FDD Talk 2021: ZIPS Dry Cleaners Franchise Review (Financial Performance Analysis, Costs, Fees, and More)

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Zips Dry Cleaners Photo by Maryland Route 5

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

  • Section I – Background information on the ZIPS Dry Cleaners franchise opportunity, including relevant news updates
  • Section II – Estimated initial investment for a ZIPS Dry Cleaners franchise, based on Item 7 of the company’s 2021 FDD
  • Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for a ZIPS Dry Cleaners franchise, based on Items 5 and 6 of the company’s 2021 FDD
  • Section IV – Number of franchised and company-owned ZIPS Dry Cleaners outlets at the start of the year and the end of the year for 2018, 2019, and 2020, based on Item 20 of the company’s 2021 FDD
  • Section V – Presentation and analysis of ZIPS Dry Cleaners’ financial performance representations, based on Item 19 of the company’s 2021 FDD, including information on the:
  • 2019 average revenue, cost of production supplies, gross margin, labor, rent, repairs and maintenance, utilities, and income before general and administrative expenses for the 53 ZIPS Dry Cleaners Plant Store Businesses operated by franchisees during the period January 1, 2019 to December 31, 2019
  • 2020 average revenue, cost of production supplies, gross margin, labor, rent, repairs and maintenance, utilities, and income before general and administrative expenses for the 49 ZIPS Dry Cleaners Plant Store Businesses operated by franchisees during the period January 1, 2020 to December 31, 2020

Section I – Background Information

22 Things You Need to Know About the ZIPS Dry Cleaners Franchise

Appoints New President/CEO

1.  In early June 2021, ZIPS Dry Cleaners announced that it has appointed Bob Barry as president/CEO of the network of one-low-price dry-cleaning stores. Barry succeeds Drew Ritger, who held the role for the past three and a half years and has accepted a position with a Midwestern chain of gourmet coffee restaurants. Barry has been a member of the ZIPS board of directors for the past eight years and he will retain that position. He has also served on the boards of the American Heart Association and the Restaurant Association of Maryland.

2.  Barry spent 12 years as president/CEO of The Greene Turtle Sports Bar & Grille, growing that chain from just a handful of locations to nearly 50 full-service franchised and company-owned restaurants. Prior to The Greene Turtle, he spent nine years as president/CEO of Ms. Desserts/The Great Cookie Ltd., a retail, mobile and e-commerce baked goods business, and worked for Marriott Corp. and W.R. Grace & Co.

3.  More recently, he has been an investor in and advisor for several companies, including Truvelop, a talent transformation company specializing in team member evaluation and development; Lost Ark Distilling Co., a Maryland-based artisanal distillery; and Columbia Treatment Center, a rehab facility supporting individuals confronted by substance use and mental health issues.

4.  Jim Bolduc, ZIPS’ board chairman, said, “We are thrilled to have Bob step up to the helm of our organization. He is a proven leader and strategic business developer who has been a valued and respected member of our board for almost a decade. We look forward to leveraging his experience in the restaurant/hospitality field and his many connections, especially throughout our Maryland/DC base. With Bob’s leadership, ZIPS will emerge from the pandemic strong and with a bright future.”

5.  Barry will concentrate on guiding ZIPS successfully out of the pandemic and expanding the brand’s footprint by increasing unit profitability, innovating and rolling out new programs to broaden the concept’s menu of services (including both consumer and commercial business), developing fill-in strategies for existing markets and determining penetration strategies for new markets.

6.  Barry said, “I’m honored to lead ZIPS into its next chapter, capitalizing on the many assets that were put in place before the world closed down. As consumers start returning to the workplace and attending events and experiences, ZIPS will be there to ensure they look their best without impacting their schedules or their wallets. As we open more locations, our convenient same-day, cost-efficient service will become available to even more customers who appreciate quality, cost savings and convenience.”

7.  With nearly 70 open locations in 10 states plus Washington, D.C., another 150 units slated to open in the next three years and numerous markets with multi-unit development opportunities available, ZIPS is primed to become the premier brand in the $20 billion garment care industry. The company handles more than 24 million garments a year, comprised of both consumer and commercial business.

8.  Behind its iconic black and bright yellow branding are a commitment to environmentally friendly practices, an in-by-9-out-by-5 guarantee, a single low price and a system of checks and balances that ensures each article of clothing receives optimal attention and care.

9.  ZIPS will get a boost in the Southeast later this year when implementation commences on a 10-unit deal for Charlotte, N.C., signed shortly before the pandemic began. The company also recently completed a deal that will yield 20 stores in the Atlanta market. Prime territories are now available throughout the eastern United States and in select regions of the Midwest and West.

Eyes Rapid Franchise Expansion Focused on Unit and Revenue Growth

10.  At the end of June 2021, ZIPS Dry Cleaners announced that the brand was revving up for growth, re-energized and ready to soar as an industry-disrupting brand. ZIPS has set its sight on aggressive nationwide expansion in the highly fragmented $20 billion dry cleaning industry. The Greenbelt, Md.-based chain boasts a robust franchise development pipeline of 150 new stores slated to open over the next three years, using a targeted, data-driven approach to site selection designed to maximize performance potential at every location.

11.  Over the years, the ZIPS brand has perfected the science and process of high-quality garment care to maximize consumer satisfaction and deliver superior returns to investors. High volume combined with proven turn-key processes gives owners a streamlined operations model with multiple revenue streams – dry cleaning, laundry services, household item care, and alterations – to maximize profits. A resilient mindset focused on value, transparency and unparalleled customer service has served the brand and its franchise partners well.

12.  The brand’s unmatched positioning appealed strongly to North Carolina entrepreneurs Visesh and Vishal Velagapudi, who recently signed an eight-unit development agreement that will bring ZIPS to Charlotte. Visesh explains that he and his brother were seeking a scalable concept that would provide sustained success when they discovered ZIPS. The pair, who own residential rental properties in Charlotte, knew the concept’s same-day service and flat price of $2.49 per item would do well there. After talking with more than 20 franchisees, they were sold on ZIPS’ high-value proposition, benefiting both customers and franchisees.

13.  Visesh Velagapudi said, “The ZIPS franchise opportunity aligned with our vision of joining and expanding with a successful and proven franchise model. Charlotte presents a unique business opportunity to tap into a market where ZIPS can truly be a disruptor and bring the brand’s unparalleled consumer proposition to life! We are excited to bring ZIPS to Charlotte.”

14.  In addition to attracting new franchisees, the ZIPS business model has been inspiring existing franchisees to expand in their markets. Prior to the pandemic, a multi-unit operator in the Maryland/Virginia/Washington, D.C. area, Franklin Morgan Capital, signed a new development agreement that will yield 20 new locations in the Atlanta market within the next five years. Operating partners Allan Boomer and Tiffany Hawkins are eagerly pursuing opportunities to open the first of these new locations.

15.  Hawkins said, “After opening a few locations in ZIPS’ home market, we were ready to break ground in a new market. There was no question that Atlanta was our first choice. I love Atlanta; the people of this city deserve a high-quality dry cleaner with a modern, service-oriented focus and a cost-saving single low price.”

16.  As the United States emerges from the pandemic, ZIPS has resumed opening new locations to bring its unparalleled service to more communities nationwide. In recent weeks, new stores have debuted in Centreville, Virginia and Perry Hall, Maryland. Additional openings are on the horizon. ZIPS also plans to roll out new initiatives to increase revenue potential for its operators. Several such programs are slated to debut later this year.

17.  The company is also leading the way in employing new environmentally friendly practices, such as its use of hydrocarbon, a more eco-friendly and less aggressive dry-cleaning solvent than the more commonly used perchloroethylene (or “PERC”). ZIPS also recycles thousands of hangers each year, uses 100% biodegradable plastic bags, and focuses on continuing to reduce water usage and waste production.

18.  ZIPS will continue to expand throughout the East and gradually increase its focus on adding more units in the West, says Abhi Parikh, franchise sales manager for ZIPS Franchising Inc. The company will be guided through this next chapter by new leadership, as it recently named Bob Barry, a seasoned franchise leader and ZIPS board member for the past eight years, to serve as its new president/CEO.

19.  Barry added, “Our business has never had a brighter future. Our customers are excited to re-emerge into the economy, and we are excited to help them look their best as they do, bringing our convenient, cost-effective service to more and more communities.”

Company History

20.  ZIPS Dry Cleaners was founded in 2002 when eight independent dry cleaners in the Baltimore, Maryland/Washington, D.C. area decided to combine their businesses into one unified brand. The group’s goal was to provide high-quality dry cleaning services at an affordable price. Using their knowledge of the industry, ZIPS’ founders streamlined the brand’s business model and began opening additional locations in the D.C. metro area not long after ZIPS was formed.

21.  Then, in 2006, the founders began franchising the ZIPS Dry Cleaners concept and implemented a system that fully supports owner-operators. After a few more years of growth, the founders of ZIPS Dry Cleaners sold a majority share of the company to JPB Capital Partners of Columbia, Maryland in 2013.

Entrepreneur’s Franchise 500

22.  ZIPS Dry Cleaners ranked No. 229 on Entrepreneur’s 2021 Franchise 500 list.

Section II – Estimated Costs

  • Please click here for detailed estimates of ZIPS Dry Cleaners franchise costs, based on Item 7 of the company’s 2021 FDD.

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

  • Please click here for detailed information on ZIPS Dry Cleaners’ initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2021 FDD.

Section IV – Number of Franchised and Company-Owned Outlets

Franchised

2018

  • Outlets at the Start of the Year:  51
  • Outlets at the End of the Year:  55
  • Net Change:  +4

2019

  • Outlets at the Start of the Year:  55
  • Outlets at the End of the Year:  63
  • Net Change:  +8

2020

  • Outlets at the Start of the Year:  63
  • Outlets at the End of the Year:  66
  • Net Change:  +3

Company-Owned

2018

  • Outlets at the Start of the Year:  2
  • Outlets at the End of the Year:  2
  • Net Change:  0

2019

  • Outlets at the Start of the Year:  2
  • Outlets at the End of the Year:  2
  • Net Change:  0

2020

  • Outlets at the Start of the Year:  2
  • Outlets at the End of the Year:  2
  • Net Change:  0

Section V – Financial Performance Representations (Item 19, 2021 FDD) and Analysis

Part 1 – System-wide ZIPS Dry Cleaners Businesses – Statement of Average Total Revenue, Total Cost of Goods, Total Gross Profit, and Total Certain Costs (During Period January 1, 2019 to December 31, 2019)

  • Presented below are the average total revenue, average total cost of goods, average total gross margin, and average cost of labor, rent, repairs and maintenance, and utilities data for 53 ZIPS Dry Cleaners Plant Store Businesses operated by franchisees during the period January 1, 2019 through December 31, 2019.
  • All 53 Franchised Businesses were open and operating during the 12-month period January 1, 2019 to December 31, 2019. These Franchised Businesses are located in the District of Columbia, Maryland, Pennsylvania, Virginia, Texas, and California.
  • Eight Franchised Businesses are not included because they were not in operation for the entire period and two Franchised Businesses are not included because they did not provide financial detail for the entire year.
  • This data was compiled from unaudited financial statements submitted to the franchisor by the Franchised Businesses. The franchisor believes the information is accurate, but it has not audited or verified the information and cannot verify that the information was compiled using consistently applied accounting principles.
  • Some Franchised Businesses have sold this amount. Your individual results may differ. There is no assurance that you will sell as much.


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