In this FDD Talk 2017 post, you’ll learn the following:
- Section I – Background information on the Marco’s Pizza franchise opportunity, including relevant news updates
- Section II – Estimated initial investment for a Marco’s Pizza 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 Marco’s Pizza franchise, based on Items 5 and 6 of the company’s 2017 FDD
- Section IV – Presentation and analysis of Marco’s Pizza’s financial performance representations, based on Item 19 of the company’s 2017 FDD, including information on the:
- 2016 net royalty sales for the 638 System-wide Stores (598 Franchised Stores and 40 Company-Managed Stores) that were open for business for 52 weeks in Marco’s Pizza’s 2016 fiscal year ended December 25, 2016, by sales range
- 2016 average, high, and low net royalty sales for the 638 System-wide Stores (598 Franchised Stores and 40 Company-Managed Stores) that were open for business for 52 weeks in Marco’s Pizza’s 2016 fiscal year ended December 25, 2016
- 2016 average, high, and low net royalty sales for the 40 Company-Managed Stores that were open for business for 52 weeks in Marco’s Pizza’s 2016 fiscal year ended December 25, 2016
- 2010-2016 average net royalty sales of Stores in operation for at least 1 full year as of the end of each fiscal year listed in the chart
- change in average net royalty sales for the last 6 years (dollar amount and percent of change from the prior year listed, and dollar amount and percent of change over the results of 2010)
- number of System-wide Stores with net royalty sales over $1,000,000, by year for the last 6 fiscal years
- 2016 average net royalty sales, direct costs (food, paper, direct labor, management salary), indirect labor, operating expenses, fixed expenses (including rent), advertising expenses, and store level income before owner’s compensation, taxes, depreciation, interest, and administration for the 37 Company-Managed Stores that were open and managed by Marco’s Pizza’s affiliates during the entire 52-week period ending December 25, 2016
Section I – Background Information
12 Things You Need to Know About the Marco’s Pizza Franchise
Hires Industry Veterans to Lead Development
1. In March of this year, Marco’s Pizza hired John Ramsay and Travis Edmonson to lead the brand’s future growth. Ramsay joins the company as its new Vice President of Franchise Development Services and will oversee development of new territories while driving franchise sales at Marco’s Pizza. He comes to Marco’s with nearly three decades of experience in franchising and real estate. He spent 28 years in restaurant development for leading national brands such as Jack in the Box, TGI Fridays, Long John Silver’s, and Sbarro.
2. Edmonson was appointed as Vice President of Franchise Sales and Development and will orchestrate the development and execution of effective franchise sales programs. He has worked with various pizza and restaurant concepts such as J&H Foods, Cheezies Pizza, and Campero USA on the global and regional levels.
3. Earlier in the year, Marco’s Pizza said that it was on track toward reaching its goal of 1,500 stores open by 2020. The company says that it currently opens about three stores a day and will add over 100 new locations by the end of 2017, bringing its count up to over 900 units.
CEO Receives Award from Nation’s Restaurant News
4. In July, Nation’s Restaurant News (NRN) chose Marco’s Pizza CEO Jack Butorac as the 2017 recipient of NRN’s Golden Chain Award. The award recognizes restaurant executives for outstanding leadership, strong company performance, career achievements, and contributions to the industry and communities served.
5. Butorac was honored during the annual Multi-Unit Foodservice Operators Conference (MUFSO) held October 1 to 3. He said that while he was honored to receive the award, Marco’s success is owed to “Pat Giammarco, who had the original vision to bring authentic Italian pizza to the United States.” Butorac said: “The success and growth of the brand is a collective effort of our incredible executive leadership team headed by Bryon Stephens, our committed corporate staff, all of our franchisees and employees at the store level who deliver on our brand promise each and every day.”
Partnership with Pure Leaf Iced Tea
6. At the beginning of June, Marco’s Pizza announced that it was launching its “Magnifico Summer” program, which offered customers a large Ultimate Magnifico Pizza paired with a 64-ounce Pure Leaf Iced Tea for $12.99. At the time, the Ultimate Magnifico Pizza was Marco’s newest Magnifico Pizza and featured regular pepperoni, Old World Italian pepperoni, crumbled sausage, and Italian sausage.
7. In addition to the special offer, Marco’s hosted a “Magnifico Summer” social media sweepstakes. To enter the contest, customers were asked to share photos on Marco’s Facebook page that portrayed the ways they make their summer Magnifico at the pool, beach, picnics, or backyard gatherings with friends. The winners received summer “ParTEAs” with free pizza and tea.
8. Marco’s Pizza’s Chief Marketing Officer Steve Seyferth said that Marco’s “sought out a real, leaf-brewed beverage to complement [its] superior pizza product” and that the “pairing provides an elevated experience for [its] customers.”
9. Marco’s Pizza was founded in Orgeon, Ohio in 1978 by Pasquale “Pat” Giammarco, who emigrated to the United States when he was nine years old. Marco’s is the only U.S. pizza chain that was started by a native Italian. Prior to opening the first Marco’s location, Giammarco grew up working in his family’s pizzeria in Michigan. He and his father spent years refining and perfecting their sauce, which is still used at all of Marco’s locations today.
10. Over the next 20 years, Marco’s continued to grow and by 2002 there were around 123 locations. Around this time, restaurant industry luminary Jack Butorac took a look at Marco’s and realized that the brand had a lot of potential. Butorac felt that the pizza was delicious but that Giammarco “didn’t know how to brand it and differentiate it from other brands out there.” Butorac began working as a consultant for Giammarco and later expressed interest in purchasing the franchising rights to Marco’s Pizza.
11. In 2004, Butorac took over leadership of the company and announced that the brand would go national. Under Butorac’s ownership, Marco’s has grown to over 830 locations in over 30 states, the Bahamas, India, and Puerto Rico.
Entrepreneur’s Franchise 500
12. Marco’s Pizza has ranked on Entrepreneur’s annual Franchise 500 list every year in the last decade. The company’s highest rank was No. 38 in 2017, while its lowest rank was No. 237 in 2008.
Section II – Estimated Costs
- Please click here for detailed estimates of Marco’s Pizza 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 Marco’s Pizza’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
- Marco’s Pizza has prepared this financial performance representation to reflect the Net Royalty Sales of 598 Marco’s Pizza Stores operated by Franchisees (“Franchised Stores”), and 40 Company-Managed Stores (as defined below), that were open during the entire 52-week period ending December 25, 2016.
- This information does not include the performance of 132 new Stores that were not open for the entire 52-week period in 2016.
- This financial performance representation also reflects certain operating results for 40 Company-Managed Stores that were open and in operation for the entire fiscal year ending December 25, 2016, based on internally prepared accounting statements.
- “Company-Managed Stores” include all Stores owned by Cleveland Marco’s, LLC and all other Stores that Cleveland Marco’s, LLC manages for a fee that are owned by Marco’s Pizza’s affiliated entities including Authentic Pizza, LLC, Marco’s Indiana, LLC, and 45 Pizza, LLC (collectively, “Company-Managed Stores”).
- Cleveland Marco’s, LLC has an equity ownership interest in Authentic Pizza, LLC, Cleveland Marco’s, LLC and Marco’s Pizza’s CEO has an equity interest in Marco’s Indiana, LLC and 45 Pizza, LLC.
Chart 1 – Net Royalty Sales of System-Wide Stores (2016), By Ranges
- Chart 1 below provides the ranges of the Net Royalty Sales for the 638 System-wide Stores (598 Franchised Stores and 40 Company-Managed Stores) that were open for business for 52 weeks in Marco’s Pizza’s 2016 fiscal year ended December 25, 2016.