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

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

• Section I – Background information on the Firehouse Subs franchise opportunity, including relevant news updates

• Section II – Estimated initial investment for a Firehouse Subs franchise, based on Item 7 of the company’s 2016 FDD

• Section III – Presentation and analysis of Firehouse Subs’ financial performance representations, based on Item 19 of the company’s 2016 FDD, including information on the:

• 2015, 2014, and 2013 weekly average and median unit volume for company-owned and franchised Firehouse Subs Restaurants that were open during the company’s fiscal years 2015, 2014, and 2013

• 2015, 2014, and 2013 average food sales, discounts, employee meals, total revenue, food costs, paper costs, total cost of sales, gross profit, wages and benefits, health insurance, marketing expenses, telephone and utilities, professional fees, rent and occupancy expenses, other operating expenses, royalty, total operating expenses, and EBITDA from operations for Firehouse Subs Restaurants operated by the company’s affiliates

Section I – Background Information

Firehouse Subs Moves Into Canada, Boosts Advertising

Firehouse Subs, which is nearing 1,000 locations, has aggressive expansion plans that include doubling its locations, reaching beyond the U.S. border into Canada, and kick-starting the fast-casual sandwich chain’s advertising plan.

The company, founded by former firefighting brothers Chris and Robin Sorenson, has more than 960 locations in 44 states and Puerto Rico, as well as the chain’s first restaurant in Canada. Firehouse Subs opened in Oshawa, Ontario, located northeast of Toronto, in October 2015. Onfire Restaurants Inc., based in Toronto, has signed a development agreement that will bring as many as 90 locations to Ontario.

Firehouse Subs plans to open a second Canadian location by the end of 2016.

Chain Picks New Marketing Agency

Firehouse Subs, which is in its second year of national TV advertising, is going in a different direction this year, both in terms of angle and advertising agency.

The change replaces the firefighting founders with a comedic actor, which enables Firehouse Subs to be a little more self-promotional. Instead of the “Founded by Firemen” tagline, advertising will now use the line “The Hero of All Subs” as promotion focuses on the brand rather than any particular products.

As part of the change, the chain switched its agency of record from Zimmerman to March USA. Firehouse Subs had used Zimmerman since 2009.

The first national campaign did not produce the uptick in average unit volumes the chain was looking for. This time around, Firehouse is looking to pack a bigger punch. The campaign, which will also feature digital advertising, will also push for national brand awareness, which currently sits at less than 50 percent. Firehouse is looking to boost that number significantly.

Restaurants Feature Firefighting Decor

The Sorenson brothers opened their first Firehouse Subs restaurant in 1994 in Jacksonville, Florida. They started franchising only a year later.

Firehouse Subs locations are decorated with memorabilia and artwork that highlight firefighting on the local level, along with a menu that features firefighting-inspired names, like the Hook & Ladder sub. That sandwich joins turkey breast, ham and melted Monterey Jack cheese, along with a pile of veggies.

The chain sells primarily hot subs, both regular and specialty sandwiches, on toasted buns. The only cold subs are tuna and Momma’s Chicken Salad. Salads are available, as are kids meals that come with red firefighter hats.

The firefighting atmosphere is shown in more than appearance and sandwiches. The chain’s Firehouse Subs Public Safety Foundation, which was started in 2005, allocates funding to thousands of public safety organizations, benefiting fire departments and other agencies, as well as the public.

Sandwich Chain No. 62 on Franchise 500

Firehouse Subs was No. 62 on Entrepreneur’s 2016 Franchise 500 list, one position down from 2015. With 174 units added in the three-year period that closed at the end of 2015, the chain has enjoyed unit growth of 19.3 percent in that time period. Ninety-nine stores were added in 2015. The chain ended 2015 with 928 restaurants in the U.S., 20 corporate locations, and one Canadian store.

Firehouse Subs was also No. 28 on Entrepreneur’s Fastest-Growing Franchises of the Year list and No. 18 on Fast Casual’s Top 100 Movers & Shakers, among other 2016 awards.

Section II – Estimated Costs

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

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