FDD Talk (Pizza Franchise Series): Peter Piper Pizza’s Average Unit Volume, Cost of Goods Sold, and Operating Profits

(Ambrosio’s note:  Over the next few days, I will be discussing the Item 19 financial performance representations of 10 up-and-coming pizza franchises that you’ve probably never heard of. 

Unlike Papa John’s, Papa Murphy’s, Marco’s Pizza, and Hungry Howie’s (all of which I’ve featured previously on FDD Talk), these franchises are not yet household names. But I do think they are worth examining because they can provide us with helpful clues on the profit potential of pizza franchises in general.

Please stay tuned for my industry-level bottom line analysis to be published at the end of this series.)

Highlights of Peter Piper Pizza’s 2011 Franchise Disclosure Document

• Peter Piper, Inc. franchises the right to operate Restaurants under the name Peter Piper Pizza, featuring a variety of pizzas, appetizers, beverages, and desserts, along with a family entertainment area.

• The total investment necessary to begin operating a single original Peter Piper Pizza restaurant ranges from $1,534,500 to $1,792,500, excluding real property costs. This includes the $25,000 initial franchise fee payable to Peter Piper, Inc.

• The total investment necessary to begin operating a 6,000 sq. ft. prototype Peter Piper Pizza restaurant ranges from $1,269,500 to $1,517,500, excluding real property costs. This includes the $25,000 initial franchise fee payable to Peter Piper, Inc.

• Restaurants franchised by the company will be developed under an Exclusive Area Development Agreement. The Exclusive Area Development Agreement Fee is $10,000 per Restaurant and is based on the number of Restaurants to be developed in the area covered by the agreement.

• The total estimated initial investment is the Exclusive Area Development Agreement Fee plus the $1,534,500 to $1,792,500, excluding real property costs, for each original Restaurant to be developed or $1,269,500 to $1,517,500, excluding real property costs, for each 6,000 sq. ft. prototype Peter Piper Pizza restaurant.

 Financial Performance Representations – Background

• This section sets forth certain historical revenue information for certain company-owned and franchisee operated restaurants which are substantially similar to the Restaurants being offered in the franchise disclosure document, for the 52-week period ending December 26, 2010 (the “Measurement Period”).

• The company and franchisee operated Restaurants included in this Item 19 have between 1,800 and 2,500 sq. ft. of floor space to accommodate the entertainment area.

Average Revenues for Franchisee Representative Locations

• As of December 26, 2010, there were 55 franchisee owned restaurants operating in the United States. As of December 26, 2010, 18 franchisee owned restaurants operating in the United States are substantially similar to the Restaurants being offered in this franchise disclosure document (“Franchisee Representative Locations”).

• The following section shows the average revenues during the Measurement Period for these 18 substantially similar restaurants which operated during the entire Measurement Period and had total floor space between 8,000 and 12,500 sq. ft.