American Leak Detection Franchise
Audited FinancialsRisk Score
Pending analysis
Investment Range
$76,755 - $259,550
Franchise Fee
$29,500
Total US Locations
135
Business Summary
American Leak Detection operates a business that offers specialized leak detection services, together with related repair and other services. American Leak Detection franchisees focus on finding hidden plumbing leaks in various locations such as concrete slabs, asphalt, earth, and walls, and can also locate utility lines. Their services extend to detecting leaks in water, gas, pools, spas, and sewers. The primary clientele for American Leak Detection includes swimming pool and spa owners, as well as residential and commercial property owners who encounter hidden leak problems.
Corporate History
American Leak Detection was initially founded in 1974 as a sole proprietorship in Hemet, California, by Richard Rennick. The business relocated to Palm Springs, California, in 1982 and began operating as a partnership. In 1984, it was incorporated under the name American Leak Detection of Palm Springs. American Leak Detection started offering franchises for leak detection and related services in January 1985. The company is currently a wholly-owned subsidiary of American Leak Detection Holding Corp., which in turn is wholly owned by Water Intelligence plc, a UK public limited company.
Financial Overview
Investment Range
$76,755 - $259,550
Franchise Fee (Low)
$29,500
Franchise Fee (High)
$120,000
Royalty %
10%
Equipment Costs (Low)
$25,800
Equipment Costs (High)
$94,000
Working Capital
$25,000
Audited Financials
Yes
Offers Financing
No
Audit Opinion
Unqualified opinion
Financial Health Notes
American Leak Detection's FDD explicitly states that its financial condition, as reflected in its financial statements, calls into question its financial ability to provide services and support to franchisees. The company's balance sheets show significant negative working capital for both 2023 and 2022, with current liabilities far exceeding current assets. For example, in 2023, current liabilities were $46.7 million while current assets were $23.1 million, resulting in negative working capital of approximately $23.6 million. This is largely due to a substantial amount owed to its parent company, categorized as a current liability. This indicates that American Leak Detection relies heavily on financial support from its parent company for its short-term liquidity. While the company has reported net income and positive cash flow from operating activities, this reliance on its parent for short-term obligations is a significant financial consideration for potential franchisees.
Financing Details
American Leak Detection does not offer any direct or indirect financing to its franchisees. The company also states that it does not arrange financing for franchisees nor does it guarantee any franchisee loans. Therefore, franchisees will need to secure their own funding from third-party sources.
Performance Metrics
Total US Locations
135
Franchised Units
90
Corporate Units
45
Franchising Since
1985
Legal & Compliance Analysis
Recent Litigation
No
Bankruptcy
No
Litigation Summary
American Leak Detection reports that no litigation is required to be disclosed in Item 3 of its Franchise Disclosure Document. This indicates that American Leak Detection has a clear legal history with no material litigation to report.
Bankruptcy History
American Leak Detection has no bankruptcy history to disclose.
Agreement Terms
Initial Term
10 years
Renewal Term
10 years
Renewal Conditions
To renew their American Leak Detection franchise, American Leak Detection franchisees must not be in default and must have substantially complied with their current franchise agreement and all other agreements with the franchisor. They will need to sign a new franchise agreement, which may contain materially different terms and conditions, and provide general releases of claims, except for indemnification claims. American Leak Detection franchisees must also bring their operation into conformity with all standards then applicable to new American Leak Detection franchisees, including methods of operation, updated equipment and product packages, office facilities, vehicle condition, image, and other system standards. They (or a manager) must satisfactorily complete any new training and refresher programs as reasonably required by American Leak Detection. Additionally, American Leak Detection franchisees may be charged for any out-of-pocket costs incurred for processing the renewal.
Training & Support Program
Franchisor Assistance
American Leak Detection provides various forms of assistance to its franchisees. Before opening, American Leak Detection supplies the standard equipment and product packages and training packages. It defines the operating territory for each franchisee. American Leak Detection loans comprehensive business operation, equipment training, and production manuals, and provides specifications for motor vehicles and their appearance. New American Leak Detection franchisees are advised to purchase specific business management accounting software. American Leak Detection also conducts a voluntary advertising program, providing templates for various marketing materials such as brochures, business cards, and vehicle wraps, with costs varying by volume. All advertising, including internet usage and websites, requires prior approval from American Leak Detection, and websites must integrate with the main ALD website. American Leak Detection does not regulate the location of the franchisee's office, allowing for home-based operations. Initial training includes home study, classroom, and on-the-job components.
Initial Training Hours
292
Training Location
Bridgeport, CT
Ongoing Support
American Leak Detection provides ongoing support to its franchisees after they open their businesses. This includes offering additional special training programs at headquarters if requested in writing, at no additional fee for the training itself (though American Leak Detection franchisees are responsible for their own travel and living expenses). American Leak Detection continuously upgrades and improves equipment, literature, and manuals for the entire system, and may introduce changes to operating methods, marketing strategies, and product/service offerings, which American Leak Detection franchisees are required to adopt at their own expense. American Leak Detection welcomes suggestions from its franchisees and shares beneficial ideas. If consumer or agency complaints arise, American Leak Detection will take the lead in addressing them, with the ultimate resolution being the franchisee's responsibility. American Leak Detection franchisees are also required to attend the annual convention one out of every three years, with additional attendance being optional. American Leak Detection helps with statistical information gathering through recommended business management software for system analysis and royalty reporting. American Leak Detection collaborates with the American Leak Detection Advisory Council (ALDAC), an elected body of franchisees, to discuss strategic marketing plans, operational policies, and system development.
Franchise Requirements
Industry Experience Required
No
Management Experience Required
No
Sales Experience Required
No
Technical Skills Required
No
Operational Details
Location Type
hybrid
Owner Participation
supervisory
Territory Type
exclusive
Territory Size Requirements
American Leak Detection territories are typically defined based on a minimum population of not less than 300,000 people and are designed to not overlap with other operating territories.
Staffing Notes
American Leak Detection highly recommends and encourages owner participation in the franchise business due to the individual nature of the services provided. If the owner is not personally involved in the direct operation of their American Leak Detection business, a manager must be employed who has successfully completed the initial training provided by American Leak Detection. The training program also allows a spouse or another technician to attend initial training at no additional fee. Franchisees are responsible for all expenses incurred by themselves, their managers, and employees related to all training programs, including wages, travel, meals, lodging, local transportation, and other incidental expenses. American Leak Detection may require the franchisee or their manager to re-attend and successfully complete training if deemed necessary for compliance with their standards.