FDD Talk: Another Broken Egg Cafe 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 Another Broken Egg Cafe franchise opportunity, including relevant news updates

• Section II – Estimated initial investment for an Another Broken Egg Cafe franchise, based on Item 7 of the company’s 2018 FDD

• Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for an Another Broken Egg Cafe franchise, based on Items 5 and 6 of the company’s 2018 FDD

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

• 2017 average, median, high, and low gross sales for the 36 franchised Another Broken Egg Cafe restaurants that had been open for at least 12 months as of December 31, 2017

Section I – Background Information

15 Things You Need to Know About the Another Broken Egg Cafe Franchise

Appoints New Vice President of Franchise Sales and Real Estate Development

1.  In early February 2018, Another Broken Egg Cafe announced the appointment of Clay Carson as the company’s new vice president of franchise sales and real estate development. With more than 15 years of experience in real estate and development, Carson joins Another Broken Egg Cafe as it positions itself for accelerated expansion in new markets throughout the country, targeting approximately 25 new cafe openings per year.

2.  In his role at Another Broken Egg of America, Carson is responsible for franchise sales, strategic market planning, site selection, and lease negotiations. He also assists in overseeing the construction and facilities functions for both new and existing franchise entities.

3.  Christopher Artinian, president and COO of Another Broken Egg of America, LLC, said, “Clay’s broad background is exactly what we need at this time of rapid expansion at Another Broken Egg Cafe. Breakfast and brunch continue to be two of the fastest-growing dayparts in the industry today, and Clay’s extensive experience in franchising, site selection, lease negotiation and construction will allow our brand to better capitalize on that growth in markets throughout the country. We are delighted to have Clay on board at Another Broken Egg Cafe.”

4.  Prior to joining Another Broken Egg, Carson was the director of development for Oklahoma-based Coolgreens, a healthy-lifestyle eatery offering salads, sandwiches, and wraps. Before Coolgreens, he was the owner of White Sands Franchise Development, the U.S. developer for The Counter Burger and BUILT Custom Burgers. Earlier in his career, Carson was the co-owner and CEO of East Coast Kilt, the largest developer for the Tilted Kilt Pub and Eatery, where he developed over 70 units.

5.  Throughout his career, Carson has been extensively involved in concept start-ups, brand re-concepting, operations, training, marketing, site selection, design, and construction.

Private Equity Firm Buys Majority Stake in Company

6.  In late 2017, Beekman Investment Partners III, LP, a leading private equity firm based in New York, announced that an affiliate had made a majority investment in Another Broken Egg of America, LLC. As part of the deal, Beekman appointed Christopher Artinian as president of Another Broken Egg Cafe, a position previously held by founder Ron Green.

7.  Artinian is a veteran restaurant executive with over 25 years of relevant experience, who has served as president and CEO of Morton’s The Steakhouse, Smokey Bones Bar & Fire Grill, and TooJay’s Deli-Bakery-Restaurant.

8.  At the time of the announcement, Artinian said, “Another Broken Egg Cafe is a modern and on-trend restaurant concept with a distinctive menu and friendly service. We are excited to partner with the talented management team at Another Broken Egg to build on the company’s legacy and accelerate growth. Another Broken Egg is a winning franchisor model and positioned as one of the leading daytime restaurant concepts in the quickly growing upscale breakfast category. We look forward to working with franchise partners as we continue to innovate the brand and grow our market presence.”

Opens First Location in Coastal Georgia Region

9.  In recent years, Another Broken Egg Cafe has been expanding across the United States and one of the brand’s newest locations opened at the end of August 2018 in Pooler, Georgia. This location is the first Another Broken Egg Cafe for the coastal Georgia region.

10.  Prior to its official opening, the Pooler location held a Friends & Family weekend on Friday, August 24 from 8 a.m. to noon, and Saturday, August 25 from 9 a.m. to 2 p.m. At the pre-opening event, customers had the opportunity to support two local charities, with 100 percent of the donations given to the YMCA of Coastal Georgia and the Girl Scouts of Historic Georgia.

11.  Patrons for Friends & Family weekend received a complimentary meal and were encouraged to voluntarily donate to the featured charities. Spaces were limited so guests were encouraged to reserve their spot and show their support to the local charities involved. To sign up for the Friends & Family offer, customers were asked to reserve seating in advance by visiting Another Broken Egg Cafe’s website.

Company History

12.  Another Broken Egg Cafe was founded in 1996 by Ron Green in Old Mandeville, Louisiana as a single restaurant called the Broken Egg Cafe. Green has said that he never had any intentions to start a franchise, but the original Broken Egg Cafe was so popular that customers often had to wait for two hours for a table. A customer asked Green to “please open another Broken Egg,” which inspired Green to expand and rename the business.

13.  Green opened the second Broken Egg Cafe with his brother in 1998 in Destin, Florida. Over the next few years, Green opened a few more locations before deciding to finally start franchising Another Broken Egg Cafe. According to Green, he had over 1,500 inquiries about opening Another Broken Egg Cafe restaurants in people’s hometowns without even advertising the franchise.

14.  By 2014, Another Broken Egg Cafe had 34 restaurants with 75 scheduled for development over the next five years. Today, there are Another Broken Egg Cafe restaurants across the United States.

Entrepreneur’s Franchise 500

15.  Another Broken Egg Cafe did not rank on Entrepreneur’s 2019 Franchise 500 list.

Section II – Estimated Costs

• Please click here for detailed estimates of Another Broken Egg Cafe 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 Another Broken Egg Cafe’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:  49
• Outlets at the End of the Year:  56
• Net Change:  +7

2016

• Outlets at the Start of the Year:  56
• Outlets at the End of the Year:  63
• Net Change:  +7

2017

• Outlets at the Start of the Year:  63
• Outlets at the End of the Year:  61
• Net Change:  -2

Company-Owned

2015

• Outlets at the Start of the Year:  3
• Outlets at the End of the Year:  2
• Net Change:  -1

2016

• Outlets at the Start of the Year:  2
• Outlets at the End of the Year:  2
• Net Change:  0

2017

• Outlets at the Start of the Year:  2
• Outlets at the End of the Year:  2
• Net Change:  0

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

• Below are the unaudited average, median, high, and low Gross Sales of Cafes operating in 2017.

• The data below does not include Cafes owned and operated by Another Broken Egg Cafe’s affiliates during the measurement period of January 1, 2017 to December 31, 2017 (“Measurement Period”).

• The data also does not include the 2 Cafes that operated under a license agreement, which operated using the System and the Marks, but which did not operate under a franchise agreement similar to that offered in the Disclosure Document.

• Furthermore, Hurricane Irma impacted many of Another Broken Egg Cafe’s locations in September of 2017 which led to extended closures. Another Broken Egg Cafe has excluded the Cafes that were forced to cease operations for four or more days during this event.

• All Cafes offer substantially the same products and services to the public. New franchisees will receive substantially the same services as those offered to existing franchisees.

• Another Broken Egg Cafe obtained these historical financial results from the information submitted by its franchisees. Neither Another Broken Egg Cafe nor an independent certified public accountant independently audited or verified the information.

Statement of Average, Median, High, and Low Gross Sales for 2017

• The table below provides information on the average, median, high, and low Gross Sales of Cafes operating during the 12-month period starting January 1, 2017 and ending December 31, 2017.

• The Cafes are limited to Cafes operated by franchisees during the Measurement Period and are divided into quartiles.

• The term “Gross Sales” is defined as all products and services sold in or from the Cafes, including off premises catering and delivery, but excluding comps, discounts, excise or sales taxes.

• As of December 31, 2017, there were 63 Cafes operated by franchisees and 2 Cafes that were operated by Another Broken Egg Cafe’s affiliates as corporate locations.

• Of the 65 Cafes, 48 Cafes operated by franchisees and 2 Cafes operating as corporate locations had been open for at least 12 months as of January 1, 2017.

• Of those 50 Cafes, 3 Cafes were excluded since they were Cafes operated as corporate locations during the Measurement Period.

• Of those 47 Cafes, 11 Cafes were excluded since they were Cafes that were forced to cease operations for four or more days due to the impact of Hurricane Irma in September 2017.

• Of the 36 Cafes referenced in the below table, all reported sufficient financial performance information to be included in this financial performance representation.

Quartile 1