Earnings Claims of Top Franchises Revealed

Earnings Claims of Top Franchises Revealed

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FDD Talk: Average Variable and Fixed Costs of Saladworks Restaurants (2013 FDD)

by Franchise Chatter on January 29, 2014

in Franchise Earnings, Salad Franchise



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Highlights of Saladworks’ Item 19 Financial Performance Representations (2013 FDD) – Part 2

Explanatory Notes for Part 2 – Average Costs of 18 Saladworks “A” Operated Restaurants in Strip Center Locations

  • During 2012 and subsequent to the year ended December 31, 2012, Saladworks received sales and cost information from its franchised restaurants in various formats. The “A” operated Saladworks restaurants, as a group, provided the franchisor with more complete and reliable cost information than that provided by “B” and “C” operated Saladworks restaurants.
  • Saladworks Photo by Bob B. BrownThe following tables represent the data received from 18 “A” operated Saladworks restaurants in strip center locations during the calendar year ended December 31, 2012.
  • The following table shows, for the period from January 1, 2012 through December 31, 2012, the average costs of the 18 restaurants. All of the average cost of goods sold and average variable costs are expressed as percentages of the 18 restaurants’ average Net Sales, and all of the average fixed costs are expressed as dollar amounts, with the total average fixed costs expressed as a percentage of the Net Sales.
  • Unless otherwise indicated, the average costs are actual per franchisee financial submissions, and are believed by the franchisor to be reasonably reflective of the costs of Saladworks restaurants generally.
  • All variable costs listed below, to include royalties, Brand Development Fund contributions, credit card charges, payroll taxes, and local store marketing requirements are calculated based on Net Sales.
  • Food costs cover all ingredients used to make salads, sandwiches, wraps, panini, soups, breads, and beverages.
  • Paper costs cover all bowls, lids, cups, utensils, straws, and napkins.
  • Payroll-hourly costs cover hourly employees, but not management employees. It is the Gross Hourly wage and does not include franchisee paid employer payroll taxes. Those taxes are accounted for in the variable cost section below.
  • Under a franchise agreement, a restaurant not located in a food court must spend at least 2% of Net Sales on local store marketing, and a restaurant located in a food court must spend at least 1% of Net Sales on local store marketing.
  • Payroll taxes are a percentage of Net Sales. They cover social security, unemployment, and Medicare taxes for hourly and management employees.
  • Credit card charges are a percentage of Net Sales.
  • Under a franchise agreement, a restaurant not in a Food Court must contribute 3% of Net Sales to the Brand Development Fund. Those restaurants located in a Food Court must contribute 1.5% of Net Sales to the Brand Development Fund.
  • Automobile expenses include gas, tolls, repairs, and, if applicable, payments for a leased delivery vehicle.
  • Insurance costs cover general liability, workers’ compensation, and auto insurance.
  • As a franchisee operating a single restaurant, you (if you are an individual) or your principal owner (if you are a legal entity) may function as the management employee. As a franchisee operating multiple restaurants, you likely will hire 1 or more management employees.
  • Rent costs cover all charges imposed under lease agreements, including base rent, percentage rent, and common area maintenance charges. Rent costs vary significantly depending on the location of a restaurant, the local real estate market, the size and condition of the property leased, and other factors.
  • Utilities costs cover gas, electric, water, and sewer, and do not cover telephone and internet service. Telephone and internet service costs are reported under “Telephone & Internet.”
  • The total variable costs and the total fixed costs shown in the chart below do not include certain costs that you may incur as a franchisee, such as interest and financing costs; payroll management costs (if you do not manage your restaurant); travel and entertainment costs; non-cash costs such as amortization and depreciation; income taxes; and educational and training costs.

Part 2 – Average Costs of 18 Saladworks “A” Operated Restaurants in Strip Center Locations

Cost of Goods Sold



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