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

by Franchise Chatter on November 2, 2015

in FDD Talk 2017: Food Franchises, Franchise Earnings, Hot Dog Franchise

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Nathan's Famous Photo by joseph a

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

  • Section I – Background information on the Nathan’s Famous franchise opportunity, including relevant news updates
  • Section II – Estimated initial investment for a Nathan’s Famous franchise, based on Item 7 of the company’s 2015 FDD
  • Section III – Presentation and analysis of Nathan’s Famous’s financial performance representations, based on Item 19 of the company’s 2015 FDD, including information on the:
  • 2014 average gross sales for all domestic Nathan’s Famous restaurants, including franchised and company-owned restaurants, in enclosed malls; transportation hubs; entertainment venues; freestanding restaurants; and limited-menu restaurants (co-branded or otherwise) located within another concept and seasonal restaurants, respectively, that were in operation for the company’s full fiscal year ended March 29, 2015
  • 2014 average food costs, paper costs, and direct labor costs for two of the franchisor’s company-owned Nathan’s Famous restaurants that were operated for the company’s entire fiscal year that ended March 29, 2015

Section I – Background Information

Nathan’s Famous Stays Famous After 99 Years

Nathan’s Famous will turn 100 years old in 2016, with its original location still in operation and its famed hot dogs not only in restaurants but also in supermarket coolers.

The original Nathan’s restaurant was opened in 1916 at the corner of Surf and Stillwell avenues in the Coney Island neighborhood of Brooklyn, New York, and has been in business ever since, with the only breaks necessitated by Hurricane Sandy in 2012 and a fire in 2013. The company even holds the state of New York’s oldest beer license, issued in 1934.

The restaurant is the subject of “Famous Nathan,” a documentary by Nathan and Ida Handwerker’s grandson, Lloyd Handwerker, that was shown at the Tribeca Film Festival in April 2014.

Love and Hot Dogs on Coney Island

Founders Nathan and Ida Handwerker, both Polish immigrants, met as workers on Coney Island. They married and started a hot-dog business with their savings of $300, reportedly on the advice of singing waiters Jimmy Durante and Eddie Cantor.

The couple used Ida’s hot-dog recipe and her grandmother’s secret spice recipe to create their Coney Island hot dog, which they sold for a nickel to undercut the 10-cent hot dog sold by Nathan’s former employer, Feltman’s German Gardens.

Son Leads Expansion Efforts

After many successful years, their son Murray Handwerker led the expansion that started with a second branch in Oceanside, New York, in 1959 and a third in Yonkers, New York, in 1965. Murray was named company president in 1968 as the company went public. Another son, Saul, left the company and opened his own hot-dog restaurant amid turbulence between the two brothers.

The family sold all locations to a group of private investors in 1987. At that point, the company was franchised, with many locations opened in New York City and environs.

More Than 300 Locations Today

Today, the company has more than 300 restaurants, primarily franchised units, including traditional stores as well as units within shopping centers, strip malls, college campuses, airports, sports arenas, casino hotels, and travel plazas. The company, headquartered in Jericho, New York, says more than 435 million Nathan’s Famous hot dogs were sold in 2014.

The hot dogs are also sold in supermarkets in all 50 states, along with complementary items like pickles, mustard, barbecue sauce and salty stacks.

Nathan’s has exclusive co-branding rights to Arthur Treacher’s Fish and Chips. In November 2014 the company debuted its first co-branded unit with frozen treat seller Rita’s Ice in Roxborough, Pennsylvania, a Philadelphia suburb.

Nathan’s Famous Really Is Famous

The company’s fame extends beyond sales and enters icon status. Politicians and celebrities, such as Barbra Streisand and Jacqueline Kennedy, have for years eaten and praised Nathan’s hot dogs, which Walter Matthau requested to be served at his funeral.

A “Seinfeld” episode featured a trip to Nathan’s, and former New York City Mayor Rudy Giuliani declared the Nathan’s Famous hot dog as the “World’s Best Hot Dog.”

New Hot Dog Eating Champ

The company has hosted the Nathan’s Hot Dog Eating Contest each year at the original location since the 1970s. In the televised event, contestants consume as many hot dogs as they can in 10 minutes.

The current champ is Matt “Megatoad” Stonie, who ate 62 hot dogs and buns on July 4, 2015, to unseat eight-time winner Joseph “Jaws” Christian Chestnut, who had won the contest each year since 2007. Midi Sudo claimed the women’s title for the second straight year on July 3 by eating 38 hot dogs and buns.

Nathan’s Famous set a Guinness World Record for most selfies (4,296) on May 16, 2015, at Busch Stadium in St. Louis. The group effort handily downed the previous record of 2,997 selfies in a St. Louis Cardinals game against visiting Detroit.

Joey Chestnut, then eight-time defending Nathan’s Famous National Hot Dog Eating contest champion, participated by taking a selfie at the stadium with the iconic Gateway Arch prominently in the background.

No. 22 on Forbes List of Small Companies

Nathan’s Famous was No. 22 in Forbes’ 2015 list of America’s Best Small Companies, with $87 million in sales, sales growth of 11 percent, earnings per share growth of 21 percent and return on equity of 16 percent.

Exclusive Deal at Barclays Center

Nathan’s signed an exclusive three-year deal with Barclays Center in Brooklyn, where it will sell its hot dogs and crinkle-cut fries at Brooklyn Nets and New York Islanders games and other events.

Section II – Estimated Costs

  • Please click here for detailed estimates of Nathan’s Famous franchise costs, based on Item 7 of the company’s 2015 FDD.

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

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