In this FDD Talk post, you’ll learn the following:
- Section I – Background information on the Wetzel’s Pretzels franchise opportunity, including relevant news updates
- Section II – Estimated initial investment for a Wetzel’s Pretzels 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 Wetzel’s Pretzels franchise, based on Items 5 and 6 of the company’s 2018 FDD
- Section IV – Number of franchised and company-owned Wetzel’s Pretzels 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 Wetzel’s Pretzels’ financial performance representations, based on Item 19 of the company’s 2018 FDD, including information on the:
- 2017 average, median, highest, and lowest adjusted gross revenues for the franchised Wetzel’s Pretzels bakeries that were open for 12 months ended December 31, 2017, by venue type (entertainment center locations, outlet malls, regional malls, transit locations, and Walmart store locations)
- number of franchised Wetzel’s Pretzels bakeries operated in regional malls for 12 months ended December 31, 2017 for each of the following sales ranges: $700,000 and up; $550,000 to $699,999.99; $400,000 to $549,999.99; $250,000 to $399,999.99; and up to $249,999.99
- 2017 average, median, highest, and lowest net sales, cost of goods sold, gross profit, labor, rent, other expenses, total expenses, and net operating income for the franchised Wetzel’s Pretzels bakeries that were open for 12 months ended December 31, 2017
Section I – Background Information
13 Things You Need to Know About the Wetzel’s Pretzels Franchise
Celebrates Opening of 350th Location
1. In mid-November 2018, Wetzel’s Pretzels announced that it had opened its 350th location. The new location is at the Denver Premium Outlets in Colorado and is the fifth Wetzel’s Pretzels franchise now open in the Denver area, which Wetzel’s Pretzels views as a key growth market.
2. Jennifer Schuler, president of Wetzel’s Pretzels, said, “Wetzel’s Pretzels is an established West Coast fan favorite, and we’re excited about the ongoing brand and product acceptance in outer markets, such as the Denver area. Whether traditional or non-traditional, Wetzel’s Pretzels continues to be positioned for growth thanks to operational simplicity, unit size flexibility, and the corporate team’s core focus on franchisee profitability.”
3. Beyond traditional mall buildouts, Wetzel’s Pretzels is able to capitalize on various non-traditional locations, such as the Denver Premium Outlets. The brand offers a variety of build-out options to accommodate most any space, including both baking and non-baking kiosks, as well as remote units that can supplement a traditional in-line location. The Wetzel’s Pretzels concept can fit anywhere there is appropriate space.
Continues Domestic Expansion With Texas Development Focus
4. In late October 2018, Wetzel’s Pretzels announced that Doug Flaig, vice president of franchise development, hosted exploratory meetings with qualified multi-unit operators across Austin, San Antonio, and Houston, Texas. Wetzel’s targeted growth plans for Texas come on the heels of another banner year for the company, which included consistent, industry-leading sales growth as well as being named one of the top three fastest-growing snack concepts by Franchise Times Magazine, and a top franchise by Entrepreneur Magazine.
5. Jennifer Schuler, president of Wetzel’s Pretzel’s, said, “Wetzel’s Pretzels’ menu items sit at a fantastic intersection of being quick, affordable snacks that are made from scratch with limited ingredients, exactly what today’s consumers are looking for. This brand is positioned for immediate and long-term growth thanks to operational simplicity, unit size flexibility and the corporate team’s core focus on franchisee profitability. We believe there is tremendous opportunity across Texas, and look forward to partnering with operators to bring this beloved West Coast brand to life throughout the region.”
6. Company leadership views Texas as a fantastic growth opportunity thanks to the enormous amount of well-trafficked large properties across the state. Wetzel’s Pretzels currently has more than 10 locations across the Dallas/Fort Worth area to build off of, along with locations in Houston, Corpus Christi, and Austin. Major well-trafficked properties Wetzel’s is targeting for expansion include: San Marcos Premium Outlets; Cielo Vista Mall in El Paso; South Plains Mall in Lubbock; and Barton Creek Square in Austin.
Adds Cheesy Dog Bites to Permanent Menu
7. At the end of October 2018, Wetzel’s Pretzels announced that it had made the fan-favorite Cheesy Dog Bites a part of its permanent menu. Wetzel’s Pretzels had first launched the Cheesy Dog Bites as a limited-time menu item three months before making it permanent.
8. The Cheesy Dog Bites start with fresh dough made from scratch at each Wetzel’s Pretzels location. The dough is then wrapped around a 100% beef mini hot dog, topped with a cheese blend, then baked to a golden brown. The product is one of Wetzel’s Pretzels’ top sellers, making up a significant mix without cannibalizing the brand’s other premium items such as the Original Dog Bites.
9. According to Jennifer Schuler, president of Wetzels Pretzels, “The people have spoken, and guests have made it clear through their purchases and love across social media that Cheesy Dog Bites should be here to stay. Cheesy Dog Bites’ sales mix since introduction have continued to grow. They’re clearly a platform we can continue to innovate against, as we look to further stretch our average unit volume category lead even further.”
10. Wetzel’s Pretzels was founded in 1994 by Bill Phelps and Rick Wetzel in Redondo Beach, California. Both Phelps and Wetzel were former marketing executives who saw an opportunity to sell soft pretzels that were hand-rolled, baked fresh, and served hot from the oven. The first Wetzel’s Pretzels location was a hit and two years later, Phelps and Wetzel started franchising the concept. As Wetzel’s Pretzels grew, new items were added to the menu, including the Wetzel Dog, an all-beef hot dog wrapped with a pretzel.
11. In 2007, Los Angeles private equity firm Levine Leichtman Capital Partners, Inc. bought a majority stake in Wetzel’s Pretzels for an undisclosed amount. At the time, Phelps retained a 20% share in the company, while Wetzel held a smaller stake. A few years ago, in 2016, Levine Leichtman Capital Partners sold its majority stake in the company to CenterOak Partners, a leading Dallas-based private equity group with significant consumer brand, business service, and industrial sector holdings. Phelps remains as CEO of Wetzel’s Pretzels and Wetzel has retained a seat on the company’s board of directors.
12. Today, Wetzel’s Pretzels has locations across the United States and in the Dominican Republic and continues to seek franchisees around the world.
Entrepreneur’s Franchise 500
13. Wetzel’s Pretzels ranked No. 268 on Entrepreneur’s 2018 Franchise 500 list.
Section II – Estimated Costs
- Please click here for detailed estimates of Wetzel’s Pretzels 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 Wetzel’s Pretzels’ 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: 256
- Outlets at the End of the Year: 264
- Net Change: +8
- Outlets at the Start of the Year: 264
- Outlets at the End of the Year: 276
- Net Change: +12
- Outlets at the Start of the Year: 276
- Outlets at the End of the Year: 294
- Net Change: +18
- Outlets at the Start of the Year: 6
- Outlets at the End of the Year: 8
- Net Change: +2
- Outlets at the Start of the Year: 8
- Outlets at the End of the Year: 12
- Net Change: +4
- Outlets at the Start of the Year: 12
- Outlets at the End of the Year: 12
- Net Change: 0
Section V – Financial Performance Representations (Item 19, 2018 FDD) and Analysis
- The information presented in this Item 19 excludes sales information from (a) affiliate-owned Bakeries, (b) Bakeries that were not continuously open and operating under the same franchise owner throughout the last fiscal year, and (c) 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.
Part 1 – 2017 Fiscal Year Adjusted Gross Revenues
- The chart below reflects the Adjusted Gross Revenues for franchised locations. The chart does not reflect net income or profits and does not include costs or expenses you will incur in operating your Bakery.
- The chart below includes 183 Bakeries that were open for 12 months ended December 31, 2017. Of the 183 Bakeries, 21 were in Arizona, 96 in California, 5 in Colorado, 2 in Connecticut, 1 in Florida, 1 in Georgia, 2 in Idaho, 5 in Illinois, 3 in Indiana, 4 in Massachusetts, 1 in Maryland, 3 in Michigan, 1 in Minnesota, 7 in Nevada, 7 in New Jersey, 5 in New York, 2 in Oregon, 10 in Texas, 1 in Virginia, and 6 in Washington.
- The franchises are substantially similar to those being offered in the disclosure document.
- The figures for franchised Bakeries were provided to Wetzel’s Pretzels by franchisees. In all cases, these sales figures have been used as the basis for collection of royalties. In many instances, the franchisor has not audited those figures nor has it independently confirmed their accuracy.
- For purposes of Part 1, the following terms have the following definitions:
- Entertainment Center Locations: An Entertainment Center Location is a place where people congregate to be entertained by performances or amusement, including but not limited to movie theatres, sports arenas, casinos, amusement parks, and theme parks.
- Outlet Malls: Outlet Malls are typically a large group of shops, “outlet shops,” or “factory shops” usually located outside of a town or city in which the shops sell products and services at discounted prices.
- Regional Malls: For purposes of Part 1, the term Regional Malls means all types of malls other than Outlet Malls.
- Transit Locations: Transit Locations shall mean airports, railroad stations, train stations, and other similar locations intended for other modes of transportation.
- Each of the Bakeries used in compiling the figures in Part 1 had been in operation for at least 12 months. In most cases, financial performance, revenues, and overall results for Bakeries are materially less favorable during a Bakery’s first 12 months of operation.
All Franchised Bakeries