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

• Section I – Background information on the McAlister’s Deli franchise opportunity, including relevant news updates

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

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

• 2018 average net sales by quartile for the 350 franchised Traditional McAlister’s Deli Restaurants that operated throughout all of Fiscal Year 2018

• 2018, 2017, 2016, 2015, and 2014 average net sales for the affiliate-owned and franchised Traditional McAlister’s Deli Restaurants that operated throughout all of Fiscal Year 2018, 2017, 2016, 2015, and 2014, respectively

• 2018 average total gross sales, cost of goods sold, personnel expenses, advertising, operating expenses, occupancy expenses, general and administrative expenses, and EBITDA from operations for the 311 franchised Traditional McAlister’s Deli Restaurants that operated throughout all of Fiscal Year 2018

Section I – Background Information

18 Things You Need to Know About the McAlister’s Deli Franchise

Enters One of the Largest Development Deals in Company History

1.  In early October 2019, McAlister’s Deli announced the signing of a new development deal with Best Choice Restaurants, an affiliate of Sun Holdings, Inc., a franchise organization founded by mega multi-unit operator Guillermo Perales. The agreement marks Perales’ entry into the fast-casual restaurant space.

2.  As part of the deal, Best Choice Restaurants will spearhead McAlister’s Deli’s growth in Florida, Louisiana, and Texas, in addition to developing 47 restaurants over the next seven years. The company consolidated several franchises to get to 51 locations throughout the four states: 36 in Texas, eight in Florida, four in New Mexico, and three in Louisiana.

3.  In addition to its franchise agreements with Best Choice Restaurants, McAlister’s Deli is continuing with its aggressive expansion and is seeking single- and multi-unit operators to join its successful franchise network. McAlister’s Deli is currently targeting new markets across the U.S.

4.  Joe Guith, president of McAlister’s Deli, said, “This particular development deal marks a very significant milestone for our brand, as it is one of the largest number of franchises that we have sold in a single transaction in our company history. This transaction accelerates our nationwide growth plans. Perales is the owner and operator of several iconic brands, and his investment in McAlister’s Deli showcases the strength of our business model and franchise opportunity. We are thrilled to welcome Guillermo and his team to the McAlister’s Deli family and know that his business acumen and knowledge of the foodservice industry will be invaluable to our brand.”

5.  Sun Holdings operates Burger King, Arby’s, Golden Corral, CiCi’s, Krispy Kreme, T-Mobile, Taco Bueno, GNC, and now McAlister’s Deli locations across the country. During the past three years, the company has developed more than 200 locations and 200 remodels.

6.  In addition to multiple awards and recognitions that include four Golden Plate and four Silver Plate awards for Popeyes, the MUFSO Golden Chain Award, and Nation’s Restaurant News’ Top 10 Power List, Perales was named Ernst & Young’s Entrepreneur of the Year in 2008, as well as Latino Leaders Magazine’s 101 Most Influential Latinos for several consecutive years.

7.  According to Perales, founder and CEO of Sun Holdings, Inc., “We recently opened our 1,000th location and have been looking for a best-in-class fast casual restaurant brand to add to our rapidly growing portfolio. As a segment leader with strong unit-level economics that consistently outperform competing brands, McAlister’s Deli exceeded our criteria and was the obvious choice. We are honored to be able to expand our impact in the communities we serve by offering great tasting food as well as contributions to education and meals for the underserved.”

Appoints New Chief Marketing Officer

8.  In mid-June 2019, McAlister’s Deli announced that Natalia P. Franco was joining the brand leadership team as chief marketing officer. In her new role as CMO, Franco is responsible for leading, developing, and executing marketing strategies and programs, while inspiring concepts and solutions to enable continued brand growth and profitability. Franco will also accelerate the evolution of the brand to increase its relevance from a positioning, menu innovation, and digital guest experience standpoint.

9.  Joe Guith, president of McAlister’s Deli, said, “Natalia’s experience leading iconic brands to exceptional growth will be instrumental as we continue to push the envelope on menu innovation, amplify digital marketing strategies and leverage the strengths of this great brand. Her leadership in this newly created role of CMO will help propel the brand forward, and we are looking forward to the positive impact she will have on the brand.”

10.  Prior to launching her own brand marketing consulting group, BrandMark Global LLC, Franco was chief brand and strategy officer of California Pizza Kitchen. At CPK, Franco was responsible for leading strategy, brand repositioning, advertising, brand messaging, consumer insights, and culinary development for the restaurant system as well as public relations.

11.  Previously, Franco was the senior vice president of marketing and culinary for IHOP. She was also the executive vice president and worldwide chief marketing officer for Burger King in Miami. Franco has also held various global leadership roles with The Coca-Cola Company, Pillsbury Company, General Mills, and Unilever.

12.  According to Franco, “McAlister’s is a relevant brand, friendly and casual, with fresh offerings that appeal to a broad set of consumers. I look forward to partnering with its dynamic leadership team and experienced franchisees to further develop McAlister’s growth in the marketplace. In joining McAlister’s Deli, I will also enjoy being part of the FOCUS Brands family, a wonderful organization with strong brands across the U.S. and around the world.”

Starts Testing Plant-Based Protein Sandwich

13.  In mid-February 2019, McAlister’s Deli announced that for the first time, it would be running a test with a plant-based protein sandwich in Chicago and Knoxville, Tennessee. With 14 locations (seven in each market) participating both in Chicago and Knoxville, locals can try out the new Chimichurri Sandwich for a limited time from February 13 to March 26.

14.  The Chimichurri Sandwich features chimichurri marinated plant-based protein, balsamic onions, provolone cheese, chimichurri aioli, tomato, and spring mix on toasted ciabatta. In addition to the plant-based protein option, customers are also able to order with chicken or roast beef. The sandwich is priced at $8.99.

Company History

15.  McAlister’s Deli was founded in 1989 by Don Newcomb in Oxford, Mississippi. The first McAlister’s Deli was located in a gas station that had been turned into a 1950s gas station by a movie production that filmed in town. At the time, Newcomb was a dentist, but he did have restaurant industry experience – Newcomb owned Sonic and Danver’s franchises – and always wanted to start a restaurant of his own.

16.  Newcomb started franchising McAlister’s Deli in 1994 and by the end of the decade, the chain had grown to several dozen locations. A few years later, in 1999, Newcomb sold McAlister’s Deli to CEO Michael J. Stack and executive Philip Friedman for an undisclosed amount. As part of the deal, Newcomb remained with the company as a member of its board of directors and as an exclusive franchisee for Kentucky.

17.  Over the next decade, McAlister’s Deli continued to grow in the U.S. and by 2008 there was 300 locations around the country. A few years before, in 2005, McAlister’s Deli was acquired by the private equity firm Roark Capital Group. FOCUS Brands, an affiliate of Roark, remains the parent company of McAlister’s Deli to this day.

Entrepreneur’s Franchise 500

18.  McAlister’s Deli ranked No. 72 on Entrepreneur’s 2020 Franchise 500 list.

Section II – Estimated Costs

• Please click here for detailed estimates of McAlister’s Deli 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 McAlister’s Deli’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:  318
• Outlets at the End of the Year:  355
• Net Change:  +37

2017

• Outlets at the Start of the Year:  355
• Outlets at the End of the Year:  381
• Net Change:  +26

2018

• Outlets at the Start of the Year:  381
• Outlets at the End of the Year:  415
• Net Change:  +34

Company-Owned

2016

• Outlets at the Start of the Year:  43
• Outlets at the End of the Year:  32
• Net Change:  -11

2017

• Outlets at the Start of the Year:  32
• Outlets at the End of the Year:  28
• Net Change:  -4

2018

• Outlets at the Start of the Year:  28
• Outlets at the End of the Year:  29
• Net Change:  +1

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

Part 1 – Statement of Average Net Sales by Quartiles for Franchised Traditional Restaurants (Fiscal Year 2018)

Top Quartile