In this FDD Talk post, you’ll learn the following:
- Section I – Background information on the Auntie Anne’s franchise opportunity, including relevant news updates
- Section II – Estimated initial investment for an Auntie Anne’s franchise, based on Item 7 of the company’s 2017 FDD
- Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for an Auntie Anne’s franchise, based on Items 5 and 6 of the company’s 2017 FDD
- Section IV – Presentation and analysis of Auntie Anne’s financial performance representations, based on Item 19 of the company’s 2017 FDD, including information on the:
- 2015 average, median, high, and low sales for Auntie Anne’s venues in Enclosed Malls, Airports, Outlet Centers, Walmarts, Alternative Locations, and Train Stations, that were open for business under the same ownership for the entire 2015 fiscal year
- 2015 average net sales, cost of goods sold, gross profit, labor, rent, other expenses, total expenses, and net operating income for Auntie Anne’s Enclosed Mall franchises, system-wide and by region (Mid-Atlantic, Northeast, Southeast, Midwest, and West), that were open for business under the same ownership for the entire 2015 fiscal year, and submitted complete data
Section I – Background Information
10 Things You Need to Know About the Auntie Anne’s Franchise
Finding New Ways to Bring Pretzels to Customers
1. As consumer foot traffic has declined in physical retail spaces such as malls – where Auntie Anne’s is a staple – Auntie Anne’s has been looking for new ways to get people to eat more pretzels even if they’re not near the mall. In October 2017, the brand launched a promotion it called “Shoptoberfest” and said that it was a new holiday created specifically for shopping enthusiasts nationwide.
2. From October 9 through October 14, customers could use the My Pretzel Perks mobile app to avail of the Buy One Get One (BOGO) pretzel promotion while they shopped. To go along with the BOGO promotion, Auntie Anne’s jokingly marketed a “Hands-Free Pretzel-Eating Apparatus” to make it possible to eat a pretzel while holding shopping bags.
3. Heather Neary, president of Auntie Anne’s, talked about the other ways that Auntie Anne’s has been trying to get consumers to buy more pretzels, including catering and delivery services. Auntie Anne’s has offered catering for years, but recently relaunched the service with new packaging materials, and invested in advertising. Neary said that catering “takes us from an impulse purchase to a more logical solution to afternoon meetings, tailgates and business events.”
4. In addition to catering, some Auntie Anne’s locations are using food trucks and concession trailers. Some franchisees are even using mobile delivery services to get pretzels to their customers. Neary said that Auntie Anne’s plans to roll out delivery nationwide. She talked about how delivery could be more profitable because consumers tend to order more items than they typically would at a mall kiosk.
Fans Pick Next Pretzel Flavor
5. In June, Auntie Anne’s asked its followers on social media to make flavor suggestions. The brand received over 1,200 suggestions, from which it chose the ten most popular flavors to compete as Pretzel Nation Creation finalists. There was a mix of sweet and savory flavors, including Apple Pie, Chocolate Cherry, Maple Brown Sugar, S’mores, Pink Lemonade, Sriracha, Taco, Korean BBQ, Dill Pickle, and Buffalo Wing.
6. From July 21 through July 30, Auntie Anne’s asked the public to vote on its next pretzel flavor. Customers were asked to vote on the flavor they liked best at www.pretzelnationcreation.com. At the end of the contest, Auntie Anne’s announced that the winner was Sriracha. The new Sriracha Pretzel and Pretzel Nuggets were rolled out in October 2017.
Celebrates the Release of the Pretzel Emoji on Apple iOS
7. At the beginning of November 2017, the pretzel emoji was released on Apple iOS and Auntie Anne’s decided to celebrate the occasion. The brand gave away a coupon for a free Classic Pretzel with any pretzel purchase to its My Pretzel Perks loyalty members. Auntie Anne’s also rewarded the first 100 customers who used the pretzel emoji and the hashtag #AuntieAnnesGiveaway on Instagram.
8. Auntie Anne’s started in 1988 when Anne and Jonas Beiler bought a stand at a farmers market in Downingtown, Pennsylvania. They started selling the same pretzels and lemonade the brand is now famous for at their farmers market stand. A year later, they opened the first Auntie Anne’s franchise at Saturday’s Market in Middletown, Pennsylvania.
9. Auntie Anne’s was immensely popular and by 1992 the brand opened its 100th location. In 1995, Auntie Anne’s opened its first international location in Jakarta, Indonesia. Since then, the company has continued to grow globally. In 2010, Auntie Anne’s was acquired by FOCUS Brands, a portfolio company of private equity firm Roark Capital. Today, there are over 1,800 Auntie Anne’s stores around the world.
Entrepreneur’s Franchise 500
10. Auntie Anne’s has ranked on Entrepreneur’s annual Franchise 500 list every year for the past 10 years. The company’s highest rank was No. 31 in 2016, while its lowest rank was No. 124 in 2018.
Section II – Estimated Costs
- Please click here for detailed estimates of Auntie Anne’s 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 Auntie Anne’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
- Tables 1 through 8 present net sales or average net sales, average expenses, and average net operating income figures for the year ended December 27, 2015 obtained from the unaudited profit and loss statements submitted by Auntie Anne’s franchisees based upon a uniform reporting system.
- The information presented in Item 19 excludes sales information from (a) affiliate-owned Shops, (b) Subway Co-Branded Locations, (c) Shops that were not continuously open and operating under the same franchise owner throughout the entire applicable fiscal year, and (d) Shops that submitted late, incomplete, or illegible financial information, experienced hardware or software technical issues that inhibited proper reporting, or submitted such information in an unacceptable format (“Incomplete Information”).
Definition of Terms for Auntie Anne’s Profit and Loss Statements
- As used throughout Item 19, the following definitions apply:
- Net Sales – Net Sales includes, without limitation, monies, gift card redemptions, or credit received from the sale of food, beverages, and merchandise, from tangible property of every kind and nature, promotional or otherwise, and for services performed from or at the Shop, including, without limitation, off-premises services such as catering and delivery.
- Net Sales will not include the initial sales or reloading of gift cards, coupon discounts, the sale of food or merchandise for which refunds have been made in good faith to customers, the discounted portion of employee meals, the sale of equipment used in the operation of the Shop, nor will it include sales, meals, use, or excise tax imposed by a governmental authority directly on sales and collected from customers; provided that the amount for the tax is added to the selling price or absorbed therein, and is actually paid by you to a governmental authority.
- Cost of Goods Sold – Cost of Goods Sold is a figure which reflects the cost of materials used to produce the products you sell to your customers. It includes the cost of food ingredients (pretzel mix, butter, beverages, etc.), paper products (cups, napkins, bags, straws, etc.), and retail items (Auntie Anne’s At Home pretzel kits, etc.).
- Gross Profit – Gross Profit is Net Sales minus Cost of Goods Sold.
- Operating Expenses – Operating Expenses are the day-to-day costs incurred in conducting normal business operations.
- Labor – Labor includes wages paid to your employees and payroll taxes paid for your employees. Labor does not include actual wages and related expenses you pay to yourself.
- Rent – Rent includes the base rent for your lease including extra charges, such as common area maintenance (CAM) charges, real estate taxes, percentage rents, etc.
- Other Expenses – Other expenses include such things as utilities (electric, telephone), royalties, ad fund fees, advertising, insurance (Workers’ Comp, property, casualty, liability, health, etc.), licenses, permits, repairs, uniforms, store supplies, etc.
- Total Expenses – The total of Labor, Rent, and Other Expenses.
- Net Operating Income – Gross Profit minus Total Expenses.
- Alternative Locations – A franchised Shop that is located in alternative locations such as travel plazas, casinos, concession trailer/trucks, farmer’s markets, seasonal locations, strip malls, grocery stores, military bases, amusement parks, colleges and universities. “Alternative Locations” does not include Shops located in airports, outlet centers, Walmarts, or train stations.
- Enclosed Mall Franchises – A franchised Shop that is located inside an enclosed mall, including sales from related non-baking SRUs (Satellite Retail Units). Enclosed Mall Franchises do not include (a) company-owned Shops, (b) Subway Co-Branded Locations, or (c) Shops located in airports, outlet centers, Walmarts, train stations, or Alternative Locations.
Auntie Anne’s Stores By Region
- Auntie Anne’s includes the following Regions, and their respective states, in the information presented in Item 19:
- Mid-Atlantic Region: (i) West Virginia; (ii) District of Columbia; (iii) Virginia; (iv) Maryland; (v) Pennsylvania; and (vi) Delaware.
- Northeast Region: (i) New York; (ii) Connecticut; (iii) New Hampshire; (iv) Massachusetts; (v) New Jersey; (vi) Vermont; (vii) Rhode Island; and (viii) Maine.
- Southeast Region: (i) North Carolina; (ii) Georgia; (iii) Alabama; (iv) Arkansas; (v) Tennessee; (vi) Florida; (vii) South Carolina; (viii) Louisiana; and (ix) Mississippi.
- Midwest Region: (i) Kansas; (ii) North Dakota; (iii) Iowa; (iv) Kentucky; (v) Michigan; (vi) Illinois; (vii) Indiana; (viii) Missouri; (ix) Nebraska; (x) Ohio; (xi) Minnesota; (xii) Wisconsin; and (xiii) South Dakota.
- Western Region: (i) Nevada; (ii) Oregon; (iii) Texas; (iv) Oklahoma; (v) California; (vi) Washington; (vii) New Mexico; (viii) Colorado; (ix) Arizona; (x) Idaho; (xi) Utah; and (xii) Alaska.
Table 1 – Net Sales Range for 2015 Fiscal Year – Various Venues (All Regions)
Enclosed Mall Franchises
- The sales information for Enclosed Mall Franchises includes sales from 46 non-baking SRUs. Approximately 59% of Auntie Anne’s franchises are located in enclosed malls.