Christmas Decor Franchise: Is Profit Worth the Cost? (2024)
Christmas decorating is a way for businesses and individuals to generate revenue during the traditionally slow holiday season. The Christmas Decor franchise opportunity allows seasonal businesses to offset fixed overhead costs and retain key employees all year round. Christmas Decor is a good seasonal business to expand revenues.
For over 20 years, Christmas Decor professional holiday decorators have been creating enchanting displays for customers. Christmas Decor Inc is the leading holiday decorating and professional Christmas light installation company in North America, providing its clients with captivating displays and unparalleled service.
Christmas Decor was founded in 1986 in Lubbock, Texas, where it initially began by hanging lights during the holidays. In 1996, the company opened its first 7 franchises in Texas, Oklahoma, Tennessee, and Illinois. Then in 2015, the company moved its corporate headquarters from Lubbock to Irving, Texas. In order to increase accessibility for franchisees to attend training and events.
How Is Christmas Decor Franchise Positioned in the Christmas Decor Industry?
The Christmas decor industry includes a wide range of products. Such as holiday lights, ornaments, artificial Christmas trees, wreaths, garlands, and other decorations.
According to a report by IBISWorld, the Christmas decorations industry in the U.S. generated around 3.8 billion U.S. dollars in revenue in 2020. There is an expectation to grow at an annualized rate of 3.5% to reach 4.6 billion U.S. dollars by 2025. The Christmas tree market is one of the most significant segments of the holiday decor industry, with an estimated value of 2.4 billion U.S. dollars in 2020.
The market is mainly driven by factors such as an increase in consumer spending on seasonal decorations, the growth in population, and the rising popularity of outdoor decorations.
Online sales of Christmas decorations have also been growing in recent years, driven by the convenience and wider selection offered by e-commerce platforms. It’s worth mentioning that this is a highly seasonal industry. Most of the sales and revenues happen in Q4, a few months before and during the Christmas period.
How Much Is a Christmas Decor Franchise?
The initial Christmas Decor Franchise Fee is $9,900. You have to pay this upfront fee when opening a Christmas Decor franchise.
Christmas Decor Franchise Cost
The estimated total investment necessary to begin the operation of a Christmas Decor Franchise ranges from $19,550 to $62,250. The following costs are part of the upfront costs included in the initial investment for Christmas Decor. Many of these are one-time fees that are needed to launch the franchise. Review the chart below to see how much it costs to buy a Christmas Decor franchise in 2023.
| Type of expediture | Amount | To Whom Payment Is to Be Made | |
|---|---|---|---|
| Low | High | ||
| Initial Franchise Fee Base Fee | $9,900 | $9,900 | TDG |
| Initial Franchise Fee – Territory Fee | $1,500 | $22,000 | TDG |
| Initial Rent & Deposit | $0 | $1,000 | Lessor |
| Leasehold Improvements | $0 | $1,000 | Contractor/Landlord |
| Vehicle | $0 | $350 | Vendor |
| Business Licenses and Permits | $0 | $500 | State and Local Agencies |
| Insurance | $200 | $3,000 | Broker or Insurance Company |
| Initial Printing Supply Package | $1,500 | $5,000 | Approved Suppliers |
| Legal and Accounting Fees | $250 | $1,500 | Attorneys & Accountants |
| Initial Inventory and Equipment | $4,000 | $10,000 | ACLS or Approved Suppliers |
| Compute System | $0 | $500 | Vendor |
| Quick Dtart Training – Travel & living expenses | $1,200 | $1,500 | Vendor |
| Additional Funds for initial 6 month period | $1,000 | $6,000 | Suppliers, Employees, Etc |
| Totals | $19,550 | $62,250 | |
How Much Do Christmas Decor Franchise Owners Make?
| Franchise Above Average | Franchises Below Average | Highest | Lowest | Median | ||
| +5 years in operation | $343,941 | 31% | 69% | $4,748,236 | $8,066 | $208,406 |
| +3 years in operation | $339,252 | 31% | 69% | $4,748,236 | $8,066 | $204,950 |
| 2 years in operation | $82,894 | 36% | 64% | $145,574 | $18,465 | $85,274 |
2022 Christmas Decor Median Franchise Sales: $204,950
| Initial investment (midpoint) | %Profit margin of median franchise sales | Estimated Profits | Time to recoup investments |
|---|---|---|---|
| $40,900 | 30% | $61,485 | 3 years |
| 35% | $71,732 | 2.5 years | |
| 40% | $81,980 | 2 years |
Based on the median sales provided by Christmas Decor’s franchise locations, at an average of a 15% profit margin it will take around 2.5 years to recoup your investment. This is shorter than other franchise opportunities but due to the highly season nature of the business, this will not be consistent year round. You may not get a 15% profit margin, which would elongate getting a return on your investment.
Many factors affect the sales, costs, and expenses of your Franchised Store, such as the Franchised Store’s size, geographic location, menu mix, and competition in the marketplace; the presence of other Christmas Decor stores; and the extent of market penetration and brand awareness that Christmas Decor stores have attained in your market. Also, the quality of management and service at your Franchised Store are major factors.
Is the Franchise Profit Worth the Franchise Cost?
To assign a valuation multiple for Christmas Decor franchises, we leverage estimates from DealStats, a database of acquired private company transactions sourced from U.S. business brokers and SEC filings. We reviewed the larger franchise industry. As well as selling price multiples for larger systems where more transaction data is available.
Under $5 Million Net Sales
- Estimated Selling Price = Net Sales * 0.56
When you go to sell a Christmas Decor franchise based on the median multiple of .56 and of $204,950, it would sell for $114,772. This is significantly higher than the midpoint investment of $40,900.
The more franchises you own, the more earning potential you have as private equity firms become interested in your business instead of individual owner-operators.
How Many Christmas Decor Units Have Opened and Closed?
| Outlet type | Year | Outlets at the Start of the Year | Outlets at the End of the Year | Net Change |
|---|---|---|---|---|
| Franchised | 2020 | 229 | 225 | -4 |
| 2021 | 225 | 235 | +10 | |
| 2022 | 235 | 235 | 0 | |
| Company-Owned | 2020 | 0 | 0 | 0 |
| 2021 | 0 | 0 | 0 | |
| 2022 | 0 | 0 | 0 | |
| Total Outlets | 2020 | 229 | 225 | -4 |
| 2021 | 225 | 235 | +10 | |
| 2022 | 235 | 235 | 0 |
Over the last three years, the company has remained mostly constant, opening 2 stores each year from 2020 through 2022.
(Franchisor) Income Statement Key Insights
| 2022 | 2021 | 2020 | |
|---|---|---|---|
| Revenue | |||
| Product sales | $19,387,459 | 12,800,855 | 12,460,880 |
| Franchise Royalties | 2,906,640 | 2,336,331 | 2,180,487 |
| Marketing Development Fund Fees | 549,705 | 449,120 | 404,439 |
| Initial and renewal franchise fees | 220,809 | 119,337 | 118,657 |
| Other franchise revenues | 150,026 | 48,204 | 156,223 |
| Total revenue | 23,214,639 | 15,753,847 | 15,320,686 |
| Operating expenses | |||
| Cost of products sold | 12,485,298 | 8,917,078 | 7,858,873 |
| Personnel | 3,621,598 | 3,133,845 | 3,293,731 |
| Marketing and support | 1,334,204 | 822,746 | 1,249,426 |
| Facilities and equipment | 1,376,292 | 1,310,513 | 1,240,439 |
| General and administrative | 268,381 | 132,040 | 243,639 |
| Credit card and bank fees | 341,116 | 263,863 | 220,556 |
| Software and other technology | 173,750 | 193,042 | 209,704 |
| Professional | 142,612 | 180,748 | 198,314 |
| Insurance | 113,564 | 65,315 | 122,794 |
| Bad debt provision and collections | 670,028 | 60,000 | 45,000 |
| Total operating expenses | 20,526,843 | 15,079,190 | 14,682,476 |
| Operating profit | 2,687,796 | 674,657 | 638,210 |
| Other income (expense) | |||
| Other nonoperating income (expense), net | 530,051 | 698,656 | 106,320 |
| Interest Expense | (129,103) | (143,919) | (197,351) |
| Total other income (expense), net | 400,948 | 554,737 | (91,031) |
| Income (loss) before income taxes | 3,088,744 | 1,229,394 | 547,179 |
| Income tax expense (benefit) | 58,559 | 47,754 | 56,098 |
| Net Income (Loss) | 3,030,185 | 1,181,640 | 491,081 |
Christmas Decor is a very profitable business for the franchisor with retained earnings of $3.03 million in 2022. Compared to $0.49 million in 2020, they saw an increase of 300% from 2020 to 2022. This is a good indication of high growth as a company overall.
Conclusion
In conclusion, the Christmas Decor franchise offers a unique opportunity for seasonal businesses to offset fixed overhead costs and retain key employees all year round by expanding revenues during the traditionally slow holiday season. With over 20 years of experience and a reputation for creating enchanting holiday displays and providing exceptional service, Christmas Decor Inc is a leading player in the Christmas decor industry.
The initial investment ranges from $19,550 to $62,250. And the franchise fee is $9,900, with ongoing fees and a median franchise sales of $204,950. Based on the median sales provided by Christmas Decor’s franchise locations, at an average of a 15% profit margin, it will take around 2.5 years to recoup the investment. However, it’s important to note that these estimates are based on average figures. And actual results may vary depending on factors such as location, competition, and management.
While this may be the business for you, make sure also to check out other companies offered on Vetted Biz and in the Home and Building industry.
