In this FDD Talk post, you’ll learn the following:
- Section I – Background information on the Cousins Subs franchise opportunity, including relevant news updates
- Section II – Estimated initial investment for a Cousins Subs 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 Cousins Subs franchise, based on Items 5 and 6 of the company’s 2019 FDD
- Section IV – Number of franchised and company-owned Cousins Subs 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 Cousins Subs’ financial performance representations, based on Item 19 of the company’s 2019 FDD, including information on the:
- 2018 average gross receipts for the 19 affiliate-owned traditional Cousins Subs Shops that were open the entire 2018 fiscal year
- 2018 average gross receipts for the 62 franchised traditional Cousins Subs Shops that were open the entire 2018 fiscal year
- 2018 average gross receipts for the 10 franchised non-traditional Cousins Subs Shops that were open the entire 2018 fiscal year
- 2018 average total revenue, cost of goods sold, wages, occupancy costs, telephone and utilities, advertising, employee benefits, other operating expenses, franchise fees, and shop EBITDA for the 17 affiliate-owned traditional Cousins Subs Shops that were open the entire 2018 fiscal year
- growth in average unit volume for all Cousins Subs Shops between fiscal year 2011 and fiscal year 2018
- system-wide annual net sales in fiscal years 2011 and 2018 for the 66 traditional franchised Cousins Subs Shops, 9 non-traditional franchised Cousins Subs Shops, 19 traditional affiliate-owned Cousins Subs Shops, and 1 non-traditional affiliate-owned Cousins Subs Shop that were open from the start of the 2011 fiscal year through the end of the 2018 fiscal year
- percentage growth in net sales in the 1st, 2nd, 3rd, and 4th quarters of 2018 as compared to the previous year for all Cousins Subs Shops that were open for both of the full comparison periods
Section I – Background Information
26 Things You Need to Know About the Cousins Subs Franchise
Opens First Out-of-State Location in Chicago
1. In January 2019, Cousins Subs – which is based out of Milwaukee, Wisconsin – celebrated its first out-of-state location under the brand’s new growth plan with the grand opening of its downtown Chicago restaurant at 120 W. Madison St. in the heart of Chicago’s Loop.
2. Christine Specht, president and CEO of Cousins Subs, said, “What sets Cousins apart from other sandwich concepts is the passion for the brand that resonates throughout our system. As a brand that was built in the Midwest by Midwesterners, kicking off our out-of-state development efforts with a location in the heart of the city of Chicago is a big win for us, proving that our strategic changes are paying off.”
3. Not only is the downtown Chicago Cousins Subs location the brand’s first in the state of Illinois, but it is also the first of 40 units that are set to open throughout the Chicagoland area as part of a large-scale development deal with OM Group, headed by multi-brand franchisees Amit and Kalpesh Patel. OM Group plans to open an additional five to six locations each year over the next several years.
4. According to Kevin Dinnen, director of operations for OM Group, “Being the first Cousins franchisees in Illinois is a point of great pride for us. Establishing our roots in Chicago’s Loop is going to be a huge benefit from a foot traffic standpoint and will help establish Cousins in the Chicago market. A lot of different elements differentiate Cousins from its competitors in the segment and we’re confident the new concept will explode. This is just the beginning and we’re excited to see where we can take the brand beyond the Chicagoland area as well.”
5. Cousins’ downtown Chicago location boasts the greatest population density of any restaurant in the sub shop’s franchise system. The 2,600-square-foot restaurant offers guests two levels of seating to accommodate the lunch rush crowd, online and mobile app ordering, delivery, and a designated catering manager to coordinate all catering needs.
6. Customers will enjoy the company’s Milwaukee Sub Shop restaurant design, which reflects its Midwestern roots and celebrates the hardworking, industrial culture of Cousins’ heritage. The sub shop also features the brand’s next-generation digital signage with menu boards and advertising materials displayed on high-definition monitors. By incorporating digital upgrades and new design elements, the sub shop delivers on its mission to provide a quality dining experience while positioning its brand as an emerging leader in the city’s booming restaurant scene.
7. Joe Ferguson, vice president of development for Cousins Subs, added, “Chicagoans like good, hearty food and we deliver. Our high-quality, made to order grilled and deli fresh subs served on bread baked daily and made with locally sourced ingredients from the Midwest set us apart from our competitors. Plus, Wisconsin Cheese Curds, shakes and floats made with Wisconsin dairy, and Sprecher Root Beer are products that can’t be beat. This prime real estate gives us the chance to offer a dining experience featuring food made by good people who truly care about serving others and we know guests will appreciate the effort and attention to detail.”
8. Cousins sees the Chicago grand opening as a launch point not only for the 40-unit development deal, but as the crucial first step in the sub franchise’s continued expansion plans for the Midwest. Ferguson continued, “OM Group’s restaurants in the Chicagoland area are just the beginning. The Midwest is flush with markets where Cousins is primed for success, and we’re excited to work with new franchise partners in markets we’ve identified as opportunities.”
Launches Delivery-Only Restaurant Concept
9. Near the end of June 2019, Cousins Subs launched its first delivery-only restaurant concept, in the business district of downtown Milwaukee (the brand’s home city), to meet consumer demand and further expand the sub shop’s urban market guest base. The delivery-only restaurant concept will allow guests to order online and receive delivery within a specified area of Milwaukee, Wisconsin – west to I-94/43, including Menomonee River Valley Corridor; east to Lake Michigan; north to North Avenue; south to Howard Avenue.
10. Bringing an innovative approach to Milwaukee’s delivery scene, Cousins Subs will offer its full menu of deli fresh and made to order grilled subs, including Wisconsin Mac & Cheese, made to order French fries, Wisconsin cheese curds, and vanilla and chocolate shakes made with Wisconsin-based dairy products.
11. Joe Ferguson, vice president of development for Cousins Subs, said, “Launching a delivery-only restaurant concept presents an opportunity to better serve all of our guests in the downtown Milwaukee market, including the city’s growing residential community. By implementing a lower cost structure, we’re able to expand our operating hours, spend additional resources on labor and delivery drivers to increase our speed of service and efficiently distribute large catering orders throughout Milwaukee’s downtown area.”
12. The launch of Cousins Subs’ delivery-only restaurant concept is part of the brand’s commitment to exceeding guests’ expectations beyond their experience at Cousins Subs restaurants. Utilizing a delivery-only concept will allow the brand to put additional focus on large catering orders to fulfill business and residential requests.
13. Ferguson added, “This approach allows us to utilize space in downtown Milwaukee to increase food production and offer full-service delivery without the guest-facing portion of a restaurant. We’re able to allocate more space and equipment for the kitchen area and focus on the fulfillment of large catering orders delivered directly to our guests’ homes or offices.”
14. The opening of the delivery-only restaurant concept is in conjunction with Cousins Subs’ recent introduction of third-party delivery through cousinssubs.com and the Cousins Subs mobile app at 71 locations throughout Wisconsin and Illinois. The brand expects an estimated five additional locations to launch third-party delivery by the end of June. With nearly 85% of Cousins Subs locations offering delivery, the brand is better positioned to accommodate the needs of guests throughout their system.
15. According to Justin McCoy, vice president of marketing for Cousins Subs, “As guest expectations continue to evolve in our industry, we’re committed to meeting consumer demand by expanding our delivery service to better serve the downtown Milwaukee market and beyond. Through our third-party delivery partnership and delivery-only restaurant concept, our guests will have access to Cousins’ local eats with the touch of a button.”
Partners with Milwaukee Bucks to Bring Back ‘Block Out Hunger’ Campaign
16. Near the end of October 2019, for the fifth consecutive season, the Milwaukee Bucks and Cousins Subs teamed up to fight hunger across the state through the Block Out Hunger campaign. Cousins Subs’ Make It Better Foundation will donate $50 for every blocked shot the Bucks tally in the 2019-20 regular season to Hunger Task Force to purchase nutritious milk for the nearly 50,000 Wisconsin families it serves.
17. According to Matt Pazaras, senior vice president of business development for Milwaukee Bucks, “The Milwaukee Bucks continuously strive to make a positive impact on our community and partnering with Cousins Subs and Hunger Task Force through the Block Out Hunger initiative enables us to do that.”
18. Justin McCoy, vice president of marketing for Cousins Subs, added, “Cousins Subs is local at heart and we’re proud to partner with community-driven organizations like the Milwaukee Bucks and Hunger Task Force to make it better for Wisconsin children and families by addressing the vital community need of hunger.”
19. Last season, the Bucks blocked 486 shots, which ranked first in the Eastern Conference and second overall in the NBA. As a result, Cousins Subs donated $24,300 to Hunger Task Force. Since its inception in the 2015-16 season, the Block Out Hunger campaign has raised more than $76,000 and 14,400 pounds of food to support Hunger Task Force and its affiliated pantries.
20. Sherrie Tussler, executive director of Hunger Task Force, said, “Hunger Task Force is excited to once again join our friends at Cousins Subs and the Milwaukee Bucks to Block Out Hunger this season! This campaign has become a local tradition, bringing hunger awareness to our community while rooting for one of our favorite hometown teams. We appreciate Cousins Subs’ continued support and look forward to seeing plenty of blocked shots by the Bucks!”
21. As part of the Block Out Hunger campaign, the Bucks and Cousins Subs also made three surprise visits to community centers across the state to deliver a nutritious dinner. The visits took place on: Oct. 22, in Oshkosh; Nov. 11, in Madison; and Dec. 18, in Milwaukee. Bango, the 414 Crew, and Bucks Hoop Troop attended select visits.
22. Cousins Subs was founded in 1972 by cousins Bill Specht and Jim Sheppard in Milwaukee, Wisconsin. Specht and Sheppard were originally from New Jersey and were unable to find a place that made the same style of sub sandwiches they enjoyed back home. They decided to take matters into their own hands, and Specht and Sheppard began their own sandwich shop.
23. Not long after, Specht and Sheppard partnered with a local baker to make bread for their new restaurant. Baking the sandwich bread each day at each location has now become something that Cousins Subs is known for.
24. Specht and Sheppard continued to run Cousins Subs over the next decade and began franchising the concept in the mid-1980s. However, growth has remained slow but steady. In 2015, Specht retired from Cousins Subs and his daughter, Christine Specht-Palmert, stepped in as CEO, a position she retains today.
25. A year later, Cousins Subs launched a rebranding effort, remodeling all locations to its new Milwaukee Sub Shop design to unify the brand. Today, Cousins Subs is still primarily located around Milwaukee, but is looking to expand to other states in the Midwest.
Entrepreneur’s Franchise 500
26. Cousins Subs ranked No. 457 on Entrepreneur’s 2019 Franchise 500 list.
Section II – Estimated Costs
- Please click here for detailed estimates of Cousins Subs 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 Cousins Subs’ 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: 83
- Outlets at the End of the Year: 79
- Net Change: -4
- Outlets at the Start of the Year: 79
- Outlets at the End of the Year: 78
- Net Change: -1
- Outlets at the Start of the Year: 78
- Outlets at the End of the Year: 72
- Net Change: -6
- Outlets at the Start of the Year: 22
- Outlets at the End of the Year: 22
- Net Change: 0
- Outlets at the Start of the Year: 22
- Outlets at the End of the Year: 18
- Net Change: -4
- Outlets at the Start of the Year: 18
- Outlets at the End of the Year: 20
- Net Change: +2
Section V – Financial Performance Representations (Item 19, 2019 FDD) and Analysis
- “Traditional Shops” mean all Cousins Subs other than those “Non-Traditional Shops.” “Non-Traditional Shops” mean those Cousins Subs which are (a) co-branded with a pizza establishment, (b) located within a convenience store, or (c) attached to a convenience store.
- There were no affiliate-owned Non-Traditional Shops operated in 2018.
- Each chart below includes all the affiliate-owned and franchised Shops that were open the entire 2018 fiscal year. These charts do not include Shops that were opened during the 2018 fiscal year or closed for an extended period during a remodel.
- The Traditional Shops were ranked according to the annual amount of gross receipts and divided into 3 equal categories. The “High” category contains the top third, the “Middle” category contains the middle third, and the “Low” category contains the bottom third.
- “Gross receipts” means the aggregate amount of all sales of food products, beverages, and other merchandise and products of every kind or nature sold from, at, or in connection with your Shop or arising out of the operation or conduct of business by your Shop, including any revenues from all vending machine, video game machine, and jukebox sales, less any customer refunds up to the amount of the sales price and excluding all sales, use, or service taxes collected and paid to the appropriate taxing authority.
- “Gross receipts” shall include: (a) all amounts redeemed from gift certificates, gift cards, or similar mediums, (b) all insurance proceeds received by you for loss of business due to a casualty or similar event at your Shop, and (c) the fair market value of any services or products received by you in barter or exchange for your services or products.
Part 1 – 2018 Average Gross Receipts of Affiliate-Owned Shops