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

• Section I – Background information on the McAlister’s Deli franchise opportunity, including relevant news updates

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

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

• 2017 average net sales by quartile for the 324 franchised Traditional McAlister’s Deli Restaurants that operated throughout all of Fiscal Year 2017

• 2017, 2016, 2015, 2014, and 2013 average net sales for the affiliate-owned and franchised Traditional McAlister’s Deli Restaurants that operated throughout all of Fiscal Year 2017, 2016, 2015, 2014, and 2013, respectively

• 2017 average total gross sales, cost of goods sold, personnel expenses, advertising, operating expenses, occupancy expenses, general and administrative expenses, and EBITDA from operations for the 239 franchised Traditional McAlister’s Deli Restaurants that operated throughout all of Fiscal Year 2017

Section I – Background Information

17 Things You Need to Know About the McAlister’s Deli Franchise

Partners with Tillster to Improve Customer Insights and Guest Experience

1.  At the end of February 2018, Tillster, the global leader in digital ordering and engagement solutions for restaurants, announced the launch of a consolidated digital ordering and CRM program for McAlister’s Deli. With this unified solution, McAlister’s Deli can now leverage the Tillster technology infrastructure to better understand its customer base, improve the quality of guest touch points, and ultimately provide a superior guest experience.

2.  Perse Faily, CEO of Tillster, said, “The restaurant industry, and even more so fast-casual establishments, are in a race to offer technology options that entice and retain customers. McAlister’s Deli is second to none when it comes to customer hospitality, and the synergy that these new technologies afford is instrumental to the growth of the brand.”

3.  McAlister’s Deli first started working with Tillster in 2017 to modernize its CRM efforts. This database enhancement combined with targeted email content, push notifications, and ongoing tests have more than doubled email open rates and significantly improved app engagement. These programs over time will enable McAlister’s to contextualize communications and serve content at the right moment to delight guests even more.

4.  At the end of January 2018, McAlister’s made its most significant move using Tillster’s technology, by launching a redesigned mobile app. This latest update not only improved the guest ordering experience, but introduced a new rewards program where guests receive rewards via the McAlister’s Deli app and can redeem them through a mobile order or in-restaurant.

5.  This new program provides guests with offers for their favorite McAlister’s items, and gives McAlister’s the ability to unify digital and in-store transactional data. These added capabilities provide McAlister’s with an even better understanding of its guests, allowing more targeted communications and offers, while guests receive a simplified app ordering experience.

6.  Paul Macaluso, then-president of McAlister’s Deli, said, “At McAlister’s, we’ve always been focused on genuine hospitality and providing our guests a little something extra. Our enhanced mobile app and rewards program are the next steps that allow us to extend that hospitality outside our doors and consistently thank our loyal guests in a way most accessible to their daily lives. We look forward to understanding how our guests engage with McAlister’s technology and uncovering new insights provided by Tillster.”

Appoints New President

7.  In early April 2018, McAlister’s Deli announced that veteran leader Joe Guith had been promoted to brand president. Kat Cole, FOCUS Brands COO and president, North America, said, “We are thrilled to have Joe step into the role as president of McAlister’s and are excited to see him guide the brand through its continued growth. Joe’s skills in developing brands, driving businesses forward, and leading large franchise systems make him a great fit for this vibrant brand.”

8.  Guith joined FOCUS Brands, parent company to McAlister’s Deli, in 2014 as chief operating officer for Cinnabon, and quickly assumed the role of brand president in 2015. In the three years Guith was president, he drove significant P&L results through strong performance management, application of process-driven improvements, and building collaborative, high-performing teams.

9.  Prior to joining FOCUS, Guith held roles in general management and strategy with Coca-Cola, where he served as vice president, global business development and vice president, vending operations; and Yum! Brands where he served as general manager, KFC, South Territory.

10.  Guith said, “I am honored to have the opportunity to join McAlister’s at such a pivotal time for the brand. McAlister’s is poised for tremendous growth and I look forward to working with the McAlister’s team in shaping the future.”

New Summer Menu

11.  To kick off the summer season in 2018, McAlister’s Deli introduced four new menu additions in early July:

• McAlister’s Spud Chips, which are available in Sea Salt, Sea Salt + Vinegar, BBQ, and Jalapeno flavors.
• The Jalapeno Turkey Crunch, which features sliced turkey, bacon, pepper jack cheese, McAlister’s Jalapeno Spud Chips, sliced avocado, and mayo on a jalapeno roll. For customers who prefer to turn down the heat, the sandwich is also available with Sea Salt Spud Chips.
• The fan-favorite Pecanberry Salad returns to the menu with fresh strawberries, blueberries, candied pecans, and grilled chicken, served over mixed greens or spinach with fat-free raspberry-pecan vinaigrette dressing.
• McAlister’s Strawberry Lemonade is made with pure cane sugar lemonade and all-natural, real fruit strawberry puree.

12.  Joe Guith, president of McAlister’s Deli, said, “The summer season is the perfect time to bring our guests refreshing new flavors, and McAlister’s is excited to roll out our new summer menu items that offer something for everyone. The Jalapeno Turkey Crunch sandwich made with our new spud chips has flavors and a fun twist that fits perfectly with summer, and pairs well with the sweet and cool flavor of our Strawberry Lemonade.”

Company History

13.  McAlister’s Deli was founded in 1989 by Don Newcomb in Oxford, Mississippi. Although Newcomb was a dentist, he had experience in the restaurant industry and had always dreamed of starting his own restaurant. Before establishing McAlister’s Deli, Newcomb owned franchises from Sonic’s and Danver’s.

14.  In 1987, Newcomb ended up buying a movie set that was turned into a 1950s diner and transformed the set into a real restaurant. With help from his dentist office manager, Debra Bryson, and two sons, Chris and Neil, Newcomb opened a sandwich shop called Chequers, but quickly changed its name to McAlister’s Deli to avoid confusion with the Checkers chain of restaurants.

15.  In 1994, Newcomb started franchising the McAlister’s Deli concept and by the end of the decade, the chain had grown to about 45 franchised locations. In 1999, Newcomb sold McAlister’s Deli to CEO Michael J. Stack and executive Philip Friedman for an undisclosed amount. Newcomb maintained his ties with the company as a member of its board of directors and as an exclusive franchisee for Kentucky.

16.  McAlister’s Deli continued to grow beyond the southern U.S. over the next few years and in 2005 the company was sold to Roark Capital Group. At the time of the acquisition, McAlister’s Deli had 170 franchised and company-owned locations in 19 states. Today, McAlister’s Deli is managed by FOCUS Brands, an affiliate of Roark Capital Group, which also owns Schlotzsky’s, Carvel, Cinnabon, Moe’s Southwest Grill, Auntie Anne’s, and Jamba Juice.

Entrepreneur’s Franchise 500

17.  McAlister’s Deli ranked No. 41 on Entrepreneur’s 2019 Franchise 500 list.

Section II – Estimated Costs

• Please click here for detailed estimates of McAlister’s Deli 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 McAlister’s Deli’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:  293
• Outlets at the End of the Year:  318
• Net Change:  +25

2016

• Outlets at the Start of the Year:  318
• Outlets at the End of the Year:  355
• Net Change:  +37

2017

• Outlets at the Start of the Year:  355
• Outlets at the End of the Year:  381
• Net Change:  +26

Company-Owned

2015

• Outlets at the Start of the Year:  44
• Outlets at the End of the Year:  43
• Net Change:  -1

2016

• Outlets at the Start of the Year:  43
• Outlets at the End of the Year:  32
• Net Change:  -11

2017

• Outlets at the Start of the Year:  32
• Outlets at the End of the Year:  28
• Net Change:  -4

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

Part 1 – Statement of Average Net Sales by Quartiles for Franchised Traditional Restaurants (Fiscal Year 2017)

Top Quartile