In this FDD Talk post, you’ll learn the following:
- Section I – Background information on the Sweetwaters Coffee & Tea franchise opportunity, including relevant news updates
- Section II – Estimated initial investment for a Sweetwaters Coffee & Tea 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 Sweetwaters Coffee & Tea franchise, based on Items 5 and 6 of the company’s 2017 FDD
- Section IV – Presentation and analysis of Sweetwaters Coffee & Tea’s financial performance representations, based on Item 19 of the company’s 2017 FDD, including information on the:
- 2016 total net sales for the 2 affiliate-owned and 3 franchised Sweetwaters Coffee & Tea Cafes (separately stated) that were open for the entire 2016 calendar year
- 2016 total net sales, cost of sales, gross margin, total labor, other operating expenses, rent, and net operating income for 2 Sweetwaters Coffee & Tea Cafes (1 affiliate-owned and 1 franchised, separately stated) that were in operation for 5 years or more as of December 31, 2016, and reported their cost information to Sweetwaters using the chart of accounts Sweetwaters designated for use in connection with its System
Section I – Background Information
9 Things You Need to Know About the Sweetwaters Coffee & Tea Franchise
Expanding Outside of Ann Arbor
1. In the two decades since the first location opened in Ann Arbor, Michigan in 1993, Sweetwaters Coffee & Tea only opened additional locations in the Ann Arbor area. However, in early 2016, the brand announced its plans to grow its franchising efforts. That same year, Sweetwaters opened a new location in Canton, Michigan, its first outside of Washtenaw County.
2. The brand has partnered with Ann Arbor franchising specialists Franworth to sell franchised locations to interested and qualified investors. Lisa Bee, owner of Sweetwaters Coffee & Tea, said that working with Franworth has helped the company build a foundation for expansion that ensures she can control quality and experience for her guests in cafes not directly owned by her and her partners. Bee added, “We want to make sure our stores always maintain the same attitude and atmosphere that store number one has. We’ve never wanted our stores to become cookie-cutter. Working with Franworth, we feel like we can definitely do that.”
3. In addition to growing throughout the rest of Michigan, Sweetwaters has two new locations in Ohio and one location in California that will be opening in early 2018. The first of the Ohio locations will open in Dublin in the Bridge Park mixed-use development. According to a press release, Sweetwaters will be the first coffee shop to open in Bridge Park. The location’s franchisee Alice McKeever said, “The walkable environment and neighborhood feel at Bridge Park are exactly what we’ve been searching for.” The other Ohio location will open in Columbus, while the California shop will be located in Walnut Creek.
Online Shop Features Coffee Subscription Boxes, Branded Gear, Specialty Coffees and Teas
4. Sweetwaters Coffee & Tea stays on top of trends with the items available in its online shop. One of the brand’s unique items is its coffee subscription box, which features coffees from small farms in remote places that aren’t available in its cafes. Every month, customers who sign up for the box receive either one or two bags of exclusive small batch coffee beans. Customers have a choice of paying monthly or doing a prepaid subscription for 3, 6, or 12 months. Prepaid subscriptions can also be given as gifts. The box for December featured Colombian Pájaro, a medium roast coffee from La Pradera Estate in San Gil, Colombia (north of Bogota).
5. In addition to the subscription boxes, Sweetwaters sells its specialty coffees and teas as well as branded merchandise. Some of the coffees available include Wei’s Furrawri, French Chicory, Mackinac Island Fudge, and the Arbor Ypsi Organic Blend. Sweetwaters sells two different flavors of its own bottled tea: Ginger Lemon and Ginger Raspberry, which are available by the case or individual bottles. The brand also sells several loose teas, including Cinnamon Spice, Dragon Pearl Jasmine, Mandarin Orange Rooibos, White Peony, and Goji Berry.
6. Sweetwaters’ branded merchandise include buttons, beanies, shirts, baseball caps, tumblers, and mugs.
7. Sweetwaters Coffee & Tea was founded in 1993 by Wei and Lisa Bee in Ann Arbor, Michigan. The Bees opened the first location near their alma mater, the University of Michigan. They were inspired by their love of food and drink, as well as their families’ restaurant businesses, to start their own coffeehouse.
8. Sweetwaters offers classic coffee fare alongside globally-influenced coffee and teas. Although the company is over 20 years old, its growth thus far has been fairly limited. The Bees started franchising in 2015 and today, there are seven locations open in Michigan and three more opening soon in Ohio and California.
Entrepreneur’s Franchise 500
9. Since Sweetwaters Coffee & Tea is a newer franchise, it has yet to earn a spot on Entrepreneur’s annual Franchise 500 list.
Section II – Estimated Costs
- Please click here for detailed estimates of Sweetwaters Coffee & Tea 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 Sweetwaters Coffee & Tea’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
- As of the end of Sweetwaters’ most recent fiscal year, it had 7 Cafes in operation. Of these 7 Cafes, 3 were affiliate-owned and 4 were franchised as of December 31, 2017.
- In the first chart below, Sweetwaters discloses the total Net Sales of the 5 Cafes that were open for the entire 2016 calendar year (each, a “Representative Cafe”).
- Sweetwaters excluded 1 franchised Cafe and 1 affiliate-owned Cafe from the definition of “Representative Cafes” because these locations did not open until some point in 2016 and were therefore not open the entire measurement period.
- The Representative Cafes are operated in a substantially similar manner to the Franchised Business offered in the Disclosure Document.
- In the second chart, Sweetwaters discloses the total Net Sales, along with certain cost of sales and other operating cost information, for the 2 Representative Cafes that were: (i) in operation for 5 years or more as of December 31, 2016; and (ii) reported their cost information to Sweetwaters using the chart of accounts Sweetwaters designated for use in connection with its System (the “Mature Locations”).
- Sweetwaters excluded 2 Representative Cafes from the second chart because they were not open for at least 5 years as of December 31, 2016, as well as 1 Representative Cafe because it did not report its cost information to Sweetwaters utilizing the correct chart of accounts for inclusion in this Item.
- The financial performance representation presented in this Item 19 was prepared without an audit. No certified public accountant has audited these figures or expressed his/her opinion with regard to their contents or form for purposes of this Item.
- Some outlets have sold the amounts set forth in this Item. There is no assurance that you will do as well. Your individual results may differ.