Earnings Claims of Top Franchises Revealed

Earnings Claims of Top Franchises Revealed

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FDD Talk 2014: Our Latest Views on Smoothie King’s Average Cost of Goods Sold, Wage Expenses, and Rent

by Franchise Chatter on October 14, 2014

in Franchise Earnings, Smoothie Franchise



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Smoothie King 20 oz. with Fruit

Highlights of Smoothie King’s Item 19 Financial Performance Representations (2014 FDD) – Part 2

Explanatory Notes for Section C – Statement of Units with $500,000 or More in Gross Sales and Units with Less Than $500,000 in Gross Sales for Calendar Years 2010 to 2013

  • Section C below provides information on the number, percentage, and average Gross Sales of Units located in the United States that have achieved Gross Sales of $500,000 or more in the last four calendar years (2010-2013). Smoothie King refers to the group of Units with $500,000 or more of Gross Sales in a calendar year as the King’s Club.
  • Section C also gives the number, percentage, and average Gross Sales of those Units that had less than $500,000 of Gross Sales, as well as the total Units and the average Gross Sales for all Units reported on for each calendar year.
  • The Units are limited to Units operated by franchisees. Units operated by Smoothie King for the majority of the calendar year were excluded from Section C. The information in Section C is provided for Traditional Units only, with Non-Traditional and military base Units excluded. Non-Traditional and military base Units are excluded as they typically operate with a limited menu and have a non-public trade area.
  • The information disclosed in Section C is limited to Units that were open for a full 12 months of operations for the applicable calendar year. Gross Sales during the first year of operations likely will differ from those that have been open for a year or more.

Explanatory Notes for Section D – Statement of Gross Sales and Cost Information for USA Smoothie King Owned Units (January 1, 2013 to December 31, 2013)

  • Section D below provides information on the Gross Sales and certain cost information of Smoothie King owned Units located in the United States. Specifically, information is provided for the following three cost categories:  Cost of Goods Sold, Wage Expenses, and Rent Costs for each Smoothie King Unit identified in the Table.
  • Section D also states total costs for each cost category as a percentage of Gross Sales for each of the Smoothie King Units identified.
  • In addition, Section D states the total costs for all three cost categories as a percentage of Gross Sales for each of the Smoothie King Units identified.
  • The information and results described in Section D are based on Smoothie King Units that have been owned by the franchisor and in operation during all of calendar year 2013. Smoothie King Units that were not in operation during all of the 2013 calendar year are excluded from Section D.
  • “Cost of Goods Sold” includes the cost of the products and inventory shrinkage, freight and shipping, including food products and other consumables, and does not include any warranty expenses.
  • “Wage Expenses” include wages, employee commissions, payroll taxes, and bonuses for all in-Unit employees. Wage Expenses include wages for the Unit Manager. Smoothie King presumes that in a single, franchised Unit, the owner-operator will be the Unit Manager. “Wage Expenses” do not include workers’ compensation insurance, health insurance, or any profit sharing expenses.
  • “Rent Costs” include base rent, common area maintenance (CAM) costs, taxes, insurance, and percentage or additional rent if applicable.
  • Section D includes certain major costs of the franchisor’s operation of Smoothie King Units but does not include all cost information regarding operations. For example, this cost information does not include certain corporate allocated expenses such as human resources, IT support, banking and credit card fees, legal fees, accounting, invoicing, payment collection, tax preparation, and financial reporting expenses that were incurred because the Smoothie King Units are part of a larger corporate structure.
  • While an owner-operated, single unit franchised Unit will likely incur some costs related to one or more of these items, many of these allocated expenses are unique to Smoothie King’s corporate structure and are not reflective of an owner-operated, single unit franchised operation.
  • In addition, other costs and expenses will be incurred when operating a Unit which are not included in the three categories of cost information provided (i.e., COGS, Wage Expenses, and Rent Cost).

Section C – Statement of Units with $500,000 or More in Gross Sales and Units with Less Than $500,000 in Gross Sales for Calendar Years 2010 to 2013

Units with Gross Sales of $500,000 or More (King’s Club)

2010



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