In this FDD Talk post, you’ll learn the following:

• Section I – Background information on the Cheba Hut franchise opportunity, including relevant news updates

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

• Section IV – Number of franchised and company-owned Cheba Hut 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 Cheba Hut’s 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 14 franchised Cheba Hut locations that operated as franchises during all of 2020

Section I – Background Information

21 Things You Need to Know About the Cheba Hut Franchise

Drives Loyalty with New App

1.  In mid-December 2020, Cheba Hut launched a new loyalty app. A week after its Flippy Bird content launched, downloads were up more than 50 percent, engagement on social media was up 15 percent, and a new leader had risen to the top on a quest to be one of the first 10 to finish the game.

2.  Scott Jennings, founder of Cheba Hut, said, “Since launching the app, we have had more than a 50 percent increase in downloads. With everyone stuck at home, the holiday season is lacking its usual sentiment, opening the door for us to bring some fun, friendly competition into the lives of our loyal customers.”

3.  The Cheba Hut app was built from scratch and includes two main features – 10 cents back to the customer for every dollar they spend and offering a one-of-a-kind in-app mobile game that provides bonus loyalty points that the customer can exchange for grub and gear.

4.  Jennings added, “It’s the only game where you can grab bags of parmesan and weed, fly a blunt through VW busses, and t-bag the enemies, all while listening to the Harlem Underground Band.” Those who played the loyalty app’s game, Flippy Bird, through the end of January 2021 had a chance to win free Cheba for a year.

Targets More Orlando Sites After Opening First Location

5.  At the end of March 2021, Cheba Hut announced that it was preparing to open its first area location near the University of Central Florida in east Orlando. Franchisee Tim Brashear opened a 2,200-square-foot, 60-seat Cheba Hut at 12100 E. Colonial Drive. The restaurant previously was slated to open as early as July 2020, but was delayed by the COVID-19 pandemic’s impact on Central Florida.

6.  The weed-themed eatery – none of its restaurants serve food with marijuana in it – features more than 30 signature subs, as well as snacks like Rice Krispy treats, salads, and beer with names based off of weed. Sandwiches on the menu include marijuana-themed names like Kush – a BLT – and Dank, which is a pizza sub.

7.  Quest Brashear, shift leader for the Orlando restaurant, told Orlando Business Journal that his father Tim – owner of Brashear Enterprises, LLC, which was founded in 2019 – plans to open two more locations after the first one debuts. Brashear said downtown and another site closer to UCF are being considered as potential options for expansion within two years.

8.  Tim Brashear previously worked with AT&T, including as a director of finance, prior to entering the restaurant business, according to his LinkedIn. Brashear added that he and his father were introduced to the chain on a trip to Colorado and thought it could be competitive in the Orlando market.

9.  Seth Larsen, chief relationship officer for Cheba Hut, told OBJ the chain also has a location in the pipeline for the Fort Lauderdale area, opening in late 2021 or early 2022. “The Florida weather and Cheba Hut’s laid-back vibes go hand-in-hand and the state has the capacity for double-digit growth over the next few years.”

10.  Each location will hire about 30 people and future locations could range from 2,200 to 2,500 square feet and can include a full bar. The stores each cost about $463,500 to $746,500 to start on average, according to the company’s franchising page.

Announces Winner of National Flippy Bird Contest

11.  In mid-May 2021, Cheba Hut announced that John Bozek had won the brand’s National Flippy Bird Contest. Bozek won $5,000 as well as a year of free Cheba Hut and a giant wrestling-style award belt for his victory. The celebration, which took place in Cheba Hut’s Chicago location on May 12, showed the brand’s love for The Windy City by offering each guest a free meal.

12.  The Flippy Bird Contest centered around a gaming app Cheba Hut invented to reward its most loyal customers. The one-of-a-kind mobile game provides bonus loyalty points that customers can exchange for grub and gear. But to win the grand prize, customers had to battle for the highest score of the game. The result? A total of 60,000 customers entered the contest from all over the country, playing at an average of four hours per week. The mobile game also increased social engagement for the brand by 15 percent, and the app’s download rate is up over 50 percent.

13.  Bozek was drawn to the game because of its unique offering, something he felt other brands had never done before. “The fact that they give you points for playing the game, which you can redeem for cash is wild. I don’t think anyone else does that,” he said. “That alone made me a lifetime customer, because the company as a whole seems like they care about giving customers a great experience.”

14.  Bozek says he has been playing the game everyday for a few hours since December. That dedication has paid off. “I’m hugely competitive, and when I saw the belt, I wanted it,” Bozek said. “I love the food, too, and everyone I’ve taken to Cheba Hut has as well. So playing the game and earning free food, it was a total win-win.”

15.  The brand is thrilled to have a local Chicago area native as its winner. The contest celebration took place at the Wicker Park location, which features a massive 700-square-foot patio – one of the largest in the area. As part of the celebration, the Chicago store offered free “nugs,” Cheba Hut’s 4” sub sandwich size, for all guests from 11:00 a.m. to 4:20 p.m. CST.

16.  Scott Jennings, founder of Cheba Hut, said, “We wanted to celebrate a local Chicago customer who absolutely crushed it playing our game by inviting fans to come out and enjoy some food on us. We love being a favorite in the Wicker Park neighborhood and I am so excited to see the shop, thank the local owners for making it a reality, and personally handing ‘narrows’ the 5gs and the title belt!”

17.  According to Jennnings, the brand is looking at real estate in Lincoln Park and has plans to open at least two more locations in Chicago. So far, Cheba Hut’s Chicago location has seen immense growth, with one of the brand’s strongest restaurant launches with $2M+ annual sales average and an average service rate of more than 2,000 customers per week.

Company History

18.  Cheba Hut was founded in 1998 by Scott Jennings in Tempe, Arizona. Jennings, who describes himself as a lifelong foodie, had worked in the restaurant industry while he attended college. He decided that he wanted to continue in the industry, but do things his own way.

19.  While working as a delivery driver, Jennings noticed a severely underserved market for late night deliveries. So, he came up with the idea for a cannabis-themed sandwich shop. Although Cheba Hut’s theme is fun and a little goofy, Jennings made sure that his subs were better quality than those served in the fast-casual market.

20.  After a few years, Jennings began franchising Cheba Hut in 2002. Most of the initial locations opened around Arizona. Around 2017, Cheba Hut began pushing a national expansion initiative, but the brand’s footprint remains fairly small, with locations primarily around the Southwestern United States.

Entrepreneur’s Franchise 500

21.  Cheba Hut did not rank on Entrepreneur’s 2021 Franchise 500 list.

Section II – Estimated Costs

• Please click here for detailed estimates of Cheba Hut 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 Cheba Hut’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:  12
• Outlets at the End of the Year:  13
• Net Change:  +1

2019

• Outlets at the Start of the Year:  13
• Outlets at the End of the Year:  14
• Net Change:  +1

2020

• Outlets at the Start of the Year:  14
• Outlets at the End of the Year:  36
• Net Change:  +22

Company-Owned

2018

• Outlets at the Start of the Year:  8
• Outlets at the End of the Year:  9
• Net Change:  +1

2019

• Outlets at the Start of the Year:  9
• Outlets at the End of the Year:  15
• Net Change:  +6

2020

• Outlets at the Start of the Year:  15
• Outlets at the End of the Year:  0
• Net Change:  -15

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

• As of December 31, 2020, there were no Affiliate Locations and 36 Franchised Locations.

• The financial information provided in this Item 19 represents the historical performance of the 14 Franchised Locations that operated as franchises during all of 2020 (“2020 Reporting Group”), and reports on results attained January 1, 2020 to December 31, 2020 (“2020 Reporting Period”).

• The following locations were excluded from the 2020 Reporting Group: 16 Franchised Locations that were sold by Cheba Hut’s affiliate to a franchisee in 2020 and six Franchised Locations that opened in 2020.

Franchised Locations in the 2020 Reporting Group

• The following table provides Net Sales information for the Franchised Locations in the 2020 Reporting Group during the 2020 Reporting Period.

• Average Net Sales:  $1,460,460.35
• Number and Percent That Attained or Exceeded Average:  8 (57%)
• Median Net Sales:  $1,509,225.50
• Highest Net Sales:  $1,949,826.07
• Lowest Net Sales:  $743,392.44

• As used in this Item 19, “Net Sales” means gross sales less complimentary meals, discounts, and sales tax.

• The numbers in this Item 19 were gathered from the POS system and internal accounting records and are compiled on a cash basis.

• The financial performance representations in this Item 19 do not reflect the costs of sales, operating expenses, or other costs or expenses that must be deducted from the Net Sales figures to obtain your net income or profit.

• Some Cheba Hut Businesses have sold this amount. Your individual results may differ. There is no assurance that you’ll sell as much.

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