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

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

• Section I – Background information on the Culver’s franchise opportunity, including relevant news updates

• Section II – Estimated initial investment for a Culver’s franchise, based on Item 7 of the company’s 2015 FDD

• Section III – Presentation and analysis of Culver’s financial performance representations, based on Item 19 of the company’s 2015 FDD, including information on the:

• 2014 average, median, high, and low gross sales for the 493 franchised and company-owned Culver’s Restaurants open for the entire 12-month period ended December 31, 2014

• 2014 average food cost, paper cost, salaries and wages, employee benefits, direct operating expenses, supplies and chemicals, utilities, general and administrative expenses, repairs and maintenance, advertising royalty, local advertising, and service royalty, as a percentage of gross sales, for the 7 company-owned Culver’s Restaurants operated by subsidiaries of Culver Franchising System, Inc. (“CFSI”) open for the entire 12-month period ended December 31, 2014

Section I – Background Information

Freshness Started at Home

Culver’s started in 1984 when Craig and Lea Culver, along with Craig’s parents, George and Ruth, opened the first Culver’s in Sauk City, Wisconsin, the family’s hometown. George and Ruth bought their first restaurant in 1961, and their children grew up serving guests.

Craig’s idea for a Culver’s restaurant stemmed from his mother’s homemade hamburgers and his favorite vacation treat from childhood, frozen custard, creating the signature combination of Culver’s ButterBurger and Fresh Frozen Custard. Local Culver’s restaurants each offer a different flavor of the day of Fresh Frozen Custard, such as Cherry Cheesecake, Chocolate Oreo Volcano and Raspberry Cordial.

Culver Stepped Down as CEO

Co-founder and CEO Craig Culver retired on June 15, 2015, his 65th birthday. President and Chief Operating Officer Phil Keiser, who joined Culvers in 1996, became president and CEO at that time. Culver stays on as chairman and continues to appear in promotional materials.

“It’s important for every business to have a strong succession plan so the right people are in the right positions to lead into the future,” Culver said in a press release. “What makes me excited and makes my decision easier is that the reins are being turned over to someone who has been responsible for so much of our success for so many years.”

Gluten-Free Bun Added

Culver’s in March 2015 added gluten-free buns, with the warmed, wrapped bun served separately from the rest of the sandwich ingredients to avoid cross-contamination. Culver’s had been testing the buns in select markets since the fall of 2014.

Culver’s Chain Hit 500

Two Culver’s restaurants shared the honor of being the 500th location when the Cedar Falls, Iowa, and Wixom, Michigan, restaurants opened on March 3, 2014. The milestone came as Culver’s celebrated its 30th anniversary in 2014.

Culver’s Community Theater

Culver’s may be known for its ButterBurgers, but the restaurant chain does a pretty good job of video production as well. Its animated “Culver’s Community Theater” vignettes spoof popular movies with such titles as “Lord of the Onion Rings” and “The Wizard of Cod.” These videos are highlighted on social media, targeting younger customers.

The chain has live-action videos as well, of course. A TV campaign that launched in April 2015 focuses on Culver’s “fresh, never frozen” Midwest beef, highlighting the sirloin, chuck and plate cuts used in the restaurants. The videos are available on the Culver’s website and YouTube site.

In September 2014, Culver’s put the spotlight on its chicken, in a video campaign highlighting the importance of antibiotic-free chicken from humanely raised birds and featuring one of the farmers who supplies chicken to the chain.

Section II – Estimated Costs

• Please click here for detailed estimates of Culver’s 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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