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

by Franchise Chatter on July 20, 2016

in FDD Talk 2017: Food Franchises, Franchise Earnings, Frozen Dessert Franchise, Hamburger Franchise



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Freddy's Frozen Custard and Steakburgers Photo by RowleySnyderAblah

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

  • Section I – Background information on the Freddy’s Frozen Custard & Steakburgers franchise opportunity, including relevant news updates
  • Section II – Estimated initial investment for a Freddy’s Frozen Custard & Steakburgers franchise, based on Item 7 of the company’s 2016 FDD
  • Section III – Presentation and analysis of Freddy’s Frozen Custard & Steakburgers’ financial performance representations, based on Item 19 of the company’s 2016 FDD, including information on the:
  • 2015 average, highest average, and lowest average weekly gross sales for the 122 franchised, 13 affiliate-operated, and all 135 Freddy’s Frozen Custard & Steakburgers stores that were open prior to the beginning of the fiscal year ended December 30, 2015 (separately stated)
  • 2015 average costs of sales, labor costs, and controllable expenses for the 3 affiliate-operated Freddy’s Frozen Custard & Steakburgers stores with average weekly sales less than $31,824, and the 10 affiliate-operated Freddy’s Frozen Custard & Steakburgers stores with average weekly sales greater than $31,824 (separately stated)

Section I – Background Information

Although Freddy’s has a very retro look reminiscent of diners from the 40s and 50s, this chain got its start in 2002 with a group of co-founders that included restaurateur Scott Redler, brothers Bill and Randy Simon, and their father Freddy, a WWII veteran who grew up on a Kansas farm eating steakburgers prepared at home (he’s 87 now).

The first location opened in Wichita, Kansas, and the concept was franchised beginning in 2004. Growing at a steady clip for the last five years, the total number of locations has reached 198, 14 of which are company-owned.

Food is prepared fresh and cooked to order, and the frozen custard is also freshly churned throughout the day. The frozen custard is decent but not stellar, and only makes up about 25% of the company’s sales.

Interior décor at these throw-back-to-a-simpler-time eateries features lots of red vinyl and chrome with black-and-white checkered tile floors and plenty of photos of Freddy and his family.

Here’s how Freddy’s Frozen Custard & Steakburgers keeps customers coming back for more in the fast casual restaurant segment:

The Menu

Freddy’s menu consists of sandwiches (7 different burgers, a double patty melt, a veggie burger, and a grilled chicken sandwich), three different styles of hot dogs, an array of sides (fries, cheese fries, chili cheese fries, onion rings, chili, chicken tenders, and sometimes fried pickles), and of course freshly churned frozen custard for dessert, which can be had in various forms such as a sundae, a concrete (blended with toppings and add-ins), cone, shakes, and malts.

Steakburger?

Theoretically there’s supposed to be a difference between a hamburger and a steakburger. The patty of the latter should be made from much higher-grade meat than plain old ground beef, but Freddy’s website only mentions ground beef, so their steakburger is really just a hamburger.

Their unique twist, however, is an incredibly thin patty, which makes for very crispy edges and an overall crust that many people like, seasoned with a special combination of salt, garlic, onion, paprika and other spices. It comes out bigger than the bun, so that crispy edge with its grill flavor is what hits you first.

Frozen Custard

With more egg yolks than regular ice cream and a production technique that forces out air for less ice crystals and a slower melt time, the richer, creamier frozen custard treat has become hugely popular in recent years. The Freddy’s approach is simple – it offers vanilla and chocolate frozen custard with 20 toppings and add-ins from which to choose.

Treating People Right

Freddy’s doesn’t skimp on its commitment to purchasing quality ingredients – an attitude that extends to include franchisees and their employees. The chain is clearly doing something right, as the turnover in their chain is less than half the industry average.

Section II – Estimated Costs

  • Please click here for detailed estimates of Freddy’s Frozen Custard & Steakburgers 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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