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

by Franchise Chatter on September 26, 2016

in Fast Casual Restaurant Franchise, FDD Talk 2017: Food Franchises, Franchise Earnings, Pizza Franchises

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MOD Pizza Exterior 2

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

  • Section I – Background information on the MOD Pizza franchise opportunity, including relevant news updates
  • Section II – Estimated initial investment for an MOD Pizza franchise, based on Item 7 of the company’s 2016 FDD
  • Section III – Presentation and analysis of MOD Pizza’s financial performance representations, based on Item 19 of the company’s 2016 FDD, including information on the:
  • 2015 average and median weekly net sales, cost of goods sold, total labor, and prime cost (i.e. cost of goods sold plus total labor) for the 21 company-operated MOD Pizza Restaurants that were open and operating for a minimum of 64 weeks as of December 27, 2015 (the end of the franchisor’s fiscal year 2015) and had been operated continuously during the period between December 29, 2014 and December 27, 2015

Section I – Background Information

MOD Pizza Opens First UK Location

MOD Pizza solidified its first international market in June 2016 when it entered the United Kingdom with a restaurant in Leeds.

The fast-casual pizza restaurant chain had signed a joint venture agreement in September 2015 with Sir Charles Dunstone and business partner Roger Taylor, who plan to open a number of other UK sites.

John Nelson was in December 2015 named CEO of MOD’s UK operations and worked closely with Dunstone and Taylor for the first UK opening. Nelson, most recently operations director for Nando’s U.K., has more than 20 years of experience developing restaurant and retail concepts in the UK.

Restaurant Chain Celebrates Diversity, Rewards Personality

The Leeds restaurant expects to hire some staffers who come from underprivileged backgrounds or who have struggled in life, including former criminal offenders, which has been a theme for MOD Pizza co-founders Scott and Ally Svenson. MOD Pizza celebrates diversity and individuality and considers personality and passion more important than previous food experience when hiring workers.

MOD Pizza pays a base salary of $10.50 per hour, considerably higher than the federal minimum wage of $7.25. Employees who work more than an average of 26 hours per week, are eligible for vision and dental benefits.

Chain Raises $32 Million in Equity Funding Round

MOD Pizza, which plans to double its unit count in 2016 to nearly 200 locations, raised $32 million in an equity funding round in March 2016. The funds will go toward growth for the fast-casual pizza restaurant chain. The funding round was led by Perella Weinberg Partners, a boutique investment bank that also led the chain’s $45 million funding round in March 2015. So far, MOD has raised about $106 million from the bank and a small pool of private investors.

The chain will primarily open company-owned locations but will also develop several multi-unit franchise partnerships.

In addition to entering the UK, MOD Pizza announced plans to enter six new markets in the U.S. in 2016, including Kansas, Kentucky, Missouri, Ohio, South Carolina and Wisconsin.

MOD ended 2015 with 92 stores, including 80 corporate locations.

MOD Surpasses 125 Locations

MOD Pizza was founded in Seattle, Washington, in 2008 by Scott and Ally Svenson, who previously founded Seattle Coffee Company, which was sold to Starbucks in 1998.

The pizza chain currently has more than 125 locations in the United States. The chain opened its 100th store Feb. 10, 2016, in Downey, California.

Individuality in Pizzas

Handmade pizzas are cooked in less than three minutes in 800-degree ovens. Customers can choose pizzas from the menu or have their own creations made to order.

Those seeking a spicy meal might enjoy the Calexico, which features chicken, jalapenos, mozzarella and gorgonzola cheeses, hot buffalo sauce and MOD red sauce. For milder flavor and a meat-free meal, there’s the Tristan, with roasted red peppers, mushrooms, pesto and mozzarella cheeses. Mild sausage covers the Dominic, along with red onion, sliced tomatoes, fresh chopped basil, asiago and white sauce.

In addition to artisanal pizzas, MOD Pizza also sells hand-tossed salads, homemade milkshakes, lemonades and iced teas, as well as local craft beers and wines.

EY Entrepreneur of the Year Award Goes to Co-Founders

The chain’s co-founders received the EY (Ernst & Young) Entrepreneur of the Year award in June 2016 in the Emerging category for the Pacific Northwest. The award was presented at a gala event in Seattle. The Svensons were chosen by an independent panel of judges and will advance to the national program.

Asparagus Graces New Pizza

MOD Pizza embraced asparagus in 2016 in its veggie-heavy pizza, The Cooper. The pizza features roasted asparagus, red peppers, red onion, Italian sausage, mozzarella and ricotta cheeses, and basil.

Section II – Estimated Costs

  • Please click here for detailed estimates of MOD Pizza 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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