The Designery: $1.92M Average Sales for Affiliate Locations vs. $156K-$387K Franchise Cost

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

Section I – Estimated initial investment (franchise costs) for The Designery franchise, based on Item 7 of the company’s 2024 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 2024 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 2021, 2022, and 2023, based on Item 20 of the company’s 2024 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 2024 FDD, including information on the:

• 2023 gross sales, cost of goods sold, gross profit, disclosed expenses (management compensation, commission, burden, and benefits; miscellaneous general and administrative expenses; marketing, advertising, and promotion; building, rent, and utilities; insurance), franchisor fees (Royalty Fee, Brand Fund Fee, Technology Fee, local advertising requirement, Annual Conference Fee, Marketing Management Fee, Online Local Presence Fee), and adjusted profit generated by the 2 affiliate-owned locations (Rossville, GA and Calhoun, GA) 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

• 2023 average, median, highest, and lowest job size for the 2 affiliate-owned locations and 15 designated territories operated by 10 franchised businesses that operated for 1 or more months in 2023

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 2024 FDD:

• Initial Franchise Fee:  $54,900 to $68,900
• Opening Assistance Fee:  $5,000
• Travel Expenses to Training:  $1,000 to $3,000
• Security Deposit and Rent:  $3,500 to $12,000
• Inventory, Furniture, Fixtures, and Equipment:  $10,000 to $70,000
• Utilities:  $250 to $750
• Leasehold Improvements:  $25,000 to $115,000
• Business Management and Technology System:  $1,000 to $3,000
• Technology Fee (3 months):  $1,797
• Online Local Presence Fee:  $747
• Marketing Management Fee:  $1,500
• Licenses, Permits, and Certifications:  $0 to $2,500
• Professional Fees (lawyer, accountant, etc.):  $500 to $2,000
• Insurance Deposits and Initial Premiums:  $6,000 to $12,000
• Signage:  $5,000 to $11,000
• Office Expenses:  $500 to $1,000
• Dues and Subscriptions:  $4,395 to $4,895
• Grand Opening Marketing:  $15,000 to $22,000
• Additional Funds (3 months):  $20,000 to $50,000
• Total Estimated The Designery Franchise Costs:  $156,089 to $387,089

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 2024 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, 2% of Gross Revenue
• Local Advertising Requirement:  currently, the minimum required spend is the greater of: (i) 3% of Gross Revenue per month; or (ii) $3,000
• Marketing Management Fee:  $500/month
• Regional Advertising and Promotional Cooperative:  if established, determined by the cooperative

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

Franchised

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:  +4

2023

• Outlets at the Start of the Year:  4
• Outlets at the End of the Year:  21
• Net Change:  +17

Company-Owned

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

2023

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

Section IV – News Updates on The Designery Franchise

• The Designery and HomeFront Brands’ Support Eased This Franchisee’s Transition Into Business Ownership

• From Engineer to Entrepreneur With The Designery Franchise

• The Designery Did Not Rank on Entrepreneur’s 2024 Franchise 500 List

Section V – Financial Performance Representations (Average Revenues and/or Profits) for The Designery Franchise (Item 19, 2024 FDD)

• As of December 31, 2023, there were 21 franchised locations in operation. Two Affiliate-Owned Locations converted to Franchised Locations during 2022.

• 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). The 2 Affiliate-Owned Locations are managed by the same personnel and administrative functions (finance, human resources, billing, etc.) are shared between the locations in a similar manner as franchisees who operate more than 1 location under a Multi-Unit Addendum. Other than as described above, there are no other material financial or operational differences between the Affiliate-Owned Locations and operational franchise outlets.

Part 1 – Gross Sales, Gross Profit, Expenses, Estimated Fees, and Adjusted Profit Generated by the Reported Affiliate-Owned Location During the 2023 Measurement Period

A.  Affiliate Location #1: The Designery – Rossville, GA

2023 Measurement Period

Gross Sales:  $ 3,122,674 (100.0%)

Total Cost of Goods Sold:  $1,652,998 (52.9%)

Gross Profit:  $1,469,676 (47.1%)

Disclosed Expenses:

• Management Compensation, Commission, Burden, & Benefits:  $448,599 (14.4%)
• Miscellaneous G&A:  $79,875 (2.6%)
• Marketing, Advertising, & Promotion:  $72,271 (2.3%)
• Building, Rent, & Utilities:  $58,781 (1.9%)
• Insurance:  $8,204 (0.3%)

Franchisor Fees:

• Royalty Fee (~5.86%):  $183,134 (5.86%)
• Brand Fund Fee (2%):  $62,453 (2.0%)
• Technology Fee ($599/mo):  $7,188 (0.2%)
• Local Advertising Requirement:  $0 (0.0%)
• Annual Conference Fee ($1,000/year):  $1,000 (0.03%)
• Marketing Management Fee ($500/mo):  $6,000 (0.2%)
• Online Local Presence Fee ($249/mo):  $2,988 (0.1%)

Total Disclosed Expenses:  $930,494 (29.8%)

Adjusted Profit:  $539,182 (17.3%)

B.  Affiliate Location #2: The Designery – Calhoun, GA

2023 Measurement Period

Gross Sales:  $723,833 (100.0%)

Total Cost of Goods Sold:  $289,533 (40.0%)

Gross Profit:  $434,300 (60.0%)

Disclosed Expenses:

• Management Compensation, Commission, Burden, & Benefits:  $60,510 (8.4%)
• Miscellaneous G&A:  $10,020 (1.4%)
• Marketing, Advertising, & Promotion:  $32,900 (4.5%)
• Building, Rent, & Utilities:  $62,400 (8.6%)
• Insurance:  $2,735 (0.4%)

Franchisor Fees:

• Royalty Fee (7%):  $50,668 (7.0%)
• Brand Fund Fee (2%):  $14,477 (2.0%)
• Technology Fee ($599/mo):  $7,188 (0.2%)
• Local Advertising Requirement: $0 (0.0%)
• Annual Conference Fee ($1,000/year):  $1,000 (0.03%)
• Marketing Management Fee ($500/mo):  $6,000 (0.2%)
• Online Local Presence Fee ($249/mo):  $2,988 (0.1%)

Total Disclosed Expenses:  $250,886 (34.7%)

Adjusted Profit:  $183,414 (25.3%)

C.  Average

2023 Measurement Period

Gross Sales:  $1,923,253.50 (100.0%)

Total Cost of Goods Sold:  $971,265.50 (50.5%)

Gross Profit:  $951,988.00 (49.5%)

Disclosed Expenses:

• Management Compensation, Commission, Burden, & Benefits:  $254,554.50 (13.2%)
• Miscellaneous G&A:  $44,947.50 (2.3%)
• Marketing, Advertising, & Promotion:  $52,585.50 (2.7%)
• Building, Rent, & Utilities:  $60,590.50 (3.2%)
• Insurance:  $5,469.50 (0.3%)

Franchisor Fees:

• Royalty Fee (~6.1%):  $116,901 (6.1%)
• Brand Fund Fee (2%):  $38,465 (2.0%)
• Technology Fee ($599/mo):  $7,188 (0.4%)
• Local Advertising Requirement: $0 (0.0%)
• Annual Conference Fee ($1,000/year):  $1,000 (0.1%)
• Marketing Management Fee ($500/mo):  $6,000 (0.3%)
• Online Local Presence Fee ($249/mo):  $2,988 (0.2%)

Total Disclosed Expenses:  $590,690 (30.7%)

Adjusted Profit:  $361,298 (18.8%)

• “Gross Sales” is defined to include all income of any type or nature and from any source that you derive or receive directly or indirectly from, through, by or on account of the operation of the Franchised Business at any time after the signing of your Franchise Agreement, 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 Sales 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.

• “Management Compensation, Burden, & Benefits” includes all wages and salaries paid to the owners, union and non-union employees, payroll taxes, and employee benefits.

• “Miscellaneous G&A” 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.

• “Marketing, Advertising, & Promotion” includes advertising & promotion, new business development.

• “Building, Rent, & Utilities” includes fees for rent, upkeep of office/warehouse space, and utilities for the Approved Locations.

• “Insurance” includes cost of required and optional insurance.

• The Term “Royalty Fee” means the Royalty Fee that the Affiliate Location would have had to pay The Designery over the 2023 Measurement Period if the Affiliate Location were owned by a System franchisee and governed by The Designery’s current form of Franchise Agreement. The Designery calculated the Royalty Fee by multiplying Gross Sales by 0.0586 (5.86% for Rossville, GA) and 0.07 (7.00% for Calhoun, GA) to account for the sliding scale Royalty Fee of 5%-7% set forth and required under The Designery’s current form of Franchise Agreement.

• The term “Brand Fund Contribution” means the Brand Fund Contribution that the Affiliate Location would have had to pay The Designery over the 2023 Measurement Period if the Affiliate Location were owned by a System franchisee and governed by The Designery’s current form of Franchise Agreement. The Designery calculated the Brand Fund Contribution by multiplying Gross Sales by .02 to account for the Brand Fund Contribution of 2% set forth and required under The Designery’s current form of Franchise Agreement.

• “Technology Fee” is calculated by taking The Designery’s current Technology Fee of $599 and multiplying that number by 12. The Designery does not presently expect the Technology Fee to exceed $1,000 per month, however, there is no cap on the amount the Technology Fee may be increased. An increase will be based on the following: cost of inflation, cost of underlying products and services, including development costs of software, mobile applications, websites, costs of software, subscriptions, and related services, and any other products or services added to the technology stack.

• “Local Advertising Requirement” for Rossville, GA is calculated by taking The Designery’s current Local Advertising Requirement of $3,000 per month for the Rossville, GA location and $3,000 per month for the Calhoun, GA location. The Local Advertising Requirement can be increased to $4,000 per month upon a 90-day notice.

• “Adjusted Profit” is calculated by taking the Gross Profit and subtracting that number by the Total Disclosed Expenses. Adjusted Profit is not equal to net profit or income and, except as to Cost of Goods Sold and Services 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 – Job Size Statistics for Franchised and Affiliate-Owned Businesses with Operation During the 2023 Measurement Period

Job Size – Summary Statistics

• Highest:  $65,939
• Average:  $10,012
• Median:  $8,405
• Lowest:  $108.12

• This data includes 15 Designated Territories operated by 10 Franchised Businesses that operated for 1 or more months in 2023 and includes Affiliate-Owned Locations.

• Job Size for purposes of Part 2 is a completed job. The amount of each job is the total Gross Sales from a Job. A Job can be inclusive of all product and service sales related to a single job.

• In some instances where The Designery measures for cabinets but a customer does not order cabinets, there is a flat $75 charge. These tickets have not been included in the above table because the customer did not proceed with a project.

• This data includes 2,031 customer records. There was a total of 1,297 customer records from the Affiliate-Owned Locations with a high job size of $50,592.38, an average of $7,274.92, a median of $4,914.48, and a low of $108.12. There was a total of 734 customer records from Franchised Businesses with a high job size of $65,938.79, an average of $15,831.21, a median of $17,418.52, and a low of $12,313.92.

• This data was collected from The Designery’s Business Management and Technology System.

• 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.

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