In this FDD Talk post, you’ll learn the following:
- Section I – Estimated initial investment (franchise costs) for a Home Clean Heroes franchise, based on Item 7 of the company’s 2022 FDD
- Section II – Initial franchise fee, royalty fee, and marketing fee for a Home Clean Heroes franchise, based on Items 5 and 6 of the company’s 2022 FDD
- Section III – Number of franchised and company-owned Home Clean Heroes 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 Home Clean Heroes franchise opportunity, including relevant news updates
- Section V – Presentation and analysis of Home Clean Heroes’ financial performance representations (average revenues and/or profits), based on Item 19 of the company’s 2022 FDD, including information on the:
- 2019, 2020, and 2021 total revenue by quarter and year-over-year change for the one affiliate-owned Home Clean Heroes business operated by the franchisor’s affiliate, HCH Local Operations, which has been in operation since May 2017
- 2021 total revenue, technician labor, materials costs, gross profit, royalty, marketing fee, advertising, automobile expense, fuel, credit card fees, insurance expense, field supplies and safety gear, repairs and maintenance, computer and internet expense, integrated business system fees, call center costs, and operating cash flow before non-itemized expenses for the one affiliate-owned Home Clean Heroes business operated by the franchisor’s affiliate, HCH Local Operations
- 2020 and 2021 total revenue by quarter and year-over-year change for the franchised Home Clean Heroes business in Williamsburg, which began operations in October 2019 and was open and operating for the full 2020 and 2021 calendar years
- 2021 total revenue by quarter for the franchised Home Clean Heroes business in North Atlanta, which began operations in November 2020 and was open and operating for the full 2021 calendar year
- key operational and sales metrics (new customer lead conversion, in-home estimate conversion, monthly recurring customers, average number of services per month per recurring customer, average revenue per service provided, average daily revenue per team, and average hourly labor rate) for the one affiliate-owned Home Clean Heroes business operated by the franchisor’s affiliate, HCH Local Operations, the franchised Home Clean Heroes business in Williamsburg, and the franchised Home Clean Heroes business in North Atlanta
- Section VI – Key ratios, comparables, computations, and analyses for the Home Clean Heroes franchise opportunity (exclusive content for Platinum subscribers)
Section I – Home Clean Heroes Franchise Costs
- Home Clean Heroes franchise costs, based on Item 7 of the company’s 2022 FDD:
- Initial Franchise Fee: $35,000
- Set-Up Fee: $1,000
- Mailing List Fee: $500 to $1,000
- Postcard Fees: $9,750
- SEO Fees: $3,600
- Digital Marketing Fees (first 3 months): $6,000
- Start-Up Package (equipment, uniforms, marketing supplies, and office supplies): $7,500 to $11,000
- National Call Center Set-up Fee: $300
- National Call Center Fees: $1,725 to $2,625
- Vehicle and Decals: $1,202 to $3,196
- Initial Training: $500 to $2,000
- Insurances and General Office Supplies: $1,800 to $3,600
- Professional Fees: $0 to $1,000
- Licenses and Certifications: $300 to $1,500
- Integrated Business Management Pre-opening Fee: $350 to $1,400
- Integrated Business Management Fee: $1,050
- Computer, Internet Devices, Phones, Software Setup: $300 to $1,800
- Heroes First Charitable Contribution Program: $25 to $30
- Additional Funds for 3 Months: $6,000 to $15,000
- Total Estimated Home Clean Heroes Franchise Costs: $76,902 to $100,851
Section II – Home Clean Heroes’ Initial Franchise Fee, Royalty Fee, and Marketing Fee
- Home Clean Heroes’ initial franchise fee, royalty fee, and marketing fee, based on Items 5 and 6 of the company’s 2022 FDD:
- Initial Franchise Fee: $35,000
- Royalty and Service Fee: 8% of Total Revenue
- Marketing Fee: 2% of Total Revenue
- Mailer Program Fees, Consisting of Setup Fee, Mailing List Fee, and Postcard Fee: Setup Fee: currently, $1,000; Postcard Fee: currently, $0.39 per postcard, $19,500 (50,000 postcards) per year; Mailing List Fee: currently, $0.05 per Targeted Household on the mailing list obtained, $500 to $1,000 (10,000 to 20,000 Targeted Households) per year
- Digital Advertising Program Fees, Consisting of SEO Fees and Digital Marketing Fees: SEO Fee: currently, $300 per month ($3,600 per year); Digital Marketing Fee: currently, $2,000 per month ($24,000 per year)
Section III – Number of Franchised and Company-Owned Home Clean Heroes Outlets
- Outlets at the Start of the Year: 0
- Outlets at the End of the Year: 1
- Net Change: +1
- Outlets at the Start of the Year: 1
- Outlets at the End of the Year: 3
- Net Change: +2
- Outlets at the Start of the Year: 3
- Outlets at the End of the Year: 8
- Net Change: +5
- 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: 2
- Net Change: 0
Section IV – Background Information on the Home Clean Heroes Franchise
17 Things You Need to Know About the Home Clean Heroes Franchise
Closes Out Q2 with Impressive Customer and Revenue Growth
1. At the beginning of July 2022, Home Clean Heroes shared that it had a busy first half of the year full of impressive accolades. The brand celebrated its fifth anniversary, new franchise signings and openings, customer and revenue growth, new partnerships, and prestigious honors in the franchising community. It was also recognized on Entrepreneur Magazine’s Top New and Emerging Franchises in 2022 list that came out in April.
2. Home Clean Heroes has continued its national expansion, establishing a strong footprint in Houston, Texas, with the new opening of a West Houston location and an additional signing in Houston North. The company has also continued to grow its customer base by 71% year-to-date and 47% in Q2 alone. Revenue growth has also been increasing impressively for Home Clean Heroes, up 88% year-to-date and 78% for Q2.
3. Around the time of the announcement, Home Clean Heroes launched its Heroes First Initiative, a partnership with the First Responders Children’s Foundation, a philanthropic organization supporting first responders. Home Clean Heroes is participating in a franchisee/franchisor matching contribution – $1 of every recurring or one-time service fee collected will be donated to first responder families and aid with financial hardships for those who have suffered tragic circumstances or death in the line of duty. The initiative, announced in January, has already raised over $8,000 donated to the First Responders Children’s Foundation. Over 60% of that money was raised in Q2, due to the increase in customer growth and awareness of the cause.
4. These numbers reflect the record revenue months many Home Clean Heroes franchisees have experienced this year due to the booming industry. According to IBIS World, the proven pandemic-resistant cleaning industry is estimated to be worth $6 billion. This segment provides enormous growth opportunities for new franchise owners looking to get their business off the ground or for expansion.
5. The corporate team is ready to aid new franchise owners on a path to joining their success. Parent franchisor Buzz Franchise Brands recently hired Chris Davenport as vice president of franchise development, and he will be spearheading the efforts to scale Home Clean Heroes and capitalize on the opportunities present within the space.
6. According to Home Clean Heroes President Joe Delatte, “The ideal Home Clean Heroes franchisee needs to be willing to follow a process. We’ve put in the time to build this business model, and without a doubt, the franchisees that are most successful are the ones that follow the system. Our hiring, training and retention tools are a great example of how we can provide franchisees with the necessary resources to grow the right way and achieve their dream of business ownership, regardless of any challenges that may come up.”
7. Home Clean Heroes aims to award 10 franchise locations in 2022 and is targeting markets such as Denver, Colorado and Houston, Texas where demand is high to make it happen. Currently, the brand is offering a summer signing incentive worth up to $30,000 for new franchisees who commit between now and September 5, 2022.
Parent Company Appoints New Vice President of Franchise Development
8. At the beginning of August 2022, Buzz Franchise Brands, which recently celebrated its 10th anniversary, announced that it has hired Chris Davenport as the new vice president of franchise development. Davenport brings many years of experience in the franchise industry to the table. He worked with Pak Mail Centers of America, made conversion franchise sales for Direct Energy, and has most recently been the vice president of franchise development for Mathnasium and GYMGUYZ.
9. “A recruiter contacted me, and in talking to them, I knew immediately what the opportunity represented. It was a no-brainer for me. This is absolutely where I wanted to go,” said Davenport of being hired by Buzz Franchise Brands. “I love what the company represents and the history and the track record they have built. I am very excited to be here.”
10. Davenport started the role in June and is focused on helping the franchisor with scaling its three subsidiaries: Home Clean Heroes, a 12-unit residential cleaning franchise; Pool Scouts, a 110-plus-unit pool maintenance brand; and British Swim School, a 150-plus-unit swimming lesson brand.
11. “Buzz has done a fantastic job developing healthy, strong, recognized franchise firms with British Swim School and Pool Scouts, and my role is to continue the growth of both those brands, as well as Home Clean Heroes,” said Davenport, who said the goal is to grow Home Clean Heroes to also have a triple-digit number of territories. “They have very lofty goals, and I’m excited to be an integral part of that growth and positioning the brand for that kind of success.”
12. Davenport added, “I find it very rewarding when somebody comes to Buzz Franchise Brands. We have the ability to find a fit across any one of our franchise lines. If a territory is unavailable for one brand, we can quickly pivot and look to find another business in our family of brands that might be a good fit for them and the area.”
13. Davenport is grateful to be a part of a franchise system that has seen phenomenal success in its first decade of operations and that has an excellent corporate team to back its brands’ franchisees. “Buzz has a reputation in the industry of being a leader in the franchise world from a leadership structure to an employee involvement standpoint. Kevin [Wilson, CEO] and Brian [Garrison, president and COO] have done an absolutely phenomenal job of building a company that supports their teams, employees and franchise partners. They go out of their way to be a franchisor of note that people should pay attention to,” he added.
14. Home Clean Heroes was founded in 2017 as the third brand of Buzz Franchise Brands in Virginia Beach, Virginia. Buzz Franchise Brands began in 2012 with one company, Mosquito Joe, which was later sold in 2018.
15. Buzz Franchise Brands says that it started Home Clean Heroes because it felt that the home cleaning industry had become stagnant. According to Buzz Franchise Brands, “We wanted to start a residential cleaning brand without using the tired and dated maid service concept, but instead bring fresh ideas to the cleaning industry.”
16. Buzz Franchise Brands started franchising Home Clean Heroes in 2018 and there are now a few franchised locations as well as some company-owned locations around the U.S.
Entrepreneur’s Franchise 500
17. Home Clean Heroes did not rank on Entrepreneur’s 2022 Franchise 500 list.
Section V – Financial Performance Representations (Average Revenues and/or Profits) for the Home Clean Heroes Franchise (Item 19, 2022 FDD)
- The information set forth in this Item 19 summarizes financial information of historic operations of HCH Local Operations (the franchisor’s affiliate) for the full calendar years 2019, 2020 and 2021, one franchisee (Williamsburg) that was open and operating for the full calendar years 2020 and 2021, and one franchisee (North Atlanta) that was open and operating for the full calendar year 2021, as obtained from Home Clean Heroes’ field management software program, payroll data, and Home Clean Heroes’ National Call Center provider.
HCH Local Operations
- HCH Local Operations, the franchisor’s affiliate, began providing services in the cities of Chesapeake, Norfolk, and Virginia Beach, Virginia, in May 2017. Since it began operations, the Home Clean Heroes model has been adjusted periodically to respond and adapt to market challenges and opportunities.
- Although HCH Local Operations serviced the cities of Chesapeake, Norfolk, and Virginia Beach, its focus in its first year was largely on Virginia Beach, the territory known as VA-001, which consists of 40,957 targeted households across 7 zip codes. In 2018, HCH Local Operations fully expanded its efforts in Chesapeake and Norfolk, the territory known as VA-002, which consists of 34,899 targeted households in 19 zip codes.
- Residential cleaning was deemed an essential business in the states where Home Clean Heroes operates, and as such HCH Local Operations was able to continue operating throughout 2020. The onset and impact of the pandemic in early 2020 did cause HCH Local Operations to shut down for a three-week period, and, not unexpectedly, did cause an increase in skipped services and a decline in new customer recruitment as the residents of the territories covered by HCH Local Operations were also under state and local restrictions for much of the spring.
- Once this restriction eased and residents began to resume a more “normal” lifestyle, HCL Local Operations experienced a marked recovery characterized by a trend back to more normalized service and revenue levels in the last two quarters of 2020. That momentum continued into and throughout 2021.
Part 1 – Quarterly Revenue Comparison for 2019, 2020, and 2021 (HCH Local Operations)
- The economic impact of the COVID-19 pandemic caused revenues to be negatively impacted in the first three quarters of 2020, beginning in March 2020, peaking in April and May 2020, and then beginning to rebound in the summer months. By the fourth quarter, financial performance had returned to +12% positive performance compared to the same quarter in 2019.
- Throughout 2021, the quarterly revenue has exceeded the pre-pandemic quarterly revenue.
- 2021 Total Revenue: $203,436 (34% YoY Change)
- 2020 Total Revenue: $152,327 (-10% YoY Change)
- 2019 Total Revenue: $169,931
- 2021 Total Revenue: $265,018 (141% YoY Change)
- 2020 Total Revenue: $109,771 (-46% YoY Change)
- 2019 Total Revenue: $202,311
- 2021 Total Revenue: $250,727 (51% YoY Change)
- 2020 Total Revenue: $165,565 (-12% YoY Change)
- 2019 Total Revenue: $187,628
- 2021 Total Revenue: $278,937 (42% YoY Change)
- 2020 Total Revenue: $196,575 (12% YoY Change)
- 2019 Total Revenue: $175,272
- 2021 Total Revenue: $998,118 (60% YoY Change)
- 2020 Total Revenue: $624,238 (-15% YoY Change)
- 2019 Total Revenue: $735,142
Part 2 – Income Statement for 2021 (HCH Local Operations)
- The income statement below illustrates the revenue, cost of goods sold, and disclosed expenses associated with HCH Local Operations.
- In 2021, HCH Local Operations generated a 59% Gross Margin, increased revenue for the measured period by 60%, from $624,238 in 2020 to $998,118 in 2021, and increased the operating cash flow margin from 17% to 20%.
Total Revenue: $998,118 (100%)
Cost of Goods Sold
- Technician Labor: $410,223 (41%)
- Materials Costs: $2,472 (0.2%)
- Total Cost of Goods Sold: $412,695 (41%)
Gross Profit: $585,423 (59%)
- Royalty: $79,849 (8%)
- Marketing Fee: $19,962 (2%)
- Advertising – Consumer: $134,484 (13%)
- Automobile Expense: $58,156 (6%)
- Fuel: $13,053 (1%)
- Credit Card Fees: $19,492 (2%)
- Insurance Expense: $9,872 (1%)
- Field Supplies and Safety Gear: $19,209 (2%)
- Repairs and Maintenance: $2,958 (0.3%)
- Computer and Internet Expense: $3,402 (0.3%)
- Integrated Business System Fees: $3,850 (0%)
- Call Center Costs: $17,138 (1.7%)
- Total Itemized Expenses: $381,426 (38%)
Operating Cash Flow Before Non-Itemized Expenses: $203,998 (20%)
- The information set forth in the income statement summarizes financial performance for HCH Local Operations’ two territories, VA-001 and VA-002, based on itemized expenses from January 1, 2021 through December 31, 2021.
- “Total Revenue” means the revenue invoiced for initial cleaning services, recurring cleaning services, and one-time cleans.
- “Technician Labor” includes all costs (wages, taxes, etc.) for the cleaning specialists that performed the services. In light of the economic impact of the COVID-19 pandemic, Home Clean Heroes’ parent company, Buzz Franchise Brands, provided wage incentives and guarantees for days and hours not worked in the Technician Labor line above. For 2021, these employees were paid a wage between $11.00 and $17.00 per hour, with an average wage paid equal to $14.41 per hour. The median wage paid was $13.50 per hour.
- “Materials Costs” includes the actual cost of cleaning products and consumables required to complete the total services for the year.
- HCH Local Operations did not pay Home Clean Heroes any royalty fees or marketing fees during 2021. Home Clean Heroes supplemented HCH Local Operations’ income statement by including entries for a “Royalty and Service Fee” and a “Marketing Fee” to reflect the current Royalty and Service Fee of 8% and the current Marketing Fee of 2% that you will have to pay.
- You will be required to pay to Home Clean Heroes, its affiliates, or its designated suppliers all of the fees described in the disclosure document. Going forward, HCH Local Operations will pay a Marketing Fee to Home Clean Heroes on the same basis as franchisees.
- Other than the Royalty and Service Fee and Marketing Fee, HCH Local Operations incurs the same costs for these items as Home Clean Heroes franchisees will incur.
- For 2021, the “Automobile Expense” represents the actual expense for all 9 vehicles used by HCH Local Operations.
- The above information is stated as Operating Cash Flow Before Non-Itemized Expenses. Non-itemized 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, (c) professional expenses such as accounting services should you decide to outsource this function, and (d) discretionary expenses such as office supplies, meals and entertainment, professional dues/subscriptions, or charitable contributions to such organizations as Cleaning For A Reason.
Home Clean Heroes Franchising, LLC
- As of December 31, 2021, Home Clean Heroes had recruited 9 unique franchisees that have signed franchise agreements for a total of 25 territories. Only two of those franchisees were open and operating in one territory each from January 1 through December 31, 2021, and Parts 3 and 4 contain information for those franchisees. Franchisees not in operation for a full year have been excluded.
- Home Clean Heroes does not require its franchisees to report their operating expense data to it, so it does not have the data to present a profit and loss statement.
Part 3 – Quarterly Revenue Comparison for 2020-2021 (Williamsburg)
- Home Clean Heroes’ Williamsburg franchisee began operations in October 2019, was open and operating the full calendar year ending December 31, 2020, and incurred impacts to its revenue and customer service activity due to the COVID-19 pandemic similar to that of HCH Local Operations.
- The Williamsburg franchisee, like HCH Local Operations, was under state and local restrictions as a result of the COVID-19 pandemic for much of the spring of 2020. As these restrictions eased, the franchisee experienced a positive revenue growth beginning in the third quarter of the year.
- Part 3 shows the total revenue by quarter for Home Clean Heroes’ franchisee for a one territory operation. This franchisee began operation in October 2019, so this represents the first and second full years of operation.
- Similar to HCH Local Operations, Home Clean Heroes’ Williamsburg franchisee experienced strong recovery in Q4 of 2020 and continued strong growth momentum throughout 2021.
- 2021 Total Revenue: $82,691 (101% YoY Change)
- 2020 Total Revenue: $41,106
- 2021 Total Revenue: $108,979 (180% YoY Change)
- 2020 Total Revenue: $38,989
- 2021 Total Revenue: $116,964 (64% YoY Change)
- 2020 Total Revenue: $71,344
- 2021 Total Revenue: $130,021 (44% YoY Change)
- 2020 Total Revenue: $90,247
- 2021 Total Revenue: $438,654 (81% YoY Change)
- 2020 Total Revenue: $241,686
Part 4 – Quarterly Revenue Comparison for 2021 (North Atlanta)
- Home Clean Heroes’ North Atlanta franchisee began operations in November 2020, so only 2021 data is reported.
- Q1 Revenue: $36,221
- Q2 Revenue: $57,740
- Q3 Revenue: $49,088
- Q4 Revenue: $59,316
- Total Revenue: $202,365
Part 5 – Key Operational and Sales Metrics for 2021 (HCH Local Operations, Williamsburg, and North Atlanta)
- Home Clean Heroes tracks key operational and sales metrics for all franchises and HCH Local Operations. Part 5 contains those metrics broken out for each business separately. HCH Local Operations data is measured across both of its operating territories. Williamsburg and North Atlanta each operate only one territory.
Leads received requesting proposal for new service
- HCH Local Operations (Combined Territories): 1,238
- Williamsburg Franchisee (Single Territory): 920
- North Atlanta Franchisee (Single Territory): 473
New customers served for the first time
- HCH Local Operations (Combined Territories): 505
- Williamsburg Franchisee (Single Territory): 467
- North Atlanta Franchisee (Single Territory): 170
Percentage of leads that became customers
- HCH Local Operations (Combined Territories): 41%
- Williamsburg Franchisee (Single Territory): 51%
- North Atlanta Franchisee (Single Territory): 36%
Number of in-home estimates completed for prospective recurring customers
- HCH Local Operations (Combined Territories): 425
- Williamsburg Franchisee (Single Territory): 311
- North Atlanta Franchisee (Single Territory): 191
Prospects receiving in-home estimates that became recurring customers
- HCH Local Operations (Combined Territories): 320
- Williamsburg Franchisee (Single Territory): 202
- North Atlanta Franchisee (Single Territory): 108
Percentage of recurring prospects that became recurring customers
- HCH Local Operations (Combined Territories): 75%
- Williamsburg Franchisee (Single Territory): 65%
- North Atlanta Franchisee (Single Territory): 57%
Total services completed
- HCH Local Operations (Combined Territories): 6,294
- Williamsburg Franchisee (Single Territory): 2,481
- North Atlanta Franchisee (Single Territory): 1,340
Total services completed for recurring customers
- HCH Local Operations (Combined Territories): 5,663
- Williamsburg Franchisee (Single Territory): 1,974
- North Atlanta Franchisee (Single Territory): 1,157
Percent of total services completed that were recurring services
- HCH Local Operations (Combined Territories): 90%
- Williamsburg Franchisee (Single Territory): 80%
- North Atlanta Franchisee (Single Territory): 86%
Number of unique recurring customers served
- HCH Local Operations (Combined Territories): 547
- Williamsburg Franchisee (Single Territory): 298
- North Atlanta Franchisee (Single Territory): 138
Average number of services per month provided to each recurring customer
- HCH Local Operations (Combined Territories): 1.8
- Williamsburg Franchisee (Single Territory): 1.5
- North Atlanta Franchisee (Single Territory): 1.7
Average revenue per service provided
- HCH Local Operations (Combined Territories): $157
- Williamsburg Franchisee (Single Territory): $177
- North Atlanta Franchisee (Single Territory): $151
Average daily revenue generated by each team
- HCH Local Operations (Combined Territories): $640
- Williamsburg Franchisee (Single Territory): $517
- North Atlanta Franchisee (Single Territory): $441
Average hourly labor rate
- HCH Local Operations (Combined Territories): $14.41
- Williamsburg Franchisee (Single Territory): not available to franchisor
- North Atlanta Franchisee (Single Territory): not available to franchisor
- Leads are requests for service proposals received from prospective customers between January 1, 2021 and December 31, 2021.
- New customers served are any new customer served and invoiced during the same period.
- Recurring customers are those customers who receive regular weekly, bi-weekly, or monthly services during the measured period. All recurring customers receive an in-home estimate for service price.
- Services include recurring services and one-time services.