FDD Talk 2021: Pokéworks 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 Pokéworks franchise opportunity, including relevant news updates

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

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

• 2020 monthly and nine-month average, median, highest, and lowest gross sales; average food cost + supplies & materials; and labor cost for the 1 company-owned Pokéworks restaurant that was open and operating generally according to standard procedures for nine full months of 2020

• 2020 monthly and annual average, median, highest, and lowest gross sales; average food cost + supplies & materials; and labor cost for the 10 franchised Pokéworks restaurants that were open and operating generally according to standard procedures in January through December 2020

Section I – Background Information

23 Things You Need to Know About the Pokéworks Franchise

Unveils Prototype for Innovative Cruise-Thru Lane

1.  At the beginning of January 2021, Pokéworks unveiled a prototype for its first-ever Cruise-Thru Lane – a mobile order pick-up lane developed with “on-the-go” guests in mind. Customers will be able to order ahead online and pickup without having to leave their vehicles. The first Cruise-Thru Lane was set to debut in Knoxville, Tennessee in the spring of 2021.

2.  Pokéworks’ Cruise-Thru Lane is not the traditional drive-thru model, but rather allows guests to place a mobile order on the Pokéworks Rewards App prior to arriving at the restaurant. The rewards app is available on the app store for both Android and iPhone users. After placing a mobile order, guests can make their way to the restaurant – upon arrival, they will be able to skip the in-store line and cruise right up to the window to pick up their order quickly and efficiently – without ever stepping foot out of their vehicle.

3.  The brand has plans to integrate Cruise-Thru Lanes into its future restaurant build-outs – primarily in suburban areas, where the concept is most poised for success – in order to better serve the modern, convenience-driven consumer. The new design rollout rides on the heels of rapid expansion and optimization of Pokéworks’ digital and in-store experience to better serve the ever-changing consumer lifestyle, while maintaining profitability for its franchise partners through this added revenue stream.

4.  Peter Yang, chief development officer and co-founder of Pokéworks, said, “This year we’ve seen that safety, comfort and convenience have become the top priority for today’s consumers. The Cruise-Thru Lane is just one way we’ve leaned into our commitment to innovation and adapting to better serve the needs of our guests, while maintaining delicious, high quality cuisine. It’s our responsibility to listen to our guests and their needs while providing a solution without losing sight of the essence of our brand, which is the epitome of what the Cruise-Thru Lane is for Pokéworks. We look forward to testing the prototype and continuing to grow as we continue to serve communities nationwide.”

5.  Pokéworks has been taking enhanced precautions to ensure the safety of its guests and team members based on recommendations from the National Restaurant Association (NRA), and the CDC, and will continue to do so throughout the integration of the Cruise-Thru Lane.

Makes Several Changes to C-Suite to Enhance Brand Vision in Post-Pandemic Era

6.  In late March 2021, Pokéworks announced its high-level executive additions by welcoming Michael Walters as the new chief operating officer, Steve Heeley as the new chief marketing officer, and Larry Sidoti as the new chief development officer as the brand plans to expand its footprint in the post-pandemic, quick-service restaurant landscape.

7.  Serving as the brand’s interim COO since September of 2020, Michael Walters has brought unmatched value and experience to the Pokéworks team. He strengthened the structure of the organization by implementing procedures that ensure guests always receive an exceptional experience at Pokéworks restaurants. Walters also invested in the brand by bringing in new talent that will help streamline the franchise network to help them become even better operators.

8.  Especially crucial amid the global pandemic, Walters helped strengthen communications between Pokéworks’ corporate departments and franchisees to create a more integrated and cohesive brand. Now, as the permanent COO, Walters will continue to use the momentum he established and guide Pokéworks to new and exciting heights in the fast-casual franchise industry.

9.  Steve Heeley joins the Pokéworks team with an extensive background in brand management, menu creation, and health-centered restaurant development. Prior to joining the Pokéworks team as CMO, Heeley held the role of CEO at Veggie Grill, where he spearheaded the growth of the plant-based, fast-casual concept through rebranding, new menu development, and digital transformation.

10.  His roster of past executive roles held in the industry include Earl of Sandwich, Au Bon Pain, The Coffee Bean & Tea Leaf, and Baja Fresh. As the CMO of Pokéworks, Heeley will oversee the marketing department while spearheading efforts surrounding revenue strategy, including brand and digital strategy, product development, and customer relationship management.

11.  Larry Sidoti is welcomed by the poke concept as the new chief development officer, where he will oversee the development team and lead the brand’s real estate and site selection strategy, construction management, and franchise recruitment. Before taking on this role with Pokéworks, Sidoti was the CDO for Garbanzo Mediterranean Fresh, where he helped bring nearly 50 new locations to the franchise system. Larry also held executive positions at Paris Baguette, Ruby’s Diner, Yogurtland, Mrs. Fields, and Juice it Up.

12.  According to Michael Chen, president and co-founder of Pokéworks, “Pokéworks began with nine founders who shared a vision to create a concept that delivers fresh, healthy and delicious poke to all, and have grown from one location in Manhattan to over sixty locations worldwide in just five years. We strive to continue to innovate, grow and improve our operations, and that is why we are thrilled to welcome Michael, Steve and Larry to our team to help carry our vision while also giving us a new point of view.”

Appoints Restaurant Industry Veteran as CEO

13.  In mid-August 2021, Pokéworks announced the promotion of Steve Heeley from chief marketing officer to chief executive officer, effective immediately. Heeley’s appointment comes at a pivotal time for the brand as it rolls out new restaurant design and development projects, menu innovations, and major additions to the C-Suite, fueling rapid franchise development as the brand is on track to add 10 locations by the end of 2021.

14.  Heeley joined the Pokéworks team as CMO in March 2021 with an extensive background in brand management, menu creation, and health-centered restaurant development. Prior to joining the Pokéworks team, Heeley held the role of CEO at Veggie Grill, where he spearheaded the growth of the plant-based, fast-casual concept through rebranding, new menu development, and digital transformation. His roster of past executive roles held in the industry include Earl of Sandwich, Au Bon Pain, The Coffee Bean & Tea Leaf, and Baja Fresh.

15.  In his role as CMO of Pokéworks, Heeley has overseen the marketing department while spearheading efforts surrounding revenue strategy, including brand and digital strategy, product development, and customer relationship management. As he steps into the CEO position, Heeley will be working passionately to build the brand, team, and systems to support the success of all franchise operators.

16.  Heeley said, “It has been exciting and humbling to be part of the tremendous growth of this brand. Pokéworks’ founders, management team, and franchise partners have done an incredible job of growing Pokéworks into a hugely successful national brand in a short period of time. I am excited to build on this foundation and help guide Pokéworks into the future with our shared vision to become the most trusted, leading, premium fast casual poke brand in the world. Poke is no longer a trend; it has matured into a broadly accepted growth category in fast casual.”

17.  The brand’s performance in the past few years has earned multiple awards wins, including being ranked as one of NRN’s Top Five Concepts in 2018, inclusion in Fast Casual’s Top 100 Movers and Shakers three years in a row, including being ranked in the top five brands for 2019 and 2020, and inclusion in Entrepreneur’s Franchise 500 ranking in 2021. Pokéworks has set aggressive expansion goals to double new store commitments in 2021 and 2022 as it seeks multi-unit operators throughout the United States and internationally.

18.  Mike Chen, president and co-founder of Pokéworks, added, “Pokéworks is an evolving restaurant, rising to meet the needs of consumer demand for high quality, premium fast casual options that are differentiated. Under Steve’s leadership, Pokéworks has and will continue to grow into a consumer-focused brand. With Steve’s past CEO experience and his commitment to setting Pokéworks up as the most trusted, premium poke brand, we have no doubt he will lead us to a future success as we continue to innovate, adapt and grow with world-class franchise partners.”

19.  As part of the executive moves, Mike Wu, past CEO and co-founder of Pokéworks, will be stepping into the role of head of culinary. In this role, he will focus efforts on menu ideation and cultivation, which have been his passion since beginning his time with Pokéworks in 2015. Wu said, “This announcement is a strategic part of our company’s evolution. There are exciting times ahead, and I know Steve is looking forward to working with everyone at Pokéworks to help write the next pivotal chapters in our story.”

Company History

20.  Pokéworks was founded in 2015 by Kevin Hsu, his brother Kasper, and his college friends Peter Yang and Michael Wu in Midtown Manhattan in New York City. The Hsus, Yang, and Wu were inspired by the Hawaiian concept of poke bowls, raw marinated fish atop a bed of rice with various toppings, and wanted to bring that experience back to New York.

21.  From the beginning, people in New York City were into the Pokéworks concept and people often waited in line for at least 45 minutes. Then, Pokéworks released the very first “Sushi Burrito,” essentially a giant sushi roll, and the brand went viral. Fueled by the heightened interest in the concept, Pokéworks began franchising in 2016.

22.  Over the next few years, Pokéworks opened more locations. Then, in 2018, Pokéworks partnered with Toridoll Holdings Corporation and received an investment to help fuel the brand’s growth. Today, there are Pokéworks locations around California, Connecticut, Florida, Georgia, Idaho, Illinois, Louisiana, Massachusetts, Michigan, North Carolina, Nebraska, New York, Rhode Island, Tennessee, Texas, Virginia, Vermont, Washington, and Wisconsin. There are also a few international locations in Mexico.

Entrepreneur’s Franchise 500

23.  Pokéworks ranked No. 272 on Entrepreneur’s 2021 Franchise 500 list.

Section II – Estimated Costs

• Please click here for detailed estimates of Pokéworks 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 Pokéworks’ 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:  4
• Outlets at the End of the Year:  21
• Net Change:  +17

2019

• Outlets at the Start of the Year:  21
• Outlets at the End of the Year:  40
• Net Change:  +19

2020

• Outlets at the Start of the Year:  40
• Outlets at the End of the Year:  49
• Net Change:  +9

Company-Owned

2018

• Outlets at the Start of the Year:  11
• Outlets at the End of the Year:  11
• Net Change:  0

2019

• Outlets at the Start of the Year:  11
• Outlets at the End of the Year:  8
• Net Change:  -3

2020

• Outlets at the Start of the Year:  8
• Outlets at the End of the Year:  8
• Net Change:  0

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

• In 2020, most Pokéworks Restaurants operated according to standard procedures in all locations in January and February, which include on-premises dining, take-out counter service, and delivery service. In mid-March 2020, all but one Company restaurants (owned and operated by BRG and Pokéworks’ Affiliates) and most franchised restaurants closed in response to the COVID-19 pandemic and were subject to local restrictions that prevented operation according to Pokéworks’ standard pre-pandemic procedures.

• As of December 31, 2020, there were a total of 49 franchised Pokéworks Restaurants. Of these, ten Franchised Restaurants were open and operating from January 2020 to December 2020, while all other Franchised Restaurants were subject to the closures described above.

• The tables below show the performance of the open Company-owned and Franchised Restaurants for comparable periods in 2020. The tables are organized to show the time periods and number of Pokéworks Restaurants that were open and operating.

• Some open Pokéworks Restaurants offered limited seating in compliance with social distancing requirements. Other Pokéworks Restaurants were closed or had their operations severely restricted by local requirements, mostly to take-out and delivery services.

• The performance information does not present franchise fees, selling, general and administrative expenses, occupancy costs such as utilities and rent, taxes, insurance, and other expenses. Net profit is not presented.

Part 1 – Financial Performance of Certain Company-Owned Location

• Part 1 includes the data for the Company-owned Pokéworks Restaurant open and operating generally according to standard procedures for nine full months of 2020.

Nine Full Months