Jani King Franchise: Profits and Lawsuits (2024)
Jani-King International, Inc. is an American chain of cleaning service franchises. The company provides cleaning for public spaces such as offices, retail spaces, hotels, and stadiums. The Jani King Franchise claims to be “the world’s largest commercial cleaning franchise company with more than 120 support offices in 10 countries.”
In this article, we will look at Jani-King of Milwaukee who is one of the Master Franchisees of Jani-King.
Contents
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How is Jani-King Franchise Positioned in the Cleaning and Maintenance Industry?
There is a rising demand for cleaning and maintenance services in the U.S. as construction activities, investment in real estate, and the number of working women increased. The Cleaning and Maintenance industry offers commercial and residential services such as window cleaning, floor cleaning and care, carpet and upholstery cleaning, maid services, janitorial services, landscaping, vacuuming, snow plowing, and more.
Jani-King competes in the Cleaning and Maintenance market against big brand companies such as JAN-PRO and Janitize. Jani-King franchisees also compete against other nearby Jani-King locations.
How Much is a Jani King Franchise?
The initial Jani-King Franchise Fee is between $16,750 to $33,000. You have to pay this upfront fee when opening a Jani King franchise.
Jani-King Franchise Cost
The estimated total investment necessary to begin the operation of a Jani-King Franchise ranges from $20,354 to $51,840. The following costs are part of the upfront costs included in the initial investment for a Jani-King. Many of these are onetime fees that are needed to launch the franchise. Review the chart below to see how much it costs to buy a Jani-King franchise in 2022.
ESTIMATED INITIAL INVESTMENT
| Type of Expenditure | Amount | To whom Payment is to be Made |
|---|---|---|
| Initial Franchise Fee | $ 16,750 to $ 33,000 | Us |
| Real Estate | $ -0- to $ 5,000 | – |
| Supplies | No Cost | N/A |
| Equipment | $ 1,849 to $ 2,500 | Vendors, LEASING |
| Business licenses, tax registrations and permits | $ 100 to $ 1,000 | Vendors, Suppliers, Utilities |
| Business Entity, Establishment Fees | $ 100 to $ 1,000 | State and Local Municipalities and filing agents |
| Additional Funds (for initial 120 day period) | $ 800 to $ 8,500 | Us, Vendors, Employees |
| TOTAL | $ 20,354 to $ 51,840 |
Owning a Jani-King Franchise Requires Ongoing Fees
Royalty: 10% of monthly Gross Revenue
Accounting Fee: 3.0% of monthly Gross Revenue
Advertising Fee: 1.5% of monthly Gross Revenues
Technology Licensing Fee: 2.5% of monthly Gross Revenues
Business Protection Plan (Optional): 5-8% of monthly Gross Revenue plus the cost of Administration Fee of $10/month or $20/month
Jani-King Worker’s Compensation Insurance Broker Program (Optional): 1-5%, depending on the Gross Revenue and the number of employees
In all, these add up to 14.5% of monthly Gross Revenue in mandatory fees and between 1% to 13% of monthly Gross Revenue in optional costs.
How much do franchise owners make?
Based on the median sales provided by Jani-King’s franchise locations, at a 50% profit margin, it will take around 1 to 3 years to recoup your investment. You may not get a 50% profit margin which would elongate getting a return on your investment.
Many factors affect the sales, costs, and expenses of your Franchised Store. Such as the Franchised Store’s size, geographic location, menu mix, and competition in the marketplace. The presence of other Cleaning and Maintenance stores; the extent of market penetration and the brand awareness that Jani-King stores have attained in your market. Also, the quality of management and service at your Franchised Store are major factors.
Is the Jani-King Franchise Profit Worth the Franchise Cost?
To assign a valuation multiple for Jani-King franchises, we leverage estimates from DealStats, a database of acquired private company transactions sourced from U.S. business brokers and SEC filings. We reviewed the larger franchise industry as well as selling price multiples for larger systems where more transaction data is available.
- Estimated Selling Price = Net Sales * 0.58
When you go to sell a Jani-King franchise based on the median multiple of .58 and net sales of $101,290, it would sell for $58,748. This might be higher or same as your investment.
The more franchises you own, the more earning potential you have as private equity firms become interested in your business instead of individual owner-operators.
Statement of Income and Retained Earnings for the Year Ended
| December 31, 2020 | |
|---|---|
| Revenues: | |
| Janitorial Service Revenues | $ 9,202,781 |
| Franchise Sales | $ 16,857 |
| Total Revenues | $ 9,219,638 |
| Cost of Revenues: | $ 7,216,274 |
| Gross Profit | $ 2,003,364 |
| Selling, General, and Administrative Expenses: | $ 1,373,530 |
| Net Income from Operations | $ 629,834 |
| Other Income: | – |
| Interest Income | $ 90 |
| Gain on Sale of Fixed Assets | $ 13,917 |
| Total Other Income | $ 14,007 |
| Net Income before Other Expenses | $ 643,841 |
| Other Expenses: | |
| Interest Expense | $ 20,287 |
| Depreciation and Amortization | $ 96,472 |
| State Taxes | $ 44,930 |
| Total Other Expenses | $ 161,689 |
| Net Income before Extraordinary Item | $ 482,152 |
| Extraordinary Item: | |
| Forgiveness of LPP Loan | $ 126,692 |
| Net Income | $ 608,844 |
| Retained Earnings – beginning | $ 934,289 |
| Stockholder’s Distributions | ( $ 264,888 ) |
| Retained Earnings – ending | $ 1,278,245 |
Jani-King is a very profitable business for the franchisor, with retained earnings of $1.278 million in 2020.
Pending Litigation
All this seems very good for the company and its franchisees with the low cost and high returns. However, that is not the full picture. There is a lot of litigation pending against the franchisor. These include allegations including:
- Violations of intentional misrepresentation, concealment, negligent misrepresentation, breach of contract, labor codes, wage orders, and more
- The Department of Labor alleges the violation of the record keeping requirements of the Fair Labor Standards Act
- Violation of Minimum Wage Laws in multiple states
This is bad news for the company and a big red flag for any prospective franchisees. As we see below, people are no longer buying these franchises.
How many units have opened and closed?
| Outlet Type | Year | Outlets at the Start of the Year | Outlets at the End of the Year | Net Change |
|---|---|---|---|---|
| Franchised | 2018 | 5,871 | 5,692 | -179 |
| 2019 | 5,692 | 5,596 | -96 | |
| 2020 | 5,596 | 5,378 | -218 | |
| Company-Owned | 2018 | 19 | 16 | -3 |
| 2019 | 16 | 16 | 0 | |
| 2020 | 16 | 16 | 0 | |
| Total Outlets | 2018 | 5,890 | 5,708 | -182 |
| 2019 | 5,708 | 5,612 | -96 | |
| 2020 | 5,612 | 5,394 | -218 |
Over the last three years, the company has been in decline. Both franchising units and company-operated stores have decreased. Franchises have closed at a rate of 164 per year over the past three years. This is an indicator that these stores may not be performing well or their franchise term is up and they are not renewing it.
The estimated total investment necessary to begin the operation of a Jani King Franchise ranges from $20,354 to $51,840
Conclusion
Jani-King offers people the opportunity to own a franchise in a very established cleaning service. While this may be the business for you, make sure also to check out other companies offered on Vetted Biz and in the Cleaning and Maintenance Industry.
