11 Sep Sample BRG Entry ~ Flower Shops (Florists)
SIC: 5992-01 | NAICS: 453110
Number of Businesses / Units: 37,000
Rule Of Thumb
- 30 to 35 percent of annual sales includes inventory
- 2 times EBITDA
Pricing Tips
- “Review the Profit and Loss Statement to determine if wire service revenues and expenses (FTD, Teleflora, etc.) are tracked on separate line items to ensure that the sales are not overstated and cost of goods is not understated.”
- “A premium should be given for stores with a significant number of commercial accounts (especially if there is a credit card on file for ease of billing) which helps protect revenues from big box stores that also sell flowers and plants.”
- “Florists with a significant number of weekly or house accounts are very attractive in the marketplace and can command slightly higher multiples. Below market rent can also justify higher multiples. Conversely, shops located near grocery stores with large floral departments or near big box discounters should expect lower multiples.”
Experts Comments
“Owning a flower shop continues to be a desirable lifestyle business for creative entrepreneurs who wish to provide an artistic and meaningful contribution to their community.”
“The floral industry has been deeply affected by the economy and online ‘orders.’ Grocery stores and discount warehouses have also taken market share from retail florists.”
Benchmark Data
Statistics (Florists)
Number of Establishments……………..37,446
Average Profit Margin………………………1.2%
Revenue per Employee………………..$60,200
Average Number of Employees……………….3
Average Wages per Employee……….$16,334
Source: IBISWorld, February 2012
Products and Services Segmentation
Arranged cut flowers……….52.5%
Indoor potted plants…………..14%
Giftware………………………..12.5%
Unarranged cut flowers……….12%
Other……………………………..6%
Outdoor nursery plants…………3%
Source: IBISWorld, February 2012
Industry Costs
Profit…………………1.2%
Wages………………25.6%
Purchases…………49.5%
Depreciation……….1.9%
Utilities………………2.4%
Rent…………………..4.9%
Other………………..14.5%
Source: IBISWorld, February 2012
Establishments by Employment Size
Number of Employees Share of Establishments
0 to 4…………86.8%
5 to 9…………..9.2%
10 to 19……….3.0%
Source: IBISWorld, February 2012
Statistics (Flower Shops Online)
Number of Establishments = 6,135
Average Profit Margin = 1.3%
Revenue per Employee = $77,800
Average Number of Employees = 4.7
Average Wages per Employee =$26,015
Source: IBISWorld, February 2012
Products and Services Segmentation
Flower sales…………………………………..63.5%
Gift basket and other delivery sales…………19%
Plant sales…………………………………….10.5%
Floral network services…………………………7%
Source: IBISWorld, February 2012
Industry Costs
Profit…………………..1.3%
Wages…………………34.3%
Purchases……………38.5%
Depreciation………….3.7%
Marketing…………….15.4%
Rent & Utilities……….5.3%
Other…………………….1.5%
Source: IBISWorld, February 2012
Market Share
1-800-flowers.com Inc…….23.2%
FTD…………………………………..14.8%
Provide Commerce Inc……………12.6%
Teleflora LLC……………………….12.6%
Source: IBISWorld, February 2012
“Average Sales per establishment — $320,000”
Source: U.S. Economic Census, Retail Trade, 2007
“Weddings: account for approximately 10% of retail florists’ business.
“Sympathy: accounts for approximately 22% of retail florists’ business. “Corporate sales: makes up approximately 17 – 22% of retail florists’ sales.”
Source: Floriculture Industry Overview/Society of American Florists
“Indeed, the flower shop accounts for the bulk of Nielsen’s revenues, but sales of gifts and home décor are growing and now account for about 15 percent to 20 percent to 25 percent of the total.”
Source:”Nielsen’s Florist & Garden Shop: 2011 Retail Florist of the Year” by Shelley Urban, www.floristsreview.com
“For a florist to be profitable, the rent should not exceed 15% of gross sales.”
“Local business is generally more profitable than wire-service-generated income.”
Expenses as a Percentage of Annual Sales
Cost Of Goods: 33%
Payroll: 20%
Occupancy: 10%
Profit (pretax): 20%
General Information
“Today, giftware, home accents, jewelry and other personal accessories such as scarves mingle among the exquisite cut flowers and green and blooming plants on display in the shop’s 2,000-square-foot showroom. Products range in price from $1 to $1,200. Handblown glassware from Vermont designer Simon Pearce, which is priced from $40 for a tealight to $600 for a large vase, and ready-made permanent floral arrangements from Diane James Designs, ranging from $50 for a single stem in a vase to 4750 for a large bouquet, are among Nielsen’s newest offerings.
“’In addition to high-end merchandise, the shop carries a wealth of affordable impulse buys as well. ‘We need to have plenty of gifts for $20 or less – aside from cut flowers – to encourage impulse sales,’ shares Ms. Nielsen-Baumann. She adds that the pashminas and scarves, many of which are around $15, are great gifts and, therefore, hot sellers. And most of the jewelry, priced at $100 or less, is an enticing impulse purchase at the counter.”
Source:”Nielsen’s Florist & Garden Shop: 2011 Retail Florist of the Year” by Shelley Urban, www.FloristsReview.com
“Flowers today may be better traveled than the people who buy them. Let’s say you live in Las Vegas. Have you been to Bogota, Miami, and San Francisco? Your flowers have. Or maybe you’re in Maine. Your flowers could have been to Kenya, Holland, and Manhattan before they showed up at your daughter’s wedding. They may have flown on bigger planes than you have. More people—field workers, supervisors, sales reps, brokers, truckers, auctioneers, wholesalers, buyers, bookkeepers, retailers— have talked about your flowers in more languages than you can probably say ‘hello’ in.”
Source: Flower Confidential, by Amy Stewart, published by Amy Stewart, Algonquin of Chapel Hill, 2007
“Floral shops are among the few types of retail businesses that conduct significant sales over the phone, without ever seeing or meeting consumers, and, often, without the customers ever seeing the purchased products. In fact, some florists strive for strong phone sales, aspiring to achieve 80 percent, even 90 percent, of revenues from telephone orders, perhaps because these types of transactions can be quicker, easier and more cost-effective than in-store transactions. They can also allow for greater labor efficiency, since designers can focus on designing rather than talking to walk-in shoppers, some of whom might be browsing with no intention of purchasing.”
Source: www.floristsreview.com
Advantages
- “Being a florist can be a very rewarding and profitable business if operated by adhering to industry operating standards and not as a hobby.”
- “This is one of the few industries that allow a business owner to marry an artistic aptitude with income generation via entrepreneurship.”
- “Owning a flower shop is a ‘lifestyle’ business that, if run professionally, can be very profitable. Florists also enjoy a favorable position within their communities as they are often an integral part of many local activities and celebrations. Also with many florists located in a concentrated area, successful florists have the opportunity to acquire additional stores to increase profits and lower expenses all within close geographic proximity.”
Disadvantages
- “Success is often contingent on finding and retaining quality design staff.”
- “Increasing loss of market share to Internet ‘order gatherers’ or florists.”
- “There is increasing competition with many online order gatherers spending significant advertising dollars to reach consumers directly.”
Industry Trend
“Floral Departments ranked 6th in growth among all supermarket departments.
“Floral department sales at supermarkets: $779.3 m – in 2010. <0.18% of total supermarket sales.”
Source: Progressive Grocer. September 2012
“I am concerned about the rapid decline in the number of retail florists in the U.S. and the perilous financial condition of many of those who remain in business.
“Offshore production of cut flowers began in the late 1970s. By 1979, after occasionally receiving flowers that were grown in Colombia, I decided to go see what was taking place. I traveled to Bogota and Medellin in 1979, where I saw that the world of flower retailing was about to change drastically. Royer’s immediately initiated direct shipments of cut flowers from Colombia. By 1982, we had sold our greenhouses, which had been fulfilling 80 percent of our needs for cut flowers and plants.
“Flower growing was quickly becoming an international business and was gravitating to countries with ideal year-round conditions and low wages. As cargo planes grew larger, and as airport refrigeration and handling facilities improved, the advantages of buying from offshore producers grew proportionally.
“During the 1980s and ‘90s, virtually all cut-flower greenhouses on the East Coast were idled, and growers across the country felt the impact.
“Grocery stores entered the floral marketplace. The large volume of offshore flowers entering the U.S. made it possible, for the first time, for supermarkets to obtain a consistent supply of low-cost flowers to stock floral departments. By the mid-1970s, many progressive supermarkets began to experiment with floral departments, and the vast majority of supermarkets quickly followed. Supermarkets soon owned a 10 percent share of the retail floral market.
“Understanding the factors that have sent many florists’ sales . . .We are still reeling from the effects of a recession, which has much to do with the decline, but it is only part of the story. Sales declines for other types of retailers have averaged less than 10 percent, and anecdotal evidence indicates that many florists have experienced declines of 15 percent and more. My sources report that wire service membership is down 20 percent in 2009 alone, and florists have seen their share of the overall floral market decline from nearly 100 percent to less than 50 percent over three decades. Currently, Internet competition continues to gain market share and further reduce the florists’ share.”
Source: “What has happened to our industry?,” by Kenneth R. Royer, AAF, www.floristsreview.com
Seller Financing
- “2 to 5 years”
Questions
- “Percentage of local business versus wire service?”
Resources:
Websites
- Some free information, but lots of data available for a fee – www.aboutflowers.com
Trade Publication:
- Florists’ Review – www.floristsreview.com
Associations:
- Wholesale Florist & Florist Supplier Association – www.wffsa.org
- Society of American Florists—for members only – www.safnow.org
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