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FDD Talk 2016: The Great Harvest Bread Company Franchise Opportunity (Financial Performance Analysis, Estimated Costs, and Other Important Stuff You Need to Know)

by Franchise Chatter on November 30, 2016

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

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Great Harvest Bread Company Photo by jhofker

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

  • Section I – Background information on the Great Harvest Bread Company franchise opportunity, including relevant news updates
  • Section II – Estimated initial investment for a Great Harvest Bread Company franchise, based on Item 7 of the company’s 2016 FDD
  • Section III – Presentation and analysis of Great Harvest Bread Company’s financial performance representations, based on Item 19 of the company’s 2016 FDD, including information on the:
  • 2014, 2013, and 2012 average gross sales for Great Harvest Bread Company bakeries that (a) were open and operating for the full 12-month period ended December 31 in the year indicated and (b) have reported their sales to the franchisor for the period listed
  • 2014 vs. 2013 and 2013 vs. 2012 comparable store average sales percentage change and comparable store median sales percentage change for Great Harvest Bread Company bakeries that (a) have been open for at least 12 full months at the end of the earliest period presented and (b) have reported gross sales to the franchisor for the full periods presented (i.e. all 24 months presented)
  • 2014, 2013, and 2012 average gross sales, variable costs, fixed costs, total operating expenses, and net operating income for Great Harvest Bread Company bakeries open 12 months or more as of January 1 of the reporting year
  • pro forma worksheets that provide a detailed breakdown of certain average costs (as a percentage of sales) from 2014 for 127 reporting Great Harvest Bread Company bakeries

Section I – Background Information

Pete Wakeman was no stranger to the art of baking bread. After all, he’s been doing it his entire life. As a young child he loved helping his Aunt bake bread. By high school he was baking bread for all his friends. During summer vacations from school, he had his own roadside bakery stand.

He and his wife, Laura, had been hiking extensively in Montana, and when he heard about a bakery that was being sold, the couple jumped at the chance and bought it, thereby starting the first Great Harvest Bread Company in Great Falls, Montana. That was in 1976.

They started franchising the concept in 1978. From 2007 through 2014 the number of locations varied, ranging between 209 and 212 units. In 2015 that number dropped to 198 and as of now in 2016 there are 195 locations.

Here’s how Great Harvest Bread Company keeps the ovens hot and loaves fresh in the bakery segment:

Fresh, Wholesome Bread

It doesn’t get much better than Great Harvest if what you’re looking for is fresh-baked bread using a home-grown approach. The chain sources its wheat kernels from the high plains of Montana, almost always from family farms. The wheat kernels are then actually milled on-site to make fresh flour daily at each location.

This is a huge distinguishing difference for the chain. Yes, lots of places like to boast about how their dough is freshly made each day, but how many can say their flour is freshly made each day? It’s a key aspect of why the bread is simply superior at Great Harvest.

And the basic bread recipe uses just five ingredients: Freshly milled whole wheat flour, water, yeast, salt, and local honey. Now take a look at the ingredients list on the bottom of a loaf of bread purchased from your grocery store and see the difference.

Participatory Franchising

Great Harvest isn’t your typical franchise operation. When the Wakemans sold their interests in the chain, the new owners (who were already involved in the company as Chairman and President/CEO) wanted the franchisees to be more deeply involved in the whole company and not just their individual stores.

As a result, the Franchise Agreement Board, composed of elected franchisees, has to approve any changes made to the company’s franchise agreement. It’s a progressive, out-of-the-box way to run a chain, and the franchisees seem to love it.

Franchisees also get an unusually high degree of autonomy to establish their locations as unique bakeries rather than having to follow a cookie-cutter approach. Of course the franchisees still have to reflect the Great Harvest brand, but there’s plenty of room for individual expression.

More Than Bread

You’ve no doubt heard that ages old notion that people cannot live by bread alone. There was a time when the company’s menu consisted entirely of its original signature bread, but over the years much has been added.

Each bakery is unique, but you’re likely to find some mix of the following: Gourmet sandwiches (including vegetarian options); espresso and coffee bar; artisan hard-crusted breads; muffins, scones, cookies, and bars to satisfy any sweet tooth; the original five-ingredient Honey Whole Wheat; seasonal and regionally unique bread varieties; granolas, bakery mixes, dog biscuits, and other specialties.

Section II – Estimated Costs

  • Please click here for detailed estimates of Great Harvest Bread Company 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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