Are you on the journey to becoming your own boss and keen on venturing into the home organization and storage industry? You’re on the right track. Home organization solutions have an existing and growing demand across the US, with Americans estimated to be spending approximately $13 billion annually in the sector. Choosing the right home organization/storage services franchise with the right business model is a smart buy that can open great opportunities for growth in the industry. The Closet Factory is a notable player in the field and offers franchising opportunities across many states in the US. Other similar and affordable players with great industry options include Closet & Storage Concepts – a closet franchise.
As a general rule of the thumb, franchises require franchisees to pay all expected costs upfront before being considered as part of a franchise. Just like any other franchise, franchises in the home organization/storage industry also require franchisees in the sector to pay the set associated fees and costs and meet other financial obligations. The costs and expectations vary depending on how a particular home organization/storage franchise is valued in the market. One notable aspect is cash flow which is determined based on an evaluation of various documentation like tax reports and relevant financial statements. A profitable franchise should be worth at least 2 to 5 times its net cash flow. How much will it cost you to venture into the Closet Factory franchise?
Below is a breakdown of the total average costs associated with buying into a franchise with Closet Factory to aid your financial preparation.
- Initial Franchise Fee: Most franchises in the home organization/storage industry charge franchisees an average initial franchise fee of $40,000 to $60,000. A franchise fee is a one-time fee to the parent company that allows a franchisee various rights to the business, such as the brand, its systems, trademarks, and any other thing needed to run the business optimally. Closet Factory currently charges its franchisees an initial franchise fee of $58,500.
- Initial Investment: An initial investment in opening a franchise refers to a broad category of expenses you’ll need for your entire investment. They include inventory, branding and signage costs, rent, initial training, etc. As a franchisee in the home organization/storage industry, you’re expected to have between $90,000 and $500,000, but it can be more or less in some cases. Closet Factory currently expects franchisees to have $273,500 to $466,000 as an initial investment.
- Net Worth and Liquidity: Before getting into most franchise businesses, you need to prove that you have the right financial muscle to pull it off. Remember that the return on investment (ROI) can take years, and you’ll need to have enough to cover all the necessary costs. One way franchisors assess the eligibility of potential franchisees is by looking at their net worth (total assets – total liabilities) and liquidity (on-hand capital). As a franchisee with Closet Factory, you’ll require minimum available liquidity of $150,000.
- Royalty Fees: Other than the one-time initial fee payment to allow a franchisee to run a brand’s business independently, they may also be required to pay ongoing royalty fees. The fees are mostly set as the percentage of gross sales for a specific period, weekly, monthly, or quarterly. Royalties have been steady for most franchises and average at between 5% – 6%. Franchisees with Closet Factory pay royalty fees of 5.8%.
Veterans interested in a franchise opportunity with Closet Factory benefit from a 5% veteran discount from the franchise fee.
3 Good Reasons to Invest in a Home Service Franchise Business in 2022
Many prospective entrepreneurs with an entrepreneurial spirit have easily found vast opportunities in the home service franchise. No matter how many home improvement projects homeowners complete on their own, there is always more to be done and perfected by a trained and seasoned professional. Here are 3 reasons you should go ahead with your idea to invest in a home service franchise of choice.
- Be your Own Boss: Being your own boss without starting an independent company is arguably one of the greatest benefits of buying into a home service franchise, just like any other franchise.
- Most Homeowners Prioritize and Invest in Convenience: We live in the age of service. Many homeowners are increasingly dependent on professional service providers for many household projects regardless of whether they have the skills themselves.
- Benefit from the Comprehensive Franchise Support Systems: One significant motivation for many people buying into any franchise is the business assistance they get. This is also true for home service franchises since most provide ongoing training and marketing solutions for their franchisees.
