Closets by Design Franchise Costs, Fees & FDD

Year Business Began: 1982

Franchising Since: 1998

Headquarters: Garden Grove, California

Estimated Number of Units: 90

Franchise Description: CBD Franchising, Inc. (CBDF) is the franchisor. The franchisee will operate a retail sales and installation business selling custom closets, garage cabinets and other home organizer systems within a designated territory.
Training Overview: The successful completion of initial training by the general manager to the franchisor’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 Garden Grove, California, other designated training center, or virtually (if the franchisor deems it necessary). In addition to initial franchise training, the franchisor will provide a trainer at the franchisee’s location for one to two 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. The franchisor may make available to franchisees optional staff training courses, seminars, conferences, or other programs at a location suitable to both the franchisee and CBDF. The franchisor 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 Granted: Franchisees are granted a franchise to operate a location in a specific territory within which they must operate as a Closets by Design franchisee. The territory is determined by population and will typically contain from 200,000 to 250,000 households. While the Franchise Agreement is in effect, the franchisor 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. If the franchisor or another Closets By Design franchisee obtains any leads from customers in the franchisee’s territory, CBDF or the other franchisee will offer them to the franchisee first.

Obligations and Restrictions: Franchisees and/or their principals are required to personally participate in the direct operation of the franchise. The “principals” include every individual or entity that is or becomes an equity owner of the franchisee entity. Additionally, franchisees must either serve as (if they are an individual) or designate at least one full-time general manager for the location. The general manager must devote his or her entire business time to the management, of the franchise business in the territory. He or she also must maintain confidentiality of the trade secrets and cannot have an interest or business relationship with any of CBDF’s business competitors. Franchisees must offer all organizers and other goods and services that the franchisor 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.

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

Financial Assistance: If franchisees (i) are granted a territory containing over 300,000 to 350,000 households and (ii) meet the franchisor’s credit standards, the franchisor will finance up to the amount by which the territory fee exceeds $40,000. The franchisor is a member of the International Franchise Association and participates in IFA’s VetFran Program, which provides special financial incentives to qualified veterans. Other than the described, the franchisor does not offer direct or indirect financing.

Estimated 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.
Market Development Fee	Varies
Travel / Living Expenses for Initial Training	$2,500	$3,500
Furniture, Fixtures and Equipment (including computer)	$37,000	$254,000
Grand Opening Advertising – 1st 3 months	$30,000	$45,000
Inventory and Supplies	$10,000	$25,000
Deposits for Vehicles	$1,000	$4,000
Interior / Exterior Signs	$500	$1,000
Licenses and Permits	$500	$1,500
Rent (excluding Security Deposits)	$2,000	$12,000
Retail Shop Build-Outs and Improvements	$5,000	$30,000
Business Insurance	$1,500	$2,000
Legal / Accounting	$1,000	$3,000
Additional Funds – 1st 3 months	$25,000	$75,000
ESTIMATED TOTAL (plus any market development fee, if applicable)	$154,000	$511,000

Other Fees

Type of Fee	Amount
Continuing Royalty	The greater of (i) 7.25% 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 promotion and protection 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	$225 each month.
Purchase of Proprietary Products	At the then-current rates.
Merchandise Cost	As invoiced by the franchisor or 3rd party vendor.
Late Payment Charge	5% of the delinquent amount plus interest.
AIM Sales Management Portal Fee	The then-current fee which shall not exceed $25 per user per month.
Late Reporting Charge	$250
Late Quarterly Financial Statement Charge	$500
Transfer Fee	If transferee is identified by a third-party broker: The greater of: 2% of the sales price or $8,500. If transferee is identified by CBDF: $8,500, plus the greater of: $40,000 or 10% of the sales price.
Transfer Notification Fee	1% of the sales price.
Additional Training	$1,000 per person per day, plus the franchisor’s travel, lodging and living expenses.
Additional On-Site Training and Assistance	$750 for the 1st day and $500 for each additional day.
Annual Conference, Regional Meetings	Up to $1,500 per attendee.
Leads	Up to 120% of the then-current system average cost per lead.
Out of 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 the franchisor pays (except for the franchisor’s corporate income taxes) because of (i) services or goods it furnishes to franchisees, or (ii) the initial franchise fee, renewal fee, territory fee, continuing royalties, national fund contributions or software maintenance fees they pay.
Audit	10% interest on underpayment.
Renewal Fee	$5,000
Late Fee	5% of amount due.
Interest	Lesser of: (i) 18% or (ii) the maximum APR permitted by law.

The above information has been compiled from the FDD of Closets by Design. Year of FDD: 2025.
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