In this FDD Talk post, you’ll learn the following:
- Section I – Background information on the Freddy’s Frozen Custard & Steakburgers franchise opportunity, including relevant news updates
- Section II – Estimated initial investment for a Freddy’s Frozen Custard & Steakburgers 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 Freddy’s Frozen Custard & Steakburgers franchise, based on Items 5 and 6 of the company’s 2020 FDD
- Section IV – Number of franchised and company-owned Freddy’s Frozen Custard & Steakburgers 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 Freddy’s Frozen Custard & Steakburgers’ financial performance representations, based on Item 19 of the company’s 2020 FDD, including information on the:
- 2019 average, median, and range of (average) weekly gross receipts and annual gross receipts for the 21 stand alone with drive-thru, 2 end cap with drive-thru, 2 in-line with no drive-thru, and all 25 company-owned Freddy’s Frozen Custard & Steakburgers restaurants that were open for the entire fiscal year that ended December 25, 2019
- 2019 average, median, and range of (average) weekly gross receipts and annual gross receipts for the 277 stand alone with drive-thru, 25 end cap with drive-thru, 3 in-line with no drive-thru, and all 305 franchised Freddy’s Frozen Custard & Steakburgers restaurants that were open for the entire fiscal year that ended December 25, 2019
- 2019 average cost of sales, labor costs, and controllable expenses (as percentages of total gross receipts) for the 25 company-owned Freddy’s Frozen Custard & Steakburgers restaurants that were open for the entire fiscal year that ended December 25, 2019
Section I – Background Information
21 Things You Need to Know About the Freddy’s Frozen Custard & Steakburgers Franchise
Announces Record-Breaking Systemwide Sales in 2019
1. At the beginning of February 2020, Freddy’s Frozen Custard & Steakburgers announced that it had experienced record-breaking success in 2019, achieving its 12th consecutive period of positive same-store sales growth, as well as surpassing $500 million in annual systemwide sales for the first time in the company’s history, a 14.5% increase year-over-year. Additionally, the brand opened 40 new restaurants throughout 2019, including its first international restaurants in Dubai and non-traditional units in universities and a casino.
2. Randy Simon, president and CEO of Freddy’s Frozen Custard & Steakburgers, said, “Despite many of the challenges faced by our industry, 2019 proved to be another strong year for the brand. We surpassed a new benchmark in systemwide sales, entered our very first international market with three new restaurants and continued consistent regional growth while staying true to our core values. This momentum is a testament to our proven business model and our dedicated franchisees who continue to operate the Freddy’s way. As we enter an exciting new decade, we plan to celebrate our next milestone opening in just a few months and look forward to further expanding our footprint into new markets throughout the year.”
3. The fast-casual restaurant concept added 83 franchise restaurants in 2019 with new and existing franchisees expanding the brand’s footprint throughout key markets including western Florida, Pennsylvania, and Georgia. The brand experienced an exciting year for both international and non-traditional growth, celebrating the opening of three restaurants in Dubai and campus locations in Missouri State University and Colorado State University.
4. As a result of its rapid expansion and success achieved, Freddy’s was named the Best Franchise to Buy in America by Forbes Magazine for the second year in a row and was named one of QSR Magazine’s 2019 Best Franchise Deals.
5. Freddy’s continued commitment to giving back to the community fueled its annual National Frozen Custard Day promotion hosted in August, which resulted in a $15,000 donation to the Kids In Need Foundation, an organization that provides free school supplies to thousands of kids and teachers across the country. Through its annual promotion, the brand has raised $55,000 for the foundation to date.
6. Beyond its various community give-back initiatives across local markets nationwide, Freddy’s also shares a deep commitment to providing guests with high-quality products and hospitality. To further enhance the Freddy’s experience, the brand partnered with Tillster, the global leader in digital ordering and engagement solutions for restaurants, to enhance its guest experience with digital offerings including a loyalty program for guests.
7. With a dozen restaurants slated to open in the first quarter of the year, Freddy’s Frozen Custard & Steakburgers plans to open more than 40 restaurants nationwide in 2020. Franchise opportunities are still available in areas across the U.S., including the Northeast, Upper Midwest, and California.
Opens First International Location
8. In early July 2019, Freddy’s Frozen Custard & Steakburgers announced that it had opened its first international location in the Dubai Mall. The brand’s second international location was slated to open at the Mall of the Emirates several weeks later. The restaurants are owned and operated by Tastebuds Group, who will continue to drive Freddy’s growth throughout the Middle East, with plans to open locations in the United Arab Emirates, Saudi Arabia, Bahrain, Jordan, Kuwait, Lebanon, Oman, and Qatar.
9. Yousef Khattar, managing director of Tastebuds Group, said, “The training and support that we’ve received from Freddy’s since signing our initial master franchise and development agreement has been incredible and a true testament to the level of passion and commitment they devote to each venture. It has been a pleasure working alongside the team to ensure that all aspects of the family friendly concept will be received well by our guests in Dubai. We are truly elated to celebrate the opening of Freddy’s first international location, and to be able to bring the taste of Freddy’s authentic steakburgers and frozen custard to the Middle East for the first time.”
10. Staying true to its core values, Freddy’s worked to ensure a seamless transition as the concept entered a new country by adapting to the local culture in various aspects including training protocols, hours of operation, menu items offered, and portion size, among others. The Dubai locations serve the same premium Meadowvale frozen custard, Vienna Beef hot dogs, and USDA beef as their U.S. counterparts.
11. According to Ben Hesse, vice president of training and people development for Freddy’s Frozen Custard & Steakburgers, “As one of the world’s top tourist destinations, Dubai has an unparalleled level of hospitality, complementing Freddy’s deep commitment to providing our guests with genuine service in a welcoming atmosphere. Identifying which menu items and processes to uphold or alter were critical for our long-term success and further growth internationally. The Tastebuds team has shown incredible commitment through their extensive training in Wichita, and we’re thrilled to have the privilege of entering a new and exciting market. We look forward to delivering the Freddy’s experience throughout the Middle East.”
National Custard Day Promotion Raises $15,000 for the Kids in Need Foundation
12. In late September 2019, Freddy’s Frozen Custard & Steakburgers announced that through its annual National Frozen Custard Day promotion hosted in August, it has donated $15,000 to the Kids In Need Foundation, an organization that provides free school supplies to thousands of kids and teachers across the country. Through its annual promotion, the brand has raised $55,000 for the foundation to date.
13. Corey Gordon, chief executive officer of Kids In Need Foundation, said, “Freddy’s continued commitment to our organization has helped to provide school supplies to hundreds of additional students and teachers across the country. We’re thankful to Freddy’s for sharing our cause with their customers and giving them the opportunity to support the mission as well as enjoying that delicious custard.”
14. The Kids In Need Foundation is a national 501(c)(3) charitable organization founded in 1995. Its mission is to ensure that every child is prepared to learn and succeed in the classroom by providing free school supplies nationally to students at schools where at least 70% of students are enrolled in the federal free or reduced lunch program. To date, the foundation has distributed a total of $1 billion in school supplies, directly benefiting 6 million students and 200,000 teachers in 2018.
15. This donation follows a successful National Frozen Custard Day initiative last summer, during which participating Freddy’s locations sold its single cone, single dish, and custard cookie for $1 each on the August 8th holiday, donating half of the sales to the foundation.
16. On Thursday, September 19, Freddy’s presented the Kids In Need Foundation with a check for $15,000 at the Project Teacher location in Wichita, Kansas.
17. Scott Redler, co-founder and COO of Freddy’s Frozen Custard & Steakburgers, said, “Being able to use Freddy’s national reach for good, through our partnership with the Kids In Need Foundation, continues to be one of our proudest achievements, and this year’s success is no different. Every child deserves the joy of an education, and every teacher deserves to be able to give them that gift, regardless of their circumstances. We are so happy to help make that possible by working with this incredible organization.”
18. Freddy’s Frozen Custard & Steakburgers was founded in 2002 by brothers Bill and Randy Simon and their friend/business partner Scott Redler in Wichita, Kansas. The theme and the name of the restaurant were inspired by the Simons’ father, Freddy Simon, who was a World War II veteran. The Simons wanted to create a diner-style restaurant that was reminiscent of the post-WWII period in America.
19. Freddy’s was an immediate hit and the Simons and Redler followed up the first location with two more restaurants. The Simons and Redler started franchising Freddy’s Frozen Custard & Steakburgers in 2004 and the first franchised location opened in Hutchinson, Kansas.
20. Over the next decade, Freddy’s continued to expand around the U.S. and by 2018, there were over 300 locations around the country. That same year, Freddy’s announced plans to open locations in the Middle East, particularly in the United Arab Emirates, Saudi Arabia, Bahrain, Jordan, Kuwait, Lebanon, Oman, and Qatar. Today, there are Freddy’s Frozen Custard & Steakburgers restaurants in 31 states.
Entrepreneur’s Franchise 500
21. Freddy’s Frozen Custard & Steakburgers ranked No. 67 on Entrepreneur’s 2020 Franchise 500 list.
Section II – Estimated Costs
- Please click here for detailed estimates of Freddy’s Frozen Custard & Steakburgers 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 Freddy’s Frozen Custard & Steakburgers’ 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
- Outlets at the Start of the Year: 220
- Outlets at the End of the Year: 263
- Net Change: +43
- Outlets at the Start of the Year: 263
- Outlets at the End of the Year: 305
- Net Change: +42
- Outlets at the Start of the Year: 305
- Outlets at the End of the Year: 335
- Net Change: +30
- Outlets at the Start of the Year: 16
- Outlets at the End of the Year: 19
- Net Change: +3
- Outlets at the Start of the Year: 19
- Outlets at the End of the Year: 25
- Net Change: +6
- Outlets at the Start of the Year: 25
- Outlets at the End of the Year: 29
- Net Change: +4
Section V – Financial Performance Representations (Item 19, 2020 FDD) and Analysis
- As of December 25, 2019, there were 29 company-owned Restaurants and 338 franchised Restaurants.
- Parts 1 through 5 below display the Gross Receipts of 25 company-owned Restaurants that were open for the entire fiscal year that ended December 25, 2019 (“2019 Fiscal Year”) and 305 franchised Restaurants that were open for the entire 2019 Fiscal Year.
- These tables exclude the results of four company-owned Restaurants and 32 franchised Restaurants that were not open for the entire 2019 Fiscal Year and the one non-traditional franchised Restaurant that is located on a college campus that is not open seven days per week and operates during limited hours.
Part 1 – Weekly Gross Receipts of Company-Owned Restaurants for 2019 Fiscal Year by Facility Type
Stand Alone with Drive-Thru