FDD Talk 2021: PJ’s Coffee of New Orleans 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 PJ’s Coffee of New Orleans franchise opportunity, including relevant news updates

• Section II – Estimated initial investment for a PJ’s Coffee of New Orleans 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 PJ’s Coffee of New Orleans franchise, based on Items 5 and 6 of the company’s 2021 FDD

• Section IV – Number of franchised and company-owned PJ’s Coffee of New Orleans 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 PJ’s Coffee of New Orleans’ financial performance representations, based on Item 19 of the company’s 2021 FDD, including information on the:

• 2020 average, median, highest, and lowest net sales for the top 10%, top 25%, top 50%, bottom 50%, bottom 25%, and bottom 10% of the traditional PJ’s units with a drive-thru, traditional PJ’s units without a drive-thru, and non-traditional PJ’s units without a drive-thru that opened on or before January 1, 2020 and reported gross revenue for the entire one-year period ending December 31, 2020

• 2018, 2019, and 2020 average, median, highest, and lowest net sales for the traditional PJ’s units with a drive-thru, traditional PJ’s units without a drive-thru, and non-traditional PJ’s units without a drive-thru that opened on or before January 1, 2020 and reported gross revenue for the entire one-year period ending December 31, 2020

• 2019-2020 same-store sales growth over the prior year for the traditional PJ’s units with a drive-thru, traditional PJ’s units without a drive-thru, and non-traditional PJ’s units that reported their gross revenue for the entire two-year period ending December 31, 2020

• 2014-2015, 2015-2016, 2016-2017, 2017-2018, 2018-2019, and 2019-2020 same-store sales growth over the prior year for the PJ’s Units that reported their gross revenue for the entire two-year period ending December 31, 2015, December 31, 2016, December 31, 2017, December 31, 2018, December 31, 2019, and December 31, 2020, respectively

Section I – Background Information

20 Things You Need to Know About the PJ’s Coffee of New Orleans Franchise

Partnered with Children’s Hospital New Orleans to Design 2020 Holiday Cup

1.  At the beginning of November 2020, PJ’s Coffee announced its partnership with Children’s Hospital New Orleans to support young artists and celebrate the start of the holidays with a seasonal cup. Designed by patients in Children’s Hospital’s Art Therapy Programs, the cup featured quintessentially New Orleans-style shotgun houses, a second line of alligators, and festive lights hung from streetlamps in homage to the sights of celebrating the holiday season in the Crescent City. The cups were available in stores throughout the holiday season.

2.  Through the design of the new cups, PJ’s Coffee highlighted Children’s Hospital’s arts in healthcare, child life, and creative therapy programs, which use play, art, and music to help kids cope with illness, treatment, and hospitalization. In addition, throughout the holiday season, customers at PJ’s stores could donate $1, $3, or $5 as part of Children’s Hospital’s Light Up the Season Campaign.

3.  PJ’s customers had the opportunity to have their name displayed on light bulbs in stores. PJ’s Coffee team members also assisted in writing messages of hope and encouragement on the light bulbs that were shared directly with the patients and families spending the holidays in the hospital.

4.  With Children’s Hospital New Orleans’ unwavering commitment to provide the best care for every child, the two young artists who created the cup were able to thrive in the hospital’s art programs. Lizzie, who has suffered from recurrent bone infections since 2014 and receives treatment at Children’s Hospital for an immunodeficiency, created the holiday lights and snowflake artwork. Mindy, who was diagnosed with cancer and experienced life-saving chemotherapy and radiation at Children’s Hospital, created the holiday alligators featured on the PJ’s cup.

5.  Leslie Monson, chief marketing officer of PJ’s Coffee, said, “We are proud to partner with Children’s Hospital this holiday season. The medical care they provide to children throughout Louisiana and the Gulf South is vital. The artistic talents of Lizzie and Mindy featured on our PJ’s holiday cups are sure to light up the season for our customers and the communities we serve.”

6.  In addition to the holiday-themed cups, PJ’s Coffee also offered its seasonal limited-time beverages, including the Peppermint Bark Velvet Ice, Peppermint Bark Latte, Gingerbread Latte, and Butter Rum Latte. Customers could also enjoy a sugar cookie flavored cake ball. PJ’s Coffee served the drinks in flair in the newly designed holiday-themed cups. The limited time offerings were available from November 1 through December 31 or while supplies lasted.

Welcomed Back Spring Flavors and Launched New Dairy Alternative Option

7.  In early March 2021, PJ’s Coffee launched new springtime beverages, including a Honey Macadamia Crème, Honey Macadamia Cold Crème, and the new Honey Oatmilk Latte through April 30.

• Honey Macadamia Crème: PJ’s smooth Honey Macadamia cold brew coffee, steamed whole milk, sweetened with honey. The hot beverage is garnished with whipped cream and drizzled with honey.

• Honey Cold Macadamia Crème: PJ’s smooth Honey Macadamia cold brew coffee with whole milk, sweetened with honey and served over ice with whipped cream and drizzled honey.

• Honey Oatmilk Latte: A traditional PJ’s Latte made with steamed oat milk and honey sweetener for a delicious, non-dairy espresso beverage.

8.  For those making dairy-free choices, oatmilk is now a permanent option at PJ’s Coffee stores nationwide. In addition to multiple health benefits, oatmilk has a creamy consistency in comparison to other plant milks, making it a great choice for coffee beverages.

9.  According to Reid Nolte, vice president of brand strategy for Ballard Brands, “Oatmilk is becoming a popular choice across the country and we’re excited to give our customers this option on the menu. The new Honey Oatmilk Latte is delicious with just the right amount of sweetness, just like our Honey Macadamia Crème beverages.”

Ramps Up Franchise Opportunities in 2021

10.  At the beginning of March 2021, PJ’s Coffee reported that despite setbacks in the restaurant industry due to the ongoing COVID-19 pandemic, PJ’s Coffee franchisees were busy brewing the brand’s signature gourmet coffees, retaining the brand’s community-focused culture, and supporting the front line workers who keep everyone safe. The brand, its franchisees and team members, and growing base of dedicated customers came together and stood strong.

11.  In the end, the once-in-a-lifetime pandemic was no match to PJ’s Coffee’s solid growth during 2020. The brand saw a 15 percent increase in franchises awarded during the first half of 2020, outperforming the past three years of franchise development. The company awarded 32 franchise agreements representing 58 licenses to mostly new operators – 26 new franchisees and 6 existing owners expanding their portfolios of PJ’s Coffee locations.

12.  All told, franchisees opened 20 new locations during the year and the brand’s portfolio soared past 120 locations. Even still, brand officials said 2021 has the potential of being an even better year for growth and they expect to open 48 more stores in 2021.

13.  Ryan Stansbury, VP of franchise development for PJ’s Coffee, said, “As we continue to build momentum, we’ve set a goal of awarding 50 franchise licenses – half of which we anticipate will be multi-unit agreements. Our primary target markets are in the south and east, from Texas over to Florida and up the east coast. But we’ll consider growth opportunities in other markets across the U.S. if it’s the right fit.”

14.  One of the brand’s secrets to success in 2020 was the drive-thru. Customers flocked to drive-thru locations for safe, convenient, and quick service. As a result, franchisees experienced an increase in customer traffic and spike in sales. “Drive-thru locations are not only a function of convenience and increased revenue but also a necessity to meet an even greater shift in consumer behavior,” added Stansbury.

15.  Of course, it’s the coffee that brings customers to PJ’s Coffee. The brand offers a variety of hot, iced, and frozen coffee beverages using only the top 1% of Arabica beans. Organic tea and fresh breakfast pastries are also available. PJ’s Original Cold Brew Ice Coffee is brewed daily using a special cold-drip process that protects the flavor and strength of the beans, while producing a coffee that is 2/3 less acidic – a process and technique pioneered by the company’s founder and used for more than 30 years at all PJ’s locations. Customers can also take home bags of whole bean coffee, single serve cups of PJ’s Coffee, and PJ’s Iced Coffee Concentrate.

16.  Franchisees eagerly validate the success they’ve experienced with PJ’s Coffee. “Despite all the challenges we faced last year, I think it’s evident that the coffee industry is still going strong,” said PJ’s Coffee franchisee Tyra Harris. “We’re ecstatic to be a part of a brand that has continued to grow, even with the hurdles of navigating a pandemic, and we’re equally thrilled to be able to bring premier quality coffee to our community.”

Company History

17.  PJ’s Coffee was founded in 1978 by Phyllis Jordan (PJ) in the Carrollton neighborhood of New Orleans, Louisiana. Jordan, who had moved from Des Moines, Iowa, wanted to start her own coffee shop that offered coffee made with high quality beans and superior roasting techniques. Jordan’s coffee was a hit and she expanded the PJ’s Coffee brand around the New Orleans area.

18.  In 1989, Jordan started franchising the PJ’s Coffee concept and opened the first stores outside of New Orleans in Hammond, Louisiana and Picayune, Mississippi. Eventually, PJ’s Coffee expanded to other states in the Southeastern United States and as far as California.

19.  Over the next few years, PJ’s Coffee continued to grow and in 2002, Jordan sold PJ’s Coffee to Raving Brands, an Atlanta-based firm. A few years after Jordan sold the company to Raving Brands, PJ’s Coffee was sold to Ballard Brands – a hospitality company formed by New Orleans natives and brothers Paul, Steven, and Scott Ballard. Today, there are PJ’s Coffee locations across 14 states.

Entrepreneur’s Franchise 500

20.  PJ’s Coffee ranked No. 437 on Entrepreneur’s 2021 Franchise 500 list.

Section II – Estimated Costs

• Please click here for detailed estimates of PJ’s Coffee of New Orleans 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 PJ’s Coffee of New Orleans’ 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:  68
• Outlets at the End of the Year:  81
• Net Change:  +13

2019

• Outlets at the Start of the Year:  81
• Outlets at the End of the Year:  89
• Net Change:  +8

2020

• Outlets at the Start of the Year:  89
• Outlets at the End of the Year:  104
• Net Change:  +15

Company-Owned

2018

• Outlets at the Start of the Year:  10
• Outlets at the End of the Year:  10
• Net Change:  0

2019

• Outlets at the Start of the Year:  10
• Outlets at the End of the Year:  10
• Net Change:  0

2020

• Outlets at the Start of the Year:  10
• Outlets at the End of the Year:  10
• Net Change:  0

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

Part 1 – Average Net Sales by Category

• The PJ’s Unit must have: (1) opened on or before January 1, 2020; and must have (2) reported net sales for the entire one-year period ending December 31, 2020. The Financial Performance Representation includes domestic locations only.

• New Orleans Brew, LLC does not have any company-owned Units as of January 1, 2021. An affiliate of New Orleans Brew, LLC owns 10 PJ’s Units as of January 1, 2021.

• As of January 1, 2021, PJ’s Coffee had a total of 110 PJ’s Units in the United States, 3 PJ’s Units in Vietnam, and 1 PJ’s Unit in Kuwait. Of the total 110 domestic PJ’s Units, 56 were open for a full 12 months or greater and reported net sales for the entire 12-month period.

• The remaining PJ’s Units consist of 54 PJ’s Units that were either not open for 12 months or did not report net sales for the entire 12-month period. Specifically, 5 PJ’s Units closed in 2020, and 49 PJ’s Units were not open for a full 12-month period in 2020.

• The franchisor compiled the annual net sales for 56 franchised PJ’s Units for the calendar year 2020.

• The 56 franchised PJ’s Units reflect three of the four types of franchised units (e.g., Traditional Models, Non-Traditional Models, Special Contracts Traditional Models, and Special Contracts Non-Traditional Models).

• The 56 PJ’s Units represented do not include a Special Contracts Traditional Model as there are none operating.

• The Traditional Models have been separated into two sub models, Traditional PJ’s Units featuring a drive-thru and Traditional PJ’s Units not featuring a drive-thru.

2020 Average Net Sales by Category – Traditional PJ’s Units With a Drive-Thru

Top 10%