FDD Talk 2016: The Wetzel’s Pretzels 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 Wetzel’s Pretzels franchise opportunity, including relevant news updates

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

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

• 2015 Average Adjusted Gross Revenues for the 220 company-owned and franchised Wetzel’s Pretzels locations that were open for 12 months ended December 31, 2015

• 2015 Actual Adjusted Gross Revenues for the Top 10 Wetzel’s Pretzels locations (by 2015 Adjusted Gross Revenues) that were open for 12 months ended December 31, 2015

• 2015 Actual Adjusted Gross Revenues for the Bottom 10 Wetzel’s Pretzels locations (by 2015 Adjusted Gross Revenues) that were open for 12 months ended December 31, 2015

Section I – Background Information

With a motto like “Where Twisted Ideas Originate,” you might expect strange things from Wetzel’s Pretzels, but the concept is relatively straightforward: Fresh, filling pretzels that leave people wanting more.

Growing up with a name like Wetzel, Rick Wetzel endured many school-age years of taunting rhymes with pretzel. If they could only see him now. He decided pretty early on that pretzels would be his destiny. He developed what he felt was a superior dough recipe and opened his first store in 1994.

Realizing he was definitely onto something, he and his business partner Bill Phelps started franchising the concept in 1996. They had both been working in the marketing department at Nestle USA, so they knew a few things about how to roll out a concept and get people talking about it.

Their tactics succeeded, and as early as 1997, the brand caught the attention of movie producer John Davis, who helped raise $1 million from angel investors for the fledgling company.

Growth in the number of locations has been slow in recent years, and currently stands at just over 300, with 12 of those being company-owned and 20 of them located outside the U.S.

Headquartered in Pasadena, CA, and with co-branding relationships with Cold Stone Creamery, Juice It Up, Swensen’s, and others, here’s how Wetzel’s Pretzels twists up the competition in the pretzel segment:

How Fresh is Fresh?

Wetzel’s prides itself on hand-rolled, oven-baked soft pretzels that are as fresh as possible. In fact, if a pretzel doesn’t sell within 30 minutes, it won’t be sold at all. Now that’s fresh!

Solid Leadership

It says a lot about a company when both of its co-founders are still around after 22 years. Bill Phelps is at the helm as the company’s CEO. His superior grasp of finances and his entrepreneurial spirit keep the chain humming along nicely. Rick Wetzel is also still with the company, providing ideas and input on marketing promotions and strategic initiatives.

The Menu

Like I said, it’s a pretty straightforward concept, and the menu reflects this simplicity. Basic pretzel offerings include Wetzel’s Original (buttered or not); Sinful Cinnamon; Almond Crunch; Sour Cream & Onion; and Cin-A- Yum (coated with melted cinnamon butter, then topped with sweet glaze).

Then there’s the Wetzel Dog, a fresh baked pretzel wrapped around an all-beef hot dog that can be had with or without melted cheese added.

There are also five different cheesy pretzels: Cheese Meltdown (fresh-baked pretzel topped with hot, melted cheese); Grateful Garlic (hot, melted cheese with a light garlic flavor): Pepperoni Twist (cheese pretzel topped with pepperoni slices); Jalapeno Cheese Melt (slices of jalapeño and hot, melted cheese); Jalaroni (cheese pretzel topped with pepperoni slices and jalapeños).

The chain also offers bite-sized pretzels as Wetzel Bitz and Kid’s Bitz. Pretzels can also be had with a choice of dipping sauces, including cheese, jalapeño cheese, pizza sauce, caramel, and cream cheese.

The Disney Connection

The chain felt like it had finally arrived when it opened a flagship store at Disneyland, becoming one of the top retailers by square foot in Downtown Disney.

Section II – Estimated Costs

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

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