In this FDD Talk post, you’ll learn the following:
- Section I – Background information on the MOD Pizza franchise opportunity, including relevant news updates
- Section II – Estimated initial investment for a MOD Pizza 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 MOD Pizza franchise, based on Items 5 and 6 of the company’s 2018 FDD
- Section IV – Number of franchised and company-owned MOD Pizza 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 MOD Pizza’s financial performance representations, based on Item 19 of the company’s 2018 FDD, including information on the:
- 2017 average, median, high, and low weekly net sales for the 153 company-owned and 32 franchised MOD Pizza restaurants that had been open and operating for a minimum of one year as of December 31, 2017 (the end of the franchisor’s 2017 fiscal year) and had been operated continuously through December 31, 2017 (“Covered Restaurants”)
- 2017 average, median, high, and low weekly net sales for the 77 company-owned and 12 franchised MOD Pizza restaurants that had been open and operating for a minimum of two years as of December 31, 2017 and had been operated continuously through December 31, 2017 (“Mature Restaurants”)
Section I – Background Information
19 Things You Need to Know About the MOD Pizza Franchise
New Chief Operating Officer
1. In early October 2018, MOD Pizza announced the appointment of John Maguire to the role of chief operating officer, effective October 22. As MOD’s new COO, Maguire will lead the company’s store operations, with a strong focus on all phases of expansion and growth.
2. He will be based in MOD’s headquarters outside of Seattle, reporting directly to Paul Twohig, president of MOD Pizza (Twohig was previously president and COO). Twohig will continue to lead store development (domestic and international real estate, design, and construction), culinary, supply chain, and international and franchise operations.
3. Before joining MOD Pizza, Maguire served as president and chief executive officer of FIC Restaurants, Inc. (Friendly’s restaurants), a position he held since 2012. In 2016, he subsequently took on the role of president and chief executive officer of Johnny Rockets Group, in addition to his position with FIC. Across both private-equity-owned companies, Maguire led global operations, franchising, and store development for a combined 625 locations with total annual sales exceeding $800M.
4. Maguire also spent 20 years working at Panera Bread in numerous retail operations roles, the last six years of which were spent as executive vice president and chief operating officer.
5. Scott Svenson, co-founder and CEO of MOD Pizza, said, “As a leader at Panera during their formative years of growth combined with his experience leading two loved brands, John brings the perfect mix of deep operating expertise combined with experience sustaining the culture required to build an iconic brand. Most importantly, though, John lives the values and beliefs at the heart of MOD. The thing which most attracted him was our commitment to using our business as a platform to make a positive impact on our people and the communities we serve. We could not be more thrilled to welcome him, and are confident that his track record of leading operations across large, multi-unit brands will allow us to further strengthen the MOD experience.”
Introduces First “Impact Pizza”
6. Near the end of June 2018, MOD Pizza introduced its first “Impact Pizza,” The Isaac, across all of its U.S. locations. The Isaac pizza was created in partnership with The Jed Foundation (JED), a leading nonprofit that exists to protect emotional health and prevent suicide for our nation’s teens and young adults.
7. The Isaac pizza shines a light on teen suicide and mental health and was available until October 1, 2018, during which time MOD used its platform to help connect employees, customers, and communities to JED. MOD also donated at least $50,000 to support JED’s programs and initiatives.
8. The special Impact Pizza featured an olive oil base, topped with garlic, ricotta cheese, sliced red onion, roasted red tomatoes, finished with a swirl of Balsamic vinaigrette, and topped with a sprinkle of fresh basil.
9. Ally Svenson, co-founder and chief purpose officer of MOD Pizza, said, “We are committed to using our business as a platform to make a positive difference in our communities. Sometimes, how we can help is revealed to us in unexpected ways. This has certainly been the case with Isaac, a special customer who connected deeply with his local MOD Squad in Naperville, Illinois, and sadly died by suicide last year. When Isaac’s family shared his story with us, we felt compelled to act.”
10. Isaac’s mother, Jenn Pedley, shared her son’s story with MOD Pizza. Pedley said, “MOD was Isaac’s happy place. A place where he felt loved and accepted, without question. A place where, when I knew he was there, I could exhale knowing he was in a good place. Many places grimace when a crowd of young feisty boys come flooding into their restaurant, but not MOD. The culture of acceptance they have created is not only forging a new kind of restaurant, but an empowering environment where people can go above and beyond to make a difference. To be able to lend Isaac’s name to help educate others has been incredibly healing for our family.”
11. During the time that The Isaac was available, all MOD stores had crisis outreach cards available, as well as information on how to contact JED and the nonprofit’s many resources. Svenson added, “We realize suicide is a heavy subject to tackle, but it is a critical issue within every community and one that does not discriminate. If we can use MOD stores to shine a light on this crisis and help build communities of caring, then it is simply the right thing to do. We believe this will be a powerful partnership, and one that is needed now more than ever. Together doing what we can to move from heartbreak to hope.”
Announces Entry Into Dallas Market
12. In late June 2018, MOD Pizza announced that it was expanding its presence in Texas with the opening of its first Dallas/Fort Worth location over the summer. At the time of the announcement, MOD was slated to open a total of four Dallas/Fort Worth area stores by the end of the year: Prosper and McKinney in July and August respectively, and Midlothian and Fort Worth in the fall. MOD currently has more than 40 locations across the state of Texas and plans to continue aggressive development in the greater Metroplex area for the next several years.
13. Scott Svenson, co-founder and CEO of MOD Pizza, said, “We’re excited to expand our footprint in Texas, adding to our existing markets of Houston, Austin and San Antonio. Texas is a key market for MOD, and this is the first step in building a significant presence in the DFW market as we continue our expansion across the entire state for the foreseeable future. Our motivation to grow MOD has always been driven by our desire to make a positive social impact on as many lives as possible. For us, this means offering job and career growth opportunities to those who face barriers to employment, along with supporting local non-profits that are working to build stronger communities. We believe it is possible to build a strong sustainable business while putting people first, and we’re really excited to bring our unique culture to Dallas.”
14. MOD Pizza was founded in 2008 by husband and wife team Scott and Ally Svenson in Seattle, Washington. The Svensons had previously founded Seattle Coffee Company in the United Kingdom, which they sold to Starbucks in 1998. They also helped start Carluccio’s Ltd., an Italian restaurant in the UK.
15. When the Svensons moved back to their hometown of Bellevue, Washington, they were unable to find fast, healthy, and affordable meals for their large family. The Svensons felt that there was a need to open a different kind of pizza place that was affordable and allowed everyone to get what they wanted.
16. James Markham, who had started pizza parlors in California and China, joined the Svensons in founding MOD Pizza and helped develop the house recipes used by the company. The first MOD Pizza location was followed by several more locations in the Seattle area. In 2010, Markham left the company over disputes with the Svensons. Markham went on to start rival DIY pizza chain Pieology.
17. By 2014, MOD Pizza had 31 stores opened and secured $15 million in private investment from backers including Dunkin’ Donuts president Paul Twohig and TOMS Shoes chief executive officer Jim Alling. The following year, MOD Pizza raised even more capital to push an aggressive national growth strategy.
18. In 2016, MOD Pizza opened its first international location in the United Kingdom. Today, MOD Pizza continues to grow across the United States and the UK.
Entrepreneur’s Franchise 500
19. MOD Pizza did not rank on Entrepreneur’s 2018 Franchise 500 list.
Section II – Estimated Costs
- Please click here for detailed estimates of MOD Pizza 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 MOD Pizza’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: 1
- Outlets at the End of the Year: 12
- Net Change: +11
- Outlets at the Start of the Year: 12
- Outlets at the End of the Year: 32
- Net Change: +20
- Outlets at the Start of the Year: 32
- Outlets at the End of the Year: 72
- Net Change: +40
- Outlets at the Start of the Year: 30
- Outlets at the End of the Year: 80
- Net Change: +50
- Outlets at the Start of the Year: 80
- Outlets at the End of the Year: 155
- Net Change: +75
- Outlets at the Start of the Year: 155
- Outlets at the End of the Year: 225
- Net Change: +70
Section V – Financial Performance Representations (Item 19, 2018 FDD) and Analysis
- As of December 31, 2017, the franchisor had a total of 223 company-owned MOD Pizza Restaurants owned and operated by MOD SFP, MOD CA, and MOD WI in the United States, and a total of 72 franchised MOD Pizza Restaurants.
- The franchisor also had two company-owned non-traditional MOD Pizza Restaurants that differ from the MOD Pizza Restaurants offered here, which the franchisor has not included in this financial performance representation.
Part 1 – Covered Restaurants: Open for a Minimum of One Year
- Of the 295 MOD Pizza Restaurants in the franchise system as of December 31, 2017, a total of 185 MOD Pizza Restaurants (each a “Covered Restaurant”) met the following criteria: they had been open and operating for a minimum of one year as of December 31, 2017 (the end of the franchisor’s 2017 fiscal year) and had been operated continuously through December 31, 2017.
- Of these 185 Covered Restaurants, 153 are company-owned MOD Pizza Restaurants and the remaining 32 are franchised MOD Pizza Restaurants.