FDD Talk 2016: The Hungry Howie’s 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 Hungry Howie’s franchise opportunity, including relevant news updates

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

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

• 2015 average gross sales for the 290 franchised, 29 affiliated, and all 319 Hungry Howie’s restaurants (separately stated) that were open for the entire 52-week period from December 28, 2014 through December 27, 2015

• 2015 average gross sales, food costs, paper costs, and labor costs for the 214 franchised, 29 affiliated, and all 243 Hungry Howie’s restaurants (separately stated) that provided select cost information in income statements submitted to the franchisor for the entire 52-week period from December 28, 2014 through December 27, 2015

Section I – Background Information

A Successful Partnership

In 1973 in Taylor, Michigan, James Hearn decided to turn a small, old hamburger stand into a pizza delivery/carryout restaurant. Hearn hired a young man named Steve Jackson to be one of his delivery drivers. This meeting would turn out to be fruitful as three years later, in 1976, Jackson and Hearn became business partners and set the foundation for what Hungry Howie’s is today.

The duo expanded the business and opened a few more locations in the area surrounding Taylor. In 1982, they decided to start franchising when Hearn wanted to take their pizza idea down to Florida. He became Hungry Howie’s first franchisee and until his death in 2013 at the age of 72, he owned and operated more than 200 locations throughout Florida.

Jackson stayed behind, to continue to run the company in Michigan. Today, Jackson is the CEO and President of Hungry Howie’s.

The company expanded rapidly throughout the ’80s and by the end of the decade, Hungry Howie’s had 160 locations. Since the ’80s, Hungry Howie’s has had consistent growth. Today, they have more than 600 locations across 21 states.

Commitment to Quality and the Original Flavored Crust

One of Hungry Howie’s greatest strengths is the company’s commitment to quality. They believe in using only the freshest ingredients and their dough is made fresh daily at each of their locations. This desire to provide the best pizza possible has been present throughout the restaurant’s history.

During the company’s explosive growth in the 80s, Hearn and Jackson established Hungry Howie’s Distribution, Inc. They did this to ensure quality control and to keep their products consistent across all locations. The Michigan commissary opened in 1986 and a year later, the Florida commissary opened.

Around the time their distribution centers launched, Hearn created Hungry Howie’s signature flavored crust. The Original Flavored Crust would become the restaurant’s claim to fame. Pizza Hut and Domino’s have recently adopted the flavor crust idea, offering their own flavored crust options since 2014 and 2010 respectively.

Hungry Howie’s has 8 main crust flavors, which are Butter, Garlic Herb, Asiago Cheese, Butter Cheese, Sesame, Ranch, Onion, and Cajun. In addition to their regular flavors, they have limited-run variations like Sriracha, Italian Herb, and Loaded Baked Potato.

Rebranding and Digital Overhaul

In May of 2016, Hungry Howie’s reported continued same store sales growth for 24 consecutive quarters. According to their report, they achieved over $342 million in sales for 2015. The restaurant’s tremendous success can be attributed to their dedication to changing when things aren’t working out. They have recently re-branded and have remodeled some of their locations, moving toward a more modern look for their restaurants.

Not only has Hungry Howie’s made physical remodels, but they have overhauled their website and introduced a newer, simpler online ordering system. In fact, the company has been dedicated to developing a better IT system since after the 2008 recession hit.

They invested six figures toward creating their own internal digital system and they now have something they call HOME or Howie’s Online Management Exchange. It is a company-wide system that can pull data across all locations so the company and franchisees can monitor their performance.

Through HOME, anyone accessing the system is able to see things like sales made online, average ticket amount, sales by product, average delivery, and much more. Part of the HOME initiative was updating their Point of Sale system. Their current POS and online ordering system have made things much easier for their employees and customers. Ticket sales have gone up 30% since the changes.

Fundraising and Charity

Since 2009, Hungry Howie’s has been raising money for the National Breast Cancer Foundation. Every October, they sell their pizzas in pink boxes with the NBCF logo. A portion of every pizza sold during the month goes to the NBCF.

Throughout the month, customers have the opportunity to donate directly to the NBCF through Hungry Howie’s. In return for a donation of at least $10, the restaurant gives these customers a gift certificate for a free, large one-topping pizza. So far, Hungry Howie’s has raised over $1.5 million for the foundation.

In addition to their charitable donations, Hungry Howie’s has a fundraising program they call Dough-Raising. Through the program, organizations sell gift certificates for a one-topping medium pizza. Each certificate comes in its own mini version of Hungry Howie’s classic yellow box. Organizations have the ability to set their own prices for the certificates, though Hungry Howie’s recommended price is $7. It costs anyone participating in the fundraiser $3 per certificate, so at the recommended price, an organization can earn $4 per sale.

Top 100 on Entrepreneur’s Franchise 500

Hungry Howie’s consistently ranks in the top 100 on Entrepreneur’s annual Franchise 500 list. For 2016, Hungry Howie’s has landed at the No. 88 spot on the list. This is down a bit from 2015’s ranking of 80.

Hungry Howie’s hasn’t always ranked on Entrepreneur’s list; they ranked from 2006-2009, but dropped off the list for the next two years. They made their comeback in 2012 at No. 79. The pizza franchise achieved its highest rank in 2013 at No. 78 and they had their lowest rank in 2008 at No. 102.

Section II – Estimated Costs

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

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