iFoam Franchise: Annual Sales ($4.64M) vs. Cost ($587K to $768K)

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

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

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

Section III – Number of franchised and company-owned iFoam 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 iFoam franchise opportunity

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

• 2022 gross sales, direct cost of goods and services sold (labor, materials), gross profit, disclosed expenses, adjusted expenses, and adjusted EBITDA for the one iFoam outlet owned and operated by iFoam’s founder, Jonathan Roll

• 2022 close ratio, average ticket, percentage of foam used, revenue by spray foam rig, spray foam rig utilization, and number of rigs for the one iFoam outlet owned and operated by iFoam’s founder, Jonathan Roll

• 2022 revenue breakdown (residential new construction, residential retro fit, and commercial) for the one iFoam outlet owned and operated by iFoam’s founder, Jonathan Roll

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

Section I – iFoam Franchise Costs

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

• Initial Fee:  $59,500
• Insurance (90 days):  $10,000 to $15,000
• Tuition Fee:  $4,995
• Travel and Living Expenses While Training:  $1,500 to $3,500
• Opening Package:  $28,255 to $38,255
• Initial Inventory Package:  $0 to $50,000
• Shipping and Freight:  $0 to $5,000
• Rent and Utilities (90 days):  $10,000 to $20,000
• Vehicles:  $385,400 to $440,925
• Licenses, Certificates, and Permits:  $4,500 to $7,000
• Professional Fees:  $0 to $5,000
• Technology Fee:  $9,500
• Call Center Fee:  $3,600
• Dues and Subscriptions:  $0 to $1,000
• Leasehold Improvements:  $0 to $15,000
• Local Brand Optimization Fee (first year):  $15,000
• Creative Media Fund Fee:  $6,500
• Initial Marketing Expenditure and Local Advertising Expenditure (90 days):  $20,000
• Digital Management Fee:  $3,000
• National Permit Database Fee:  $297
• Accounting Services Fee:  $4,999
• Additional Funds:  $20,000 to $40,000
• Total Estimated iFoam Franchise Costs:  $587,046 to $768,071

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

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

• Initial Franchise Fee:  $59,500
• Royalty Fee:  the greater of: (i) 8.5% of Gross Revenues Collected; or (ii) the Minimum Royalty Fee (ranging from $817 to $1,308 per week for 1 territory, depending on number of months in operation)
• Brand Fund Contribution:  if and when established, iFoam’s then-current Brand Fund Contribution amount, which shall not exceed 3% of weekly Gross Revenues Collected
• Local Advertising Expenditure Requirement:  the greater of either: (i) $2,000 per month; or (ii) 5% of your monthly Gross Revenues Collected

Section III – Number of Franchised and Company-Owned iFoam Outlets

Franchised

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:  9
• Net Change:  +7

Company-Owned

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:  1
• Net Change:  +1

Section IV – News Updates on the iFoam Franchise

• This Couple Keeps Customers Warm With Their iFoam Insulation Franchise

• Horse Power Brands Inches Closer to ’25 by 2025′ With Acquisition of iFoam

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

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

• An iFoam Business will offer “Spray Foam Insulation Services” to residential and commercial customers within a defined protected territory on a year-round basis.

• On November 15, 2021, the franchisor purchased certain assets of iFOAM Franchise Group LLC and I-Foam LLC, including rights in two existing franchise agreements for two outlets (the “Outlets”) operating in territories in Alabama and Tennessee.

• One of the Outlets is owned and operated by iFoam’s founder, Jonathan Roll. These Outlets operate under the principal trademark “iFoam” and offer substantially similar products and services as the iFoam Business you will operate under the iFoam trademark.

• This Item sets forth historical revenue and cost information for the one Outlet which was provided to iFoam by the owner of such Outlet.

• The Outlet was open for the entire period from January 1, 2022, through December 31, 2022 (the “Measurement Period”).

• The Outlet operates in an area containing approximately 2 territories being offered hereunder with 4 crews.

• Except for the exclusions of certain costs and expenses that you will pay under the franchise agreement as noted below, the Outlet is substantially similar to the iFoam Business offered under the Disclosure Document.

• Part 1 sets forth Gross Sales, Direct Cost of Goods and Services Sold, and certain Disclosed Expenses of the Predecessor Business during the Measurement Period, as well as certain Adjusted Expenses of the Predecessor Business during the Measurement Period.

• Part 2 sets forth the Close Ratio for Residential and Commercial, Average Ticket for Residential and Commercial, Percent of Foam Used Closed Cell, Percent of Foam Used Open Cell, Revenue by Spray Foam Rig, Spray Foam Rig Utilization, and Number of Rigs during the Measurement Period.

• Part 3 sets forth Percent of Revenue – Residential New Construction, Percent of Revenue – Residential Retro Fit, and Percent of Revenue – Commercial.

• iFoam has not audited or independently verified the data submitted by the Outlets and no assurance can be offered that the data does not contain inaccuracies that an audit might disclose.

Part 1 – Gross Sales, Direct Cost of Goods and Services Sold, and Certain Disclosed Expenses of the Predecessor Business During the Measurement Period (January 1, 2022, through December 31, 2022)

Gross Sales:  $4,644,127 (100.0%)

Direct Cost of Goods and Services Sold

• Labor:  $899,712 (19.4%)
• Materials:  $1,674,745 (36.1%)
• Total Direct Cost of Goods and Services Sold:  $2,574,457 (55.4%)

Gross Profit:  $2,069,670 (44.6%)

Disclosed Expenses

• Advertising and Promotion:  $162,029 (3.5%)
• Insurance Expense:  $47,219 (1.0%)
• Equipment Rental:  $15,897 (0.3%)
• Fuel:  $180,379 (3.9%)
• Rent, Utilities, and Trash:  $28,514 (0.6%)
• Merchant Fees and Bank Fees:  $16,565 (0.4%)
• Operating and Miscellaneous Supplies:  $168,382 (3.6%)
• Equipment Repairs, Maintenance, and Other:  $73,045 (1.6%)
• Uniforms:  $2,056 (0.0%)
• Office Supplies:  $31,612 (0.7%)
• Dues, Subscriptions, Taxes, and Licenses:  $23,598 (0.5%)
• Total Disclosed Expenses:  $749,296 (16.1%)

Gross Profit Less Disclosed Expenses:  $1,320,374 (28.4%)

Adjusted Expenses: Disclosed Expenses Not Paid by Founder but Charged to a Franchisee

• Royalty Fee:  $394,751 (8.5%)
• Technology Fee:  $9,500 (0.2%)
• Call Center Fee:  $3,600 (0.1%)
• Digital Management Fee:  $12,000 (0.3%)
• Annual Conference Fee:  $1,000 (0.0%)
• Total Adjusted Expenses:  $420,851 (9.1%)

Total Disclosed Expenses and Adjusted Expenses:  $1,170,147 (25.2%)

Adjusted EBITDA:  $899,523 (19.4%)

• “Gross Sales” is defined as the total revenue less sales tax, discounts, allowances, and returns during the Measurement Period.

• “Direct Cost of Goods and Services Sold” is defined as the direct non-managerial and non-administrative cost of goods sold, materials, and labor incurred in directly performing and/or installing Approved Services and Products resulting in Gross Sales during the Measurement Period.

• Direct Cost of Goods and Services Sold does not include managerial expenses, field management, administrative expenses, Disclosed Expenses, operating expenses, or general expenses including, but not limited to, credit card processing or bank fees.

• “Labor” is defined as all reported compensation for labor used to operate the business during the Measurement Period.

• “Materials” is defined as the reported cost of materials used in the operation of the business during the Measurement Period.

• “Total Direct Cost of Goods and Services Sold” is defined as the sum of Labor and Materials during the Measurement Period.

• “Gross Profit” is defined as Gross Sales less Total Direct Cost of Goods and Services Sold during the Measurement Period.

• “Disclosed Expenses” is defined as a limited selection of historical expenses incurred as disclosed in this table to this Item 19 during the Measurement Period. The franchisees may incur additional expenses depending on how they operate their franchise from a staff perspective.

• “Advertising and Promotion” is defined as the costs associated with marketing, advertising, and promotion during the Measurement Period.

• “Insurance Expense” is defined as the costs of insurance required for the operation of the business, including, but not limited to, general liability insurance, umbrella insurance, workers compensation insurance, professional liability, contractors, and any other insurance required in the operation of the business during the Measurement Period.

• “Equipment Rental” is defined as the costs associated with the rental of certain equipment in the operation of the business during the Measurement Period.

• “Fuel” is defined as the costs to maintain fuel in the vehicles required in the operation of the business during the Measurement Period.

• “Rent, Utilities, and Trash” is defined as the costs associated with renting a facility to serve as an office and warehouse to store the inventory, equipment, and supplies, including utility costs such as power, water, gas, trash, and any other utilities that service the rented facility for the operation of the business during the Measurement Period.

• “Merchant Fees and Bank Fees” is defined as the fees associated with the merchant and bank service providers incurred by the business during the Measurement Period.

• “Operating and Miscellaneous Supplies” is defined as the costs of all supplies and tools incurred in the operation of the business during the Measurement Period.

• “Equipment Repair, Maintenance, and Other” is defined as the costs associated with the repair and general maintenance of equipment required in the operation of the business, as well as other maintenance items incurred in the operation of the business during the Measurement Period.

• “Uniforms” is defined as the costs associated with obtaining uniforms in the operation of the business during the Measurement Period.

• “Office Supplies” is defined as the items used by the business to run and operate the business, such as pens, paper, notebooks, envelopes, folders, tape, glue, markers, and any other related administrative expenses pertaining to office supplies incurred in the operation of the business during the Measurement Period.

• “Dues, Subscriptions, Taxes, and Licenses” is defined as the costs of dues, subscriptions (and related software) for or related to local networking groups or other professional, business and industry organization, as well as the costs of taxes, permits, licenses, certificates, and registrations required for the operation of the business during the Measurement Period. These costs may vary by geographic location or market circumstances.

• “Total Disclosed Expenses” is defined as the sum of: (i) Advertising and Promotion; (ii) Insurance Expense; (iii) Equipment Rental; (iv) Fuel; (v) Rent, Utilities, and Trash; (vi) Merchant Fees and Bank Fees; (vii) Operating and Miscellaneous Supplies; (viii) Equipment Repairs, Maintenance, and Other; (ix) Uniforms; (x) Office Supplies; and (xi) Dues, Subscriptions, Taxes, and Licenses during the Measurement Period.

• “Adjusted Expenses: Disclosed Expenses Not Paid by Founder but Charged to a Franchisee” is defined as certain expenses not paid by iFoam’s Founder during the Measurement Period, but are incurred by the Franchisee, including but not limited to the Royalty Fee, Technology Fee, Call Center Fee, Digital Management Fee, and Annual Conference Fee, as described below.

• “Royalty Fee” is defined as royalty fees paid to Franchisor. This fee was calculated based upon a Royalty Fee of 8.5% of Gross Revenues Collected in the operation of the business during the Measurement Period.

• “Technology Fee” is defined as fees paid to Franchisor to cover costs associated with system network functions, updating microsites, data reporting, customer relationship management, call center interfacing software, and various software programs that the Franchisee must utilize in the operation of the franchised business.

• “Call Center Fee” is defined as the fee charged by iFoam’s affiliate, HPB Call Center, for all Call Center Services received by the Franchisee.

• “Digital Management Fee” is defined as the fee charged by iFoam’s affiliate or Designated Vendor to cover the costs of digital marketing and website management.

• “Annual Conference Fee” is defined as the costs to attend the required annual conference held by Franchisor.

• “Total Adjusted Expenses” is defined as the sum of: (i) Royalty Fee; (ii) Technology Fee; (iii) Call Center Fee; (iv) Digital Management Fee; and (v) Annual Conference Fee.

• “Total Disclosed Expenses and Adjusted Expenses” is defined as the sum of: (i) Total Disclosed Expenses; and (ii) Adjusted Expenses.

• “Adjusted EBITDA” is defined as Gross Profit less Total Disclosed Expenses and Adjusted Expenses.

Part 2 – 2022 Key Performance Indicators

• Close Ratio – Residential:  30%
• Close Ratio – Commercial:  60%
• Average Ticket – Residential:  $8,800
• Average Ticket – Commercial:  $62,000
• % of Foam Used – Closed Cell:  25%
• % of Foam Used – Open Cell:  75%
• Revenue by Spray Foam Rig:  $928,825
• Spray Foam Rig Utilization:  60%
• # of Rigs:  5

• “Close Ratio – Residential” is defined as the percentage of total estimates written that turned into invoices for residential foam insulation services.

• “Close Ratio – Commercial” is defined as the percentage of total estimates written that turned into invoices for commercial foam insulation services.

• “Average Ticket – Residential” is defined as the average dollars spent per transaction for foam insulation services performed on residential homes during the Measurement Period.

• “Average Ticket – Commercial” is defined as the average dollars spent per transaction for foam insulation services performed on business or commercial buildings during the Measurement Period.

• “% of Foam Used – Closed Cell” is defined as the percent of all foam insulation jobs performed during the Measurement Period in which Closed Cell foam was used.

• “% of Foam Used – Open Cell” is defined as the percent of all foam insulation jobs performed during the Measurement Period in which Open Cell foam was used.

• “Revenue by Spray Foam Rig” is defined as the average revenue per spray foam rig achieved during the Measurement Period.

• “Spray Foam Rig Utilization” is defined as the percentage of days the Spray Foam Rigs were onsite producing revenue. Based on 260 days a year.

• “# of Rigs” is defined as the total number of spray foam rigs in operation during the Measurement Period.

Part 3 – 2022 Revenue Breakdown

• % of Revenue – Residential New Construction:  48%
• % of Revenue – Residential Retro Fit:  42%
• % of Revenue – Commercial:  10%

• “% of Revenue – Residential New Construction” is defined as the portion of total revenue attributable to residential new construction jobs performed during the Measurement Period.

• “% of Revenue – Residential Retro Fit” is defined as the portion of total revenue attributable to residential retro fit jobs performed during the Measurement Period.

• “% of Revenue – Commercial” is defined as the portion of total revenue attributable to commercial jobs performed during the Measurement Period.

Part 4 – Historical Revenue

• 2022 Revenue:  $4,644,127
• 2021 Revenue:  $3,428,794

• “Historical Revenue” is defined as total revenue achieved less sales tax, discounts, allowances, and returns during the fiscal year from January 1 to December 31 of 2021 and 2022 respectively.

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

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