FDD Talk 2018: TCBY 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 TCBY franchise opportunity, including relevant news updates

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

• Section IV – Number of franchised and company-owned TCBY 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 TCBY’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 upper quartile, second highest quartile, third highest quartile, lowest quartile, and all 114 franchised traditional TCBY stores that reported their revenue for the full 52-week period ended June 30, 2018 and have not closed since June 30, 2018

Section I – Background Information

15 Things You Need to Know About the TCBY Franchise

Celebrates 37th Birthday With Froyo Happy Hour

1.  On August 7, 2018, TCBY celebrated its 37th birthday by offering its loyal customers Buy One, Get One for only 37 cents (excluding cakes and pies). From 3:00 p.m. to 7:00 p.m. on that day, TCBY customers were able to join the happy hour celebration and received this offer at participating locations. Additionally, participating locations across the nation hosted a “Birthday Bash” featuring specialty soft-serve flavors such as birthday cake batter and strawberry birthday shortcake.

2.  Dustin Lyman, chief executive officer of TCBY, said, “For the last thirty-seven years, it has been our pleasure to deliver the most delicious and healthy frozen yogurt in the industry. We’re excited to share this milestone with our loyal fans who have helped us grow into the brand we are today.”

Brings Back Three Limited-Time Fall Favorites

3.  To kick off the fall 2018 season, TCBY brought back three limited-time seasonal flavors starting in September. These seasonal favorites are Apple Pie, Pumpkin Pie, and Graham Cracker. The Apple Pie flavor is a hand-scooped frozen yogurt that is made with real apples, ground cinnamon, and crumbled crust. Low-fat Pumpkin Pie soft-serve is made with real pumpkin. TCBY suggests pairing Pumpkin Pie with the Graham Cracker soft-serve, which is made with real graham crackers.

4.  Dustin Lyman, chief executive officer of TCBY, said, “We start with natural ingredients and add fall flavor staples like pumpkin, apple and graham cracker, making our autumn frozen yogurt selections some of our biggest fan favorites. The flavors are delicious and guests can pair them for unique taste combinations or simply enjoy them on their own.”

Opens 25th Location in Texas

5.  One of TCBY’s newest locations for 2018 opened in April in Irving, Texas at the Toyota Music Factory complex. The location is the 25th overall in the state of Texas and is the second TCBY store for owners Alkesh and Tina Jariwala. The Jariwalas opened their first TCBY three years ago in Coppell, Texas.

6.  After working five years in the banking industry, Tina decided to search for a career that allowed her to spend more time with her two daughters. Alkesh is a lifelong fan of TCBY and has fond memories of visiting his local TCBY as a child. The couple felt that TCBY was the perfect business to open in their community.

7.  Alkesh Jariwala said, “I grew up with TCBY, so I am continuously honored to be a part of the brand and elated to open my second location in the area. TCBY has allowed my wife and I to lead by example for our daughters, and we look forward to having them inherit the business one day and become franchisee owners themselves.”

Company History

8.  TCBY, which stands for The Country’s Best Yogurt, was founded in 1981 by Frank D. Hickingbotham in Little Rock, Arkansas. Hickingbotham was already an experienced entrepreneur and was looking for his next business venture when he tried frozen yogurt for the first time at a Neiman-Marcus department store.

9.  According to company legend, Hickingbotham and his wife liked the frozen yogurt so much that he exclaimed, “This can’t be yogurt!” This was TCBY’s original name, but the company was forced to create a new name from its initials, eventually using “The Country’s Best Yogurt” in 1984, after a lawsuit from a competitor called I Can’t Believe It’s Yogurt.

10.  Hickingbotham used the same supplier as Neiman-Marcus, Arthur’s Ice Cream Specialties, Inc., for his frozen yogurt mix. TCBY bought Arthur’s Ice Cream Specialties in 1983 and changed its name to Arthur’s Foods, Inc.

11.  The first TCBY store was a hit and Hickingbotham enlisted various family members to help him open a few more stores. Franchising started in 1982 and within a year, the TCBY system had made $1.8 million in sales. TCBY grew rapidly throughout the rest of the 1980s and by the end of the decade, the company had over 1,500 stores.

12.  During the 1990s, TCBY went through ups and downs even though it was the leading frozen yogurt company. To help sales, in 1995, TCBY started co-branding with Taco Bell, McDonald’s, Subway, and Burger King.

13.  In 2000, TCBY was acquired by Mrs. Fields and Mrs. Fields Famous Brands was formed. Mrs. Fields still owns TCBY today and the two franchises are often co-branded.

14.  In 2010, TCBY changed its business model to reflect the new trend of self-serve frozen yogurt, where customers can choose and serve their own frozen yogurt and pick their own toppings. Although the frozen yogurt space is crowded today, TCBY still has a strong presence across the United States and in several countries around the world.

Entrepreneur’s Franchise 500

15.  TCBY did not rank on Entrepreneur’s 2018 Franchise 500 list.

Section II – Estimated Costs

• Please click here for detailed estimates of TCBY 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 TCBY’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:  321
• Outlets at the End of the Year:  304
• Net Change:  -17

2016

• Outlets at the Start of the Year:  304
• Outlets at the End of the Year:  285
• Net Change:  -19

2017

• Outlets at the Start of the Year:  285
• Outlets at the End of the Year:  259
• Net Change:  -26

Company-Owned

2015

• Outlets at the Start of the Year:  1
• Outlets at the End of the Year:  1
• Net Change:  0

2016

• Outlets at the Start of the Year:  1
• Outlets at the End of the Year:  0
• Net Change:  -1

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

• As of the end of TCBY’s most recent fiscal year (June 30, 2018), there were 259 Stores in operation, all of which were owned by third-party franchisees.

• TCBY excluded from that group 83 Stores that did not report their revenue to it or for which it was not able to pull their revenue for the full 52-week period that ended on the last day of its most recent fiscal year.

• TCBY then excluded from the remaining 176 Stores, 58 Stores that are not traditional Stores; that is, Stores that operate seasonally, that are located in non-traditional locations such as gas stations, or are co-branded with another brand.

• From the remaining 118 Stores, TCBY excluded 4 Stores that have closed since June 30, 2018.

• The data used to formulate the information in this Item 19 was derived from the remaining 114 Stores.

• To determine the average Gross Revenue for each group shown in the chart below, TCBY took the group’s total Gross Revenue (as that term is defined in the Franchise Agreement), then divided that number by the number of Stores in the group.

• For example, for the 114 Stores that made up the entire data set, TCBY added the Gross Revenue of all 114 Stores for the entire fiscal year (the 52-week period ending June 30, 2018), then it divided that number by 114.

• In the chart below, TCBY also reports the results by quartile. Each quartile represents 25% of the 114 Stores that form the data set. For each group, the reported average Gross Revenue (as that term is defined in the Franchise Agreement) is for the full fiscal year.

• Since the data set is comprised entirely of franchised Stores, the data is what was reported to TCBY by the franchisees or what was entered by the franchisees in the Store’s point-of-sale system and, thus, reported to TCBY.

• For purposes of this Item 19, TCBY assumed what they reported is accurate. TCBY did not audit or otherwise verify their numbers.

• In the results below, TCBY also reports, for each group, the range and the median.

• The range reflects the low and high data point for each group.

• The median is the data point that is the center of all data points used for the group, except that, in the second and third highest quartiles, there is an even number of Stores, so the median is derived by adding the two numbers in the middle of the data set for that group, then dividing that number by two.

Upper Quartile