FDD Talk 2019: PJ’s Coffee of New Orleans 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 PJ’s Coffee of New Orleans franchise opportunity, including relevant news updates

• Section II – Estimated initial investment for a PJ’s Coffee of New Orleans 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 PJ’s Coffee of New Orleans franchise, based on Items 5 and 6 of the company’s 2019 FDD

• Section IV – Number of franchised and company-owned PJ’s Coffee of New Orleans 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 PJ’s Coffee of New Orleans’ financial performance representations, based on Item 19 of the company’s 2019 FDD, including information on the:

• 2018 average, median, highest, and lowest gross revenue for the top tier, middle tier, bottom tier, and all 66 domestic franchised PJ’s Units opened on or before January 1, 2018 and reported gross revenue for the entire one-year period ending December 31, 2018

• 2014-2015, 2015-2016, 2016-2017, and 2017-2018 same-store sales growth over the prior year for the PJ’s Units that reported their gross revenue for the entire two-year period ending December 31, 2015, December 31, 2016, December 31, 2017, and December 31, 2018,
  respectively

Section I – Background Information

14 Things You Need to Know About the PJ’s Coffee of New Orleans Franchise

Opens 100th Location and Further Expands Footprint Nationwide

1.  At the end of January 2019, PJ’s Coffee of New Orleans recapped its achievements for 2018 as the brand looked to further expand its footprint nationwide by the end of this year. Following 2018’s milestone growth, with PJ’s Coffee surpassing 100 storefronts, the brand looks to continue suit, opening another 30 locations by the end of this year. Additionally, it will continue its initiative to further expand its locations nationwide through franchise development.

2.  Rounding out an exciting year, PJ’s Coffee awarded 22 franchises representing 37 licenses. 2018 also resulted in 17 new store openings, one of which launched PJ’s Coffee’s presence in Maryland and, moreover, the Northeast. Continuing its track for expansion, PJ’s Coffee looks to broaden its scope domestically with continued expansion in Maryland while also bolstering its stance in the Southeast with sights set on development in Texas and Florida. Internationally, PJ’s continued to expand its footprint in both the Vietnam and Kuwait markets.

3.  David Mesa, executive vice president and chief development officer of PJ’s Coffee, said, “2018 was a momentous year for PJ’s Coffee as it marked our 40th anniversary and the opening of the 100th location. With the coffee industry continually growing and changing, PJ’s Coffee is committed to offering its guests the highest quality coffee and customer service and this begins with our strategic partnerships with coffee farmers across the globe. We are committed to bettering our communities and creating great opportunities for our existing, and future, farmers and franchisees alike. We look forward to continued advancement in 2019 as we build our notoriety and solidify our great name across the globe and further throughout America.”

Ramps Up Expansion Plans in Texas

4.  Near the end of May 2019, PJ’s Coffee of New Orleans announced rapid expansion plans for Texas with hopes to open 180 new locations within the next 10 years. The region’s plethora of added storefronts will center in the state’s four largest cities with 60 locations slated for Houston, 25 for Austin, 40 for San Antonio, and 55 for Dallas-Fort Worth.

5.  The planned coffeehouses will join the three PJ’s Coffee locations already seeing success in Cypress, Downtown Houston, and Pearland. Kyra Sam, franchise owner of the Pearland location, opened the 100th PJ’s Coffee location in August 2018 and has since found incredible success in her first year of operation.

6.  According to Sam, “As a New Orleans native and former general manager of a PJ’s coffee in Louisiana, I wanted to bring the coffee houses’ superior product that I loved so much to the people of Pearland. Since opening, I have seen success I could not have imagined. This journey has allowed me to become the entrepreneur I always hoped to be. With the unmatched support that PJ’s Coffee offers its franchisees, I look forward to continuing to grow with the brand. I can’t wait for their further expansion throughout Texas!”

7.  David Mesa, chief development officer for PJ’s Coffee, added, “At PJ’s coffee we are committed to serving up a top-tier product rooted in southern hospitality. As we sought further expansion, Texas became an obvious choice as an area with similar values and upbeat vibe. We look forward to rapidly expanding and consistently adding to the PJ’s coffee family in our neighboring state because you know what they say – everything’s bigger and better in Texas.”

Launches First Ready-to-Drink Coffee

8.  In mid-December 2018, PJ’s Coffee of New Orleans launched its first ready-to-drink offering, PJ’s Nitro Cold Brew Coffee, at all of its locations across the United States. PJ’s Nitro Cold Brew Coffee infuses nitrogen gas into its classic cold brew, creating a creamy, stout-like effect – with zero calories. The canned nitro coffee is available in two flavors: Original Cold Brew Coffee and Southern Pecan.

9.  Felton Jones, roastmaster of PJ’s Coffee, said, “We’ve been serving our unique nitro-infused cold brew recipe on tap inside the original PJ’s location on Maple Street in New Orleans since it reopened this fall – and people love it. We knew our flavor profile was something special, and we’re now excited to offer it to all our PJ’s customers.”

9.  PJ’s Nitro Cold Brew Coffee is made with PJ’s Viennese Blend – 100 percent Direct Trade beans from Finca Terrerito in Honduras and Agua Fresca in Nicaragua – before being infused with nitrogen for a smooth texture. The Cold Brew is made daily using a special cold-drip process that protects the flavor and strength of the beans, while producing a coffee that is two-thirds less acidic – a process and technique pioneered by the founder of PJ’s and used for more than 30 years. PJ’s Coffee also said that the ready-to-drink Nitro Cold Brew Coffee will be available at grocery stores sometime in the future.

10.  Peter Boylan, president of PJ’s parent company, Ballard Brands, said, “A lot of people enjoy an iced coffee but may not want the extra calories from milk or cream. The nitro cold brew is a great option for those looking for their coffee-fix on-the-go, while trying to stay healthy.”

Company History

11.  PJ’s Coffee of New Orleans was founded in 1987 by Phyllis Jordan in the Carrollton neighborhood of New Orleans, Louisiana. Jordan named the shop after herself (PJ) and initially called it PJ’s Coffee & Tea Co. Jordan had moved to New Orleans in the late 1970s and had often spent time in her friend’s bookstore/coffee shop. Eventually, Jordan came to appreciate the shop’s open atmosphere that allowed people to meet and converse regularly and she was inspired to start up her own coffee shop.

12.  Over the next decade, Jordan opened additional PJ’s Coffee shops throughout the Greater New Orleans area. In 1989, the first PJ’s Coffee franchise location opened in Mandeville, Louisiana and several more franchises followed in Hammond, Louisiana and Picayune, Mississippi. Eventually, PJ’s Coffee expanded to other parts of the United States and in 2002, Jordan sold the company to Raving Brands, an Atlanta-based firm.

13.  A few years later, PJ’s Coffee returned to New Orleans when Raving Brands sold the company to New Orleans natives and brothers Paul, Steven, and Scott Ballard of Ballard Brands. Today, PJ’s Coffee of New Orleans shops can be found Arkansas, Louisiana, Mississippi, South Carolina, and Texas; Vietnam; and Kuwait.

Entrepreneur’s Franchise 500

14.  PJ’s Coffee of New Orleans did not rank on Entrepreneur’s 2019 Franchise 500 list.

Section II – Estimated Costs

• Please click here for detailed estimates of PJ’s Coffee of New Orleans 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 PJ’s Coffee of New Orleans’ 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:  62
• Outlets at the End of the Year:  67
• Net Change:  +5

2017

• Outlets at the Start of the Year:  67
• Outlets at the End of the Year:  68
• Net Change:  +1

2018

• Outlets at the Start of the Year:  68
• Outlets at the End of the Year:  81
• Net Change:  +13

Company-Owned

2016

• Outlets at the Start of the Year:  10
• Outlets at the End of the Year:  10
• Net Change:  0

2017

• Outlets at the Start of the Year:  10
• Outlets at the End of the Year:  10
• Net Change:  0

2018

• Outlets at the Start of the Year:  10
• Outlets at the End of the Year:  10
• Net Change:  0

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

Part 1 – Average Gross Revenue

• The PJ’s Unit must have: (1) opened on or before January 1, 2018; and must have (2) reported gross revenue for the entire one-year period ending December 31, 2018. The Financial Performance Representation includes domestic locations only.

• New Orleans Brew, LLC does not have any company-owned Units as of January 1, 2019. An affiliate of New Orleans Brew, LLC has 10 PJ’s Units as of January 1, 2019.

• As of January 1, 2019, PJ’s Coffee had a total of 87 PJ’s Units in the United States, 3 PJ’s Units in Vietnam, and 1 PJ’s Unit in Kuwait. Of the total 91 PJ’s Units, 66 were open for a full 12 months or greater and reported gross revenue for the entire 12-month period.

• The remaining PJ’s Units consist of 25 PJ’s Units that were either not open for 12 months or did not report gross revenue for the entire 12-month period. Specifically, 3 PJ’s Units closed in 2018; 11 PJ’s Units were not open for a full 12-month period; 4 PJ’s Units were international in 2018; and 7 PJ’s Units did not report revenue in 2018.

• The franchisor compiled the annual gross revenues for the top tier representing 22 of the 66 PJ’s Units, the middle tier representing 22 of the 66 PJ’s Units, and the bottom tier representing 22 of the 66 PJ’s Units. All 66 were franchised PJ’s Units for the calendar year 2018.

• The 66 franchised PJ’s Units reflect three of the four types of franchised units (e.g., Traditional Full-Service Models, Non-Traditional Limited Service Models, Special Contracts Traditional Full-Service Models, and Special Contracts Non-Traditional Limited Service Models).

• The 66 PJ’s Units represented do not include a Special Contracts Traditional Full-Service Model as there are none operating. The three other types of franchised units are represented in each of the three tiers (top, middle, and bottom) set forth below, as historical sales data evidences that sales volume is impacted by the location of the PJ’s Unit and volume of consumer traffic, rather than square footage and menu offering.

Top Tier (22 Franchised PJ’s Units)