Closet Factory Franchise
Audited FinancialsRisk Score
Pending analysis
Investment Range
$392,500 - $663,500
Franchise Fee
$58,500
Total US Locations
90
Business Summary
The Closet Factory Business markets, designs, manufactures, constructs, installs, repairs, and services custom closets and storage systems for consumers. It also sells other related products and services, operating from a single physical location within a defined territory.
Corporate History
The Closet Factory Franchise Corporation was incorporated in California on May 17, 1985. It also operates under the name "Closet Factory." Its predecessor, The Closet Factory, Inc. (CFI), was organized in 1983 by John La Barbera, who serves as the Co-Chief Executive Officer and Chief Financial Officer for both entities. CFI has been operating a business substantially identical to the offered franchises since 1983 and currently runs 6 retail outlets. The Closet Factory Franchise Corporation began selling franchises in December 1985. The company also has an affiliate, Sierra Support Service, Inc., incorporated in 2019, which provides advertising and support services, and another affiliate, Painting Masters Franchise Corporation, incorporated in 2018, which offers painting franchises.
Financial Overview
Investment Range
$392,500 - $663,500
Franchise Fee (Low)
$58,500
Franchise Fee (High)
$58,500
Royalty %
6.75%
Marketing %
15%
Equipment Costs (Low)
$190,000
Equipment Costs (High)
$340,000
Working Capital
$80,000
Audited Financials
Yes
Offers Financing
No
Audit Opinion
Unqualified opinion
Financial Health Notes
The Closet Factory Franchise Corporation's financial statements for 2024 and 2023 were audited and received an unqualified opinion, indicating a clean financial bill of health. The company transitioned from a C Corporation to an S Corporation effective January 1, 2024, which means future federal income tax obligations will be passed through to shareholders, with exceptions for built-in gains. A notable aspect of the company's financial position is a significant receivable from its affiliate, The Closet Factory Inc. (TCFI), totaling $5,517,145 as of December 31, 2024. This loan is unsecured, non-interest bearing, and due on demand. Additionally, the company recorded a bad debt charge of $393,599 in 2024. Despite these details, the auditors did not raise any concerns about the company's ability to continue as a going concern.
Financing Details
The Closet Factory Franchise Corporation does not offer any direct or indirect financing options to its franchisees. This means that franchisees will need to secure their own funding for the initial investment and ongoing operations through third-party lenders, as the franchisor does not guarantee any notes, leases, or other obligations.
Performance Metrics
Total US Locations
90
Franchised Units
84
Corporate Units
6
Franchising Since
1985
Legal & Compliance Analysis
Recent Litigation
No
Bankruptcy
No
Litigation Summary
The Closet Factory Franchise Corporation has no litigation cases required to be disclosed in Item 3 of its Franchise Disclosure Document. This means there have been no reported lawsuits or legal disputes involving the franchisor or its key executives.
Bankruptcy History
The Closet Factory Franchise Corporation has no bankruptcy history to report for itself or its executives.
Agreement Terms
Initial Term
5 years
Renewal Term
5 years
Renewal Conditions
To renew their franchise agreement, Closet Factory franchisees must comply with all existing agreements, including the Franchise Agreement and any other related contracts. They need to meet current operational, qualification, and training requirements, provide written notice of their election to renew, satisfy all monetary obligations to the franchisor and its affiliates, sign a new franchise agreement and a general release, and pay a renewal fee of $7,000.
Training & Support Program
Franchisor Assistance
The Closet Factory Franchise Corporation provides pre-opening support by loaning franchisees a copy of the Operations Manual and offering initial training covering management, marketing, sales, and installation methods. Franchisees also receive standards for equipment, signs, and fixtures. For ongoing support, the franchisor offers guidance on the Grand Opening Marketing Program and general operations through electronic, written, telephonic, and on-site consultations, which may incur a fee. They may also provide remedial training for a fee and evaluate proposed suppliers. For marketing, franchisees must spend at least 15% of gross receipts on approved activities, with the franchisor controlling internet marketing and potentially establishing a Marketing Fund or Franchisee Marketing Groups in the future. Franchisees are required to use specific computer systems, including ClosetWare software, and QuickBooks. The franchisor assists with territory agreement and site approval, and may help secure third-party financing for equipment. Additional mandatory training includes Regional Leadership Conferences held 1-4 times annually, with an absence fee for non-attendance.
Initial Training Hours
95
Training Location
Corporate headquarters in Los Angeles, CA or Virtual Communication Platform
Ongoing Support
After opening, Closet Factory franchisees receive ongoing guidance on operations, which can be provided electronically, in writing, telephonically, through training programs, or optional on-site consultations for a fee. The franchisor may also offer remedial training for franchisees or their managerial personnel, with a daily fee plus incurred costs. Franchisees must attend mandatory Regional Leadership Conferences 1-4 times per year, with a $750 fee for missed attendance. The franchisor will evaluate proposed suppliers upon request and can provide potential customer leads for a fee ranging from $30 to $75 per referral. Furthermore, the franchisor has the right to establish a Marketing Fund and Franchisee Marketing Groups in the future, requiring franchisee contributions and participation in promotional campaigns.
Franchise Requirements
Industry Experience Required
No
Management Experience Required
No
Sales Experience Required
No
Technical Skills Required
No
Operational Details
Location Type
Retail
Owner Participation
Hands-On
Territory Type
Limited
Staffing Notes
The Closet Factory Business requires various personnel for its operations, including a Service Coordinator, Design Consultants, Installers, and Factory Workers. The franchisor provides detailed selection criteria and job descriptions for each of these roles to guide franchisees in their hiring process. Franchisees are solely responsible for all hiring and employment decisions, including training, wage policies, and supervision of their employees, ensuring compliance with all legal requirements. A supervisorial or managerial employee, who has completed the franchisor's mandatory training, must manage the Closet Factory Outlet on a full-time basis. While this manager could be a hired employee, the franchisor strongly recommends that the franchisee provides full-term, on-site management, indicating a preference for hands-on owner involvement.