FDD Talk 2019: Johnny Rockets 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 Johnny Rockets franchise opportunity, including relevant news updates

• Section II – Estimated initial investment for a Johnny Rockets franchise, based on Item 7 of the company’s 2019 FDD

• Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for a Johnny Rockets franchise, based on Items 5 and 6 of the company’s 2019 FDD

• Section IV – Number of franchised and company-owned Johnny Rockets outlets at the start of the year and the end of the year for 2016, 2017, and 2018, based on Item 20 of the company’s 2019 FDD

• Section V – Presentation and analysis of Johnny Rockets’ financial performance representations, based on Item 19 of the company’s 2019 FDD, including information on the:

• 2018 average, median, high, and low unit volume for the 131 domestic franchised Johnny Rockets Restaurants that were open and operating for the entire 12-month period of January 1, 2018 through December 30, 2018, organized by venue type (airport, tourist, casino, theme park, downtown, mall, lifestyle/streetfront, military, grocery-anchored center, outlet, power center, strip center, and all reporting franchised Restaurants)

Section I – Background Information

18 Things You Need to Know About the Johnny Rockets Franchise

Introduces New BBQ Menu for the Summer

1.  At the end of June 2019, Johnny Rockets introduced a new summer-inspired menu with over-the-top BBQ menu items and enticing shakes. These new seasonal menu items are available from July 1, 2019 through September 1, 2019, at participating Johnny Rockets restaurants.

2.  Linda SanGiacomo, senior vice president of marketing for Johnny Rockets, said, “We’re fully embracing the spirit – and even more so, the irresistible flavors – of summertime with our seasonal menu offerings, which we’ve affectionately dubbed “JRBQ”. Our line-up of BBQ menu items, as well as two new varieties of our delicious shakes, perfect for a much-needed cool-down, provide an exciting way to enjoy the best that summer brings.”

3.  The new summer JRBQ menu at Johnny Rockets includes:

• Honey BBQ Burger – Certified Angus burger topped with a stack of beer-battered onion rings, lettuce, tomato, American cheese, bacon, and honey BBQ sauce.

• Honey BBQ Chicken Sandwich – Grilled chicken topped with a stack of beer-battered onion rings, lettuce, tomato, American cheese, bacon, and honey BBQ sauce.

• A1 Burger – Certified Angus burger with Provolone cheese, Applewood smoked bacon, caramelized onions, grilled mushrooms, A.1. Steak Sauce, lettuce, tomato, and mayonnaise.

• BBQ Bacon Cheese Tots – Tater Tots smothered with a cheese sauce, bacon pieces, and drizzled with BBQ sauce.

• Honey BBQ Chicken Salad – Crispy chicken tenders, dipped in BBQ sauce, served on seasonal greens with Applewood smoked bacon, fresh diced tomatoes, avocado, corn, black beans, grilled red onions, Monterey jack cheese, Cheddar cheese, Jalapeño cornbread croutons, and served with dill Ranch dressing.

• Orange Dreamsicle Shake – Made with Johnny Rockets’ rich, natural, creamy vanilla ice cream, blended with Orange flavoring, and topped with whipped cream.

• S’mores Shake – Premium vanilla ice cream, chocolate and marshmallow syrups, graham cracker crumbles, all topped with whipped cream and a drizzle of chocolate syrup.

Celebrates 33rd Birthday with New “Extreme Cake Shake”

4.  At the beginning of June 2019, Johnny Rockets announced the addition of the “Extreme Cake Shake,” an over-the-top tower of frosted fun, testing at a dozen of its U.S. restaurants in advance of the restaurant chain’s 33rd birthday on June 6.

5.  Leaning into creativity in dessert trends, the Extreme Cake Shake is topped with a slice of 3-layer vanilla cake, rainbow sprinkles, and whipped topping. Garnished with vanilla frosting, M&Ms, and more sprinkles, this over-the-top shake is sold for $9.99 and will be introduced at several international Johnny Rockets locations later this year.

6.  Linda Sangiacomo, senior vice president of marketing for Johnny Rockets, said, “The new Extreme Cake Shake is a multi-sensory experience that is consistent with the fun and entertaining dining environment that our guests have come to know and love about us. And we’re not stopping there. With additional varieties being added to the Extreme Shake line-up by year-end, the brand continues its commitment to overall shake category ownership, as well as bringing smiles around the world.”

Partners with Warner Bros. Pictures and Legendary Pictures for Release of Godzilla: King of the Monsters

7.  In early May 2019, Johnny Rockets announced a cross promotional partnership with Warner Bros. Pictures and Legendary Pictures’ epic action adventure Godzilla: King of the Monsters – in theaters May 31, 2019 – to tout the restaurant’s new over-the-top avocado menu items.

8.  The release of Godzilla: King of the Monsters coincided with the debut of Johnny Rockets’ new avocado menu, which featured an Avocado Bacon Ranch Burger and Chicken Sandwich, each piled high with fresh avocado slices, thick-cut bacon, Swiss cheese, and crunchy onion rings.

9.  Also on the menu are an Avocado Chicken Salad, topped with bacon and bleu cheese crumbles, and Loaded Totchos, a sizable, shareable starter with tater tots smothered in cheese, chili, avocado, and jalapenos. Johnny Rockets also released two new flavors in its celebrated line of hand-spun indulgent shakes: Chocolate Coco Chill and Strawberry Chocolate Swirl.

10.  The new menu items were available at Johnny Rockets restaurants from May 6 through June 30, 2019.

11.  According to Linda Sangiacomo, senior vice president of marketing for Johnny Rockets, “With the rise of the avocado – the undisputed king of food trends – comes an opportunity to incorporate Godzilla fans’ epic taste of adventure into a variety of mouth-watering dishes, from loaded salads to starters to our beloved burgers. We pride ourselves in entertaining our guests every day, whether it’s through our iconic dancing servers, timeless upbeat music, creative ketchup art, or blockbuster partnerships such as this one.”

Company History

12   Johnny Rockets was founded in 1986 by Ronn Teitelbaum on the iconic Melrose Avenue in Los Angeles, California. Teitelbaum wanted to create a “non-gimmicky” recreation of the 1940s-vintage malt shops of his childhood.

13.  Before opening the first Johnny Rockets, Teitelbaum spent a year and a half planning the restaurant and trying to recreate the hamburger of his childhood memories. He cooked hamburgers with a number of seasoning combinations until he found the right flavor. All of Teitelbaum’s hard work paid off and the restaurant was a hit from the start – there was a line of customers out the door while every seat in the restaurant was full.

14.  Teitelbaum began franchising the Johnny Rockets concept within the first year of opening the original restaurant. Johnny Rockets quickly grew into a small chain of franchised and company-owned restaurants. As Johnny Rockets continued to open restaurants across the U.S. in the late 1980s and early 1990s, it opened its first international locations in Tokyo, Japan and Melboune, Australia.

15.  In the mid-1990s, to aid with the company’s rapid expansion, Ray Cabana, formerly of Taco Bell and Kentucky Fried Chicken, stepped in as the company’s president; Teitelbaum remained as CEO and chairman of the board.

16.  Johnny Rockets’ growth continued into the early 2000s and in 2007, the company was acquired by RedZone Capital, the private equity firm of Daniel Snyder, who announced plans to expand the chain both within the United States and worldwide, including the launch of smaller outlets known as Johnny Rockets Express.

17.  RedZone Capital only owned Johnny Rockets for a few years before selling the company to Sun Capital Partners in 2013. In the past few years, Johnny Rockets has focused on opening international restaurants in countries such as Pakistan, Bangladesh, Paraguay, and Canada.

Entrepreneur’s Franchise 500

18.  Johnny Rockets did not rank on Entrepreneur’s 2019 Franchise 500 list.

Section II – Estimated Costs

• Please click here for detailed estimates of Johnny Rockets franchise costs, based on Item 7 of the company’s 2019 FDD.

Section III – Initial Franchise Fee, Royalty Fee, Marketing Fee, and Other Fees

• Please click here for detailed information on Johnny Rockets’ initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2019 FDD.

Section IV – Number of Franchised and Company-Owned Outlets

Franchised

2016

• Outlets at the Start of the Year:  173
• Outlets at the End of the Year:  182
• Net Change:  +9

2017

• Outlets at the Start of the Year:  182
• Outlets at the End of the Year:  170
• Net Change:  -12

2018

• Outlets at the Start of the Year:  170
• Outlets at the End of the Year:  169
• Net Change:  -1

Company-Owned

2016

• Outlets at the Start of the Year:  24
• Outlets at the End of the Year:  25
• Net Change:  +1

2017

• Outlets at the Start of the Year:  25
• Outlets at the End of the Year:  20
• Net Change:  -5

2018

• Outlets at the Start of the Year:  20
• Outlets at the End of the Year:  13
• Net Change:  -7

Section V – Financial Performance Representations (Item 19, 2019 FDD) and Analysis

• Except as noted below, Johnny Rockets’ Item 19 includes financial performance information for all of the domestic (U.S. and U.S. territories) franchised Johnny Rockets Restaurants that were open and operating for the entire 12-month period of January 1, 2018 to December 30, 2018 (the end of Johnny Rockets’ last fiscal year) (collectively, the “Reporting Franchised Restaurants”).

• Specifically, of the 162 total domestic franchised Johnny Rockets Restaurants operating at the end of the company’s last fiscal year, there are 131 Reporting Franchised Restaurants.

• The domestic franchised Johnny Rockets Restaurants not included in this Item 19 are not included because:

• (i) they were not open for the entire 12-month period, and/or
• (ii) they were located at a professional sports stadium or a university with seasonal operation.

• Specifically, this Item 19 does not contain any information for the 2 domestic franchised Johnny Rockets Restaurants that were not open for the full 12-month period.

• Additionally, this Item 19 also does not include any information for:

• (a) the 12 domestic franchised Restaurants located at professional sports stadiums as these locations were open for operation approximately 100 days (for those Restaurants located in professional baseball stadiums) and 20 days (for those Restaurants located in professional football stadiums) during the 12-month period, or
• (b) the 2 domestic franchised Restaurants located at universities as these locations were open for operation approximately 8 months during the 12-month period.

• Additionally, this Item 19 does not include data for 8 domestic franchised Johnny Rockets Restaurants due to data reporting issues and for 10 domestic franchised Johnny Rockets Restaurants that closed during the 12-month reporting period, none of which closed after being open less than 12 months.

Average Unit Volume of Reporting Franchised Restaurants by Venue

• The financial performance information contained in this Item 19 represents the average unit volume of the Reporting Franchised Restaurants for the 12-month period from January 1, 2018 to December 30, 2018 (the end of the company’s last fiscal year).

• As described further below, the average unit volume for the Reporting Franchised Restaurants is organized by venue type.

• Johnny Rockets calculated the average unit volume numbers based on sales reports submitted to it by the Reporting Franchised Restaurants. It has not audited the reports for purposes of this Item 19.

• The financial information contained in this Item 19 does not include any financial performance information for:

• (i) domestic franchised Johnny Rockets Restaurants that opened or closed during the 12-month reporting period;
• (ii) any corporate or affiliate-owned and operated Restaurants;
• (iii) stadium locations; or
• (iv) university locations.

Airport