Earnings Claims of Top Franchises Revealed

Earnings Claims of Top Franchises Revealed

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FDD Talk: Operating Expenses and Restaurant Operating Profits of Free-Standing Popeyes Louisiana Kitchen Restaurants (2013 FDD)

by Franchise Chatter on February 6, 2014

in Chicken Franchises, Franchise Earnings



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Highlights of Popeyes Louisiana Kitchen’s Item 19 Financial Performance Representations (2013 FDD) – Part 2

Explanatory Notes for Table 6 – Operating Expenses and Restaurant Operating Profits of Free-Standing Restaurants

  • Table 6 sets forth the Food and Paper Costs, Labor Costs, and Restaurant Operating Profits at 750 franchised free-standing Popeyes Restaurants and 36 company-owned free-standing Popeyes restaurants that were continuously operated during the period from December 26, 2011 through December 30, 2012.
  • Popeyes Franchise Exterior Photo by BestofNJ.comAs of December 30, 2012, there were 5 company-owned free-standing Popeyes Restaurants and 78 franchised free-standing Popeyes Restaurants that had not been in continuous operation during the trailing 12-month period.
  • Additionally, 371 franchised free-standing Popeyes Restaurants did not submit properly prepared income statements for the relevant period.
  • The franchisor has excluded Food and Paper Costs, Labor Costs, and Restaurant Operating Profits related to the performance of those 371 franchised free-standing Popeyes Restaurants and also the 78 franchised free-standing Popeyes Restaurants and 5 company-owned free-standing Restaurants not in continuous operation for the trailing 12-month period.
  • Sales, restaurant expenses, and restaurant operating profits were adjusted to reflect a 52-week year.
  • Food and Paper Costs consist of the total costs of food and beverage items as well as the cost of paper and packaging supplies in each sales range described. With respect to the company-owned Restaurants, food and beverage shipping costs and carbonation costs were included in Food and Paper Costs, and beverage credits and vendor rebates were excluded from Food and Paper Costs. Not all franchisees used the same reporting method.
  • Labor Costs include the cost for restaurant-level hourly and management labor including salaries, workers’ compensation insurance, workers’ medical claims, bonuses, FICA, payroll taxes, unemployment insurance, medical benefits, vacation pay, holiday pay, other pay, sick pay, contract labor, fringe benefits, and training.
  • Costs related to district managers, area managers, life insurance, maintenance labor, and auto expenses are not included in the results. However, if a franchisee did not separately report these costs on their income statements, then these costs could be included in the franchised Restaurant results.
  • Restaurant Operating Profits are calculated by subtracting Operating Expenses from Sales. Operating Expenses consist of the following major items:  Food and Paper Costs; Labor Costs; Controllable Expenses; Marketing Expenses; and Non-Controllable Expenses, excluding any lease expenses for land, building, and equipment.
  • Operating Expenses do not include any non-cash expenses such as depreciation, gains and losses on the sale of assets, impairment or disposal of assets and amortization of business value, franchise fees, or loan fees.
  • Controllable Expenses consist of utility expenses, monthly services, maintenance and repair costs (excluding capitalized building expenses or new equipment), telecommunications expenses, cash over/short, and other miscellaneous restaurant supplies needed to operate the Restaurant. Monthly services include all services like trash removal, landscaping, security monitoring, security systems, pest control, cleaning, grease trap services, window cleaning, and light replacement.
  • Marketing Expenses consist of all marketing related costs including contributions to the Ad Fund, local marketing expenses, and kid’s prizes or toys.
  • Non-controllable Expenses include all royalties paid to the franchisor, general liability insurance, and other licenses or taxes. Non-controllable expenses exclude any lease expenses for land, building, and equipment.
  • Popeyes Restaurants typically open at elevated sales levels. The duration and level of the elevated sales will vary by Restaurant depending upon a number of factors, including the Restaurant’s location and the operator’s ability to accommodate elevated sales levels. The period of elevated sales is often the first 12 weeks of operations.

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