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

by Franchise Chatter on September 8, 2016

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

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Zoup Photo by tory.me 2

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

  • Section I – Background information on the Zoup! franchise opportunity, including relevant news updates
  • Section II – Estimated initial investment for a Zoup! franchise, based on Item 7 of the company’s 2016 FDD
  • Section III – Presentation and analysis of Zoup!’s financial performance representations, based on Item 19 of the company’s 2016 FDD, including information on the:
  • 2015 average, high, and low gross sales for the 65 Zoup! Restaurants located in the USA that were opened for a full 12 months during 2015, divided into 2 subgroups, namely:  (a) Franchise Restaurants operated in the USA (63 Restaurants); and (b) Affiliate Restaurants operated in the USA (2 Restaurants)
  • 2015 average percentage of annual revenue per quarter for the 63 Zoup! Franchise Restaurants operated in the USA that were open for a full 12 months during 2015
  • 2015 average payroll costs, including compensation for the general manager, as a percentage of gross sales, for the 2 Zoup! Restaurants owned and operated by the franchisor’s affiliates for a full 12 months during 2015
  • 2015 average cost of goods sold (food and paper), as a percentage of gross sales, for the 2 Zoup! Restaurants owned and operated by the franchisor’s affiliates for a full 12 months during 2015
  • 2015 average ticket information for the 63 Zoup! Franchise Restaurants opened for the full 12 months during 2015

Section I – Background Information

Commitment to Quality Food

Zoup! was founded in 1998 in Southfield, Michigan by Eric Ersher. Ersher, whose original business Michigan Foods made soup and spice mixes for other restaurants, was inspired to open Zoup! by consumer demand for high quality soups. Ersher felt that soup had always been an afterthought in restaurants and worked for a year with an experienced chef to develop fresh soup with premium ingredients.

Though the restaurant’s main focus was soup, they quickly added salads and sandwiches to meet customers’ requests for more variety.

Franchising began in 2003 after Ersher opened a few more Zoup! locations in the Detroit area. In 2009, Richard Simtob, a respected franchise executive, joined Zoup! Fresh Soup Co. LLC to help foster the company’s franchising growth. Zoup! now has 88 locations in the United States and Canada.

Slow and Steady Growth

Though Zoup! has been around for almost two decades, they have not seen rapid expansion. This is by design, as Eric Ersher and the other leaders of Zoup! are committed to providing quality products and cultivating a caring corporate environment. Zoup!’s leaders tend to look for franchisees that understand Zoup!’s passion and commitment to providing fresher and better quality foods.

Though they’ve been slow to expand, Zoup! has been pretty successful; system-wide sales rose from $38.2 million in 2014 to $47.6 million in 2015, a 25% increase.

Rather than pushing wide expansion, the company is focused on opening more locations in already established areas, mainly in the Northern U.S. and Canada. Although they are taking their growth slowly, Zoup! hopes to have 100 locations by the end of 2016.

Customer Feedback Drives Changes

Eric Ersher believes that adapting to meet consumer demands is what drives franchise growth. He feels that Zoup! fits with consumers’ growing demands for fresher, cleaner, less processed foods.

From the beginning of the company, Zoup! has always used customer feedback to make changes to its restaurants, including the addition of salads and sandwiches early in the restaurant’s inception.

Zoup! is committed to providing quality customer service and makes sure to respond to every customer comment within 24 hours. They maintain a database of customer comments and use it to implement future changes.

On July 20, 2016, Zoup! honored their patrons with a customer appreciation day. All bowls of soup were only 98 cents to commemorate the year Zoup! was founded. Fan favorites Lobster Bisque and Chicken Pot Pie were available at all locations.

Zoup! Creates and Sells Its Own Broth

Zoup! and its customers felt that there was no one out there making high quality authentic broth. To remedy the situation, Zoup! decided to make its own broths, both to use in its own soups and for consumers to buy. The broths, sold under the name Good, ReallyGood™ Broth, took three years to develop, and started selling in 2012.

All their broths have simple ingredients, are GMO free, and gluten free. The broths also contain no preservatives, antibiotics, or hormones. Zoup!’s broths are available in four flavors: Beef Bone Broth, Chicken Bone Broth, Veggie Savory Vegan, and Low Sodium Chicken.

Consumers can purchase the broths in select grocery stores in states that have Zoup! restaurants.

Summer Best in Bowl

Zoup! claims to have more than 100 proprietary soup recipes and each location serves 12 varieties that rotate daily. To celebrate the summer, Zoup! asked customers to vote for their favorite soups in 8 different categories: Seafood, Enlightened, Brothy Chicken, Vegan, Cheese, Meat, Specialty Chicken, and Gluten Free.

The winners, which include Shrimp and Crawfish Etouffee, Mulligatawny, Old-Fashioned Chicken Noodle, Spicy Black Bean Chili, Loaded Baked Potato, Hearty Vegetable Beef, Curry Thai Chicken, and Fire Roasted Tomato Bisque, are on the menu rotation at all locations for the whole summer.

In addition to the Best in Bowl flavors, three gazpachos (Cucumber Gazpacho, a classic Gazpacho, and Soba Noodle Gazpacho), are currently being offered.

Holding Out in the Bottom Half

Zoup! has continued to maintain its position in the upper 300s of Entrepreneur Magazine’s Franchise 500 list. For the 2016 list, Zoup! ranked at No. 314, dropping from No. 309 on last year’s list. Zoup! reached its highest position at No. 300 in 2012 and had its lowest rank in 2014 at No. 332.

Section II – Estimated Costs

  • Please click here for detailed estimates of Zoup! 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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