FDD Talk (Pizza Franchise Series): Average, High, and Low Gross Food and Beverage Revenue for Franchised 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 2

• As a franchisee, you will operate a Shakey’s Pizza Parlor restaurant. Shakey’s restaurants serve pizza (thin, pan, or gourmet), salad, chicken, potatoes, pastas, and beverages, including beer and wine, where permissible.

• Shakey’s Restaurants are usually quick service with buffet-style Bunch of Lunch. Additionally, a redemption game room, with prizes, provides an entertainment venue for adults and children.

• Shakey’s offers 2 franchise programs:  a single Shakey’s Restaurant and multiple Shakey’s Restaurants within a defined area, under an Area Development Agreement.

• The total investment necessary for a traditional limited Shakey’s Restaurant ranges from $624,000 to $2,204,500. This includes the $35,000 that must be paid to the franchisor.

• The total investment necessary for a Shakey’s World’s Greatest Pizza Buffet ranges from $843,000 to $1,553,500. This includes the $35,000 that must be paid to the franchisor.

• If you will open more than one Shakey’s Restaurant in a defined geographic area, you can enter into an Area Development Agreement. The initial development fee is $15,000 for each Shakey’s Restaurant to be developed under the Area Development Agreement. The minimum initial investment under an Area Development Agreement is $65,000, which includes the franchise fee for the first Shakey’s Restaurant of $35,000 and the minimum development fee for the remaining 2 units of $30,000.

Analysis of Gross Food and Beverage Revenue for Franchised Shakey’s Restaurants

• As of January 4, 2011, there were 37 franchised Shakey’s Restaurants.

• The analysis in this section contains certain ranges of gross Food and Beverage revenue information in the operation of Shakey’s Franchised Restaurants. This analysis was prepared based on operating results of those Restaurants open and operating during the entire period of the year ending January 4, 2011. The Restaurants were divided into 3 categories based on gross Food and Beverage revenue volume.

• The financial performance representation does not reflect the cost of sales, operating expenses, or other costs or expenses that must be deducted from the Food and Beverage revenue figures to obtain your net income or profit.

• 26 Franchised Restaurants are located in Southern California and 11 are located in Northern California and other states or outside the United States. These Restaurants averaged $996,278 in gross Food and Beverage revenue per unit, with 14 units achieving beyond this level of Food and Beverage revenue. These Restaurants offer substantially the same services that your Restaurant will offer.

• The amount of gross Food and Beverage revenue will vary from unit to unit. The revenue, costs, and expenses of your Restaurant will be directly affected  by many factors such as the Restaurant’s size; geographic location and competition in the marketplace; the existence of other Shakey’s Restaurants; the quality of management and service at the Restaurant; the contractual relationships with lessors and vendors; the extent to which you finance the construction and operation of the Restaurant; the legal, accounting, real estate, and other professional fees; the federal, state, and local income and other taxes; the discretionary expenditures; and the accounting methods used.

Bases and Assumptions

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