FDD Talk 2017: What You Need to Know About the World of Beer 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 World of Beer franchise opportunity, including relevant news updates

• Section II – Estimated initial investment for a World of Beer 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 World of Beer franchise, based on Items 5 and 6 of the company’s 2017 FDD

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

• 2016 average sales of bottled beer; draft beer; spirits; wine; other beverages; food; loyalty, merchandise, and other items; and total sales for the 13 World of Beer Taverns owned and operated by the franchisor’s affiliates (collectively, the “Company Taverns”) that were open and operating for at least 12 full months as of December 25, 2016

• 2016 average, median, high, and low total sales for the 36 franchised World of Beer Taverns, in operation for at least 12 full months as of December 25, 2016, that have kitchens and sell tavern fare

• 2016 average, median, high, and low total sales for the 9 franchised World of Beer Taverns, in operation for at least 12 full months as of December 25, 2016, that do not have kitchens or sell tavern fare

Section I – Background Information

14 Things You Need to Know About the World of Beer Franchise

New Chief Operating Officer

1.  At the beginning of June, World of Beer announced that it had promoted Dave Reid to the new position of Chief Operating Officer. Reid is a 30-year veteran of the restaurant and hospitality industries. Prior to joining World of Beer, Reid served as chairman of the Florida Restaurant and Lodging Association and worked for 21 years with Miller’s Ale House.

2.  Paul Avery, president and CEO of World of Beer, said that the company is “excited to see [Reid] in the new role of Chief Operating Officer, as we believe it will bring great growth to our company and brand” and that Reid’s successful track record will assist World of Beer in its next stage of development.

Updated App Makes Beer Suggestions to Customers

3.  In mid-July, World of Beer updated its loyalty rewards app to include a new feature called “ALEgorithm,” which is a discovery engine that makes beverage recommendations as users narrow their taste preferences.

4.  Hannah Davis, Senior Director of Brand Marketing for World of Beer, said that the company used platforms such as Amazon, Netflix, and music service Pandora as inspirations while it was developing ALEgorithm. World of Beer partnered with Paytronix, the consumer rewards program provider, to develop the new feature.

5.  In order for ALEgortihm to make better suggestions to customers, they need to use the “thumbs up-thumbs down” interface often. Davis said that the more information customers provide to the app, the better the recommendations will be.

6.  By the start of August, more than 7,000 new users had signed up for the app and the company invited its existing app users (more than 200,000 users) to try the new program.

7.  Davis also said that World of Beer launched ALEgorithm to increase loyalty and speed of service. She said that in 2016, the company was evaluating the legacy loyalty program and noticed “a lot of people who weren’t swiping their cards because [the company was] requiring customers to buy a new beer to get points” and that “there are a lot of customers who come into World of Beer and don’t drink something new every time.”

8.  ALEgorithm will also help speed up staff service as servers will be able to make suggestions and provide beer samples quicker based on ALEgortihm’s recommendations. Davis said that the program will get to know customers over time and will shift its suggestions as a customer’s taste evolves and changes.

Multi-Unit Franchisee Chooses to Rebrand After Differences with Corporate Office

9.  Evan Matz, ex-franchise owner of three World of Beer bars in the Northern Virginia area, separated from the company in February and said that he will be reopening his businesses under the Crafthouse brand. Matz opened his three World of Beer franchises in the past five years, but said that over the last year and a half, he had been “butting heads” with World of Beer’s corporate office over “operational differences.”

10.  According to Matz, he decided to separate from World of Beer because “there are so many different things that needed to be elevated. World of Beer was just about beer, that was our main focus. And to me, it is more than beer, because people come to not just drink, they want to eat, and the food is an important aspect of it.”

Company History

11.  World of Beer was founded in 2007 by two best friends, Scott Zepp and Matt Lafon in Tampa, Florida. Prior to starting World of Beer, Zepp co-owned and operated a retail shop in Clearwater, FL selling premium beer from across the globe. He realized that there was increasing interest in beers from other countries, and so he partnered with Lafon to develop World of Beer.

12.  The bar and restaurant franchise features more than 500 beers, including almost 50 on tap, and offers burgers, wings, soups, sandwiches, flatbreads, and main course entrees such as salmon and steak.

13.  World of Beer is currently co-owned by Benjamin Novello, who is also the company’s Chief Development Officer, and Jim Pollard. The company’s growth has been steady over the last decade and today, there are over 75 World of Beer locations in the United States, as well as a few locations in China and South Korea.

Entrepreneur’s Franchise 500

14. World of Beer has yet to rank on Entrepreneur’s annual Franchise 500 list.

Section II – Estimated Costs

• Please click here for detailed estimates of World of Beer 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 World of Beer’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

Part 1 – Annual Sales Information for Company-Owned Taverns for 2016

• The following chart shows certain information regarding annual sales of 13 World of Beer Taverns owned and operated by the franchisor’s affiliates (collectively, the “Company Taverns”) that were open and operating for at least 12 full months as of December 25, 2016.

• “Sales” means all gross revenue derived from sales of products and services to customers of the Tavern, but excluding sales, use, or service taxes; customer refunds, adjustments, credits, and allowances.

• The Company Taverns that meet this criteria are located, and began serving tavern fare food, as follows:

• Brandon, Florida – serving tavern fare food since 2014
• Pensacola, Florida (Palafox) – serving tavern fare food since 2014
• Tampa, Florida (Westchase) – not serving tavern fare food
• Tampa, Florida (South) – serving tavern fare food since 2014
• Ft. Myers, Florida (Ft. Myers II) – serving tavern fare food since 2015
• Destin, Florida – serving tavern fare food since 2015
• Ft. Worth, Texas – serving tavern fare food since 2015
• Tampa, Florida (Fowler) – serving tavern fare food since 2015
• College Station, Texas  – serving tavern fare food since 2015
• New Orleans, Louisiana – serving tavern fare food since 2015
• Fayetteville, North Carolina – serving tavern fare food since 2015
• Louisville, Kentucky – serving tavern fare food since 2015
• Greensboro, North Carolina – serving tavern fare food since 2015

• The Company Taverns receive substantially the same services as those the franchisor offers to new franchisees. However, 11 of these Company Taverns receive centralized accounting, financial, and management services from the franchisor for a fee.

• The franchisor compiled the yearly sales information from information developed from its point-of-sale systems. The sales figures presented below are based on the accrual basis of accounting and may not conform to generally accepted accounting principles. Neither the franchisor, nor an independent certified public accountant, has independently audited or verified the information. This information may not be representative of the sales of Company Taverns in any other years.

• Certain fees you pay to the franchisor under the Area Development Agreement and Franchise Agreement and other differences between the expenses of Company Taverns and franchised Taverns are not reflected in the charts below. These fees and expenses include, for example, development fees, initial franchise fees, and royalty fees. In addition, interest expense will be incurred if you finance any part of the initial investment.

• All of the franchisor’s affiliates paid advertising contributions during the applicable periods presented below. WOB Palafox and WOB Westchase did not pay royalties during the applicable periods presented below. WOB Brandon, WOB South Tampa, WOB Fowler, WOB Ft. Myers II, WOB Forth Worth, WOB College Station, and WOB Fayetteville did pay royalty fees.

Brandon, FL (Opened October 2013)