FDD Talk (Pizza Franchise Series): Average Sales, Cost of Goods Sold, Operating Expenses, and Cash Flow of Company-Owned Shakey’s Pizza Restaurants

(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 Shakey’s Pizza’s 2011 Franchise Disclosure Document – Part 1

Analysis of Sales and Average Costs and Expenses for Company-Owned Shakey’s Restaurants

• This analysis contains certain ranges of sales information and averages of certain types of costs and expenses incurred in the operation of 22 of the 24 company-owned restaurants. This analysis was prepared based on operating results of those 22 company-owned restaurants open and operating during the entire period of the year ending January 4, 2011 (“Sample Restaurants”). The Sample Restaurants were divided into 3 categories based on gross sales volume.

• All of the Sample Restaurants are located in Southern California, where Shakey’s has a significant market presence. There are no company-owned restaurants outside of California.

• During the fiscal year 2010, there were a total of 61 Shakey’s Restaurants, of which 37 were franchised Shakey’s Restaurants and 24 company-owned Shakey’s Restaurants.

• The Sample Restaurants averaged $1,731,109 in gross sales per unit, with 10 units achieving beyond this level of gross sales. These restaurants offer substantially the same services that your Restaurant will offer.

• The Sample Restaurants were open and in operation for the entire year (13 periods) ending January 4, 2011 and they were divided into 3 categories. The highest revenue level of any of the Sample Restaurants was $2,698,103, and the lowest was $1,260,644.

• Sample Restaurants with annual gross revenue in excess of $1,950,000 were placed in the “High” category. Sample Restaurants with annual gross revenue ranging between $1,500,000 and $1,949,000 were placed in the “Medium” category. Sample Restaurants with annual gross revenue below $1,499,000 were placed in the “Low” category.

Table of Sales and Average Costs and Expenses (Unaudited)

Shakey’s Average Unit Information for Fiscal Year Ended January 4, 2011

• You need to consider the additional expenses you will incur as a franchisee, specifically, a royalty of 5% of Gross Revenue, and advertising, either local, with a minimum monthly cost of 1% of Gross Revenue, or national advertising, with a monthly contribution of up to 5% of your Gross Revenue.