Cruise Planners Franchise Closures Level Off Post Pandemic (2024)
The Cruise Planners franchises are currently owned by Cruise Planners Holdings, Inc. Specifically, Cruise Planners offer franchises for establishing and operating businesses that help customers explore the world by land and sea, including planning vacations, crafting itineraries, and offering a variety of unique perks, benefits, and amenities for cruises, hotels and resorts around the world. Cruise Planners is located in all 50 states, making it easy for customers to find an experienced advisor to customize their trip. It is famous for providing competitive pricing while offering the best services.
With nearly 30 years of franchise experience, Cruise Planners has become the nation’s largest home-based travel agency franchise network with more than 2,000+ franchise owners. Recognized as the #1 travel franchise owned by Entrepreneur every year since 2002, Cruise Planners allows franchisees the opportunity to offer customers exclusive promotions operating under the right brand name, consisting of consistent sales growth. With comprehensive training and support, franchisees are able to work from anywhere.
Who Owns the Cruise Planners Franchise?
Cruise Planners Holdings, Inc., Cruise Planners’ parent company, is a Florida corporation formed in 1998 by Michelle Fee, Lynn Korn, and Marvin Davis. It completed a merger with MLM Planners, Inc. in 2013.
How is Cruise Planners Franchise Positioned in the Travel and Hospitality Industry?
The Travel, Hospitality, and Leisure industries intersect with multiple industries, such as Food & Beverage, Hotel, Recreation, and Tourism. As it is both a capital and labor-intensive industry, it relies on investments in fixed assets. This industry generates over $1.6 trillion in economic output, representing 2.8% of GDP.
The travel and hospitality industry has grown tremendously over the last few years as flights have become more affordable and people are willing to spend their money on vacations and travel. Under the COVID-19 pandemic, the industry can expect some changes in consumers’ demand, where people will tend to travel more within the borders than abroad. Cruises are one of the rapidly growing markets within the travel and tourism sector. The largest market for cruises is seniors 65 years or older who have time and disposable income to spend on these types of leisure activities.
Cruise Planners compete in the Travel and Hospitality Industry against other travel agencies and in-house travel departments such as CruiseOne, Expedia Cruiseshipcenters, and Itrip Vacations. Cruise Planners franchises also compete against other franchisees in your territory.
What is the Cruise Planners Franchise Cost?
The total investment necessary to begin the operation of a Cruise Planners franchise business is from $2,295 to $23,465. These totals include a $695 to $11,955 initial franchise fee that must be paid to the franchisor. The amount of the franchise fee varies depending upon the assessment of the franchisee’s experience and the number of commissions the franchisee has earned.
| New Travel Advisor | Some Experience in Travel Industry | Retail Experience in Travel Industry | Seasoned Travel Advisor | |
|---|---|---|---|---|
| Initial Franchisee Fee | 10,995 | 6,995 | 3,995 | 695 |
From time to time, Cruise Planners may offer a reduction in the initial franchise fee based on performance or other criteria. In 2021, the initial franchise fees paid to the Cruise Planners ranged from $0 to $10,995. Currently, Cruise Planners is taking $4,000 off of the initial franchise fee! Franchisees are required to pay an annual access fee of $85 for each person the franchisor requires to register as a co-owner or associated. Franchisees also need to pay $695 for any additional person who needs to attend the initial training program.
Once the operations begin, franchisees are expected to pay the company a royalty fee of 1.5%-3% on gross commissionable fares and the annual maintenance fee ranges from $0 to $2,000. The annual E&O insurance fee is $180 per person. The royalty fee on each annual commissionable sale is calculated as follows:
- 1.5% of gross commissionable fares upon which Cruise Planners receives a commission rate of less than 6%
- 3% of gross commissionable fares upon which Cruise Planners receives a commission rate of 6% or more
Compared to the average Travel and Hospitality percentage fee, Cruise Planners has an absolute advantage. The average industry royalty fee is approximately 5.2%, while Cruise Planners has the highest at 3%. As the average industry marketing fee requires 2.3% of the commissionable sales, Cruise Planners’ marketing fees vary depending on purchases.
How Much do Cruise Planners Franchise Owners Make?
Cruise Planners does not make any representations about a franchisee’s future financial performance or the past financial performance of company-owned or franchised outlets. However, if you are purchasing an existing Cruise Planners franchise, the company may provide you with the actual records of that franchise.
Through our analysis of the franchisor income statement, we can guesstimate sales figures from the income statement line item “Franchise Revenue.” Ideally, the line item is Royalty Revenue. Franchise revenue can include franchise fees received.
Cruise Planners during 2021 saw a revenue increase of over 38.7% and we can conclude that Cruise Planners recovered strongly from the losses in the COVID-10 pandemic in 2020. There was an approximately $9 million increase in net income compared to 2020.
2021 Cruise Planners Sales and Breakeven point:
Royalty fee: 2.25% of annual commissionable sales
Royalty revenues: $7,687,161
Estimated system-wide franchise sales: $341,651,600
Estimated average franchise revenue: $128,682
| Initial Investment – Midpoint | %Profit Margin Of Average Franchise Sales | Estimated Profits | Time to Recoup Investment |
|---|---|---|---|
| 12,880 | 30% | 38,604 | 1.33 years |
| 12,880 | 40% | 51,472 | 1.25 years |
| 12,880 | 50% | 64,341 | 1.20 years |
According to Glassdoor, our estimated average franchise revenue of $128,682 is reasonable. Based on the average sales calculated above, at an average of a 40% profit margin, it will take approximately 1.25 years to recoup your investment. We scaled up one year to reflect the time of training and preparation for opening. Usually, the time to recoup investments incorporates roughly a 2-year period to scale up the franchise. However, since franchisees can open up a Cruise Planners franchise solely online, there is less time and money investment to start the business.
Is the Cruise Planners Franchise Profit Worth the Franchise Cost?
To assign a valuation multiple for Cruise Planners 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 of travel agencies.
Under $1 Million Net Sales
- Estimated Selling Price = Net Sales – 0.47
$1 Million – $5 Million Net Sales
- Estimated Selling Price = Net Sales – 0.13
Over $5 Million Net Sales
- Estimated Selling Price = Net Sales – 7.07
When you go to sell a Cruise Planners franchise based on the median multiple of 0.47 and net sales of $128,682, it would sell for $60,480. This is significantly higher than the midpoint investment of $12,880. If you have at least 8 stores, the median multiple for net sales between $1 million and $5 million is 0.13, resulting in $1.1 million in franchise sales. Selling these 8 stores would amount to $133,829.
However, only as an owner of multiple (39+) Cruise Planners
franchises, you do have the ability to make a significant profit, enjoying a median multiple of 7.70, with over $5 million in sales. However, this is very unlikely because 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 Cruise Planners Units Have Opened and Closed?
The number of franchisees is increasing over the last three years. In 2021, there were 339 agencies opened while 151 terminated, 133 non-renewals, and 54 ceased operations. Failure rate represents franchise unit terminations, non-renewals, and franchises that ceased operations for other reasons in a given year relative to the total number of franchise units. The failure rate for Cruise Planners is approximately 12.7% in 2021, lower than the average industry failure rate of 15.61%.
The failure rate in 2020 is 22.9% and decreased significantly to 12.7% in 2021 recovering strongly from the pandemic. As the failure rate decreased and more franchises started to join the brand in 2021, this franchise system proved to be a viable option by looking at the store count. There will be 337 franchisees joining the business in 2022.
| State | Year | Outlets at Start of Year | Outlets Opened | Terminations | Non-Renewals | Reacquired by F0ranchisor | Ceased Operations Other Reasons | Outlets at End of the Year | |
|---|---|---|---|---|---|---|---|---|---|
| Total | |||||||||
| 2019 | 2810 | 492 | 89 | 53 | 0 | 47 | 3113 | ||
| 2020 | 3113 | 255 | 619 | 42 | 0 | 53 | 2654 | ||
| 2021 | 2654 | 339 | 151 | 133 | 0 | 54 | 2655 |
Cruise Planners’ Income Statements Takeaways
| 2021 | 2020 | 2019 | |
|---|---|---|---|
| REVENUE | |||
| Commissions revenues from travel sales, net | 7,687,161 | 5,541,650 | 15,153,967 |
| Franchise fee and other franchise related revenue | 5,321,257 | 5,242,986 | 7,689,190 |
| Volume-based commission revenue | 2,230,281 | 1,394,252 | 7,829,016 |
| Marketing revenue | 4,806,369 | 2,958,386 | 6,522,898 |
| Other revenue | 29,022 | 406,701 | 2,440,927 |
| Total revenue | 20,074,090 | 15,543,975 | 39,635,998 |
| COST OF REVENUE | |||
| Other costs | 4,063,232 | 3,572,375 | 9,861,815 |
| Total cost of revenue | 4,063,232 | 3,572,375 | 9,861,815 |
| Gross profit | 16,010,858 | 11,971,600 | 29,774,183 |
| Operating and administrative expenses | 11,240,676 | 12,245,573 | 19,120,693 |
| Depreciation and amortization | 1,306,916 | 1,424,078 | 1,259,110 |
| 12,547,592 | 13,669,651 | 20,379,803 | |
| Operating income (loss) | 3,463,266 | (1,698,051) | 9,394,380 |
| FINANCIAL INCOME | |||
| Interest income, net | 12,434 | 86,688 | 110,861 |
| Other income (expense), net | 3,865,202 | 7,213 | (10,638) |
| 3,877,636 | 93,901 | 100,223 | |
| Net income (loss) | 7,340,902 | (1,604,150) | 9,494,603 |
The net income of Cruise Planners in 2021 was $7,340,902. Due to the COVID-19 pandemic, Cruise Planners experienced significant losses with a net loss. With increasing revenues and controlled expenses, the Cruise Planners franchise saw an approximately 38.7% increase in net income from 2020 to 2021.
Cruise Planners Cash Flows Statements Takeaways
Liquidity is one of the most important measurements of a company’s ability to meet potential cash requirements, including ongoing commitments to repay borrowings, fund business operations, operations, and expansion of franchised locations. According to the cash flows statement, Cruise Planners has a $6.3 million increase in cash and cash equivalents. At the end of the fiscal year, its total cash and cash equivalents amounted to approximately $16 million. Compared to 2020, there was a $6 million increase in cash in 2021.
Statements of Cash Flows Years Ended December 31, 2021, 2020 and 2019
| 2021 | 2020 | 2019 | |
|---|---|---|---|
| Cash Flows From Operating Activities | |||
| Net income (loss) | 7,340,902 | (1,604,150) | 9,494,603 |
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||
| Depreciation | 579,950 | 697,111 | 530,252 |
| Loss on disposal of furniture and equipment | – | – | 13,969 |
| Amortization, intangibles and goodwill | 734,280 | 734,280 | 734,280 |
| Amortization, deferred financing costs | 3,015 | 3,015 | 3,015 |
| Bad debt expense | (78,454) | 240,928 | 846,094 |
| PPP Loan forgiveness | (1,902,800) | – | – |
| Changes in assets and liabilities: | |||
| (Increase) Decrease in: | |||
| Accounts receivable | (8,953,706) | 9,327,624 | (2,756,534) |
| Other receivable | (1,324,875) | – | – |
| Other assets | (242,708) | 361,002 | (211,738) |
| (Increase) Decrease in: | |||
| Accounts payable | 8,386,134 | (7,412,172) | 265,692 |
| Accrued expenses | 348,235 | (1,628,373) | 789,490 |
| Deferred revenue | 343,114 | (1,573,684) | 809,245 |
| Net cash provided by (used in) operating activities | 6,557,962 | 854,419 | 10,518,368 |
| Net cash provided by (used in) operating activities: | |||
| Cash flow operating activities: | |||
| Purchases of furniture and equipment, including internally developed software | (313,872) | (257,752) | (1,095,938) |
| Due from related party | (150,025) | (46,106) | (16,902) |
| Net cash provided by (used in) investing activities: | (463,897) | (303,858) | (1,112,840) |
| Cash flow investing activities: | |||
| Distributions to member | (1,480,000) | – | (4,300,177) |
| Due to related party | (26,785) | (172,415) | (221,198) |
| Notes payable | 1,736,012 | 1,902,800 | |
| Net cash provided by (used in) financing activities | 229,227 | 1,730,385 | (4,521,375) |
| Net increase (decrease) in chas | 6,323,292 | 572,108 | 4,884,153 |
| Cash: | |||
| Beginning | 10,246,615 | 9,674,507 | 4,790,354 |
| Ending | 16,569,907 | 10,246,615 | 9,674,507 |
| Supplemental disclosure of cash flow information: | |||
| PPP Loan forgiveness | 1,902,800 | – | – |
Conclusion
Investing in a Cruise Planners Vacations franchise is an interesting opportunity especially post COVID-19 outbreak, as they are positively recovering from the sale losses. Cruise Planners prove to be a viable business model. The average entry investment of $12,880 is relatively low compared to other industries, and it can be lower if you already are an experienced franchisee. Although the industry can be easily influenced by pandemics and nature, this is a resilient industry. You can recoup your investment in less than two years. However, this is not the type of business you can expect to earn $10,000+ a month. Earnings are limited for Cruise Planners franchise owners.
