FDD Talk 2020: Pokéworks 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 Pokéworks franchise opportunity, including relevant news updates

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

• Section IV – Number of franchised and company-owned Pokéworks 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 Pokéworks’ 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; average cost of goods sold, labor cost, and gross rent for the 8 company-owned Pokéworks Restaurants that had been open and operating for a minimum of 12 months as of December 31, 2019, had been operated continuously during the period between January 1, 2019 and December 31, 2019, and submitted their completed financial reports for the entire reporting period

• 2019 average, median, high, and low gross sales; average cost of goods sold, labor cost, and gross rent for the 19 franchised Pokéworks Restaurants that had been open and operating for a minimum of 12 months as of December 31, 2019, had been operated continuously during the period between January 1, 2019 and December 31, 2019, and submitted their completed financial reports for the entire reporting period

• 2019 average, median, high, and low gross sales; average cost of goods sold, labor cost, and gross rent for the 27 company-owned and franchised Pokéworks Restaurants that had been open and operating for a minimum of 12 months as of December 31, 2019, had been operated continuously during the period between January 1, 2019 and December 31, 2019, and submitted their completed financial reports for the entire reporting period

Section I – Background Information

19 Things You Need to Know About the Pokéworks Franchise

Poised for Momentous 2020 After Closing Out 2019 with Impressive Growth

1.  In mid-February 2020, Pokéworks said that it was forging ahead in 2020 riding the momentum of last year’s impressive growth and showing no signs of slowing. The brand has solidified its place at the forefront of the fast-casual restaurant space, leading the pack with impressive menu innovation and development last year and plans to build on this momentum in 2020.

2.  In 2019, Pokéworks listened to consumer demand for a fresh take on a maturing trend with menu innovations that incorporated new flavors and textures, while staying true to its traditional Hawaiian roots. In partnership with Bravo’s Top Chef alumnus, Chef Sheldon Simeon, Pokéworks rolled out two limited time spice-centric, flavor-packed bowls – the Spicy Sichuan Bowl and the Lava Bowl. The brand also unveiled a new warm, torched poké that is served with a broth, called Poké-Zuke, to make poké the perfect dish year-round.

3.  Driven by innovation behind the counter, Pokéworks saw heightened consumer demand for its fresh poké. To keep up with demand, the brand opened 20 new restaurants last year, leading to a total of 46 open restaurants with 130 in development. This year, Pokéworks plans to keep up this momentum with plans to bring 30 locations to untapped markets across the nation, such as St. Louis, Denver, and Portland.

4.  Mike Wu, co-founder and CEO of Pokéworks, said, “This has been a milestone year for us, most notably when it comes to menu innovation. This is a direct result of the support, unmatched dedication and creativity of our franchise partners and corporate staff. We are looking forward to elevating our efforts in bringing a fresh take on traditional poké to communities across the nation in 2020.”

5.  In addition to menu innovation and development, Pokéworks solidified its place at the top by earning recognition across the restaurant industry in 2019. The brand earned the No. 3 spot on Restaurant Business’s Future 50 list – a measurement of the fastest-growing restaurant concepts – and was recognized on Fast Casual’s Movers & Shakers list – an annual ranking that lists the top 100 brands in growth, creativity, and contribution to the restaurant industry.

Opens First Ghost Kitchen

6.  At the beginning of July 2020, Pokéworks opened its first ghost kitchen, in partnership with Epic Kitchens, delivering to the River West area of Chicago and surrounding neighborhoods. Pokéworks will be available via all major delivery platforms, including DoorDash, GrubHub, Uber Eats, Postmates, and Caviar.

7.  With the growing demand in digital ordering and delivery services, Pokéworks hopes to combine its fresh take on customizable, Hawaiian-inspired poké bowls with Epic Kitchens’ expertise and specialty in 3rd party platforms, to bolster customer needs.

8.  Mike Wu, CEO of Pokéworks, said, “The current national restaurant climate has forced all QSR’s to analyze their sales strategies in order to accommodate public health concerns. Our partnership with Epic Kitchens is the perfect medium to evolve our brand while addressing public health concerns amongst our audience.”

9.  The delivery-exclusive Chicago location will be Pokeworks’ 54th location nationwide alongside franchises developing throughout Canada and Mexico. The partnership with Epic Kitchens has been in development throughout this year, but increasing digital demand comes at an even greater need with the current pandemic climate where a large portion of consumers are hesitant to dine in.

10.  Epic Kitchens is a multi-brand platform of delivery and catering restaurants. With an expertise in non-traditional restaurant operations, Epic was designed from the ground up to optimize brand quality and customer experience in the off-premise segment. According to Epic Kitchens, “We are proud to partner with such a forward-thinking category leader as Pokéworks. We are excited to add them to the Epic Kitchens platform as we support their strategic evolution in the Chicago market.”

Releases New Sichuan Bowl

11.  In late October 2019, Pokéworks launched its newest menu item, the Spicy Sichuan Bowl. The new spice-centric dish was created in collaboration with the award-winning alumnus of Bravo’s Top Chef and owner of Tin Roof in Maui, Chef Sheldon Simeon.

12.  Featuring a house-made sauce that consists of red chili peppers, peppercorns, and honey-infused soy, the flavor-packed Spicy Sichuan Bowl is topped with spicy crushed peanuts to add a satisfying crunch. The fusion of these ingredients creates a tingly sensation that transforms taste buds, offering guests a taste they can feel.

13.  According to celebrity Chef-collaborator Sheldon Simeon, “The Spicy Sichuan Bowl is for spice-seeking foodies who look for an exciting, effervescent dining experience. Pokéworks gives me the freedom to implement the Hawaiian traditions I grew up with and fuse them with my passion for flavor and spice. We are excited to turn up the heat with the Spicy Sichuan Bowl to offer guests across the nation not only a meal, but an experience in every bite.”

14.  Dedicated to offering a fresh take on Hawaiian-inspired poké bowls and burritos with high-quality, flavorful ingredients at an affordable price, Pokéworks has an ongoing partnership with Chef Sheldon Simeon to drive innovation within the brand. As part of this collaboration, Simeon handcrafts a series of Signature Works for Pokéworks with ingredients that draw inspiration from the mix of cultures that he grew up with in Hawaii.

15.  Chef Sheldon Simeon is known for bringing the heat in his cooking. His previous collaboration with Pokéworks earlier in 2019 – the Lava Bowl, which featured ghost peppers – left Pokéworks guests hungry for more.

Company History

16.  Pokéworks was founded in 2015 by Kevin Hsu, his brother Kasper, and his college friends Peter Yang and Michael Wu, in Midtown Manhattan in New York City. After taking many trips to Hawaii together and enjoying lots of poké, the Hsus, Yang, and Wu wanted to bring this experience back with them to New York and decided to open a tiny grab-and-go delivery location.

17.  Pokéworks was an instant hit and hundreds of people stood in line just to get a bowl or the now-famous “Sushi Burrito.” After a video of Pokéworks’ Sushi Burrito went viral, demand for the brand’s food grew even more. Capitalizing on the fame, Pokéworks decided to start franchising the concept in 2016.

18.  After intelligent growth comprised almost entirely of multi-unit institutional franchisees, Pokéworks joined forces with Toridoll Holdings Corporation in 2018. There are now a mix of company-owned and franchised Pokéworks restaurants around the U.S. and the brand is seeking franchisees worldwide.

Entrepreneur’s Franchise 500

19.  Pokéworks did not rank on Entrepreneur’s 2020 Franchise 500 list.

Section II – Estimated Costs

• Please click here for detailed estimates of Pokéworks 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 Pokéworks’ 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:  2
• Outlets at the End of the Year:  4
• Net Change:  +2

2018

• Outlets at the Start of the Year:  4
• Outlets at the End of the Year:  22
• Net Change:  +18

2019

• Outlets at the Start of the Year:  22
• Outlets at the End of the Year:  40
• Net Change:  +18

Company-Owned

2017

• Outlets at the Start of the Year:  4
• Outlets at the End of the Year:  11
• Net Change:  +7

2018

• Outlets at the Start of the Year:  11
• Outlets at the End of the Year:  11
• Net Change:  0

2019

• Outlets at the Start of the Year:  11
• Outlets at the End of the Year:  8
• Net Change:  -3

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

• As of December 31, 2019, Pokéworks had a total of 40 open and operating franchised Pokéworks Restaurants.

• Of that total number, 19 franchised Pokéworks Restaurants, and all 8 of the Pokéworks Restaurants owned by Pokéworks’ Affiliates, met the following criteria (“Reporting Criteria”): the Pokéworks Restaurant (i) had been open and operating for a minimum of 12 months as of December 31, 2019, (ii) had been operated continuously during the period between January 1, 2019 and December 31, 2019, and (iii) submitted its completed financial reports for the entire reporting period.

• The 21 remaining franchised Pokéworks Restaurants did not satisfy all of the Reporting Criteria.

• Of the 48 Pokéworks Restaurants open on December 31, 2019, 27 or 56.25% are included in this presentation.

• This Financial Performance Representation is based on the financial performance of fully operational Pokéworks Restaurants during 2019.

• Sales will vary from restaurant to restaurant. In particular, the sales and expenses of your Pokéworks Restaurant will be directly affected by factors which include the Pokéworks Restaurant’s geographic location; competition in the market; the quality of both management and service at the Pokéworks Restaurant; contractual relationships with lessors and vendors; the extent to which you finance the operation of your Pokéworks Restaurant; your legal, accounting and other professional fees; federal, state and local income taxes, gross profits taxes or other taxes; cost of any automobile used in the business; and other discretionary expenditures.

• The locations of these restaurants are in densely populated, affluent urban and suburban areas that may not be similar to the market in which your restaurant will be located.

Part 1 – 2019 Financial Performance of Certain Company-Owned Locations

Financial Performance of All Pokéworks Company-Owned Restaurants Meeting the Reporting Criteria During the Full 12-Month Period From January 1, 2019 Through December 31, 2019

• This information covers the 8 company-operated Pokéworks Restaurants that met the Reporting Criteria. All performance figures listed below cover the 12-month period beginning January 1, 2019 and ending December 31, 2019.