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

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

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

• 2017 average and median net sales, cost of goods sold, labor costs, and rent, as well as  average same-store sales growth, for the 105 franchised Traditional Stores that had been continuously in operation for the entire calendar year of 2017, that were not co-branded with another concept or supplemented with a Satellite, and that provided the franchisor with the presented financial information for the full calendar year 2017

• 2017 average and median net sales and average same-store sales growth for Pretzelmaker franchisees in the sample that operated 1-2 Stores, 3-5 Stores, and more than 5 Stores, respectively

Section I – Background Information

13 Things You Need to Know About the Pretzelmaker Franchise

Launches New Concept With All-Day Menu Offerings

1.  At the beginning of April 2018, Pretzelmaker launched its new Fresh Twist by Pretzelmaker concept. Fresh Twist by Pretzelmaker takes the brand’s fresh hand-rolled Pretzels, Pretzel Bites, and Pretzel Dogs and adds breakfast and late-night menu options allowing it to be competitive in both traditional and non-traditional venues across the country.

2.  The new menu will offer breakfast sandwiches on pretzel buns, Cinnamon Toast Pretzel Sticks, Pretzel Flatbread Pizzas, and Pepperoni Pretzel Rolls in addition to its all-natural lemonades and smoothies.

3.  Fresh Twist can operate in a space as little as 250 square feet and is scalable to fit the needs of most venues. The concept features premium pricing with competitive food costs, ongoing training, and support from Global Franchise Group (the franchisor of Pretzelmaker) and is a simple operation with Pretzelmaker’s signature “fresh theater action” for customers. Potential franchisees can also take advantage of a streamlined equipment package.

4.  Global Franchise Group is offering special construction incentives for the first Fresh Twist franchise agreement. It is also working with higher education development firm OnCampus Brands to market and connect Fresh Twist by Pretzelmaker to college and university dining programs and auxiliary services across the U.S.

5.  Allison Lauenstein, executive vice president of Pretzelmaker, said, “Pretzelmaker is known for our product innovation and putting a unique spin on traditional pretzel products. Fresh Twist by Pretzelmaker demonstrates just how versatile our best in class pretzel dough can be. We know customers are snacking more and are always looking for a portable way to grab a meal on the go. In fact, soft pretzels were named the second most popular dish of 2017 by GrubHub with a 221% rise in popularity. Fresh Twist was designed with that in mind. The concept is ideal for travel centers, universities and airports.”

Opens First Location in Asia

6.  In early October 2018, Pretzelmaker opened its first location in Asia in Alabang, Metro Manila, Philippines. Through a Master Franchise agreement with Vavel Foods, Inc., Pretzelmaker opened its first store in the Philippines at the Festival Mall Alabang. Vavel Foods plans to open 14 additional Pretzelmaker locations throughout the Philippines.

7.  Chris Dull, president and CEO of Global Franchise Group, said, “Pretzelmaker’s first location in Asia is symbolic of the popularity of pretzels and the rise of snacking internationally. We are proud of the expansion of the Pretzelmaker brand and our global reputation. We look forward to working with Vavel to open more stores across the Philippines.”

8.  Pretzelmaker at Festival Mall in Alabang is located in a busy retail area and offers the brand’s signature line-up of hand-rolled pretzels, Pretzel Bites, Pretzel Dogs, dipping sauces, and beverages including all-natural lemonades. In addition, Pretzelmaker Philippines exclusively launched Cream Cheese Stuffed Bites in three varieties: Almond Crunch, Cinnamon Sugar, and Garlic Seasoning.

9.  According to Migo Ochoa, general manager of Pretzelmaker Philippines, “We decided to open Pretzelmaker in the Philippines because the delicious hand-rolled pretzel products far surpass the competition and we knew customers would love them. As demonstrated by the success of our Grand Opening, the community is very excited to have a Pretzelmaker at the mall and we are very happy to be providing a new twist on snacking options for busy shoppers.”

Company History

10.  Pretzelmaker was founded as Pretzelvania in 1991 by Jeffrey Tripp. The company’s name was changed to Pretzelmaker not long after to prepare for nationwide franchising. Charles L. Smith was the founding president of Pretzelmaker Corporation with Bruce W. Stratford serving as legal counsel and CFO. J. Kelly Hansen and Stephen A. Thorpe ran the day-to-day operations as co-founders and VP of sales and VP of operations respectively.

11.  By the mid-1990s, Pretzelmaker sold more than 100 franchises and had over 40 stores in operation. In 1995, Don Cox, Marc Geman, Tony Joseph, and Dale Fowler bought Pretzelmaker with a small group of investors. Within the next few years, Pretzelmaker had grown to 288 locations. Pretzelmaker changed owners once again in 1999 when the company was sold to Mrs. Fields Famous Brands.

12.  Along with sister brand Pretzel Time, Pretzelmaker was sold in 2007 to NexCen for a combined transaction total of $29.7 million. Both brands were merged into Pretzelmaker in 2010 when NexCen Franchise Management was bought out by Global Franchise Group. Today, Pretzelmaker is one of the largest retailers of soft, hand-rolled pretzels.

Entrepreneur’s Franchise 500

13.  Pretzelmaker did not rank on Entrepreneur’s 2018 Franchise 500 list.

Section II – Estimated Costs

• Please click here for detailed estimates of Pretzelmaker 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 Pretzelmaker’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:  214
• Outlets at the End of the Year:  222
• Net Change:  +8

2016

• Outlets at the Start of the Year:  222
• Outlets at the End of the Year:  217
• Net Change:  -5

2017

• Outlets at the Start of the Year:  217
• Outlets at the End of the Year:  205
• Net Change:  -12

Company-Owned

2015

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

2016

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

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

• The data below presents historical revenue and limited expense information for calendar year 2017 for certain franchised Pretzelmaker Stores. The expenses listed below do not reflect any start-up expenses that you may incur.

• The sample used to obtain this information includes only franchised Traditional Stores that had been continuously in operation for the entire calendar year of 2017, that were not co-branded with another concept or supplemented with a Satellite, and that provided the franchisor with the presented financial information for the full calendar year 2017.

• There were 205 franchised Stores open and operating as of December 31, 2017. Of these, 105 were Traditional Stores that operated for all of 2017, 51 were Non-Traditional Stores, 41 were Co-Branded Stores, and 8 Stores were not open for the entire 2017 calendar year.