Dream Vacations Franchise Cost Recovered Insanely Fast (2023)
Written by: Parth Parth
Last Updated by
Rocio Somoza: January 18, 2023
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Dream Vacations offers franchises for establishing and operating businesses that sell cruises, vacation packages, and certain other travel‐related products and services.
“CruiseOne, Inc. offers franchises for businesses operating under the CruiseOne and Dream Vacations Start Here service marks.” This basically means that CruiseOne Franchises and Dream Vacations Franchises are the same things in two different flavors.
There are currently 1577 CruiseOne Inc. (the franchisor for Dream Vacations) locations operating.
Contents
Who owns CruiseOne and Dream Vacations?
In 2021, World Travel Holdings announced that it is merging its Cruises Inc. independent contractor and Dream Vacations franchise business models. Starting in 2022, the company will be operating one franchise unit under the CruiseOne and Dream Vacations brands. The company offers customers a wide range of vacation options from owned brands and private-label brands.
At the start of 2005, Brad and Jeff Tolkin leveraged their years of experience as operating executives in the travel industry to co-found World Travel Holdings. Since then, WTH has expanded through multiple acquisitions of travel companies. In 2006, WTH more than doubled in size with the acquisition of National Leisure Group (NLG), the largest cruise seller in America. WTH’s CruiseOne franchise business comes from NLG’s expansion in 2003. WTH later launched the travel franchise Dream Vacations in 2016. Franchisees can choose to operate under either CruiseOne or Dream Vacations. Since 2016, nearly 85% of the franchise owners operate under the Dream Vacations brand, and 100% of all new franchise owners choose to go to market under the Dream Vacations brand.
How is the Dream Vacations 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. This franchise offers one of the most comprehensive options for customers, which is considered a head start for franchisees operated under the WTH.
CruiseOne and Dream Vacations compete in the Travel and Hospitality Industry against other travel agencies and in-house travel departments such as Cruise Planners, Expedia Cruiseshipcenters, and Itrip Vacations.
Dream Vacations franchises also compete against other Dream Vacations franchisees in their territories.
How Much is a Dream Vacations Franchise?
The initial Dream Vacations Franchise Fee is $10,500. You have to pay this upfront fee when opening a Dream Vacations franchise.
Dream Vacations Franchise Cost
The estimated total investment necessary to begin the operation of a Dream Vacations Franchise ranges from $11,800 to $21,000. The following costs are part of the upfront costs included in the initial investment for Dream Vacations. 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 Dream Vacations franchise in 2022.
Your Estimated Initial Investment
| Type of Expenditure | Amount | To Whom Payment is to be Made |
|---|---|---|
| Initial franchise fee | $10,500 (for a new franchisee) | CruiseOne |
| Training expenses | $200 – $250 | Airlines & Restaurants |
| Additional Signatories/Associates Training and Travel | $0 – $645 | Crusie One, Airlines, Hotels & Restaurants |
| Office Equipment and Furniture | $0 – $1,500 | Vendors |
| Initial Office Supplies | $50 – $300 | Vendors |
| Computer Hardware/Software Equipment | $0 – $2,500 | Vendors |
| Insurance, Legal, and Accounting | $150 – $1,000 | CruiseOne & Vendors |
| Permits, Franchises, Bonds, & Memberships | $150 – $500 | Professional Organizations and Governmental Authorities |
| Initial Promotion and Advertising | $250 – $1,200 | Vendors |
| Criminal and Civil Background Check | $0 – $30 | Investigative firm we designate |
| Additional Funds (3-months initial phase for full-time franchisees) | $500 – $2,500 | Vendors |
| Financing Application Fee | $0 – $75 | CruiseOne |
| Total | $11,800 – $21,000 |
Owning a Dream Vacations Franchise Requires Ongoing Fees
Royalty: The Royalty Fee is equal to 1.5% – 3.0% of your Annual Commissionable Sales
Travel Insurance Royalty Fee: 3% of all Annual Commissionable Sales relating to travel insurance
How Much do Dream Vacations Franchise Owners Make?
Dream Vacations 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 Dream Vacations franchise, the company may provide you with the actual records of that franchise. Through our analysis of the franchisor’s income statement, we have estimated sales figures.
2021 Dream Vacations Sales and Breakeven point:
Royalty revenues: $3,485,922 at a 2% Royalty Fee
Estimated system-wide franchise sales: $174,299,600
Estimated average franchise revenue: $117,531
| Initial Investment (midpoint) | %Profit margin of average franchise sales | Estimated profits | Time to recoup investment |
|---|---|---|---|
| $12,072 | 30% | $35,259 | 1.34 years |
| $12,072 | 40% | $47,012 | 1.25 years |
| $12,072 | 50% | $58,765 | 1.21 years |
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. This is shorter than other franchise opportunities. You may not get a 40% 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 Travel and Leisure operators; the extent of market penetration and brand awareness that Dream Vacations locations have attained in your market. Also, the quality of management and service at your Franchised Store are major factors.
Is the Dream Vacations Franchise Profit Worth the Franchise Cost?
To assign a valuation multiple for Dream Vacations 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 $5 Million Net Sales
- Estimated Selling Price = Net Sales * 0.47
Over $5 Million Net Sales
- Estimated Selling Price = Net Sales * 7.07
When you go to sell a Dream Vacations franchise based on the median multiple of 0.47 and net sales of $117,531, it would sell for $55,239. This is significantly higher than the midpoint investment of $12,072 and even higher than the highest investment of $21,000.
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.
CruiseOne (Franchisor) Income Statement Key Insights:
| For the Year Ended December 31, | ||
|---|---|---|
| 2021 | 2020 | |
| Revenues: | ||
| Royalties from travel sales, net | $3,485,992 | $4,497,859 |
| Franchise and other fees | 3,812,755 | 3,478,511 |
| Total revenues | 7,298,747 | 7,976,370 |
| Expenses: | ||
| Selling, general and administrative | 6,576,342 | 6,393,951 |
| Amortization of intangible assets | 9,580 | 9,581 |
| Depreciation | 152,244 | 221,608 |
| Total expenses | 6,738,166 | 6,625,140 |
| Net income | $560,581 | $1,351,230 |
CruiseOne is very profitable with retained earnings of $560,581 in 2021. Compared to $1.351 million in 2020, they saw a decrease. However, this was definitely in large part due to COVID and the financials for CruiseOne should pick up again.
How many Dream Vacations 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 | 1287 | 1480 | +193 |
| 2020 | 1480 | 1483 | +3 | |
| 2021 | 1483 | 1577 | +94 | |
| Company and Affiliate-Owned Outlets | 2019 | 0 | 0 | 0 |
| 2020 | 0 | 0 | 0 | |
| 2021 | 0 | 0 | 0 | |
| Total Outlets | 2019 | 1287 | 1480 | +193 |
| 2020 | 1480 | 1483 | +3 | |
| 2021 | 1483 | 1577 | +94 |
Over the last three years, the company has expanded rapidly except for the slowdown in 2020 due to COVID. Over the last three years, franchises have opened at a rate of 97 units a year. This is when the net count increased by only 3 in 2020.
Conclusion
Investing in a Dream Vacations franchise is an interesting opportunity especially post-COVID. The average entry investment of $12,072 is relatively low compared to other industries, and it can be lower if you already are an experienced franchisee.
