In this FDD Talk post, you’ll learn the following:
- Section I – Estimated initial investment (franchise costs) for a ZIPS Dry Cleaners franchise, based on Item 7 of the company’s 2022 FDD
- Section II – Initial franchise fee, royalty fee, and marketing fee for a ZIPS Dry Cleaners franchise, based on Items 5 and 6 of the company’s 2022 FDD
- Section III – Number of franchised and company-owned ZIPS Dry Cleaners outlets at the start of the year and the end of the year for 2019, 2020, and 2021, based on Item 20 of the company’s 2022 FDD
- Section IV – Background information on the ZIPS Dry Cleaners franchise opportunity, including relevant news updates
- Section V – Presentation and analysis of ZIPS Dry Cleaners’ financial performance representations (average revenues and/or profits), based on Item 19 of the company’s 2022 FDD, including information on the:
- 2021 average revenue, cost of production supplies, gross margin, labor, rent, repairs and maintenance, utilities, and income before general and administrative expenses for the 49 ZIPS Dry Cleaners Plant Store Businesses operated by franchisees during the period January 1, 2021 to December 31, 2021
- Section VI – Key ratios, comparables, computations, and analyses for the ZIPS Dry Cleaners franchise opportunity (exclusive content for Platinum subscribers)
Section I – ZIPS Dry Cleaners Franchise Costs
- ZIPS Dry Cleaners (with a processing plant on premises) franchise costs, based on Item 7 of the company’s 2022 FDD:
- Initial Fees – Initial Franchise Fee: $30,000
- New Store Marketing: $10,000 to $50,000
- Real Property/Rent: $10,000 to $20,000
- Utility Deposits: $2,000 to $6,000
- Leasehold Improvements: $195,000 to $375,000
- Architectural and Engineering Fees: $10,000 to $35,000
- Construction Management Services: $0 to $5,000
- Furnishings, Fixtures, Marketing Materials, Supplies, and Other Branded Items: $13,000 to $17,000
- Insurance: $3,000 to $7,000
- Signage: $20,000 to $25,000
- Point-of-Sale System/Technical Equipment: $16,000 to $25,000
- Software: $7,500
- Office Equipment and Supplies: $1,200 to $4,000
- Dry Cleaning/Laundry Production Equipment and Installation: $300,000 to $425,000
- Initial Production Supplies: $10,000 to $15,000
- Training: $500 to $30,000
- Licenses, Permits, and Professional Fees: $1,500 to $13,500
- Additional Operating Funds – 6 Months: $100,000 to $200,000
- Total Estimated ZIPS Dry Cleaners Franchise Costs: $729,700 to $1,290,000
Section II – ZIPS Dry Cleaners’ Initial Franchise Fee, Royalty Fee, and Marketing Fee
- ZIPS Dry Cleaners’ initial franchise fee, royalty fee, and marketing fee, based on Items 5 and 6 of the company’s 2022 FDD:
- Initial Franchise Fee: $30,000
- Royalty: 6% of Royalty Net Sales
- Total Marketing Obligation: 5% of Royalty Net Sales divided among the National Marketing Fund, any Regional Marketing Fund (or, any Regional Co-op), and Local Store Marketing
- National Marketing Fund Contribution: up to 4% of Royalty Net Sales; currently, 1.5% of Royalty Net Sales
- Regional Marketing Fund Contribution: amount ZIPS determines (not to exceed 3% of Royalty Net Sales); currently, 2.5% of Royalty Net Sales
- Regional Co-op Fee: amount determined by the Co-op
- Local Store Marketing: currently, 1% of Royalty Net Sales
Section III – Number of Franchised and Company-Owned ZIPS Dry Cleaners Outlets
- Outlets at the Start of the Year: 55
- Outlets at the End of the Year: 63
- Net Change: +8
- Outlets at the Start of the Year: 63
- Outlets at the End of the Year: 66
- Net Change: +3
- Outlets at the Start of the Year: 66
- Outlets at the End of the Year: 64
- Net Change: -2
- Outlets at the Start of the Year: 2
- Outlets at the End of the Year: 2
- Net Change: 0
- Outlets at the Start of the Year: 2
- Outlets at the End of the Year: 2
- Net Change: 0
- Outlets at the Start of the Year: 2
- Outlets at the End of the Year: 3
- Net Change: +1
Section IV – Background Information on the ZIPS Dry Cleaners Franchise
19 Things You Need to Know About the ZIPS Dry Cleaners Franchise
Signs 10-Unit Development Agreement for Raleigh/Durham Area
1. At the end of September 2021, ZIPS Dry Cleaners announced that it had signed a development agreement with a new franchisee group, RR2 Clean Raleigh LLC, to open 10 full-service and dropoff/pickup satellite locations throughout Wake County, Durham County, and Chapel Hill, N.C., within six years. Franchisees Ron and Rose Cappello of Apex, N.C., expect to open their first unit in Wake County in spring of 2022.
2. News of ZIPS’ planned expansion in Raleigh followed the announcement earlier in 2021 of an eight-unit deal with a separate group for the Charlotte area. The Raleigh stores will be the first ZIPS units for the Cappellos and mark the first development commitment secured under the leadership of President/CEO Bob Barry, who joined ZIPS in May 2021.
3. Barry said, “We’re excited to have our first deal in place after a relatively quiet period brought on by the pandemic and our transition to new leadership. We’re very proud that we’ve remained viable and appealing throughout this chapter and look forward to celebrating with our franchisees as we spread across North Carolina and continue our aggressive expansion into other key markets throughout the country.”
4. Ron Cappello, whose background includes 30 years in commercial real estate with a focus on retail, will oversee development and day-to-day operation of the ZIPS business. A loyal ZIPS customer during his time living in the Philadelphia area, he was surprised upon moving to North Carolina in early 2018 to find that there were no affordable dry-cleaning options.
5. According to Cappello, “We could not find any professional dry cleaner in the Raleigh area at a reasonable price similar to a ZIPS operation. So I contacted ZIPS and told them I was interested in developing their franchise operations here. There’s definitely a need for affordable, professional dry cleaning that appeals to all demographics and income levels.”
6. Cappello said three factors governed the couple’s decision to make a multi-unit development commitment with ZIPS. One was the opportunity to join a robust and well-established organization as opposed to going it alone. Where independent mom-and-pop businesses might struggle to compete in the $10B+ segment, ZIPS offers sophisticated technology and a comprehensive system consisting of marketing, training, development, and operational support. Second was the explosive population and industry growth taking place in the Raleigh-Durham area, giving rise to an ever-increasing pool of potential customers. Third was the experience and commitment of the ZIPS corporate team.
7. Cappello added, “This is the future of dry cleaning. ZIPS is a professionally run franchise system offering service and value to everyone. This market is booming and people in all professions and from all walks of life need a reliable, affordable and convenient way to care for their garments and make sure they always look their best. We’re confident ZIPS can help us capitalize on the demand for these services. They have the systems in place plus the experience to put them to use effectively, with many members of the corporate team having been in the industry for 10 to 20 years. There’s also a real sense of commitment to the franchisee’s success among the whole team. We really appreciated that Bob Barry personally spent a day driving around the market with us.”
8. Abhi Parikh, ZIPS’ director of business development, said the company is looking to expand into several other key areas of North Carolina as well as other strategic U.S. markets. He explained that the company’s drop-store program, which lets franchisees who already have full-service ZIPS locations open satellite stores where customers can drop and retrieve their items with the same quick turnaround and low prices as at full-service locations, will facilitate multi-unit growth in these markets.
9. Parikh said, “The drop store strategy brings us closer to more customers while enabling franchisees to expand into smaller locations with lower up-front equipment investment and streamlined staffing needs. With our dual full-service/drop store offering, we’re making it easier than ever for growth-minded investors to expand quickly and cover a full market. We’re eager to find more ambitious investors to help grow our system and are currently seeking franchise partners in Winston-Salem and Greensboro in North Carolina, as well as in Texas, Georgia, Maryland, Pennsylvania and other parts of the country.”
Appoints Jeremy Larkin and Brooks Walter to Corporate Team
10. At the end of January 2022, ZIPS Dry Cleaners announced that it has named Jeremy Larkin director of procurement and strategic development and Brooks Walter director of marketing. Both gentlemen will be based in the company’s Savage, Md., headquarters and will report directly to President/CEO Bob Barry.
11. Larkin has more than 20 years of experience in the supply chain management field. He was most recently director of supply chain for sports-themed casual dining chain The Greene Turtle, and previously worked as a food and beverage manager for Choice Hotels International, and as a sales and marketing representative for Katcef Brothers Inc., an Anheuser-Busch and craft beverage wholesaler based in Maryland.
12. At ZIPS, Larkin will develop and implement a new strategy for the company’s supplier portfolio, negotiate all pricing, contracts, terms and conditions, and distribution of supplies to ZIPS stores, and play a key role in the company’s research and development efforts, spearheading innovation and strategy to ensure consistent delivery on customer expectations.
13. Walter also comes to ZIPS from The Greene Turtle, where he most recently was director of marketing. A graduate of York College of Pennsylvania with a degree in public relations, marketing, and speech communications, he brings more than 10 years of experience in corporate sponsorships, partnership marketing, brand marketing, public relations, and other activities to his new role.
14. Earlier in his career, Walter was director of brand marketing at Executive Media Communications, a full-service advertising and marketing agency involved heavily with professional sports organizations; manager of partnership marketing for Monumental Sports & Entertainment, owner of the NBA’s Washington Wizards, NHL’s Washington Capitals, and WNBA’s Washington Mystics; and held additional roles with the Baltimore Orioles, Philadelphia Eagles, and other pro sports teams.
15. At ZIPS, Walter will be responsible for maximizing the return on the company’s marketing investment as measured by new trials and overall sales volume. He will guide the company’s in-house and external marketing resources in executing a program to build comparable sales growth, championing the cause for franchisee success via systemwide and local store marketing, and curating the systemwide brand.
16. “I feel very fortunate – and know that ZIPS is very fortunate – to have Jeremy and Brooks join our team,” said Barry, who worked with both gentlemen while he was president/CEO of The Greene Turtle. “More than extensive skills in their respective fields, they both bring incredible passion for pursuing excellence and deep appreciation for teamwork as a vehicle for company-wide success. I am confident they will play integral roles in making ZIPS the premier garment-care brand that our founders envisioned at the start and that our corporate team and franchisees strive to be every day.”
17. ZIPS Dry Cleaners was founded in 2002 when eight independent dry cleaners in the Baltimore, Maryland – Washington, D.C. area decided to combine their businesses into one unified brand. The group’s goal was to provide high-quality dry cleaning services at an affordable price. Using their combined years of knowledge, the founders of ZIPS streamlined the brand’s business model and began opening additional locations in the D.C. metro area not long after ZIPS was formed.
18. In 2006, ZIPS began franchising and expansion continued around Washington D.C., Maryland, Virginia, and Pennsylvania. After a few years of successfully running the franchise, the founders of ZIPS sold a majority share of the company to JPB Capital Partners of Columbia. Over a decade later, in 2017, ZIPS opened its first location in a different region of the country, in Austin, Texas. That same year, the brand’s first West Coast location opened in Costa Mesa, California.
Entrepreneur’s Franchise 500
19. ZIPS Dry Cleaners ranked No. 312 on Entrepreneur’s 2022 Franchise 500 list.
Section V – Financial Performance Representations (Average Revenues and/or Profits) for the ZIPS Dry Cleaners Franchise (Item 19, 2022 FDD)
System-wide ZIPS Dry Cleaners Businesses – Statement of Average Total Revenue, Total Cost of Goods, Total Gross Profit, and Total Certain Costs (During Period January 1, 2021 to December 31, 2021)
- Presented below are the average total revenue, average total cost of goods, average total gross margin, and average cost of labor, rent, repairs and maintenance, and utilities data for 49 ZIPS Dry Cleaners Plant Store Businesses operated by franchisees during the period January 1, 2021 through December 31, 2021.
- All 49 Franchised Businesses were open and operating during the 12-month period January 1, 2021 to December 31, 2021. These Franchised Businesses are located in California, the District of Columbia, Florida, Maryland, Ohio, Pennsylvania, Texas, and Virginia.
- Twenty Franchised Businesses are not included in these calculations. Of these, four are not included because they opened during 2021 so were not open for the entire period; one was closed due to fire; three ceased operations and were closed during 2021; one was purchased by the franchisor during 2021; and eleven Franchised Businesses are not included because they did not provide financial detail for the entire year.
- This data was compiled from unaudited financial statements submitted to the franchisor by the Franchised Businesses. The franchisor believes the information is accurate, but it has not audited or verified the information and cannot verify that the information was compiled using consistently applied accounting principles.
- Some outlets have earned this amount. Your individual results may differ. There is no assurance that you’ll earn as much.
- Average Revenue: $707,349 (100.0%)
- Average Production Supplies: $75,758 (10.7%)
- Average Gross Margin: $631,591 (89.3%)
- Average Labor: $284,650 (40.2%)
- Average Rent: $127,246 (18.0%)
- Average Repairs and Maintenance: $16,660 (2.4%)
- Average Utilities: $35,677 (5.0%)
- Average Income Before General and Administrative Expenses: $167,358 (23.7%)
- Revenue – This figure is an average of all income and revenue from the sale of all services and products to customers less refunds to customers, discounts, and store value gift cards and gift certificates. For 2021, the highest amount of revenue for a Franchised Business was $1,498,617 and the lowest amount of revenue for a Franchised Business was $164,379.
- Production Supplies – The average Production Supplies includes the total costs of all services and products sold at ZIPS Dry Cleaners Businesses (such as alterations, supplies, leather costs, dry cleaning and laundry supplies, and waste disposal). These costs may vary from year to year, or within a year, due to fluctuations in the prices of supplies and/or materials, transportation costs, and/or shipping costs.
- Gross Margin – This figure represents the Revenue minus the Production Supplies.
- Labor – Labor includes salary, payroll taxes, wages, or benefits (including vacation pay) for management personnel and employees. Each ZIPS Dry Cleaners Business compensates its managers differently and may use varied formulas. Franchisees may compensate managers differently or may compensate one or more individual owners in lieu of one or more managers.
- You will set and pay compensation (and any benefits) for owners and management personnel at your Franchised Business at a rate you determine. Your benefits package to employees may include some, all, or none of the expenses incurred by the ZIPS Dry Cleaners Businesses covered in this Item 19. The total amount of salaries for your employees and managers at a particular location will vary according to local wages, the number of employees, and the number of hours that the Franchised Business is open for business. You must make labor, wage, and benefit determinations based on your market, experience, and other factors.
- Rent – This includes rent, property taxes, and miscellaneous items. Rent consists of minimum rents, percentage rents, common area maintenance charges, and any sales or other taxes. Property taxes are real estate taxes and assessments levied against the property upon which the business is located.
- The amount or rate of taxation varies from jurisdiction to jurisdiction and you should consult with your tax advisors regarding the impact that these taxes will have on this analysis.
- Repairs and Maintenance – This includes equipment and facility repair and maintenance.
- Utilities – This includes trash/dumpster and charges for water, gas, and electric. The charges for water and trash/dumpster are included in either the Utilities category or the Rent category, depending upon whether such charges are payable under the terms of the lease for the particular ZIPS Dry Cleaners Business.
- Income Before General and Administrative Expenses – This figure represents the Gross Margin minus Labor, Rent, Repairs and Maintenance, and Utilities, as defined above.