FDD Talk 2017: What You Need to Know About the Andy’s Frozen Custard Franchise Opportunity (Financial Performance Analysis, Costs and Fees)

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

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

• Section II – Estimated initial investment for an Andy’s Frozen Custard franchise, based on Item 7 of the company’s 2017 FDD

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

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

• 2016 actual, average, and median gross sales for the 13 franchised and 15 company-owned Andy’s Frozen Custard Stores that operated during Andy’s entire 2016 fiscal year period from January 1, 2016 until December 31, 2016

• 2016 actual, average, and median gross sales, cost of goods sold, gross profit, and adjusted gross profit for the 15 company-owned Andy’s Frozen Custard Stores that operated during Andy’s entire 2016 fiscal year period from January 1, 2016 until December 31, 2016

Section I – Background Information

11 Things You Need to Know About the Andy’s Frozen Custard Franchise

Opens 50th Location

1.  In early June, the company celebrated a milestone by opening its 50th location in Fort Worth, Texas. The location is the seventh Andy’s Frozen Custard store in the Dallas, Texas area and the first in North Fort Worth.

2.  Andy Kuntz, President of Andy’s Frozen Custard, says that while 50 is a big number, the company is “looking forward to the day when there are ten times as many Andy’s to serve the public.”

Plans for Major Growth

3.  Although Andy’s Frozen Custard has been in business for over 30 years, the company’s growth has remained moderate. But in a 2016 interview, President Andy Kuntz said he plans to grow the chain to 75 locations by the end of 2017. According to Kuntz, the company “wants to be the Chick-fil-A of frozen custard” where “quality of product and quality of service is what wins.”

4.  Andy’s Frozen Custard plans to expand into new markets such as Dallas, Texas; Oklahoma City, Oklahoma; Denver, Colorado; Phoenix, Arizona; and Nashville, Tennessee over the next two years. Kuntz is also targeting Chicago, Illinois; Kansas City and St. Louis, Missouri; Tulsa, Oklahoma; and Austin, Texas.

5.  Kuntz disclosed plans to move Andy’s headquarters to a much larger space in a renovated historic building in downtown Springfield, Missouri. The new space will feature a 14-foot custard cone suspended from the third floor ceiling that is visible from the first floor entryway. The offices will be located on the top two floors along with a kitchen and workout facility for employees to use.

Seasonal Treats

6.  Andy’s Frozen Custard offers a rotating menu of seasonal treats and typically brings them back each year. For summer 2017, Andy’s is offering the Peach Sundae, which is Andy’s vanilla frozen custard topped with peaches, and the Key Lime Pie Concrete, which is Andy’s vanilla frozen custard blended with a slice of key lime pie.

7.  Other seasonal flavors, which are available during specific times of the year, include: Pumpkin Pie Concrete, Andy Nog Shake, Cookie Casanova Sundae, Candy Cane Concrete, Blueberry Concrete, Strawberry Shortcake Sundae, and many more items that make use of seasonal ingredients.

Company History

8.  Andy’s Frozen Custard was founded in 1986 by John and Carol Kuntz in Osage Beach, Missouri. The business was named after the Kuntzes’ son, Andy. The couple wanted to bring frozen custard to their home state of Missouri after tasting it for the first time in Wisconsin. The Kuntzes learned everything they could about running a frozen custard shop from Leon and Doris Schneider, who had owned a Milwaukee frozen custard shop since 1942.

9.  After expanding to Springfield, Missouri, Andy Kuntz and his wife Dana, started working at the shop to learn everything about the business. In 2008, after John Kuntz died, Andy took over the company and continues to run Andy’s Frozen Custard with his wife and mother.

10.  Andy’s Frozen Custard began franchising in 2005 and today, there are 50 shops in 9 states with more opening soon.

Entrepreneur’s Franchise 500

11.  Although Andy’s Frozen Custard has been operating for over 30 years, the company has not focused on growth until very recently and has yet to appear on Entrepreneur’s annual Franchise 500 list.

Section II – Estimated Costs

• Please click here for detailed estimates of Andy’s Frozen Custard 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 Andy’s Frozen Custard’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

• There were 44 Andy’s Frozen Custard Stores operating as of December 31, 2016, 28 of which operated during Andy’s entire 2016 fiscal year period from January 1, 2016 until December 31, 2016. The franchisor calls these 28 Andy’s Frozen Custard Stores the “Covered Stores.”

• Franchisees operate 13 of the Covered Stores (the “Franchised Covered Stores”) and Andy’s affiliates operate the other 15 Covered Stores (the “Company-Owned Covered Stores”).

• All statistics in these financial performance representations cover Andy’s 2016 fiscal year.

• 13 of the Covered Stores are located in Missouri, 4 in Arkansas, 5 in Illinois, 3 in Oklahoma, and 3 in Texas.

• 17 of the Covered Stores opened in 2012 or earlier (2 of the Company-Owned Covered Stores opened more than 26 years ago and 1 of the Company-Owned Covered Stores opened more than 16 years ago).

• The franchisor expects that franchised Andy’s Frozen Custard Stores will offer the same products and services as the Covered Stores. The Covered Stores generally reflect the mix of characteristics that the franchisor expects for new franchised Andy’s Frozen Custard Stores.

• For example, all of the Covered Stores offer walk-up counter service (with little or no indoor seating), 27 of the Covered Stores are in freestanding locations and 1 Covered Store is in an in-line location.

• The franchisor compiled the information in the below financial performance representations from financial information its franchisees reported to it and the internal, unaudited financial statements of its affiliates, AFCI and AFCS, for the fiscal year ended December 31, 2016. These financial statements were not prepared in accordance with Generally Accepted Accounting Principles.

Part 1 – Gross Sales for All Covered Stores

Gross Sales for All Franchised Covered Stores

• In this first table, the franchisor includes the annual Gross Sales for its 2016 fiscal year for the 13 Franchised Covered Stores.