In this FDD Talk 2017 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 2017 FDD
- Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for a Great Harvest Bread Company franchise, based on Items 5 and 6 of the company’s 2017 FDD
- Section IV – Presentation and analysis of Great Harvest Bread Company’s financial performance representations, based on Item 19 of the company’s 2017 FDD, including information on the:
- 2016 average and median annual gross sales for the (a) 25 bakery cafes, i.e., either bread-baking or non-bread-baking; (b) 13 traditional bread companies selling only bread and therefore not considered a bakery cafe; and (c) 97 traditional bread companies also selling sandwiches and salads, also not considered a bakery cafe (separately stated)
- 2016 average and median annual gross sales for the (a) 4 bread-baking (hub) locations that have 1 or 2 related non-bread-baking (spoke) locations; (b) 5 non-bread-baking (spoke) locations by themselves; and (c) 16 single-site bread-baking locations (separately stated)
- 2016 average gross sales, variable costs, fixed costs, total operating expenses, and net operating income for the (a) 16 single-site bread-baking locations and (b) 4 sets of hub/spoke locations with a total of 9 bakery cafes (separately stated)
Section I – Background Information
12 Things You Need to Know About the Great Harvest Bread Company Franchise
New Franchise Model Sparks Growth
1. In late June, Great Harvest Bread Company reported that its revolutionary new “hub and spoke” franchise model, announced in early 2017, is starting to pay off. Since the start of the year, Great Harvest has grown to nearly 200 locations in the U.S. and there are agreements in place to open another 45 by the end of 2018. The primary growth regions that the brand has targeted are the Northeast and Southern regions of the U.S.
2. Great Harvest CEO Mike Ferretti said that the company has already signed 30 franchise agreements with existing bakery cafe owners, “which is a testament to [its] already tremendous owners, quality products, and national growth plans.”
3. The new hub and spoke franchise model allows franchisees to purchase a large territory that includes a single Great Harvest bakery operations and as many café-only units as they desire in surrounding towns. The bakery locations will be equipped with ovens and enough space to produce and deliver the hand-milled breads to the nearby café-only locations throughout the day. The model allows Great Harvest owners to own multiple locations under one agreement, while competing against segment rivals in all territories.
4. Great Harvest says that the new model is helping the company reach its annual projections and that there will be over 200 locations open by the end of the year. The brand’s next target is major metro areas like New York, Philadelphia, Boston, and Buffalo.
Files to Block Panera Bread’s $7.5 Billion Acquisition
5. In late April, Great Harvest Bread Company filed an objection with the Federal Trade Commission over its competitor Panera Bread Co.’s $7.5 billion acquisition by JAB Holding. Great Harvest said that the deal will give Panera an unfair advantage because the bakery cafe chain will dominate the breakfast industry and could interfere with Great Harvest’s arrangement to sell Peet’s Coffee, a JAB company.
6. Great Harvest has another pending suit against Panera Bread, which it filed in 2016 over trademark infringement stating that Panera’s slogan “Panera Bread, food as it should be” is “confusingly similar” to Great Harvest’s “Bread. The way it ought to be.”
7. The latest update on both cases was made through an interview with Great Harvest president Eric Kenshin in a Franchise Times article. At the time of the article’s publication, both cases were still pending and Panera Bread declined to comment on said legal matters. There is no current news (at the time of this writing) about either of Great Harvest’s cases and Panera Bread is now listed as a JAB company on JAB Holding’s website.
Launches Sandwich of the Week Club for Mother’s Day
8. At the start of May, Great Harvest Bread Company rolled out its first ever Sandwich of the Week Club promotion in time for Mother’s Day. For $43, customers were able to sign up for the Sandwich of the Week Club, which allowed them to receive their pick of a sandwich, salad, or loaf of bread from participating Great Harvest bakery cafes every other week for 12 weeks.
9. A coupon code was emailed or texted to Sandwich of the Week Club recipients and each code was good for up to three weeks. The offer was available from May 1 to 14 (Mother’s Day). Due to the success of the Mother’s Day promotion, Great Harvest brought back the Sandwich of the Week Club offer in June for Father’s Day.
10. Great Harvest Bread Company was founded in 1976 by Pete and Laura Wakeman in Great Falls, Montana. Prior to opening the first Great Harvest bakery and getting married in 1975, Pete and Laura baked scratch-made whole grain bread to help pay for their college tuition. A few years after opening the first Great Harvest bakery, the Wakemans’ friends and neighbors asked about starting their own Great Harvest bakeries and the first franchised location was opened in 1978 in Kalispell, Montana.
11. Over the next few decades, Great Harvest continued to grow and new locations opened across the United States. In 2001, the Wakemans sold the company, which is now owned by Great Harvest employees and officers, including CEO Mike Ferretti and president Eric Keshin. Today, there are nearly 200 Great Harvest bakery and cafe locations across the U.S.
Entrepreneur’s Franchise 500
12. Great Harvest Bread Company has appeared on Entrepreneur’s annual Franchise 500 list every year in the last decade. The company’s highest rank was No. 155 in 2011, while its lowest rank was No. 411 in 2016.
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 2017 FDD.
Section III – Initial Franchise Fee, Royalty Fee, Marketing Fee, and Other Fees
- Please click here for detailed information on Great Harvest Bread Company’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 historically have been 4 principal types of Great Harvest bread companies: (1) a traditional bread company baking bread and other products for retail sale; (2) a traditional bread company that has added sandwiches to its menu but no seating; (3) a single-site, bread-baking “bakery cafe” with seating for 30 people most of the year, a menu that includes franchise-recommended sandwich options, salads, and/or grain bowls, and an inviting “eat-in” atmosphere with product lines for all day parts; and (4) a “hub and spoke” operation where 2 or more “bakery cafes” owned by the same franchisee work together, with the primary “hub” location baking bread and then supplying it to the “spoke” locations, but where the spoke locations still bake their own non-bread products.
- Great Harvest currently offers franchises only for Great Harvest bread companies operating as single-site, bread-baking bakery cafes (described in (3) above) or, if the franchisee intends to have a “hub and spoke” operation (described in (4) above), Great Harvest bread companies that are bread-baking (“hub”) locations and non-bread-baking (“spoke”) locations.
Part 1 – Average and Median Annual Gross Sales System Wide by Category of Bread Company
- Part 1 shows average and median annual Gross Sales for the 12 months ended December 31, 2016, reported by Great Harvest bread companies falling into the following categories: (a) any type of bakery cafe, i.e., either bread-baking or non-bread-baking; (b) a traditional bread company selling only bread and therefore not considered a bakery cafe; and (c) a traditional bread company also selling sandwiches and salads, also not considered a bakery cafe.
- Although not considered bakery cafes under Great Harvest’s current definition, Great Harvest included the operating results of the bread companies described in (1) and (2) because they still represent the majority of Great Harvest bread companies currently operating in the system.
- The bread companies whose annual Gross Sales for the year ended December 31, 2016 are represented in Part 1, were open and operating for the full 12-month period ended December 31, 2016, and reported their sales to Great Harvest.