Estimated owner-operator benefit is about $63,000 to $482,000 per year, with a base scenario near $262,000. These are pre-tax, pre-financing analytical scenarios for one USA Insulation franchise business—not earnings reported by the franchisor. The manager-run range becomes relevant only after the franchisor approves a Dedicated Manager.
Legal franchisor: USA Insulation Franchise, LLC. FDD issuance: April 10, 2026. Item 19 period: calendar year ended December 31, 2025. Reporting population: 37 franchise businesses operating 74 territories, with one corporate-owned location referenced in the Item 19 notes. Evidence status: Gross Sales and selected direct costs are official; owner earnings are estimated. External benchmarks: U.S. Bureau of Labor Statistics manager wages and U.S. Census Bureau NAICS 238310 industry classification. Checked: July 14, 2026.
Item 19 median for the 37-business reporting cohort; revenue, not owner income.
After a $103,000 manager wage assumption; before debt service and personal taxes.
Includes residual operating profit plus the labor value of managing the business.
The cohort represented about 79% of open franchise businesses and 77% of open territories.
5% royalty + 2% Brand Fund + 15% Local Advertising Requirement; minimums and technology are additional.
Item 20 counts each Designated Territory as one franchised outlet.
What does USA Insulation Item 19 actually measure?
Officially, Item 19 measures 2025 Gross Sales and four selected direct-cost categories—not Operating Profit, EBITDA, Net Income, cash flow, owner compensation, or owner distributions. The disclosure covers 37 reporting franchise businesses operating 74 territories for the full 12-month period, subject to the exclusions below.
How large was the reported sales distribution?
The official median Gross Sales figure was $1,491,238, while the average was $1,588,037. The difference matters because only 17 of 37 reporting businesses, or 46%, met or exceeded the average. Item 19 also shows a broad $174,348-to-$4,650,231 range, so a single average is not a reliable proxy for every owner.
| Item 19 population | Businesses | Average Gross Sales | Median Gross Sales | Reported range |
|---|---|---|---|---|
| All reporting businesses | 37 | $1,588,037 | $1,491,238 | $174,348–$4,650,231 |
| First quartile by Gross Sales | 9 | $3,060,277 | $2,569,903 | $2,100,000–$4,650,231 |
| Second quartile by Gross Sales | 10 | $1,759,539 | $1,759,821 | $1,491,238–$1,998,892 |
| Third quartile by Gross Sales | 9 | $1,057,385 | $1,083,431 | $741,936–$1,316,987 |
| Fourth quartile by Gross Sales | 9 | $455,891 | $432,204 | $174,348–$709,595 |
Source: 2026 USA Insulation FDD, Item 19, pp. 48–53. Quartiles rank the reporting businesses by 2025 Gross Sales; they are not probabilities, forecasts, or guarantees.
Which costs are included—and which are missing?
Item 19 officially reports proprietary foam products, other Cost of Goods, sales commissions, and installer payroll as percentages of Gross Sales. Installer payroll excludes benefits, and the disclosure expressly says the tables omit other costs needed to calculate net income or profit.
- Gross Sales
- Revenue from products and services under the FDD definition. It is not owner earnings.
- Selected direct costs
- Proprietary foam, other insulation goods, sales commissions, and installer payroll. One first-quartile business reports N/A for the two product-cost fields.
- Required recurring charges
- Standard royalty, Brand Fund, Local Advertising Requirement, and Technology Fee. These are modeled separately rather than assumed to be in Item 19 direct costs.
- Other overhead
- Occupancy, insurance, payroll taxes and benefits, vehicles, fuel, repairs, office payroll, utilities, professional fees, payment processing, and similar expenses. Item 19 does not provide an all-in overhead figure.
- Estimated pre-tax owner earnings
- Cash available after normal unit-level operating expenses and recurring franchise charges, before personal income taxes, financing principal, interest, depreciation, and discretionary capital expenditures.
How complete is the reporting cohort?
The official cohort is substantial but incomplete. As of December 31, 2025, the system had 47 open franchise businesses operating 96 territories. Item 19 excluded eight businesses operating 14 territories that did not submit 2025 data and two businesses operating eight territories that were not open for the full year. It also notes 13 franchise businesses operating 21 territories that permanently closed during 2025.
Item 20 separately reports that franchised outlets—defined there as Designated Territories—fell from 109 to 96 during 2025, while nine outlets transferred to new owners. Those figures do not prove why an individual outlet closed or transferred, but they increase uncertainty around survivor selection, ramp-up, and the experience of nonreporting operators.
How does the model convert Gross Sales into owner earnings?
The estimate starts with official Item 19 revenue anchors, subtracts FDD-reported or FDD-required cost categories, and then applies explicit assumptions for overhead the FDD does not disclose. Conservative, Base, and Upside are analytical cases—not “worst,” “expected,” or “best” outcomes.
What formula is used?
The formula is derived and reproducible: Gross Sales minus selected direct costs, standard royalty, Brand Fund, Local Advertising Requirement, Technology Fee, and other operating overhead equals owner-operator benefit; subtracting manager compensation produces manager-run pre-tax owner earnings.
- Revenue anchors: $432,204 fourth-quartile median, $1,491,238 overall median, and $2,569,903 first-quartile median from 2025 Item 19.
- Selected direct-cost rates: 43%, 44%, and 45%, rounded from sales-weighted calculations using the Item 19 product, commission, and installer-payroll percentages for the relevant cohorts. The first-quartile calculation excludes the business with N/A product costs.
- Standard recurring percentage charges: 5% royalty, 2% Brand Fund, and 15% Local Advertising Requirement. The Franchise Option Program’s 9% royalty is not modeled.
- Technology: $500 per month, or $6,000 per year, for a new franchisee. Minimum royalty and Brand Fund amounts are below the percentage calculations at all three revenue anchors.
- Other overhead: 19%, 16%, and 14% of sales. This is an editorial assumption reflecting lower fixed-cost absorption at low sales and greater scale at high sales; it is not an Item 19 figure.
- Manager labor: $103,000 per year, rounded from the Bureau of Labor Statistics’ General and Operations Managers wage benchmark. Local recruiting cost, incentives, payroll taxes, and benefits may differ; payroll burden is included in the other-overhead assumption.
| Scenario | Gross Sales anchor | Selected direct costs | Other overhead | Manager-run earnings | Owner-operator benefit |
|---|---|---|---|---|---|
|
Conservative Fourth-quartile median sales |
$432,204 | 43% | 19% | −$40,000 | $63,000 |
|
Base Overall median sales |
$1,491,238 | 44% | 16% | $159,000 | $262,000 |
|
Upside First-quartile median sales |
$2,569,903 | 45% | 14% | $379,000 | $482,000 |
Rounded to the nearest $1,000 after calculation with full dollar inputs. Results exclude personal income taxes, interest, financing principal, depreciation, and discretionary capital expenditures. Initial investment from Item 7 is not treated as an annual operating expense.
Manager-run pre-tax earnings versus owner-operator benefit, $000s
Interpretation: The $103,000 labor-value difference is constant by design, but the residual business economics change sharply with sales and overhead absorption.
Source and method: 2026 USA Insulation FDD, Item 19 revenue and selected costs; Item 6 recurring charges; Item 15 owner-role rules; BLS manager-wage benchmark; independent overhead assumptions. Values rounded to the nearest $1,000.
What does the Base scenario revenue bridge look like?
At the official $1,491,238 median Gross Sales anchor, the model leaves about $262,000 of owner-operator benefit before financing and personal taxes. The bridge below reconciles the entire revenue dollar; its 16% “other overhead” line is the largest assumption not supplied by Item 19.
Reconciled allocation of $1,491,238 in median Gross Sales
Interpretation: Direct installation economics and the 15% Local Advertising Requirement consume most of the revenue before occupancy, fleet, insurance, administration, or owner compensation.
Reconciliation: $1,491,238 − $656,145 − $74,562 − $29,825 − $223,686 − $238,598 − $6,000 = $262,423. Percentages may not sum visually to exactly 100% because technology is a fixed dollar fee and displayed percentages are rounded.
How does owner involvement change the result?
Owner involvement changes the modeled annual benefit by about $103,000 because an active owner can perform management work that a manager-run business must purchase. This is labor value, not passive profit, and the FDD requires personal participation at the outset.
Can USA Insulation be manager-run from day one?
No—not under the standard Item 15 language. The owner must personally participate in actual operation. A Dedicated Manager may handle day-to-day on-site management only under specified conditions, with prior approval, and only after the Franchised Business has operated for at least 18 months.
That makes the manager-run case a later-stage scenario rather than a day-one passive-ownership assumption. The Dedicated Manager must complete required training and receive approval. The owner also remains economically exposed to the business and its contractual obligations.
What does “owner-operator benefit” include?
It includes both residual operating profit and compensation for work the owner performs. In the Base scenario, about $159,000 is the modeled residual after paying a manager, while another $103,000 represents the management labor retained by an owner-operator. The combined $262,000 therefore should not be described as passive income.
Which variables can move annual owner earnings most?
Sales volume, direct installation cost, local advertising productivity, and unreported overhead are the largest earnings drivers. The evidence confidence is LIMITED because Item 19 supplies revenue and partial direct costs but not a complete income statement, manager status, debt structure, or owner compensation.
How sensitive is the Base scenario?
Every one percentage point of cost at the $1,491,238 median-sales anchor changes annual earnings by about $14,912. A five-point miss in direct cost or overhead therefore changes the result by roughly $74,562 before considering sales effects.
| Change from Base assumptions | Owner-operator benefit | Manager-run earnings | Interpretation |
|---|---|---|---|
| Direct costs 5 points higher | $187,861 | $84,861 | Product mix, installation efficiency, commission structure, or crew productivity deteriorates. |
| Base assumptions | $262,423 | $159,423 | 44% selected direct costs and 16% other overhead. |
| Other overhead 5 points lower | $336,985 | $233,985 | Higher fixed-cost absorption or unusually lean occupancy, fleet, insurance, and administration. |
| Franchise Option royalty applies | $202,773 | $99,773 | A 9% royalty replaces the standard 5%, reducing the Base result by about $59,650. |
| Sales 10% below Base; cost rates unchanged | $235,580 | $132,580 | Shows revenue sensitivity without assuming a change in cost structure. |
Sensitivity calculations are independent scenarios, not Item 19 results. The fixed $6,000 Technology Fee and $103,000 manager wage are held constant except where stated.
What is deliberately excluded from the earnings estimate?
Debt service and personal taxes are excluded because the FDD does not establish a single financing structure or owner tax profile. Interest and principal payments can materially reduce cash available to the owner. Depreciation, discretionary capital expenditures, truck replacement, and future remodel or re-equipment costs are also excluded from the annual operating scenarios.
Item 7’s $304,400-to-$476,750 initial investment is startup capital, not an annual expense. Subtracting that amount from one year of Gross Sales would not produce a valid profit estimate.
What should a buyer verify before relying on this range?
A buyer should replace every editorial assumption with territory-specific evidence and actual franchisee records. The most important task is obtaining complete operating statements that bridge Gross Sales to owner compensation for comparable, mature businesses.
- Request Item 19 substantiation. Reconcile the four reported direct-cost categories, understand the N/A row, and ask whether the corporate-owned location is included in each table.
- Separate business count from territory count. Ask how Gross Sales are reported when one franchise business operates several territories and whether shared overhead sits at the business or territory level.
- Interview comparable franchisees. Focus on similar Large Market or Small Market territories, similar climate and housing stock, comparable age, and the same owner-operated or Dedicated Manager structure.
- Build a complete expense bridge. Verify occupancy, insurance, payroll taxes and benefits, fleet payments, fuel, maintenance, payment processing, office payroll, warranty work, professional fees, bad debt, and capital replacement.
- Confirm the applicable royalty path. Standard, Franchise Option, and Conversion Franchise Program rates differ; the scenario above models the standard 5% royalty.
- Investigate 2025 closures and transfers. Item 20 contacts and former-franchisee lists can help identify ramp-up, market, capitalization, staffing, or operational issues that averages do not reveal.
- Model financing separately. Use the buyer’s actual financed amount, interest rate, amortization, vehicle obligations, and working-capital needs rather than a generic debt assumption.
What is the strongest defensible annual earnings range?
The strongest defensible estimate is approximately a $40,000 loss to $379,000 of manager-run pre-tax owner earnings, or about $63,000 to $482,000 of owner-operator benefit. It is a Mode C scenario range anchored to 2025 Item 19 quartile medians—not an official USA Insulation profit claim and not a prediction that each case is equally likely.
The central driver is Gross Sales after the 15% Local Advertising Requirement and direct installation costs. The largest unresolved uncertainty is the complete overhead structure omitted from Item 19, followed by how multi-territory businesses allocate shared labor, fleet, occupancy, and administration. Before making a decision, a buyer should verify Item 19 substantiation, obtain complete profit-and-loss statements from comparable franchisees, and interview current and former operators about owner hours, Dedicated Manager economics, working capital, and 2025 outlet changes.