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FDD Talk 2016: The Schlotzsky’s Franchise Opportunity (Financial Performance Analysis, Estimated Costs, and Other Important Stuff You Need to Know)

by Franchise Chatter on May 18, 2016

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



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Schlotzsky's Restaurant Interiors

In this FDD Talk 2016 post, you’ll learn the following:

  • Section I – Background information on the Schlotzsky’s franchise opportunity, including relevant news updates
  • Section II – Estimated initial investment for a Schlotzsky’s franchise, based on Item 7 of the company’s 2016 FDD
  • Section III – Presentation and analysis of Schlotzsky’s financial performance representations, based on Item 19 of the company’s 2016 FDD, including information on the:
  • 2015 average, median, high, and low sales for the 291 franchised Schlotzsky’s Restaurants that were in operation continuously throughout fiscal year 2015, and the number of Restaurants in the segment with a Cinnabon Express Bakery
  • 2015 average, median, high, and low sales for the 38 company-owned Schlotzsky’s Restaurants that were in operation continuously throughout fiscal year 2015, and the number of Restaurants in the segment with a Cinnabon Express Bakery
  • 2015 average, median, high, and low sales for the 109 Schlotzsky’s Restaurants that opened between 2001 and 2014 and were in operation continuously throughout fiscal year 2015
  • 2015 average gross sales, cost of goods sold, personnel expenses, advertising, operating expenses, occupancy expenses, general and administrative expenses, and EBITDA for the 38 company-owned Schlotzsky’s Restaurants that were in operation continuously throughout fiscal year 2015

Section I – Background Information

Schlotzsky’s Banks on Combination of Familiar and New

Schlotzsky’s Bakery Cafe has risen to its success by sticking with what works while also developing more. The chain’s first sandwich, known as The Original, is still its most popular offering. The sandwich’s blend of select meats, cheeses and marinated black olives on hot sourdough bread sparked a passionate following that is still going strong.

The chain is now an international franchise with more than 350 restaurants in 35 U.S. states and three other countries. The Original has been joined by other sandwiches as well as flatbreads, pizzas, toasted wrap, fresh salads, gourmet soups, and fresh-baked bread.

Redesign Features Circle Motif

The privately held restaurant chain is five years into a redesign that incorporated a circle theme that’s bright and colorful and features a quirky “Lotz Better” theme that extends to multiple uses of the “Lotz” in the brand’s name.

Restaurants Co-Branding with Cinnabon, Carvel

Many locations also offer warm Cinnabon treats and premium ice cream and milk shakes from Carvel. Future development for the brand will focus on co-branding with Cinnabon and Carvel at new locations. The chain is seeking multi-unit developments in established markets, but all U.S. states are open to potential franchisees.

Schlotzsky’s is owned by Atlanta-based FOCUS Brands, which franchises more than 4,000 ice cream shops, bakeries and restaurants in the U.S. and other countries. Moe’s Southwest Grill and McAlister’s Deli are among the other franchises.

Chain Drops Slightly in Franchise 500

Schlotzsky’s was No. 155 on Entrepreneur’s 2016 Franchise 500 list, down slightly from No. 141 in 2015. The chain’s highest rank was No. 137 in 2013, and its lowest ranking was No. 322 in 2008.

Specialty Sandwiches Join Menu

Seven new specialty sandwiches are on the menu, featuring rich, hearty choices: French Dip, Ultimate Grilled Cheese, Sicilian, Tuscan, Caprese, Chicken Bacon SmokeCheesy, and Beef Bacon SmokeCheesy. The Caprese is a vegetarian option.

These sandwiches join The Original and other favorites such as Angus Roast Beef & Cheese, Turkey Bacon Club, Fiesta Chicken, Albuquerque Turkey and more. Customers can choose from several flavors and types of buns or tortillas.

For those not in the mood for a sandwich, the restaurants offer oven-baked pastas, flatbreads that star chicken, and half a dozen gourmet pizzas. A large selection of salads, chips, desserts and children’s dishes round out the offerings.

Limited-Time Sandwiches Served on Pretzel Rolls

Schlotzsky’s partnered with Auntie Anne’s in September 2015 to offer four limited-time sandwiches served on Soft Pretzel Rolls and accompanied by signature sauces. The Pretzel Dippers included four varieties: The Beef Chief, The Hogfather, The Big Cheese, and The Ham Dunk.

Chain Debuted 25 Years Ago

The chain was founded in 1971 in Austin, Texas, by Don and Dolores Dissman. Ten years and 100 stores later, the couple sold the company to real-estate investors. Schlotzsky’s peaked in 2001 with 759 stores and more than $400 million in sales, but same-store sales started to flatten out.

By 2003, the company had posted an $11.7 million loss, the board had relieved the owners of their managerial duties, Sam Coats had been picked as the new chief executive of the company, and Schlotzsky’s had started its comeback.

Focus Brands, an affiliate of private equity firm Roark Capital Group, acquired Schlotzsky’s in 2006. Under new President Kelly Roddy, the chain focused on growth through updated locations, revamped menus and table service, and the introduction of Cinnabon.

Chain Hires VP of Global Marketing

Monte Jump joined Schlotzsky’s in August 2015 as vice president of global marketing. Jump has more than 25 years of experience in marketing, including working as chief operations officer and chief marketing officer for Nashville-based Back Yard Burgers. His background also includes stints at Captain D’s, Buffets Inc., Carrabba’s Italian Grill, Golden Corral, T.G.I. Fridays and, for more than a decade, PepsiCo.

Section II – Estimated Costs

  • Please click here for detailed estimates of Schlotzsky’s franchise costs, based on Item 7 of the company’s 2016 FDD (updated).

Section III – Financial Performance Representations (Item 19, 2016 FDD) and Analysis



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