Closets By Design Franchise Cost, Revenue & Review 2026
- Investment
- $154K – $511K
- Disclosed sales
- $9.9M
- gross sales, not profit
- SBA charge-off
- 17.1%
- on 45 loans
Data from FDD filing + SBA 7(a) records
Analysis by FranchiseVerdict Research · Methodology
Closets By Design is a home-services franchise designing and installing custom closets, garage, and home-office storage systems. Franchisees run a design-and-install operation with in-home consultations, manufacturing, and installation in a territory.
FranchiseVerdict summary · 2026
A Closets By Design franchise requires a total initial investment of $154K – $511K, including a $20K franchise fee and an ongoing 7.2% royalty[2]. Per the 2025 FDD, average revenue per franchisee was $9.9M. This franchisor reports Item 19 per franchisee rather than per outlet, so the figure is not comparable with per-outlet averages[2]. SBA 7(a) loans show a 17.1% charge-off rate across 45 loans[1]. FranchiseVerdict grade: B (Above average), an editorial assessment, not investment advice. Run a live ROI scan →
Sources, dates and evidence
FDD issued: · Data extracted: · Last cited check: · Staleness risk: medium - issued 12 to 24 months ago; a newer filing is likely on file
Evidence: strong✓ Investment (Item 7)✓ Item 19 status✓ Units and owners (Item 20)✓ SBA loan coverage✓ Litigation (Item 3)✓ Financial statements (Item 21)✓ Franchisor identityhow this is scored7 of 8 headline figures on this page cite a page of the filing; the rest are marked “Not cited” beside the figure.
Overview
- Investment
- $154K – $511K
- 61st pct Home Services
- Avg gross sales
- $9.9M
- Per franchisee, not per outlet
- Royalty
- 7.2%
- 65th pct Home Services
- Units
- 85
- 55th pct Home Services
- SBA charge-off
- 17.1%
- % of SBA 7(a) loans not repaid · median varies by category
Quick verdict · Home Services · color = vs category peers
Green = favorable by >10% vs Home Services median · No shading = within ±10% · Red = unfavorable by >10% · Source: FDD filings + SBA 7(a)
Data from public FDD filings and SBA records. Not financial advice. Methodology
Bottom line
- COSTTotal investment $154K – $511K including a $20K franchise fee, 7.2% ongoing royalty.
- RETURNSAverage revenue per franchisee of $9.9M/year (median $7.2M). Averaged per franchisee, not per outlet - not comparable with per-outlet figures.
- RISKVerdict B (Above average), verdict score 56/100 (higher is better). SBA loan charge-off rate of 17.1% across 45 loans (above the 16% franchise average, based on all SBA 7(a) franchise lending, 2010–2025).
- GROWTHPositive: net +3 franchised outlets in the latest year (3 opened, 0 closed); 1 signed but not yet open (Item 20).
- GROWTHSystem growing at 19.7% CAGR over 3 years with 85 total units. Strong expansion trajectory.
Item 1 · who you're contracting with
The Franchisor
Corporate structure & franchisor financials
- Legal entity
- CBD Franchising, Inc.
- Parent company
- Home Organizers, Inc. (HOI)
- FDD Item 1, page 6 of the 2025 FDD
- Predecessor
- Closets By Design Franchising, LLC (CBD-LLC)
- Prior franchisor entity
- CEO title
- Chairman and CEO
- Frank Melkonian
- Incorporated in
- CA
- HQ
- 13272 Garden Grove Boulevard, Garden Grove, California 92843
- Auditor
- Windes, Inc.
- Audited financials
- Franchisor revenue
- $124.1M
- vs $104.6M prior year
Overview
About
- CEO
- Frank Melkonian
- Headquarters
- CA
- Founded
- 2001
- FDD year
- 2025
- States available
- 32
Can you afford it, and what does the money buy?
Entry cost runs 98% above the typical home services franchise.
Source: FDD 2025 · Items 5–7
FDD Item 7 · 2025 filing
Initial investment breakdown
| Cost component | Low | High |
|---|---|---|
| Initial franchise fee | $20K | $20K |
| Working capital (3–6 mo) | $25K | $75K |
| Equipment, build-out, other | $109K | $416K |
| Total initial investment | $154K | $511K |
Source: Closets By Design 2025 FDD, Items 5 and 7[2]. “Equipment, build-out, other” is computed as total minus disclosed line items above.
Item 7 · what it costs to open + operate
The Vitals
- Total investment
- $154K – $511K
- Middle of category vs category
- Liquid capital req'd
- $25K – $75K
- Middle of category vs category
- Franchise fee
- $20K – $20K
- Top 40% of category vs category
- Royalty
- 7.2%
- Set by a formula · typical 6–8%
- Ad fund
- 2.3%
- typical 3–5%
- Total fee load
- 9.5%
- vs 9–13% typical
Ongoing fees · Item 6
| Fee | Amount |
|---|---|
| Royalty | 7.2% of gross sales |
| Marketing / ad fund | 2.3% |
| Technology fee | $300 |
| Transfer fee | $9K |
| Renewal fee | $5K |
| Inventory (initial) | $10K – $25K |
| Total fee load | 9.5% of rev |
What do units actually make?
Average unit sales run 1594% above the home services norm.
Averaged per franchisee, not per outlet - not comparable with per-outlet figures
Source: FDD 2025 · Item 19
Single-unit · not modelled
Returns at a glance
An FDD discloses gross sales, not profit, and the operating costs that turn one into the other are in no filing. We publish no modelled return for Closets By Design until someone supplies them — yours, in the models below.
—
Not modelled yet
An FDD discloses gross sales, not profit. We hold no sourced figure for COGS, labour, rent / occupancy and other operating costs, and will not substitute an assumed one. Enter your own and the model runs on your assumptions.
Total invested capital · disclosed
$383K
Item 7 initial investment plus working capital, as filed — the one figure here that needs no assumption.
ROI & LBO modelsSingle-unit · 25-unit portfolio · editable
What one unit earns on your invested capital
Model A · Single-Unit Return
Computes unlevered return on invested capital (ROIC) for a single franchise unit, read against the 30–60% reference band · Yale SOM, Post-MBA Path Exhibit 2 (2023). Below that band a passive index fund likely outperforms; above it the franchisor has pricing power you're subsidizing.
Note: Item 19 revenue is what the franchisor discloses, and it is the top line only — gross sales are not profit. No FDD discloses the operating costs that turn one into the other, so those fields start empty and nothing is modelled until you supply them from your own lease quote, labor market and build-out budget.
Returns model · single-unit ROIC
What would one Closets By Design unit return on the cash you put in?
Illustrative category typicals — not sourced to any filing, survey or sample. Replace them with figures from franchisee validation calls before you rely on the output.
Unlevered ROIC · per unit
Your modelled return on total invested capital, before any debt financing.
—
An FDD discloses gross sales, not profit. We hold no sourced figure for COGS, labour, rent / occupancy and other operating costs, and will not substitute an assumed one. Enter your own and the model runs on your assumptions.
What 25 units return when you use SBA financing
Model B · Return on Equity: Debt-Financed Acquisition
Models a 25-unit portfolio acquisition financed with an SBA 7(a) loan. Shows equity IRR (your return on cash invested), DSCR (how safely the cash flow covers debt service), and the capital stack (SBA + seller + equity breakdown).
This is the “search fund” or “entrepreneurship through acquisition” scenario: you buy an existing multi-unit operator, use leverage to amplify returns, and either operate or hire management. The 25-unit size is the typical minimum for an SBA-backed franchise portfolio acquisition to pencil as a full-time income.
What “return on equity” means here: if you put in $500K of your own cash and the business generates enough EBITDA to pay down debt and grow, your equity IRR is the annual return on that $500K, including the value created when you eventually sell. Target IRR for a search fund is typically 25–35%.
Not modelled yet
An FDD discloses gross sales, not profit. We hold no sourced figure for COGS, labour, rent / occupancy and other operating costs, and will not substitute an assumed one. Enter your own and the model runs on your assumptions.
A 25-unit return is built on a per-unit EBITDA. Fill in the operating costs in Model A above and this model runs on that figure, or take the whole scenario to the full ROI workbench, where the portfolio and LBO models accept your own per-unit economics directly.
These models are for research and scenario planning only. Not investment advice. Actual results depend on your specific location, management, and market conditions. Consult a franchise attorney and accountant before signing any franchise agreement.
Item 19 · Source: 2025 FDD
Financial Performance
Averaged per franchisee, not per outlet - not comparable with per-outlet figures
- Avg gross sales
- $9.9M
- Per franchisee, per year — not per outlet
- Median gross sales
- $7.2M
- Per franchisee, not per outlet
Gross sales are revenue before expenses — not profit. Actual owner earnings depend on rent, labor, royalties, marketing fees, and debt service.
- Item 19 type
- gross sales
- Sample size
- 60 franchisees
- vs category median 32
- Range (low → high)
- $1.5M→$36.2MCited, not corroborated — printed on page 46 of the 2025 FDD. Nothing else in our record independently restates or re-derives it.
- Cohort dispersion (min → max)
- Quartile band
- $3.3M→$21.1M
- Bottom 25% → top 25%, per franchisee
- Reporting year
- 2024
- Fiscal year the figures cover
- Source filing
- FDD 2025
- Disclosed in the 2025 filing, covering 2024
- Transparency
- 4 / 10
- vs category median 4 / 10 · typical
Compared against 319 Home Services brands
Operator outlook
What the numbers say
Data-driven interpretation of this brand's financial disclosures, fee structure, and system trajectory.
Unit economics
The average franchisee generates $9.9M/year in gross sales. Median is $7.2M — top performers pull the average up, so a typical unit earns less.
Fee burden
Total ongoing fee load of 9.5% — above the Home Services median of 8.0%.
Disclosure
Transparency score 4/10 — this franchisor discloses detailed breakdowns (quartiles, segments, or cohort data). Buyers can model unit economics with higher confidence.
Operator retention
System expanding at 19.7% CAGR over 3 years across 85 units — operators are staying and new ones are joining.
Source: FDD Item 19 financial performance representations and publicly filed FDD data. Past performance is not indicative of future results. Verify all figures with the franchisor and current franchisees before making any investment decision.
vs Home Services medians
How Closets By Design Compares
Per franchisee, not per outlet - the category median is per-outlet only, so no comparison is shown
Category median of published Home Services brands that report the figure; the middle half spans the 25th to 75th percentile and n counts the brands behind it. Medians are used because a few very large systems pull an average far from the typical brand. Revenue is disclosed gross sales, not profit.
Is the system healthy?
Source: FDD 2025 · Item 20
Unit growth
Item 20 · unit dynamics
The Growth Chart
- Total units
- 85
- Opened
- 3
- Last reporting year
- Closed
- 0
- Terminated
- 0
- Franchisor ended the franchise (per Item 20)
- Non-renewed
- 0
- Term expired, not renewed (per Item 20)
- Turnover rate
- N/A
- Company-owned
- 6
- Corporate units in the system
- % franchised
- 93%
- vs corporate-owned
- Net growth (3-yr)
- +19.7%
- Net unit change over 3 years
- 3-yr CAGR
- +19.7%
- Compounded over last 3 years
Last fiscal year · Item 20 exits and transfers
- Terminated
- 0
- Not renewed
- 0
- Transferred
- 1
- Reacquired
- 0
- Franchisor bought back
- Signed, not yet open
- 1
- 0.01 per open outlet · Item 20 Table 5
- Projected new
- 3
- Franchisor's next-year forecast
Year-over-year franchised unit counts and net change. Source: FDD Item 20.
Item 20 · 32 states with active franchisees
The Territory Map
Derived from franchisee contact records. Shows states with at least one current operator. Not where the franchisor is registered to sell new units (that data is re-extracting in a future refresh).
States derived from franchisee contact records (FDD Item 20). Shows states with at least one current operator on file. Full state registration data (Item 12) will appear on a future FDD refresh.
Where the owners are · Item 20 owner list
62 current owners across 32 states.
- FL 9
- TX 4
- IL 3
- MI 3
- NJ 3
- OH 3
- SC 3
- IA 2
- LA 2
- NC 2
- NY 2
- PA 2
- +20 more states
Counts only, from the list the franchisor prints in Item 20. Names and phone numbers are for your own due diligence and are not shown here.
SBA loan performance
Government records
SBA Loan Data
Aggregated from SBA 7(a) and 504 loan disclosures, public data unique to FranchiseVerdict.
- Total loans
- 45
- Loan volume
- $16.6M
- Median loan
- $238K
- 50th percentile
- Charge-off rate
- 17.1%
- on 45 loans · rates vary by category · see methodology
Historical SBA 7(a) lending data, not predictive of future performance. How SBA charge-off rates are calculated
- Repayment rate (PIF)
- 82.9%
- 5-yr charge-off
- 0.0%
- Loans approved 2021+
- Active lenders
- 26
- Defaults
- 6
- Typical loan rate
- 6.9%
- avg rate to borrowers
- Franchised industry avg
- 17.1%
- brand above franchise avg ↑
- Jobs supported
- 578
- 3.5 per loan
- Lender concentration
- 11%
- top lender's share
Borrower mix: 78% went to startups / new businesses, 22% to established operators
Franchise vs independent — in residential remodelers, franchised businesses charge off at 17.1% vs 22.4% for independents — franchising is associated with 24% lower SBA default risk in this category.
Vintage analysis
Closets By Design charge-off rate by loan vintage
Top lenders financing Closets By Design franchisees
Showing 3 of 26 lenders. The full breakdown — every lender, state distribution, interest rates & risk ratings — is in the SBA Lending Report below.
Explore lender portfolios on Bank Reports or regional data on State Reports.
Lender network · 7(a) + 504
SBA Lending Report
Full lending analysis for Closets By Design from SBA 7(a) FOIA data.
- Principal loss rate
- 4.1%
- Avg SBA guarantee
- 71%
- Avg interest rate
- 6.89%
- Avg chargeoff amount
- $114K
- Lender concentration
- 11.1%
- Job velocity
- 3.5 per $100K
- NAICS benchmark
- 9.5%
- NAICS 236118
- Jobs supported
- 578
Top SBA lendersTop lender holds 11% of loans
| # | Lender | Loans | Volume | Default % |
|---|---|---|---|---|
| 1 | Truist Bank | 5 | $3.6M | 0.0% |
| 2 | The Huntington National Bank | 5 | $3.1M | 0.0% |
| 3 | Wells Fargo Bank National Association | 4 | $435K | 0.0% |
| 4 | Manufacturers and Traders Trust Company | 3 | $626K | 66.7% |
| 5 | Stearns Bank National Association | 3 | $878K | 0.0% |
| 6 | JPMorgan Chase Bank, National Association | 2 | $190K | 0.0% |
| 7 | United Community Bank | 2 | $335K | 100.0% |
| 8 | Merchants Bank of Indiana | 2 | $750K | N/A |
| 9 | ESL FCU | 2 | $671K | N/A |
| 10 | First National Bank of Omaha | 1 | $180K | 100.0% |
Geographic failure vector
| State | Loans | Defaults | Rate |
|---|---|---|---|
| FLFlorida | 8 | 0 | 0.0% |
| OHOhio | 4 | 0 | 0.0% |
| TXTexas | 4 | 0 | 0.0% |
| INIndiana | 3 | 1 | 100.0% |
| NYNew York | 3 | 0 | 0.0% |
| ARArkansas | 2 | 0 | 0.0% |
| CACalifornia | 2 | 0 | 0.0% |
| MDMaryland | 2 | 2 | 100.0% |
| NCNorth Carolina | 2 | 0 | 0.0% |
| UTUtah | 2 | 2 | 100.0% |
SBA 7(a) lending trend
Borrower profile
Source: SBA 7(a) + 504 FOIA loan-level data, matched by FranchiseVerdict
What could kill this investment?
SBA loans here charge off near the 16.0% national average.
Source: SBA 7(a) FOIA · FDD Items 3, 21
Risk analysis
FranchiseVerdict rating + FDD Items 3, 4, 8, 16, 21
Risk & Legal
Litigation (Item 3)
Subject: the franchisor is a named party (defendant).
3 pending: (1) customer class action (Vernon v CBD); (2) competitor false advertising (Casablanca v CBD); (3) CBDF appeal against former franchisee/competitor (CBD v Central Jersey/One Day). 2 concluded: CBD v Van Alstyne (breach/bankruptcy, recovered $127K); CBD v Frank Dres (settled $320K).
Bankruptcy (Item 4)
None disclosed
Audited financials (Item 21)
Yes · Windes, Inc.
Franchisor revenue (Item 21)
Franchisor entity revenue (not unit-level)
FY2024 total revenue comprises Royalty and related income $120,841,938, Advertising fund management income $1,956,002, and Franchise fees $1,259,579. Other income (non-operating) of $1,003,346 is reported separately below operating income. Audited by Windes for CBD Franchising, Inc., a wholly owned subsidiary of Home Organizers, Inc.
Supplier relationship · Items 8 & 16
- Franchisor sells you products: Yes
- Kickbacks from required suppliers: Yes
- Must buy proprietary products: No
- Restricted to system-approved products: Yes
- Can negotiate own supplier terms: No
Score breakdown · what drove the 56 / 100 verdict
- 01HIGHMultiple active litigations including consumer class action, RICO allegations, and non-compete disputes signal systemic operational/compliance issues
- 02MINORStagnant unit growth (3.9% YoY) with only 85 units suggests market saturation or franchisee dissatisfaction
- 03MEDNo disclosed net income data prevents ROI validation; high royalty floor ($3,000/month = $36,000/year minimum) on undisclosed profitability is concerning
- 04HIGHHistory of concluded litigation over unpaid royalties and abandonment indicates franchisor-franchisee relationship breakdown
- 05MEDInvestment range ($154K–$511K) is substantial relative to disclosed unit economics and franchisor stability
Severity inferred from the FDD text · not a regulatory classification
What are you signing up for?
Ongoing fees run about 9.5% of sales (royalty + ad fund), before rent and labor.
Source: FDD 2025 · Items 11, 12, 17
FDD Items 12, 15, 17 · continued from Risk & Legal
Contract & Territory Detail
| Initial term | 5 years |
|---|---|
| Renewal term | 5 years |
| Territory type | Exclusive territory |
| Protected territory | Yes |
| Exclusive territoryℹ | Yes |
| Territory population | 180,000 |
| Online sales rightsℹ | Restricted |
| Franchisor can compete | Yes |
| Hire a manager? | Allowed |
| Owner-operator | Required |
| Non-compete (years)ℹ | 2 years |
| Non-compete (miles)ℹ | 35 mi |
| Right of first refusalℹ | Yes |
| RoFR response window | 45 days |
| Transfer requires consent | Yes |
| Termination notice | 30 days |
| Mandatory arbitration | No |
| Arbitration location | California |
| Jury trial waiver | No |
| Governing law | CA |
| Litigation count | 5 |
View Item 3 litigation summary
3 pending: (1) customer class action (Vernon v CBD); (2) competitor false advertising (Casablanca v CBD); (3) CBDF appeal against former franchisee/competitor (CBD v Central Jersey/One Day). 2 concluded: CBD v Van Alstyne (breach/bankruptcy, recovered $127K); CBD v Frank Dres (settled $320K).
Items 10, 11
Training & Operations
- Classroom training
- 64 hrs
- On-the-job training
- 56 hrs
- Training location
- Garden Grove, California or other designated training center (or virtually)
- Ongoing training
- Required
- Site selection
- Franchisee with franchisor guidance
- Franchisor financing
- Offered
- Item 10
- POS system
- CBD Manager
- Operating tech stack
Items 5 & 11
Franchisor Support
Technology: CBD Manager
Item 20 · call current owners
Franchisee Contacts
62 owners to call
Name · phone · city · state. Extracted from FDD Item 20
Frequently asked questions
Frequently Asked Questions
How much does it cost to open a Closets By Design franchise?
The total investment to open a Closets By Design franchise ranges from $154K – $511K, with an initial franchise fee of $20K. This includes real estate, equipment, inventory, and working capital as disclosed in their Franchise Disclosure Document (FDD).
What do Closets By Design franchise owners earn?
According to Item 19 of the Closets By Design FDD, the average gross sales per unit is $9.9M. The median is $7.2M. Important context: Averaged per franchisee, not per outlet - not comparable with per-outlet figures. Note: this is gross revenue, not profit. Actual owner earnings vary based on location, operating costs, and management.
Who owns Closets By Design?
Closets By Design is franchised by CBD Franchising, Inc.. Its parent company is Home Organizers, Inc. (HOI). Source: FDD Item 1, 2025 filing.
What is Item 19 in the Closets By Design FDD?
The FDD section where a franchisor may disclose financial performance of its outlets. Disclosure is optional and formats vary; figures are typically gross sales, which is revenue before expenses, not profit. FranchiseVerdict extracts these figures directly from the Closets By Design FDD and qualifies whose outlets they describe.
What is Closets By Design's franchise failure rate?
Based on SBA 7(a) loan data, Closets By Design has a charge-off rate of 17.1% across 45 loans, meaning 17.1% of franchise loans were charged off. Charge-off rates are one proxy for franchise risk, though they do not capture all closures. This data comes from FOIA-sourced SBA lending records.
How many Closets By Design franchise locations are there?
As of their most recent FDD filing, Closets By Design has 85 total units in the United States, including 79 franchised units and 6 company-owned units. 3 new units were opened in the latest reporting year.
Is Closets By Design a good franchise to buy?
FranchiseVerdict rates Closets By Design as a B-grade franchise with a verdict score of 56 out of 100 (higher is better). The grade is a deterministic score built from six weighted dimensions — financial health, unit economics, unit growth, scale, legal, and transparency — then calibrated against SBA loan charge-off rates and FDD age. Transparency is one of the six, so a filing that discloses less scores lower on that dimension than one that discloses more. Our rating is based solely on publicly available FDD and government data; we recommend speaking with current franchisees before making any investment decision. This is not investment advice.
Data sourced from public FDD filings and SBA 7(a) FOIA records. Not financial advice.
For franchisors
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Data extracted from public FDD filings and SBA 7(a) loan disclosures (FOIA). This information is provided for research purposes only and does not constitute financial, legal, or investment advice. Verify all figures with the franchisor's current Franchise Disclosure Document before making any investment decision.