In this FDD Talk post, you’ll learn the following:
- Section I – Background information on the Cinnabon franchise opportunity, including relevant news updates
- Section II – Estimated initial investment for a Cinnabon 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 Cinnabon franchise, based on Items 5 and 6 of the company’s 2018 FDD
- Section IV – Number of franchised and company-owned Cinnabon 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 Cinnabon’s financial performance representations, based on Item 19 of the company’s 2018 FDD, including information on the:
- 2017 average, median, high, and low net sales for franchised Cinnabon bakeries (full and express) in enclosed malls, convenience stores, and airports (respectively), which were in operation continuously throughout Cinnabon’s fiscal year 2017 and were not co-branded
- 2017 average, median, high, and low net sales by quartile for franchised Cinnabon bakeries (full bakeries only) in enclosed malls, which were in operation continuously throughout Cinnabon’s fiscal year 2017 and were not co-branded
- average, median, high, and low net sales by fiscal year (2013 to 2017) for franchised Cinnabon bakeries in enclosed malls, which were in operation continuously throughout the applicable fiscal year and were not co-branded
- 2017 average net sales, cost of goods sold, gross profit, labor, rent, other expenses, total expenses, and net operating income by region for franchised Cinnabon bakeries in enclosed malls, which were in operation continuously throughout Cinnabon’s fiscal year 2017 and were not co-branded
Section I – Background Information
13 Things You Need to Know About the Cinnabon Franchise
New Brand President
1. In early April 2018, Cinnabon announced that Kristen Hartman had been promoted to brand president. In her new role, Hartman will be responsible for the brand’s strategy and continued business growth. Kat Cole, FOCUS Brands (Cinnabon’s parent company) COO and president, North America, said, “We are thrilled to have Kristen step into the role as President of Cinnabon. With her business expertise, love of the customer and passion for the brand teams, we are excited for her to lead Cinnabon through its continued growth.”
2. Hartman joined FOCUS Brands in 2012 as vice president of marketing after a 16-year career with Burger King. As vice president of marketing, Hartman oversaw brand marketing, menu innovation, and consumer engagement strategies for Cinnabon. Her leadership was instrumental in the brand’s resurgence as a global icon. Hartman’s previous contributions to Cinnabon included strategic brand positioning, evolving identity and store design, as well as comprehensive marketing and menu development to strengthen appeal among existing and new consumers.
3. Hartman said, “I am honored to have the opportunity to return to Cinnabon and, most importantly, reconnect with the franchisees who have contributed so much to the brand’s accomplishments. I’ve enjoyed watching them flourish and am excited to contribute to their future success. It’s a wonderful feeling to be part of a brand that brings a smile and so many special memories to mind whenever it’s mentioned.”
Joins the Big Apple Circus’ 40th Anniversary Tour
4. At the beginning of November 2017, Cinnabon announced that it had joined the Big Apple Circus for its 40th Anniversary Tour as the official cinnamon roll under the Big Top. The brand, along with Carvel, will be highlights of the show’s concession during its 40th Anniversary Tour, starting at Lincoln Center in NYC and traveling around the east coast through August 2018. Cinnabon will have an exclusive pop-up location inside the reception tent.
5. Jill Thomas, vice president of global marketing at Cinnabon, said, “We’re delighted to spread Cinnabon warmth to many families as they share the magic of the Big Apple Circus. It doesn’t get much cooler than this!”
Debuts New Cookie BonBite for National Cookie Day
6. In late 2017, Cinnabon debuted its newest menu item, the Cookie BonBite, in time for National Cookie Day on December 4. The innovative treat features a BonBite, the bite-sized version of Cinnabon’s famous cinnamon rolls, stuffed into a chocolate chip cookie. The Cookie BonBite was only available for a limited time.
7. To celebrate National Cookie Day as well as the Cookie BonBite’s release, Cinnabon partnered with fairlife® to give customers a free 8 oz. bottle of milk with every Cookie BonBite purchase, while supplies lasted.
8. Jill Thomas, vice president of global marketing at Cinnabon, said, “The Cookie BonBite is one of our yummiest examples of creativity to come out of the innovation kitchen. The delicious Cookie BonBite joins two extraordinary baked goods to create an unexpected out-of-this-world flavor combination not to be missed! National Cookie Day provides the perfect occasion for our guests to enjoy the ultimate cookie experience.”
9. The dough used for the Cookie BonBite was provided by Nashville’s Christie Cookie Company, which makes the famous DoubleTree by Hilton cookie. Thomas added, “Our partnership with Christie Cookie Company is just one example of our dedication to supporting premium bakery brands that offer craveable products on par with Cinnabon.”
10. Cinnabon was founded in 1985 by father and son duo, Rich and Greg Komen, in Seattle, Washington. Rich Komen was already well-known for opening several successful restaurants in the Seattle area when he got the idea to open a cinnamon roll franchise. Rich asked Jerilyn Brusseau, who baked the pies and other goods for her small restaurant in Montana, to help him develop the perfect cinnamon roll recipe. After months of trial and error, Brusseau finally created a cinnamon roll that Rich was happy with and the first Cinnabon store was opened in the SeaTac Mall (now called The Commons at Federal Way).
11. Rich’s gamble to only sell one item paid off and on its first day, Cinnabon earned $500 in sales, which was doubled the next day. Demand for the brand’s giant cinnamon rolls increased and the following year, the Komens started franchising the Cinnabon concept. Over the next few years, Cinnabon continued to open locations across the country in malls, gas stations, airports, universities, amusement parks, casinos, and rapid transit stations.
12. In 1998, AFC Enterprises, Inc. acquired Cinnabon for $65 million. AFC Enterprises owned Cinnabon until it was sold to FOCUS Brands, Inc. – which is owned by the Atlanta-based private equity firm Roark Capital Group – in 2004 for $30.3 million. Today, Cinnabon has a presence in over 48 countries around the world.
Entrepreneur’s Franchise 500
13. Cinnabon ranked No. 98 on Entrepreneur’s 2018 Franchise 500 list.
Section II – Estimated Costs
- Please click here for detailed estimates of Cinnabon 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 Cinnabon’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
- Outlets at the Start of the Year: 677
- Outlets at the End of the Year: 748
- Net Change: +71
- Outlets at the Start of the Year: 748
- Outlets at the End of the Year: 834
- Net Change: +86
- Outlets at the Start of the Year: 834
- Outlets at the End of the Year: 880
- Net Change: +46
- Outlets at the Start of the Year: 1
- Outlets at the End of the Year: 2
- Net Change: +1
- Outlets at the Start of the Year: 2
- Outlets at the End of the Year: 2
- Net Change: 0
- Outlets at the Start of the Year: 2
- Outlets at the End of the Year: 2
- Net Change: 0
Section V – Financial Performance Representations (Item 19, 2018 FDD) and Analysis
- As used throughout Item 19, the following definitions apply:
- Net Sales – Net Sales means all revenues generated by your Bakery or conducted from or with respect to the Bakery, whether the sales are evidenced by cash, check, credit, charge, account, barter, or exchange.
- Net Sales includes monies, gift card redemptions, or credit generated by or received from (i) the sale of Approved Products or tangible property of every kind and nature, promotional or otherwise, anywhere and (ii) services performed from, at, or in connection with the Bakery, including (x) off-premises services (such as catering and delivery), (y) on-premises services such as games (e.g., slot machines) or third-party advertising (e.g., on menus), or (z) any other services or activities that use either the System, the Proprietary Marks, or products that are the same as or similar to the Approved Products.
- Cost of Goods Sold – Cost of Goods Sold (COGS) 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 (dough, frosting, beverages, etc.), paper products (cups, napkins, bags, straws, etc.) and retail items (Cinnabon cinnamon, 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), Royalty Fee, Advertising Contribution, 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.
- Excluded Venues – Franchised Bakeries that are located in casinos, concession trailers/trucks, farmer’s markets, seasonal locations, strip malls, grocery stores, military bases, amusement parks, train stations, entertainment venues, hotel food courts or lobbies, colleges and universities, travel plazas, or other non-traditional locations. Excluded Venues also include Express Bakeries located in a Schlotzsky’s Restaurant. Excluded Venues do not include Bakeries located in airports or convenience stores.
- Enclosed Mall Franchises – Franchised Bakeries that are located inside an enclosed mall. Enclosed Mall Franchises do not include Bakeries located in airports, convenience stores, or Excluded Venues or Bakeries that have been co-branded with another restaurant. Approximately 29.6% of all Bakeries (Full and Express) operating at a given point in time are Enclosed Mall Franchises.
Cinnabon Stores By Region
- Cinnabon’s four Regions, and their respective states, are used in the information presented in Item 19. These four Regions comprise the entire group of Regions within the Cinnabon system:
- Northeast Region: (i) Connecticut; (ii) District of Columbia; (iii) Delaware; (iv) Maryland; (v) Massachusetts; (vi) New Hampshire; (vii) New Jersey; (viii) New York; (ix) Pennsylvania; (x) Rhode Island; (xi) Virginia; and (xii) West Virginia.
- Southeast Region: (i) Alabama; (ii) Arkansas; (iii) Florida; (iv) Georgia; (v) Louisiana; (vi) Mississippi; (vii) North Carolina; (viii) South Carolina; (ix) Tennessee; and (x) Texas.
- Midwest Region: (i) Iowa; (ii) Illinois; (iii) Indiana; (iv) Kansas; (v) Kentucky; (vi) Michigan; (vii) Minnesota; (viii) Missouri; (ix) North Dakota; (x) Nebraska; (xi) Ohio; (xii) Oklahoma; (xiii) South Dakota; and (xiv) Wisconsin.
- Western Region: (i) Alaska; (ii) Arizona; (iii) California; (iv) Colorado; (v) Hawaii; (vi) Idaho; (vii) Montana; (viii) New Mexico; (ix) Nevada; (x) Oregon; (xi) Utah; (xii) Washington; and (xiii) Wyoming.
- The information presented in Item 19 excludes sales information from (a) affiliate-owned Bakeries; (b) Excluded Venues; (c) co-branded Bakeries; and (d) Bakeries 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”).
- Due to the types of venues comprising Excluded Venues, Bakeries in Excluded Venues are generally smaller in size than typical Bakeries, consumer traffic flow is significantly reduced, and operating hours are generally substantially less than the operating hours of the three venues included in this table. As a result, Bakeries operating in Excluded Venues have been excluded from this Item 19.
- Parts 1 through 4 present Net Sales or average Net Sales, average expenses, and average Net Operating Income figures for the fiscal year ended December 31, 2017 (“fiscal year 2017”), obtained from reported sales or the unaudited profit and loss statements submitted by Cinnabon franchisees in the venues represented in the tables.
Part 1 – Net Sales Range Fiscal Year 2017 – Various Venues (Franchised Bakeries – All Regions)
- The Bakeries in this chart do not include Excluded Venues or any Bakeries that are co-branded with another restaurant.
- The Bakeries whose results are reflected in this table are all Bakeries (Full and Express) which were in operation continuously throughout Cinnabon’s fiscal year 2017 in the three venues represented. Results of Bakeries that either opened or closed during fiscal year 2017 are not included.