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

by Franchise Chatter on June 22, 2016

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

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McAlister's Deli Photo by 10outofsomething

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

  • Section I – Background information on the McAlister’s Deli franchise opportunity, including relevant news updates
  • Section II – Estimated initial investment for a McAlister’s Deli franchise, based on Item 7 of the company’s 2016 FDD
  • Section III – Presentation and analysis of McAlister’s Deli’s financial performance representations, based on Item 19 of the company’s 2016 FDD, including information on the:
  • 2015 average net sales by quartile for the 275 franchised Traditional McAlister’s Deli Restaurants that operated throughout all of Fiscal Year 2015
  • 2015, 2014, 2013, 2012, and 2011 average net sales for the company-owned and franchised Traditional McAlister’s Deli Restaurants that operated throughout all of Fiscal Year 2015, 2014, 2013, 2012, and 2011, respectively
  • 2015 average net sales for the 42 franchised Traditional McAlister’s Deli Restaurants opened between the beginning of Fiscal Year 2012 and end of Fiscal Year 2014, and operated throughout all of Fiscal Year 2015
  • 2015 average total revenue; cost of sales; gross profit; labor and benefits; advertising expenses; telephone, utility, and professional expenses; other operating expenses; occupancy expenses; imputed royalty fees; total operating expenses; and EBITDA from operations by quartile for the 41 company-owned Traditional McAlister’s Deli Restaurants that operated throughout all of Fiscal Year 2015

Section I – Background Information

McAlister’s Deli is on the Move

McAlister’s Deli is working on increasing its footprint across the country. While most of the brand’s restaurants are in the southeastern United States, the company is seeking franchisees nationwide – and in particular is looking for franchise partners in Wisconsin and Colorado in its westward moves.

McAlister’s opened 34 restaurants in 2015, with commitments for 60 more, including recent expansion plans for Chicago; northwestern Indiana; Omaha, Nebraska; and Des Moines, Iowa.

The chain has numerous multi-unit developer agreements in place with franchise groups in the Midwest and in western and northern states, along with continued development in the familiar South.

Company Leader Moves to Red Robin

McAlister’s is temporarily without a chief executive. Carin Stutz, who became president and CEO of McAlister’s Deli in November 2014, left the company in May 2016 to become executive vice president and chief operating officer at Red Robin Gourmet Burgers.

Paul Damico, FOCUS Brands president of North America, is involved in the day-to-day operations of McAlister’s while seeking Stutz’s replacement.

Brand Rises 15 Spots on Franchise 500 List

McAlister’s Deli was ranked No. 146 on Entrepreneur’s 2016 Franchise 500 list. The chain reached a high of 136 in 2009 and then dropped off the list until 2014, when it re-emerged at No. 164. It rose to No. 161 in 2015 and picked up 15 spots in its 2016 ranking.

After several years of modest growth, McAlister’s had a nice jump in 2015, finishing the year with 318 U.S. locations and 43 corporate restaurants. With 34 new units in 2015, McAlister’s enjoyed a jump of 9.4 percent in unit growth.

Founder Wanted ‘Gourmet Deli With Southern Charm’

McAlister’s Deli was founded in 1989 in Oxford, Mississippi, by Don Newcomb, who wanted to create a “gourmet deli with Southern charm.” The original location was housed in a renovated gas station, a start that is evident in many of the locations still built today through such elements as a garage door and vintage-look black-and-white tiles. Franchising began in 1994.

Newcomb sold the chain in 2004 and founded Newk’s Eatery, a fast-casual restaurant chain. McAlister’s Deli Corporation, which is privately held, is a subsidiary of FOCUS Brands, which also owns Cinnabon, Schlotzsky’s, Moe’s Southwest Grill, Auntie Anne’s and Carvel. It’s headquartered in Ridgeland, Mississippi, and Alpharetta, Georgia.

McAlister’s Club is Top Sandwich

McAlister’s Deli offers sandwiches, potatoes, soups, salads and desserts, along with McAlister’s Famous Sweet Tea. The company has more than 350 restaurants in 26 states.

The chain provides regional handcrafted favorites as well as standard menu items. McAlister’s is renowned for its 13-layer McAlister’s Club, its most popular sandwich, but it offers numerous club, classic, hot and grilled sandwiches on a variety of breads. The restaurant chain’s baked potatoes, or Spuds, range from the basic variety to the Spud Max, which is packed with ham, turkey, bacon, cheese, green onions and black olives.

McAlister’s Famous Sweet Tea is brewed several times a day and comes with free refills.

Sandwiches, Bread, Green Tea Added to Menu

New to the menu is the West Coast Bánh Mì, McAlister’s take on the Vietnamese classic. The sandwich features pulled pork, jalapeno peppers, pickled vegetables, cilantro and sriracha mayonnaise. Another newcomer, which the chain recommends to go with the Bánh Mì, is Mango Green Tea, which can be served sweet or unsweet.

Also new is a marbled rye bread with The New Yorker and the Reuben, both served on toasted bread. The New Yorker is stacked with 10 ounces of corned beef and pastrami, while the Reuben features 8 ounces of corned beef.

No. 7 on 25 Best Fast-Food Chains in America

McAlister’s Deli was in May 2016 named No. 7 on the list of the 25 Best Fast-Food Chains in America by Business Insider, in a partnership with Restaurant Business, a food-service industry expert and media outlet.

Section II – Estimated Costs

  • Please click here for detailed estimates of McAlister’s Deli 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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