FDD Talk 2020: Twin Peaks 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 Twin Peaks franchise opportunity, including relevant news updates

• Section II – Estimated initial investment for a Twin Peaks 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 Twin Peaks franchise, based on Items 5 and 6 of the company’s 2020 FDD

• Section IV – Number of franchised and company-owned Twin Peaks 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 Twin Peaks’ financial performance representations, based on Item 19 of the company’s 2020 FDD, including information on the:

• 2019 average, median, high, and low unit volume for the 53 franchised Twin Peaks Restaurants operating for the full 2019 fiscal year ended December 29, 2019

• 2018 average, median, high, and low unit volume for the 53 franchised Twin Peaks Restaurants operating for the full 2018 fiscal year ended December 30, 2018

• 2019 average, median, high, and low unit volume for the 27 company-owned Twin Peaks Restaurants operating for the full 2019 fiscal year ended December 29, 2019

• 2019 average cost of goods sold (food cost, bar cost, total) and labor cost (hourly staff, manager, payroll taxes/benefits, total) for the 27 company-owned Twin Peaks Restaurants operating for the full 2019 fiscal year ended December 29, 2019

Section I – Background Information

21 Things You Need to Know About the Twin Peaks Franchise

Rolls Out First Franchise Incentive Program

1.  In mid-August 2020, Twin Peaks launched its first-ever franchise incentive program designed to drive development nationwide by eliminating franchise royalties. The new program waives franchise royalties for franchisees during the first year of opening a new Twin Peaks restaurant and is available to all qualified developers that meet Twin Peaks’ then-current criteria at the time of execution of an Area Development Agreement.

2.  According to Joe Hummel, CEO of Twin Peaks, “Twin Peaks is back and better than ever. We came out of the gate incredibly strong in early 2020 and we look forward to continuing that momentum as we rapidly expand in 2021. We created this progressive program to attract new franchisees, incentivize existing ones, and increase brand awareness in states where Twin Peaks doesn’t have a presence.”

3.  “Currently, with all the open real estate opportunities, now is the optimal time for converting a restaurant into a Twin Peaks. We are seeking franchisees who are excited about bringing our brand to new markets. We believe our franchise incentive program is the true testament in showcasing the level of support Twin Peaks has for its franchise business partners and its first step in fueling our brand’s footprint across the country,” added Hummel.

Prepares for Domestic and International Expansion

4.  In late August 2020, Twin Peaks announced that it was set to open its first Latin American location in Mexico City, proving that the brand has not slowed down its efforts to expand across the continent despite navigating through a global pandemic.

5.  Twin Peaks has 20 additional domestic and international stores in the pipeline for the next 18-24 months throughout Arizona, Florida, Kentucky, Mexico, Michigan, North Dakota, Ohio, South Dakota, Tennessee, and Texas. This development will bring the brand’s systemwide total to nearly 100 units.

6.  Joe Hummel, CEO of Twin Peaks, said, “We have our foot on the gas, and we are not letting up anytime soon. Twin Peaks is on track for substantial expansion in 2020, with most of that slated growth being done by existing franchisees. Our new franchise incentive program, coupled with the expansive white space for the Twin Peaks brand, make 2020 the perfect time for new developers to join the Twin Peaks family and become a part of our record-breaking growth.”

Drives Menu Innovation and Accelerated Expansion in 2020

7.  In mid-January 2020, Twin Peaks said that it plans to continue its positive momentum and success from 2019 as it looks toward future growth and innovation in 2020. Twin Peaks reported a 2.5% increase in year-over-year sales and a 1.2% increase in year-over-year traffic in 2019.

8.  Over the last year, Twin Peaks also introduced its innovative smoker program and enhanced beverage and lunch menus. In addition to menu innovation, Twin Peaks opened three new restaurants, remodeled two locations, and signed three franchise deals.

9.  Joe Hummel, CEO of Twin Peaks, said, “Twin Peaks is on a winning streak with no plans of slowing down. 2019 was a very successful year for us and we are excited to bring that momentum with us through 2020. Twin Peaks thrives on innovation, excellence and separating ourselves from the normal. Each of our kitchens are equipped with a smoker for serving up in-house smoked menu items which isn’t something that many restaurants can claim, in addition to our extensive beverage selection.”

10.  “But menu innovation doesn’t stop there. It will continue to be a focus in 2020. Our culinary team will have new menu items in our test kitchens each month to keep the ideas fresh and flowing. And with our continued expansion, we also plan to expect to see even more regional shifts to the Twin Peaks menu,” added Hummel.

11.  Along with its focus on menu innovation, Twin Peaks plans to continue ramping up development with even more new restaurant openings and redesigns. Twin Peaks plans to open 12-15 additional new restaurants throughout 2020. Q1 initiatives included a new store opening in Lubbock, Texas, a remodel of one of the flagship restaurants in Austin, Texas, and new beverage and food menu rollouts. Its first restaurant in Latin America was set to open in Mexico City in Q2.

12.  Redesigns are in the pipeline throughout the year for several locations, which will be upgraded with expanded indoor and outdoor bars, enhanced AV packages, fun elements like outdoor firepits, and other improvements.

13.  After signing three franchise deals in 2019, Twin Peaks is expected to expand into several new markets in 2020. The brand is also looking to continue its franchise development in 2020 by signing up to 10 new partners for 40 new locations.

14.  Twin Peaks also dedicated part of 2019 to giving back to the community. During the Miss Twin Peaks pageant, the brand announced its lifetime donation amount of $750,000 to its national nonprofit partner Folds of Honor to help fund scholarships for families of fallen and disabled service members. Twin Peaks plans to continue this partnership in 2020.

Lands Strategic Partnership with ApplePie Capital to Accelerate Franchise Expansion

15.  At the beginning of November 2019, Twin Peaks announced that it was teaming up with ApplePie Capital – an innovative capital markets partner exclusively focused on franchising – to allocate up to $30 million in debt capital to its franchisees and propel its franchise expansion to new and existing groups.

16.  “It is of the utmost importance for us to ensure our franchisees can continue to develop,” said Joe Hummel, CEO of Twin Peaks. “This partnership with ApplePie will allow us to help our franchisees grow through a lending program that aids their financial needs. This gives them more opportunity to consider new steps such as remodels or opening new locations. It can also be an option for refinancing when needed. This assistance will be key in driving expansion as we continue to capitalize on aggressive franchising opportunities while we move into new markets nationwide.”

17.  Denise Thomas, co-founder and CEO of ApplePie, added, “We are excited to team up with Twin Peaks and their franchisees to make accessing capital easy. We look forward to helping accelerate the brand’s growth through our competitive financing program.”

Company History

18.  Twin Peaks was founded in 2005 by Randy Dewitt and Scott Gordon in Lewisville, Texas. Dewitt, who had previously helped Brinker International develop Rockfish Seafood, noticed a thriving sports-bar market and decided to create a chain with a mountain-lodge motif and attractive servers.

19.  Locations feature large fireplaces, faux stonework, stuffed and mounted animal trophies, and dozens of gigantic television screens. The servers are women who wear midriff-and-cleavage-revealing cropped plaid shirts and khaki-colored shorts, a concept similar to Hooters.

20.  Franchising the Twin Peaks concept started in 2007, and more restaurants were opened around Texas. After opening a few more locations in the state, Twin Peaks expanded to other areas of the country. By 2018, there were 85 Twin Peaks restaurants, a mix of corporate-owned and franchised, in more than 26 states.

Entrepreneur’s Franchise 500

21.  Twin Peaks did not rank on Entrepreneur’s 2020 Franchise 500 list.

Section II – Estimated Costs

• Please click here for detailed estimates of Twin Peaks 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 Twin Peaks’ 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:  51
• Outlets at the End of the Year:  48
• Net Change:  -3

2018

• Outlets at the Start of the Year:  48
• Outlets at the End of the Year:  50
• Net Change:  +2

2019

• Outlets at the Start of the Year:  50
• Outlets at the End of the Year:  51
• Net Change:  +1

Company-Owned

2017

• Outlets at the Start of the Year:  27
• Outlets at the End of the Year:  30
• Net Change:  +3

2018

• Outlets at the Start of the Year:  30
• Outlets at the End of the Year:  30
• Net Change:  0

2019

• Outlets at the Start of the Year:  30
• Outlets at the End of the Year:  28
• Net Change:  -2

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

Part 1 – Annual Unit Volume (AUV) of Mature Franchised Twin Peaks Restaurants (FY 2019 and FY 2018)

• Twin Peaks’ 2019 fiscal year began on December 31, 2018 and ended on December 29, 2019 (“FY 2019”) and its 2018 fiscal year began on January 1, 2018 and ended on December 30, 2018 (“FY 2018”).

FY 2019

• As of the last day of FY 2019, there were 55 franchised Twin Peaks Restaurants operating in the US, of which 53 Twin Peaks Restaurants were open and had been operating for the full FY 2019 (the “2019 Mature Franchised Restaurants”).

• The 2019 Mature Franchised Restaurants are included in the data set for Part 1 and are located in the following states: Alabama, Arkansas, Arizona, California, Florida, Georgia, Idaho, Indiana, Kansas, Louisiana, Michigan, Missouri, Mississippi, North Carolina, Ohio, Oklahoma, South Carolina, Tennessee, Texas, and Washington.

• The 2019 Mature Franchised Restaurants operated for an average of 5.4 years as of the last day of FY 2019.