A reasonable manager-run scenario for a mature Closet Factory franchisee business is approximately $27,000 to $519,000 in annual pre-tax owner earnings, with a modeled base near $237,000. This is a per-franchisee portfolio estimate, not a per-territory figure. The 2026 Franchise Disclosure Document reports 2025 Gross Sales, but it does not report business profit, EBITDA, owner compensation, or cash flow.
This range is an independent analytical scenario, not an Item 19 financial performance representation by The Closet Factory Franchise Corporation. It combines identified 2026 FDD facts with a U.S. Internal Revenue Service industry-margin benchmark and a stated sensitivity band. Actual results can differ materially because of territory scale, sales mix, labor, material costs, occupancy, local marketing, financing, owner involvement, and execution.
The evidence confidence is limited because the FDD supplies strong same-brand revenue distribution data but no same-brand expense or profit data; the earnings model therefore relies materially on a broad official industry proxy.
Manager-run base estimate
Derived from the all-franchisee median sales figure and a 5.1% IRS margin proxy.
Overall 2025 median Gross Sales
Calculated from the 25th and 26th franchisee results in the FDD's 50-franchisee distribution.
Franchisees / agreements
Item 19 reports franchisee portfolios; many reporting businesses covered multiple territories.
Industry net-income proxy
IRS net income less deficit divided by business receipts for furniture and related product manufacturing.
Owner labor-value adjustment
BLS May 2024 median pay for general and operations managers, used only in the owner-operator scenario.
What does Closet Factory's Item 19 actually report?
Officially, Item 19 reports 2025 Gross Sales for 50 franchisees that operated for the full fiscal year; it does not report what those owners earned. The population excludes four existing franchisees that were not open for all of 2025 and one franchisee that closed during 2025. The figures are historical and unaudited. Source: 2026 FDD, Item 19, pp. 28-33.
The most important unit-of-analysis issue is that the table is per franchisee, not per territory or conventional storefront. Those 50 franchisees held 86 franchise agreements. Item 20 says the system reports territories because stores are not used in this business and shows 92 franchised territories at year-end 2025. A reporting franchisee can therefore represent a multi-territory portfolio served through one operating organization. Source: 2026 FDD, Item 20, pp. 34-39.
Item 19's Gross Sales means Core Sales plus Special Account Contract Amounts. That measure can include amounts retained or deducted by a Special Account customer before cash is remitted to the franchisee. It is also defined differently from Gross Receipts, the fee base used in the Franchise Agreement. Neither measure is owner salary, business profit, cash flow, or after-tax take-home pay.
How widely did 2025 Gross Sales vary?
Official quartile medians per reporting franchisee portfolio; the dashed marker is the derived overall median.
Interpretation: The sales distribution is exceptionally wide. Because a single franchisee may operate several territories, the chart should not be read as a four-tier per-unit performance ladder.
Source: 2026 Closet Factory FDD, Item 19, Tables 1-4, pp. 30-33. The $4.651 million overall median is a derived calculation: ($4,982,913 + $4,319,921) ÷ 2.
What are the most useful official sales benchmarks?
The most decision-useful central figure is the derived overall median of $4,651,417 in 2025 Gross Sales per reporting franchisee portfolio. The official all-population average was approximately $6,361,239, but it was pulled upward by several large multi-territory businesses, including one at $44.6 million. Median sales therefore provide a more stable central revenue anchor than average sales.
| 2025 sales observation | Gross Sales | Evidence class | How it is used |
|---|---|---|---|
| Fourth-quartile median | $1,284,178 | OFFICIAL | Conservative revenue anchor |
| Overall median | $4,651,417 | DERIVED | Base revenue anchor |
| Second-quartile median | $6,413,460 | OFFICIAL | Upside revenue anchor |
| All-population average | $6,361,239 | DERIVED | Context only; not the base case |
| First-quartile median | $10,865,830 | OFFICIAL | Higher-sales context; not used in the upside case |
How was the manager-run earnings range modeled?
The manager-run estimate multiplies three Item 19 revenue anchors by an official U.S. industry net-income proxy of 5.0866%, with a transparent sensitivity band of minus or plus 3 percentage points. The result is estimated pre-tax owner earnings after normal operating deductions in the benchmark, but before personal income taxes and financing principal payments.
Why use the IRS furniture-manufacturing benchmark?
The benchmark is estimated, not same-brand evidence. Closet Factory designs, manufactures, sells, and installs custom storage systems. The closest broad official category found was U.S. Census NAICS 337, Furniture and Related Product Manufacturing, which includes cabinets, fixtures, custom production, and integrated design work. It remains imperfect because Closet Factory franchisees also perform local selling, installation, marketing, and territory management.
The IRS 2022 Corporation Income Tax Returns Complete Report lists $96.993 billion of business receipts, $6.139 billion of net income, and $1.205 billion of deficits for the broad furniture and related product manufacturing category. The scenario uses net income less deficit divided by business receipts:
Scenario margins = 2.0866%, 5.0866%, and 8.0866%
Estimated manager-run owner earnings = scenario revenue × scenario margin
The underlying figures are available in the IRS 2022 minor-industry Table 1 workbook. The margin is an all-corporation tax-return proxy, not a Closet Factory margin. It is older than the 2025 FDD sales period and is used without inflation adjustment because it is a ratio, not a dollar cost.
| Scenario | Revenue anchor | Margin assumption | Manager-run owner earnings |
|---|---|---|---|
|
Conservative Fourth-quartile median |
$1,284,178 | 2.0866% | $26,796 |
|
Base Derived overall median |
$4,651,417 | 5.0866% | $236,599 |
|
Upside Second-quartile median |
$6,413,460 | 8.0866% | $518,631 |
- The scenarios are not probabilities.Quartile medians are historical sales observations, and the margin band is an editorial sensitivity assumption rather than an FDD forecast.
- The upside case is deliberately below the top-quartile median.The second-quartile median is used to avoid presenting the highest-sales portfolios as a routine outcome.
- The IRS margin is treated as all-in.Royalty, marketing, technology, and other recurring costs are not subtracted again because doing so could double count operating deductions. This treatment avoids mechanical overcharging but cannot prove that Closet Factory's post-fee margin equals the industry result.
- Accounting profit is not cash flow.The IRS proxy reflects tax-return deductions such as interest and depreciation to the extent reported. Financing principal, replacement capital spending, owner distributions, and personal taxes are outside the calculation.
How does owner involvement change the result?
A full-time owner-operator may receive more total economic benefit than a manager-run owner because the owner can supply labor that otherwise requires a paid manager. The 2026 FDD requires full-time personal management by a trained managerial employee and strongly recommends full-time on-site management by the franchisee because absentee management carries greater risk. The official U.S. Closet Factory franchise page also describes daily involvement as a desired owner commitment.
The owner-operator scenario adds the BLS May 2024 median annual wage of $102,950 for general and operations managers to the manager-run residual profit. This added amount is labeled owner-operator benefit, not pure business profit, because it compensates the owner for full-time work.
Manager-run earnings versus owner-operator benefit
The distance between markers is the $102,950 annual labor-value adjustment, not additional passive profit.
Interpretation: Active operation increases the owner's total economic benefit only by replacing paid labor. It does not make the underlying business more profitable by assumption, and the labor component should not be described as passive income.
Sources: 2026 FDD, Item 15, p. 24; BLS Occupational Outlook Handbook, May 2024 wage data. Scenario values are rounded to the nearest $1,000 after full-precision calculations.
The modeled owner-operator benefit is approximately $130,000 to $622,000, with a base near $340,000. About $102,950 of each figure represents the market value of management labor performed by the owner. It is not a distribution available to an absentee investor.
Which recurring fees can move owner earnings most?
The largest disclosed percentage obligations are the 6.75% royalty, marketing requirements, and the technology fee, all based on FDD-defined Gross Receipts or Core Receipts rather than Item 19 Gross Sales. Because the definitions differ, it would be misleading to multiply every fee directly by the Item 19 sales figures without franchisee-level statements.
| Recurring obligation | 2026 FDD amount | Earnings interpretation |
|---|---|---|
| Royalty | Greater of 6.75% of Gross Receipts or $975 per week; minimum begins after week 40 and is inflation-adjustable | Direct operating burden; the percentage and minimum cannot be combined as if both apply simultaneously |
| Marketing Fund | 1.0% of Gross Receipts, increaseable to 1.5% | Credited toward minimum local marketing expenditures |
| Technology Fee | 1.0% of Gross Receipts, increaseable to 1.5%, beginning on the first anniversary | Supports required technology platforms and development |
| Minimum local marketing | Up to 15% of Core Receipts, less fund contributions and qualifying group fees | Potentially material, but the annual amount is set through planning and cannot be inferred from Gross Sales alone |
At stated percentage rates, royalty, Marketing Fund, and Technology Fee total 8.75% to 9.75% of Gross Receipts after the technology fee begins, before local marketing and other costs. This derived percentage is not separately deducted in the scenario because the IRS net-income proxy is already an all-in margin. The inability to reconcile actual Closet Factory expenses to that proxy is one of the model's largest uncertainties. Source: 2026 FDD, Item 6, pp. 3-6.
What do these earnings figures include and exclude?
The published figure is estimated pre-tax owner earnings, not after-tax take-home pay. It is intended to approximate the residual accounting profit available to a manager-run owner after normal operating deductions represented in the benchmark, while keeping financing principal, personal taxes, and owner labor value separate.
- Manager-run pre-tax owner earningsResidual accounting profit after the model's all-in operating margin. Manager compensation is assumed to be embedded in the broad IRS tax-return results. Interest and depreciation are also reflected to the extent reported in those returns.
- Owner-operator benefitManager-run residual profit plus $102,950 of labor value for a full-time general and operations manager. The added amount compensates work; it is not pure business profit.
- Debt serviceThe FDD states that the franchisor does not offer or guarantee financing. Principal repayments are excluded. Because the IRS proxy is based on tax-return net income, interest may already be reflected, but actual borrower terms could materially reduce cash available to the owner.
- Startup investmentThe Item 7 estimated initial investment of $531,500 to $903,500 is not treated as an annual expense and is not subtracted from one year of Gross Sales. Depreciation, lease costs, and financing must be modeled separately from the initial outlay.
- Personal taxes and distributionsNo federal, state, or local personal tax is estimated. Owner salary, draws, distributions, retained earnings, and business profit depend on entity structure and must not be collapsed into one figure.
What remains uncertain about Closet Factory owner income?
The largest unresolved uncertainty is the absence of same-brand operating expenses and profit by sales cohort. Item 19 cannot show whether a $4.7 million franchisee portfolio earns 2%, 5%, 8%, or a loss after materials, designers, installers, manufacturing labor, occupancy, local marketing, royalties, technology, vehicles, warranty work, and management.
- Portfolio scale varies.The FDD combines franchisees with one to six agreements. Shared facilities and management can create scale economies, but additional territories also require market development, staffing, vehicles, and working capital.
- Special Accounts complicate revenue quality.Item 19 Gross Sales can include contract amounts that are retained or deducted before money reaches the franchisee. Cash receipts and reported Gross Sales may therefore diverge.
- The reporting population is selective by maturity.Only franchisees open for all of 2025 are included. Four not open for the full year and one closure are excluded, so the distribution does not describe startup ramp-up or the closed business.
- One top-quartile record has mixed ownership history.The six territories identified as franchisee 9668 were company-operated until March 2025, and the table includes the combined full-year sales of CFI and the franchisee.
- The external margin is broad and older.IRS 2022 NAICS 337 includes many furniture manufacturers that do not share Closet Factory's franchise fees, local marketing rules, sales model, installation operations, or territory structure.
The Item 19 sample is strong for understanding mature-system revenue dispersion, but it is insufficient for estimating a narrow earnings range. The $27,000-$519,000 manager-run range is wide because both revenue and margin uncertainty are material, not because the model identifies a likely minimum and maximum.
What should a buyer verify before relying on the range?
A buyer should request the Item 19 substantiation and obtain comparable franchisee financial statements before treating any scenario as a planning number. The FTC's consumer guide to buying a franchise explains that Item 19 is the required location for franchisor sales or earnings claims, while the FTC's guidance on evaluating financial performance representations recommends examining the source, limitations, assumptions, and written substantiation.
- Match the portfolio.Compare with franchisees operating a similar number of territories, a similar manufacturing footprint, and a similar mix of Core Sales and Special Accounts.
- Request a complete operating statement.Obtain sales, material cost, design commissions, installation labor, shop payroll, occupancy, vehicles, insurance, warranty work, royalty, marketing, technology, manager compensation, interest, and depreciation.
- Reconcile sales definitions.Bridge Item 19 Gross Sales to Franchise Agreement Gross Receipts, cash collected, refunds, Special Account deductions, and accounts receivable.
- Separate owner labor from profit.Ask how many hours the owner works, what responsibilities are performed, and what replacement compensation would be required for a full-time Designated Manager.
- Include ramp-up and capital needs.Review the first three years, not only a mature year, and identify equipment replacement, vehicle additions, leasehold work, and working-capital requirements.
- Test financing independently.Model interest and principal using the buyer's actual loan amount, rate, term, collateral, and covenants because the franchisor provides no financing terms.
What is the decision-useful takeaway?
The strongest defensible annual range is approximately $27,000 to $519,000 in manager-run pre-tax owner earnings, with a scenario base near $237,000; it is an independent FDD-anchored estimate, not an official profit disclosure. A full-time owner-operator may realize about $130,000 to $622,000 of total economic benefit, but roughly $102,950 of that represents labor performed by the owner.
The primary earnings driver is sales scale across the franchisee's territory portfolio. The largest uncertainty is the undisclosed same-brand cost structure, especially materials, labor, local marketing, occupancy, and management. Before relying on the range, a buyer should verify the 2026 FDD Item 19 substantiation, reconcile Gross Sales to cash and fee-bearing Gross Receipts, and interview comparable franchisees using complete operating statements rather than revenue alone.