FDD Talk 2014: Our Latest Views on Freddy’s Frozen Custard and Steakburgers’ Average Sales, Cost of Sales, Labor Costs, and Other Expenses

In this FDD Talk post based on Freddy’s Frozen Custard and Steakburgers’ 2014 FDD, you will find the answers to the following questions:

• As of December 25, 2013, how many restaurants were operated by the franchisor’s affiliate? How many restaurants were operated by franchisees?

• How many affiliate-owned and franchisee-owned restaurants were included in the calculation of average weekly gross sales? What were the criteria for inclusion in the sample?

• What was the average weekly gross sales for affiliate-owned restaurants? What was the average weekly gross sales for franchisee-owned restaurants? What was the average weekly gross sales for all Freddy’s restaurants included in the sample?

• For the section on Cost of Sales, Labor Costs, and Other Controllable Expenses, how many restaurants were included in the sample, how were they chosen, and where are they located? Were franchisee-owned stores included?

• What was the average Costs of Sales, Labor Costs, and Other Controllable Expenses for restaurants that met or exceeded the average weekly gross sales for all Freddy’s Restaurants?

• What was the average Costs of Sales, Labor Costs, and Other Controllable Expenses for restaurants that did not meet the average weekly gross sales for all Freddy’s Restaurants?

• Do the percentages include non-recurring, opening, and pre-opening costs, such as grand opening advertising, etc.?

• What is the franchisor’s definition of Cost of Sales (as a percentage of Gross Receipts)? Labor (as a percentage of Gross Receipts)? Controllable Expenses (as a percentage of Gross Receipts)?

• Does Labor include deferred management compensation, phantom stock bonuses, owners’ draws, or management expenses not directly attributable to a restaurant, such as an area manager’s salary?

• Why does the franchisor believe in management short-term and deferred incentive pay plans?

• Were franchise fees and minimum required Marketing and Advertising Fund or advertising cooperative contributions included in the disclosures? Why or why not?

• Based on the company’s experience, do the restaurants experience seasonal fluctuations? If so, what are the strongest sales months? What are the weakest sales months?

• What are Franchise Chatter’s latest views on Freddy’s Frozen Custard and Steakburgers’ financial performance representations?

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