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

• Section I – Background information on the Saladworks franchise opportunity, including relevant news updates

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

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

• 2017 average, median, highest, and lowest net sales for the 68 Saladworks franchised restaurants in operation during the entire 2017 calendar year, grouped by tiers 1-4, and operated by various franchisees during the entire 2017 calendar year

Section I – Background Information

22 Things You Need to Know About the Saladworks Franchise

Announces Major Changes to Set Franchisees Up for Success

1.  In late May 2018, Saladworks released a press statement discussing all of the company’s recent changes, which were designed to help its franchisees become more profitable. Under president and CEO Patrick Sugrue’s leadership, Saladworks has undergone a major overhaul in the last two years, working aggressively to set franchisees up for success while also delivering a product and atmosphere that customers want to continue returning to.

2.  Around the time of the press release, Eric Lavinder joined the team as director of franchise development. Now, the brand is setting its sights on growing the Saladworks family of franchisees. To appeal to franchise candidates, Saladworks’ leadership has worked diligently to make restaurants as profitable as possible.

3.  A key initiative that’s been in the works for over a year is around the size of the footprint of Saladworks restaurants. The leadership team created a full-size replica of a restaurant in a vacant office space to determine what square footage was needed to service today’s consumer.

4.  After getting input from team members, outside vendors, equipment purveyors, architects, and consumers, Saladworks’ leadership realized they could shrink the footprint from around 2,400 sq. ft. to storefronts that are closer to 1,600 sq. ft. With a focus on queue space, speed of service delivery, takeout optimization, and efficiencies in prep, Saladworks will be able to lower not only the initial project investment but the ongoing occupancy cost.

5.  Orhan Veli, a multi-unit franchisee with four locations and plans to take over ownership of two more restaurants, has been a franchisee since 2012 and thrives in a 1,500 sq. ft. location. The previous owners originally had a Saladworks that was over 3,000 sq. ft., before moving it to a different part of the strip mall in a 1,500 sq. ft. operation. Veli purchased it and grew his business from the small footprint. Veli was recognized at the Saladworks Brand Summit as part of the million dollar store club.

6.  Veli said, “I came in two years ago and it’s grown by 20 percent. I’m also a Charley’s Philly Steaks franchisee, and my first location for that concept was 425 sq. ft. When I transitioned from that to Saladworks, it always felt like the space was a waste. Our seats are never full to capacity, and we’re paying for all this square footage but not truly utilizing it. We’re obviously saving a lot of money on rent and it also becomes very efficient operationally and in staffing. When it comes to food costs, it’s my best location. I’m ordering so efficiently so there is a much smaller chance anything will spoil or go missing.”

7.  With the real estate changes, Saladworks was able to drop its total investment on the low end by more than $50,000. Saladworks strives not only to help franchisees grow their top line sales but achieve maximum potential on profitability. In 2016, the top tier of franchised locations averaged $1.1M in sales, while in 2017, the top performers were above $1.2M in sales.

8.  As sales increased across the system due to a refreshed menu and upgraded interior, Saladworks celebrated nine consecutive quarters of same-store sales growth. More impressively, this came at a time when many quick-service restaurants struggled to see positive sales growth.

9.  Sugrue, president and CEO of Saladworks, added, “If you drive up and down Main Street, U.S.A., you’ll see plenty of fast food restaurants, but options for healthy and convenient meals are few and far between. As we track the growing trends across America, we know that more and more people are desiring cleaner eating and plant-based diets. We are meeting this demand with our fresh and innovative menu items.”

10.  According to Lavinder, director of franchise development for Saladworks, “We know airports work for us, so that’s an option, and we also have proven that Saladworks does well on college campuses and even in a grocery store. Our Temple University location has been wildly successful, so we’re looking to duplicate that model on other college campuses. Our flexible platform lets franchisees operate successfully in a strip center or non-traditional locations. Franchisees can put these stores in areas with major foot traffic and have a chance to see a strong flow of customers.”

Plans Expansion in New States

11.  In 2018, Saladworks expanded its portfolio of franchise partners doing extensive work with non-traditional operators like Aramark and ShopRite grocery stores. At the end of January 2019, the company announced that it plans to continue opening new locations this year with Aramark and ShopRite. Additionally, Saladworks recently rolled out its veterans program offering qualified franchisees 50 percent off the total cost of a franchise fee.

12.  In the same press release, Saladworks said its expansion plans also extend to Little Rock, Arkansas where Saladworks plans to have its first location open in early 2019. The company has partnered with a multi-unit, multi-concept franchisee to spearhead development to add three to five locations in downtown Little Rock and the surrounding areas.

13.  Saladworks has also signed a franchise agreement with John Pisaturo to open the brand’s first Rhode Island location in Providence. Pisaturo has worked in the hospitality industry since he was 18-years-old. He considered opening his own restaurant, but after researching the benefits of franchising, he opted for the proven systems and processes of Saladworks rather than start a restaurant from the ground up. The Saladworks team is currently searching for ideal real estate locations to launch the brand’s presence in the state. The market can hold eight to ten locations but Saladworks and Pisaturo have their sights set on Cranston, Warwick, and Brown University for the brand’s debut.

14.  Also in 2018, Saladworks opened corporate-owned locations in new cities and venues to help introduce the brand to new markets. Its first Atlanta-area location opened in North Druid Hills and will act as a catalyst for growth with more restaurants slated to open over the next year. The next opening in Atlanta will be done with an experienced contract services group and will open at the Hartsfield-Jackson Atlanta International Airport in concourse C in the first quarter of 2019.

15.  The Saladworks location in Southlake, Texas will also spur growth in the Dallas-Fort Worth area. The debut of a Saladworks in a ShopRite grocery store in Philadelphia has garnered rave reviews from consumers and generated interest from potential franchisees. Saladworks will continue the success with two to three more openings in ShopRite locations this year.

16.  Each new Saladworks will boast changes rolled out in 2018, such as a smaller footprint; new, streamlined equipment package; enhanced operational model; and new technology. In addition, new products like warm grain bowls and aguas frescas beverages will be seen in both new and existing stores throughout the year.

17.  Patrick Sugrue, president and CEO of Saladworks, said, “Brand expansion for Saladworks is on the horizon. We are expanding with franchise partners in new markets with new channels of distribution. We remain tirelessly dedicated to our franchisees and consumers and look forward to growing with them as we focus on technology, service and menu development that will enhance our consumer experience.”

Company History

18.  Saladworks was founded in 1986 by John Scardapane in Cherry Hill, New Jersey. That first Saladworks location opened at the Cherry Hill mall and offered made-to-order, entrée-sized salads as an alternative food choice for consumers on the go. The success of this first Saladworks led to additional locations in New Jersey and Pennsylvania.

19.  Scardapane started franchising the Saladworks concept in 2001 and by 2007, there were 88 Saladworks restaurants in eight states, including Pennsylvania, New Jersey, Delaware, Maryland,
Florida, and Illinois. Although Saladworks continued to grow over the next few years, the company filed for Chapter 11 bankruptcy protection in 2015.

20.  This came about not because Saladworks wasn’t profitable, but because CEO and founder Scardapane had a falling out with minority partner, Vernon W. Hill of Commerce Bank. As Scardapane and Hill fought behind the scenes, they both decided to sell the company, but could not agree on the details of the sale. Instead, they filed for bankruptcy so Saladworks could be sold properly.

21.  In June of 2015, Saladworks was sold to Centre Lane Partners, a New York-based private equity firm, for nearly $17 million. The company’s $2 million debt was paid and then-president Paul Steck was chosen to replace Scardapane as CEO. After Centre Lane Partners stepped in, Saladworks refocused on expanding its domestic and international footprint.

Entrepreneur’s Franchise 500

22.  Saladworks did not rank on Entrepreneur’s 2019 Franchise 500 list.

Section II – Estimated Costs

• Please click here for detailed estimates of Saladworks 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 Saladworks’ 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:  106
• Outlets at the End of the Year:  98
• Net Change:  -8

2016

• Outlets at the Start of the Year:  98
• Outlets at the End of the Year:  89
• Net Change:  -9

2017

• Outlets at the Start of the Year:  89
• Outlets at the End of the Year:  86
• Net Change:  -3

Company-Owned

2015

• Outlets at the Start of the Year:  1
• Outlets at the End of the Year:  0
• Net Change:  -1

2016

• Outlets at the Start of the Year:  0
• Outlets at the End of the Year:  1
• Net Change:  +1

2017

• Outlets at the Start of the Year:  1
• Outlets at the End of the Year:  1
• Net Change:  0

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

• This Item contains the following historical sales information: the average Net Sales of 68 Saladworks franchised restaurants in operation during the entire 2017 calendar year, grouped by tiers 1-4, and operated by various franchisees during the entire 2017 calendar year.

• The data used in preparing this financial performance representation was compiled from information submitted to the franchisor by the franchisees in their unaudited sales reports for their franchised restaurants.

• While the franchisor believes that these sales reports contain accurate information, the franchisor has not independently verified the information.

Net Sales Data of 68 Saladworks Franchised Restaurants in 2017

• Franchisees operated 81 Saladworks restaurants during the entire 2017 calendar year. Of those restaurants, 68 were at standard locations that were open 7 days a week during typical operating hours, and 13 were enclosed mall locations.

• In response to the changing retail landscape, Saladworks no longer offers franchises for the development of Saladworks restaurants in enclosed shopping malls, and as such, it has not included mall locations in this analysis.

Tier 1