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FDD Talk 2016: The Charleys Philly Steaks Franchise Opportunity (Financial Performance Analysis, Estimated Costs, and Other Important Stuff You Need to Know)

by Franchise Chatter on June 14, 2016

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



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Charley's Philly Steaks Gourmet Combo

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

  • Section I – Background information on the Charleys Philly Steaks franchise opportunity, including relevant news updates
  • Section II – Estimated initial investment for a Charleys Philly Steaks franchise, based on Item 7 of the company’s 2016 FDD
  • Section III – Presentation and analysis of Charleys Philly Steaks’ financial performance representations, based on Item 19 of the company’s 2016 FDD, including information on the:
  • 2015 average gross sales and range of gross sales for the 40 company-owned Charleys Philly Steaks Restaurants and 380 franchised Charleys Philly Steaks Restaurants that were open during the entire 2015 calendar year
  • 2015 average gross sales and range of gross sales for the 40 company-owned Charleys Philly Steaks Restaurants that were open during the entire 2015 calendar year
  • 2015 average gross sales and range of gross sales for the 380 franchised Charleys Philly Steaks Restaurants that were open during the entire 2015 calendar year

Section I – Background Information

Charley Shin was an Ohio State University student back in 1985 when he was visiting relatives near Philadelphia and tasted his first Philly cheesesteak sandwich. It was love at first bite. He immediately set about to perfect his very own recipe and then opened his first Charley’s Grilled Subs on the campus. He was only 22, but his sandwich shop was an instant hit with both students and faculty.

The number of locations has been steadily expanding over the last ten years and currently stands at 537 (47 of which are company-owned and 83 of which are located outside the U.S.). Here’s how Charleys Philly Steaks keeps grinding out the grinders for customers in the highly competitive submarine sandwich segment:

The Menu

It’s pretty simple – sandwiches and fries.

On the hot sub list are the following choices: Philly Cheese Steak, Pepperoni Steak, Bacon 3 Cheese Steak, BBQ Cheddar Steak, Chicken Philly, Chicken California, Chicken Buffalo, Chicken Teriyaki, Italian Deluxe, Ultimate Club, Turkey Cheddar Melt, and Veggie Delight.

On the fry side, there’s Cheese Fries, Cheese & Bacon Fries, and Ultimate Fries (cheese, bacon, ranch dressing).

Rounding out the menu are three different salads (Fresh Garden, Grilled Chicken, and Steakhouse), signature lemonades made with real fruit, and a kids meal.

Leveraging Limited-Time-Only Offers

Restaurants and blogs have something in common. Both have to keep a steady stream of fresh content flowing out to customers in order to keep them engaged with the brand. For restaurants, one of the best ways to do that is by experimenting with all kinds of new menu offerings. If one makes an especially big splash, it might wind up on the permanent menu.

Here are some of the limited-time-only offers Charleys has rolled out in the last year: Double Bacon Potato Skin Fries; Loaded Philly Fries (a Philly cheesesteak’s ingredients put on fries); Pepperoni Pizza Fry (fresh grilled pepperoni, grilled mushrooms, onions and green peppers, Cheddar cheese sauce, melted Provolone and topped with Italian seasoning delivered on fries). Because of that kind of successful experimentation, fries can account for more than 17% of sales at Charleys.

On the sandwich side, there was the Bacon BBQ Ranch Chicken Sandwich, the Cheesy BBQ Chicken Sandwich, and the 3 Cheese Chicken Sandwich with Roasted Red Pepper Sauce. The current new offering is the Habanero BBQ Chicken Sandwich.

Hitting a Sweet Spot

Lots of Charleys are located in malls and shopping centers. Franchisee James Novak already had four locations, but when an opportunity became available at Tucson Premium Outlets, he jumped on it and opened his fifth store. In its first two weeks, it far outstripped sales projections and even went beyond what they would normally make on the biggest retail day of the year – Black Friday.

A New VP of Marketing

Jon Quinn has joined the executive team at Charleys, and he brings a ton of experience with him from leading marketing at such brands as Fazoli’s, Bob Evans, Applebee’s, Golden Corral, and Boston Market. He holds a BA in Economics from the University of Pittsburgh, a Master’s degree in Marketing from Pennsylvania State University, and a Master’s in Business Administration from Carnegie Mellon University. He also held executive positions in two different marketing communications firms.

Section II – Estimated Costs

  • Please click here for detailed estimates of Charleys Philly Steaks 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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