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

• Section I – Background information on the Smashburger franchise opportunity, including relevant news updates

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

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

• 2018 average, median, high, and low gross sales for the 272 Mature Traditional Smashburger Restaurants (184 affiliate-owned and 88 franchised) that were in operation for at least one year as of December 30, 2018

• 2018 average, median, high, and low gross sales for the 31 Mature Special Venue Smashburger Restaurants (2 affiliate-owned and 29 franchised) that were in operation for at least one year as of December 30, 2018

• 2018 average, median, high, and low gross sales, cost of goods sold, gross profit, labor costs, and gross profit less labor costs for the 184 affiliate-owned Mature Traditional Smashburger Restaurants that were in operation for at least one year as of December 30, 2018

Section I – Background Information

20 Things You Need to Know About the Smashburger Franchise

Jollibee Foods Corporation Now 100 Percent Owner of Smashburger

1.  In mid-December 2018, Jollibee Foods Corporation and Smashburger announced key senior management changes reflecting the anticipated synergies between the two entities predicated on
JFC’s newly-acquired full ownership interest in Smashburger. Jollibee spent $10 million to acquire the remaining 15 percent of the burger chain’s shares. Earlier in 2018, in February, JFC took a $100 million stake in Smashburger, which brought its ownership up from 40 percent to 85 percent.

2.  Per the announcement, Jose “Pepot” Miñana had assumed the role of president of Smashburger. In his new role, Miñana will oversee the daily operations of the company, collaborate on strategic and brand direction, and lead the continuous efforts to integrate Smashburger into the JFC portfolio of companies/brands. Miñana has held numerous senior management positions over his multi-decade tenure with JFC, most recently as president of JFC North America.

3.  Tom Ryan, founder and CEO of Smashburger, will take on the additional title of chief product development advisor for JFC Global. In this new capacity, Ryan will focus on strengthening taste and quality aspects across key JFC brands as well as enhancing JFC brands’ relevance across global markets. Ryan remains Smashburger’s CEO, focused on brand vision, strategy, product, and public relations.

Announces Leadership Changes

4.  In mid-August 2019, Jollibee Foods Corporation, parent company of Smashburger, announced
leadership changes for Smashburger in its aim to successfully grow a meaningful business in North America. The new appointments include: Carl Bachmann as president; Scott Johnson as vice president and head of marketing; and Charlie Sayre as vice president and head of finance.

5.  Bachmann brings in three decades of experience in managing restaurant chains such as Bertucci’s and Ruby Tuesday, resulting in increased revenues and efficiencies. He joined Smashburger two and half years ago and started out as vice president of operations for the East and then was appointed chief operating officer in August 2017.

6.  As Smashburger’s COO, Bachmann was able to effect improvements in the stores that resulted in record highs in terms of food quality and speed of service, including 80% on guest experience scores. With a strong track record as a successful restaurant executive and entrepreneur, Bachmann is well-positioned to take on his new role.

7.  Johnson, a seasoned and multi-awarded marketing professional, joined Smashburger this August as vice president and head of marketing. Johnson comes with over 20 years of experience in restaurants such as Arby’s, Outback Steakhouse, Bravo Restaurant Group, and most recently BurgerFi – where his experience included delivering on industry-leading sales growth and business turnarounds.

8.  Sayre, who joined Smashburger in July 2016, is now the company’s vice president and head of finance. Prior to joining Smashburger, Sayre had worked as a financial and investment analyst for different companies and played a crucial role in the international go-to-market strategies of World Wrestling Entertainment and the mergers and acquisitions valuation of Mooreland Partners. As head of finance, Sayre is responsible for ensuring the brand’s sustainable profit model in the years to come.

9.  The Smashburger leadership team and other JFC brands in the North American market will be under the leadership of Rowel Vijandre, president and country business group head of JFC North America. Vijandre was previously president of Chowking, one of the biggest restaurant chains of JFC. Chowking delivered double-digit growth for the past three years and its highest sales value and market share, making it the fastest-growing brand in the Philippines and overtaking KFC.

10.  Prior to JFC, Vijandre led Fast Moving Consumer Goods (FMCG) companies such as Johnson & Johnson Vietnam, tripling its business in three years and making it the fastest-growing FMCG company in Vietnam. He then turned around L’Oreal Philippines from double-digit negative to double-digit positive sales on top of re-engineering its cost structure, achieving sustainable profit gain coming from profit loss.

11.  Ernesto Tanmantiong, chief executive officer of JFC, said, “The synergy of homegrown and external talents at the helm of Smashburger with proven track records, in conjunction with integrating synergies across the JFC Group of Companies, will power up the organization and enable it to achieve its business goals. We are very excited to see Smashburger reach its full potential with this new leadership team now steering the company.”

12.  Rowel Vijandre, JFC’s country business group head for North America, added, “With the leadership and industry experience of Carl, Scott and Charlie, and the rest of the team working together, we are confident that Smashburger will move closer towards achieving its goal of becoming the #1 Fast Casual Better Burger Brand in North America.”

13.  On a final note, Tony Tan Caktiong, chairman and founder of JFC, said, “With these leadership changes, I am very confident in the success of Smashburger, and likewise with the long-term success and profitability of our business in North America.”

Celebrates 12th Anniversary with 12 Cent Burgers

14.  In early August 2019, Smashburger invited burger lovers across America to take part in its upcoming birthday bash. On Friday, August 16, 2019, Smashburger marked its 12th year in business by offering its signature double Smashburger for just $0.12. Customers were able to purchase one double Smashburger at the regular price and buy a second for 12 cents. The offer was only good on that day while Smashburger celebrated its birthday.

15.  According to Scott Johnson, vice president of marketing for Smashburger, “Smashburger has grown into one of the leading burger restaurants in the world over the last 12 years thanks to our incredible fans. We want to show our appreciation by offering our loyal fans a sizzling deal on their favorite burger and encourage new fans to discover the famous Smashburger flavor.”

Company History

16.  Smashburger was founded in 2007 by two restaurant industry veterans, Tom Ryan and Rick Schaden, in Denver, Colorado. Ryan had helped develop Pizza Hut’s famous stuffed crust pizza and Schaden was a former owner of Quizno’s. Using $15 million in capital, Ryan and Schaden purchased a former burger restaurant and applied upgraded cooking and management techniques for a higher-end burger concept. After several months, Ryan and Schaden were ready to open the first Smashburger.

17.  From the beginning, Ryan and Schaden had franchising in mind. After opening an additional restaurant in Houston and Minneapolis, Smashburger began national franchising in 2008. Smashburger grew fairly rapidly over the next few years and by the end of 2011, the chain had grown to 143 restaurants and $54 million in annual revenue.

18.  That same year, Smashburger opened some of its first international stores in Kuwait, Saudi Arabia, and Bahrain. Smashburger’s growth continued and by 2017, there were 380 locations across 38 states and nine countries, 220 of which were company-owned with the rest being franchises.

19.  While Smashburger continued to grow around the world, Jollibee Foods Corporation, a Philippine-based quick-service operator, acquired a 40 percent stake in Smashburger for $100 million. Then in early 2018, Jollibee raised its interest to 85 percent and at the end of the year, Jollibee acquired the remaining 15 percent, making Jollibee the full owner of Smashburger.

Entrepreneur’s Franchise 500

20.  Smashburger did not rank on Entrepreneur’s 2019 Franchise 500 list.

Section II – Estimated Costs

• Please click here for detailed estimates of Smashburger 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 Smashburger’s 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:  140
• Outlets at the End of the Year:  146
• Net Change:  +6

2017

• Outlets at the Start of the Year:  146
• Outlets at the End of the Year:  147
• Net Change:  +1

2018

• Outlets at the Start of the Year:  147
• Outlets at the End of the Year:  127
• Net Change:  -20

Company-Owned

2016

• Outlets at the Start of the Year:  185
• Outlets at the End of the Year:  209
• Net Change:  +24

2017

• Outlets at the Start of the Year:  209
• Outlets at the End of the Year:  186
• Net Change:  -23

2018

• Outlets at the Start of the Year:  186
• Outlets at the End of the Year:  196
• Net Change:  +10

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

• As of the end of Smashburger’s 2018 fiscal year (December 30, 2018), there were 323 Smashburger Restaurants in operation in the United States (196 affiliate-owned and 127 franchised).

• For purposes of making the calculations described in Item 19 and to eliminate start-up volatility, Smashburger has included the results of only the Mature Restaurants (i.e. those that were in operation for at least one year as of December 30, 2018), which means that it eliminated from the data 10 franchised Smashburger Restaurants that opened during the course of its 2018 fiscal year.

• Smashburger has also excluded 10 franchised Smashburger Restaurants that were acquired by it or its affiliates during the 2018 fiscal year, because sales generated by Restaurants that change ownership can be different before and after the transfer.

• Smashburger has based its calculations in this section on the remaining 303 Mature Restaurants. Of these 303 Mature Restaurants, 31 were Mature Special Venue Restaurants (2 affiliate-owned and 29 franchised), and 272 were Mature Traditional Restaurants (184 affiliate-owned and 88 franchised).

• Information regarding the performance of franchised Smashburger Restaurants used in this section was obtained by polling data from the franchisees’ point-of-sale systems. Smashburger has not audited or verified the data polled from the franchisees nor has that data been audited or reviewed by an independent certified public accountant acting on Smashburger’s behalf.

Part 1 – Average and Median Annual Gross Sales for Franchised and Affiliate-Owned Smashburger Restaurants

• The chart below shows the average annual Gross Sales for the Measurement Period (i.e. Smashburger’s 2018 fiscal year, a 52-week period, which began January 1, 2018 and ended on December 30, 2018) for:

• (a) all 303 Mature Restaurants,
• (b) all 186 affiliate-owned Mature Restaurants,
• (c) all 117 franchised Mature Restaurants in the data set, each broken out by Mature Traditional Restaurants and Mature Special Venue Restaurants.

• To calculate the average annual Gross Sales for all 303 Mature Restaurants, Smashburger added, for each classification (Mature Traditional Restaurants and Mature Special Venue Restaurants), the Gross Sales generated during the Measurement Period by all Mature Restaurants in each classification (272 Mature Traditional Restaurants and 31 Mature Special Venue Restaurants), then divided that number by the number of Smashburger Restaurants in that classification.

• The median is calculated by putting all annual Gross Sales numbers in numerical order, and the median is the middle number in such sequence (or if there is an even number of results, the median is the average of the two central numbers).

• “Gross Sales” includes all revenue derived from operating the Restaurant, in whatever form (including student meal cards, meal vouchers, tokens, tickets, and comparable methods) but excludes (1) sales, use, or service taxes and (2) documented refunds, credits, and discounts to customers and employees. Gift certificate, gift card, or similar program payments are included when the gift certificate, gift card, other instrument, or applicable credit is redeemed. Gross Sales also include all insurance proceeds received for loss of business due to a casualty to or similar event.

Annual Gross Sales – Mature Traditional Restaurants

Affiliate-Owned Mature Traditional Restaurants