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.
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.
|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|
|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.
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.
|Initial Investment (midpoint)||%Profit margin of average franchise sales||Estimated profits||Time to recoup investment|
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.
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
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.
|Royalty and support fees||$22,683,000|
|Other franchise revenue||8,721,000|
|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|
|Income before income taxes||798,000|
|Income tax benefit||(952,000)|
|Outlet Type||Year||Outlets at the Start of the Year||Outlets at the End of the Year||Net Change|
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.
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.
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