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FDD Talk 2015: The Cinnabon Franchise Opportunity (Financial Performance Analysis, Estimated Costs, and Other Important Stuff You Need to Know)

by Franchise Chatter on May 21, 2015

in Bakery Franchise, FDD Talk 2017: Food Franchises, Franchise Earnings

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Cinnabon Photo

In this FDD Talk 2015 post, you’ll learn the following:

  • Section I – Background information on the Cinnabon franchise opportunity, including relevant news updates
  • Section II – Estimated initial investment for a Cinnabon franchise, based on Item 7 of the company’s 2015 FDD
  • Section III – Presentation and analysis of Cinnabon’s financial performance representations, based on Item 19 of the company’s 2015 FDD, including information on the:
  • 2014 average, high, and low net sales for franchised Cinnabon bakeries (full and express) in enclosed malls, convenience stores, travel plazas, and airports (respectively) which were in operation continuously throughout Cinnabon’s fiscal year 2014 and not co-branded with another business
  • 2014 average, high, and low net sales by quartile for franchised Cinnabon bakeries (full bakeries only) in enclosed malls, which were in operation continuously throughout Cinnabon’s fiscal year 2014
  • 2014 average net sales, cost of goods sold, gross profit, labor, rent, other expenses, total expenses, and net operating income by region for franchised Cinnabon bakeries in enclosed malls that were operated continuously throughout fiscal year 2014 and the ownership of the Cinnabon franchise remained the same throughout fiscal year 2014

Section I – Background Information

If you look at the news on the Cinnabon website, you might feel like you’ve taken a wrong turn and ended up at AMC, because you’ll see an abundance of articles about the AMC television show “Better Call Saul,” a spinoff prequel to “Breaking Bad.” But all of them feature Cinnabon.

After a casual mention in the penultimate episode of “Breaking Bad,” Cinnabon got a starring role in the debut of “Better Call Saul,” which shows the evolution of Saul Goodman, the sleazy but snazzy lawyer in “Breaking Bad.” The episode opens with a black-and-white scene showing Goodman, played by Bob Odenkirk, working in a Cinnabon bakery in a shopping mall in Omaha.

Odenkirk spent a day at a Cinnabon to train as a baker to prepare to shoot the Feb. 8, 2015, debut episode, which became the highest-rated scripted series premiere in the history of basic cable TV. The episode reached 4.4 million viewers in the 18-49 demographic, and 6.9 million overall.

Kat Cole, group president of Cinnabon parent company FOCUS Brands, and former Cinnabon president, busily retweeted mentions of Saul and Cinnabon the morning after the premiere.

Cinnabon, which did not pay for the exposure, partnered with AMC to shoot the footage at its Cottonwood Mall location in Albuquerque and run a tie-in promotion. The bakery chain gave away free mini-bons in “Saul”-themed boxes on the first night of the show’s regular time slot (Feb. 9, a day after the special time slot for the debut).

Cinnabon also ran a promotion in which visitors who tweeted selfies at the stores with the hashtag #SaulSelfie were entered in a sweepstakes to win a year’s supply of Cinnabon baked goods. The promotion ended March 3.

Guith Takes Over

Cole was replaced as Cinnabon president by Joe Guith, chief operating officer, in February 2015. Guith previously worked with The Coca-Cola Bottling Company, Molson Coors Brewing Company and Staples, Inc.

Cole was promoted to group president of Cinnabon’s parent, Atlanta-based Focus Brands, owned by private equity firm Roark Capital.

Bon Bake Shop Opens

At 37, Cole is one of the youngest executives working with chain restaurants. She joined Cinnabon in 2010 and was named president in 2011. She oversaw hundreds of new store openings and aggressively moved the company into new product areas, such as the Bon Bake Shop, a standalone store in Houston that opened in November 2014. The shop features bite-sized pastries sold in multipacks.

It’s All About the Cinnamon

The Cinnabon story began in 1985, when its first store opened in Seattle, selling only the Cinnabon Classic cinnamon roll. The recipe was honed over a period of months, using Makara Cinnamon from Indonesia.

Cinnabon, which now has more than 1,100 stores in more than 55 countries, doesn’t stray terribly far from its cinnamon roots. The menu contains variations on the cinnamon theme – a theme that also plays out in stores through careful orchestration of tempting smells that waft toward customers.

Promotion on social media is big for Cinnabon, which is extremely active on Facebook, Twitter and Instagram. The chain even has a social media page on its website showing tempting photos it has shared via Facebook and Instagram.

New Sweet Treats

In January 2015, Cinnabon added two new frosted treats to the lineup of CinnaSweeties: Frosted CinnaSweeties, featuring pieces of Oreo cookies; and Frosted CinnaSweeties with sprinkles. The treats were a limited-time selection available through April 19. Cinnabon paired the Frosted CinnaSweeties with the return of the Oreo Mint Chillatta for a sweet pairing.

Pillsbury, Cinnabon Connect

Pillsbury and Cinnabon partnered in September 2014 to put Cinnabon into grocery stores. The new jumbo Cinnabon Bakery Inspired Cinnamon Rolls come four to a package, with a pouch of frosting, and can be found in the refrigerator section along with other Pillsbury refrigerated dough offerings.

Section II – Estimated Costs

  • Please click here for detailed estimates of Cinnabon franchise costs, based on Item 7 of the company’s 2015 FDD (updated).

Section III – Financial Performance Representations (Item 19, 2015 FDD) and Analysis

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