Servpro Franchise

Financing Details

Servpro may offer direct financing for a portion of the franchise acquisition. Franchisees must make a down payment of $30,000 to $50,000, depending on their financial status. The remaining balance is subject to a secured promissory note with an interest rate between 12% and 15% and a repayment term of up to 96 months. For existing franchisees purchasing additional licenses, the repayment term cannot exceed 60 months, with a designated down payment and an interest rate between 12% and 15%. Servpro may also finance equipment or vehicle purchases for qualified existing franchisees (in the system over a year) for up to 100% of the price, with a typical interest rate of 10% (variable between Prime Rate + 1% and Prime Rate + 2%) over no more than 60 months. For new franchisees purchasing vehicles, the interest rate is variable (Prime Rate + 1% to Prime Rate + 2%) with a down payment of $2,500 to $20,000, repayable in 12 to 60 months. All financing requires a security interest in the franchise's assets and personal guarantees from all owners and their spouses. Notes can be prepaid without penalty, and default on the franchise agreement is also a default on the note. Servpro does not typically sell these notes but reserves the right to do so in the future. Servpro does not receive payments for placing third-party financing or guarantee third-party obligations.

Litigation Summary

Servpro Franchisor, LLC is currently involved in one lawsuit filed on February 22, 2024, against a former franchisee, R. Rimualdo Enterprises, Inc. and Ralph Rimualdo. Servpro terminated the franchise license on September 25, 2023, due to the franchisee's failure to pay royalties and comply with an audit. Servpro is seeking to enforce the non-compete obligations and recover unpaid royalties and fees, as well as protect its trademark rights. The former franchisee has filed a counterclaim alleging breach of contract, violation of implied duty of good faith and fair dealing, and common law trademark infringement, seeking monetary relief. This matter is in the preliminary stages of litigation.

Renewal Conditions

To renew the Servpro franchise for an additional five-year term, franchisees must provide 30 days' written notice before expiration. They must ensure all monetary obligations to Servpro and its affiliates are current, and they must not be in default of any part of their agreements. Franchisees need to comply fully with all terms and conditions throughout the agreement's term, acquire the latest vehicles, equipment, supplies, cleaning products, uniforms, computer hardware, and software, and hire appropriate staff to meet Servpro's current standards. Renewal also requires attending and successfully completing any mandatory retraining programs, executing Servpro's then-current standard Franchise License Agreement (which may have different terms), signing a general release, providing proof of required insurance, ensuring vehicles are properly painted and decaled, and employees are uniformed. Additionally, franchisees must submit their most recent year-end balance sheet and income statement (compiled by a CPA or licensed public accountant) and federal income tax returns for themselves, their spouses, and any businesses they own. Finally, they must pay the then-current renewal fee, with an additional fee if an extension is needed to complete renewal requirements.

Staffing Notes

Servpro franchisees are required to staff their franchises at specified levels, though a specific number of employees is not provided. An owner of the franchise does not qualify as a Sales Marketing Representative (SMR) for receiving open territory jobs, implying that SMRs must be hired employees. All designated employees must complete required training programs and certifications, such as IICRC Water Damage Technician and Applied Structural Drying courses. Background checks are mandatory annually for all owners and employees (more frequently if suspicion arises), and franchisees cannot employ anyone with a felony conviction involving dishonesty, breach of trust, theft, or violence. All employees who have access to confidential information or computer systems must sign confidentiality agreements. The franchise requires neat and clean, approved uniforms for all personnel.