In this FDD Talk post, you’ll learn the following:
- Section I – Background information on the Dunn Brothers Coffee franchise opportunity, including relevant news updates
- Section II – Estimated initial investment for a Dunn Brothers Coffee 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 Dunn Brothers Coffee franchise, based on Items 5 and 6 of the company’s 2018 FDD
- Section IV – Number of franchised and company-owned Dunn Brothers Coffee 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 Dunn Brothers Coffee’s financial performance representations, based on Item 19 of the company’s 2018 FDD, including information on the:
- 2017 average, median, high, and low gross revenue for the 35 franchised and 2 affiliate-owned (separately stated) Dunn Brothers Coffee Shops in operation during the entire 12-month period ended December 31, 2017 and that offered Dunn Brothers Coffee’s full menu of food Products
- 2017 average, median, high, and low gross margin percentage and labor cost percentage for the 12 franchised and 2 affiliate-owned (separately stated) Dunn Brothers Coffee Shops in operation during the entire 12-month period ended December 31, 2017, offered Dunn Brothers Coffee’s full menu of food Products, and submitted financial statements for the year ended December 31, 2017 to Dunn Brothers Coffee by April 20, 2018
Section I – Background Information
16 Things You Need to Know About the Dunn Brothers Coffee Franchise
Launches Women Coffee Producers Collection
1. According to the Dunn Brothers Coffee website, the brand has partnered with Cafe Imports to recognize the amazing work of women growing and producing fine coffees around the world. Sometime in 2018, Dunn Brothers Coffee began releasing coffee selections from women producers as part of its Women Coffee Producers Collection. The brand says that programs like this help to empower women who work in many facets of the coffee supply chain throughout the world, while facing inequality and hardships within the coffee industry.
2. The coffee offered in the Women Coffee Producers Collection comes from both women’s only cooperatives, and from women who are members of mixed-gender cooperatives. Women producers who are part of Cafe Imports’ Women Coffee Producers program are paid additional premiums per pound for their coffee. The additional premiums come with no strings attached and most of the time these women are choosing to use the additional money to support projects in their communities. Some of these community projects include providing health-care access and improving location education.
3. One of the featured members of the Women Coffee Producers Collection is AMACA (Asociacion de Mujeres Productoras Agropecuarias del Cauca) of Colombia. The association was formed nearly 20 years ago by 80 women coffee producers and its goal has always been to improve the quality of life of its members and their families. Today, there are about 140 active members of AMACA; all of them are women and the heads of their households.
4. When Dunn Brothers Coffee asked Luz Marina Sanchez, the legal representative of AMACA, what she would say to people who drink the coffee AMACA produces, “I would tell them to drink with full confidence that this comes from women, and from a family environment. This is coffee done by hand, 100% purely from specialty farms of women.”
Seasonal Products and Current Promotions
5. To kick off the fall season, Dunn Brothers Coffee has brought back its Pumpkin Pie Latte as well as its Honey Spiced Nirvana. The brand’s Pumpkin Pie Latte uses real pumpkins, real spices, and real maple syrup. For 2018, Dunn Brothers has added its new house-made cinnamon whipped cream to really capture the season’s flavors.
6. The Honey Spiced Nirvana features Dunn Brothers Coffee’s Nirvana recipe combined with Miel (honey). The drink uses house-made honey syrup, brown sugar, and a dash of cinnamon combined with cold press and cream. Both seasonal drinks can be ordered steamed, iced, or as a frappe.
7. Dunn Brothers Coffee has also added Apple Honey Toast to its menu for fall. The Apple Honey Toast features creamy mascarpone cheese and a layer of Granny Smith apple slices, topped off with crushed granola and honey.
8. In addition to the seasonal drinks, Dunn Brothers Coffee has a special promotion for the first week of October. At participating locations, customers can pair any new food items with a prepared beverage to receive $2 off their order. The offer is valid with purchase of an Apple Honey Toast, Triple Berry Toast, Bacon, Tomato & Egg Toast, Avocado, Bacon & Egg Toast, California Chicken Sandwich, and Build Your Own Sandwich or Breakfast Bowl.
9. One of Dunn Brothers Coffee’s newest locations opened in early March 2018 in Keokuk, Iowa. The new shop is owned and operated by DeAngelo and Alexandra Seay, who have been interested in starting their own business for a few years.
10. The couple became interested in owning a Dunn Brothers Coffee franchise after Alexandra and her mother were brainstorming business ideas in the Dunn Brothers Coffee of Burlington. She said, “We just looked around us and it hit us. We were enjoying great coffee and great customer service and we liked the Dunn Brothers philosophy of a quality experience.”
11. It took about three years for the Seays to open their Dunn Brothers Coffee shop and they spent months learning the ropes by working in various nearby shops within the company. The Seays said that even though the hours are long, they enjoy the work and finally feel like they’re living their dream.
12. While the Seays continue to build up this location’s customer base, they have considered opening another Dunn Brothers Coffee location in Cedar Rapids, Iowa City, or both.
13. Dunn Brothers Coffee was founded in 1987 by brothers Ed and Dan Dunn in St. Paul, Minnesota. The Dunns learned how to properly roast coffee in Portland, Oregon and left to find an underserved location for a coffee business. After the success of their first location, the Dunns opened a second coffee shop in Uptown Minneapolis in 1991 and started franchising a few years later in 1994.
14. From the beginning, the mission of Dunn Brothers Coffee has been to:
- Roast in small batches;
- Serve the freshest brew possible;
- Provide a warming coffee experience; and
- Put community at the core of business.
15. Although Dunn Brothers Coffee now has locations across the United States, the franchise has stayed true to its original mission. Each location still roasts small batches of coffee in-house everyday and each roaster is required to complete the Dunn Brothers Coffee Certified Roaster Program. Dunn Brothers Coffee has also made a commitment to only using ethically-sourced coffee beans that are also sustainable. In addition to fresh coffee, each Dunn Brothers Coffee shop offers fresh foods that are handmade.
Entrepreneur’s Franchise 500
16. Dunn Brothers Coffee ranked No. 442 on Entrepreneur’s 2018 Franchise 500 list.
Section II – Estimated Costs
- Please click here for detailed estimates of Dunn Brothers Coffee 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 Dunn Brothers Coffee’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: 79
- Outlets at the End of the Year: 80
- Net Change: +1
- Outlets at the Start of the Year: 80
- Outlets at the End of the Year: 78
- Net Change: -2
- Outlets at the Start of the Year: 78
- Outlets at the End of the Year: 72
- Net Change: -6
- Outlets at the Start of the Year: 4
- Outlets at the End of the Year: 5
- Net Change: +1
- Outlets at the Start of the Year: 5
- Outlets at the End of the Year: 4
- Net Change: -1
- Outlets at the Start of the Year: 4
- Outlets at the End of the Year: 5
- Net Change: +1
Section V – Financial Performance Representations (Item 19, 2018 FDD) and Analysis
Key Item 19 Terms Defined
- Gross Revenues – Total actual receipts for all products and services sold by the Shop, whether or not identified by the Trademarks, whether at wholesale or retail, for cash or credit or in any other way, but excluding federal, state, municipal, or other sales, value added, or retailer’s excise taxes collected from customers and paid to the appropriate taxing authority, and before any sales discounts.
- Dunn Brothers Coffee collected Gross Revenues data from the Shops’ POS Systems and have not independently verified the information.
- Gross Margin – Gross Revenues less the Cost of Goods Sold, including amounts for coffee beans, dairy, food items, syrups, tea, cups, lids, paper products, freight, and other direct products associated with serving food and beverage products.
- Dunn Brothers Coffee obtained the Cost of Goods Sold data from the financial statements the Shops submitted to it and it has not independently verified the information.
- Gross Margin Percentage – Gross Margin divided by Gross Revenues.
- Labor Costs – Includes wages for in-store employees including payroll taxes. Affiliate-owned Shops’ labor costs also include a manager’s salary and related payroll taxes. Some franchised Shops include a manager’s salary as part of Labor Costs while other franchised Shops do not include a manager’s salary because the franchisee acts as the manager and does not take a salary.
- Dunn Brothers Coffee obtained the Labor Costs data from the financial statements for the Shops and has not independently verified the information.
- Labor Costs Percentage – Labor Costs divided by Gross Revenues.
Part 1 – 2017 Annual Average Gross Revenue
- The table below presents the 2017 annual average Gross Revenue for franchised and affiliate-owned Dunn Brothers Coffee Shops in operation during the entire 12-month period ended December 31, 2017 and that offered Dunn Brothers Coffee’s full menu of food Products.
- There were 72 franchised and 5 affiliate-owned Shops in operation during the entire 12-month period in 2017. The table below includes 35 out of those 72 franchised Shops and 2 of the 5 affiliate-owned Shops that offered Dunn Brothers Coffee’s full menu of food Products (“Qualifying Shops”).
- The remaining 37 Shops were not included because: the Shops did not offer the full menu of food Products and only offered fresh-baked breakfast and bakery food (23 Shops), the Shops were located in non-traditional sites (such as airports, convention centers, libraries, or colleges) (8 Shops); or the Shops are co-branded locations (6 Shops).
- All new franchisees must offer the full menu of food Products.
Franchised Qualifying Shops