FDD Talk 2021: Kilwins Chocolates 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 Kilwins Chocolates franchise opportunity, including relevant news updates

• Section II – Estimated initial investment for a Kilwins Chocolates franchise, based on Item 7 of the company’s 2021 FDD

• Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for a Kilwins Chocolates franchise, based on Items 5 and 6 of the company’s 2021 FDD

• Section IV – Number of franchised and company-owned Kilwins Chocolates outlets at the start of the year and the end of the year for 2018, 2019, and 2020, based on Item 20 of the company’s 2021 FDD

• Section V – Presentation and analysis of Kilwins Chocolates’ financial performance representations, based on Item 19 of the company’s 2021 FDD, including information on the:

• 2020 average and median Gross Sales for the 129 franchised Kilwins Stores that were in operation during the entire period of January 1, 2020 through December 31, 2020 and that reported Gross Sales to the franchisor

• 2019 average Cost of Sales and Non-Owner Payroll Costs for the 92 franchised Kilwins Stores from whom the franchisor was able to obtain applicable information

• 2020 average Transaction Value for the 127 franchised Kilwins Stores that were in operation during the year January 1, 2020 to December 31, 2020 that reported complete transaction values to the franchisor, including Stores that intentionally operated seasonally for part of the year (as compared to Stores that may have been operating for part of the year because they opened or closed during 2020)

Section I – Background Information

16 Things You Need to Know About the Kilwins Franchise

Opens New Location

1.  Kilwins’ growth has not slowed down over the past year, even as the food industry has been hit hard by the ongoing COVID-19 pandemic. One of its newest locations was set to open on the Pensacola Beach boardwalk in Florida over spring 2021.

2.  Franchisees Trey and Danielle Lemon are embarking on their second Kilwins venture, having operated the Orange Beach, Alabama location for close to three years. Their vision as business owners might not totally come to fruition until the Pensacola Bay Bridge reopens and the greater Pensacola population once again has quick and easy access to the beach, but Danielle Lemon said she’s excited for the Pensacola area to find out what the Michigan-based Kilwins is all about.

3.  The Pensacola Bay Bridge has been closed for repairs since being badly damaged by unmoored Skanska USA barges on Sept. 16, 2020, during Hurricane Sally. A late May reopening date was the tentative target for the bridge.

4.  Lemon said, “We feel really good about it, we were over there last July when we first looked at the location and it was just insane, so many people at the beach, at the restaurants. Everywhere. We’re thinking a daytime place where people can come off the beach, grab an ice cream, a water and some treats, but then also a nighttime destination. When you’re done with dinner and the whole family craves ice cream or something sweet. That’s kind of what’s cool about us. We’re not just an ice cream shop, we have so many things.”

5.  Kilwins’ track record is backed by more than 70 years of history, and the company boasts well over 100 locations nationwide. Its ice cream and fudge recipes, as well as its visual, in-store preparation process, make the sweet shop stand out. Lemon added, “Our fudge is cooked in a copper kettle, we pour it onto a marble table and then paddle and loaf it right there. It’s not pan fudge, it’s not made in an oven, it’s not baked. We are doing it all right there in front of our kitchen so it’s really cool, people can watch it.”

6.  Caramel, which is the base for a boatload of Kilwins products, is made using the same copper kettle system. The time-tested menu is pieced together by a variety of barks, chocolates, corns, brittles, truffles, and other goodies. And then there’s the ice cream. “We’ll have 24 flavors there in Pensacola Beach. That’s less than in Orange Beach but we’re working with a really tiny space over here,” Lemon said. “It’s super high in milk fat so it’s super premium. It’s delicious.”

7.  Kilwins’ ice cream isn’t at your local Publix and it can’t be found in any mall. Visiting Kilwins is the only way to get your hands on its original recipe ice cream. “We have a toasted coconut, which is a definite top seller. Cake batter, which is really unique,” Lemon said, while rattling off some of Orange Beach’s top-selling flavors. “Another would be the New Orleans praline pecan, that’s another unique flavor. We have sea salt caramel, too, they come in a chocolate or vanilla. Those are really popular.”

8.  Once Kilwins opens on the boardwalk in the spring, its hours of operation could initially mirror those of the store in Orange Beach, which is 10 a.m. to 10 p.m. The franchisees said they’ll play it by ear, though.

Offers a Variety of High-Quality Treats

9.  Since 1947, Kilwins has built a reputation for great chocolate, ice cream, and made-in-store confections. The brand’s attention to detail in developing and crafting its products supports its franchisees in providing the best possible products and experience to customers. 100% of their fair-trade Kilwins “Heritage” Chocolate is made in their chocolate kitchen in Petoskey, Michigan. Additionally, several of Kilwins’ confections are made in-store. These products include its creamy Mackinac Island fudge, “the perfect” caramel apple, hand-crafted caramel corn brittle, and other chocolate-dipped treats.

10.  In 1985, Kilwins began perfecting its “Original Recipe” Ice Cream in small batches. Today, the brand continues its tradition of excellence, using fresh milk and cream from family farms mixed with fudge, caramel, nuts, chocolate chips, or other quality confections to create the best ice cream available. Kilwins ice cream is kosher certified, is expertly frozen into specially designed tubs that protect the superior Kilwins quality, and is delivered to stores on Kilwins’ dedicated temperature-controlled trucks to ensure quality. Customers also enjoy Kilwins’ fresh, made-in-store waffle cones, hand-crafted hot fudge and caramel toppings, ice cream packed in quarts, and gourmet cake and ice cream cakes.

Advantages to Owning a Kilwins Franchise

11.  According to Kilwins, there are several advantages to owning a franchise with the brand, including:

• A Premium, Respected, and Recognized Brand – Kilwins products and customer experience speak for themselves. The brand is proud of the products and services it provides and the brand works hard to create and provide value for its franchisees so they may enrich their families, teams, and communities.

• Experience and Know-How – Kilwins has over 70 years of experience crafting and selling high-quality products and supporting successful stores. The brand has spent many years developing and perfecting its recipes, setting standards, and developing and implementing systems that produce results. Kilwins is an organization that is not afraid to try new ideas, and it has learned what works. It is that learning and expertise that makes the Kilwins business model successful.

• Proven Products, Standards, Systems, and Support – Understanding, growing, and protecting the Kilwins brand, planning strategically, setting standards, and developing systems are all very important to the company, but what really matters is delivering Kilwins’ great products and providing a consistent, super-premium experience to each new and returning customer. The Kilwins business model provides guidance to high-quality franchise owners to achieve this goal.

• A Business Model That Works – All of the expertise, great products, and efficient operations in the world do not count for much if you do not get results. Combined with hard-working and caring franchisees, Kilwins gets results. After decreases in mid-2020 due to COVID, Kilwins stores are generally recovering and were down less than 2% on average for the last four months of 2020.

• Two Franchised Store Formats and Available Markets – Kilwins is a growing company with many great markets available for development. The brand’s two store formats provide alternatives to best suit the market potential franchisees are interested in developing. Some markets are best suited for the Original Full Line Chocolates, Confectionery & Ice Cream Stores, while others are best for the Ice Cream and Chocolate Shops. Additionally, Kilwins’ multi-store expansions may allow franchisees to efficiently operate multiple store formats, expand in small geographic areas with their existing team, and be close to home and remain in control of their business operations.

Company History

12.  Kilwins was founded in 1947 as Kilwin’s Candies and Gifts by Don and Katy Kilwin in Petoskey, Michigan. Initially, the Kilwins were making baked goods and chocolates, but as the business grew, they decided to shift focus to chocolates and confections. Kilwins eventually added fudge, caramel, caramel corn, peanut brittle, and caramel apples to its offerings.

13.  In 1971, the Kilwins sold off the bakery portion of the business. A few years later, Kilwins began to expand and a second shop was opened by Jim Szocinski, who first worked for Kilwins in 1961.

14.  In 1978, the Kilwins decided to retire and they sold the business to Wayne and Lorene Rose. Under the Roses, Kilwins’ growth picked up and franchising started in 1982. The Roses also expanded Kilwins’ menu by adding “Original Recipe” Ice Cream.

15.  Kilwins continued to grow around the United States and in 1995, the Roses sold Kilwins to Don and Robin McCarty, who had first joined the Kilwins business in 1979. Today, there are company-owned and franchised Kilwins locations across 25 states.

Entrepreneur’s Franchise 500

16.  Kilwins ranked No. 121 on Entrepreneur’s 2021 Franchise 500 list.

Section II – Estimated Costs

• Please click here for detailed estimates of Kilwins Chocolates franchise costs, based on Item 7 of the company’s 2021 FDD.

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

• Please click here for detailed information on Kilwins Chocolates’ initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2021 FDD.

Section IV – Number of Franchised and Company-Owned Outlets

Franchised

2018

• Outlets at the Start of the Year:  111
• Outlets at the End of the Year:  125
• Net Change:  +14

2019

• Outlets at the Start of the Year:  125
• Outlets at the End of the Year:  133
• Net Change:  +8

2020

• Outlets at the Start of the Year:  133
• Outlets at the End of the Year:  138
• Net Change:  +5

Company-Owned

2018

• Outlets at the Start of the Year:  2
• Outlets at the End of the Year:  2
• Net Change:  0

2019

• Outlets at the Start of the Year:  2
• Outlets at the End of the Year:  3
• Net Change:  +1

2020

• Outlets at the Start of the Year:  3
• Outlets at the End of the Year:  3
• Net Change:  0

Section V – Financial Performance Representations (Item 19, 2021 FDD) and Analysis

• The averages presented below were prepared from the company’s internal operating records, which, in turn, were prepared from information obtained from franchisees. To the best of the company’s knowledge, this information has been prepared according to generally accepted accounting principles. The information presented in this Item 19 has not been audited.

Gross Sales (2020)

• Gross Sales figures include revenues reported for calendar year 2020 from the sale of goods to retail customers, including the full range of required products.

• This section represents the results from 129 franchised Kilwins Stores, and no company-owned Stores.

• These Stores represent all Stores that were in operation during the entire period of January 1, 2020 through December 31, 2020 and that reported Gross Sales to the franchisor, including 9 Stores that were not open, even seasonally, for the entire 12-month period.

• The franchisor excluded from the results 9 franchised Kilwins Stores which were not open, even seasonally, for the entire 12-month period.

• The franchisor separately listed only those states in which it has three or more franchisees who are operating Stores so that it does not provide information (even in summary form) that could be directly linked to any of its franchisees, or that others could use to determine the performance of any particular Store. However, data for all of the Stores (except those excluded Stores as explained above) were included in the “total” figures under the heading “All States.”

All States (129 Stores)