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The Truth About Cleaning Business Franchises

 

 

Janitorial services franchise companies, are not in the cleaning business, but rather in the business of selling franchises to would-be entrepreneurs.

 

This is how franchises work.


Example: There are two companies. The family owned business and the franchisor, both bidding on a typical 5 day a week 2.25 hr per day office cleaning account.   The family owned company places a normal bid of $755.00 per month for the account.   The franchisor sales person bids lower in order to win the account. He bids $631.00 per month for it.   The customer, not aware of what is going on likes the very low price and decides to sign with the franchisor.   Now after signing, that contract will be sold to one of the franchisees for $1893.00. 3 times the worth of the account.

 

They have to pay it off in 3 months. Thus, they will clean that account for 3 months for free in order to pay for it. After the account is paid for, the franchisor takes 20% per month off the top for franchise fee ($157.75.) plus $50 for insurance per month for each account. So now the franchisee gets $473.35 per month for that account...

 

The franchisor's sales person has now made $1893.00 on the account, plus $144.65 per month as long as they have the account. So the franchisor makes there money on quantity and re-sell of accounts. not quality. What happens in almost all cases the franchisee that has purchased the account starts to realize he is not making much money on the account so he calculates it to see how much he is really getting.

 

$473.35 per month divided into 4.33 = $109.31 per week, divided into 5 days = $21.86 per day, dividing that into normal cleaning time 2.25 hours = $9.71 per hour. After he deducts his cost for materials, equipment, etc. He realizes he is only making $9.00 per hour. Now he can not afford to hire labor unless he makes some changes. For labor its going to cost at least $8.00 per hour. But after paying taxes, workman comp, etc, etc, the total hourly cost for labor will be at least $12.00 per hour.

 

So now he needs a solution.

The Solution: Cut back on material, supplies, etc? Maybe even water down the chemicals to stretch it out, cuts the cleaning time in half say from 2.25 down to 1.25 hours. After all is done, he can now afford to have an employee and still make his 5 to 10% profit. <-- This is a pathetic profit margin, BTW!!!


Now the bigger problem. The customer has now become a victim. The customer is being short changed on service. The cleaning supplies have been cut and the cleaning time is being cut in half, leading to very poor quality cleaning. The customer has to complain to the franchisor. The sales rep promises they will take care of it.

 

Now the sales rep for the franchisor needs to solve the problem in order to save the account. He or she takes the account from the franchisee and re-sells it to another franchisee making another $1893.00 on that same account. Totaling $3786.00 for an account they did nothing for.

 

Now the problems just start all over again, but with the new franchisee. As they start the same process the last one did, usually it will continue till the customer has had enough and decides to switch companies. But in some situations the customer could be locked into a three year contract. If there is, for instance 2 years left on the contract, they will need to pay the two years left in the contract in one large sum in order to be released from it, costing the customer an additional $15,144.00.

 

In the end the franchisor has made over $18,930.00 on that one account. According to industry information, the typical legally-operated cleaning company profits between 5% to 10% after all costs and overhead are paid. Some very large corporate operations function on as little as 2-3%, but these are the exception in the industry. Franchises and others who operate unethically or illegally typically under price their services since they don't have to actually suffer the direct consequences of their pricing strategy - instead making their money "off the top".

 

It's the poor franchisee or illegal subcontractor who suffers trying to make a reasonable wage from the predicament. If a franchisor has taken anywhere from 15 to 20% off the top, it is most likely the franchisee would not succeed. In the end, they, and the customer have become victims of the franchisor.

 

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This was an example from an actual case. This is NOT the exception, sadly enough. But rather, this is the rule when it comes to cleaning franchises. This is not to say the people that go out and do the work are bad people. They are simply in a very bad situation that, in many cases, will cause them to do unethical things to their clients in order to try and make money.

 

Sadly, this gives EVERY COMPANY in the business of cleaning a bad name to start with. Many people and companies will avoid any outside company because they have experienced poor service, poor responses, etc.. Even though a professional company, such as AllClene, LLC can actually do the job better and for less money in the long run than they can do it internally.

 

Know what you are getting!!! Lower prices do NOT always = better service. While AllClene can do amazing work, many times cheaper than others can, many times, you do get what you pay for. And you deserve exactly what you pay for.

 

 

 

 

 

 

 

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