Initial Fees & Financial Performance Representations

Initial Fees

The amount of the Initial Franchise Fee will vary according to the population of the territory in which your franchise is located and whether you already have Wildlife or Pest Services in the territory. Critter Control determines the population of your territory when you sign the Franchise Agreement using the most recently published the latest U.S. census figures, or the Woods and Poole Index for Metropolitan Areas or individual zip codes, available for your territory at that time. Critter Control has designated the following eight classes of territories, and has the assigned the following Initial Franchise Fees for each of those territories:

Population

Market Size

Initial Franchise Fee

<299,900

A

$54,875

300,000 to 599,999

AA

$59,600

600,000 to 899,999

B

$64,850

900,000 to 1,199,999

BB

$70,100

1,200,000 to 1,499,999

C

$75,350

1,500,000 to 1,799,999

CC

$80,600

1,800,000 to 2,099,999

D

$85,850

2,100,000 to 2,400,000

DD

$91,900

 

ITEM 19. FINANCIAL PERFORMANCE REPRESENTATIONS

The FTC's Franchise Rule permits a franchisor to provide information about the actual or potential financial performance of its franchised and/or franchisor-owned outlets, if there is a reasonable basis for the information, and if the information is included in the disclosure document. Financial performance information that differs from that included in Item 19 may be given only if: (1) a franchisor provides the actual records from an existing outlet you are considering buying; or (2) a franchisor supplements the information provided in this Item 19, for example, by providing information about possible performance at a particular location or under particular circumstances.

Our eight market sizes are used in the information presented in Tables No. 1 and 2 below. These eight market sizes comprise the entire group of market sizes within the System.

Table No. 1 below reflects certain historical expense information for the calendar year ended December 31, 2019 (“Calendar Year 2019”) of Critter Control Franchises that operated continuously throughout Calendar Year 2019 (“One Year Group”). As of December 31, 2019, there were 74 Critter Control Franchises in the One Year Group.

Table No. 2 below reflects certain revenue information for Calendar Year 2019, of Critter Control Franchises that operated continuously throughout Calendar Year 2019, the calendar year ended December 31, 2018 and the calendar year ended December 31, 2017 (“Three Year Group”). As of December 31, 2019, there were 68 Critter Control Franchises in the Three Year Group.

We have not included financial performance information from our company-owned outlets, or any Critter Control Franchisees that were not in continuous operation throughout all of Calendar Year 2019. The Critter Control Franchises reported offer substantially the same products and services as you will as a franchisee operating a Critter Control Franchise.

Population Market Size Number of Franchises in the One Year Group Number of Such Franchises included in Table No. 1 Reporting Number of Franchises in the Three Year Group
<299,999 A 2 2 2
300,000 to 599,999 AA 18 18 17
600,000 to 899,999 B 16 16 12
900,000 to 1,199,999 BB 9 9 8
1,200,000 to 1,499,999 C 6 6 6
1,500,000 to 1,799,999 CC 5 5 5
1,800,000 to 2,099,999 D 5 5 5
2,100,000 to 2,400,000 DD 13 10 13
  Total 74 71 68

Table No. 1

Operating Expenses as Percentage of Annual Net Revenue for Calendar Year 2019
One Year Group of Critter Control Franchises
All Market Sizes

A Market
  Average High Low Median
Employee Compensation 30% 31% 30% 31%
Materials & Supplies 7% 12% 4% 8%
Advertising 7% 8% 7% 8%
Insurance 6% 9% 3% 6%
Rent/Lease 3% 3% 2% 3%
Vehicles 3% 4% 2% 3%
Royalties & Ad Fund Contributions 8% 8% 8% 8%

 

 
AA Market
  Average High Low Median
Employee Compensation 32% 60% 0% 30%
Materials & Supplies 12% 21% 5% 13%
Advertising 6% 23% 2% 13%
Insurance 4% 8% 1% 5%
Rent/Lease 2% 7% 0% 4%
Vehicles 6% 16% 2% 9%
Royalties & Ad Fund Contributions 8% 8% 8% 8%
   
B Market
  Average High Low Median
Employee Compensation 33% 61% 0% 31%
Materials & Supplies 10% 20% 4% 12%
Advertising 5% 17% 0% 9%
Insurance 3% 11% 2% 7%
Rent/Lease 2% 6% 0% 3%
Vehicles 5% 22% 2% 12%
Royalties & Ad Fund Contributions 8% 8% 8% 8%
   
BB Market
  Average High Low Median
Employee Compensation 26% 37% 0% 19%
Materials & Supplies 9% 13% 3% 8%
Advertising 9% 27% 6% 17%
Insurance 4% 9% 2% 6%
Rent/Lease 1% 2% 0% 1%
Vehicles 7% 16% 2% 9%
Royalties & Ad Fund Contributions 8% 8% 8% 8%
   
C Market
  Average High Low Median
Employee Compensation 40% 46% 30% 38%
Materials & Supplies 10% 11% 4% 8%
Advertising 6% 8% 1% 5%
Insurance 3% 6% 2% 4%
Rent/Lease 2% 3% 1% 2%
Vehicles 4% 8% 2% 5%
Royalties & Ad Fund Contributions 8% 8% 8% 8%
   
CC Market
  Average High Low Median
Employee Compensation 41% 61% 20% 41%
Materials & Supplies 9% 15% 7% 11%
Advertising 8% 16% 4% 10%
Insurance 5% 6% 4% 5%
Rent/Lease 3% 5% 0% 3%
Vehicles 6% 12% 2% 7%
Royalties & Ad Fund Contributions 8% 8% 8% 8%
     
   
D Market
  Average High Low Median
Employee Compensation 38% 55% 27% 41%
Materials & Supplies 7% 11% 1% 6%
Advertising 11% 15% 5% 10%
Insurance 5% 10% 3% 7%
Rent/Lease 2% 4% 0% 2%
Vehicles 6% 9% 3% 6%
Royalties & Ad Fund Contributions 8% 8% 8% 8%
   
DD Market
  Average High Low Median
Employee Compensation 40% 55% 21% 38%
Materials & Supplies 8% 13% 4% 9%
Advertising 9% 22% 4% 13%
Insurance 3% 10% 2% 6%
Rent/Lease 2% 4% 1% 3%
Vehicles 6% 9% 2% 6%
Royalties & Ad Fund Contributions 8% 8% 8% 8%

Table No. 1 presents the average expenses as a percentage of Annual Net Revenue (as defined in Item 11 and again below) for Calendar Year 2019 of those in the One Year Group that provided us with financial information for the full Calendar Year 2019 sufficient for us to complete Table No. 1. Please note that we received such information from 71 of the 74 Critter Control Franchises included in the One Year Group (as identified above). Table No. 1 also reports the expense percentage results of the High and the Low reporting Franchisees of the One Year Group in each market category.

As used throughout Table No. 1, the following definitions apply:

Advertising” means Advertising Contribution, sponsorships, Yellow Pages and social media advertising spend, Pay per Click and website optimization (SEO) advertising expenses.

Annual Net Revenue” means the total of all collected revenues reported by each Critter Control Franchisee’s business in a Calendar Year, including fees charged for all products and services and payments received from its customers and for Multi-Territorial Accounts and/or amounts received from disinfection, weed control, insulation, fumigation, lawn care, pest control, and/or any other ancillary services that it may be permitted to provide under an addendum to its Franchise Agreement, but exclusive of sales or use taxes, if any.

Calendar Year” means the twelve (12) month period beginning on January 1 and ending on December 31.

Employee Compensation” means wages, bonuses, and commissions paid to employees and payroll taxes paid for employees; does not include wages or expenses a franchisee pays himself or herself.

Insurance” means the cost of insurance policies required by the Franchise Agreement or otherwise obtained by Franchisee for its Critter Control Franchise.

Materials & Supplies” means cost of materials and supplies used to perform the services sold to customers, including bird supplies, crawlspace/attic supplies, construction materials, bait and other pest supplies, traps, uniforms, tools and equipment and other general job supplies.

Rent/Lease” means the amount paid in rent for the lease of office or other type of space used for the Franchised Business.

“Royalties and Ad Fund Contributions” means the Royalty and the Advertising Contributions paid in accordance with the Franchise Agreement, as further described in Item 6 above

Vehicles” means cost of vehicle purchases and/or leases, operating expenses, maintenance and repair, tolls, gas/fuel and other miscellaneous vehicle expenses.

Table No. 2

Average Annual Gross Revenue for Calendar Year 2019
Three Year Group Critter Control Franchises
All Market Sizes

Market Size Average High Low Median
A  $562,602.44  $606,754.09  $518,450.78 $562,602.44
AA  $320,190.84  $712,744.80  $86,887.00 $268,410.00
B  $627,183.14  $1,352,517.89  $173,470.40 $445,173.88
BB  $582,828.23  $1,034,568.78  $250,641.75 $570,265.90
C  $996,085.56  $2,749,378.04  $163,842.25 $591,694.44
CC  $861,155.93  $1,443,080.00  $349,352.47 $700,658.55
D  $857,464.50  $2,034,959.76  $451,318.83 $576,231.93
DD  $1,474,770.36  $3,728,987.67  $301,915.00 $1,335,537.93

Table No. 2 presents the average Annual Gross Revenue (as defined below) for Calendar Year 2019 for Franchisees in the Three Year Group by market. Table No. 2 also reports the results of the High, Low, and Median of Franchisees of the Three Year Group in each market category.

As used throughout Table No. 2, the following definition applies:

Annual Gross Revenue” means the total of all revenues invoiced by Critter Control Franchisees in a Calendar Year, including fees charged for all products and services and payments billed to customers and for Multi-Territorial Accounts and/or amounts billed for disinfection, weed control, insulation, fumigation, lawn care, pest control, and/or any other ancillary services that the franchisee may be permitted to provide under an addendum to its franchise agreement, inclusive of sales or use taxes, if any. Note that Annual Gross Revenue is different than Annual Net Revenue used above in that Annual Net Revenue is based on revenues actually collected as reported to us by our franchisees and Annual Gross Revenue is based on revenues invoiced and reflected in ServiceBridge.

 

Some outlets have sold this amount. Your individual results may differ. There is no assurance that you’ll sell as much.

 

Explanatory Notes:

The financial information provided in Table No. 1 was reported by our franchisees and the financial information provided in Table No. 2 was generated through our ServiceBridge software. None of the data provided above was derived from audited financial statements, and we have not sought to independently verify the accuracy of any of the financial information provided to us by our franchisees. Written substantiation of the information used in preparing these financial performance representations will be made available to you upon your reasonable request.

Your revenues and expenses will be affected by your own operational ability, which may include your experience with managing a business, your capital and financing (including working capital), continual training of you and your staff, customer service orientation, service quality, your business plan, and the use of trained specialists (e.g., an accountant) to assist you with your business plans. Your revenues and expenses may be affected by franchise location, including local household income, residential populations, competition, inflation, economic conditions, seasonal conditions (particularly in colder climates), inclement weather (e.g., hurricanes), etc.

We encourage you to consult with your own accounting, business, and legal advisors to assist you to prepare your budgets and projections, and to assess the likely or potential financial performance of your franchise. We also encourage you to contact existing franchisees to discuss their experiences with our System and their own Critter Control Franchises.

Other than above in this Item 19, we do not make any additional representations about a franchisee’s future financial performance or the past financial performance of company-owned or franchised outlets. We do not authorize our employees or representatives to make any additional such representations either orally or in writing. If you are purchasing an existing outlet, however, we may provide you with the actual records of that outlet. If you receive any additional financial performance information or projections of your future income, you should report it to the franchisor’s management by contacting the Law Department, Critter Control, Inc., 2170 Piedmont Road N.E., Atlanta, Georgia 30324, Phone: 404-888-2000, the Federal Trade Commission, and the appropriate state regulatory agencies.