The Designery Franchise: Average Sales ($2.17M) vs. Cost ($134K-$272K)

Section I – Estimated initial investment (franchise costs) for The Designery franchise, based on Item 7 of the company’s 2023 FDD

Section II – Initial franchise fee, royalty fee, and marketing fee for The Designery franchise, based on Items 5 and 6 of the company’s 2023 FDD

Section III – Number of franchised and company-owned The Designery outlets at the start of the year and the end of the year for 2020, 2021, and 2022, based on Item 20 of the company’s 2023 FDD

Section IV – News updates on The Designery franchise opportunity

Section V – Presentation and analysis of The Designery’s financial performance representations (average revenues and/or profits), based on Item 19 of the company’s 2023 FDD, including information on the:

• 2021 and 2022 gross sales, cost of goods sold, gross profit, disclosed expenses (commission, miscellaneous general and administrative expenses, rent and lease, utilities, local marketing), franchisor fees (Royalty Fee, Brand Fund Fee, Technology Fee), and adjusted profit generated by the 2 affiliate-owned locations (Calhoun and Rossville) that have been in operation since 2019 using a system of operations substantially similar to The Designery System and upon which The Designery System is based

• 2021 and 2022 monthly gross revenue generated by the 2 affiliate-owned locations (Calhoun and Rossville) that have been in operation since 2019 using a system of operations substantially similar to The Designery System and upon which The Designery System is based

Section VI – Key ratios, comparables, computations, and analyses for The Designery franchise opportunity (exclusive content for Platinum subscribers)

Section I – The Designery Franchise Costs

• The Designery franchise costs, based on Item 7 of the company’s 2023 FDD:

• Initial Franchise Fee:  $54,900 to $68,900
• Franchisor Directed Advertising Fee Deposit:  $6,000
• Rent and Security Deposit:  $2,000 to $8,000
• Utilities:  $250 to $750
• Leasehold Improvements:  $25,000 to $65,000
• Grand Opening Marketing:  $5,000 to $7,000
• Inventory, Furniture, Fixtures, and Equipment:  $10,000 to $35,000
• Business Management and Technology System:  $1,000 to $3,000
• Insurance Deposits and Initial Premiums:  $1,800 to $2,500
• Signage:  $5,000 to $8,000
• Office Expenses:  $500 to $1,000
• Licenses, Permits, and Certifications:  $0 to $2,500
• Technology Fee (3 months):  $1,797
• Dues and Subscriptions:  $1,000 to $8,000
• Professional Fees (lawyer, accountant, etc.):  $500 to $2,000
• Travel Expenses to Training:  $250 to $3,000
• Additional Funds (3 months):  $20,000 to $50,000
• Total Estimated The Designery Franchise Costs:  $134,997 to $272,447

Section II – The Designery’s Initial Franchise Fee, Royalty Fee, and Marketing Fee

• The Designery’s initial franchise fee, royalty fee, and marketing fee, based on Items 5 and 6 of the company’s 2023 FDD:

• Initial Franchise Fee:  $54,900 to $68,900
• Royalty Fee:  the greater of: (i) 5-7% of Gross Revenue; or (ii) the Minimum Royalty Fee
• Brand Fund Contribution:  currently, 1% of Gross Revenue
• Local Advertising Requirement:  currently, the minimum required spend is the greater of: (i) 3% of Gross Revenue per month; and (ii) $3,000
• Regional Advertising and Promotional Cooperative:  if established, determined by the cooperative

Section III – Number of Franchised and Company-Owned The Designery Outlets

Franchised

2020

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

2021

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

2022

• Outlets at the Start of the Year:  0
• Outlets at the End of the Year:  4*
• Net Change:  +2

*Two of these outlets were formerly affiliate-owned and have been converted to franchised.

Company-Owned

2020

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

2021

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

2022

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

Section IV – News Updates on The Designery Franchise

• The Designery Did Not Rank on Entrepreneur’s 2023 Franchise 500 List

Section V – Financial Performance Representations (Average Revenues and/or Profits) for The Designery Franchise (Item 19, 2023 FDD)

• As of December 31, 2022, there were 4 franchised locations in operation.

• This Item sets forth certain Gross Revenue information for the Affiliate-Owned Locations from January 1, 2022 to December 31, 2022 (the “2022 Measurement Period”).

• The Affiliate-Owned Locations have been in operation since 2019 using a system of operations substantially similar to The Designery System and upon which The Designery System is based. The Affiliate-Owned Locations converted their branding to The Designery on June 1, 2022.

• The data was obtained through reported financial statements. The information in this Item has not been audited, is based on historical financial data provided to The Designery by the Affiliate-Owned businesses.

• Prior to converting to Franchised Businesses, the Affiliate-Owned Locations were not subject to the franchisee fees relating to royalties and advertising (including mandatory minimum advertising spend requirements). More than one of the Affiliate-Owned Locations may be managed together by the same personnel. Other than as described above there are no other material financial or operational differences between the Affiliate-Owned Locations and operational franchise outlets.

• Only The Designery’s Affiliate-Owned Locations have earned this much. Your individual results may differ. There is no assurance that you’ll do as well.

Part 1 – Gross Revenue, Gross Profit, Expenses, Estimated Fees, and Adjusted Net Income Generated by the Reported Affiliate-Owned Location During the 2021-2022 Measurement Period

A.  Affiliate Outlet: The Designery – Calhoun

2022 Measurement Period

Gross Sales:  $829,855 (100.00%)

Less: Cost of Goods Sold:  $372,634 (44.90%)

Gross Profit:  $457,221 (55.10%)

Disclosed Expenses

• Commission:  $29,045 (3.50%)
• Miscellaneous SG&A Expense:  $27,251 (3.28%)
• Rent & Lease:  $45,362 (5.47%)
• Utilities:  $7,800 (0.94%)
• Local Marketing:  $36,000 (4.34%)

Franchisor Fees

• Royalty Fee (~ 6.88%):  $57,085 (6.88%)
• Brand Fund Fee (1%):  $8,299 (1.00%)
• Technology Fee ($599/mo.):  $7,188 (0.87%)

Total Disclosed Expenses:  $218,030 (26.27%)

Adjusted Profit:  $239,191 (28.82%)

2021 Measurement Period

Gross Sales:  $776,702 (100.00%)

Less: Cost of Goods Sold:  $388,718 (50.00%)

Gross Profit:  $387,984 (50.00%)

Disclosed Expenses

• Commission:  $34,238 (4.40%)
• Miscellaneous SG&A Expense:  $13,156 (1.10%)
• Rent & Lease:  $45,449 (5.90%)
• Utilities:  $7,800 (1.00%)
• Local Marketing:  $36,000 (4.60%)

Franchisor Fees

• Royalty Fee (~ 6.88%):  $60,080 (7.00%)
• Brand Fund Fee (1%):  $7,767 (1.00%)
• Technology Fee ($599/mo.):  $7,188 (0.93%)

Total Disclosed Expenses:  $209,889 (27.00%)

Adjusted Profit:  $178,094 (22.93%)

B.  Affiliate Outlet: The Designery – Rossville

2022 Measurement Period

Gross Sales:  $3,516,058 (100.00%)

Less: Cost of Goods Sold:  $2,392,261 (68.04%)

Gross Profit:  $1,123,797 (31.96%)

Disclosed Expenses

• Commission:  $48,981 (1.39%)
• Miscellaneous SG&A Expense:  $234,496 (6.67%)
• Rent & Lease:  $42,375 (1.21%)
• Utilities:  $15,152 (0.43%)
• Local Marketing:  $36,000 (1.02%)

Franchisor Fees

• Royalty Fee (~ 5.77%):  $202,803 (5.77%)
• Brand Fund Fee (1%):  $35,161 (1.00%)
• Technology Fee ($599/mo.):  $7,188 (0.20%)

Total Disclosed Expenses:  $622,156 (17.69%)

Adjusted Profit:  $501,641 (14.27%)

2021 Measurement Period

Gross Sales:  $3,153,261 (100.00%)

Less: Cost of Goods Sold:  $2,270,142 (71.99%)

Gross Profit:  $883,119 (28.01%)

Disclosed Expenses

• Commission:  $33,718 (1.07%)
• Miscellaneous SG&A Expense:  $368,096 (11.67%)
• Rent & Lease:  $52,500 (1.66%)
• Utilities:  $23,721 (0.75%)
• Local Marketing:  $38,597 (1.22%)

Franchisor Fees

• Royalty Fee (~ 5.77%):  $157,663 (5.00%)
• Brand Fund Fee (1%):  $31,533 (1.00%)
• Technology Fee ($599/mo.):  $7,188 (0.23%)

Total Disclosed Expenses:  $713,016 (22.61%)

Adjusted Profit:  $170,103 (5.39%)

C.  Average

2022 Measurement Period

Gross Sales:  $2,172,956 (100.0%)

Less: Cost of Goods Sold:  $1,382,448 (63.6%)

Gross Profit:  $790,509 (36.4%)

Disclosed Expenses

• Commission:  $39,013 (1.8%)
• Miscellaneous SG&A Expense:  $130,874 (6.0%)
• Rent & Lease:  $43,868 (2.0%)
• Utilities:  $11,476 (0.5%)
• Local Marketing:  $36,000 (1.7%)

Franchisor Fees

• Royalty Fee (6%):  $129,944 (6.0%)
• Brand Fund Fee (1%):  $21,730 (1.0%)
• Technology Fee ($599/mo.):  $7,188 (0.3%)

Total Disclosed Expenses:  $420,093 (19.3%)

Adjusted Profit:  $370,416 (17.0%)

2021 Measurement Period

Gross Sales:  $1,964,982 (100.0%)

Less: Cost of Goods Sold:  $1,329,430 (67.7%)

Gross Profit:  $635,552 (32.3%)

Disclosed Expenses

• Commission:  $33,978 (1.7%)
• Miscellaneous SG&A Expense:  $190,626 (9.7%)
• Rent & Lease:  $48,974 (2.5%)
• Utilities:  $15,760 (0.8%)
• Local Marketing:  $37,298 (1.9%)

Franchisor Fees

• Royalty Fee (5.5%):  $108,872 (5.5%)
• Brand Fund Fee (1%):  $19,650 (1.0%)
• Technology Fee ($599/mo.):  $7,188 (0.4%)

Total Disclosed Expenses:  $462,346 (23.5%)

Adjusted Profit:  $173,206 (8.8%)

• “Gross Revenue” includes all income of any type or nature and from any source that is derived or received directly or indirectly from, through, by or on account of the operation of the Business at any time, in whatever form and from whatever source, including but not limited to cash, services, in kind from barter and/or exchange, on credit or otherwise as well as business interruption insurance proceeds, all without deduction for expenses including marketing expenses and taxes. However, the definition of Gross Revenue does not include sales tax that is collected from customers and actually transmitted to the appropriate taxing authorities.

• “Cost of Goods and Services Sold” means the direct non-managerial and non-administrative cost of goods sold and labor incurred by the Affiliate-Owned Location in directly performing and/or installing Approved Services and Products resulting in Gross Revenue. Cost of Goods and Services Sold does not include managerial expenses, including field management, administrative expenses, disclosed expenses, operating expenses, or general expenses including, but not limited to, credit card processing and bank fees.

• Gross Profit is calculated by taking Gross Revenue and subtracting Cost of Goods and Services Sold. Gross Profit is not net profit or income and, except as to Cost of Goods and Services Sold, does not include the deduction of all other expenses incurred by a Franchised Business including, but not limited to, Disclosed Expenses, operating expenses, interest, taxes, depreciation, and amortization.

• “Miscellaneous SG&A Expense” means the administrative and managerial expenses incurred by the Affiliate-Owned Location in the normal course of business. This includes general expenses related to office supplies, discretionary dues and subscriptions, commissions, bonuses, maintenance, and other related staffing, general, and other administrative expenses that are not directly incurred by outlet in performing/providing Approved Services and Products.

• “Rent and Lease” means the total amount the Affiliate-Owned Location incurred in connection with base rent over the Measurement Period.

• “Utilities” means the total amount the Affiliate-Owned Location expended on utilities over the Measurement Period. Utilities includes electric, gas, and water.

• “Estimated Local Marketing” means the total Local Marketing Expenditures that the Affiliate-Owned Location would have to pay The Designery or otherwise expend over the Measurement Period if the Affiliate-Owned Location were owned by a System franchisee and governed by The Designery’s current form of Franchise Agreement. The Local Marketing Requirement is currently the greater of (i) 3% of Gross Revenue, or (ii) $3,000 per month. The Designery took the minimum of $3,000 and multiplied that amount by 12 to generate this line item.

• “Estimated Royalty Fee” means the Royalty Fee that the Affiliate-Owned Location would have had to pay The Designery over the Measurement Period if the Affiliate-Owned Location were owned by a System franchisee and governed by The Designery’s current form of Franchise Agreement. The Royalty Fee is currently: (i) 7% of Gross Revenue generated between $0 to $75,000; (ii) 6% of Gross Revenue generated between $75,000.01 to $150,000; and (iii) 5% of Gross Revenue generated above $150,000.01.

• “Estimated Brand Fund Contribution” means the Brand Fund Contribution the Affiliate-Owned Location would have expended over the Measurement Period if the Affiliate-Owned Location were owned by a System franchisee and governed by The Designery’s current form of Franchise Agreement. The Designery’s Brand Fund Contribution is currently 1% of Gross Revenue. The Brand Fund Contribution is calculated by taking the total Gross Revenue of $776,702 and multiplying that amount by 0.01 (1%).

• “Estimated Technology Fee” means the Technology Fee the Affiliate-Owned Location would have spent over the Measurement Period if the Affiliate-Owned Location were owned by a System franchisee and governed by The Designery’s current form of Franchise Agreement. The technology fee is calculated by taking the current Technology Fee of $425/month and multiplying that amount by 12.

• Total Disclosed Expenses is calculated by adding Miscellaneous SG&A Expense, Rent & Lease, Utilities, Estimated Local Marketing, Estimated Royalty Fee, Estimated Brand Fund Contribution, and Estimated Technology Fee. It does not include any other expense other than the ones noted herein.

• Adjusted Profit means Gross Profit less Disclosed Expenses. Adjusted Profit is not equal to net profit or income and, except as to Cost of Goods Sold and Disclosed Expenses, does not include the deduction of all other expenses incurred by a Franchised Business including, but not limited to, other operating expenses, management wages, interest, taxes, depreciation, and amortization.

Part 2 – Monthly Gross Revenue Generated by the Affiliate-Owned Locations During the 2021-2022 Measurement Period

2021

Affiliate-Owned Location 1

• January:  $212,070
• February:  $236,690
• March:  $258,715
• April:  $226,976
• May:  $283,533
• June:  $267,831
• July:  $215,750
• August:  $364,430
• September:  $350,247
• October:  $247,028
• November:  $234,694
• December:  $255,297
• Total:  $3,153,261

Affiliate-Owned Location 2

• January:  $64,860
• February:  $63,878
• March:  $47,987
• April:  $72,774
• May:  $56,933
• June:  $53,388
• July:  $59,355
• August:  $78,948
• September:  $89,506
• October:  $48,220
• November:  $75,043
• December:  $65,810
• Total:  $776,702

2022

Affiliate-Owned Location 1

• January:  $238,824
• February:  $303,390
• March:  $291,648
• April:  $351,583
• May:  $333,690
• June:  $330,171
• July:  $352,395
• August:  $277,777
• September:  $375,917
• October:  $225,017
• November:  $219,333
• December:  $216,313
• Total:  $3,516,058

Affiliate-Owned Location 2

• January:  $49,467
• February:  $58,511
• March:  $88,319
• April:  $83,314
• May:  $65,541
• June:  $104,702
• July:  $93,195
• August:  $54,183
• September:  $105,940
• October:  $54,575
• November:  $21,297
• December:  $50,811
• Total:  $829,855

• The Designery recently restructured the size of the Protected Territory that it grants under its current form of Franchise Agreement. The Affiliate-Owned Locations operate in territories of the following sizes:

• Affiliate-Owned Location 1 – Approximately 139,000 Qualified Households.
• Affiliate-Owned Location 2 – Approximately 44,000 Qualified Households.

• During the 2021 Measurement Period, the Affiliate-Owned Locations operated under The Designery’s prior proprietary mark “A1 Kitchen and Bath Design.” The Affiliate-Owned Locations began transitioning to the current mark “The Designery” on June 1, 2022.

• The term “Affiliate-Owned Location” means any location that is owned directly or indirectly by The Designery, its affiliates, or any person identified in Item 2 of the Franchise Disclosure Document.

• The Designery’s Affiliate-Owned Locations have earned this much. There is no assurance you’ll do as well. If you rely upon The Designery’s figures, you must accept the risk of not doing as well.

Section VI – The Designery Franchise Ratios, Comparables, Computations, and Analyses (Exclusive Content for Platinum Subscribers) ⬇️