In this FDD Talk 2015 post, you’ll learn the following:
- Section I – Background information on the Schlotzsky’s franchise opportunity, including relevant news updates
- Section II – Estimated initial investment for a Schlotzsky’s franchise, based on Item 7 of the company’s 2015 FDD
- Section III – Presentation and analysis of Schlotzsky’s financial performance representations, based on Item 19 of the company’s 2015 FDD, including information on the:
- 2014 average, median, high, and low net sales for the 282 franchised Restaurants that were in operation continuously throughout fiscal year 2014, and the number of Restaurants in the segment with a Cinnabon Express Bakery
- 2014 average, median, high, and low net sales for the 38 company-owned Restaurants that were in operation continuously throughout fiscal year 2014, and the number of Restaurants in the segment with a Cinnabon Express Bakery
- 2014 average, median, high, and low net sales for the 98 Restaurants that opened between 2001 and 2014 and were in operation continuously throughout fiscal year 2014
- 2006-2013 average unit volume for Schlotzsky’s Restaurants in the sample
- 2014 average gross sales, cost of goods sold, personnel expenses, advertising, operating expenses, occupancy expenses, general and administrative expenses, and EBITDA for the 38 company-owned Restaurants that were in operation continuously throughout fiscal year 2014
Section I – Background Information
South Congress in Austin TX was the site of the first Schlotzsky’s restaurant back in 1971, founded by Don and Dolores Dissman. For its humble beginning, the location featured just one sandwich, The Original, based on the muffuletta concept.
What the heck is a muffuletta, you may be wondering? It refers to both a style of bread and a style of sandwich. The bread is a Sicilian-style roll, which is round (usually about 10 inches in diameter, although Schlotzsky’s is only 8 inches), crispy on the outside and light on the inside, with sesame seeds baked into it.
Schlotzsky’s version of the sandwich featured premium meats, cheese, and marinated black olives served on a sourdough version of the roll. Today the sandwich includes smoked ham, Genoa and cotto salamis, melted cheddar, mozzarella, and Parmesan cheeses layered with black olives, red onion, lettuce, tomato, and mustard, all served up on a toasted sourdough bun.
Patrons today also enjoy a variety of fresh baked breads, hot sandwiches, artisan flatbreads, specialty pizzas, toasted wraps, freshly tossed salads, gourmet soups, and more. Many locations also feature Cinnabon products.
The privately-held sandwich chain is still headquartered in Austin and now has more than 350 franchised and company-owned locations in 37 states and 5 foreign countries.
Here’s how Schlotzsky’s tries to keep things rolling in the right direction:
Growth Trajectory Stymied
Back in 2011, Schlotzsky’s president, Kelly Roddy, felt there was enough momentum to hit around 700 locations by 2015. Given that there are currently only half that many restaurants in the chain, things obviously haven’t gone quite as planned.
Entering the Digital Age
Working with the Punchh platform, Schlotzsky’s released its Lotz4Me app in June, 2014. The launch was a huge success, resulting in more than 60,000 downloads of the app in three-and-a-half weeks.
It’s a customer loyalty app that lets patrons take $7 off their next purchase after 7 visits to the restaurant. Customers can stay apprised of company news and special offers, and also earn rewards for sharing Lotz4Me with friends via social media.
Schlotzsky’s has also been remodeling its restaurants in recent years. Under the slogan of a “Lotz Better” look, the restaurants feature bright, bold colors, circle-themed furniture and décor, and many playful “lotz” slogans. The company’s website design gives a good sense of these different themes.
Strategic Software Partnership
The chain recently named MonkeyMedia Software as its Vendor of the Year. It credits the company for being a top-notch cloud platform specializing in takeout, delivery, and catering that has played a critical role in revitalizing the chain’s catering business.
Schlotzsky’s catering sales jumped by 40% in 2014 with MonkeyMedia’s guidance and software for online, mobile, and phone catering orders. And it looks like 2015 will be an even better year.
Tax Day Promotion
April 15 is a seriously stressful day for many Americans. Schlotzsky’s decided to give the day a more positive, “lotz better” twist by offering free food. On tax day, patrons who purchased a 32 oz. drink and a bag of chips could claim a free Original small sandwich.
Section II – Estimated Costs
- Please click here for detailed estimates of Schlotzsky’s franchise costs, based on Item 7 of the company’s 2015 FDD.