FDD Talk 2018: Wild Birds Unlimited Franchise Review (Financial Performance Analysis, Costs, Fees, and More)

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

• Section I – Background information on the Wild Birds Unlimited franchise opportunity, including relevant news updates

• Section II – Estimated initial investment for a Wild Birds Unlimited 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 Wild Birds Unlimited franchise, based on Items 5 and 6 of the company’s 2018 FDD

• Section IV – Number of franchised and company-owned Wild Birds Unlimited 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 Wild Birds Unlimited’s financial performance representations, based on Item 19 of the company’s 2018 FDD, including information on the:

• fiscal years 2015, 2016, and 2017 average gross sales for those Wild Birds Unlimited franchises open and operational for at least 24 consecutive months as of December 31, 2015, December 31, 2016, and December 31, 2017, respectively

• actual number of stores, which were open and operational for at least 24 months as of the end of the applicable fiscal year, that achieved certain gross sales levels for fiscal years 2015, 2016, and 2017

• summary of gross sales for the first full 12 months of operation for stores that opened between January 1, 2013 and December 31, 2016 and that had completed at least 12 full months of operation as of December 31, 2017

• summary of gross sales for the second full 12 months of operation for stores that opened between January 1, 2013 and December 31, 2016 and that had completed at least their second 12 full months of operation as of December 31, 2017

• average monthly sales volume percentage that contributed to the 2017 gross sales for those Wild Birds Unlimited franchises open and operational for all of 2017 and opened prior to December 31, 2015

• average cost of goods sold for products offered by the stores open for at least 24 months as of the end of each fiscal year 2014, 2015, and 2016, as well as the average of advertising and wage expenses incurred by first year stores that completed their first year of operation in 2012, 2013, 2014, 2015, and 2016

• fiscal years 2015 and 2016 average owner’s discretionary cash flow achieved by stores as reported by franchisees that were operating the previous full 24 months

Section I – Background Information

17 Things You Need to Know About the Wild Birds Unlimited Franchise

Introduces Omni-Channel Initiative to Enhance E-Commerce Platform

1.  In late 2017, Wild Birds Unlimited introduced a new omni-channel initiative to stay ahead of the curve when it comes to technological innovation and the latest in consumer shopping trends. The initiative bridges the gap between the brand’s brick and mortar stores and its online shopping experience. Wild Birds Unlimited created its own digital retail center that takes its store shelves and puts them online in a way that is attractive to both consumers and franchisees.

2.  Bo Lowery, director of marketing support for Wild Birds Unlimited, said, “While Wild Birds Unlimited is primarily a brick and mortar retail concept, we’ve long had online ordering capability through a third-party platform. But now, we’re taking our e-commerce capabilities to the next level by taking ownership of our online store and gearing it towards customer expectations. The initiative is branded ‘MyWBU Store’ to drive home the fact that it’s an extension of the local store customers already shop. When ordering via MyWBU Store, orders are fulfilled by the same local staff customers already know and trust.”

3.  The idea for an updated online store came from Wild Birds Unlimited founder and CEO Jim Carpenter. He realized that the brand needed to enhance its online ordering system in order to maintain its position as a leading innovative force, not just in the retail industry, but in the franchising industry as a whole. Through years of research and development with the help of the brand’s internal team as well as a third-party development company, the new platform was created.

4.  MyWBU Store works in conjunction with Wild Birds Unlimited’s loyalty program and the online shopping experience was also designed to be mobile friendly. To stand out from other traditional e-commerce platforms, the new system isn’t being introduced as one version system-wide. The initiative can be tailored to every one of the brand’s 300-plus locations and offer local store prices.

5.  At the time of the press release, Wild Birds Unlimited was still in the testing phase of its omni-channel initiative. There were 13 stores completely on boarded, with the brand aiming to open up the program to all of its stores by early 2018. Wild Birds Unlimited said that the omni-channel won’t be mandatory, but the brand is expecting a majority of its franchisees to enroll because of the program’s benefits.

Celebrating 2018 as the Year of the Bird

6.  The year 2018 marks the 100th anniversary of the Migratory Bird Treaty Act being ratified. The agreement—which was originally established between the United States and Great Britain on behalf of the Commonwealth of Canada—ended the hunting of non-game birds in the two countries. In honor of the Act’s centennial year, the Cornell Lab, National Geographic, the National Audubon Society, and BirdLife International have all come together to raise awareness about the importance of protecting wild birds.

7.  Hundreds of organizations, including Wild Birds Unlimited, have partnered with the initiative. All Wild Birds Unlimited stores, owners, employees, and customers will be able to partake in centennial celebrations and learn more about birds across North America. Wild Birds Unlimited is actively making an effort to promote events and themes related to the centennial celebrations.

8.  Wild Birds Unlimited will be participating in events throughout 2018 that align with the centennial celebrations. One of the brand’s first events took place in February, and franchisees, employees, and customers came together to participate in the Great Backyard Bird Count. Wild Birds Unlimited also plans to focus on being both plant and bird-friendly in April and will help children connect with nature over the summer.

Nest Cam Provides Glimpse Into Lives of Owls

9.  Jim Carpenter, Wild Birds Unlimited founder and CEO, first installed the camera outfitted to an owl nest box in his wooded backyard in Central Indiana in 2010. Since then, Carpenter has streamed the footage live on wbu.com through the spring and summer. Wild Birds Unlimited hosts the video stream in partnership with the Cornell Lab of Ornithology, who are actively engaging with the community of regular viewers.

10.  This year, two Barred Owls (a male and a female) have made Carpenter’s box their home and are preparing to welcome three hatchlings.

11.  For 2018, Carpenter installed a second camera to monitor the box from the outside. The new angle shows the adult owls leaving the nest to hunt and returning with their spoils. Charles Eldermire, Cornell Lab of Ornithology’s bird cams project leader, said that the real attraction of the second camera will come when the nestlings start taking an interest in the world outside their box.

12.  Although the box has had several different occupants since Carpenter first installed it in 1998, the owls have been living in the box since 2010.

Company History

13.  Wild Birds Unlimited was founded in 1981 by Jim Carpenter in Indianapolis, Indiana. Carpenter had always been a bird enthusiast and wanted to share his passion with others. He used a small inheritance to open the first Wild Birds Unlimited location and, according to Carpenter, he initially saw the business as a hobby. He says that he didn’t get serious about the business until seven or eight years after he started and that he felt overwhelmed by running a successful business.

14.  Although Carpenter started franchising Wild Birds Unlimited in 1983, he didn’t receive any business training until 1990 when he attended the Birthing of Giants event. The event helped Carpenter steer his company in the right direction.

15.  Carpenter created a strategic advisory group in 1995, comprised of three people who’ve now been members of the group for over 22 years. The purpose of the group was to provide guidance across the board, such as identifying areas for improvement within the business, establishing a mentor system, and helping franchisees make decisions in their market using the assets available to them.

16.  Carpenter’s efforts have been successful and today, there are over 300 Wild Birds Unlimited locations in the United States and Canada.

Entrepreneur’s Franchise 500

17.  Wild Birds Unlimited ranked at No. 218 on Entrepreneur’s 2018 Franchise 500 list.

Section II – Estimated Costs

• Please click here for detailed estimates of Wild Birds Unlimited 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 Wild Birds Unlimited’s 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:  287
• Outlets at the End of the Year:  292
• Net Change:  +5

2016

• Outlets at the Start of the Year:  292
• Outlets at the End of the Year:  306
• Net Change:  +14

2017

• Outlets at the Start of the Year:  306
• Outlets at the End of the Year:  327
• Net Change:  +21

Company-Owned

2015

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

2016

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

2017

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

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

• Provided below are seven schedules that provide certain information regarding Same Store Sales Percentage Change, Gross Sales, Cost of Goods Sold, Wages and Advertising Expenses, and Owner’s Cash Flow, as reported by Wild Birds Unlimited franchisees.

• Schedule 1 includes a chart with a summary of fiscal year 2015, 2016, and 2017 Same Store Gross Sales Percent Change for those Wild Birds Unlimited stores open and operational for at least 24 consecutive months. If an individual store was closed for a period of time in any of the applicable years, it was excluded from this analysis. As used herein, “Same Store Gross Sales Percent Change” means the year over year growth (or decline) in same Store Gross Sales, expressed as a percentage of the previous year’s Gross Sales.

• Schedule 2 includes a chart with a summary of fiscal year 2015 Gross Sales for those Wild Birds Unlimited franchises open and operational for at least 24 months as of December 31, 2015; a summary of fiscal year 2016 Gross Sales for those Wild Birds Unlimited franchises open and operational for at least 24 months as of December 31, 2016; and a summary of fiscal year 2017 Gross Sales for those Wild Birds Unlimited franchises open and operational for at least 24 months as of December 31, 2017.

• Schedule 3 is a chart showing the actual number of stores that achieved certain Gross Sales levels for fiscal years 2015, 2016, and 2017, which stores were open and operational for at least 24 months as of the end of the applicable fiscal year.

• Schedule 4 is a summary of Gross Sales for the first full 12 months of operation for stores that opened between January 1, 2013 and December 31, 2016 and that had completed at least 12 full months of operation as of December 31, 2017.

• Schedule 4 also includes a summary of Gross Sales for the second full 12 months of operation for stores that opened between January 1, 2013 and December 31, 2016 and that had completed at least their second full 12 months of operation as of December 31, 2017.

• Schedule 5 is the average monthly sales volume percentage that contributed to the Annual Gross Sales for those Wild Birds Unlimited franchises open and operational for all of 2017 and opened prior to December 31, 2015.

• Schedule 6 is the historical average Cost of Goods Sold, shown as a percentage of Gross Sales, for products offered by stores open for at least 24 months as of the end of each fiscal year 2014, 2015, and 2016, as applicable, as well as the historical average of Advertising and Wage expenses incurred by first year stores that completed their first year of operation in 2012, 2013, 2014, 2015, and 2016.

• Schedule 7 includes a chart with a summary of Owner’s Discretionary Cash Flow achieved by stores in fiscal years 2015 and 2016, as applicable, as reported by franchisees that were operating the full previous 24 months.

• Wild Birds Unlimited compiled the Gross Sales information in this financial performance representation from its franchisees’ monthly sales reports and annual financial statements submitted to the franchisor (the “P & L Statements”).

• The stores in this financial performance representation range in age from 1 to over 30 years of operation.

• The financial performance information provided for each 12-month period excludes stores that were not operational during the entire 12-month period.

• This information is not audited, and the franchisor has not verified nor does it warrant the accuracy of the information or the method used by each franchisee in its computation.

• The stores included in this financial performance representation represent a variety of geographic and demographic circumstances. These variations include:  (a) the total population of the city in which the store is located ranges from over 700,000 to less than 1,000; (b) a number of cities in which the stores are located are suburbs of larger metropolitan areas; and (c) some stores located in areas with small populations are in areas with a substantial amount of “tourist” traffic.

• Two of Wild Birds Unlimited’s officers own and operate a Wild Birds Unlimited store under a Franchise Agreement with the company.

• The stores listed in this financial performance representation are generally located in neighborhood or regional strip shopping centers or freestanding buildings.

• Several of the stores included in this financial performance representation operate temporary seasonal kiosks. These sales are included in this Item 19 data as part of the franchisees’ Gross Sales.

• Gross Sales is defined as the sales price of all merchandise and services sold, including cash and charge sales of every kind made at the store, and mail, internet, or telephone orders received or taken at the store.

• Sales and expenses from the 7 small-sized Wild Birds Unlimited outlets have been excluded from this analysis as they have characteristics that differ from the traditional retail locations included in this Item 19.

• Sales from Wild Birds Unlimited’s Canadian stores have been excluded from this analysis due to the fact that its Canadian stores report their sales to the franchisor in U.S. dollars according to the current month’s exchange rate and that exchange rate fluctuates considerably from year to year.

Schedule 1 – Fiscal Year 2015-2017 Same Store Sales Percent Change

2015