FDD Talk 2020: Black Bear Diner 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 Black Bear Diner franchise opportunity, including relevant news updates

• Section II – Estimated initial investment for a Black Bear Diner franchise, based on Item 7 of the company’s 2020 FDD

• Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for a Black Bear Diner franchise, based on Items 5 and 6 of the company’s 2020 FDD

• Section IV – Number of franchised and company-owned Black Bear Diner outlets at the start of the year and the end of the year for 2017, 2018, and 2019, based on Item 20 of the company’s 2020 FDD

• Section V – Presentation and analysis of Black Bear Diner’s financial performance representations, based on Item 19 of the company’s 2020 FDD, including information on the:

• 2019 average, median, high, and low gross sales for the top quartile, second quartile, third quartile, bottom quartile, and all 70 traditional franchisee-owned Black Bear Diner restaurants in operation for one year or longer as of December 25, 2019 that have provided the franchisor with the necessary data as of the effective date of the 2020 FDD

Section I – Background Information

19 Things You Need to Know About the Black Bear Diner Franchise

Names New Chief Executive Officer and Chief Operating Officer

1.  In early January 2020, Black Bear Diner announced the promotion of Anita Adams to chief executive officer and the addition of restaurant veteran Jeff Guido as chief operating officer. Bruce Dean, the brand’s co-founder and previous CEO, will remain active with the company as executive chairman.

2.  According to Dean, “As co-founder and chief executive officer, Black Bear Diner is now entering its 25th year in business. We have grown this brand larger than I ever would have anticipated and hoped for, and there is much more to come. My focus is now on perpetuating the next 25 years and ensuring we continue to prosper, grow and be the leader in family dining.”

3.  Dean added, “Succession planning is paramount to ensure our long-term success, and to that end, I will be assuming the executive chairman position. I’m pleased to announce that Anita Adams, our president and former chief financial officer, will now assume the role of chief executive officer. Anita is a true industry professional, and she is the right person to guide Black Bear Diner in our next chapter of success.”

4.  With 24 years of broad leadership and transaction experience across private and public companies, Adams was most recently president of Black Bear Diner, overseeing short- and long-term strategies that drove the brand’s rapid growth and performance, as well as the franchise’s shared services, including operations, franchise and corporate development, and human resources.

5.  Adams first joined the company in 2017 as chief financial officer. In March of 2019, Adams was promoted to president in addition to her role as CFO. In October that same year, the company hired Steve Sparks to assume the role of CFO, allowing Adams to focus on her role as president.

6.  For nearly a decade before joining Black Bear Diner, Adams was CFO of American Blue Ribbon Holdings (ABRH), a diversified food service company that operated more than 690 company and franchise restaurants in more than 40 states, where she helped grow revenue from $400 million to $1.2 billion, managing five restaurant brands and a bakery operation.

7.  Before that, she was the vice president controller for VICORP Restaurant Group prior to its acquisition by ABRH, and the vice president of corporate accounting for First Data Corporation, a Fortune 500 global financial services company generating over $10 billion in revenue, in addition to high ranking financial roles with PRO Group, Inc., Seahawk Minerals, and Pricewaterhouse Coopers. She has a bachelor’s degree in accounting from the University of Wyoming and holds an active CPA license in the State of Colorado.

8.  Adams said, “Black Bear Diner has enjoyed an amazing 25 years and I am proud to assume the CEO role of such a well-respected brand. Our efforts have been focused on building a scalable foundation to support our aggressive growth strategy, while ensuring we stay true to the brand’s heritage of hospitality, quality and operational excellence. I look forward to partnering with our franchise community, team leaders and shareholders to position the brand for continued prosperity.”

9.  Guido joins Black Bear Diner as chief operating officer by way of ABRH where he held the position of president for the Family Restaurant Division, overseeing all financial and administrative aspects of Village Inn and Baker’s Square restaurant concepts. During that time, Guido built an exceptional team that delivered 26 consecutive quarters of same-store sales growth. With over 40 years leading major restaurant brands, Guido has consistently built value for stakeholders by identifying strategic opportunities to provide exceptional customer service.

10.  “My mission at Black Bear Diner is to ensure we’re operating at the same extraordinarily high level that the company did when it opened its first, single restaurant 25 years ago,” said Guido. “Offering a consistently great experience as we continue to expand is critical. I look forward to working alongside a great leadership team to strengthen Black Bear Diner’s already exceptional offerings of enthusiastic customer service and abundant, quality food to more guests across the nation.”

11.  Dean co-founded Black Bear Diner in 1995, and served as co-president until 2016 when he was named CEO. He will remain with the company as executive chairman. Dean contributed to the brand’s early success by leveraging his early beginnings in the restaurant business. “Bruce has shown that family dining, when done right and with authenticity, is here to stay,” said Adams. “Over the last several years, I’ve highly valued Bruce’s leadership and partnership, and will continue to benefit from his experience and passion.”

Marks 2019 Expansion Momentum with Four Restaurant Openings

12.  In December 2019, Black Bear Diner wrapped up a year of growth and expansion by announcing the opening of four new Black Bear Diners in four states. Three company-owned locations opened in November in Sugar Land, Texas; Olathe, Kansas; and Independence, Missouri. Black Bear Diner also opened an additional location in Kingman, Arizona with franchisee partner TravelCenters of America, LLC.

13.  With these openings, Black Bear Diner opened a total of 19 locations in 2019, a strong finish to the year that saw substantial growth for the popular family dining chain. The Olathe, Kansas opening also marked the first restaurant in the state, and Black Bear Diner’s presence in 14 total states nationwide. Earlier in 2019, Black Bear Diner announced its first opening in its 13th state, Arkansas.

14.  Bruce Dean, co-founder and CEO (at the time) of Black Bear Diner, said, “Opening four diners in one month, including two in one day in the Midwest, is an exciting milestone in our journey to bring Black Bear Diner across the nation, and strongly contributes to our strategic growth plan. We’re thrilled to give more communities and guests the opportunity to enjoy our genuine hospitality and delicious menu, and we look forward to an equally great year in 2020.”

15.  Black Bear Diner’s expansion across the United States highlights the company as one of the fastest-growing franchises in the country. Other 2019 milestones included:

• Executive leadership team additions with the most recent addition of Steve Sparks as CFO and Tammy Johns as the company’s first-ever chief people officer. Earlier in the year, the company also named longtime company leader Anita Adams as president.

• A new strategic partnership with Postmates and a partnership expansion with DoorDash to bring Black Bear Diner’s home-style comfort food classics direct to customers’ doorsteps.

• A renewed focus on elevating its dinner service, including the addition of Carving Station Dinners and Breakfast for Dinner menu items, as well as new uniforms, music, and lighting after 4 p.m.

• The company was named to Franchise Times’ 2019 Fast and Serious List, Nation’s Restaurant News’ Top 200 ranking, and a Top Food Franchise of 2019 by Entrepreneur magazine.

Company History

16.  Black Bear Diner was founded in 1995 by Bruce Dean and Bob Manley in Mount Shasta, California. Dean and Manley wanted to open a family restaurant that served scratch-made meals that tasted like food a grandmother would make. The business partners/friends decided to name their new restaurant after Manley’s art gallery, Black Bear Gallery.

17.  Both Dean and Manley contributed to Black Bear Diner’s identity. Manley was instrumental in developing the brand’s family-friendly and welcoming atmosphere and environment, while Dean created the recipes for some of the brand’s most popular and best-selling food items. Dean is also responsible for Black Bear Diner’s “bear-sized” portions, a brand commitment to deliver unrivaled comfort food value and portions to its guests.

18.  The first Black Bear Diner was such a success that Dean and Manley opened a second location in Redding, California not long after. After opening a few more locations around California, Black Bear Diner began to expand in other states in 2002 after Jerry’s Restaurants — with locations in Arizona, California, and Northern Nevada — wanted Dean and Manley to convert their family restaurants into Black Bear Diners. After converting Jerry’s Restaurants, Dean and Manley decided to start franchising Black Bear Diner.

19.  Today, there are Black Bear Diners in at least 14 states.

Entrepreneur’s Franchise 500

20.  Black Bear Diner ranked No. 468 on Entrepreneur’s 2020 Franchise 500 list.

Section II – Estimated Costs

• Please click here for detailed estimates of Black Bear Diner franchise costs, based on Item 7 of the company’s 2020 FDD.

Section III – Initial Franchise Fee, Royalty Fee, Marketing Fee, and Other Fees

• Please click here for detailed information on Black Bear Diner’s initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2020 FDD.

Section IV – Number of Franchised and Company-Owned Outlets

Franchised

2017

• Outlets at the Start of the Year:  59
• Outlets at the End of the Year:  68
• Net Change:  +9

2018

• Outlets at the Start of the Year:  68
• Outlets at the End of the Year:  75
• Net Change:  +7

2019

• Outlets at the Start of the Year:  75
• Outlets at the End of the Year:  83
• Net Change:  +8

Company-Owned

2017

• Outlets at the Start of the Year:  27
• Outlets at the End of the Year:  38
• Net Change:  +11

2018

• Outlets at the Start of the Year:  38
• Outlets at the End of the Year:  45
• Net Change:  +7

2019

• Outlets at the Start of the Year:  45
• Outlets at the End of the Year:  55
• Net Change:  +10

Section V – Financial Performance Representations (Item 19, 2020 FDD) and Analysis

• This Item contains Gross Sales information about franchisee-owned Black Bear Diner restaurants for the fiscal year ended on December 25, 2019 and represents a 52-week year.

• In determining Gross Sales, the franchisor does not include sales tax collected from customers, discounts deducted from the prices charged, and/or amounts reported for employees’ meals.

• In compiling the chart below, the franchisor has only included traditional franchisee-owned Black Bear Diner restaurants in operation for one year or longer as of December 25, 2019 that have provided it with the necessary data as of the effective date of the 2020 Franchise Disclosure Document.

• The information has not been audited or reviewed by an independent certified public accountant; it is derived from unaudited financial reports submitted by franchisees as part of the franchisor’s reporting requirements.

• For the fiscal year ended December 25, 2019, there were 83 franchisee-owned Black Bear Diner restaurants in operation.

• Of these 83 restaurants, 10 have been in operation for less than one year and are not included in the chart below.

• In addition, 3 franchisee-owned Black Bear Diner restaurants are not included in the chart below because each is located in a casino which is a nontraditional location and has a captive market which the franchisor believes does not accurately reflect the Gross Sales of a typical Black Bear Diner restaurant.

• Thus, the information in the chart below is based on reports received from 70 Black Bear Diner restaurants.

• These numbers can vary considerably due to a variety of factors, such as: location, local popularity and consumer tastes in general, physical layout, competition from other similar and dissimilar restaurants, management capabilities, and local market conditions.

Top Quartile (Diners 1-17)