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FDD Talk 2014: Our Latest Views on Tokyo Joe’s Average Net Sales, Expenses, and Operating Profits

by Franchise Chatter on November 21, 2014

in Asian Restaurant Franchise, Franchise Earnings

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Tokyo Joe's Photo by Kent Kanouse

Highlights of Tokyo Joe’s Item 19 Financial Performance Representations (2014 FDD)

  • As of December 29, 2013, there were a total of 26 Tokyo Joe’s Restaurants open and in operation, all owned by Tokyo Joe’s affiliate, Tokyo, Inc., and all located in Colorado. The company had no franchised Restaurants open as of the date of their 2014 FDD.
  • Of the 26 Tokyo Joe’s Restaurants, two opened during fiscal year 2013 and did not operate for the full fiscal year, one has shortened operating hours (it does not operate during weekends or evenings), and two are located in distinct real estate sites that would not meet Tokyo Joe’s qualifications for a new franchised Restaurant. Because of those differences, these five restaurants’ results are excluded from the data presented in this Item.
  • The following information is based on the results of the remaining 21 affiliate-owned Tokyo Joe’s Restaurants that were operating as of December 29, 2013 and had operated for at least all of fiscal year 2013.
  • The chart below shows average key profit/loss statement results the 21 affiliate-owned Tokyo Joe’s Restaurants achieved during fiscal year 2013.
  • The number shown for each entry was determined by adding that item for all 21 Restaurants in this group, then dividing by 21.
  • “Net Sales” is all revenue derived from the operation of the Restaurant before discounts minus amounts deducted from the sales price of products for employees and for promotional coupons. Net Sales does not reflect either gross or net profits.
  • “Cost of Goods Sold” includes revenue spent on food and beverage, paper, and alcohol. It excludes any vendor rebates received by Tokyo Joe’s affiliate.
  • “Gross Profit” is Net Sales minus Cost of Goods Sold.
  • “Labor” includes revenue spent on restaurant wages (salaried and hourly), bonuses, payroll taxes, payroll fees, benefits (insurance, 401K, vacation, etc.), and other employee-related labor expenses. This does not include an owner-operator salary.
  • “Other Operating Expenses” include revenue spent on operating and marketing items (these Restaurants did not contribute to the Brand Promotion Fund), including equipment maintenance, facilities maintenance, operating and cleaning supplies, POS monthly fees, gift card fees, restaurant security, pest control, credit card fees, postage and freight, utilities, and other restaurant-related operating expenses.
  • Please note the following differences between these affiliate-owned Restaurants and the Tokyo Joe’s Restaurant that you would develop that could be relevant to your Operating Expenses:
  • (a) The amount shown as Operating Expenses does not include overhead expenses not related to the operations of a specific Restaurant.
  • (b) The amount shown as Operating Expenses does not include any Royalty or contribution to the Brand Promotion Fund. You will be required to pay a Royalty and contribute to the Brand Promotion Fund and other marketing activities based on your Net Sales. Marketing dollars spent by these Restaurants were Restaurant-specific. Money you contribute to the Brand Promotion Fund or an advertising cooperative may have less direct impact on your sales than if you were to spend money on local marketing (which the franchisor encourages you to do). These factors should be considered in your assessment of these numbers.
  • “EBITDAR” means earnings before deductions for interest, taxes, depreciation, amortization, and rent.
  • “Rent” includes restaurant rent, common area maintenance, and personal property taxes. It does not include utilities and other occupancy costs. Recently, Tokyo Joe’s has reduced by 200-300 square feet the size of a prototypical restaurant (at a historical rental rate of $25-$35 per square foot). Typical rent, based on this reduction is approximately $7,500/month or $90,000/year.
  • “EBITDA” means Net Sales minus the sum of Cost of Goods Sold, Labor, Operating Expenses, Non-Operating Expenses, Rent, and Other Occupancy Expenses.
  • Some Restaurants have earned these amounts. There is no assurance that you will do as well.
  • While the size of a prototypical Tokyo Joe’s Restaurant has been reduced since the 21 affiliate-owned Tokyo Joe’s Restaurants on which the information described in this Item are based were built, these Restaurants are operated substantially similar to the Tokyo Joe’s Restaurant offered under this Disclosure Document.
  • However, you should consider that Tokyo Joe’s is based in Colorado, and that all of the Tokyo Joe’s Restaurants were developed and operated there.

Average 2013 P&L Information for the 21 Affiliate-Owned Restaurants

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