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Closets by Design Franchise Costs & Fees

Date of Incorporation: 1982
Franchising Since: 1998
Headquarters: Cypress, California

Business Description: CBD Franchising, Inc. is the franchisor. CBDF has been offering franchises for the operation of retail outlets selling and installing custom closets, custom home/office organizers and related products (collectively, Custom Organizers) by independent operators throughout the United States.

Franchise Offer: The franchisee will operate a retail sales and installation business selling custom closets, garage cabinets and other organizers within a designated territory.

Financial Assistance: If franchisees (i) are granted a Territory containing over 300,000 households and (ii) meet CBDF’s credit standards, CBDF will finance up to the amount by which the Territory Fee exceeds $40,000. Other than the above, the franchisor does not offer direct or indirect financing.

Training and Assistance: There is no fee for training the General Manager and 1 other person. The successful completion of initial training by the General Manager to CBDF’s satisfaction is a condition to the opening of a Location to the public. Training consists of approximately 64 hours of classroom training and 56 hours of on-the-job training. All classroom training occurs in Cypress, California, or another training center designated by CBDF. In addition to Initial Franchise Training, the franchisor will provide a trainer at the franchisee’s location for 1 to 2 weeks (at its option) of on-site training around the time of the date the business opens. The franchisor will periodically offer follow-up assistance in the day-to-day operations of the Franchise or to discuss any operational problems. CBDF intends to hold a mandatory annual conference which at least one of the Principals must attend, to discuss Custom Organizers, sales techniques, personnel training, bookkeeping, accounting, inventory control, performance standards, advertising programs and merchandising procedures.

Territory: Franchisees are granted a franchise to operate a location in a specific territory within which they must operate as a CBDF franchisee. The Territory is determined by population and will typically contain from 50,000 to 200,000 residents. While the Franchise Agreement is in effect, CBDF will not locate another Closets by Design franchise in the Territory unless franchisees are not in material compliance with the terms of the Franchise Agreement.

Term of Agreement and Renewal: The length of the initial franchise term is 5 years. If franchisees are in good standing, they can add additional terms of 5 years.

Obligations and Restrictions: While the Franchise Agreement does not specifically require franchisees or their Principals to personally participate in the direct operation of the franchise, it is CBDF’s intention to select only those franchisees whose Principals plan to actively participate in the direct operation and daily affairs of the franchise. Franchisees must offer all Custom Organizers and other goods and services that CBDF designates as required for all CBDF franchisees. Whenever franchisees use the trademarks, they must only provide the goods and services that the franchisor authorizes them to.

Estimated Number of Units: 50

Investment Tables:
Initial Investment
Name of Fee Low High
Initial Franchise Fee $20,000 $20,000
Territory Fee Greater of (i) $18,000 or (ii) $1,000 for each increment or portion of 10,000 households in the Territory.
Travel/Living Expenses for Initial Training $1,500 $2,000
Furniture, Fixtures and Equipment (including computer) $25,000 $105,000
Grand Opening Advertising – 1st 3 months $100 $500
Inventory and Supplies $10,000 $25,000
Deposits for Vehicles $1,000 $4,000
Interior and Exterior Signs $500 $1,000
Licenses and Permits $500 $1,500
Rent/Rental Security Deposits $2,000 $8,000
Retail Shop Build-Outs and Improvements $5,000 $15,000
Business Insurance $5,000 $15,000
Legal/Accounting $1,000 $3,000
Additional Funds (First 3 months) $25,000 $50,000
ESTIMATED TOTAL $126,000 $296,500
Other Fees
Type of Fee Amount
Continuing Royalty The greater of (i) 6.75% of the previous month's Gross Revenues, or (ii) the “Minimum Royalty” of $3,000 per month.
Required Advertising Expenditures Franchisees must spend the total amount described in the FDD on contributions to the National Promotion and Protection Fund and local advertising of the Franchised Business.
National Promotion and Protection Fund National Fund Contribution of 2.25% of monthly Gross Revenues. This fee is included in the Required Advertising Expenditures described.
Software License Fee $300 annual lease payment.
Software Maintenance Fee $175 each month.
Purchase of Proprietary Products Varies.
Late Payment Penalty 5% of the delinquent amount plus interest.
Transfer $7,500
Additional Training $250 per person per day.
Additional Assistance $250 to $500 per day.
Annual Conference, Regional Meetings Up to $750 per attendee.
Leads $170 or our then-current lead referral fee for leads generated or obtained using funds collected by the Closets By Design National Promotion and Protection Fund.
Market Development Fee 25% of the Gross Revenue franchisees obtain from the extra territorial transaction.
Replacement Manual $5,000
Taxes Franchisees must pay the franchisor all taxes we pay (except for the franchisor’s corporate income taxes) on account of (a) services or goods the franchisor furnishes to franchisees, or (b) the Initial Franchise Fee, Renewal Fee, Territory Fee, Continuing Royalties, National Fund Contributions or Software Maintenance Fees franchisees pay.
Audit 10% interest on underpayment.
Renewal Fee $5,000

The above information has been taken from the FDD of Closets by Design. Year of FDD: 2016

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