Franchise in Focus: Examining these Five Core Factors of the Zerorez Franchise Opportunity.
With so much information available at your fingertips on franchise concepts, it’s easy to get lost. Unfortunately much of this information does not go nearly far enough to allow you to truly make an informed decision one way or the other.
In order to make an informed decision, non-essential information must be stripped away and essential information added in to see the concept clearly for what it is.
If you’ve read any of our other blogs or reviewed some of our brand evaluations, you know the Franchise Evaluator is central to how we examine concepts.
Of the Evaluator’s seven internal and seven external factors, five factors, when considered together, do just that… strip away non-essential information and allow you to focus on those first macro decisions – “Is this a category, and a brand, I want to be involved with?”. All the other Factors cover areas that support these core five factors. But unless you are comfortable with the ‘Big 5’, the rest really do not matter.
Five Core Franchise Evaluation Factors.
The Five factors that shape the macro picture of any opportunity are:
- External Factor 1 – Market Size
- External Factor 2 – Industry Trend
- External Factor 5 – Competitive Climate
- Internal Factor 1 – Revenue Model
- Internal Factor 2 – Franchisee Role
The story these Factors tell when put together are the 1). size, strength and potential longevity of the market for 2). the products and/or services you are considering. 3). How the business accesses the revenue potential in this market through the Revenue Model. And 4). what your role is in setting up and operating this business. Unless you understand and can answer these favorably, not much other information will be helpful.
It almost doesn’t even matter the concept you’re looking at. Your first major decision comes down to these five elements.
As we’ve discussed in other blogs, a business, especially franchises, are entities set up to 1). access revenue potential, 2). among a defined market through a 3). system to reliably and repeatedly deliver specified goods and services. Essentially a ‘Market + Model’ way to evaluate an opportunity plus added franchise specific features such as Internal Factors 3 and 4 – Franchising Experience and Leadership – which are about the Franchisor themselves. These Factors help determine how well a particular concept can do that.
Why the Zerorez Franchise Opportunity Hit Our Radar
Home service concepts have always been an interest of ours and more recently, since the pandemic, especially with the focus on cleaning and sanitation.
It’s also no surprise American homeowners do not like household chores and typically outsource for the things they can’t or don’t like to do.
Household chores, especially ones that require specialized skill, equipment, techniques or are inordinately physical or time consuming, seem to be the ones most American households outsource first and most often. The nature of the chore itself drives homeowners to seek outsourced solutions. Carpet, upholstery and floor cleaning certainly fit that bill. (Think of the last time you did any of these things yourself. Me neither…)
Zerorez is an emerging franchise concept seeking to expand nationwide. But different in a fundamental way. Unlike most floor cleaning companies, their proprietary Zr Water is a powerful, non-toxic cleaner that does not use soaps or other residue leaving solutions, but is also completely safe for people, pets and the indoor and outdoor environment.
We wanted to explore further.
Putting Zerorez through the Franchise Evaluator.
The full Zerorez Franchise analysis of all 14 internal and external factors and total score can be found here. In this blog, we’ll run through the 5 Core Franchise Evaluation Factors that cover the Market + Model + Franchise Feature way of assessing an opportunity.
External Factor 1. Market Size: Scale: Small to Large Market Size Score: 8
Factor Definition: What population does the brand serve? Is the market broad, niche, or somewhere in-between?
Our Assessment: This is a large market 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,  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.
External Factor 2. Industry Trend: Scale: Low to High Growth Trend Score: 9
Factor Definition: 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?
Our Assessment: The industry seems to be solidly a growth industry. According to a study published by IBIS World in 2022, 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.
External Factor 5. Competitive Climate: Scale: Low to High Competition Score: 7
Factor Definition: Are competitors a major factor in operating your business? If so, is competition sparse or saturated? Will it matter to your business?
Our Assessment: 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 let alone scale. 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.
|< 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%|
This is a highly fractured industry.
Internal Factor 1. Revenue Model: Scale: Simple to Complex Model Score: 9
Factor Definition: 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?
Our Assessment: 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 various 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.
Understanding your role and the franchisor’s role in how demand is generated, especially on start up is a worthwhile conversation.
Zerorez also makes earnings claims outlined in their FDD based on a long operating history that are certainly worth reviewing. You should review this section carefully with the franchisor and competent legal and financial resources.
2. Franchisee Role: Scale: Service Executor to Business Manager Role Score: 8
Factor Definition: What role is the franchisee expected to play in starting, ramping and the ongoing operation of the business?
Our Assessment: 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. However, as ‘sales’ with homeowners who may be evaluating several service providers is central to how revenue is generated, sales and/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.
This is a simple business model, based on a clearly understandable consumer need, a clearly differentiated service, 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.
Review Zerorez’s full assessment of all 14 External and Internal Factors here.
As always, the information presented in this article and others is for guidance only and should not replace competent guidance from legal and financial professionals and your own due diligence.
And certainly contact us if you have any questions about Zerorez or any other concept you may be considering.