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

• Section I – Background information on the Pool Scouts franchise opportunity, including relevant news updates

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

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

• 2020 total revenue, cost of goods sold (technician labor, material costs), gross profit, operating expenses (royalties, brand development, advertising – consumer, automobile expense, operations fuel expense, credit card fees, insurance expense, other expenses, office supplies, professional fees, meals and entertainment), and operating cash flow before non-disclosed expenses for the VA-001 territory and the VA-002 territory (collectively, the “Combined Territories”) for the affiliate-owned Pool Scouts business in calendar year 2020, as well as the income statement information for VA-001, as a representation of a single territory

• 2020 average, median, high, and low revenue, number of customers, and number of services for the 26 franchised Pool Scouts territories, segmented by the year they first opened (2017, 2018, 2019, and 2020)

Section I – Background Information

17 Things You Need to Know About the Pool Scouts Franchise

Reaches Major Milestone with 100th Unit Signed

1.  In early November 2021, Pool Scouts said that it continued to surf the wave of the post-pandemic boom in pool construction, breaking revenue and franchise sales goals along the way. The brand saw a revenue jump of 77.8% in Q3 of 2021 versus Q3 of 2020 with sales rising 76.3% year-to-date, and it has signed 20 new franchisees and 39 purchased territories year-to-date. Most notably, that quarter also saw Pool Scouts reach the coveted 100-unit mark and enter its 15th state with the signing of franchisee Clarence Herry in Annapolis, Maryland.

2.  Pool sales in general tripled in 2021 due to the thousands of new pools installed during the pandemic as families spent more time in their outdoor spaces. These new pool owners need help with upkeep, and Pool Scouts is uniquely primed to satisfy this demand with quality and professional maintenance services. As a result, more and more savvy entrepreneurs are recognizing Pool Scouts’ recession- and pandemic-proof business opportunity.

3.  In Q3 of 2021 alone, Pool Scouts welcomed five new franchisees to its system. That’s in addition to the 12 new signings in the first half of the year. On its mission to expand nationwide, Pool Scouts broke into two brand new markets that quarter and also sold out the market of Huntsville, Alabama. The previous quarter, Pool Scouts also saw its largest development deal to date with a six-unit agreement in Phoenix, Arizona.

4.  The brand was looking to ride this franchise development momentum into Q4 with hopes to see additional units signed by the end of the year in identified markets primed for growth, including Houston, Dallas, San Antonio, Las Vegas, New Orleans, and Atlanta.

5.  Michael Wagner, president of Pool Scouts, said, “We blew our goals out of the water in the first half of 2021. The growth in pool owners in 2020 really amplified our target market, and our growing brand awareness put us in a great position to take advantage of that. Our team is ready to keep expanding and bring the Pool Scouts name to communities across the country. Having 100 units signed is a huge deal for any franchise brand, and we are thrilled to have reached that groundbreaking milestone as we wrap up what has already been an amazing year.”

Celebrates Best Year Yet

6.  In mid-January 2022, Pool Scouts said that it was celebrating the end of a flagship year. As the COVID-19 pandemic continues to increase pool construction, the brand spent 2021 breaking revenue and franchise sales goals across the country. Year-to-date, Pool Scouts has seen a 75% increase in systemwide revenue and signed 22 new franchisees and 44 purchased territories. Most notably, in 2021, Pool Scouts reached the coveted 100-unit mark and entered its 15th state with the signing of franchisee Clarence Herry in Annapolis, Maryland.

7.  Michael Wagner, president of Pool Scouts, said, “Business has been robust to say the least – 2021 has been our best year by far. We’ve seen fabulous growth through both existing franchisees and new franchisees. Sixty-three percent of the customers we serviced were new to the brand, which is a great indicator about the health of the business. Two franchisees broke through the million-dollar mark. That is a big benchmark. We also saw five franchisees expand their portfolio this year. Now, we are set to open 10 new franchisees in the first quarter of 2022.”

8.  When it comes to why Pool Scouts has seen tremendous growth while other businesses have continued to struggle due to the COVID-19 pandemic, Wagner says there are a few reasons. Wagner said, “The pool business in general has been killer over the past two years – residential pool construction grew 24% in 2020. Normally, it is anywhere from 3% to 6%. People are spending more time at their homes, and more pools are being built. Additionally, we are fortunate that our service does not require face-to-face contact with clients and that we were deemed an essential service from day one.”

9.  In addition to heightened sales, this increased demand also led to stronger franchise growth, Wagner said. “Our existing franchisees saw how well-positioned the Pool Scouts brand was to grow, which not many businesses could say,” he said. “We were still growing amidst the storm, and that led to quality franchisee validation. When prospective franchisees reached out to established franchisees, they were able to see how much support we are offered and the state of the business. Best of all, we have fabulous people in the system, and they bring in similarly great people, which makes our system better and better.”

10.  Wagner said the business model is also proving to be a major differentiator in the current franchising landscape. “Pool Scouts doesn’t require a retail or commercial space, so the business can be started out of the home at first,” he added. “The work itself is done by a single technician in a vehicle, which makes it a streamlined model with simple staffing requirements. It is also a low-cost investment overall, which is appealing to more and more entrepreneurs.”

11.  As the brand grows through franchising, Pool Scouts has also been expanding its leadership team and increasing the level of support offered to owners. “We’ve been adding both internal roles and franchisee coaches,” Wagner said. “We are growing so rapidly, and we know we can’t just sit here and wait until we are overworked. We want to be able to provide that same level of support to new franchisees as we expand our Pool Scouts family.”

12.  All of these differentiators have allowed the Pool Scouts brand to see a record-breaking year, and the industry is taking notice. The brand won a number of growth-oriented accolades in 2021, including being named number 78 on Entrepreneur’s 500 Best Home Services brands.

13.  Looking ahead, Wagner said Pool Scouts’ goal in 2022 is to add an additional 20-plus franchisees and inch closer to the 150 territory mark. The team has identified several markets primed for growth, including Houston, Dallas, San Antonio, Las Vegas, New Orleans, and Atlanta.

14.  According to Wagner, “We want to add several new territories, both through existing franchisees expanding and welcoming new owners into the system. We are looking at another killer year coming up, and that will continue to further our brand. I really feel we hit a tipping point between last year and this year – we got up that rollercoaster, and now we are rolling faster than ever downhill, which is incredibly exciting.”

Company History

15.  Pool Scouts was founded in January 2016 by parent company Buzz Franchise Brands, which is based out of Virginia Beach, Virginia. The brand provides cleaning and maintenance services for residential pools. Buzz Franchise Brands began franchising Pool Scouts right away and said that its goal was to rapidly expand within the first few years.

16.  Today, there are Pool Scouts locations across Arizona, Florida, Georgia, Idaho, North Carolina, Ohio, South Carolina, Tennessee, Texas, and Virginia.

Entrepreneur’s Franchise 500

17.  Pool Scouts ranked No. 475 on Entrepreneur’s 2022 Franchise 500 list.

Section II – Estimated Costs

• Detailed estimates of Pool Scouts franchise costs, based on Item 7 of the company’s 2021 FDD.

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

• Detailed information on Pool Scouts’ 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:  5
• Outlets at the End of the Year:  18
• Net Change:  +13

2019

• Outlets at the Start of the Year:  18
• Outlets at the End of the Year:  23
• Net Change:  +5

2020

• Outlets at the Start of the Year:  23
• Outlets at the End of the Year:  31
• Net Change:  +8

Company-Owned

2018

• Outlets at the Start of the Year:  2
• Outlets at the End of the Year:  2
• Net Change:  0

2019

• Outlets at the Start of the Year:  2
• Outlets at the End of the Year:  4
• Net Change:  +2

2020

• Outlets at the Start of the Year:  4
• Outlets at the End of the Year:  2
• Net Change:  -2

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

• Pool Scouts began offering franchises on February 23, 2016. As of December 31, 2020, Pool Scouts had 19 franchisees operating 31 Franchised Businesses. Detailed information for these 31 Franchised Businesses is provided below.

• Pool Scouts considers the pool service and maintenance industry (“Industry”) to be segmented into seasonal and year-round business models. Pool Scouts believes the Industry to be predominantly seasonal in the northern two-thirds of the United States (“Seasonal Business”).

• The locations operated by Pool Scouts’ affiliate, Local Operations, are Seasonal Businesses, running predominantly from mid-March to mid-November.

• Pool Scouts believes the Industry to be predominantly year-round in the remaining warmer climate states (“Year-Round Business”).

• In the Seasonal Business market, Pool Scouts segments the services provided into three distinct categories: pool openings, pool service/maintenance, and pool closings.

• The Year-Round Business in the warmer climate states consists primarily of pool service/maintenance visits, with a relatively few pool openings or closings.

• Note that this segmentation of the Industry does not include repair services (beyond minor repairs), which are present in both business models (Seasonal Business and Year-Round Business).

• Pool Scouts expects franchisees initially to use third-party service providers to perform such repair services. Over time, Pool Scouts expects that most or all franchisees will obtain the appropriate technical training, experience, and any certification or licensure (as required by applicable state law), to offer repair services directly to their customers.

• Some franchisees (i.e., those franchisees with sufficient experience providing pool repair services) may be permitted to offer repair services immediately, but Pool Scouts expects that most new franchisees will not.

Part 1 – Local Operations (Pool Scouts’ Affiliate)

• Local Operations commenced business operations in January 2016, following the acquisition of the service arm of a Virginia Beach, Virginia-based pool construction firm (“Acquisition”). The Acquisition consisted of 31 service customers, 2 service vehicles, and an experienced pool service professional.

• Upon launch of business operations, Pool Scouts provided service to the south Hampton Roads region of Virginia.

• Although Local Operations serviced the entire region, its focus in its first two years was primarily on northern Virginia Beach and Norfolk, in the territory known as VA-001 (consisting of 10,447 Targeted Households across 8 ZIP Codes). In 2018, Local Operations began servicing southern Virginia Beach and Chesapeake, the territory known as VA-002 (consisting of an estimated 9,182 Targeted Households across 23 ZIP Codes).

• Recognizing that Local Operations’ geographic area had multiple established competitors, Pool Scouts went to market with an aggressive advertising program in its first two years as it sought to establish the Pool Scouts brand and to scale the business rapidly.

• The results of this effort can be seen in the growth of customers, services, and revenue between calendar year 2016 and calendar year 2020, as illustrated in the tables below.

A. Detailed Income Statement for Calendar Year 2020

• The Income Statement below illustrates the revenue, cost of goods sold, and operating expenses for the VA-001 territory and the VA-002 territory (collectively, the “Combined Territories”) for calendar year 2020. It also includes income statement information for VA-001, as a representation of a single territory.

2020 Single Territory Representation

Total Revenue:  $468,429 (100%)

Cost of Goods Sold

• Technician Labor:  $123,001 (26.3%)
• Material Costs:  $76,522 (16.3%)
• Total Cost of Goods Sold:  $199,523 (42.6%)

Gross Profit:  $268,907 (57.4%)

Operating Expenses

• Royalties:  $37,474 (8.0%)
• Brand Development:  $9,369 (2.0%)
• Advertising – Consumer:  $40,220 (8.6%)
• Automobile Expense:  $26,552 (5.7%)
• Operations Fuel Expense:  $6,320 (1.3%)
• Credit Card Fees:  $11,158 (2.4%)
• Insurance Expense:  $10,869 (2.3%)
• Other Expenses:  $6,758 (1.4%)
• Office Supplies:  $234 (0.0%)
• Professional Fees:  $1,102 (0.2%)
• Meals and Entertainment:  $476 (0.1%)
• Total Disclosed Expenses:  $150,532 (32.1%)

Operating Cash Flow Before Non-Disclosed Expenses:  $118,375 (25.3%)

2020 Entity Representation

Total Revenue:  $793,948 (100.0%)

Cost of Goods Sold

• Technician Labor:  $208,476 (26.3%)
• Material Costs:  $129,698 (16.3%)
• Total Cost of Goods Sold:  $338,174 (42.6%)

Gross Profit:  $455,774 (57.4%)

Operating Expenses

• Royalties:  $63,516 (8.0%)
• Brand Development:  $15,879 (2.0%)
• Advertising – Consumer:  $72,553 (9.1%)
• Automobile Expense:  $45,004 (5.7%)
• Operations Fuel Expense:  $10,712 (1.3%)
• Credit Card Fees:  $18,912 (2.4%)
• Insurance Expense:  $18,422 (2.3%)
• Other Expenses:  $11,454 (1.4%)
• Office Supplies:  $396 (0.0%)
• Professional Fees:  $1,868 (0.2%)
• Meals and Entertainment:  $807 (0.1%)
• Total Disclosed Expenses:  $259,523 (32.7%)

Operating Cash Flow Before Non-Disclosed Expenses:  $196,251 (24.7%)

• The information set forth in the Income Statement summarizes financial performance for Local Operations in the VA-001 territory and the Combined Territories from January 1, 2020 through December 31, 2020.

• “Total Revenue” means the revenue billed for pool openings, recurring customer services, one-time services, and repairs.

• “Technician Labor” includes all costs (wages, taxes, etc.) for the technicians that performed the services. These employees were paid a wage between $12.00-$17.00 per hour with an average wage paid equal to $14.18 per hour. The median wage paid was $14.00 per hour. Your costs will vary depending on the prevailing wage rates in your area.

• “Materials Costs” includes the actual cost of chemical products, parts, and consumables required to complete the total services for the period.

• Local Operations did not pay Pool Scouts any royalty fees during 2020. Pool Scouts adjusted the Local Operations Income Statement to include a “Royalty Fee” entry to reflect the Royalty and Service Fee you will have to pay.

• The “Other Expenses” category of Operating Expenses consists of seven different line items. These line items include bank service charges, franchise convention costs, repairs and maintenance, postage and delivery, taxes, staff uniforms, and miscellaneous charges. Your expenses related to this category will vary.

• The above information is stated as Operating Cash Flow Before Non-Disclosed Expenses. Non-disclosed expenses may include but are not limited to (a) rent and utilities should you decide to operate the business from a commercial location, (b) wages and benefits should you decide to hire an office manager or other office staff to run the business instead of running it yourself, and (c) charitable contributions should you decide to contribute to any charities.

• Revenue from services to customers located in ZIP Codes not assigned to either the VA-001 territory or the VA-002 territory is included in the table and allocated equally across both territories.

B. Local Operations Revenue by Territory, Calendar Years 2016 and 2020

2016

• VA-001:  $217,463
• VA-002:  $66,692
• Total:  $284,155

2020

• VA-001:  $468,429
• VA-002:  $325,519
• Total:  $793,948

2016-2020 Growth Rate (%)

• VA-001:  215%
• VA-002:  488%
• Total:  279%

C. Local Operations Customer Count by Territory, Calendar Years 2016 and 2020

2016

• VA-001:  307
• VA-002:  107
• Total:  413

2020

• VA-001:  534
• VA-002:  386
• Total:  920

2016-2020 Growth Rate (%)

• VA-001:  174%
• VA-002:  361%
• Total:  223%

D. Local Operations Service Visit Count by Territory, Calendar Years 2016 and 2020

2016

• VA-001:  2,071
• VA-002:  682
• Total:  2,753

2020

• VA-001:  3,951
• VA-002:  2,800
• Total:  6,751

2016-2020 Growth Rate (%)

• VA-001:  191%
• VA-002:  410%
• Total:  245%

E. Supporting Metrics for Local Operations

• The following are based on Pool Scouts’ CRM data for Local Operations.

• Customer Acquisition Cost:  Local Operations recruited 448 new customers in 2020 on a local marketing spend of $94,741 for an average acquisition cost of $211 per customer. The median cost to acquire a customer was $193.

• Technician Cost:  Local Operations technicians do not receive benefits and are paid on an hourly basis. The average hourly rate in 2020 was $14.18/hour. The range was $12/hour to $17/hour. The median wage in 2020 for technicians was $14/hour.

• Services Per Customer:  Local Operations provided 6,751 services to 920 unique customers in 2020 for an average of 7.3 services per customer. The range of services per customer was 1 to 52. The median services per customer was 3.

• Revenue Per Truck:  Local Operations averaged (collectively) 6 trucks during the season and generated approximately $132,325 per truck.

• Customers Per Truck:  The number of customers that a single truck can service will depend on the geographic market in which you operate, the density of your customer base, the efficiency of your routing, and the type of service being provided. During the 2020 summer months, Local Operations was able to provide recurring service to 8-14 customers per truck per day, with one or two technicians. For opening and closing services, two technicians were able to service 4-5 customers per truck per day.

• Revenue Per Customer:  Local Operations’ average revenue per customer in 2020 was $845. The median revenue per customer in 2020 was $508.

• Revenue Per Pool Opening:  Local Operations’ average revenue per pool opening in 2020 was approximately $240. The median net revenue per pool opening in 2020 was $251.

• Revenue Per Service:  Local Operations’ average revenue per visit in 2020 was $115 per visit. The median net revenue per visit in 2020 was $93 per visit.

• Revenue Per Pool Closing:  Local Operations’ average revenue per pool closing in 2020 was $241 per service. The median net revenue per pool closing in 2020 was $250.

Part 2 – Pools Scouts Franchised Businesses

• As of December 31, 2020, Pool Scouts had 31 Franchised Businesses actively operating across 8 States. 80% of Pool Scouts’ franchisees have committed to opening multiple territories.

Class of 2017

• Number of Territories:  3

• Average Revenue:  $227,846
• Median Revenue:  $158,756
• High Revenue:  $493,036
• Low Revenue:  $31,746
• Year-Over-Year Growth (2019-2020):  24%

• Average Number of Customers:  188
• Median Number of Customers:  110
• High Number of Customers:  392
• Low Number of Customers:  61
• Year-Over-Year Growth (2019-2020):  11%

• Average Number of Services:  2,487
• Median Number of Services:  2,462
• High Number of Services:  4,268
• Low Number of Services:  1,811
• Year-Over-Year Growth (2019-2020):  12%

Class of 2018

• Number of Territories:  12

• Average Revenue:  $191,958
• Median Revenue:  $174,033
• High Revenue:  $404,072
• Low Revenue:  $20,285
• Year-Over-Year Growth (2019-2020):  39%

• Average Number of Customers:  168
• Median Number of Customers:  169
• High Number of Customers:  321
• Low Number of Customers:  45
• Year-Over-Year Growth (2019-2020):  27%

• Average Number of Services:  3,018
• Median Number of Services:  3,318
• High Number of Services:  4,911
• Low Number of Services:  331
• Year-Over-Year Growth (2019-2020):  27%

Class of 2019

• Number of Territories:  8

• Average Revenue:  $99,004
• Median Revenue:  $106,922
• High Revenue:  $152,865
• Low Revenue:  $28,721
• Year-Over-Year Growth (2019-2020):  164%

• Average Number of Customers:  97
• Median Number of Customers:  88
• High Number of Customers:  264
• Low Number of Customers:  17
• Year-Over-Year Growth (2019-2020):  76%

• Average Number of Services:  2,130
• Median Number of Services:  1,240
• High Number of Services:  6,916
• Low Number of Services:  443
• Year-Over-Year Growth (2019-2020):  269%

Class of 2020

• Number of Territories:  3

• Average Revenue:  $31,630
• Median Revenue:  $27,055
• High Revenue:  $48,510
• Low Revenue:  $19,325
• Year-Over-Year Growth (2019-2020):  N/A

• Average Number of Customers:  37
• Median Number of Customers:  23
• High Number of Customers:  67
• Low Number of Customers:  20
• Year-Over-Year Growth (2019-2020):  N/A

• Average Number of Services:  446
• Median Number of Services:  518
• High Number of Services:  521
• Low Number of Services:  299
• Year-Over-Year Growth (2019-2020):  N/A

• The Year-Over-Year Growth rate represents the change in average location performance in revenue, customers, and services from 2019 to 2020.

• Revenue, customers, and services from out of territory zip codes are included in the table for all franchise locations.

• Revenue from repair (services and parts) for the franchise system was 15% of total revenue in 2019 and 16% of total revenue in 2020.

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