FDD Talk: Churroholic 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 Churroholic franchise opportunity, including relevant news updates

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

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

• actual monthly sales from August 2017 to June 11, 2018 for the 3 company-owned Churroholic Restaurants (Anaheim, which opened August 28, 2017; Carson, which opened November 27, 2017; and Whittier, which opened April 11, 2018) that were open as of the end of the reporting period

Section I – Background Information

9 Things You Need to Know About the Churroholic Franchise

Opens First Location Outside of California

1.  Churroholic is already starting to grow beyond its home state of California; the company opened its first non-California store in San Antonio, Texas in August 2018. Although churros are a common snack in Texas, Churroholic’s variety of churro toppings and glazes are a first for the state. The San Antonio location was well received and there were long lines throughout the store’s first week in operation. More locations are set to open in Texas in 2019, particularly in Houston, Pasadena, and New Braunfels.

2.  In early October 2018, Churroholic announced that it would be opening its first franchise in Arizona sometime in early 2019. The location is set to open at Tempe Marketplace, which is a prime spot near Arizona State University.

3.  Churroholic’s menu includes items such as the Original Churro Sandwich (choice of ice cream served between two churro “buns”); the Cookie Monster Milkshake (blue vanilla ice cream with brownies, cookie dough, and whipped cream); and the Churro Sundae (cut churros with ice cream, whipped cream, caramel and chocolate drizzle, coconut flakes, and toffee). It also serves coffee and tea drinks including Horchata Latte, Mexican Coco Spice Latte, Thai Milk Tea, Coffee Mocha, and Blended Caramel Frappe.

4.  The new Churroholic location in Arizona will create between 15 and 20 jobs. A spokesperson for Churroholic said that the company plans to open additional Arizona locations, but there were no specifics to share at the time. According to the company’s website, it appears that two additional Arizona locations will be opening in 2019, one in Glendale and the other in Peoria.

Offers Online Ordering

5.  One unique aspect of Churroholic is that its locations offer online ordering, which is not a common feature of dessert and drink places. This is something that parent company Hiccups does as well. Churroholic’s entire menu is available for online orders, which need to be picked up. Group ordering is also available, which allows different people to place their own items in one pickup order. Customers can also sign up for Churroholic’s mailing list online to receive deals and information about special promotions.

6.  Churroholic’s menu includes a wide variety of churros beyond the regular cinnamon sugar churro. Some of the unique flavors are chocolate glaze and almonds, cookies and cream, matcha and fruity pebbles, and chocolate glaze and coconut flakes. Customers can also order ice cream with their churros or on its own; ice cream flavors include horchata, salted caramel, vanilla, and cookie monster (cookies and cream dyed blue). To go along with all the sweet treats, Churroholic also offers blended coffees, flavored hot coffee drinks, iced coffees, milk teas, milkshakes, and slushes.

Company History

7.  Churroholic was founded in 2017 in Anaheim, California by its parent company Hiccups, an Asian-fusion restaurant offering an array of boba drinks. Hiccups began selling the artisanal churros out of its Hiccups locations in California before spinning it off into a stand alone concept. Franchising started right away and there are now Churroholic locations in California and Texas. New locations will be opening soon in Arizona.

8.  According to Churroholic, every churro artisan undergoes rigorous training to ensure that the product customers receive is of high quality. To ensure freshness, the churros are made in small batches throughout the day. In addition to the churros, Churroholic also sells a variety of flavored coffee drinks.

Entrepreneur’s Franchise 500

9.  Being a brand new franchise, Churroholic has not yet appeared on Entrepreneur’s Franchise 500 list.

Section II – Estimated Costs

• Please click here for detailed estimates of Churroholic 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 Churroholic’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:  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

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

Sales Information for Company-Owned Restaurants

• The following chart shows the monthly sales of 3 company-owned Churroholic Restaurants and their opening dates. All have been open less than a year.

• “Sales” means all gross revenue derived from sales of products and services to customers of the Restaurant, but excluding sales, use, or services taxes, customer refunds, adjustments, credits, and allowances.

• None of the 3 company-owned Churroholic Restaurants included in this Item 19 received any services not generally available to other franchisees, and substantially the same services will be offered to new franchisees, other than the management services of its operator and the franchisor’s affiliate.

• The franchisor obtained these sales figures from information developed from its point-of-sale systems.

• The sales figures presented below are based on the cash basis of accounting and may not conform to generally accepted accounting principles. Neither the franchisor nor an independent accountant has independently audited or verified the information.

• This information may not be representative of the sales of these company-owned Churroholic Restaurants in any other months.

Anaheim (Opened August 28, 2017)