Multi-Unit Franchise Experts

Franchise Evaluator™: Zerorez

Low cost to start and operate business in a growing, in-demand, easy-to-understand business category. Clearly differentiated through a proprietary product offering.

Franchise at a Glance

Corporate Address

Zerorez Franchising Systems, Inc.
1809 West State Street, Building B-2
Pleasant Grove, Utah 84062
(801) 443-1034

Year Founded: 2001
Year Started Franchising: 2003
Business Description:

ZEROREZ is in the business of providing residential and business carpet, tile, fabric care, living surfaces, and restorative cleaning services, including upholstery, fabrics, hard surfaces floors, and optionally air duct cleaning, air filters and wood floor cleaning and limited restoration (the “Services”) and related products under its trademarks and service marks, providing access to

equipment and supplies related to 2022 Franchise Disclosure Document 2 4879-3770-5485 those services and licensing franchisees to operate a ZEROREZ Franchise in a particular geographic area (the “Territory”). Franchisees are prohibited from pursuing, marketing or providing products or Services to non-residential customers outside their Territory, unless approved in advance in writing by us.

MARKET Factors

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What population does the brand serve? Is the market broad, niche, or somewhere in-between?

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Market Size
This is a large segment. Essentially any American homeowner or renter with 1) floors – whether carpeted, tile, wood or other material that 2). Get dirty and 3). Where householders would rather have someone else clean them constitutes a large market. While anyone with floors can choose to hire a company to clean them, this may be a service for households with higher disposable income. According to the U.S. Census Bureau, [1] there are 33.6% of U.S. households that earn $100,000 or more per year. This means that out of the 129.93 million households in the country, at least 44.69 million of them earn $100,000 a year.

8

We categorize the market size as a large market.

Scale

Small to Large Market Size
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Is the overall industry growing, that is creating new customers who have never used these services before, or mature where most population segments are already using these types of products and services?

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Industry Trend

The industry seems to be solidly a growth industry. According to a study published by Carpet Cleaning Industry in the US – Market Research Report, around 17% of US households with an income of over $100,000 per year use carpet or floor cleaning services. The study also found that the upper-income brackets are more likely to outsource their floor-cleaning services, with the highest concentration of carpet cleaners being found in households with income over $100,000.

9

We categorize the Industry Trend as high growth trend.

Scale

Low to High Growth Trend
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What drives the purchase of the product or service? Is it a “need-to-buy” or a “want-to-buy”? How are customers drawn to your business?

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Product and Service Drivers
One could argue this is right in between a want and need based service. Floors that are dirty should be, but don’t have to be clean. It truly is the housholder’s choice. However most healthy households prefer clean homes, including floors, but because of the specialized equipment, the physical nature of the cleaning technique, time it takes and in some sectors, like the growing geriatric population, outsourcing specialized cleaning jobs becomes a ‘need’ based on abilities and other factors.

8

We categorize the product and service drivers as mid to high drivers.

Scale

Low to High Drivers
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Are competitors a major factor in operating your business? If so, is competition sparse or saturated? Will it matter to your business?

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Competitive Climate
There are certainly a lot of floor cleaning companies and services in virtually any market. However, it is dominated by fairly unsophisticated ‘mom and pops’ who quickly max out on capacity or struggle with maintaining quality/consistency. According to the US Census Bureau, of the roughly 7,000 carpet and floor cleaning companies in the US, 73% have less than 5 employees, and 88% have less than 9 employees.
All establishments 2020 7110
< 5 employees 2020 5203 73.18%
5 to 9 employees 2020 1054 14.82%
10 to 19 employees 2020 513 7.22%
20 to 49 employees 2020 282 3.97%
50 to 99 employees 2020 45 0.63%
100 to 249 employees 2020 11 0.15%

7

We categorize the competitive climate as low-mid competitive pressure.

Scale

Low to High Competition
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Are the business’s products or services regulated, or do they require licensing? Will you or your employees require special licensing? If so, is the regulatory climate strict or lax? Will this affect recruiting employees?

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Regulatory Climate

Like many industries, the residential and commercial cleaning industries face increasing regulatory scrutiny. But unlike many other industries, the residential cleaning industry regulatory climate is relatively tame compared to others like foodservice, home health care, child care, automotive repair and financial services.

According to one industry association the ISSA (International Sanitary Supply Association), regulatory attention seems to focus on cleaning agent ingredients and their potential health impacts. This does not seem to be an issue for Zerorez. Review the ISSA website for deeper understanding of these issues.

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We categorize the regulatory climate as low regulation.

Scale

Low to High Regulation

MODEL Factors

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This is one of the most important factors of all. To understand it you have to look beyond what the business physically does, the services performed or products sold and ask how does the franchise make money? Where does the revenue come from? How is it generated? Are financial performance representations made? Coupled with External Factors 1, 2 and 5 – Market Size, Industry Trend and Competitive Climate and the next Internal Factor 2, Franchisee Role – the true nature of the franchise starts to take shape.

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Revenue Model

The business is about selling a necessary home service to residential customers within a specified trade area that will be defined by Zerorez and agreed to by you. The service represents a recurring revenue model in that a customer tends to use these services on a regular basis over an extended period of time. The existence of cleaning services is clearly understood by the consumer as are the benefits. You as the franchise will build and manage a team, or teams, to perform these services dependably and with a consistent outcome, with a focus on high consumer satisfaction along with sales and marketing, and overall business management to achieve re-occuring revenue and referrals. 

There also are earning claims in the FDD based on a long operating history. You should review this with the franchisor and competent legal and financial resources.

9

We categorize the Operational Model as Simple.

Scale

Simple to Complex Model
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How developed are the systems on which you will rely to operate your business?

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Operational Systems
There is a clearly defined system for starting your Zerorez business as well as ramping up. Along with proprietary cleaning solutions, technologies and methods and a track record of successful franchisees in applying these methods, there is ample evidence the systems are effective.

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We categorize the Operational Systems as Comprehensive.

Scale

Basic to Comprehensive
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In this highly diffuse world, creating, managing and projecting a Brand is essential for the health and vitality of a franchise system. How well does the Franchisor manage this? How well positioned is the brand among competitors? Is it differentiated enough? How well would potential customers recognize the brand? How is it projected into new markets? What is your role and obligations in this process? How is the Brand’s digital footprint managed?

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Brand Management
Zerorez is undoubtedly growing. However, there are many US markets where there are no Zerorez locations and therefore no brand awareness, understandably. This is a situation where there is low brand awareness, but we’d put it in the ‘does not matter’ category. What does matter is the competency and completeness of their digital processes to manage the brand and help establish the brand in these new markets and help create demand. As a complex, yet critical topic with many facets, this should be discussed in depth with the Franchisor.

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We categorize the Brand Management as High Engagement.

Scale

Low to High Engagement
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What role is the franchisee expected to play in starting, ramping and the ongoing operation of the business?

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Franchisee Role

A Franchisee of the Zerorez system is recommended to establish and operate a business, not perform the actual in-home services. But you are not obligated to do so and do have wide latitude here to set up and operate the business as you see fit to maximize the opportunity within your territory. In this role the franchisee is expected to be a business owner/manager as opposed to being on site performing services. However, as this is a ‘sales-based’ model, meaning sales skills with homeowners who may be evaluating several service providers, will be a critical aspect. Whether the franchisee has sales or sales management experience will be extraordinarily helpful in a system such as this. Along with adequate financial resources for this type of business and according to Zerorez requirements, potential

franchisees do not need specialized industry knowledge or skills. As expected, you must have an aptitude and willingness to learn the system and follow the procedures, as with most franchise systems. General management, sales, hiring, retention, marketing, motivation, problem-solving, issue resolution and a financial management acumen, should a franchisee have these skills, will all be helpful in starting and growing your business, but none are required outside of learning the Zerorez way of executing and managing these aspects.

Note: You may score this differently depending on what role you want to play in the business.

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We categorize the Franchisee Role as Business Manager.

Scale

Service Executor to Business Manager Role
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What type of location, if any, is needed to deliver the product or service? If real estate is needed, are the requirements flexible or stringent? Is real estate essential to the product or brand experience or required for services to be performed onsite?

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Real Estate Needs
Real estate needs are minimal and not specialized like a restaurant or retail location. This could be a home office based business, or a small, light industrial office space is all that is necessary. Less real estate needs means less start-up and ongoing operating costs. We see this as a positive.

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We categorize the regulatory climate as basic need.

Scale

Basic to Essential Needs

ORGANIZATION Factors

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How experienced is the franchisor at being a franchisor?

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Franchising Experience

Zerorez was founded in 2001 and started franchising in 2003. They have grown 34% to 67 locations from 12/31/19 to 12/31/21.

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We categorize the Franchising Experience as Extensive.

Scale

Limited to Extensive
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What is the tenure, background, and commitment of the franchise’s leadership?

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Franchise Leadership

The leadership team by and large has a long tenure with the brand. The founder and key executives have deep longstanding experience with the brand and are still involved in key roles. As well, more recent executives come from extensive backgrounds in franchising.

From the Zerorez 2022 Franchise Disclosure Document

CHIEF EXECUTIVE OFFICER: Shawn D. Moon Mr. Moon is our Chief Executive Officer, a position he has held since September 2017. Mr. Moon was the Executive Vice President of Leadership and Strategic Accounts at Franklin Covey Co. in Salt Lake City, Utah from January 2015 to September 2017. 2022

CHAIRMAN OF THE BOARD: Gaylord Karren Mr. Karren is a co-founder of ZEROREZ and has been a board member of ZEROREZ since March 2014.

SPECIAL ADVISOR TO THE BOARD: Dr. Benjamin Litalien Dr. Litalien has been a special advisor to the board since January 2022. Dr. Litalien was a member of our Board of Directors from June 2018 to January 2022. Dr. Litalien was the Chief Development Officer for ZEROREZ from April 2013 to January 2019. He is also the President of the consulting firm Franchise Well in Stafford, Virginia and has served in that position since October 2008.

CHIEF OPERATING OFFICER AND MARKETING DIRECTOR: Ben Hulme Mr. Hulme has been our Director of Marketing since April 2019 and our Chief Operating Officer since August 2020. Mr. Hulme was the general manager of Zerorez Phoenix, one of our franchisees, in Phoenix, Arizona from June 2013 to August 2020.

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We categorize the Franchising Leaders as Highly Experienced.

Scale

Limited to Highly Experienced
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How often and how well does the franchisor engage franchisees? What assistance is provided in starting and operating your business.

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Franchisee Engagement
In reviewing the 2022 Franchise Disclosure Document, there is an extensive section on the franchisor’s training and assistance. Please review Item 11 – FRANCHISOR’S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS AND TRAINING in detail. Suffice to say there is significant assistance and support in starting and operating your Zerorez business.

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We categorize the Franchisee Engagement as Highly Engaged.

Scale

Low to Highly Engaged
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In what kind of financial shape is the franchisor?

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Financial Health
According to the most recent documents outlined in the FDD, Zerorez is in sound financial health. You should review this section with competent financial and legal professionals.

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We categorize the Financial Health as Sound.

Scale

Weak to Sound Financial Health

The BASICS

Investment Range

$57,635 – $201,715

Initial Franchise Fee

$26,420 – $144,660

Financial Performance Representation

Yes

We offer financing only for Additional Territory Fees pursuant under certain conditions

Locations

67

As of Dec 31, 2021

3 Year Growth in Units

34%

12/31/19 – 12/31/21

Royalty Fee

6%

Marketing Fund Fee

1-3%

Agreement Term

10

Initial (Years) & Renewal

Obligations to Participate in the Actual Operation of the Franchised Business

Franchisee Recommended, no obligated
Other(s) Minimum 2 persons who can serve as manager

Total Franchise Evaluator Score

120
0 – 24

Missing fundamental, internal or external factors

25 – 49

More investigation is needed

50 – 74

Worth exploring further with caution

75 – 99

Add to consideration set

100 – 140

Sound opportunity and likely a great fit

Summary

This is a simple business model, based on a clearly understandable consumer need, with macro industry drivers expanding the customer base of the industry. Along with being a leading brand in the category, healthy growth rate and highly experienced and engaged executive team, this is a system we would invite closer scrutiny.