In this FDD Talk post, you’ll learn the following:

• Section I – Background information on the Cousins Subs franchise opportunity, including relevant news updates

• Section II – Estimated initial investment for a Cousins Subs franchise, based on Item 7 of the company’s 2018 FDD

• Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for a Cousins Subs franchise, based on Items 5 and 6 of the company’s 2018 FDD

• Section IV – Number of franchised and company-owned Cousins Subs outlets at the start of the year and the end of the year for 2015, 2016, and 2017, based on Item 20 of the company’s 2018 FDD

• Section V – Presentation and analysis of Cousins Subs’ financial performance representations, based on Item 19 of the company’s 2018 FDD, including information on the:

• 2017 average gross receipts for the 18 affiliate-owned traditional Cousins Subs Shops that were open the entire 2017 fiscal year

• 2017 average gross receipts for the 67 franchised traditional Cousins Subs Shops that were open the entire 2017 fiscal year

• 2017 average gross receipts for the 11 franchised non-traditional Cousins Subs Shops that were open the entire 2017 fiscal year

• 2017 average total revenue, cost of goods sold, wages, occupancy costs, telephone and utilities, advertising, employee benefits, other operating expenses, franchise fees, and shop EBITDA for the 18 affiliate-owned traditional Cousins Subs Shops that were open the entire 2017 fiscal year

• growth in average unit volume for all Cousins Subs Shops between fiscal year 2011 and fiscal year 2017

• system-wide annual net sales in fiscal years 2011 and 2017 for the 66 traditional franchised Cousins Subs Shops, 10 non-traditional franchised Cousins Subs Shops, and 21 traditional affiliate-owned Cousins Subs Shops that were open during both the entire 2011 fiscal year and the entire 2017 fiscal year

• percentage growth in net sales in the 1st, 2nd, 3rd, and 4th quarters of 2017 as compared to the previous year for all Cousins Subs Shops that were open for both of the full comparison periods

Section I – Background Information

14 Things You Need to Know About the Cousins Subs Franchise

Rebranding Initiative to Position Brand for Next Phase of Growth

1.  Over the last several years, Cousins Subs has taken a calculated approach to its growth plan by strengthening its unit-level economics and creating a stronger core of franchise partners. In May 2016, the Wisconsin-based sub shop announced a rebranding initiative to streamline the look and feel of its locations — a strategy that has positioned the brand for its next phase of growth.

2.  Christine Specht, president and CEO of Cousins Subs, said, “With our remodeling and rebranding initiative underway, now is the right time to revive the brand through Midwest growth, specifically in the Chicagoland area. We’ve increased our same-store sales and average unit volumes, positioning us for multi-unit franchise investment.”

3.  With the brand’s revival underway, Cousins has signed three new franchise groups to join its system. Around the end of March 2017, Amit and Kalpesh Patel of Chicago, Illinois and Munster, Indiana, were the most recent multi-unit owners to enter the Cousins system. The Patels will be the first group to develop the Cousins brand in the Chicagoland market through a multi-unit investment of 10 stores over four years.

4.  Chad Ellett and Randy Fusch from Reedsburg, Wisconsin joined the Cousins system around the same time as the Patels. Ellet and Fusch purchased two corporate-owned Cousins Subs locations, with an opportunity to purchase a third location in the future. They have also signed a development agreement to open two new stores over the next two years between Madison and Rockford, Illinois.

5.  In November 2016, father-and-son business owners, John Stewart Sr. and John Stewart Jr., purchased both Cousins’ franchise locations in Sheboygan, as well as a third in Mequon. Stewart Jr. oversees operations at all three locations and has more than 19 years of restaurant experience from his family’s business, Food Services Inc., which was started by his father 24 years prior and sold in 2016.

6.  Specht added, “The new multi-unit franchise groups provide a strong foundation for growth not only in our current markets but in new markets as well. We plan to grow contiguously in markets near our home state of Wisconsin and believe we will experience the most success by growing in these areas first.” The brand is currently seeking additional multi-unit franchise owners to join its system throughout Wisconsin, Chicagoland, and the Midwest.

Debuts Employee Scholarship Program

7.  At the beginning of May, Cousins Subs and its Make It Better Foundation announced the debut of their Legacy Scholarship program. Through the program, Cousins Subs plans to award its employees with $10,000 in Legacy Scholarships. The brand is encouraging all of its corporate and franchise restaurant-level employees to apply to the program. Cousins will offer four employees a $2,500 scholarship to assist in their dreams of post-secondary education at a two or four-year institution, trade school, or apprenticeship.

8.  The scholarships are funded through the sub shops’ Make It Better Foundation – a nonprofit charitable organization dedicated to funding causes that address health and wellness, hunger, and youth education in the communities that Cousins Subs serves. Following the program’s submission deadline, the company’s Make It Better Foundation board of directors will select the first-ever group of scholarship winners.

9.  Christine Specht, president of the Cousins Subs Make It Better Foundation board, said, “We at Cousins believe in the power of personal growth and invest in the development of our employees from the moment they become part of our family. Our goal is to not only offer a career for those who are part of our family, but to foster opportunity by providing a solid foundation for success.”

Fan Favorite Limited-Time Offerings Return

10.  At the end of April 2018, Cousins Subs brought back its famous Cubano as well as the Wisconsin BBQ Pork sub for a limited time. The fan favorite Cubano is made to order with ham, Genoa salami, pulled pork, and Wisconsin Swiss cheese topped with pickles, onions, tomatoes, mayo, and brown mustard. The Wisconsin BBQ Pork features pulled pork slathered in Sweet Baby Ray’s BBQ sauce, topped with Wisconsin cheddar cheese, pickles, and crispy onions. Both sub sandwiches are served on freshly baked Italian bread.

11.  The brand is encouraging fans of the Cubano and Wisconsin BBQ Pork sub to share their love on social media using the hashtag #GOHOGWILD. Justin McCoy, vice president of marketing for Cousins Subs, said, “For a limited time, we’re giving our guests a reason to ‘Go Hog Wild.’ Our guests voiced their opinions and we listened! By bringing back the famous Cubano alongside the Wisconsin BBQ Pork, guests can indulge in flavors that complement the warmer months.”

Company History

12.  Cousins Subs was founded in 1972 by cousins Bill Specht and James Sheppard in Milwaukee, Wisconsin. The cousins, who were originally from New Jersey, were unable to find a suitable sub sandwich option in Milwaukee and felt that they could be the ones to bring East Coast-style subs to their new hometown. After opening their first sub shop, Specht and Sheppard partnered with a local baker to make their own bread. This decision was later highlighted by the brand’s slogan “Better Bread, Better Subs.”

13.  The original Cousins Subs location initially attracted a lot of former East Coast residents and Specht and Sheppard had to open a second shop to keep up with demand. The success of both shops encouraged the cousins to continue growing their business. They started franchising the concept in 1985. Although Cousins Subs now has over 95 locations, nearly all of the shops are located in Wisconsin (there are a couple of Cousins Subs shops in Arizona).

Entrepreneur’s Franchise 500

14.  Cousins Subs ranked at No. 404 on Entrepreneur’s 2018 Franchise 500 list.

Section II – Estimated Costs

• Please click here for detailed estimates of Cousins Subs franchise costs, based on Item 7 of the company’s 2018 FDD.

Section III – Initial Franchise Fee, Royalty Fee, Marketing Fee, and Other Fees

• Please click here for detailed information on Cousins Subs’ initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2018 FDD.

Section IV – Number of Franchised and Company-Owned Outlets

Franchised

2015

• Outlets at the Start of the Year:  98
• Outlets at the End of the Year:  83
• Net Change:  -15

2016

• Outlets at the Start of the Year:  83
• Outlets at the End of the Year:  79
• Net Change:  -4

2017

• Outlets at the Start of the Year:  79
• Outlets at the End of the Year:  78
• Net Change:  -1

Company-Owned

2015

• Outlets at the Start of the Year:  20
• Outlets at the End of the Year:  22
• Net Change:  +2

2016

• Outlets at the Start of the Year:  22
• Outlets at the End of the Year:  22
• Net Change:  0

2017

• Outlets at the Start of the Year:  22
• Outlets at the End of the Year:  18
• Net Change:  -4

Section V – Financial Performance Representations (Item 19, 2018 FDD) and Analysis

• “Traditional Shops” mean all Cousins Subs other than those “Non-Traditional Shops.” “Non-Traditional Shops” mean those Cousins Subs which are (a) co-branded with a pizza establishment, (b) located within a convenience store, or (c) attached to a convenience store.

• There were no affiliate-owned Non-Traditional Shops operated in 2017.

• Each chart below includes all the affiliate-owned and franchised Shops that were open the entire 2017 fiscal year. These charts do not include Shops that were opened during the 2017 fiscal year or closed for an extended period during a remodel.

• The Traditional Shops were ranked according to the annual amount of gross receipts and divided into 3 equal categories. The “High” category contains the top third, the “Middle” category contains the middle third, and the “Low” category contains the bottom third.

• “Gross receipts” means the aggregate amount of all sales of food products, beverages, and other merchandise and products of every kind or nature sold from, at or in connection with your Shop or arising out of the operation or conduct of business by your Shop, including any revenues from all vending machine, video game machine, and juke box sales, less any customer refunds up to the amount of the sales price and excluding all sales, use, or service taxes collected and paid to the appropriate taxing authority.

• “Gross receipts” shall include: (a) all amounts redeemed from gift certificates, gift cards, or similar mediums, (b) all insurance proceeds received by you for loss of business due to a casualty or similar event at your Shop, and (c) the fair market value of any services or products received by you in barter or exchange for your services or products.

Part 1 – 2017 Average Gross Receipts of Affiliate-Owned Shops

Traditional Shops

High