Earnings Claims of Top Franchises Revealed

Earnings Claims of Top Franchises Revealed

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FDD Talk 2014: Our Latest Views on DQ (Dairy Queen) Treat’s Average Net Sales, COGS, Labor, and Manageable Profit

by Franchise Chatter on May 27, 2014

in Franchise Earnings, Frozen Dessert Franchise



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DQ Treat

Highlights of Dairy Queen’s Item 19 Financial Performance Representations (2014 FDD)

Schedule A disclosed information about DQ Treat stores that:

  • were newly constructed and developed under ADQ’s (i.e. the franchisor’s) new store development or ARD programs that are located in shopping malls (enclosed or open air, such as a lifestyle center) with at least 500,000 square feet of gross leasable area (GLA);
  • were developed and first opened for business between January 1, 2008 and December 31, 2011;
  • were operated for the full 2012; and
  • are franchisee owned and operated.

Schedule A includes the following information for locations that submitted usable profit and loss statements (“P & L”) to ADQ:

  • 1.  Weighted average, straight average and median sales, Manageable Profit, and selected expenses for those stores located in malls with GLA of at least 1,000,000 square feet and the high and low range for each item disclosed; and
  • 2.  Weighted average, straight average and median sales, Manageable Profit, and selected expenses for those stores located in malls with less than 1,000,000 square feet GLA (but more than 500,000 square feet GLA) and the high and low range for each item disclosed.

Schedule A also includes Net Sales information for locations that did not submit a P & L to ADQ that ADQ could use as a basis for including expense information from the location.

  • Number of locations that qualify for inclusion in Schedule A:  26
  • Number of locations that submitted a usable P&L to ADQ:  23
  • Number of locations that only have a reported Net Sales included in Schedule A:  3
  • Because ADQ has not received a P&L for the location:  2
  • Because the P&L submitted to ADQ showed a variance of +3% from the sales reports submitted to ADQ:  1

The data in Schedule A is based on information submitted on profit and loss statements and sales reports submitted to ADQ from franchisees of the restaurants included in the schedule. ADQ has not audited or independently verified the results in the profit and loss statements or sales reports.



Definition of Terms

  • Net Sales. Gross sales less sales tax, sales discounts, and coupons.
  • Cost of Goods Sold (“COGS”). The cost of food products that are sold to consumers and the associated packaging. The food products include ingredients, beverages, and condiments. The associated packaging includes bags, product wraps and containers, other paper products, cups and lids, straws, and eating utensils.
  • Labor. The sum of crew labor wages, manager’s salary and other compensation, and related taxes and benefits. Labor does include payments that may be made to a franchisee or its owners in the form of a manager’s salary or wages. Labor does not include payments that may be made to a franchisee or its owners in the form of an owner’s draw, a dividend, or similar distributions. Because of the many forms through which a franchisee may be compensated for their work in a store, not all stores paid a manager’s salary and benefits. The Labor numbers used for the purposes of this financial performance representation (FPR) were those included in the P&L Statements received from franchisees without any adjustments for the manner in which the franchisees handled owner compensation.
  • Controllable Expenses. The sum of utilities, repairs and maintenance, laundry and cleaning, office supplies, store supplies (other than inventory), trash and recycling, and bank charges (other than debt service).
  • Occupancy Costs. The sum of base rent, applicable percentage rent, common area maintenance charges, food court common area maintenance charges (when applicable), mall property taxes, city and business taxes, business licenses, and promotional fund charges.
  • Manageable Profit. Profit remaining after deduction of sales taxes, discounts, Cost of Goods Sold, Labor, and Controllable Operating Expenses.
  • Weighted Average. A method of valuation that considers the sales of each individual store included in the FPR in relation to the total sales of the group of stores that are included. This determined the weighting that is applied to the sales, expense, or manageable profit percentage of each category.

Gross Leasable Area (GLA) of At Least 1 Million Sq. Ft.

  • Total Number of All Stores:  12
  • Number of Stores with P&Ls Used:  10
  • Average Age of Stores with P&Ls Used:  3 years

Weighted Average



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