In this FDD Talk post, you’ll learn the following:
- Section I – Background information on the Freddy’s Frozen Custard & Steakburgers franchise opportunity, including relevant news updates
- Section II – Estimated initial investment for a Freddy’s Frozen Custard & Steakburgers 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 Freddy’s Frozen Custard & Steakburgers franchise, based on Items 5 and 6 of the company’s 2019 FDD
- Section IV – Number of franchised and company-owned Freddy’s Frozen Custard & Steakburgers 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 Freddy’s Frozen Custard & Steakburgers’ financial performance representations, based on Item 19 of the company’s 2019 FDD, including information on the:
- 2018 average, median, highest average, and lowest average weekly gross receipts for the 258 franchised, 19 affiliate-owned, and all 277 Freddy’s Frozen Custard & Steakburgers stores that were open prior to the beginning of the fiscal year ended December 26, 2018 (separately stated)
- 2018 average cost of sales, labor costs, and controllable expenses for the 19 affiliate-owned Freddy’s Frozen Custard & Steakburgers stores that were open prior to the beginning of the fiscal year ended December 26, 2018
Section I – Background Information
19 Things You Need to Know About the Freddy’s Frozen Custard & Steakburgers Franchise
Achieves Significant Growth and Nationwide Expansion in 2018
1. In early February 2019, Freddy’s Frozen Custard & Steakburgers recapped its 2018 achievements, which include opening 54 new restaurants in key target markets throughout the U.S. and achieving a 15.5 percent increase in company growth. Freddy’s, which was named the Best Franchise to Buy in America (in the high-investment category) by Forbes Magazine, also experienced a surge in franchise development with seven new agreements signed, including deals to develop the first Freddy’s locations in Wisconsin and New Jersey.
2. According to Randy Simon, president and CEO of Freddy’s Frozen Custard & Steakburgers, “Since day one, the foundation of Freddy’s has been our unwavering commitment to our guest-centric values, and we’re proud that staying loyal to our brand identity has translated to strong results year after year. The passion of our operators has been a driving force behind our ongoing success, and we’re thrilled that our franchise network has continued to grow alongside the brand. 2018 was an outstanding year for Freddy’s, and we look forward to leveraging this momentum and continuing to take the brand to new heights in 2019 and beyond.”
3. In addition to its ongoing growth in existing markets, Freddy’s continued to grow its presence in new regions throughout 2018, opening its first location in the state of Wyoming. The company also expanded into the nontraditional space for the first time with the opening of new locations at the Wichita State University student center and the Oklahoma State University football and basketball stadiums, which also marked Freddy’s first operations in a sports arena.
4. Freddy’s also continued its ongoing innovation in 2018, introducing a smaller restaurant prototype with an updated kitchen design that maintains volume capacity. Scott Redler, co-founder and COO of Freddy’s Frozen Custard & Steakburgers, added, “At Freddy’s, we prioritize investing in innovation to ensure that our brand is constantly evolving, and our nontraditional growth and new prototypes are a direct reflection of those efforts.”
Enters Nontraditional Space for the First Time
5. At the end of March 2019, Freddy’s Frozen Custard & Steakburgers announced that it had expanded into the nontraditional sector for the first time with the opening of five new locations in spaces across the Midwest. The brand recently celebrated the opening of restaurants in Old Capitol Town Center in Iowa City, Wichita State University’s student center, and Oklahoma State University’s football and basketball stadiums. The company also signed an agreement to bring Freddy’s to the Missouri State University student center before the end of the year.
6. Owned by MLY Investments, LLC, Freddy’s most recent nontraditional franchised location opened in February at the Old Capitol Town Center in Iowa City. The first three nontraditional locations opened in quick succession timed with the new school year beginning in August 2018.
7. Freddy’s celebrated the opening of its first nontraditional location at the Wichita State University student center in early August. This location is owned and operated by Compass Group USA and Chartwells Higher Education. Two locations at Oklahoma State University, one in the football stadium and one in the basketball stadium, opened in August and December 2018, respectively. Both locations at Oklahoma State University are operated by Cowboy Custard, LLC.
8. Quintin Eason, resident district manager of Chartwells Higher Education, the management group of campus dining locations, said, “It’s truly been a pleasure working with the Freddy’s team to bring their craveable food and hospitality to both Wichita State University and now Missouri State University in the coming months. Since opening the first location in August, the fast-casual concept has consistently been a top-performer and well received by the students, faculty and staff. Chartwells takes pride in partnering with companies that go above and beyond and are committed to creating a welcoming on-campus dining option, and we’ve found just that in Freddy’s. We look forward to continuing our relationship for many years to come.”
9. The nontraditional locations will be equipped with new technology that streamlines the back-of-house process and will efficiently meet the demands of guests on-the-go. Now having the ability to exist in unique spaces such as universities, stadiums, and airports, Freddy’s will offer new and returning guests the opportunity to experience the brand in a convenient setting.
10. This aggressive, nontraditional development will continue throughout 2019, with the brand’s first international locations slated to open at the Mall of the Emirates and the Dubai Mall later this year.
11. Additionally, in 2018, Freddy’s also introduced a smaller restaurant prototype with an updated kitchen design that maintains volume capacity to allow new and existing franchisees innovative ways to expand their portfolio with the brand.
12. Scott Redler, co-founder and COO of Freddy’s Frozen Custard & Steakburgers, said, “At Freddy’s, we place a deep commitment to providing our guests with high-quality products and hospitality, and we’re thrilled that we can now serve guests in the nontraditional segment. We’re always working to implement new and innovative ways to accelerate the growth opportunities for our franchisees, and this extension of the Freddy’s brand will allow new and existing franchisees the ability to grow in their local markets in a unique and exciting way.”
Launches Bill Simon Memorial Scholarship Foundation
13. In early November 2018, Freddy’s Frozen Custard & Steakburgers announced that it had launched the Bill Simon Memorial Scholarship Foundation in memoriam of the company’s beloved co-founder and CEO Bill Simon. As a testament to Simon’s passion for education and commitment to helping all achieve a brighter future, the scholarship foundation was created to support Freddy’s team members’ pursuit of post-secondary education in college or vocational programs and was made possible through generous contributions from franchisees, vendor partners, the corporate office team, and members of the community.
14. Ben Simon, president of the Bill Simon Memorial Scholarship Foundation and vice president of operations for Freddy’s Frozen Custard & Steakburgers, said, “Freddy’s has achieved substantial success over the past several years, and we know that we didn’t get here alone. The dedication and passion of our team members has been the driving force behind all of our achievements, and we’re proud to turn our appreciation into action through the launch of the Bill Simon Memorial Scholarship Foundation. Bill worked tirelessly to build a brand that is rooted in family values, and we look forward to honoring his belief in the importance of education through our new scholarship program for years to come.”
15. This year marked the first time all Freddy’s team members had the opportunity to apply for the Bill Simon Memorial Scholarship, and the company awarded a total of $20,000 to 30 company team members. Through Freddy’s generosity, the scholarship recipients will be able to pursue their dream of receiving an education at some of the nation’s largest universities, including Arizona State University, the University of Kansas, the University of Colorado Boulder, Wichita State University, and more. The deadline for this year was in early June 2019.
16. Scholarship recipients are selected based on academic record, demonstrated leadership and participation in school and community activities, honors, work experience, and statement of goals and aspirations. Applicants must be Freddy’s team members in good standing with one year of employment completed (minimum of 750 hours). Applicants must also be current students or high school seniors who are prospective students in full-time undergraduate study at an accredited two- or four-year college, university, or vocational-technical school.
17. Freddy’s Frozen Custard & Steakburgers was founded in 2002 by Scott Redler and brothers Bill and Randy Simon in Wichita, Kansas. The business partners wanted to open a restaurant reminiscent of classic American diners. They also named the business after the Simons’ father, Freddy Simon, who was a World War II veteran.
18. In 2004, the Simons and Redler opened the first franchised Freddy’s Frozen Custard & Steakburgers store in Hutchinson, Kansas. Over the next decade, the company grew steadily around the United States and in 2013, Freddy’s opened its 100th location. Growth picked up over the next few years and by 2018 there were 300 Freddy’s Frozen Custard & Steakburgers restaurants in the U.S. Also in 2018, the brand signed its first international master franchise agreement for the Middle East.
Entrepreneur’s Franchise 500
19. Freddy’s Frozen Custard & Steakburgers ranked No. 51 on Entrepreneur’s 2019 Franchise 500 list.
Section II – Estimated Costs
- Please click here for detailed estimates of Freddy’s Frozen Custard & Steakburgers 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 Freddy’s Frozen Custard & Steakburgers’ 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
- Outlets at the Start of the Year: 163
- Outlets at the End of the Year: 220
- Net Change: +57
- Outlets at the Start of the Year: 220
- Outlets at the End of the Year: 263
- Net Change: +43
- Outlets at the Start of the Year: 263
- Outlets at the End of the Year: 306
- Net Change: +43
- Outlets at the Start of the Year: 14
- Outlets at the End of the Year: 16
- Net Change: +2
- Outlets at the Start of the Year: 16
- Outlets at the End of the Year: 19
- Net Change: +3
- Outlets at the Start of the Year: 19
- Outlets at the End of the Year: 25
- Net Change: +6
Section V – Financial Performance Representations (Item 19, 2019 FDD) and Analysis
Part 1 – Sales of Affiliate-Owned and Franchised Freddy’s Frozen Custard and Steakburgers Restaurants
- As of December 26, 2018, there were 25 restaurants which are operated by the franchisor’s affiliate, FFC, under the name “Freddy’s Frozen Custard and Steakburgers” and there were 306 franchisee restaurants.
- The FFC operating restaurants and the franchisee restaurants are a mix of stand-alone units located in former restaurant or other retail buildings, stand-alone and in-line new construction, and in-line in former restaurant or other retail sites.
- This financial performance representation is based on the actual operating results of the 19 FFC stores and the franchisee-reported sales of the 258 franchise stores that were open prior to the beginning of the fiscal year ended December 26, 2018 and remained open as of December 26, 2018, although no accountant independently audited the specific data from which the following information was derived.
- The following table shows figures from the fiscal year ended December 26, 2018. The table shows the average weekly gross receipts for stores open prior to the beginning of the fiscal year then ended that remained open as of December 26, 2018.
Weekly Gross Receipts for Franchise Stores (Fiscal Year Ended December 26, 2018) – 258 Stores