In this FDD Talk post, you’ll learn the following:
- Section I – Background information on the Teriyaki Madness franchise opportunity, including relevant news updates
- Section II – Estimated initial investment for a Teriyaki Madness 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 Teriyaki Madness franchise, based on Items 5 and 6 of the company’s 2021 FDD
- Section IV – Number of franchised and company-owned Teriyaki Madness 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 Teriyaki Madness’ financial performance representations, based on Item 19 of the company’s 2021 FDD, including information on the:
- 2016 to 2020 average, median, high, and low gross sales for the franchised Teriyaki Madness restaurants that have been in operation for at least two years, were larger than 1,350 square feet and smaller than 3,000 square feet (which match the footprint required of new Teriyaki Madness restaurants), were in traditional locations, have had no change of ownership within the two-year period, and are not for sale
- 2020 average total sales, cost of goods sold, gross profit, payroll and labor, occupancy, direct operating expenses, and operating income for the 22 franchised Teriyaki Madness restaurants (including 4 affiliate-owned restaurants owned by the franchisor’s predecessor) that have been open for a minimum of 24 months, are larger than 1,350 square feet and smaller than 3,000 square feet, have not changed ownership in the last two years, are not in resale, are in traditional locations, and provided their profit and loss statements to the franchisor
Section I – Background Information
22 Things You Need to Know About the Teriyaki Madness Franchise
Introduces New Affiliate Management Company
1. In early June 2020, Teriyaki Madness announced that it was expanding its franchise opportunity to even more entrepreneurs through the launch of its new affiliate restaurant management company, Restaurant Sherpas. Recognizing the varying needs of entrepreneurs that are seeking different levels of involvement in the day-to-day operations of a restaurant franchise, the Teriyaki Madness team developed Restaurant Sherpas as a solution for absentee and semi-absentee franchisees across the nation.
2. Michael Haith, CEO of Teriyaki Madness, said, “We created Restaurant Sherpas as a means of harnessing our operational expertise to provide our franchise partners with a reliable solution at the unit level that meets them where they want to be as far as day-to-day involvement is concerned. The role Restaurant Sherpas plays is tailor-made to each of our partners, and franchisees can be as involved as they choose. We’re excited about the opportunity this presents for even more entrepreneurs to get involved with Teriyaki Madness as we continue to grow across North America.”
3. The leadership team of Restaurant Sherpas uses their decades of experience to operate Teriyaki Madness franchise partners’ shops and provides full support during the process. Everything from site selection to construction oversight to the recruiting, hiring, and training of the staff to the ongoing day-to-day operations is handled by Restaurant Sherpas.
4. Haith added, “Restaurant Sherpas acts as multi-unit leadership, hiring the General Manager and making sure the team and the shop consistently meet and/or exceed the brand guidelines laid out in the franchise agreement. The team ensures the shop is run efficiently, profitably and to the franchisee’s specifications. We currently have two corporate-owned Teriyaki Madness shops using Restaurant Sherpas as well as FirstPathway Partners and Globofran, two companies that help foreign investors achieve business ownership through the EB-5 and E2 visa programs. In addition to being immigration investment-friendly and an extremely viable option for multi-unit operators, we’re confident this versatile, first-of-its-kind offering will attract even more qualified franchise owners to our ever-growing system.”
Pushes Restaurant Loyalty Program Into Overdrive
5. Even before COVID-19 drove the restaurant industry to double-down on apps and online ordering, loyalty programs had become an important offering for most restaurant brands. Now, with delivery and take-out orders skyrocketing, it’s become nothing less than essential. That’s good news for Teriyaki Madness, which just introduced a robust loyalty program in 2019, allowing fans to accrue points with every purchase that can be redeemed for free drinks, sides, and its teriyaki bowls.
6. That program has proven a massive success for the brand, whose growing number of loyalty members spend an average of 17% more per order than non-loyalty members by December 2020. Now, Teriyaki Madness is making its loyalty program even more attractive with new offers and rewards.
7. Michael Haith, CEO of Teriyaki Madness, said, “As we continue to grow, we know we need to invest in strong relationships with our customers, and the best way to do that in the current climate is by making our mobile offerings better and more convenient. Since last year, we’ve found that our loyalty program results in an increased frequency of visits from customers. Plus, loyalty members spend 17% more on average than non-loyalty customers. Showing love to repeat customers is key to driving business, and at Teriyaki Madness, we are grateful for our loyal customers and want to reward them for choosing to satisfy their cravings with us.”
8. At the end of 2020, Teriyaki Madness’ loyalty program got even more generous with its rewards, offering a free bowl (with purchase) to anyone who simply downloaded the mobile app. But it was not just free food – there were iPhones, too. Loyalty members who placed four mobile orders throughout December were entered into a drawing to win an iPhone 12. These promotions not only reward loyal customers, they also encourage new customers to download the mobile app and utilize the brand’s online ordering channels, expanding the franchise’s already-enviable base of rabid – or at least very enthusiastic – fans.
9. According to Haith, Teriyaki Madness’ mobile app is in some ways a natural extension of the brand’s core values. “We built ourselves for convenience,” Haith added. “We have a very simple menu, and delivery is a great way for us to get our food to customers at home. We built our technology around leveraging third-party delivery services rather than our own crews, and it now works with all available delivery providers in most of its markets.”
10. Catering to customers’ needs requires strategies that can satisfy them both during and after the pandemic. By continuing to invest in the loyalty program and keeping pace with consumers’ ever-changing preferences, Teriyaki Madness is making sure to maintain its competitive edge now and in the future. On a final note, Haith said, “We’re excited to continue promoting our loyalty program and mobile app as a way to thank our regular customers while also attracting new ones, thanks to our strong value proposition.”
Closes Out 2020 with 31 New Locations Despite Challenging Year
11. Despite a very challenging year due to the ongoing COVID-19 pandemic, Teriyaki Madness saw tremendous growth throughout 2020, establishing 31 new locations – 25 of which opened during the pandemic – in markets across the country. New locations are only the most visible way Teriyaki Madness has grown over the past year.
12. The brand has also expanded its corporate team, hiring 26 new members, including new Chief Development Officer David Biederman, who brings over two decades of industry experience to the table with brands like McDonald’s, Smashburger, and Toppers Pizza.
13. According to CEO Michael Haith, the surge in talent is designed to support the franchise’s ongoing momentum and ensure that franchisees continue to benefit from dedicated and personalized corporate support. He said, “We’ve always defined the success of our brand by the success of our franchisees, so as our network of restaurants continues to grow, we’re adamant about expanding the support and resources we offer in step with that growth.”
14. That strategy is paying off for the fast-growing franchise, whose franchisees also saw stunning gains in 2020. In Q3, shop-level sales were up an average of 18% across the franchise system compared to Q3 of 2019. The brand also saw a 45% year-over-year increase in grand opening sales for new locations in 2020 and a 44% increase in grand opening sales for locations that opened during COVID over those that opened before.
15. In July, Ohmar Villavicencio opened a new Teriyaki Madness location in Hawaii – the first of a ten-unit agreement he signed with the franchise. Villavicencio said the pandemic proved a minor hurdle in getting up and running. “I was given the option to delay opening due to the pandemic, and I said ‘no way.’ The support I’ve gotten from the corporate team and the growth and success of this brand over the past couple of years gave me the confidence to move forward,” said Villavicencio. “I am so glad I did make that decision because I’ve been able to provide over 30 jobs for my community, and of course some delicious food for all of our customers.”
16. In 2020, Teriyaki Madness also launched Restaurant Sherpas, a sister company restaurant management company that provides day-to-day management support for the brand’s restaurants, allowing investor franchisees to focus more on developing multiple shops and growing more rapidly to meet their growth goals.
17. Of course, Teriyaki Madness’ growth in 2020 was somewhat unique in the foodservice industry, which was hit especially hard by the COVID-19 crisis. Not content to thrive while so many others in the industry were struggling, Teriyaki Madness launched a number of campaigns in 2020 to pay its own success forward. Those efforts included the aptly named “Pay It Forward” campaign, in which the brand teamed up with customers to split the cost of more than 6,000 meals for healthcare workers, and the Wok-Star Teacher program, which also split the cost of meals that were delivered to teachers and educators in local communities.
18. As 2020 came to a close, Teriyaki Madness planned to leverage its momentum for even more growth in the new year. Biederman said, “The progress we saw in 2020 was just the start. We are well-positioned for an even stronger 2021, with excellent brand awareness, a killer consumer offering and plenty of valuable open territories available. As someone who is laser-focused on development opportunities, I could not be more excited to join this team at this time.”
19. According to Haith, 2020 was proof that Teriyaki Madness is a business model built using the best of technology and customer service to weather even the most difficult challenges. “Teriyaki Madness has always been more than a franchise – it’s a community,” he said. “The success we saw in 2020 was not just the result of a strong business model or marketing, it is the result of an amazing community working together to create something awesome. For that reason, I’m incredibly grateful to our franchisees, employees, corporate team and our customers, who make me so proud to be a part of this brand.”
20. Teriyaki Madness was founded in 2003 by Alan Arreola, Rod Arreola, and Eric Garma in Las Vegas, Nevada. The Arreolas and Garma were born and raised in Seattle, which is known for its love of teriyaki chicken bowls. After moving to Las Vegas, the Arreolas and Garma missed their beloved teriyaki bowls and also wanted to provide a healthier fast-food alternative. The bowls offered by Teriyaki Madness are made with fresh vegetables and high-quality protein. The very first Teriyaki Madness restaurant was a success and two years later, the Arreolas and Garma started franchising the concept.
21. After opening a few more locations around the Las Vegas area, Michael Haith, an experienced franchisor, was brought in to help accelerate Teriyaki Madness’ growth. Haith helped launch Teriyaki Madness’ national expansion, and in 2017, he acquired the company from the Arreolas and Garma. Haith remains as the CEO of Teriyaki Madness and there are now locations around the United States.
Entrepreneur’s Franchise 500
22. Teriyaki Madness ranked No. 247 on Entrepreneur’s 2021 Franchise 500 list.
Section II – Estimated Costs
- Please click here for detailed estimates of Teriyaki Madness 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 Teriyaki Madness’ 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
- Outlets at the Start of the Year: 41
- Outlets at the End of the Year: 42
- Net Change: +1
- Outlets at the Start of the Year: 42
- Outlets at the End of the Year: 60
- Net Change: +18
- Outlets at the Start of the Year: 60
- Outlets at the End of the Year: 88
- Net Change: +28
- Outlets at the Start of the Year: 1
- Outlets at the End of the Year: 2
- Net Change: +1
- Outlets at the Start of the Year: 2
- Outlets at the End of the Year: 2
- Net Change: 0
- Outlets at the Start of the Year: 2
- Outlets at the End of the Year: 0
- Net Change: -2
Section V – Financial Performance Representations (Item 19, 2021 FDD) and Analysis
Part 1 – Average, Median, High, and Low Gross Sales
- The information in the Gross Sales table below contains Gross Sales information obtained from franchisees’ Profit and Loss Statements and is a historical financial performance representation for the United States franchised Teriyaki Shops that met the following criteria: (a) have been in operation for at least two years; (b) were larger than 1,350 square feet and smaller than 3,000 square feet (which match the footprint required of new Teriyaki Shops); (c) were in traditional locations; (d) that have had no change of ownership within the two-year period; and (e) are not for sale (“Conditions”).
2020 Reporting Group
- Number of Franchised Shops in the Sample: 22
- High Gross Sales: $1,666,686
- Low Gross Sales: $508,366
- Average Gross Sales (“AGS”): $1,079,488
- Number of Teriyaki Shops at or Above AGS: 11
- Percent of Teriyaki Shops at or Above AGS: 50%
- Median Gross Sales (“MGS”): $1,071,702
- Number of Teriyaki Shops at or Above MGS: 12
- Percent of Teriyaki Shops at or Above MGS: 55%
2019 Reporting Group
- Number of Franchised Shops in the Sample: 15
- High Gross Sales: $1,564,146
- Low Gross Sales: $720,371
- Average Gross Sales (“AGS”): $1,154,180
- Number of Teriyaki Shops at or Above AGS: 8
- Percent of Teriyaki Shops at or Above AGS: 53%
- Median Gross Sales (“MGS”): $1,183,295
- Number of Teriyaki Shops at or Above MGS: 8
- Percent of Teriyaki Shops at or Above MGS: 53%
2018 Reporting Group
- Number of Franchised Shops in the Sample: 13
- High Gross Sales: $1,430,790
- Low Gross Sales: $631,431
- Average Gross Sales (“AGS”): $1,134,507
- Number of Teriyaki Shops at or Above AGS: 7
- Percent of Teriyaki Shops at or Above AGS: 54%
- Median Gross Sales (“MGS”): $1,247,256
- Number of Teriyaki Shops at or Above MGS: 7
- Percent of Teriyaki Shops at or Above MGS: 54%
2017 Reporting Group
- Number of Franchised Shops in the Sample: 10
- High Gross Sales: $1,338,244
- Low Gross Sales: $585,002
- Average Gross Sales (“AGS”): $1,079,140
- Number of Teriyaki Shops at or Above AGS: 6
- Percent of Teriyaki Shops at or Above AGS: 60%
- Median Gross Sales (“MGS”): $1,126,762
- Number of Teriyaki Shops at or Above MGS: 6
- Percent of Teriyaki Shops at or Above MGS: 60%
2016 Reporting Group
- Number of Franchised Shops in the Sample: 9
- High Gross Sales: $1,405,107
- Low Gross Sales: $645,613
- Average Gross Sales (“AGS”): $1,148,596
- Number of Teriyaki Shops at or Above AGS: 5
- Percent of Teriyaki Shops at or Above AGS: 56%
- Median Gross Sales (“MGS”): $1,179,139
- Number of Teriyaki Shops at or Above MGS: 5
- Percent of Teriyaki Shops at or Above MGS: 56%
- Gross Sales means the revenues from the sale of food, beverages, services, and other items from in-store dining, carry-out, online orders, delivery, third-party voucher sales, catering, and otherwise, including the sale of food and beverages, redemption of gift cards, and merchandise and all other income of every kind and nature related to the Teriyaki Madness Business or Teriyaki Madness Business operations.
- The above financial performance representation figures do not reflect the cost of sales, operating expenses, or other costs or expenses that must be deducted from the Gross Sales figures to obtain your net income or profit.
- Some Teriyaki Madness Businesses have sold this amount. Your individual financial results are likely to differ. There is no assurance you’ll sell as much.
Part 2 – Income Statements for Period Ending December 31, 2020
- The average operating income statement below is for the 2020 calendar year and are based on information reported by Teriyaki Shop owners.
- The operating income statement below is an average historical presentation for 22 franchised Teriyaki Shops in the 2020 Reporting Group that provided Profit and Loss Statements, including four Predecessor’s affiliate Teriyaki Shops.
- All Teriyaki Shops represented below have been open for a minimum of 24 months, are larger than 1,350 square feet, smaller than 3,000 square feet, have not changed ownership in the last two years, are not in resale, and are in traditional locations.
- Teriyaki Madness has not audited these statements.
Average (22 Teriyaki Shops)
Total Sales: $1,079,488 (100.0%)
COGS: $299,126 (27.71%)
Gross Profit: $780,362 (72.29%)
- Payroll and Labor: $300,529 (27.84%)
- Occupancy: $95,535 (8.85%)
- Direct Operating Expenses: $232,522 (21.54%)
- Total Operating Expenses: $628,586 (58.23%)
Operating Income: $151,776 (14.06%)
- Total Sales means the revenues you receive from the sale of food, beverages, services, and other items from in-store dining, carry-out, online orders, delivery, third-party voucher sales, catering, and otherwise, including the sale of food and beverages, redemption of gift cards, and merchandise and all other income of every kind and nature related to the Teriyaki Madness Business or Teriyaki Madness Business operations.
- Cost of Goods Sold includes all food and beverage items and related supplies such as utensils, take-away containers, napkins, cups, and straws.
- Gross Profit is defined as Total Sales less Costs of Goods Sold.
- Payroll and Labor Expenses include wages, salaries and benefits, and include the actual labor costs of all personnel in the restaurants. Locations O and R do not have defined Manager or Owner’s Salary expenses included in their reported labor costs. All others have Manager or Owner’s Salary expenses included in their reported labor cost.
- Occupancy Expenses include items such as rent and utilities.
- Direct Operating Expenses include Royalty Fee and Marketing Fund Contributions, as well as other items such as insurance, marketing, miscellaneous supplies, repairs, and bank fees.
- Operating Income is defined as Gross Profit less Payroll and Labor Expenses, Occupancy Expenses, and Direct Operating Expenses. It does not include interest, depreciation, amortization, business taxes, and other costs and expenses that must be deducted from Total Sales figures to obtain net income.
- The franchisor’s Predecessor’s affiliate Teriyaki Shops (locations A, C, F, I, and V) do not pay a Royalty Fee. The franchisor has added a 6% royalty to these operating income statements. The illustrative adjustments of adding a Royalty Fee (“Franchise Related Royalty Adjustment”) in the operating income statements above present financial projections. These projections are based on historical information. Certain assumptions and bases were made for these projections.
- Specifically, in making the Franchise Related Royalty Adjustments, the franchisor assumed that any additional expenses would not have a direct or indirect material effect on revenue or other expenses. Any change in these assumptions would require material alterations to the projections.
- Some Teriyaki Madness Businesses have earned this amount. Your individual financial results are likely to differ. There is no assurance you’ll earn as much.
- You should conduct an independent investigation of the costs and expenses you will incur in operating your Teriyaki Madness Business. Franchisees or former franchisees listed in the Franchise Disclosure Document may be one source of this information.