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

by Franchise Chatter on October 1, 2017

in FDD Talk 2017: Food Franchises, Franchise Earnings, Frozen Dessert Franchise, Ice Cream Franchise



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

  • Section I – Background information on the Baskin-Robbins franchise opportunity, including relevant news updates
  • Section II – Estimated initial investment for a Baskin-Robbins 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 Baskin-Robbins franchise, based on Items 5 and 6 of the company’s 2017 FDD
  • Section IV – Presentation and analysis of Baskin-Robbins’ financial performance representations, based on Item 19 of the company’s 2017 FDD, including information on the:
  • average sales by geographic region for continental U.S. Baskin-Robbins single brand restaurants that have been open for business to the public for at least one year during a one-year measuring period from October 25, 2015 to October 22, 2016
  • average sales by geographic region for continental U.S. Dunkin’ Donuts/Baskin-Robbins combo restaurants in freestanding and shopping center/storefront locations (separately stated) that have been open for business to the public for at least one year during a one-year measuring period from October 25, 2015 to October 22, 2016
  • average cost of goods sold and labor costs by region for continental U.S. Baskin-Robbins restaurants (and separately, for Dunkin’ Donuts/Baskin-Robbins combo restaurants) for the period from November 1, 2015 to October 31, 2016

Section I – Background Information

15 Things You Need to Know About the Baskin-Robbins Franchise

First Ever Free Sampling of New Drink and New Seasonal Items



1.  On National Coffee Ice Cream Day (September 6), Baskin-Robbins announced that it had some upcoming special deals on its Cappuccino Blast, a blended coffee and ice cream beverage. On September 22, Baskin-Robbins held its first nationwide Cappuccino Blast sampling from 3 to 7 p.m., during which customers who came into participating locations received a free 3.5 oz. sample of the drink.

2.  To celebrate the fall season, Baskin-Robbins is offering a small Cappuccino Blast to customers for only $2.99 during the months of September and October.

3.  In addition to the Cappuccino Blast promotions, Baskin-Robbins released its seasonal Pumpkin Cheesecake ice cream and Quarterback Crunch, as well as the September Flavor of the Month, Belgian Waffle.

4.  Pumpkin Cheesecake is made with NABISCO Ginger Snap cookie pieces and pumpkin and cheesecake-flavored ice cream with a cinnamon cream cheese-flavored ribbon; Quarterback Crunch, which is available during the fall football season, is made with vanilla-flavored ice cream with chocolate-flavored coated rice crunchies and a caramel ribbon; and Belgian Waffle features Belgian waffle pieces and praline pecans in a maple praline-flavored ice cream swirled with a caramel ribbon.

Partners with DoorDash for Door-to-Door Delivery Across the U.S.

5.  In early July, Baskin-Robbins announced that it had partnered with DoorDash, the mobile door-to-door delivery service that connects customers with restaurants in their area, to have Baskin-Robbins delivered straight to its customers.



6.  According to the press release, the service will be available at more than 600 Baskin-Robbins locations in 22 cities, including Atlanta, Georgia; Houston and Dallas, Texas; Chicago, Illinois; Las Vegas, Nevada; Los Angeles, California; New York City; Phoenix, Arizona; Seattle, Washington; and many more.

7.  To celebrate the launch of the service, Baskin-Robbins and DoorDash delivered Polar Pizza Ice Cream Treats to children’s hospitals in select cities on July 14. The children’s hospitals that received the Polar Pizzas are partners of the Joy in Childhood Foundation (formerly the Dunkin’ Donuts & Baskin-Robbins Community Foundation), whose mission is to bring joy to sick and hungry kids.

Plans to Remove Artificial Colors from U.S. Menus by End of 2018

8.  At the beginning of March, Dunkin’ Brands, Inc., the parent company of Baskin-Robbins and Dunkin’ Donuts, announced plans to remove artificial colors from its brands’ products in the U.S. The move is part of the company’s ongoing efforts to offer customers high-quality products and cleaner menu labels.

9.  Baskin-Robbins’ product development teams (as well as Dunkin’ Donuts’) have been working with their suppliers to eliminate synthetic colors from the company’s food and beverages and replace them with naturally sourced colors by the end of 2018. Baskin-Robbins will remove the synthetic colors from its ice cream sold both in store and in the quarts and pints sold at retail locations, as well as its syrups, sauces, sprinkles, and beverages.

10.  Supplier-branded ingredients produced by other companies (such as Oreo and NABISCO) that are used as toppings, ice cream inclusions, or decorative elements will be exempt from the change. The company also says that it may take longer to find replacements for the decorative elements on its cakes.



Company History

11.  Baskin-Robbins was founded in 1945 by brothers-in-law Burton “Burt” Baskin and Irvine “Irv” Robbins in Glendale, California. From an early age, both Baskin and Robbins had a love for ice cream and after World War II, they were both eager to start an ice cream shop. Initially, Baskin and Robbins each had their own ice cream shops, but by 1948 they had six stores between them and decided to open the first franchised Baskin-Robbins location.

12.  The brand’s signature “31 Flavors” slogan and iconic pink and brown polka dots came from the Carson-Roberts advertising agency in 1953. Over the next two decades, Baskin-Robbins would continue to expand in the U.S. and in the 1970s, the brand opened its first international locations in Japan, Saudi Arabia, South Korea, and Australia.

13.  Baskin-Robbins was owned by its founders until 1967 when it was acquired by the United Brands Company. It was then sold to British food company, J. Lyons and Co. in 1973. J. Lyons and Co. went through a few mergers and eventually became Allied Domecq, which owned Dunkin’ Brands, Inc., Baskin-Robbins’ parent company.

14.  Dunkin’ Brands, Inc. is its own company today and it still owns Baskin-Robbins as well as Dunkin’ Donuts. Baskin-Robbins has continued to grow exponentially over the years and today it is considered the world’s largest ice cream shop chain with nearly 8,000 locations around the globe.

Entrepreneur’s Franchise 500

15.  Baskin-Robbins has ranked on Entrepreneur’s annual Franchise 500 list every year in the last decade except in 2007. The company’s highest rank was No. 13 in 2009, while its lowest rank was No. 56 in 2013 and 2017. Baskin-Robbins has also appeared on Entrepreneur’s Top Global Franchises list several times in the past ten years: in 2008 at No. 14, in 2012 at No. 44, in 2014 at No. 6, and in 2016 at No. 8.

Section II – Estimated Costs

  • Please click here for detailed estimates of Baskin-Robbins 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 Baskin-Robbins’ 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 and notes provide financial performance representations that are historical, and that are based on information from existing Baskin-Robbins Restaurants (exclusive of Dunkin’ Donuts/Baskin-Robbins Combo Restaurants, Alternative Point of Distribution Restaurants, Baskin-Robbins Express, and Restaurants operating under Territorial Franchise Agreements) that have been open for business to the public for at least one year during a one-year measuring period from October 25, 2015 to October 22, 2016.
  • Tables 3 to 5 and notes provide financial performance representations that are historical, and that are based on information from existing Dunkin’ Donuts/Baskin-Robbins Combo Restaurants that have been open for business to the public for at least one year during a one-year measuring period from October 25, 2015 to October 22, 2016.

Part 1 – Sales Data (Tables 1, 3, and 4)

  • The sales figures are compiled by using historical sales that are reported to Baskin-Robbins by franchisees. Baskin-Robbins has not audited or verified the reports.
  • This sales data does not include sales tax. The vast majority of the Restaurants that comprise this data are franchised, although Baskin-Robbins affiliates may own and operate a small number of Restaurants at any given time.
  • Sales in states or regions with a higher concentration of Restaurants that have been in operation for a substantial period of time tend to have higher sales than states or regions with a lower concentration of Restaurants that have been in operation for a lesser time period.
  • Many of the Restaurants included in this data have been open and operating for several years. These franchisees have achieved their level of sales after spending many years building customer goodwill at a particular location.
  • Your sales will be affected by your own operational ability, which may include your experience with managing a business, your capital and financing (including working capital), continual training of you and your staff, customer service orientation, product quality, your business plan, and the use of experts (for example, an accountant) to assist in your business plan.
  • Your sales may be affected by Restaurant location and site criteria, including traffic count and which side of the street your Restaurant is located, local household income, residential and/or daytime populations, ease of ingress and egress, seating, parking, the physical condition of your Restaurant, the size of your site, and the visibility of your exterior sign(s).
  • Additionally, many of the Restaurants included in the sales figures are freestanding Restaurants or located at the end of a strip center, and if your Restaurant is not, your sales could be substantially lower than the figures in the chart.
  • Individual locations may have layouts and seating capacities that vary from the typical location.
  • Other factors that could have an effect upon your sales may include consumer preferences, competition (national and local), inflation, local construction and its impact on traffic patterns, and reports on the health effects of consuming food similar to that served in the Restaurants, as well as the impact of federal, state, and local government regulations.
  • Your sales may be affected by consumer preferences for certain menu items over others, changes in the menu, and regional differences in products or product demand, including whether there are products not available to you or your region but sold in other regions. Menus are continually being revised, both adding and discontinuing products and product line extensions.
  • Sales may be affected by fluctuations due to seasonality (particularly in colder climates), weather, and periodic marketing and advertising programs. Inclement weather may cause temporary Restaurant closings in some areas.
  • The data below reflects historical sales. There is no assurance future sales will correspond to historical sales.
  • Many Baskin-Robbins franchisees actively pursue cake sales opportunities. If you do not, your sales may be negatively affected. Additionally, seasonality and weather may significantly affect sales of ice cream and related products.
  • Some individual Restaurants’ sales may include wholesale accounts and other distribution outlets, which may not be available to you. Not all of these opportunities have been successful for all participating franchisees.

Part 2 – COGS and Labor Data (Tables 2 and 5)

  • “COGS” means the cost of goods sold, including food, beverages, and items served or associated with the food or beverage, such as cups, napkins, straws, bags, plastic utensils, and wrapping paper.
  • “Labor” means crew, management, training, payroll tax, and workers’ compensation.
  • COGS and Labor are stated as a percentage of gross sales (excluding sales tax and discounts). The vast majority of Restaurants that comprise this data are franchised, although Baskin-Robbins affiliates may own and operate a small number of Restaurants at any given time.
  • The cost figures from franchised Restaurants are compiled from individual Restaurants by using cost data that are reported to Baskin-Robbins by franchisees. Baskin-Robbins has not audited or verified the reports, nor have franchisees confirmed that the reports are prepared in accordance with generally accepted accounting principles or in accordance with Baskin-Robbins’ definition of COGS and Labor.
  • Your costs will be affected by your own operational ability, which may include your experience with managing quick-service restaurant operations, your experience building and managing an organization, continual training of you and your staff, your business plan, and using experts (e.g. an accountant) to assist in your business plan. Your costs may be negatively affected by not adhering to Baskin-Robbins’ standards and system.
  • Many of the Restaurants included in this data have been open and operating for several years. Those franchises may have lower cost percentages due to years of experience managing costs. For new franchisees, COGS and Labor cost percentages may initially exceed those of experienced operators.
  • There is no assurance that future costs will correspond to historical costs because of factors such as inflation, changes in menu, and other variables.
  • Factors affecting your COGS include, but are not limited to, the price of raw materials; your ability to manage and implement proper controls of waste, ruin, loss, theft, and the portion sizes served to the public; regional differences; temporary shortages; seasonal and weather fluctuations; and fluctuations due to periodic marketing and advertising programs. Additionally, freight charges may be higher in some areas. If the cost of gasoline increases in the U.S., the cost of freight will rise as well.
  • The COGS data below reflects average Restaurant aggregate costs. Different food and beverage items have different cost percentages. Customer demand for products varies among Restaurants and regions and if your Restaurant sells a high percentage of high cost items, your food cost percentage will be higher than if you have a lower percentage of higher cost items.
  • Factors affecting your Labor include, among other things, the local labor market and any applicable federal or state minimum wage law; pending healthcare legislation, employee turnover, and your operational abilities, including your ability to train and retain employees; your compensation that may be included in labor, which varies among franchisees; menu; product mix; Restaurant layout; your salary and benefits programs; and scheduling. Restaurants must be staffed in accordance with Baskin-Robbins’ standards.
  • Some franchisees purchase finished products manufactured at another location. The cost of this finished product will vary depending upon the number of Restaurants being serviced by the manufacturing location and other factors. These franchisees may pay more for food costs but may pay less for other items such as labor, equipment, distribution, and rent.
  • COGS may be particularly affected by the fluctuations in the price of coffee and other items and ingredients.
  • Restaurants with lower sales may have higher COGS and Labor cost percentages because of less efficiencies and economies of scale, and more waste.
  • The retail sales price that you establish will also affect the COGS and Labor percentages.
  • If you are in a geographic area with fewer Restaurants, you may have higher COGS as a percentage of sales due to less distribution efficiencies.
  • The “Total Number of Restaurants/Combo Restaurants in Sample” in Tables 2 and 5 is a subset of the “Total Number of Restaurants/Combo Restaurants in Sample” in Tables 1, 3,  and 4 because not all Restaurants or Combo Restaurants reported COGS and Labor data for the twelve month reporting period.
  • All of the Restaurants or Combo Restaurants in Tables 2 and 5 reported at least one month of COGS and Labor data for the twelve month reporting period.

Table 1 – Continental U.S. Baskin-Robbins Single Brand Restaurants, Average Restaurant Sales (for the Period October 25, 2015 to October 22, 2016)

Total

Total Continental United States



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