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FDD Talk: Actual Net Sales from Happy Joe’s Menu Items at a Licensed Restaurant (2013 FDD)

by Franchise Chatter on March 7, 2014

in Franchise Earnings, Pizza Franchises



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

  • The franchise is a restaurant providing pizza, ice cream, and related food items, including breakfast foods. The Company currently offers 3 types of franchises to new franchisees:  the Full Size Restaurant, the DELCO Facility, and the Bolt-On Franchise.
  • Happy Joe's PizzaThe first is a full size restaurant offering breakfast, lunch, and dinner and providing on-premises dining, carry-out, drive-up window, and delivery service featuring birthday party and fun center services, and providing premium quality pizza, ice cream, pasta, spaghetti, fresh-baked sandwiches, salads, breakfast items, and other food and beverage products prepared according to specified recipes and procedures (“Full Size Restaurant”).
  • The second franchise offering is a facility offering predominantly delivery service and carry-out service with a drive-up window, but which may have limited on-premises dining of up to approximately 50 seats (herein referred to as “DELCO Facility” for delivery and carry-out service since this unit incorporates the features of the carry-out franchise concept into the delivery-only franchise unit). Some DELCO Facilities may be located on premises where other brands of products and services are being offered (“DELCO Co-Brand Facility”).
  • The Bolt-On Franchise is only offered to owners of existing restaurant or other food service businesses who want to add Happy Joe’s pizza menu items to their existing menu. The Happy Joe’s menu items offered by the Bolt-On franchisee will be more limited than the Full Size Restaurant or the DELCO Facility, but at a minimum will include the current menu of Happy Joe’s pizzas. Delivery service is recommended but is optional. The Bolt-On Franchise is being offered for the first time under the 2013 Franchise Disclosure Document.

Explanatory Notes for Part 1 – Actual Net Sales of Licensed Restaurants

  • The data shown below is the actual net sales from Happy Joe’s menu items experienced by a restaurant owner that has been granted a license (“Licensee”) to offer certain Happy Joe’s pizza menu items in its existing restaurant. The restaurant is operated under a different name and is not identified by the mark Happy Joe’s, similar to the Bolt-On Franchise.
  • Licensee has been offering Happy Joe’s menu items in its restaurant since 1984. The restaurant is located in Iowa.
  • These results should not be considered as the actual or probable net sales that will be realized by an given Bolt-On Franchise. A new franchisee’s financial results are likely to differ from the results stated in this financial performance representation.
  • The term Net Sales as used in this Item 19 are gross sales from all Happy Joe’s food products, less all sales tax receipts, any authorized discounts, any documented refunds, charge backs, credits, and allowances given to customers by the Licensee, and any delivery surcharge charged to customers.
  • The net sales figures were compiled from royalty reports submitted to the Company by the Licensee. The data has not been audited.
  • The data below does not reflect any operating expenses that must be deducted from net sales to obtain a net income or profit.
  • You will experience some incremental operating costs in connection with the operation of a Bolt-On Franchise over and above the expenses incurred by your existing restaurant business, including food costs, labor costs, cost of materials and supplies, advertising and promotional expenses, royalties paid to the Company, insurance expenses, equipment maintenance expenses, and debt service, as applicable. This is not an all-inclusive list of expenses.
  • Licensee offers and sells Happy Joe’s pizza and calzones. The Bolt-On Franchisee and the Company will determine what Happy Joe’s menu items will be sold by the Bolt-On Franchisee, but at a minimum, the Bolt-On Franchisee must offer all current Happy Joe’s pizza products.

Explanatory Notes for Part 2 – Forecasted Percentage Cost of Sales and Gross Profit

  • The term Net Sales as used in this Item 19 are gross sales from all Happy Joe’s food products, less all sales tax receipts, any authorized discounts, any documented refunds, charge backs, credits, and allowances given to customers by the Licensee, and any delivery surcharge charged to the customers.
  • The term Cost of Sales used in this Item 19 is the cost of all food ingredients required for the preparation of Happy Joe’s pizzas following the Happy Joe’s recipes.
  • The term Gross Profit as used in this Item 19 is calculated by subtracting the Cost of Sales from Net Sales.
  • The forecast assumes that the performance of the Bolt-On Franchise relating to Cost of Sales would be similar to the average cost of sales for pizza only sold at the Company’s affiliate-owned Restaurants.
  • Cost of Sales for pizza only were calculated based on food cost data collected from six affiliate-owned restaurants during the period July 2012 through December 2012 and averaged.
  • This forecast was based on pizza prices charged by affiliate-owned restaurants as of December 2012 exclusive of sales tax or delivery fees, the cost of relevant ingredients from the current designated supplier as of December 2012, and the Company’s standard recipe portions.
  • Pizza prices assumed a 10% discount rate based on a 5-year average of affiliate-owned stores. An estimated adjustment was then made for waste, spoilage, theft, and other loss of food.
  • The Gross Profit percentage reflects a forecasted Gross Profit before deducting all other expenses besides cost of food which will vary significantly among individual restaurants. No forecast is made as to Net Profits of a Bolt-On Franchisee.

Part 1 – Actual Net Sales from Happy Joe’s Menu Items at Licensee’s Licensed Restaurants



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