If you intend to start your business journey, teaming up with a company with a proven model is one way to go about it. A franchising opportunity with Closets by Design (CBD) offers a feasible path you can take. Currently, the company is accepting inquiries in about 18 U.S states. For a comprehensive list of available locations, check out closets by design franchising.
CBD has been in the home improvement industry for over 35 years. The firm has had 70+ units in the U.S since it started franchising in 1998. By running a CBD franchise, you’ll be responsible for designing, crafting, selling, and installing multiple products, including wall beds, closets, wall units, and more. The good news is you don’t need manufacturing experience to qualify.
So, what are the costs and requirements for being a part of a chain rated #1 by Entrepreneur Magazine in its category? Here’s a breakdown of startup expenses and other nitty-gritty.
Franchise Fee Plus Territory fee
Typically, every franchise arrangement requires new entrants into the network to pay an upfront fee. Thus, a franchise fee is the entry price, allowing you to benefit from a franchisor’s established systems, trademarks, or other assets.
In that regard, CBD charges a $20,000 franchise fee, upon which you’re granted a franchise location in a particular territory. Most territories have 350,000 households at most.
But, if the franchisor allocates you a larger territory, you’ll have to part with an additional territory fee. In such a case, you’ll need to pay the greater of either $18,000 or $1,000 for every incremental portion of 10,000 households in a given area.
Meanwhile, special groups such as veterans get a 5% discount on the franchise fee. Other than that, the chain does not offer direct financing. Here’s a tabular representation of the estimated costs of starting a Closets by Design Franchise:
| Type of Fee | Minimum | Maximum |
| Franchise fee | $20,000 | $20,000 |
| Furniture | $35,000 | $240,000 |
| Initial advertising | $30,000 | $45,000 |
| Startup inventory | $10,000 | $25,000 |
| Rental deposits | $2,000 | $9,000 |
| Shop improvement | $5,000 | $30,000 |
| Extra operating costs (1st four months) | $25,000 | $80,000 |
| Total Estimate | $127,000 | $449,000 |
Your minimum or maximum estimated investment would be as indicated in the table. But, it would help if you also considered other miscellaneous expenses such as deposits for vehicles, travel costs for the initial training, signage, permits, insurance, and legal fees. Inevitably, these additional costs would increase the startup costs.
By including extra operating costs (the last item in the ‘type of fee’ column), we’re imagining a typical scenario where you will have to cover overheads from your cash reserves before your business stabilizes or starts generating sustainable revenue. These additional expenses are a standard part of running any business, even with the backup of an established franchisor. According to CBD, your total investment would run between $142,000 and $427,000, which is within the ballpark- our estimate.
Continuing Royalty
According to CBD’s 2022 franchise disclosure document (FDD), you’ll have to part with 6.75% of your monthly gross earnings as a continuing royalty. An alternative arrangement involves paying $3,000 monthly as royalty.
Besides funding your local advertising initiatives, you also have to contribute to the chain’s national promotional efforts and protection fund. That means paying 2.25% of your monthly gross revenues, as CBD’s FDD highlights.
Net Worth Requirement
It would help if you had a minimum net worth of $300,000 as part of the requirements to qualify for a CBD franchise. Why is your net worth relevant? For starters, it exemplifies your experience and ability to make money. Besides, it may show that you’re good at managing your financial resources- a quality that would serve you well while running a franchise.
Liquid Cash Requirement
This is the minimum and easily accessible cash or assets you have. In short, it’s the liquid capital that would help you operate a franchise without relying on a loan facility. Such assets may include stocks and bonds, expected retirement earnings, etc. CBD’s cash requirement is $200,000.
The Ideal Candidate
If you’re an experienced leader with sound management skills, you may qualify for a CBD franchise. Plus, it would help if you are passionate about building a business by creating the relevant infrastructure to support growth. Although experience in marketing would be a plus, CBD claims it’s not a prerequisite. Also, you don’t require manufacturing experience- as earlier noted.
You would eventually sign a renewable five-year franchise agreement by meeting all the requirements and the cost of starting a franchise. Such an opportunity may provide you with the leg-up you need to achieve business success. Also, if you need more info, it’s advisable to go over the FDD.
Better still, you may talk to other CBD franchisees for a first-hand account of the actual costs of setting up such a business. Otherwise, if you feel that a CBD franchise is the way to go, contact the firm directly to kick-start the application process.
