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FDD Talk 2017: What You Need to Know About the sweetFrog Franchise Opportunity (Financial Performance Analysis, Costs and Fees)

by Franchise Chatter on August 21, 2017

in FDD Talk 2017: Food Franchises, Franchise Earnings, Frozen Yogurt Franchises

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sweetFrog Frozen Yogurt Interior Photo by Brambleton

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

  • Section I – Background information on the sweetFrog franchise opportunity, including relevant news updates
  • Section II – Estimated initial investment for a sweetFrog 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 sweetFrog franchise, based on Items 5 and 6 of the company’s 2017 FDD
  • Section IV – Presentation and analysis of sweetFrog’s financial performance representations, based on Item 19 of the company’s 2017 FDD, including information on the:
  • average, median, high, and low monthly net sales for each of the 12 calendar months in 2016 for the 143 Franchised sweetFrog Shops that operated as Franchised Shops for the entire fiscal year 2016
  • 2016 average, median, high, and low annual net sales for the top, third, second, and bottom quartiles of the 143 Franchised sweetFrog Shops that operated as Franchised Shops for the entire fiscal year 2016
  • 2016 average gross sales, net sales, cost of goods sold, labor, rent and utilities, marketing, royalty, miscellaneous, and net operating income for the four Affiliate-Owned sweetFrog Shops whose Net Sales were the closest to the overall Franchise average Net Sales for 2016

Section I – Background Information

11 Things You Need to Know About the sweetFrog Franchise

Nationwide Acquisition and Re-Branding Push

1.  In early May, sweetFrog announced that it has plans to launch a nationwide acquisition and re-branding push to add as many U.S.-based locations as possible to the sweetFrog franchise in 2017 and beyond.

2.  According to Patrick Galleher, sweetFrog’s CEO, the award-winning brand’s reputation, supply chain, and cost structure make the frozen yogurt franchise an attractive fit for any brand seeking to be acquired and any store owner considering a re-brand. Galleher says, “There has never been a better time to launch an acquisition and re-branding push on behalf of sweetFrog.”

3.  Some of sweetFrog’s recent achievements that Galleher cited in an effort to boost interest in the brand include a NASCAR sponsorship agreement with rising driving star Gray Gaulding and reaching 2 million active sweetFrog customer loyalty program members earlier in 2017.

Hosting Lemonade Stands to Raise Money for Fight Against Childhood Cancer

4.  At the start of August, sweetFrog announced that it will be joining in the fight against childhood cancer through its partnership with Alex’s Lemonade Stand Foundation. From August 15 to September 15, participating sweetFrog locations will serve pink lemonade sorbet in sweetFrog’s unique version of a lemonade stand and collect donations to fund research projects searching for better treatments and cures for all childhood cancers.

5.  Matt Smith, Chief Marketing Officer of sweetFrog, said, “sweetFrog shops are the perfect setting for Alex’s Lemonade Stands.”

Adds Fan Favorite Dole Whip to Menu

6.  At the end of June, sweetFrog launched a partnership with Dole Packaged Foods to showcase Dole Whip as the newest addition to sweetFrog’s menu of frozen treats. sweetFrog’s CEO Patrick Galleher said this about Dole Whip: “It’s developed a real passionate following, because it was only previously available at the amusement parks. Now that sweetFrog has added Dole Whip at all locations this summer, our loyal customers don’t have to travel to California or Florida to enjoy this outstanding frozen dessert option.”

7.  Dole Whip is available in 6 flavors, including original pineapple, mango, orange, strawberry, raspberry, and lemon, at all sweetFrog stores. Phil Hipsky, sweetFrog’s Director of Product Development, says that the addition of Dole Whip to sweetFrog’s menu is a response to consistent customer demand for more non-dairy options.

Company History

8.  sweetFrog Premium Frozen Yogurt was founded in 2009 by Derek Cha in Richmond, Virginia. After Cha and his family moved to Richmond from the West Coast, Cha felt that his new community would benefit from having a West Coast-style frozen yogurt shop. Cha was also attracted to the simplicity of the business model and the low costs associated with establishing a frozen yogurt store.

9.  After receiving a minority investment from Boxwood Capital Partners, LLC in 2012, Cha began franchising the sweetFrog concept both domestically and internationally. By the end of the following year, there were nearly 200 sweetFrog locations around the world.

10.  In early February 2015, Boxwood Capital Partners, LLC acquired sweetFrog Enterprises, LLC and James Patrick Galleher, the Managing Director at Boxwood Capital Partners, became the Chief Executive Officer of sweetFrog. Today, there are over 340 sweetFrog frozen yogurt shops operating in 26 states with international locations in the United Kingdom, Egypt, and the Dominican Republic.

Entrepreneur’s Franchise 500

11.  sweetFrog has appeared on Entrepreneur’s annual Franchise 500 list twice since the company began franchising in 2012. The franchise ranked on the list in 2014 at No. 306 and in 2015 at No. 355. Although sweetFrog has not appeared on Entrepreneur’s main list since 2015, it did rank on the magazine’s Top New Franchises list in 2017 at No. 42.

Section II – Estimated Costs

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

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

  • Please click here for detailed information on sweetFrog’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

  • Tables 1 and 2 reflect historical financial performance information related to sweetFrog’s current Franchised Shops that operated as Franchised Shops for the entire fiscal year 2016.
  • sweetFrog excluded 93 franchised Shops that were not open the entire period. Tables 1 and 2 also exclude sweetFrog Shops that met those criteria but that:  (1) were permitted to close for some period of time (such as seasonal operations, limited daily hours, or limited days of operation and temporary closures) (14 Franchised Shops); (2) were operated in non-traditional locations (1 Franchised Shop); (3) did not report sales data to the franchisor (10 Franchised Shops); (4) were sold by a licensee to a new franchisee who took over under a franchise agreement (8 Franchised Shops); and (5) were sold by sweetFrog to franchisees (8 Franchised Shops).
  • The performance of sweetFrog’s Affiliate-Owned Shops and Licensed Shops are not reflected in Table 1 or Table 2.
  • The information in Table 1 and Table 2 includes only sales information for the included Franchised Shops, so you should not draw any inferences with respect to any Franchised Shop’s historic costs and expenses based on this information or profitability because that information is not presented.
  • In some instances, franchisees are not contractually required to install sweetFrog’s approved POS system or sweetFrog has made an accommodation based upon a specific request. 130 of the 143 Franchised Shops included have installed the approved POS system and the data for Tables 1 and 2 was polled from that POS system; 13 of the 143 Franchised Shops included have not installed the approved POS system and the data for Tables 1 and 2 was obtained from sales information manually reported by the franchisee in connection with royalty fee remittance. sweetFrog combined the two sets of data to prepare Tables 1 and 2. The information is unaudited.

Part 1 – Historic Average and Median Net Sales of Select Franchised Shops Along with High and Low Net Sales by Date Range for Date Ranges From January 1, 2016 to December 31, 2016

January 1 to 31

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