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

by Franchise Chatter on February 1, 2016

in Fast Casual Restaurant Franchise, FDD Talk 2017: Food Franchises, Franchise Earnings, Pizza Franchises

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MOD Pizza Exterior 2

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

  • Section I – Background information on the MOD Pizza franchise opportunity, including relevant news updates
  • Section II – Estimated initial investment for an MOD Pizza franchise, based on Item 7 of the company’s 2015 FDD
  • Section III – Presentation and analysis of MOD Pizza’s financial performance representations, based on Item 19 of the company’s 2015 FDD, including information on the:
  • 2014 average weekly net sales, cost of goods sold, total labor, and prime cost (i.e. cost of goods sold plus total labor) for 7 company-operated MOD Pizza Restaurants that were open and operating for a minimum of 24 weeks

Section I – Background Information

MOD Pizza Seeks to Double Locations in 2016

MOD Pizza has unveiled an ambitious growth plan for 2016 that would double its locations to nearly the 200-unit mark.

With plans for entry into six more U.S. states, as well as its first international location in the works, MOD is focusing on opening corporate locations and supplementing with carefully selected multi-unit franchise agreements with franchisees that align themselves with the brand’s culture.

In 2015, the Bellevue, Washington-based chain opened 61 new locations, entered eight new states, and hired 1,300 employees. The year ended with 92 stores, 80 of them company-owned. MOD’s revenue growth swelled to more than 200 percent, and the chain enjoyed 12.4 percent same-store sales growth.

As part of funding growth, MOD Pizza raised about $45 million of equity, led by PWP Growth Equity, a private equity fund managed by Perella Weinberg Partners.

Pizza Across the Pond

MOD’s initial international expansion will happen in the United Kingdom in the first half of 2016 through a 50-50 partnership between the fast-casual pizza chain and Freston Ventures, a business owned by billionaire telecommunications mogul Sir Charles Dunstone and his business partner, Roger Taylor.

As the chain moves into the UK, so does its management. John Nelson became CEO of the pizza chain’s United Kingdom operations in January 2016. Nelson, who will work closely with Dunstone and Taylor, came from Nando’s UK, where he was the operations director for more than 350 restaurants.

MOD Honored by Fortune and Inc.

Fortune magazine named MOD the seventh-best place to work in retail in its 2015 list of 20 Best Workplaces in Retail.

Also in 2015, MOD was named to the Inc. 5000 list of fastest-growing private companies for the second year in a row.

‘Made on Demand’

The pizza chain was founded in 2008 by Scott and Ally Svenson, co-founders of Seattle Coffee Company, which was sold to Starbucks in 1998. Scott Svenson is the company’s chairman and CEO, while Ally Svenson is vice president of brands.

MOD stands for “Made on Demand,” reflecting the flexibility given to customers who can choose the ingredients on their pizzas and salads; they pay the same price no matter how many toppings they add.

They can also choose specialty pizzas bearing lively names like Lucy Sunshine, Jasper and Caspian, any of which can be added to or subtracted from. Both the pizzas and salads come in three sizes – Mini, MOD and Mega – and the salads are served on an asiago-crust “plate.”

Sides, salads and beverages are also on the menu.

Pizza in Less Than Three Minutes

MOD pizzas are made by hand and cooked in less than three minutes in 800-degree ovens. The restaurants sell pizzas for dine-in and take-out but do not deliver. Customers can order online.

The chain offers a gluten-free crust, but exposure to wheat-based products is possible, so people who have celiac disease or other gluten allergies should not consume this crust.

Vegans should be aware that the red sauce and pesto contain cheese, but they can choose a barbecue sauce or garlic rub on their pizza crusts or choose a pizza salad.

Culture of Caring

MOD Pizza bills itself as being “more about the people than the pizza.” The restaurants, which are family friendly, generally pay higher salaries than competitors, starting at about $11 or more, and the chain is a strong proponent of workers receiving living wages.

The company makes a point of giving chances to people who may have troubles finding jobs because of criminal infractions or lack of employment history. Employees are provided with opportunities to give back to the community.

Seattle Business Magazine honored MOD Pizza with a 2015 Community Impact Award for Job Creation and Workplace Development.

Section II – Estimated Costs

  • Please click here for detailed estimates of MOD Pizza 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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