FDD Talk 2017: What You Need to Know About the McAlister’s Deli 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 McAlister’s Deli franchise opportunity, including relevant news updates

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

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

• 2016 average net sales by quartile for the 301 franchised Traditional McAlister’s Deli Restaurants that operated throughout all of Fiscal Year 2016

• 2016, 2015, 2014, 2013, and 2012 average net sales for the affiliate-owned and franchised Traditional McAlister’s Deli Restaurants that operated throughout all of Fiscal Year 2016, 2015, 2014, 2013, and 2012, respectively

• 2016 average total revenue; cost of sales; gross profit; labor and benefits; advertising expenses; telephone, utility, and professional expenses; other operating expenses; occupancy expenses; royalty fees; total operating expenses; and EBITDA from operations for the 138 franchised Traditional McAlister’s Deli Restaurants that operated throughout all of Fiscal Year 2016

Section I – Background Information

10 Things You Need to Know About the McAlister’s Deli Franchise

Celebrates 400th Restaurant with Free Sandwiches

1.  Near the end of April, McAlister’s Deli hit a major brand milestone with the opening of its 400th restaurant (in Cedar Hills, Texas). To celebrate the occasion and to thank its loyal customers, McAlister’s gave away free club sandwiches with the purchase of a glass of McAlister’s Famous Tea to anyone who downloaded and placed their order through the McAlister’s mobile app from May 1-4.

2.  Paul Macaluso, president of McAlister’s Deli, said that the company’s long-term goal is to open a location in every state and that there are “still tons of opportunities” for McAlister’s to expand across the U.S. Macaluso added that although McAlister’s intends to continue to grow, it doesn’t want to overextend itself because it wants to ensure that it can support its franchisees and leverage its supply chain.

3.  Over the next few years, McAlister’s is targeting key states such as Florida, Georgia, Iowa, and Texas. At the time of the 400th location’s opening, McAlister’s said that it plans to open 33 additional restaurants by the end of 2017.

New Fall Menu

4.  At the beginning of October, McAlister’s Deli released its new fall menu, which includes two limited-time offers. The two new seasonal menu items are the Garlic Herb Roast Beef Sandwich and Salted Caramel Cookies.

5.  The Garlic Herb Roast Beef Sandwich features premium, tender roast beef, topped with cheddar cheese, herb mayo, tomato, and spring mix, served on toasted 9-grain bread. It is available as a whole sandwich or a half sandwich with McAlister’s “Choose 2” option. The Salted Caramel Cookies blend caramel with crunchy sea salt and is freshly baked in-house like all of McAlister’s cookies.

Adds Lemonade Tea to Beverage Menu

6.  In July, to follow up on National Iced Tea Month in June, McAlister’s added Lemonade Tea to
its beverage menu at all of its locations. The Lemonade Tea combines freshly brewed McAlister’s Famous Tea with lemonade that is made with pure cane sugar, just like McAlister’s tea. The company said that the addition of the lemonade to its iced tea, which is made with Rainforest Alliance Certified™ tea leaves, provides customers with a “year-round beverage alternative without having to sacrifice their beloved tea.”

7.  Paul Macaluso, president of McAlister’s Deli, said, “Our Lemonade Tea is the perfect pairing, allowing guests the opportunity to continue enjoying our famous tea with a vibrant, new twist. This launch solidifies our commitment to beverage innovation while complementing a variety of our menu options, including our fresh, seasonal offerings.”

Company History

8.  McAlister’s Deli was founded in 1989 by Don Newcomb in Oxford, Mississippi. A few years earlier, a film crew turned an old gas station in the area into a 1950s style diner, which Newcomb bought after the production company was done using the site. With the help of his two sons and his dentist office manager, Debra Bryson, Newcomb turned the movie set into a real sandwich shop called Chequers. They quickly changed the name to McAlister’s Deli (the maiden name of Newcomb’s wife) to avoid any confusion with the Checker’s franchise.

9.  A second McAlister’s Deli was opened in 1992 in Hattiesburg, Mississippi and Newcomb started franchising in 1994. In 2004, Newcomb sold McAlister’s Deli and went on to start the fast-casual chain Newk’s Eatery. Today, McAlister’s Deli has grown beyond Mississippi and there are about 400 locations across 28 states.

Entrepreneur’s Franchise 500

10.  McAlister’s Deli has appeared on Entrepreneur’s annual Franchise 500 list six times in the last 10 years (it did not appear from 2010-2013). The company’s highest rank was No. 23 in 2017, while its lowest rank was No. 164 in 2014.

Section II – Estimated Costs

• Please click here for detailed estimates of McAlister’s Deli 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 McAlister’s Deli’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 – Statement of Average Net Sales by Quartiles for Franchised Traditional Restaurants (Fiscal Year 2016)