Earnings Claims of Top Franchises Revealed

Earnings Claims of Top Franchises Revealed

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FDD Talk 2013: TCBY’s Average Unit Sales Volume and Profit and Loss Statements by Quartile (2013 FDD)

by Franchise Chatter on May 12, 2013

in Franchise Earnings, Frozen Yogurt Franchises

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Highlights of TCBY’s Item 19 Financial Performance Representations (2013 FDD)

TCBY’s Self-Serve Format and Full-Service Format Distinguished (Item 1, 2013 FDD)

  • A TCBY Store typically has 800 to 1,200 square feet, seats 10 to 30 customers, and caters to both carry-out and eat-in business. Sometimes, a TCBY Store will have drive-thru facilities.
  • TCBY Exterior PhotoA TCBY Store will generally be developed in either a self-service format or a full-service format, as you and TCBY agree as part of the store approval process.
  • A self-service format allows customers to serve themselves and choose among various types and flavors of yogurt, toppings, and beverages. A self-serve TCBY Store generally includes 5 or more Stoelting machines, a self-serve beverage dispenser, and a products and toppings bar. Yogurt products and toppings are priced by weight.
  • A full-service TCBY Store typically offers a more extensive menu of items made to order by Store employees and may include yogurt cakes, pies, prepacked quarts, and other products that consumers can purchase and take home.

TCBY’s Financial Performance Representations in Item 19 are for Self-Serve Stores Only

  • The following represents the actual average sales, cost of goods sold, and labor expenses for TCBY Self-Serve Stores only.
  • These numbers are based on the actual historical performance of TCBY Self-Serve Stores that were open for all 52 weeks of 2012, that operate under the standard Self-Serve model presented in TCBY’s 2013 FDD, and reported a full 52 weeks of sales.
  • Twelve locations that were either non-standard locations or did not report a full 52 weeks of sales were excluded because they would not be indicative of the standard Self-Serve Store operations.
  • The remaining 42 are represented in Table 1 below.
  • The average unit sales volume (“AUV”) for calendar year 2012 for the 42 Self-Serve Stores, broken out by quartile, is presented below. Some Self-Serve Stores have sold this amount. Your individual results may differ. There is no assurance you’ll sell as much.
  • Of the 42 Self-Serve Stores above, 28 self-reported unaudited profit and loss statements in the categories outlined in Table 2
  • The characteristics of the Self-Serve Stores included below do not differ materially from the Self-Serve Stores that may be offered to prospective franchisees.

Bases and Assumptions for TCBY’s Average Unit Sales Volume (Table 1) and Profit and Loss Statements (Table 2)

  • As of December 2012, there are a total of 106 Self-Serve Stores and 234 total Self-Serve and Full-Service Stores combined. TCBY compiled the quartile AUV numbers provided in Table 1 from the unaudited sales reports submitted to it by its Self-Serve Store franchisees, as compiled for the 2012 calendar year.
  • There are 42 Self-Serve Stores represented in Table 1 below. This represents 40% of the total 106 locations open as of year-end 2012.
  • Table 2 contains data of 28 of the 42 TCBY Self-Serve Stores listed in Table 1. These 28 stores self-reported unaudited profit and loss statements to TCBY in the listed categories. TCBY only included stores that reported such numbers voluntarily. These numbers were provided based upon a uniform reporting system, understanding ultimately that the franchisees determined where to put various costs and expenses under general headings.

Definition of Terms for TCBY’s Profit and Loss Statements (Table 2)

  • Cost of Goods Sold includes all food and paper costs intended for resale to customers.
  • Labor Costs include the Store manager’s salary plus wages for hourly employees, and include workers’ compensation, and may include vacation (if any) and health insurance (if any) provided by the franchisee. Your costs may differ dependent on how you address vacation time and the type of insurance you offer. Payroll taxes are set out separately.
  • Utilities, repairs, and maintenance costs may vary based on regional differences and with sales activity and volume.
  • Operating supplies may include such things as office supplies, operating supplies, janitorial and cleaning supplies, and vary based on size and volume of each store.
  • Other controllable expenses may include such things as exterminator costs, professional services, in-store music, security, and other similar expenses.
  • Advertising expenses may include such things as local advertising costs, shopping center or lease mandated marketing, and other marketing activities. These costs vary based on the requirements of the location and the franchisee’s individual determination of activities to participate in.
  • Licenses and fees may include such things as the cost for business licenses and permits, credit card service charges, and new store pre-opening expenses.
  • Rent may include such things as base rent, percentage rent, common area maintenance costs, and real estate and personal property taxes. Rent will vary based on location and size, negotiated terms for the lease, and assessments and insurance costs from the landlord.
  • All other non-controllables may include all other expenses incurred by the reporting franchisees, that were required for their location (if not included in other areas), such as professional accounting or lawyer fees, property and liability insurance, required travel, etc.
  • Profit after controllables is the store profit after deducting variable costs that are arguably within the control of the store’s management. These estimated profits are before tax, and do not include any estimated federal, state, or local tax you may be required to pay.
  • These figures do not include royalty fees that you must pay under the Franchise Agreement or other financing costs you may incur in operating your store.

Table 1 – TCBY’s Average Unit Sales Volume by Quartile

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