Earnings Claims of Top Franchises Revealed

Earnings Claims of Top Franchises Revealed

  • Anytime Fitness
  • CruiseOne
  • Firehouse Subs
  • Jimmy John's
  • Massage Envy
  • Menchie's
  • Orange Leaf Frozen Yogurt
  • Planet Fitness
  • The UPS Store
  • Yogurt Land
  • And Hundreds More...

No, thanks. I'm not interested in uncovering the actual earnings of hundreds of franchises at this time.

FDD Talk: Michael Mudd, Franchise Development Manager for Menchie’s, Talks About the Frozen Yogurt Franchise’s 2012 FDD

by Franchise Chatter on May 16, 2012

in Franchise Chatter Exclusive, Frozen Yogurt Franchises, Q & A Interview

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Menchie’s, the Los Angeles-based frozen yogurt franchise, is becoming a truly global brand.

It added more than 100 units in 2011, more than doubling its size. As of May 2012, more than 180 units were open, with 200 more in development. By next year, the company projects 380 locations in 13 countries, with openings in Australia, France, Great Britain, Canada, Mexico, Monte Carlo, Japan, Jordan, Qatar, the United Arab Emirates, Saudi Arabia, and Trinidad.

The rapid growth has vaulted Menchie’s past its competitors, such as Yogurtland, which before this year ran neck-and-neck with Menchie’s as the second-largest self-serve yogurt brand. Now, Menchie’s has a clear path to 500 locations and expects to reach 1,000 stores within a few years — an extraordinary feat for a restaurant brand.

I spoke with Franchise Development Manager Michael Mudd about Menchie’s phenomenal growth and 2012 Franchise Disclosure Document.

Franchise Chatter (FC):  What’s the most important thing a potential franchisee should know about Menchie’s 2012 FDD?

Michael Mudd, Franchise Development Manager for Menchie's

Michael Mudd, Franchise Development Manager for Menchie’s

Michael Mudd (MM):  The first thing we want people to know is that Menchie’s is not in the self-serve frozen yogurt business. Menchie’s is in the business of creating a fun place where families can go to bond, have fun, and enjoy each other’s company. This place is outside home, work, and school, and is in many ways what Starbucks calls “the third place.”

Our founders created a customer experience focused on children, families, couples, adults, and seniors, and which is nothing short of magical. Often, our customers become raving fans and find themselves coming back way more than normal.

Our CEO, Amit Kleinberger, often says success in business is a result of doing the right thing. In our business, we’ve gone to great lengths to create a customer experience that really keeps people coming back.

Stop by a Menchie’s and you’ll see kids excited about the free toys they get, people writing on our chalkboards, and lots of smiles. Our franchise owners market to schools, clubs, sports teams, and churches. “We make people smile” is not just a slogan, it’s our mission. If customers enjoy coming in, the experience is consistent and the products are excellent, they will come back over and over.

This is really the secret sauce for Menchie’s.

FCWhat can you share about your startup costs and earnings claims for 2012?

Menchie's Discovery Day

Menchie’s Discovery Day

MM: Prior to 2012, we just had an average revenue number. This year, we increased the amount of data points so there are averages for three categories.

Franchised and Affiliate-Owned Sales Information

Number of Stores Included in Each Sales Range

  • $1,000,000 to $1,200,000:  2 stores
  • $700,000 to $1,000,000:  10 stores
  • $300,000 to $700,000:  42 stores

As you can see, it is possible to do more than $1 million in sales with a single Menchie’s location. We have a top performer group that does between $700,000 and $1 million in sales, and the majority of stores do between $300,000 and $700,000.

Everyone wants to be a top performer, especially franchise owners. We want to help them make the most informed and accurate business decisions they can, so we’re transparent and accurate with our information. We are trying to take a position with integrity.

Despite our growth, we’ve managed to keep our startup costs low. Depending on location and square footage, you can open a Menchie’s starting at $242,317, and most new stores cost between $350,000 and $375,000. If you’ve seen how professional our build out and finish is, that’s really impressive.

A Wendy’s hamburger franchise owner recently told us that he thought you could open four or five Menchie’s for the cost of a single Wendy’s and do higher sales volume. We think he’s right.

FC: What are some other important changes in the FDD?

Menchie's Discovery Days are typically packed with more than 40 attendees.

Menchie’s Discovery Days are typically packed with more than 40 attendees.

MM:  You’ll notice that we have substantially beefed up our field support and operations team. Our management team recruited some real heavyweights from large food franchise systems, including YUM Brands, Burger King, and Panera Bread and some frozen dessert chains, to help give our franchise owners an edge in the market.

These new field support reps are regionally located and are doing store visits, helping franchise owners develop pro formas and managing costs and profit margins using key performance indicators. Menchie’s now has a robust and highly qualified field support team to keep up with our growth, and that’s very important for new owners.

We have no litigation or bankruptcy in our FDD, which is a sign of a healthy brand.

Most importantly, for candidates researching self-serve frozen yogurt brands, lower royalty fees don’t always mean a better investment. It always comes back to the return on investment (i.e. given the startup costs and cost structure, how much money can you make?).

Our CEO explains our commitment to our franchise owners at our often-crowded Discovery Days in L.A. Unlike any other self-serve frozen yogurt franchise that we know of, we don’t mark up our supplies or take kickbacks from vendors. There are no added fees to what our franchisees pay. We have great economy of scale, and we pass that buying power onto our owners.

Other brands might have lower royalties but require franchise owners to purchase private or relabeled products. These products might have hidden costs that exceed what our royalty rates are. Their sales volume is lower, and their return on investment doesn’t compare to what Menchie’s owners experience.

Menchie's Frozen Yogurt Shop Exterior PhotoMenchie’s is not only positioned to maintain its leadership position but should widen the gap. For instance, Menchie’s produces its own yogurt and we have 90 unique, “can’t get them anywhere else” flavors. We maintain an R&D department that is always testing new flavors, and we pride ourselves in the quality of our Menchie’s Private Label products. That doesn’t mean our franchise owners pay more for supplies. Because we have no markup, our owners can operate more profitably.

Last, it isn’t really a change, but we sell exclusive, protected territories with a two-mile linear trade area. Most self-serve frozen yogurt chains can sell as many units as they want, and you could end up with a competing franchise across the street. We try to make sure our franchise owners are set up for success. Typically, we look for a population of about 30,000 per store, and in general, we’d like to see a single Menchie’s location for every 10 Subway sandwich shops.

FC: How can someone get a copy of Menchie’s 2012 FDD?

MM: Anyone who requests information as a potential franchise owner, will receive one after they start a conversation with us. You can visit our website at www.menchies.com or contact me directly at Michael.Mudd@menchies.com, or (949)429-2501.

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