FDD Talk 2018: Baskin-Robbins 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 Baskin-Robbins franchise opportunity, including relevant news updates

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

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

• average sales by geographic region for continental U.S. Baskin-Robbins single brand restaurants that have been open for business to the public for at least one year during a one-year measuring period from October 30, 2016 to October 28, 2017

• average sales by geographic region for continental U.S. Dunkin’ Donuts/Baskin-Robbins combo restaurants in freestanding and shopping center/storefront locations (separately stated) that have been open for business to the public for at least one year during a one-year measuring period from October 30, 2016 to October 28, 2017

• average cost of goods sold and labor costs by region for continental U.S. Baskin-Robbins restaurants (and separately, for Dunkin’ Donuts/Baskin-Robbins combo restaurants) for the period from November 1, 2016 to October 31, 2017

Section I – Background Information

13 Things You Need to Know About the Baskin-Robbins Franchise

Announces Continued Expansion in Toronto

1.  Around the end of February 2018, Baskin-Robbins announced its continued expansion in the Toronto, Ontario region with the signing of four new store development agreements with three existing franchise groups. There are currently 60 Baskin-Robbins locations in the Greater Toronto Area, and Baskin-Robbins said that growing the brand there is a top priority for 2018 and beyond. The first of the four new locations is set to open sometime in 2019.

2.  Franchisees Durgesh and Rakesh Sikka plan to develop one shop in Georgetown, Ontario in addition to their existing locations in Brampton; franchisee James Lin signed a multi-unit deal in Canada with an agreement to develop two units in the Toronto area; and franchisee Chintan Patel plans to develop a single location in the Toronto market.

3.  Grant Benson, CFE, vice president of global franchising and business development, Dunkin’ Brands, said, “Our secret to continued growth includes passionate franchisees who provide a high-level of customer service to our guests every day, and we are thrilled that these franchisees will be expanding our brand further in the Toronto area. Our hard-working and dedicated franchisees bring our brand, products and promotions to life each and every day and have been essential to our growth, which has solidified our position as a leader in the quick service and ice cream sector.”

Debuts New Menu Item

4.  At the beginning of May 2018, Baskin-Robbins debuted a new and innovative treat, the Sundae Shake. The Sundae Shakes are the brand’s latest permanent menu item and combine the best of two classic ice cream treats, a milkshake and a sundae, into one frozen treat. The new item features a milkshake base topped with a scoop of ice cream with all of the toppings of a classic sundae, including whipped cream, chopped nuts, and a cherry.

5.  Sundae Shakes are customizable with any milkshake and ice cream flavor combination. With so many flavors to choose from, the Sundae Shake combinations are nearly endless, but for anyone who can’t make up their mind, Baskin-Robbins has three standard Sundae Shake flavors: Strawberry, Chocolate Chip Cookie Dough, and OREO ‘n Cream.

Launches New Cookie Cakes

6.  Every few years Baskin-Robbins adds new items to its permanent menu and one of the brand’s latest additions is its Cookie Cakes. Katy Latimer, vice president of culinary innovation at Dunkin’ Brands, said, “With our new Cookie Cakes, we’re giving guests the best of both worlds – cookies and ice cream – in one delicious dessert that they can share with family and friends.”

7.  The Cookie Cakes are customizable with the customer’s choice of any ice cream flavor and are currently available in two varieties:

• Celebrations Cookie Cake, which features two 9” chocolate chip cookie crusts with a layer of ice cream in the middle. This Cookie Cake is decorated with whipped topping, rainbow confetti sprinkles, and colorful icing.

• Fudge Brownie ‘n OREO Cookie Cake is made with two 9” round fudge brownie crusts
  with a layer of ice cream in the middle. The Fudge Brownie Cookie Cake is decorated with
  whipped topping, OREO cookies, and a fudge border.

Company History

8.  Baskin-Robbins was founded in 1945 by Burton “Burt” Baskin and his brother-in-law Irvine
“Irv” Robbins in Glendale, California. Both Baskin and Robbins had a love for ice cream that started when they were young. After World War II, Baskin and Robbins established their company and each of them owned their own ice cream shop. By 1948, they had six Baskin-Robbins shops between them and they decided to open the first franchised location later that year.

9.  Baskin-Robbins’ signature “31 Flavors” slogan and classic pink and brown polka dots were the brainchild of the Carson-Roberts advertising agency. The brand debuted both the slogan and new containers in 1953.

10.  Baskin and Robbins continued to own and operate the company until 1967, when it was acquired by the United Brands Company. Less than a decade later, in 1973, Baskin-Robbins was sold again to the British food company, J. Lyons and Co.

11.  After going through a few mergers, J. Lyons and Co. became Allied Domecq, which also owned Dunkin’ Brands, Inc., the parent company of Dunkin’ Donuts. Today, Dunkin’ Brands, Inc. is its own company and still owns Baskin-Robbins as well as Dunkin’ Donuts. The two brands often appear together as co-branded franchises.

12.  Baskin-Robbins has continued to grow exponentially over the years and today it is considered the world’s largest ice cream shop chain.

Entrepreneur’s Franchise 500

13.  Baskin-Robbins ranked No. 41 on Entrepreneur’s 2018 Franchise 500 list.

Section II – Estimated Costs

• Please click here for detailed estimates of Baskin-Robbins 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 Baskin-Robbins’ 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:  906
• Outlets at the End of the Year:  1,056
• Net Change:  +150

2016

• Outlets at the Start of the Year:  1,056
• Outlets at the End of the Year:  1,092
• Net Change:  +36

2017

• Outlets at the Start of the Year:  1,092
• Outlets at the End of the Year:  1,072
• Net Change:  -20

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

• Tables 1 and 2 and notes provide financial performance representations that are historical, and that are based on information from existing Baskin-Robbins Restaurants (exclusive of Dunkin’ Donuts/Baskin-Robbins Combo Restaurants, Alternative Point of Distribution Restaurants, Baskin-Robbins Express, and Restaurants operating under Territorial Franchise Agreements) that have been open for business to the public for at least one year during a one-year measuring period from October 30, 2016 to October 28, 2017.

• Tables 3 to 5 and notes provide financial performance representations that are historical, and that are based on information from existing Dunkin’ Donuts/Baskin-Robbins Combo Restaurants that have been open for business to the public for at least one year during a one-year measuring period from October 30, 2016 to October 28, 2017.

Part 1 – Sales Data (Tables 1, 3, and 4)

• The sales figures are compiled by using historical sales that are reported to Baskin-Robbins by franchisees. Baskin-Robbins has not audited or verified the reports.

• This sales data does not include sales tax. The vast majority of the Restaurants that comprise this data are franchised, although Baskin-Robbins affiliates may own and operate a small number of Restaurants at any given time.

• Sales in states or regions with a higher concentration of Restaurants that have been in operation for a substantial period of time tend to have higher sales than states or regions with a lower concentration of Restaurants that have been in operation for a lesser time period.

• Many of the Restaurants included in this data have been open and operating for several years. These franchisees have achieved their level of sales after spending many years building customer goodwill at a particular location.

• Your sales will be affected by your own operational ability, which may include your experience with managing a business, your capital and financing (including working capital), continual training of you and your staff, customer service orientation, product quality, your business plan, and the use of experts (for example, an accountant) to assist in your business plan.

• Your sales may be affected by Restaurant location and site criteria, including traffic count and which side of the street your Restaurant is located, local household income, residential and/or daytime populations, ease of ingress and egress, seating, parking, the physical condition of your Restaurant, the size of your site, and the visibility of your exterior sign(s).

• Additionally, many of the Restaurants included in the sales figures are freestanding Restaurants or located at the end of a strip center, and if your Restaurant is not, your sales could be substantially lower than the figures in the chart.

• Individual locations may have layouts and seating capacities that vary from the typical location.

• Other factors that could have an effect upon your sales may include consumer preferences, competition (national and local), inflation, local construction and its impact on traffic patterns, and reports on the health effects of consuming food similar to that served in the Restaurants, as well as the impact of federal, state, and local government regulations.

• Your sales may be affected by consumer preferences for certain menu items over others, changes in the menu, and regional differences in products or product demand, including whether there are products not available to you or your region but sold in other regions. Menus are continually being revised, both adding and discontinuing products and product line extensions.

• Sales may be affected by fluctuations due to seasonality (particularly in colder climates), weather, and periodic marketing and advertising programs. Inclement weather may cause temporary Restaurant closings in some areas.

• The data below reflects historical sales. There is no assurance future sales will correspond to historical sales.

• Many Baskin-Robbins franchisees actively pursue cake sales opportunities. If you do not, your sales may be negatively affected. Additionally, seasonality and weather may significantly affect sales of ice cream and related products.

• Some individual Restaurants’ sales may include wholesale accounts and other distribution outlets, which may not be available to you. Not all of these opportunities have been successful for all participating franchisees.

Part 2 – COGS and Labor Data (Tables 2 and 5)

• “COGS” means the cost of goods sold, including food, beverages, and items served or associated with the food or beverage, such as cups, napkins, straws, bags, plastic utensils, and wrapping paper.

• “Labor” means crew, management, training, payroll tax, and workers’ compensation.

• COGS and Labor are stated as a percentage of gross sales (excluding sales tax and discounts). The vast majority of Restaurants that comprise this data are franchised, although Baskin-Robbins affiliates may own and operate a small number of Restaurants at any given time.

• The cost figures from franchised Restaurants are compiled from individual Restaurants by using cost data that are reported to Baskin-Robbins by franchisees for the monthly periods November 1, 2016 through October 31, 2017. Baskin-Robbins has not audited or verified the reports, nor have franchisees confirmed that the reports are prepared in accordance with generally accepted accounting principles or in accordance with Baskin-Robbins’ definition of COGS and Labor.

• Your costs will be affected by your own operational ability, which may include your experience with managing quick-service restaurant operations, your experience building and managing an organization, continual training of you and your staff, your business plan, and using experts (e.g. an accountant) to assist in your business plan. Your costs may be negatively affected by not adhering to Baskin-Robbins’ standards and system.

• Many of the Restaurants included in this data have been open and operating for several years. Those franchises may have lower cost percentages due to years of experience managing costs. For new franchisees, COGS and Labor cost percentages may initially exceed those of experienced operators.

• There is no assurance that future costs will correspond to historical costs because of factors such as inflation, changes in menu, and other variables.

• Factors affecting your COGS include, but are not limited to, the price of raw materials; your ability to manage and implement proper controls of waste, ruin, loss, theft, and the portion sizes served to the public; regional differences; temporary shortages; seasonal and weather fluctuations; and fluctuations due to periodic marketing and advertising programs. Additionally, freight charges may be higher in some areas. If the cost of gasoline increases in the U.S., the cost of freight will rise as well.

• The COGS data below reflects average Restaurant aggregate costs. Different food and beverage items have different cost percentages. Customer demand for products varies among Restaurants and regions and if your Restaurant sells a high percentage of high cost items, your food cost percentage will be higher than if you have a lower percentage of higher cost items.

• Factors affecting your Labor include, among other things, the local labor market and any applicable federal or state minimum wage law; pending healthcare legislation, employee turnover, and your operational abilities, including your ability to train and retain employees; your compensation that may be included in labor, which varies among franchisees; menu; product mix; Restaurant layout; your salary and benefits programs; and scheduling. Restaurants must be staffed in accordance with Baskin-Robbins’ standards.

• Some franchisees purchase finished products manufactured at another location. The cost of this finished product will vary depending upon the number of Restaurants being serviced by the manufacturing location and other factors. These franchisees may pay more for food costs but may pay less for other items such as labor, equipment, distribution, and rent.

• COGS may be particularly affected by the fluctuations in the price of coffee and other items and ingredients.

• Restaurants with lower sales may have higher COGS and Labor cost percentages because of less efficiencies and economies of scale, and more waste.

• The retail sales price that you establish will also affect the COGS and Labor percentages.

• If you are in a geographic area with fewer Restaurants, you may have higher COGS as a percentage of sales due to less distribution efficiencies.

• The “Total Number of Restaurants/Combo Restaurants in Sample” in Tables 2 and 5 is a subset of the “Total Number of Restaurants/Combo Restaurants in Sample” in Tables 1, 3,  and 4 because not all Restaurants or Combo Restaurants reported COGS and Labor data for the twelve month reporting period.

• All of the Restaurants or Combo Restaurants in Tables 2 and 5 reported at least one month of COGS and Labor data for the twelve month reporting period.

Table 1 – Continental U.S. Baskin-Robbins Single Brand Restaurants, Average Restaurant Sales (for the Period October 30, 2016 to October 28, 2017)

Total

Total Continental United States

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