In this FDD Talk post, you’ll learn the following:
- Section I – Background information on the Hot Dog on a Stick franchise opportunity, including relevant news updates
- Section II – Estimated initial investment for a Hot Dog on a Stick 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 Hot Dog on a Stick franchise, based on Items 5 and 6 of the company’s 2018 FDD
- Section IV – Number of franchised and company-owned Hot Dog on a Stick 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 Hot Dog on a Stick’s financial performance representations, based on Item 19 of the company’s 2018 FDD, including information on the:
- 2015, 2016, and 2017 average gross sales for the Top 25%, Middle 50%, and Bottom 25% (based upon total annual sales) of affiliate-owned Hot Dog on a Stick Stores that were open for the entire calendar year as of December 31, 2015, December 31, 2016, and December 31, 2017, respectively
- 2015, 2016, and 2017 average gross sales for the franchised Hot Dog on a Stick Stores that were open for at least 2 full years as of December 31, 2015, December 31, 2016, and December 31, 2017, respectively, and that did not operate as non-traditional units
Section I – Background Information
12 Things You Need to Know About the Hot Dog on a Stick Franchise
Offers Customers Free Lemonade After Making a Donation to the Leukemia & Lymphoma Society (LLS)
1. On National Lemonade Day (August 20, 2018), Hot Dog on a Stick invited customers to enjoy a free small lemonade when they make a donation to the Leukemia & Lymphoma Society (LLS), Hot Dog on a Stick’s charity of choice.
2. Jeremy Roy, executive vice president of Hot Dog on a Stick, said, “Hot Dog on a Stick is pouring sunshine and hope this National Lemonade Day in support of the Leukemia & Lymphoma Society. Our famous lemonade is made in-store daily with tremendous love and National Lemonade Day is a perfect way for us to treat our customers to a free cup while supporting such a worthy cause. Join us on August 20th and help us put a ‘stomp’ to cancer.”
3. The Leukemia & Lymphoma Society has a special place in Hot Dog on a Stick’s heart. The brand and its parent company, Global Franchise Group, has proudly raised more than $2.1 million for LLS to date through its annual “A Bite for the Fight” campaign and aimed to raise $500,000 in 2018.
Seasonal Limited-Time Menu Items
4. Hot Dog on a Stick often releases seasonal limited-time menu items. For 2018, the brand offered a new Spicy Batter, as well as Jalapeno Fries with Ranch dipping sauce, over the summer and Pumpkin Funnel Cake Sticks in the fall.
5. The Spicy Batter featured a blend of Chipotle and Sriracha spices and could be added to any stick item (Original Turkey, Beef, or Veggie, and Cheese on a Stick). Both the Spicy Batter and Jalapeno Fries with Ranch were only available at participating locations until late August.
6. According to Jeremy Roy, executive vice president of Hot Dog on a Stick, “Our fans have been asking for a spicy Hot Dog on a Stick, but we took it even further by creating a Spicy Batter that can be enjoyed with all of our delicious stick items. We are fired up about our new items and our future and will continue to bring the heat as we introduce delicious new products and grow our iconic brand across the world with development in entertaining places and sunny spaces.”
7. To celebrate the new spicy items, Hot Dog on a Stick had several promotional deals over the summer, including:
- Every Tuesday in July: Customers who follow Hot Dog on a Stick on social media received a spicy stick (Turkey or Veggie) for only $1 with any lemonade purchase. To receive the offer, customers had to mention the social media post, and the offer was only available at participating locations.
- Fourth of July: Party Packs of 25 spicy stick items were 50 percent off with any gallon lemonade purchase.
- National French Fry Day (Friday, July 13): Customers were able to enjoy free Jalapeno Fries with Ranch when they bought any spicy stick item.
- National Hot Dog Day (Monday, July 23): Customers received a free spicy stick item with any lemonade purchase.
8. From mid-October through December 2, Hot Dog on a Stick offered the new limited-time Pumpkin Funnel Cake Sticks. The Pumpkin Funnel Cake Sticks featured pumpkin spice funnel cake sticks topped with a sweet, vanilla drizzle. The new treats were available at participating locations for a suggested price of $3.99 for eight sticks (small), or $5.99 for 12 sticks (regular).
9. Hot Dog on a Stick was founded in 1946 by Dave Barham at the original Muscle Beach location near the Santa Monica Pier in Santa Monica, California. Barham had originally named his business Party Puffs and only sold ice cream cones and lemonade. Not long after, Barham used his mother’s cornbread recipe to develop a high-quality corndog. To highlight his new menu item, Barham changed the name of the stand to Hot Dog on a Stick and began selling his products at county fairs across the country.
10. Over the next few decades, Hot Dog on a Stick kept growing and eventually moved into malls in 1972. During the next few decades, additional Hot Dog on a Stick locations were opened in malls across the U.S.
11. In 1991, Barham passed away and he left the company to his employees through an Employee Stock Ownership Plan. Franchising began in 1997 and in 2014, Hot Dog on a Stick was acquired by Global Franchise Group, which also owns Great American Cookies, Marble Slab Creamery, and Pretzelmaker. Today, Hot Dog on a Stick is known for being a mall mainstay and most of its locations are company-owned. There are also international Hot Dog on a Stick locations in Korea.
Entrepreneur’s Franchise 500
12. Hot Dog on a Stick ranked No. 432 on Entrepreneur’s 2018 Franchise 500 list.
Section II – Estimated Costs
- Please click here for detailed estimates of Hot Dog on a Stick 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 Hot Dog on a Stick’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: 7
- Outlets at the End of the Year: 8
- Net Change: +1
- Outlets at the Start of the Year: 8
- Outlets at the End of the Year: 16
- Net Change: +8
- Outlets at the Start of the Year: 16
- Outlets at the End of the Year: 20
- Net Change: +4
- Outlets at the Start of the Year: 78
- Outlets at the End of the Year: 76
- Net Change: -2
- Outlets at the Start of the Year: 76
- Outlets at the End of the Year: 72
- Net Change: -4
- Outlets at the Start of the Year: 72
- Outlets at the End of the Year: 51
- Net Change: -21
Section V – Financial Performance Representations (Item 19, 2018 FDD) and Analysis
- Set forth below is information concerning the historical financial performance for Stores that were under the ownership of HDOS Enterprises during the fiscal years ending December 31, 2015, December 31, 2016, and December 31, 2017 (“Affiliate Stores”).
- For the fiscal year ending December 31, 2017, all Affiliate Stores (a total of 50) were also divided into three groups based upon total annual sales: (a) the top 25% Stores (13 Affiliate Stores), (b) the bottom 25% Stores (13 Affiliate Stores), and (c) the remaining 50% Affiliate Stores in the middle (24 Affiliate Stores).
- The figures in the tables below represent Affiliate Stores that were open for the entire calendar year as of December 31, 2017; this means that 1 Affiliate Store was excluded because it was not open for the full year.
- Also set forth below is information concerning the historical financial performance for the 6 franchised stores during the fiscal years ending December 31, 2015, December 31, 2016, and December 31, 2017 that were open for at least 2 full years and that did not operate as non-traditional units (“Franchised Stores”).
- Of the 20 total Franchised Stores open as of December 31, 2017, the franchisor has excluded 14 Franchised Stores open as of December 31, 2017 from this disclosure, because 12 had not been open for at least 2 full years as of December 31, 2017, and 2 operate as nontraditional units.
- Most of the Stores are located in shopping mall food courts and share common seating with other restaurants in the same mall food court.
- The length of time that these Stores have operated varies from a few months to 67 years.
- Unless you are purchasing an existing Store from the franchisor, your Store(s) will vary, in that they will not have been open as long as the franchisor’s average Store. Additionally, depending on where you open your Store, you may not be located in a shopping mall food court.
- The sales level for each Store was highly dependent on traffic level in the surrounding mall, and was largely independent of demographics (or other factors) influencing the area outside the mall.
- For example, if an anchor tenant in a mall closes and the space remains vacant for some time, traffic in the mall typically declines, even if the demographics of the surrounding area remain unchanged. When traffic in the mall drops, the sales level of the Store also drops. Once a new tenant moves into that space, traffic in the mall (and consequently the sales of the Store) tends to recover.
- The average annual sales for each group of Stores identified above is set forth in the following table.
- Just as average annual sales varies depending on traffic in the surrounding mall, the monthly sales level of each Store varies considerably over the course of the year, and is greatly affected by the traffic level in the surrounding mall (for instance, sales tend to be higher during the summer — typically, from June through August — and again during the holiday-shopping season, especially December).
- As a consequence, it is not the case that sales during any particular month are approximately one-twelfth of the average annual sales. Depending on the month, the monthly sales are likely to be either much higher or much lower.
- As noted above, these averages are based on the Stores that operated on December 31, 2017, which excludes Stores that closed or were sold during the three-year period, but includes Stores that opened during the three-year period.
- The method of calculation may have had some effect on the average sales numbers reported, but the franchisor has not calculated the effect on these averages.
- “Gross Sales” means all revenue from the sale of all products and services and all other income of every kind related to your business activities under the Franchise Agreement, whether evidenced by cash, credit, check, gift certificate, gift cards, script, or other property or services, and whether collected or not.
Part 1 – Average Gross Sales of Affiliate Stores by Year