FDD Talk: The Cleaning Authority Franchise Review (Financial Performance Analysis, Costs, Fees, and More)

In this FDD Talk post, you’ll learn the following:

• Section I – Background information on The Cleaning Authority franchise opportunity, including relevant news updates

• Section II – Estimated initial investment for a Cleaning Authority franchise, based on Item 7 of the company’s 2019 FDD

• Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for a Cleaning Authority franchise, based on Items 5 and 6 of the company’s 2019 FDD

• Section IV – Number of franchised and company-owned The Cleaning Authority outlets at the start of the year and the end of the year for 2016, 2017, and 2018, based on Item 20 of the company’s 2019 FDD

• Section V – Presentation and analysis of The Cleaning Authority’s financial performance representations, based on Item 19 of the company’s 2019 FDD, including information on the:

• 2018 total actual gross revenue; average gross revenue; total number of customers; average price per clean; total number of cleans performed; average cost of goods sold; average customer loss; total estimate calls and total estimate appointments, and conversion percentages; total sales made to new customers, and conversion percentage; estimated total number of employees; and average Territory size for the period December 31, 2017 through December 31, 2018, the franchisor’s 2018 fiscal year (the “Accounting Period”) for the top third, middle third, and bottom third of the 202 franchised Cleaning Authority businesses that were operating for the entire period December 31, 2017 through December 31, 2018

• 2018 average, median, high, and low gross revenue for the 202 franchised Cleaning Authority businesses that were operating for the entire period December 31, 2017 through December 31, 2018

• 2017 average, median, high, and low gross revenue for the 194 franchised Cleaning Authority businesses that were operating for the entire period January 1, 2017 through December 30, 2017

Section I – Background Information

20 Things You Need to Know About The Cleaning Authority Franchise

Former Executive Inducted into Hall of Fame

1.  In early June 2018, Tim Evankovich, founder and CEO of Bonita Springs-based Oasis Senior Advisors, was inducted into The Cleaning Authority Hall of Fame for his stewardship of the company’s remarkable growth during his time as president. Evankovich and former business partner Steve Robinson took The Cleaning Authority, a franchisor based in the Baltimore-Washington area, from a single location in 1989 to a thriving enterprise with more than 185 outposts across North America by 2014, when Evankovich sold his stake.

2.  The lessons Evankovich learned with The Cleaning Authority are now fueling the rapid success of Oasis, which has opened 67 franchises in its first four years of existence.

3.  According to Evankovich, “What I’m most proud of is helping franchisees become successful. The stronger you support your franchise owners, the stronger the system you have, and the more success you’re going to have within your franchise organization.”

4.  By the end of his time at The Cleaning Authority, the average yearly gross revenue per franchise was $1 million. The company expanded at the rate of one new franchise a week between 2002 and 2003. Those numbers showed Evankovich that he could empower Oasis franchise owners to become successful as well, and the experience helped him build Oasis on the foundation of personal service that helps clients along every step of their journey to senior housing.

5.  Evankovich added, “The vision has to be right at the top to get everybody on the same page and moving in the same direction.”

6.  The value of collaboration became clear as Evankovich and Robinson shepherded the business once known as Mighty Maids through a quarter-century of ups and downs that ultimately led to triumph. Evankovich and Robinson were inducted together into the Hall of Fame during The Cleaning Authority’s recent annual convention in Minneapolis.

7.  On a final note, Evankovich said, “Partnerships are very tough and challenging, but Steve and I figured out a way to work together for 25 strong years and still remain the closest of friends.”

Polls Homeowners and Cleaning Experts on Consumer Cleaning Habits

8.  In early May 2019, The Cleaning Authority commissioned a national survey asking homeowners what areas they most often overlook when cleaning. The company also surveyed its cleaning experts to see the areas they believe to be most overlooked, based on what they notice before beginning service in a home.

9.  The results of the survey, which was conducted by Google Consumer Surveys, showed that nearly 30% of homeowners forget to clean ceiling fans and light fixtures, while 50% of cleaning experts said most baseboards go untouched.

10.  According to Leanne Stapf, chief operating officer of The Cleaning Authority, “The survey gave us great insight that broadened our understanding of consumer cleaning habits and reinforced the need for professional services. Dust, dirt and grime can be harder to see in certain spots, so it didn’t come as a surprise to see baseboards, as well as ceiling fans and light fixtures, among the most popular responses from both groups. It’s easy to forget to clean these areas when the buildup is less obvious, unless you know to look for it.”

11.  Additional data from the survey found that curtains, blinds, and behind the toilet are among the areas most people intentionally avoid cleaning, with more than 50% of consumers saying they skip over these spots because cleaning them is too difficult or not a priority.

12.  Stapf added, “Cleaning is a very daunting task for most people, but there are a variety of hacks they can use in between professional cleans to make the process more simple and enjoyable. You just have to know what areas to focus on and find the methods that work best for you.”

13.  In the same press release, The Cleaning Authority put together a spring cleaning guide to make the spring cleaning process easier for consumers and is offering the following expert tips to help them clean the forgotten and more difficult areas around the home:

• Baseboards: The quickest method for removing dust from baseboards is to use the brush attachment on your vacuum. To remove any scuff marks, gently scrub the baseboards with a cleaning sponge like a Mr. Clean Magic Eraser.

• Curtains: A simple way to freshen up curtains in between washes is to use a vacuum. Use the vacuum’s brush extension to remove any dust or debris from the curtains.

• Blinds: Grab a pair of tongs, wrap two microfiber cloths around them, and fasten with rubber bands. Clasp the tongs around each blind and drag across to remove dust.

• Ceiling fan: Instead of using a rag to clean the fan, try using a pillowcase. Slip it in between the fan blades and swipe one at a time. You can then just throw your pillowcase into the washing machine.

• Behind the toilet: Given the hard to reach crevices and grout lines located behind the toilet, it’s beneficial to purchase an extendable scrubber. This eliminates any back strain or bruised knees from trying to fit behind the toilet. When using the scrubber, dip into a solution of warm water, ¼ cup vinegar, and 1 tablespoon of dish soap for a thorough clean.

Collects More Than 100,700 Pounds of Food for Local Communities

14.  At the end of August 2019, The Cleaning Authority announced that over the summer, 124 locations of The Cleaning Authority participated in The Cleaning Authority CARES Summer Food Drive to collect food for those in need in their communities. Summer is known as the hungriest time of year for children because, with school out, children in need do not have the benefit of food programs at school.

15.  Across North America, The Cleaning Authority collected 100,700 pounds of food. The collections were donated to local food banks and other organizations collecting food and will provide more than 83,917 meals.

16.  In the press release, The Cleaning Authority said that participating offices would be collecting food again in late October to get ready for the holiday season.

Company History

17.  The Cleaning Authority was founded in 1977 in the Baltimore-Washington area. The company was one of the very first whole house cleaning services in the region. The Cleaning Authority was acquired by Steve Robinson and Tim Evankovich in 1989. Under Robinson and Evankovich, The Cleaning Authority broadened its scope to serve a larger customer base. They continued to grow the company over the next few years and franchising began in 1996.

18.  In 2014, The Cleaning Authority announced a majority acquisition by PNC Riverarch Capital. A few years later, in 2017, The Cleaning Authority became the flagship brand of Authority Brands, one of the largest home services franchisors in the United States. Authority Brands was acquired by private equity firm Apax Partners in late 2018 from PNC Riverarch Capital.

19.  Authority Brands is also the parent company of Homewatch CareGivers, Mosquito Squad, America’s Swimming Pool Co., Benjamin Franklin Plumbing, Mister Sparky Electric, and One Hour Heating & Air.

Entrepreneur’s Franchise 500

20.  The Cleaning Authority did not rank on Entrepreneur’s 2019 Franchise 500 list.

Section II – Estimated Costs

• Please click here for detailed estimates of The Cleaning Authority franchise costs, based on Item 7 of the company’s 2019 FDD.

Section III – Initial Franchise Fee, Royalty Fee, Marketing Fee, and Other Fees

• Please click here for detailed information on The Cleaning Authority’s initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2019 FDD.

Section IV – Number of Franchised and Company-Owned Outlets

Franchised

2016

• Outlets at the Start of the Year:  186
• Outlets at the End of the Year:  201
• Net Change:  +15

2017

• Outlets at the Start of the Year:  201
• Outlets at the End of the Year:  211
• Net Change:  +10

2018

• Outlets at the Start of the Year:  211
• Outlets at the End of the Year:  211
• Net Change:  0

Company-Owned

2016

• Outlets at the Start of the Year:  1
• Outlets at the End of the Year:  1
• Net Change:  0

2017

• Outlets at the Start of the Year:  1
• Outlets at the End of the Year:  2
• Net Change:  +1

2018

• Outlets at the Start of the Year:  2
• Outlets at the End of the Year:  3
• Net Change:  +1

Section V – Financial Performance Representations (Item 19, 2019 FDD) and Analysis

Part 1 – Overview

• Table 1 discloses: (1) total actual gross revenues and the highest and lowest actual gross revenues; (2) average and median gross revenues; (3) total number of customers; (4) average price per clean; (5) total number of cleans performed; (6) average cost of goods sold; (7) average customer loss; (8) total estimate calls and total estimate appointments, and conversion percentages; (9) total sales made to new customers, and conversion percentage; (10) estimated total number of employees; and (11) average Territory size for the period December 31, 2017 through December 31, 2018, the franchisor’s 2018 fiscal year (the “Accounting Period”) for The Cleaning Authority’s franchised businesses (“Franchised Businesses”) (Table 1).

• The franchisor compiled this historical information from reports submitted to it via its proprietary business tracking software (TCA.net), except for designated household information that appears in certain charts below, which it obtains from one or more third-party demographic service providers.

• The franchisor requires that its franchisees and the Affiliate-Operated Businesses track all revenues (including customer information) in TCA.net, and strongly recommends that the business use TCA.net to track key cost information (for example, cost of cleaning supplies, labor, mileage reimbursement, payroll taxes, and insurance). The franchisor believes the majority of its franchisees and the Affiliate-Operated Businesses follow this recommendation and use TCA.net to track key cost information in TCA.net.

• The franchisor has not verified the information included in Item 19, and the information has not been audited.

Table 1 – Franchised Businesses Operating From December 31, 2017 to December 31, 2018

• As of the end of the franchisor’s fiscal year 2018, there were 211 Franchised Businesses operating. Table 1 provides information for the 202 Franchised Businesses (the “Reporting Businesses”) that were operating for the entire Accounting Period.

• The Reporting Businesses cover 3 Hometown Markets and 199 Enterprise Markets (2 of which began the fiscal year as Hometown Markets but converted to Enterprise Markets during the year).

• The franchisor excluded 9 Franchised Businesses that closed during the Accounting Period. Of the 9 Franchised Businesses that closed during the fiscal year 2018, no businesses closed after being open for less than 12 months.

• The Chart presents information based upon the top, middle, and lower performing Reporting Businesses. The franchisor determined the top, middle, and lower performing Reporting Businesses by comparing the actual gross revenue achieved by each Reporting Business during the Accounting Period.

Top Third of Reporting Businesses by Revenue

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