In this FDD Talk 2017 post, you’ll learn the following:

• Section I – Background information on the Capriotti’s franchise opportunity, including relevant news updates

• Section II – Estimated initial investment for a Capriotti’s franchise, based on Item 7 of the company’s 2017 FDD

• Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for a Capriotti’s franchise, based on Items 5 and 6 of the company’s 2017 FDD

• Section IV – Presentation and analysis of Capriotti’s financial performance representations, based on Item 19 of the company’s 2017 FDD, including information on the:

• 2016 average and median unit volume for all franchised Capriotti’s Restaurants open during all of 2016, all franchised Capriotti’s Restaurants open 2 years or less as of December 31, 2016, all franchised Capriotti’s Restaurants open more than 2 years as of December 31, 2016, and all franchised Capriotti’s Restaurants open more than 10 years as of December 31, 2016, respectively

• 2016 average and median unit volume for all affiliate-owned Capriotti’s Restaurants open during all of 2016, all affiliate-owned Capriotti’s Restaurants open 2 years or less as of December 31, 2016, all affiliate-owned Capriotti’s Restaurants open more than 2 years as of December 31, 2016, and all affiliate-owned Capriotti’s Restaurants open more than 10 years as of December 31, 2016, respectively

• 2016 average and median total sales, total cost of goods sold, store level salary, store level bonus – salary, payroll and related, prime cost, operating expense, rent, management fee (royalty), marketing fees – national, marketing fees – coop, total non-controllable expense, and EBITDA for the Capriotti’s Restaurant in Las Vegas Downtown Summerlin and the 7 affiliate-owned Capriotti’s Restaurants operated for a full year in 2016, respectively

Section I – Background Information

12 Things You Need to Know About the Capriotti’s Franchise

Plans for Expansion to 500 Locations by 2022

1.  In an interview in early March, David Bloom, Chief Development Officer of Capriotti’s, revealed that the sandwich chain was gearing up to become a large national brand. The company plans to move carefully, but wants to eventually have 500 locations open by an estimated date of 2022. Capriotti’s will open about 15 locations in 2017, 30 in 2018, 60 in 2019, and will continue to double the number of openings each year.

2.  Bloom says that although Capriotti’s plans to greatly increase its presence, the company does not want to become another Subway. Capriotti’s will continue to use high quality, slow cooked ingredients just like the original founders did.

Opening 12 Locations in Salt Lake City, Utah

3.  In early June, Capriotti’s announced that it had signed three franchise agreements to bring a total of 12 new locations to the Salt Lake City area of Utah over the next three years. The first of the 12 planned locations will open in October of this year in Daybreak, Utah.

4.  The new franchise agreements were signed by brothers Tyler and Wade Martin, who will open three
locations in the next two years; Jordan Blackburn, who already owns a location in St. George, Utah and will open three additional stores in the Utah Valley area; and Kevin Cornett, who will open six locations in northern Salt Lake City, with plans to open two by the end of 2017.

Celebrating 41st Anniversary

5.  On June 12, Capriotti’s celebrated its 41st anniversary with two special offers for its loyal customers. Select Capriotti’s locations offered 9-inch Bobbies (the chain’s signature turkey sandwich) for $4.

6.  The other offer, which was available through Capriotti’s mobile rewards app, let customers upgrade their small (9-inch) sub to a medium (12-inch) sub for free. The upgrade coupon was only available from June 12 to June 17 for Capriotti’s rewards members.

New Seasonal Item

7.  To kick off the summer season, Capriotti’s debuted a limited-time menu item, the Chicken Chipotle Crunch Sub. The sandwich, which is available from July 5 to August 31, features grilled premium chicken with melted American cheese and topped with chipotle ranch dressing, lettuce, crispy cheddar onions, and tomatoes.

Company History

8.  Capriotti’s was founded in 1976 by Lois Margolet and her brother, Alan, in Wilmington, Delaware. The first shop was located in a boarded up building beneath the Margolets’ apartment. The business was named after their grandfather, Philip Capriotti.

9.  The Margolets lived in the Little Italy neighborhood of Wilmington, where sandwich shops were abundant. So in order to stand out from the competition, the Margolets roasted fresh whole turkeys overnight to use in their sandwiches.

10.  Over the next decade, the business continued to grow, and in 1987, the Margolets’ cousin, Diane Rizzo, joined the business and opened additional locations throughout Delaware. Franchising officially began a few years later in 1991.

11.  In 2008, franchisees Ashley Morris, Jason Smylie, and a group of investors from Las Vegas bought Capriotti’s and today, Morris serves as the company’s CEO. By the end of 2008, Capriotti’s had 44 locations; there are now over 100 sandwich shops across the U.S.

Entrepreneur’s Franchise 500

12.  Capriotti’s has appeared on Entrepreneur’s annual Franchise 500 list almost every year in the last decade, except from 2007 to 2009. The company’s highest rank was No. 234 in 2011, while its lowest rank was No. 493 in 2017.

Section II – Estimated Costs

• Please click here for detailed estimates of Capriotti’s franchise costs, based on Item 7 of the company’s 2017 FDD (updated).

Section III – Initial Franchise Fee, Royalty Fee, Marketing Fee, and Other Fees

• Please click here for detailed information on Capriotti’s initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2017 FDD.

Section IV – Financial Performance Representations (Item 19, 2017 FDD) and Analysis

• This historical financial performance representation discloses the average and median annual gross sales of all franchised (a total of 74) and affiliate-owned (a total of 16) Capriotti’s Restaurants in the United States that were open and operating during all of 2016.

• It also discloses the average and median annual gross sales during 2016 of (i) the franchised (a total of 7) and affiliate-owned (a total of 4) Capriotti’s Restaurants that had been open for 2 full years or less as of December 31, 2016; (ii) the franchised (a total of 66) and affiliate-owned (a total of 12) Capriotti’s Restaurants that had been open for more than 2 full years as of December 31, 2016; and (iii) the franchised (a total of 29) and affiliate-owned (a total of 7) Capriotti’s Restaurants that had been open for more than 10 years as of December 31, 2016.

• This financial performance representation does not include the results of 9 Capriotti’s Restaurants — 1 affiliate-owned and 8 franchised — that opened during 2016 (and therefore were not open for the full calendar year), 6 Capriotti’s Restaurants that closed during 2016, and 2 Capriotti’s Restaurants that operate at non-traditional locations (one of which operates only seasonally and one of which operates less than 30 hours per week).

• This financial performance representation also contains (i) an actual partial operating financial statement for 2016 for 1 affiliate-owned and operated Capriotti’s Restaurant and (ii) an actual average partial operating financial statement for 2016 for 7 affiliate-owned and operated Capriotti’s Restaurants (which includes the results of the Capriotti’s Restaurant in clause (i)).

• The franchisor obtained the gross sales information for franchised Restaurants from sales reports submitted by franchisees. The franchisor has not independently audited that information.

• “Gross Sales” is defined in the Franchise Agreement as the total of all revenue derived from operating the Restaurant, whether from sales for cash or credit, and irrespective of collection, including sales of merchandise, products, and services, but excluding sales tax, proceeds from the sale of equipment not in the ordinary course of business, and franchisor pre-approved promotional discounts (provided physical evidence of the promotion/coupon is retained), and food purchased by employees for their own consumption as outlined in the Manual.

Part 1 – Sales Volume Information

Franchised Restaurants

2016 Results for All Franchised Restaurants Open During All of 2016