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FDD Talk: The Rocky Mountain Chocolate Factory Franchise Opportunity (Financial Performance Analysis, Estimated Costs, and Other Important Stuff You Need to Know)

by Franchise Chatter on February 2, 2016

in Chocolate Franchise, FDD Talk 2017: Food Franchises, FDD Talk 2017: Retail Franchises, Franchise Earnings, Retail Franchise

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Rocky Mountain Chocolate Factory Photo by princessrica

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

  • Section I – Background information on the Rocky Mountain Chocolate Factory franchise opportunity, including relevant news updates
  • Section II – Estimated initial investment for a Rocky Mountain Chocolate Factory franchise, based on Item 7 of the company’s 2015 FDD
  • Section III – Presentation and analysis of Rocky Mountain Chocolate Factory’s financial performance representations, based on Item 19 of the company’s 2015 FDD, including information on the:
  • average annual gross retail sales for the top 25%, middle 50%, lowest 25%, and all 196 franchised Rocky Mountain Chocolate Factory Stores that had been open for at least 12 months as of the end of the company’s most recent fiscal year, February 28, 2015 (this information is for the 12 months prior to that date)
  • actual annual gross retail sales for the top 5 and bottom 5 of the top 147 (or 75%) of the 196 Rocky Mountain Chocolate Factory Stores in the sample

Section I – Background Information

Based in Durango, Colorado, Rocky Mountain Chocolate Factory, Inc. is an international franchisor and manufacturer of premium chocolates and other confectionery products.

The company, its U-Swirl, Inc. self-serve frozen yogurt subsidiary, and franchisees currently operate over 571 Rocky Mountain Chocolate Factory and self-serve frozen yogurt stores in 42 states, Canada, Japan, South Korea, the United Arab Emirates, the Kingdom of Saudi Arabia, Turkey and, most recently, the Philippines.

The company went public in 1985, and its common stock is listed on the Nasdaq Global Market under the symbol “RMCF.” The company’s U-Swirl subsidiary trades on the OTCQB under the symbol “SWRL.”

Over the past two years, U-Swirl has acquired five additional yogurt franchisors, including CherryBerry, Josie’s Frozen Yogurt, Yogli Mogli, Let’s Yo! and Fuzzy Peach. As of February 2015, nearly 250 frozen yogurt cafés were being operated by U-Swirl franchisees or by the SWRL subsidiary of Rocky Mountain Chocolate Factory itself.

Handmade Chocolates

Stores feature striking colors, clean sight lines and crisp designs and are often found in airports, high traffic streetfront locations, regional malls and resort locations. The average store is about 1,000 square feet, including about 650 square feet of selling space. The company offers kiosks and full stores with flexible floorplans to franchisees.

The stores produce many products — such as caramel apples, dipped strawberries and fudge — in-house in full view of customers, using fresh ingredients and traditional candy making utensils such as copper kettles and marble slab tables for cooling. About 40 percent of the products sold at a Rocky Mountain Chocolate Factory store are prepared onsite.

The rest of the Rocky Mountain Chocolate Factory products — including about 300 varieties of clusters, caramels, creams, meltaways, truffles and molded chocolates — are handmade at the company’s 53,000-square-foot Durango factory.

Co-Branding Options

Rocky Mountain franchisees can co-brand with U-Swirl by offering both confectionery and yogurt product lines. Likewise, U-Swirl franchisees can add fine chocolates and caramel apples to expand their menu through special arrangement with Rocky Mountain.

Most Rocky Mountain stores are open seven days a week 10 a.m. to 9 p.m., Monday through Saturday, and noon to 6 p.m. on Sundays. Hours in tourist areas may vary according to the season.

Rocky Mountain Chocolate Factory was founded in 1981 by Frank Crail, a former tech executive who is now 73. Crail was a tech business executive living in Newport Beach, Calif. before he and his wife decided to move to the small town of Durango, which is famous for its Durango and Silverton Narrow Gauge Railroad.

When Crail discovered there was no candy store in Durango at the time, he borrowed $50,000 to start the Rocky Mountain Chocolate Factory. He once told an interviewer that he was interested in operating a See’s Candies franchise in Durango but was unable to do so.

Today, the company has been listed on Forbes America’s list of 200 Best Small Companies, and Entrepreneur magazine has listed the company as the top candy franchise on its Franchise 500 list.

During the Christmas, Easter and Valentine’s Day holidays, the company makes up to 100 additional items, including candies offered in special holiday packages. A typical Rocky Mountain Chocolate Factory store offers up to 100 candies throughout the year and up to 100 more products during a holiday season.

Section II – Estimated Costs

  • Please click here for detailed estimates of Rocky Mountain Chocolate Factory 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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