FDD Talk 2016: The Kilwins Chocolates 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 Kilwins franchise opportunity, including relevant news updates

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

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

2015 average and median Gross Sales for the 89 Kilwins Stores that were in operation during the entire period of January 1, 2015 through December 31, 2015 and that reported Gross Sales to the franchisor, including 4 Stores that are seasonally operated and were not open for the entire 12-month period

2014 average Cost of Sales and Non-Owner Payroll Costs for the 50 franchised Kilwins Stores from whom the franchisor was able to obtain applicable information

2015 average Transaction Value for the 92 franchised Kilwins Stores that were in operation during the year January 1, 2015 to December 31, 2015 that reported complete transaction values to the franchisor, including Stores that intentionally operated seasonally for part of the year (as compared to Stores that may have been operating for part of the year because they opened or closed during 2015)

Section I – Background Information

This chain of confections stores got its start all the way back in 1947 when Don and Katy Kilwin opened their own bakery in Petoskey, Michigan, and then added candy-making into the proverbial mix. As it turns out, they liked making candy a lot more than baking, so in 1971 they sold off the bakery operation and honed in on their love of chocolate and candy-making.

The company has changed ownership twice in the ensuing decades. In 1978 Wayne and Lorene Rose bought Kilwins and started franchising the concept in 1982. In 1995 Don and Robin McCarty bought Kilwins from the Roses.

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Under their leadership, a more aggressive expansion of the chain has taken place. The number of locations has grown slowly over the past 10 years to reach its current total of 107, two of which are company-owned.

Here’s how Kilwins keeps the sweet tooth of many a customer more than satisfied:

The Menu

Everything at Kilwins is made fresh from superior ingredients. In the chocolate, toffee and caramel category, Kilwins is well known for its signature Tuttles (pecans and caramels combined with a variety of chocolates), single-origin chocolates (made from beans sourced from particular locations such as Mexico, Dominican Republic, Peru, etc.), Creams, Truffles, Clusters, even Salt Water Taffy Chews.

Next on the menu are a dozen different kinds of fudge, 14 choices of caramel apples, and 14 choices of Corns and Brittles. All those items are available for purchase online.

In addition, each location also makes and sells its own ice cream.

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Watch It Being Made

Each new Kilwins location has to meet a very specific requirement of being at least 15 feet wide because part of the Kilwins experience is watching the products being made before your very eyes. It’s a true spectacle that draws people in.

Changing Without Changing

While the business model has changed over the years with franchising and positioning it as a tourist attraction, the recipes have remained pretty much the same. All the basic recipes date all the way back to the Kilwins who developed their own recipes.

Don Kilwin eventually trained a new candy-maker, Hershel Dunshee, and Dunshee in turn trained the current head candy cook at Kilwins, Bill Hoffman, who’s been doing it since 1985.

They’ve even managed to maintain and continue to use much of the original equipment from the 1940s-1960s.

A Model That Works

Kilwins operates on a kind of novelty approach. Because of its theatrical display of candy-making, the context in which a location works best is one that is more tourist-oriented with lots of foot-traffic passing by. The candy-making show tends to catch people’s attention as they walk by. Beaches, boardwalks, and historic areas make great places to put in a Kilwins.

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Pressure in the Chocolate Market

The only drawback that faces all chocolate makers is the fact that supply of cacao from farmers remains about the same, even as global demand for chocolate continues to rise, particularly as the middle class in Asian countries is rapidly growing. The upshot is that prices may be going up for chocolate products everywhere.

Section II – Estimated Costs

Please click here for detailed estimates of Kilwins 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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FDD Talk 2016: The Kilwins Chocolates Franchise Opportunity (Financial Performance Analysis, Estimated Costs, and Other Important Stuff You Need to Know)