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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 ExpenditureAmountTo Whom Payment is to be Made
Initial Franchise Fee$15,570 – $40,320Coverall
Initial Equipment and Supply Package$990 – $2,550Coverall or Supplier
Corporate Filings, Banking, Business License, and Permits$175 – $500State and local government, Financial Institution, as applicable
Office Supplies & Equipment$0 – $120Supplier
Apparel$0 – $150Coverall
Misc. Pre-Opening Costs$0 – $300Supplier
Additional Funds (four months)$314 – $3,500Supplier
General Liability Insurance$58 – $351 monthlyCoverall or Supplier
Franchise Owner On The Job Accident Insurance2.4% of monthly Gross Dollar Volume for the first shareholder or member owner, plus $15.00 per month for each additional sharegolder or member ownerCoverall or Supplier
Non-Conviction Janitorial Fidelity Bond or Alternative Non-Conviction Janitorial Fidelity Bond$5.95 or $11.95 per monthCoverall or Supplier
Automobile Insurance$1,200 – $3,000Supplier
Workers’ Compensation Insurance$11.88 – $22.52 per $100 of payroll dollars incurred by your franchised businessSupplier
Vehicle$225 – $900Supplier
Total$18,612.95 – $51,391.95
coverall franchise

Owning a Coverall Franchise Requires Ongoing Fees

Type of FeeAmountDue Date
Royalty5% of Gross Dollar VolumeDeducted monthly on the last calendar day of the next month
Support Fee10% of Gross Dollar VolumeDeducted 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.

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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 fees9,227,000
Other franchise revenue8,721,000
Interest income470,000
Total revenues41,101,000
Operating expenses: 
Selling, general and aministrative expenses26,889,000
Costs of other franchise revenue2,748,000
Depreciation and amortization6,480,000
Total operating expenses36,117,000
Operating income4,984,000
Interest expense4,186,000
Income before income taxes798,000
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.

coverall franchise

How many Coverall units have opened and closed?

Outlet TypeYearOutlets at the Start of the YearOutlets at the End of the YearNet Change
Franchised20195,2345,174-60
20205,1745,288+114
20215,2884,803-485
Company-Owned2019000
2020000
2021000
Total Outlets20195,2345,174-60
20205,1745,288+114
20215,2884,803-485

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.

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