FDD Talk 2021: Hungry Howie’s 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 Hungry Howie’s franchise opportunity, including relevant news updates

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

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

• 2020 average, median, high, and low gross sales for the 276 franchised units, 32 affiliated units (broadcast), 141 franchised units (broadcast), 135 franchised units (non-broadcast), and all 308 Hungry Howie’s units that had been open for the entire 2020 fiscal year (separately stated)

• 2019 and 2020 number of franchised and affiliated Hungry Howie’s units with gross sales over $1,000,000

• 2020 average gross sales, food cost, paper cost, and labor cost for the 259 franchised units, 32 affiliated units, and all 291 Hungry Howie’s units that were open and reporting sales to Hungry Howie’s for the entire 2020 fiscal year (separately stated)

Section I – Background Information

17 Things You Need to Know About the Hungry Howie’s Franchise

Spreads Love, Hope & Pizza Through Breast Cancer Awareness Campaign for Eleventh Year

1.  In late September 2020, Hungry Howie’s announced that it would continue its commitment to raising awareness and funds for the National Breast Cancer Foundation Inc. (NBCF) in October through its annual “Love, Hope & Pizza” campaign. Over the past decade, Hungry Howie’s has partnered with NBCF in support of survivors and those currently battling breast cancer by donating a portion of sales from its famous Flavored Crust pizza. Hungry Howie’s Pizza has donated more than $3 million to NBCF to date.

2.  The COVID-19 pandemic has brought additional challenges and hardship to those affected by the disease, and Hungry Howie’s will contribute to NBCF’s COVID-19 Relief Fund to help provide breast cancer patients with the services and care they need. Additionally, Hungry Howie’s is offering guests a medium 1-topping pizza for $1 with their online purchase of a large 1-topping pizza at regular menu price.

3.  From September 28 to October 29, Hungry Howie’s served its flavorful pizzas in pink boxes adorned with the NBCF logo. For every pizza purchased in a pink pizza box during Love, Hope & Pizza, Hungry Howie’s made a donation to NBCF’s COVID-19 Relief Fund. Additionally, for the remainder of 2020, customers were invited to help the cause when they ordered online or via Hungry Howie’s mobile app, with the option to round-up their total to the nearest dollar at check-out.

4.  NBCF created the COVID-19 Relief Fund to support breast cancer patients and nurse navigators in hospitals across the United States. NBCF navigators are on the frontlines of helping breast cancer patients recently diagnosed or currently undergoing treatment receive the essential services they need. Funds raised will go directly towards life-saving patient navigation services and support to NBCF’s network of hospital partners treating breast cancer patients during this pandemic.

5.  Steve Jackson, CEO of Hungry Howie’s, said, “Hungry Howie’s has been a proud partner of NBCF for more than a decade and we’re honored to continue our involvement to provide support to breast cancer patients and frontline responders during these critical times. For our 11th year of ‘Love, Hope & Pizza’, we’ve dedicated our fundraising efforts to help one of the most vulnerable groups of people impacted by COVID-19 receive access to the education, services, and care they need. With the round-up option, donating the spare change can help make a difference in the lives of those facing breast cancer across the country.”

CEO Steve Jackson Discusses How the Brand Has Fared During the COVID-19 Pandemic

6.  In early September 2020, Hungry Howie’s CEO Steve Jackson was featured in one of franchising.com’s “Stories from the Front Lines” articles. When asked how COVID-19 has affected Hungry Howie’s, Jackson said, “We’re very lucky to have stores opened and been an essential business operating during these unprecedented times. Like every business, Hungry Howie’s Pizza has had to shift and make operational changes to adapt to the pandemic. Our top priority is the safety of our customers and employees, so our first task was implementing mandatory health and safety precautions in compliance with the CDC and local/state health departments in all store locations across the country. Once established, we started discussing operational changes and ramped up projects in the works, including curbside pickup and quality stickers to seal the pizza box.”

7.  He continued, “At the start of the pandemic, we did see a drop in sales, but a few weeks later it turned, and we went into a positive sale segment. Pizza is an affordable meal that can feed multiple people. With the turn of sales, we started to see an increase in customer orders, and today one of our biggest challenges is hiring the staff to fulfill these orders. Our store employees are typically around the ages of 18 to 25, and with the shelter in place order, concerned parents have kept their families at home. We are respecting these wishes and currently hiring store employees for several positions, including cashiers and delivery drivers.”

8.  When he was asked how Hungry Howie’s has been helping franchisees, Jackson said, “We’ve always communicated directly with our franchisees on a regular basis, and the pandemic is no different. To guide them, we provided a COVID compliance handbook, offered a royalty deferment program, and assisted them in the PPP loan process. We’ve also asked our franchisees to operate as they can and focus on their customers during this time, as community engagement is more important than ever. The local customer base supports the business, so it’s prudent to be engaged in the local community. While franchisees are focused on providing the best product and service for the customers, our corporate team handles marketing prospects for store markets and franchisees.”

9.  Jackson said that corporate closed its offices when shelter-in-place orders were first announced and that teams have been able to work from home. He continued, “To stay connected, we have a leadership meeting every Tuesday morning using Microsoft Teams to discuss social distancing rules, review store sales, and share company updates.”

10.  Hungry Howie’s has issued a COVID compliance handbook that details the mandatory health practices employees are required to follow. If an employee feels unwell or has any other obligations, Hungry Howie’s has allowed them to take the time off that they may need.

11.  Franchising.com asked what franchisees were doing for customers, and Jackson said, “Community involvement is near and dear to our hearts, and our franchisees do a wonderful job in representing that value. Across the country, our stores are doing what they can to give back and help others during this difficult time. For example, in Michigan our stores have connected with hospitals to coordinate donation pizza drop-offs; partnered with local schools to feed families; and worked with the American Red Cross Disaster Action Team to offer free pizza to front-line responders.”

12.  Looking toward the future, Jackson said, “No one knows what the future holds, but we’re constantly keeping an eye and ear on the news. As we continue to adapt our marketing messaging and operational procedures for the safety of our employees and customers, we’re tweaking our business model to continue the success and growth of the brand. Pizza has proven to be a successful and resilient industry. In the end, we’ll take the lessons we’ve learned to come out stronger as a community.”

Company History

13.  Hungry Howie’s was founded in 1973 by James Hearn in Taylor, Michigan. Hearn converted a 1,000 square foot hamburger shop into a successful carry-out and delivery pizzeria. After Hearn opened his first pizzeria, he hired a delivery driver named Steve Jackson, who would later become CEO of Hungry Howie’s.

14.  The restaurant was a hit with local teens and Hearn developed a better relationship with Jackson as the years progressed and eventually, Hearn brought Jackson in as a partner in the company. In 1982, Hearn and Jackson decided to franchise Hungry Howie’s and the first franchised location was awarded the following year.

15.  Within three years, Hungry Howie’s opened 65 franchised stores. Also around that time, Hungry Howie’s developed its signature flavored crusts. The concept of flavored crust was brought to the attention of Hearn and Jackson by a franchisee who put sesame seeds and butter on their crusts. After some research and development, Hungry Howie’s rolled out eight crust flavors in 1985.

16.  Over the next few decades, Hungry Howie’s continued to grow around the United States and by 2005, the company opened its 500th store. Today, there are Hungry Howie’s locations in more than 22 states.

Entrepreneur’s Franchise 500

17.  Hungry Howie’s ranked No. 415 on Entrepreneur’s 2021 Franchise 500 list.

Section II – Estimated Costs

• Please click here for detailed estimates of Hungry Howie’s 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 Hungry Howie’s 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:  522
• Outlets at the End of the Year:  518
• Net Change:  -4

2019

• Outlets at the Start of the Year:  518
• Outlets at the End of the Year:  504
• Net Change:  -14

2020

• Outlets at the Start of the Year:  504
• Outlets at the End of the Year:  499
• Net Change:  -5

Company-Owned

2018

• Outlets at the Start of the Year:  32
• Outlets at the End of the Year:  32
• Net Change:  0

2019

• Outlets at the Start of the Year:  32
• Outlets at the End of the Year:  33
• Net Change:  1

2020

• Outlets at the Start of the Year:  33
• Outlets at the End of the Year:  32
• Net Change:  -1

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

• The financial performance representations below are based on the historical performance of a subset of existing Hungry Howie’s Units.

• Units located in the State of Florida are excluded from the information and calculations provided in this Item 19 because such units are owned by franchisees of H.H. Pizza, Inc., which operates under a license agreement with Hungry Howie’s. Subject to its license agreement, H.H. Pizza, Inc. may deviate from the Hungry Howie’s system in certain respects, including its selection of menu items, standards and specifications, and marketing strategies.

Part 1 – Average and Median Gross Sales of Certain Hungry Howie’s Units for the 52-Weeks Ended December 27, 2020

• The information shown in Part 1 was derived from Gross Sales for Hungry Howie’s 2020 fiscal year (December 30, 2019 through December 27, 2020).

• The total number of Hungry Howie’s Units as of December 27, 2020 was 531, which includes Franchised Units, Affiliated Units, “legacy units” (which are excluded from this information), and the 203 Florida units (which are excluded from this information as described under “Florida Units” above).

• The information was obtained from POS systems at each individual Unit.

• Gross Sales were only used if the Hungry Howie’s Unit had been open for the entire 2020 fiscal year. However, in Part 1, units that were closed for more than 10 days due to a force majeure event (e.g. COVID-19) were excluded.

All Units