Zoom Room: $691K Average Sales vs. $317K-$489K Franchise Cost

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

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

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

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

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

• 2022 fiscal year average gross revenues, cost of goods sold, total payroll less payroll paid to owners, royalties, national advertising fund, software fee, merchant processing fees, office and janitorial supplies, repairs and maintenance, total utilities, local marketing, total insurance, accounting, rent, total expenses, and net profit for the 5 Zoom Room Franchised Businesses that were opened as of January 1, 2020

• 2022 fiscal year average gross revenues, cost of goods sold, total payroll less payroll paid to owners, royalties, national advertising fund, software fee, merchant processing fees, office and janitorial supplies, repairs and maintenance, total utilities, local marketing, total insurance, accounting, rent, total expenses, and net profit for the 6 Zoom Room Franchised Businesses that were opened after January 1, 2020

• year-over-year and compound annual revenue growth rate from the 2020 fiscal year to the 2023 fiscal year for the 12 Zoom Room Franchised Businesses that were open on or before September 1, 2022

• average, median, high, and low cost to acquire a customer; average revenue per customer (first 8 weeks); historical lifetime revenue per customer, per high value customer (top 25% of customers), and per low value customer (bottom 25% of customers); and customer retention rate for the 20 Zoom Room Franchised Businesses that were open as of July 1, 2022

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

Section I – Zoom Room Franchise Costs

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

• Initial Franchise Fee:  $49,500
• Design and Construction Consulting Fee:  $10,000
• Real Estate/Rent:  $13,500 to $27,000
• Security and Utility Deposits:  $4,500 to $12,500
• Leasehold Improvements:  $162,000 to $236,000
• Initial Inventory:  $12,000 to $24,000
• Office Equipment and Supplies:  $4,400 to $8,000
• Travel and Lodging:  $1,500 to $4,000
• Signage:  $8,000 to $20,000
• Furniture, Fixtures, and Equipment:  $17,800 to $25,800
• Grand Opening:  $2,000 to $4,000
• Subscriptions and Dues:  $350
• Licenses and Permits:  $0 to $4,000
• Professional Fees:  $19,500 to $28,000
• Software Set-up Fees:  $400
• Weekly Software Fee:  $2,400
• Insurance:  $750 to $3,500
• Additional Funds (3 months):  $9,000 to $30,000
• Total Estimated Zoom Room Franchise Costs:  $317,600 to $489,450

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

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

• Initial Franchise Fee:  $49,500
• Royalty:  8% of weekly Gross Sales
• National Advertising Fund Contribution:  1% of weekly Gross Sales
• Local Advertising Payment:  you must spend at least 2% of your monthly Gross Sales on local advertising, with a minimum required monthly spend of $1,000
• Local and Regional Advertising Cooperatives:  established by cooperative members

Section III – Number of Franchised and Company-Owned Zoom Room Outlets

Franchised

2020

• Outlets at the Start of the Year:  8
• Outlets at the End of the Year:  11
• Net Change:  +3

2021

• Outlets at the Start of the Year:  11
• Outlets at the End of the Year:  24
• Net Change:  +13

2022

• Outlets at the Start of the Year:  24
• Outlets at the End of the Year:  52
• Net Change:  +28

Company-Owned

2020

• Outlets at the Start of the Year:  3
• Outlets at the End of the Year:  3
• Net Change:  0

2021

• Outlets at the Start of the Year:  3
• Outlets at the End of the Year:  1
• Net Change:  -2

2022

• Outlets at the Start of the Year:  1
• Outlets at the End of the Year:  1
• Net Change:  0

Section IV – News Updates on the Zoom Room Franchise

• Zoom Room Continues Unprecedented Growth Trajectory with New Unit Milestone and Prestigious Accolades

• Dog Training Franchise Zoom Room Opens 50th Unit, Receives Inc. 5000 Accolade

• Zoom Room Celebrates Largest Location Grand Opening in NYC, Signifying Rapid Growth Milestone

• Zoom Room Hits Milestone of 100 Signed Units Nationwide

• Zoom Room Finalizes 10-Unit Franchise Deal with CFO

• Pet Concept Zoom Room Embarks on Expansion

• Zoom Room Ranked No. 275 on Entrepreneur’s 2024 Franchise 500 List

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

Part 1 – Dog Training Gym Financial Performance Analysis for Operating Franchisees for Franchised Locations Opened as of January 1, 2020

• As of Zoom Room’s last fiscal year, ended August 31, 2023, there were 52 open franchised outlets.

• The reporting period for Part 1 is from September 1, 2022 through August 31, 2023 (“Reporting Period Part 1”).

• Part 1 includes all five franchisees that were opened as of January 1, 2020. These locations include Austin, Texas; Belmont, California; Huntington Beach, California; Sherman Oaks, California; and Virginia Beach, Virginia (for the purposes of this Part 1, the “Operating Franchisees”).

• The Austin, Texas location has been operating since July 2010; the Belmont, California location has been operating since April 2013; the Huntington Beach, California location has been operating since August 2013; the Sherman Oaks, California location has been operating since February 2013; and the Virginia Beach, Virginia location has been operating since July 2015.

Average

Gross Revenues:  $691,944 (100.0%)

Operating Expenses

• Cost of Goods Sold:  $59,049 (8.5%)
• Total Payroll Less Payroll Paid to Owners:  $182,333 (26.4%)
• Royalties:  $54,328 (7.9%)
• National Advertising Fund:  $6,791 (1.0%)
• Software Fee:  $5,616 (0.8%)
• Merchant Processing Fees:  $21,308 (3.1%)
• Office and Janitorial Supplies:  $10,234 (1.5%)
• Repairs and Maintenance:  $1,485 (0.2%)
• Total Utilities (Electricity and Telephone/Internet):  $9,270 (1.3%)
• Local Marketing:  $41,018 (5.9%)
• Total Insurance (Worker’s Comp and Liability Insurance):  $5,647 (0.8%)
• Accounting:  $4,500 (0.7%)
• Rent:  $114,002 (16.5%)
• Total Expenses:  $515,582 (74.5%)

Net Profit:  $176,362 (25.5%)

• The term “Gross Revenues” means the total of all revenues and income from the sale of all Zoom Room Franchised Business products and services to customers of each location. Gross Revenues does not include the sale of gift cards sold for use at the Zoom Room Franchised Business, PPP loan funds, or sales tax or any comps. The information regarding Gross Revenues has been provided to Zoom Room by each of the five Operating Franchisees and has not been audited.

• “Payroll” excludes salaries paid to the owner(s) of the Franchised Locations.

• The term “Net Profit” was calculated by subtracting the value of the Total Expenses for each location from the Gross Revenues of each location.

Part 2 – Dog Training Gym Financial Performance Analysis for Operating Franchisees for Franchised Locations Opened After January 1, 2020

• The reporting period for Part 2 is from September 1, 2022 through August 31, 2023 (“Reporting Period Part 2”).

• Part 2 includes the six franchisees that were opened after January 1, 2020. These locations include Arrowhead, Arizona; Thousand Oaks, California; Colorado Springs, Colorado; Winter Park, Florida; Reno, Nevada; and McKinney, Texas (for the purposes of this Part 2, the “Operating Franchisees”).

Average

Gross Revenues:  $427,245 (100.0%)

Operating Expenses

• Cost of Goods Sold:  $43,353 (10.1%)
• Total Payroll Less Payroll Paid to Owners:  $100,305 (23.5%)
• Royalties:  $33,279 (7.8%)
• National Advertising Fund:  $4,160 (1.0%)
• Software Fee:  $5,616 (1.3%)
• Merchant Processing Fees:  $12,231 (2.9%)
• Office and Janitorial Supplies:  $5,369 (1.3%)
• Repairs and Maintenance:  $2,870 (0.7%)
• Total Utilities (Electricity and Telephone/Internet):  $7,914 (1.9%)
• Local Marketing:  $51,025 (11.9%)
• Total Insurance (Worker’s Comp and Liability Insurance):  $5,688 (1.3%)
• Accounting:  $6,483 (1.5%)
• Rent:  $90,346 (21.1%)
• Total Expenses:  $368,637 (86.3%)

Net Profit:  $58,608 (13.7%)

Part 3 – Year-Over-Year Revenue Growth for 2020 to 2023 for Operating Franchisee Locations

• The reporting period for Part 3 is September 1, 2020 through August 31, 2023 (“Reporting Period Part 3”). Specifically, the information contained in Part 3 is based upon Gross Revenues earned by the franchisee during the 12-month period (“Annual Revenue Period”) for the time periods of September 1, 2020 to August 31, 2021 (“2021 FY”); September 1, 2021 to August 31, 2022 (“2022 FY”); and September 1, 2022 to August 31, 2023 (“2023 FY”) (each a “Reporting Fiscal Year”).

Franchised Locations Average

• 2023 FY vs. 2022 FY:  21%
• 2023 FY vs. 2021 FY:  19%
• 2023 FY vs. 2020 FY:  97%
• Compound Annual Growth Rate:  24%

• The information in this Part 3 includes certain historical financial information provided by a total of 12 Zoom Room Franchised Businesses that were open on or before September 1, 2022 (for the purposes of this Part 3, the “Operating Franchisees”).

• The Operating Franchisees include the Dog Training Gyms operated by franchisees in Arrowhead, Arizona; Belmont, California; Huntington Beach, California; Santa Clarita, California; Sherman Oaks, California; Thousand Oaks, California; Torrance, California; Winter Park, Florida; Reno, Nevada; Austin, Texas; McKinney, Texas; and Virginia Beach, Virginia.

• The term “CAGR” means compound annual growth rate. CAGR is typically used to evaluate the annual rate of growth over multiple years. It determines the rate necessary to grow from a beginning balance to an ending balance assuming the balance compounds one time per year. In this case, it is used to compare the compound annual growth rate of sales over a three-year period. CAGR does not reflect investment risk.

Part 4 – Customer Acquisition and Long-Term Revenue Data for Operating Franchisees

• The reporting period for Part 4 is set out in the applicable notes for Part 4.

Cost to Acquire a Customer

• Average:  $47
• Median:  $47
• High:  $84
• Low:  $17

Average Revenue Per Customer (First Eight Weeks)

• Average:  $432
• Median:  $423
• High:  $540
• Low:  $357

Historical Lifetime Revenue Per Customer

• Average:  $1,839
• Median:  $1,752
• High:  $3,234
• Low:  $1,161

Historical Lifetime Revenue Per High Value Customer (Top 25% of Customers)

• Average:  $4,698
• Median:  $4,302
• High:  $8,899
• Low:  $2,695

Historical Lifetime Revenue Per Low Value Customer (Bottom 25% of Customers)

• Average:  $400
• Median:  $388
• High:  $491
• Low:  $337

Customer Retention Rate

• Average:  87%
• Median:  88%
• High:  96%
• Low:  76%

• The “Cost to Acquire a Customer” was calculated based on new clients acquired between September 1, 2022 and August 31, 2023, and the amounts spent on advertising during the period of August 1, 2022 and July 31, 2023, as reported by the 20 franchisees open as of July 1, 2022 (for the purposes of this Part 4, the “Operating Franchisees”).

• The “Average Revenue per Customer (First Eight Weeks)” was determined by examining training customers’ purchases during their first eight weeks as training customers, which initial eight-week period began on the date of their first visit, looking at the period between January 1, 2022 and December 31, 2022 as reported by the 20 Operating Franchisees.

• The “Historical Lifetime Revenue per Customer” was determined by examining training customers who received services from September 1, 2020 through August 31, 2021 (“Analyzed Customers”) and analyzing the revenue from those Analyzed Customers during the period between September 1, 2018 to August 31, 2022.

• It was calculated by taking the cumulative amount spent by the Analyzed Customers at each of the eight Operating Franchisees that were open and operating for at least three years (Belmont, California; Huntington Beach, California; Sherman Oaks, California; Torrance, California; Seattle, Washington; Austin, Texas; Trophy Club, Texas; and Virginia Beach, Virginia), which includes the amounts spent by Analyzed Customers who only made a single purchase during that period and Analyzed Customers who made multiple purchases during that period, and dividing that sum by the total number of Analyzed Customers examined for each of the eight applicable Operating Franchisees.

• The term “High Value Customer” means an Analyzed Customer whose total purchases put that Analyzed Customer in the top 25% of Analyzed Customers at a particular Dog Training Gym.

• The term “Low Value Customer” means an Analyzed Customer whose total purchases put that Analyzed Customer in the bottom 25% of Analyzed Customers at a particular Dog Training Gym.

• The “Customer Retention Rate” was determined by examining customers who purchased training services for the first time between September 1, 2021 and August 31, 2022. Zoom Room looked at whether they made a subsequent purchase during the period between September 1, 2021 and August 31, 2023.

• In order to constitute a subsequent purchase, and therefore be used to indicate retention, a customer must have made two or more purchases over multiple days during this time period (“Retained Customers”).

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