Up’s services was high and the Haglunds started franchising the concept.

16.  Over the next few decades, Kitchen Tune-Up continued to grow around the United States. As the brand continued to grow, the Haglunds expanded the brand’s services. In 2003, the Haglunds’ eldest daughter, Heidi Morrissey, joined the company and led marketing and sales at the franchise Home Office for 13 years. In 2017, Heidi became president of the franchise system.

17.  In 2021, Kitchen Tune-Up along with its sister brand, Bath Tune-Up, joined the Home Franchise Concepts family of brands. Today, there are Kitchen Tune-Up locations across the U.S.

Entrepreneur’s Franchise 500

18.  Kitchen Tune-Up ranked No. 324 on Entrepreneur’s 2021 Franchise 500 list.

Section II – Estimated Costs

• Please click here for detailed estimates of Kitchen Tune-Up 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 Kitchen Tune-Up’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:  122
• Outlets at the End of the Year:  127
• Net Change:  +5

2019

• Outlets at the Start of the Year:  127
• Outlets at the End of the Year:  157
• Net Change:  +30

2020

• Outlets at the Start of the Year:  157
• Outlets at the End of the Year:  196
• Net Change:  +39

Company-Owned

2018

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

2019

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

2020

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

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

• The following is historical financial information concerning the reported annual sales of a subset of Kitchen Tune-Up’s existing outlets, namely, those franchisees who reported gross sales and who were open for business for all of calendar year 2020 (73 single territory franchisees and 26 multiple territory franchisees, representing an aggregate total of 145 territories, or 98% of the territories open for all of 2020).

Part 1 – Annual Sales Levels

• The following table shows annual gross sales reported by franchisees with a single territory and with multiple territories, that were in business throughout calendar year 2020.

• Figures for franchisees that had multiple territories are total sales for all territories – not average per territory – and if a franchisee’s additional territory opened during 2020, the total sales do not represent a full year of sales for the additional territory.

• All gross sales figures are presented without regard to the size of the territory. Although Kitchen Tune-Up currently grants territories that include approximately 41,000 households, not all territories are that size. These variations in size arise both because Kitchen Tune-Up formerly sold territories of differing sizes and because territories can experience either growth or contraction after a franchise is sold.

• During 2020, there were 73 reporting franchisees who operated a single territory throughout the year, and 26 reporting franchisees who operated multiple territories each throughout the year.

• These sales results are based upon the sales reported to Kitchen Tune-Up by the franchisees. Kitchen Tune-Up has not audited or verified the franchisees’ sales results, and Kitchen Tune-Up generally depends upon the franchisees to report their sales accurately. Kitchen Tune-Up does not have information concerning how its franchisees maintain their records, or whether those records are kept in accordance with generally-accepted accounting principles.

A. Single-Territory Franchisees

2020

• Number of Single-Territory Franchisees:  73
• Number of Territories:  73
• Average Sales:  $339,884
• Median Sales:  $286,883
• Average Sales of 75th Percentile:  $404,265
• Average Sales of Middle 50%:  $294,127
• Average Sales of 25% Percentile:  $152,654

2019

• Number of Single-Territory Franchisees:  58
• Number of Territories:  58
• Average Sales:  $261,689
• Median Sales:  $169,014
• Average Sales of 75th Percentile:  $350,493
• Average Sales of Middle 50%:  $197,569
• Average Sales of 25% Percentile:  $114,168

B. Multi-Territory Franchisees

2020

• Number of Multi-Territory Franchisees:  26
• Number of Territories:  72
• Average Sales:  $915,400
• Median Sales:  $660,000
• Average Sales of 75th Percentile:  $1,156,378
• Average Sales of Middle 50%:  $768,510
• Average Sales of 25% Percentile:  $447,647

2019

• Number of Multi-Territory Franchisees:  19
• Number of Territories:  49
• Average Sales:  $733,584
• Median Sales:  $669,778
• Average Sales of 75th Percentile:  $945,304
• Average Sales of Middle 50%:  $642,271
• Average Sales of 25% Percentile:  $408,478

Part 2 – Franchisee Responses to Survey Conducted by Kitchen Tune-Up in February 2021

• The following data are as reported by a subset of franchisees who responded to a survey that Kitchen Tune-Up conducted in February 2021 asking about their experiences during 2020. The survey was sent to all Kitchen Tune-Up franchisees, and all 99 franchisees returned responses.

A.  COVID-19 Voluntary or Mandatory Temporary Shutdowns

• As part of the survey, Kitchen Tune-Up asked its franchisees to report the number of months their business was shut down due to COVID-19. Only ten franchisees closed down at all; four for one month, four for two months, and two for three. The remaining franchisees conducted business as usual.

B.  Cost of Goods Sold

• As part of the survey, Kitchen Tune-Up asked its franchisees to report their experiences concerning average cost of goods sold (that is, the cost to franchisees of Kitchen Improvements products and consumables sold by the franchisees) as a percentage of the price at which the franchisees sold those products and consumables to their customers.

• According to that survey, the average cost of goods sold was 31% of the gross (retail) sales price.

• Kitchen Tune-Up has not independently verified the amount reported by its franchisees, but that figure is consistent with information concerning suggested mark-ups that is discussed during franchisee training classes.

• Your cost of goods sold may vary from this average, depending upon the number and nature of competitors in your area, the prices at which they sell similar decorative coatings, your abilities and efforts, and other factors.

• In addition to the cost of goods sold, you will also incur other expenses that are not included in this calculation, such as:

• monthly payments (lease or financing) for the required vehicle,
• labor costs for anyone you hire,
• rent for office/warehouse space,
• telephone and other utility expenses,
• automobile,
• general liability and other types of insurance,
• royalties and advertising expenses,
• federal, state, and local taxes, and
• financing expenses if you finance any part of your investment.

• You may also incur other expenses, depending upon the manner in which you operate the business.

C.  Average Sale Amount and Gross Profit

• As part of the survey, Kitchen Tune-Up also asked its franchisees about their average sale amount and gross profit by service line and received the following averaged responses:

Wood Restoration

• Average Sale Amount:  $2,141
• Average Gross Profit (i.e., gross sales less labor and materials):  73% of gross sales

Refacing

• Average Sale Amount:  $10,351
• Average Gross Profit:  58% of gross sales

Redooring

• Average Sale Amount:  $6,497
• Average Gross Profit:  58% of gross sales

Cabinets

• Average Sale Amount:  $11,162
• Average Gross Profit:  51% of gross sales

Painting

• Average Sale Amount:  $3,779
• Average Gross Profit:  53% of gross sales

D.  Product Mix

• As part of the survey, Kitchen Tune-Up asked its franchisees about their percentage of volume by service line. The average of all responses from Kitchen Tune-Up franchisees was as follows:

• Wood Restoration:  7.6% of total sales
• Refacing:  49.2% of total sales
• Redooring:  16.1% of total sales
• Cabinets:  16.4% of total sales
• Painting:  10.7% of total sales

E.  Closing Rate

• As part of the survey, Kitchen Tune-Up asked its franchisees about the percentage of sales calls that led to a sale. The average of all responses by its franchisees was 35%.

F.  Number of Employees

• As part of the survey, Kitchen Tune-Up asked its franchisees how many employees were employed in their Franchised Business. The responses by its franchisees were as follows:

• Sole owner/operator:  5% of respondents
• One additional employee:  5% of respondents
• Two additional employees:  4% of respondents
• Three to five additional employees:  45% of respondents
• More than five additional employees:  40% of respondents

G.  Positions of Employees

• Kitchen Tune-Up asked its franchisees who had additional employees about the positions they occupied and received the following responses:

• Installers:  48.4% of respondents
• Salespersons:  14.6% of respondents
• Administrators:  10.0% of respondents
• Management:  27.0% of respondents

H.  Number of Years In Business

• As part of the survey, Kitchen Tune-Up asked its franchisees how long they had been in business. The responses by its franchisees were as follows:

• 1-2 years:  51.4% of respondents
• 3-4 years:  12.6% of respondents
• 5-6 years:  13.5% of respondents
• 7-9 years:  8.1% of respondents
• 10+ years:  14.4% of respondents

I.  Space Outside of Home

• As part of the survey, Kitchen Tune-Up asked its franchisees who operated their business from home whether they maintained a space outside of their home to store or receive product such as a storage facility or warehouse. 63.4% of respondents answered yes.

J.  Commercial Space

• As part of the survey, Kitchen Tune-Up asked its franchisees who operated from a commercial space about the type of commercial space they operated from and received the following responses:

• Warehouse:  74.3% of respondents
• Flexible:  10.0% of respondents
• Design Center:  11.9% of respondents
• Other:  3.8% of respondents

• Some outlets have sold this amount. Your individual results may differ. There is no assurance that you’ll sell as much.

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