In this FDD Talk post, you’ll learn the following:

• Section I – Background information on the Zaxby’s franchise opportunity, including relevant news updates

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

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

• 2017 average gross revenue, cost of goods sold, labor, other operating expenses, and EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) from operations by quartile for the 672 licensee-owned Zaxby’s restaurants that were open and operating during the entire 53-week period ending on December 31, 2017

• 2017 average, median, high, and low gross revenue by quartile for the 672 licensee-owned Zaxby’s restaurants that were open and operating during the entire 53-week period ending on December 31, 2017

• 2011 to 2017 average and median gross revenue for the licensee-owned Zaxby’s restaurants that were open and operating during the entire applicable fiscal year

Section I – Background Information

15 Things You Need to Know About the Zaxby’s Franchise

Rolling Out Interactive Tailgate Experience

1.  At the beginning of September 2018, Zaxby’s launched “Zaxby’s Fanz of Flavor,” an interactive college tailgate experience, set to run during this football season. Through a partnership with IMG, the brand will be bringing its tailgate experience to 12 matchups across its footprint.

2.  Will Riley, vice president of brand management and marketing at Zaxby’s Franchising, LLC, said, “Zaxby’s has been at the forefront of sports partnerships for years, at the national and local levels, and ‘Zaxby’s Fanz of Flavor’ falls right in line. The tailgate experience is a perfect way for us to unite the brand’s love for our fans, love of flavor and love for college football. We are excited to share this with our loyal Zaxby’s fanatics in each of these towns.”

3.  Football fanatics at each stop will enjoy the “Zaxby’s Fanz of Flavor” tailgate activities, which will take place in a large custom-built structure designed and built by My Friend’s Nephew, an Atlanta-based creative advertising and design studio. By leveraging the breakthrough technology of Vive, the new virtual reality system from HTC, fans will be able to paint a three-dimensional Big Z, Zaxby’s mascot, and virtually tour a Zaxby’s location.

4.  The entire session will be captured on video and emailed to participants. Those interested are able to learn more and view videos online. In addition to the virtual reality experience, fans will have an opportunity to compete for prizes at “Flavorize Your Fandom” stations and deck themselves out in body paint with help from two master body painters.

5.  According to Josh Robinson, executive creative director and principal at My Friend’s Nephew, “Our objective was to give people the chance to engage in an experience that goes beyond the typical swag. We hope that everyone, from those who are hearing the Zaxby’s name for the first time to long-time fanatics, will discover that flavor and fun are at the heart of the brand.”

6.  Zaxby’s Fanz of Flavor tour stops are as follows:

• September 4 – University of Texas vs. Notre Dame
• September 10 – TCU vs. Arkansas
• September 17 – Arkansas vs. Texas State
• September 24 – Western Kentucky vs. Vanderbilt
• October 1 – FSU vs. UNC
• October 8 – University of Texas vs. Oklahoma
• October 15 – Georgia Tech vs. Georgia Southern
• October 29 – South Carolina vs. Tennessee
• November 5 – Ole Miss vs. Georgia Southern
• November 10 – Duke vs. UNC
• November 19 – Tennessee vs. Missouri
• November 26 – Virginia Tech vs. Virginia

Appoints New Chief Marketing Officer

7.  At the end of April 2018, Zaxby’s appointed Joel Bulger to the new position of chief marketing officer. Bulger most recently served as CMO of Johnny Rockets Group, Inc. Prior to his work at Johnny Rockets, Bulger held senior marketing leadership positions with such restaurant brands as Wendy’s, Church’s Chicken, Moe’s Southwest Grill, and Darden Restaurants, Inc. In his new role as CMO for Zaxby’s, Bulger will lead marketing, digital and social platforms, and other advertising and partnerships.

8.  Zach McLeroy, co-founder and CEO of Zaxby’s, said, “We took our time finding the ideal candidate. After an extensive search, we are confident that Joel is the right person to help take Zaxby’s branding and marketing to the next level.”

Fan-Favorite Salad Returns for a Limited Time

9.  In early April 2018, Zaxby’s brought back The Zensation Zalad in all Zaxby’s locations until July 1. According to Stephanie Gamble, vice president of menu innovation for Zaxby’s, “The Zensation Zalad is our most frequently requested limited-time-offer item, and we continue to bring it back because guests love it. I can’t begin to tell you how many times we’ve heard, ‘I don’t even eat salads, but I love The Zensation.’”

10.  The Zensation Zalad features sweet and savory flavors—like sesame, pineapple, orange juice, ginger, garlic, soy, rice vinegar, honey, and brown sugar—and great textures, from hand-chopped lettuce and crispy wontons to crunchy Asian slaw and a veggie egg roll. Customers were also able to add Zaxby’s signature Chicken Fingerz to their salads.

11.  Over the years, The Zensation Zalad has reappeared on the Zaxby’s menu as a limited-time-only option and continues to be the brand’s most requested item. It is made to order with hand-breaded Chicken Fingerz, freshly chopped mixed greens, red cabbage, carrots, and crispy wonton strips, all topped with Asian slaw and drizzled with a honey sesame glaze. It is served with Citrus Vinaigrette dressing and a vegetable egg roll.

12.  Gamble added, “For The Zensation, we use four unique ingredients that must be inventoried, prepped, and monitored daily. The build is a different process than our typical salads, and it requires training and diligent reinforcement. But it’s worth it, as there is nothing more rewarding than bringing back a fan favorite and making our guests happy.”

Company History

13.  Zaxby’s was started in 1990 by Zach McLeroy and Tony Townley in Statesboro, Georgia. McLeroy and Townley, who are childhood best friends, felt that none of the local chicken wing restaurants in Statesboro were as good as the ones near where they went to college.

14.  The Zaxby’s chicken and Zax sauce are based on the recipes from a small chicken chain called Guthrie’s that McLeroy frequented while attending the University of Georgia. Franchising started in 1994, but Zaxby’s still operates primarily in the Southern United States.

Entrepreneur’s Franchise 500

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

Section II – Estimated Costs

• Please click here for detailed estimates of Zaxby’s 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 Zaxby’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:  546
• Outlets at the End of the Year:  598
• Net Change:  +52

2016

• Outlets at the Start of the Year:  598
• Outlets at the End of the Year:  679
• Net Change:  +81

2017

• Outlets at the Start of the Year:  679
• Outlets at the End of the Year:  736
• Net Change:  +57

Company-Owned

2015

• Outlets at the Start of the Year:  112
• Outlets at the End of the Year:  128
• Net Change:  +16

2016

• Outlets at the Start of the Year:  128
• Outlets at the End of the Year:  137
• Net Change:  +9

2017

• Outlets at the Start of the Year:  137
• Outlets at the End of the Year:  141
• Net Change:  +4

Section V – Financial Performance Representations (Item 19, 2018 FDD) and Analysis

• As of December 31, 2017, Zaxby’s had 877 open and operating licensed Restaurants. Of these 877 Restaurants, 736 were owned and operated by third-party licensees that are not owned or controlled by Zaxby’s principal shareholders or its affiliates (the “Licensee-Owned Restaurants”).

• The data utilized in Item 19 is based solely on the operating results of the 672 Licensee-Owned Restaurants that were open and operating during the entire 53-week period ending on December 31, 2017 (the “Measured Restaurants”).

• Zaxby’s did not include in the analysis (i) 141 Restaurants that were owned or controlled by its principal shareholders or its affiliates and (ii) 64 Licensee-Owned Restaurants that were not open and operating for such entire 53-week period.

• During the 53-week period ending on December 31, 2017, four Restaurants closed which were excluded from the Measured Restaurants, but no Restaurant closed during its first 12 months of operation.

• All of the Measured Restaurants are free-standing Restaurants that offer substantially the same products and services as are currently utilized in all of the licensed Restaurants.

• For purposes of this Item 19, the term “Gross Revenue” means all revenues received by a Restaurant as payment for all sales generated through the Restaurant, whether such payment is in cash, by exchange, or for credit (and, if for credit, regardless of collection), including revenues received from the operation of vending machines or other mechanical devices, less any taxes collected and transmitted to the appropriate taxing authorities.

• For purposes of this Item 19, the term “EBITDA” shall mean Gross Revenue less cost of goods sold, labor costs (excepting officer salaries), and all other operating expenses (excepting interest, taxes, depreciation, and amortization).

• This Item 19 was prepared utilizing data Zaxby’s received in the periodic sales reports provided to it by its licensees and through daily polling of Point of Sale (POS) data. Zaxby’s has not independently verified any of the data provided to it, but its licensees pay its licensing fees based on such reports.

• The cost and expense information in this Item 19 pertains only to the cost of goods sold, labor costs, and other operating expenses experienced by the Measured Restaurants for the period of December 26, 2016 to December 31, 2017. You may experience capitalized or other balance sheet expenditures that are not included in this cost and expense information.

Part 1 – Average Gross Revenues and Certain Operating Expenses by Quartile

• Part 1 below contains an analysis of gross revenues and certain operating costs and expenses (cost of goods sold, labor costs, and other operating expenses) of the Measured Restaurants for the 53-week period ending December 31, 2017. Part 1 is not a profit and loss statement.

• Labor costs in Part 1 do not include officer’s salaries and benefits for any Measured Restaurant that captures or recognizes that expense.

Top Quartile