FDD Talk 2016: The Rocky Mountain Chocolate Factory 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 Rocky Mountain Chocolate Factory franchise opportunity, including relevant news updates

• Section II – Estimated initial investment for a Rocky Mountain Chocolate Factory franchise, based on Item 7 of the company’s 2016 FDD

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

• average annual gross retail sales for the top 25%, middle 50%, lowest 25%, and all 187 franchised Rocky Mountain Chocolate Factory Stores that had been open for at least 12 months as of the end of the company’s most recent fiscal year, February 29, 2016 (this information is for the 12 months prior to that date)

• actual annual gross retail sales for the top 5 and bottom 5 of the top 140 (or 75%) of the 187 Rocky Mountain Chocolate Factory Stores in the sample

Section I – Background Information

Rocky Mountain Chocolate Factory’s Flexible Footprints Offer Sweet Choices Anywhere

Rocky Mountain Chocolate Factory is one of those stores that can show up just about anywhere, from a street-front location to an airport kiosk, because of the flexibility of the stores’ footprints.

With locations around the world, the brand’s kiosk, in-line and full-store footprints can be found along sidewalks, in shopping centers, in resorts and in airport terminals, offering the temptation of sweet treats to children and adults alike.

The company is based in Durango, Colorado, where chocolates and confections are handmade in its 52,000-square-foot factory and delivered via its refrigerated trucks.

So Many Choices

Rocky Mountain Chocolate Factory creates about 300 types of chocolates and other candies, from basics such as fudge and fine boxed chocolates to seasonal treats for holidays and other special occasions.

The company’s signature candy is the Bear, a paw-sized treat made of caramel, roasted nuts and chocolate. Also popular are butter creams, nut clusters, truffles and toffee, as well as a king-sized peanut butter cup called the Bucket. The company also now sells sugar-free and no-sugar added candies.

Whether for immediate consumption or to be packaged in decorative boxes, bags and tins, these treats are designed to make people happy, which is the company’s tagline:  “Making people happy since 1981.”

Customers Can Watch Candy Being Made

Individual stores prepare some items, including fudge, caramel and candy apples, chocolate candies and confections, in view of customers, using traditional methods including cooking in copper kettles on gas-fired stoves and cooling on marble slab cooling tables.

Move to Durango Spurred Creation of Rocky Mountain Chocolate Factory

The company was founded in 1981 by Frank Crail, who had recently moved to Durango with his wife to start their family. Deciding there was a need for a chocolate shop in Durango, Crail borrowed $50,000 to start the business, partnering with two investors who later left the company. He’s still the company CEO.

Franchising began in 1982 with two locations in Colorado Springs, Colorado, and Park City, Utah.

RMCF, Kellogg’s Combine for Premium Chocolate Cereal

The company partnered with Kellogg’s in 2013 to create a Rocky Mountain Chocolate Factory cereal featuring sweetened corn flakes, sliced almonds and chocolate pieces. A trial run produced positive reviews and customer interest, so in 2014 Kellogg’s produced the cereal nationwide.

Company Continues Decline in Franchise 500

Rocky Mountain Chocolate Factory was ranked No. 369 on Entrepreneur’s Franchise 500 list for 2016. It’s the lowest ranking for the company, which has been dropping each year since achieving a high of No. 135 in 2010.

Numbers of locations have also been dwindling, although international locations have risen as domestic locations have fallen. At the end of 2015, the company had 193 franchised U.S. stores, 90 international stores, and three corporate stores. At the end of 2009, conversely, Rocky Mountain Chocolate Factory had 330 locations: 276 franchised stores in the United States, 47 in other countries, and seven owned by the company.

International Franchisees Sought

Primary international growth markets for Rocky Mountain Chocolate Factory are in Asia, the Middle East, Europe, Central America and South America, with secondary growth markets in Mexico, Australia, India and Indonesia.

Current markets are in Canada, Japan, the Republic of Korea, United Arab Emirates, the Kingdom of Saudi Arabia, and the Philippines.

Section II – Estimated Costs

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

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