Coverall Franchise Cost Worth The Payback (Unit Franchisee)
Written by: Parth Parth
Last Updated by
Rocio Somoza: July 12, 2022
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This article is based on its 2022 FDD.
Coverall is a company that offers janitorial and other professional cleaning services that have been in operation for 30 years. It is headquartered in Deerfield Beach, Florida, and is led by Rick Ascolese. At the end of 2021, they had over 4,800 locations throughout the country.
How is Coverall Positioned in the Professional Business Services Industry?
The janitorial service industry is a good seller, especially in highly populated and highly urbanized areas. Commercial cleaning companies demand a higher price especially when their SDE is above $300,000. A good sales force and low customer concentration are vital. The EBITDA in the industry is 4x and it is a growing industry.
How Much is a Coverall Franchise?
The initial Coverall Franchise Fee is $15,570 to $40,320. You have to pay this upfront fee when opening a Coverall franchise.
Coverall Franchise Cost
The estimated total investment necessary to begin the operation of a Coverall Franchise ranges from $18,612 – 51,391. The following costs are part of the upfront costs included in the initial investment for a Coverall. 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 Coverall franchise in 2022.
Your Estimated Initial Investment
| Type of Expenditure | Amount | To Whom Payment is to be Made |
|---|---|---|
| Initial Franchise Fee | $15,570 – $40,320 | Coverall |
| Initial Equipment and Supply Package | $990 – $2,550 | Coverall or Supplier |
| Corporate Filings, Banking, Business License, and Permits | $175 – $500 | State and local government, Financial Institution, as applicable |
| Office Supplies & Equipment | $0 – $120 | Supplier |
| Apparel | $0 – $150 | Coverall |
| Misc. Pre-Opening Costs | $0 – $300 | Supplier |
| Additional Funds (four months) | $314 – $3,500 | Supplier |
| General Liability Insurance | $58 – $351 monthly | Coverall or Supplier |
| Franchise Owner On The Job Accident Insurance | 2.4% of monthly Gross Dollar Volume for the first shareholder or member owner, plus $15.00 per month for each additional sharegolder or member owner | Coverall or Supplier |
| Non-Conviction Janitorial Fidelity Bond or Alternative Non-Conviction Janitorial Fidelity Bond | $5.95 or $11.95 per month | Coverall or Supplier |
| Automobile Insurance | $1,200 – $3,000 | Supplier |
| Workers’ Compensation Insurance | $11.88 – $22.52 per $100 of payroll dollars incurred by your franchised business | Supplier |
| Vehicle | $225 – $900 | Supplier |
| Total | $18,612.95 – $51,391.95 |
Owning a Coverall Franchise Requires Ongoing Fees
| Type of Fee | Amount | Due Date |
|---|---|---|
| Royalty | 5% of Gross Dollar Volume | Deducted monthly on the last calendar day of the next month |
| Support Fee | 10% of Gross Dollar Volume | Deducted monthly on the last calendar day of the next month |
A 5% royalty fee is in the range of standard royalty fees in the industry.
How much do Coverall franchise owners make?
Coverall does not provide sales for their franchise system but from their revenues, we estimate that their average franchise sold $31,484 worth of services in 2021.
2021 Coverall Average Franchise Sales: $31,484
| Initial Investment (midpoint) | %Profit margin of average franchise sales | Estimated profits | Time to recoup investment |
|---|---|---|---|
| $35,001 | 40% | $12,593 | 4.25 years |
| 50% | $15,742 | 3.75 years | |
| 60% | $18,890 | 3.25 years |
Based on the median sales provided by Coverall’s franchise locations, at an average of a 50% profit margin it will take around 3-4 years to recoup your investment. This is in the same range as other franchise opportunities. You may not get a 50% 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 Janitorial Services stores; the extent of market penetration and brand awareness that Coverall stores have attained in your market. Also, the quality of management and service at your Franchised Store are major factors.
Is the Coverall Franchise Profit Worth the Franchise Cost?
To assign a valuation multiple for Coverall 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 $1 Million Net Sales
- Estimated Selling Price = Net Sales * 0.58
When you go to sell a Coverall franchise based on the median multiple of .58 and net sales estimate in 2021 of $31,484, it would sell for $18,260. This is significantly lower than the midpoint investment of $35,001.
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.
Coverall (Franchisor) Income Statement Key Insights:
Consolidated Statement of Income
Period from July 1, 2021 through December 31, 2021
| Revenues: | |
| Royalty and support fees | $22,683,000 |
| Franchise fees | 9,227,000 |
| Other franchise revenue | 8,721,000 |
| Interest income | 470,000 |
| Total revenues | 41,101,000 |
| Operating expenses: | |
| Selling, general and aministrative expenses | 26,889,000 |
| Costs of other franchise revenue | 2,748,000 |
| Depreciation and amortization | 6,480,000 |
| Total operating expenses | 36,117,000 |
| Operating income | 4,984,000 |
| Interest expense | 4,186,000 |
| Income before income taxes | 798,000 |
| Income tax benefit | (952,000) |
| Net income | $1,750,000 |
Coverall is a very profitable business for the franchisor with retained earnings of $1.75 million in 2021. There is no historical data available for this franchisor, but a net income of $1.75 million put the company in a strong financial position if continued.
How many Coverall 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 | 2019 | 5,234 | 5,174 | -60 |
| 2020 | 5,174 | 5,288 | +114 | |
| 2021 | 5,288 | 4,803 | -485 | |
| Company-Owned | 2019 | 0 | 0 | 0 |
| 2020 | 0 | 0 | 0 | |
| 2021 | 0 | 0 | 0 | |
| Total Outlets | 2019 | 5,234 | 5,174 | -60 |
| 2020 | 5,174 | 5,288 | +114 | |
| 2021 | 5,288 | 4,803 | -485 |
Over the last three years, the company has been in decline. 2021 saw the company lose 485 stores which were 9% of its stores at the start of the year. Between 2019 and 2021, 431 stores have closed at an average rate of 144 stores per year. This is not a good sign and it means that either franchisees are not renewing their franchises or the industry is no longer appealing to them.
Conclusion
Coverall boasts a strong network of over 4800 stores but it is in decline with profit margins very slim. Their decline in locations in 2021 is a worrying sign and we recommend speaking to existing Coverall franchise owners to learn whether this is a business you’d be interested in further. It might be an option to explore for those seeking supplemental income.
While this may be the business for you, make sure to also check out other businesses offered on Vetted Biz and in the Professional Business Services Industry.
