FDD Talk: How Much Does a Charleys Cheesesteaks Franchise Make (Average Revenues and/or Profits)?

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

• Section I – Background information on the Charleys Cheesesteaks franchise opportunity, including relevant news updates

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

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

• 2020 average gross sales, median gross sales, and range of gross sales for the 470 franchised Charleys Cheesesteaks Restaurants that were open during the entire 2020 calendar year (including 377 franchised Charleys Cheesesteaks Restaurants that temporarily closed during 2020 due to COVID-19 restrictions), grouped according to venue type (military bases, airport, mall food court, strip center, and all)

Section I – Background Information

19 Things You Need to Know About the Charleys Cheesesteaks Franchise

Celebrates 35th Anniversary with Big Expansion Plans

1.  In mid-March 2021, Charleys Cheesesteaks celebrated its 35th anniversary. The next 35 years look to be quite exciting for the leading cheesesteak brand, adding close to 30 new locations in 2020, with plans to open over 100 locations in 2021. “We see a lot of opportunity to grow our brand. We will reach a thousand locations, and very soon,” says Brian Hipsher, chief marketing officer of Charleys Cheesesteaks.

2.  These rapid growth plans represent a refresh in the brand’s overall approach to the business. Historically, Charleys was ubiquitous in the mall food court. Now, Charleys is primarily expanding outside of mall food courts, driving higher sales performance with smart location decisions and a tuned-up concept which includes extended menu offerings, like chicken wings.

3.  Charleys has also fully embraced digital sales by launching online ordering and an app-based loyalty program. In just a few short months, the brand went from zero to over 250,000 loyalty members. In many stores, more than 25 percent of the business is now coming through digital channels.

4.  Hipsher added, “In the last 9 months, we’ve touched just about everything, including our core branding. In addition to launching online ordering and a mobile app, we’ve retooled our menu development process and new location opening playbook, added a reputation management platform, a social media content platform, gift cards, and a marketing analytics solution.”

5.  “The marketing, IT, development, and operations teams have been extremely busy creating the Charleys of the future – and the results of that hard work is already showing. Everything we do is focused on making our guests happy and ensuring the success of our franchisees. Now we have the data and systems to support our efforts to continually improve as we move into our next 35 years,” added Hipsher.

6.  March 17th officially marks this milestone for Charleys. To celebrate the brand’s 35th anniversary, everyone who visited Charleys and used their Charleys Rewards app received a surprise offer to use on their next purchase. Additionally, 35 lucky guests who ordered on the anniversary were selected to win free cheesesteaks for a year. The team at Charleys is looking forward to the next 35 years.

Begins Walmart Expansion

7.  In late November 2020, Charleys Cheesesteaks announced the opening of its newest location in partnership with Walmart. This location marks the first Charleys Cheesesteaks opening within Walmart, with growth plans for 10 more Walmart locations in 2021.

8.  Charleys’ updated store design for Walmart is centered around not only food, but fun family experiences, including arcade games and whimsical design elements. The Walmart menu includes grilled-to-order cheesesteaks, boneless and classic chicken wings, along with loaded gourmet fries and real fruit lemonades. Guests can also enjoy special value-priced food bundles available only at Walmart locations, along with ice cream sundaes and Icees.

9.  Brian Hipsher, chief marketing officer of Charleys Cheesesteaks, said, “We are excited about this opportunity to partner with Walmart, and also to bring smiles to our guests with an updated and whimsical environment. Guests can take a selfie with a giant grill spatula, which may be the world’s largest, or be mesmerized by our giant doodle wall. It’s all about having a little fun and taking a break from the hustle and bustle of a busy day.”

10.  Located in the Walmart at 3900 Morse Rd., Columbus, OH, the restaurant officially opened at 10:00 a.m. Limited seating is available within the restaurant’s dining space and the store offers online ordering, curbside pick-up, and third-party delivery, as well as the brand’s newly-launched mobile app and rewards program.

11.  This location launches the brand’s pilot program with Walmart. Future locations are opening within the retail supercenter chain in early 2021, with the potential for further expansion.

Rolls Out Old School Cheesesteak and Old School Fries

12.  In late September 2021, Charleys Cheesesteaks decided to go back to basics with its latest menu offerings. The brand introduced the Old School Cheesesteak and Old School Gourmet Fries, available for a limited time.

13.  The Old School Cheesesteak is prepared with an extra portion of freshly grilled and seasoned USDA choice steak and sautéed onions, which are loaded onto a freshly toasted roll. The cheesesteak is then topped off with the original and classic melted Cheez Whiz. Guests can also enjoy Old School Fries, which put Cheez Whiz, sautéed onions, and freshly grilled steak onto Charleys’ famous French Fries.

14.  Brian Hipsher, chief marketing officer for the brand, said, “Our guests were very clear that they were craving more steak and they wanted the timeless classic, Cheez Whiz, on their cheesesteaks. So why not give our fans exactly what they are asking for! The Old School Cheesesteak is one of the top-rated new items we have ever introduced.”

15.  Charleys teased the launch of the Old School with an original song contest on their social media channels, encouraging followers to share original entries that are inspired by classic beats. Members of their loyalty program and mobile app, Charleys Rewards, can look forward to promotions in the coming months geared towards the new menu items. The limited time cheesesteak and fries are planned to be offered into early 2022.

Company History

16.  Charleys Cheesesteaks was founded in 1986 by Charlie Shin in Columbus, Ohio. Shin, who was studying real estate at the Ohio State University at the time, had tasted his very first Philly cheesesteak the year before and fell in love with the sandwich. He had some experience in the restaurant industry as he worked at his mother’s restaurant. After spending a lot of time perfecting his cheesesteak sandwich, Shin convinced his mother to sell her restaurant and invest in the first Charleys location.

17.  Shin opened the restaurant across the street from Ohio State’s campus because he knew that his cheesesteak would be popular with the college crowd. The gamble paid off and Charleys was a hit. Building on the success of the first Charleys, Shin began working on a growth plan and franchising was launched in 1991.

18.  Shin made sure all locations featured a grill that faced the customers so they could see their food being cooked. This is one of Charleys’ signature features. Over the years, Charleys has gone through several name changes. Recently in 2021, the brand settled on Charleys Cheesesteaks. Today, there are Charleys Cheesesteaks locations in 45 states and more than 19 countries.

Entrepreneur’s Franchise 500

19.  Charleys Cheesesteaks ranked No. 294 on Entrepreneur’s 2021 Franchise 500 list.

Section II – Estimated Costs

• Detailed estimates of Charleys Cheesesteaks franchise costs, based on Item 7 of the company’s 2021 FDD.

Section III – Initial Franchise Fee, Royalty Fee, Marketing Fee, and Other Fees

• Detailed information on Charleys Cheesesteaks’ 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:  455
• Outlets at the End of the Year:  471
• Net Change:  +16

2019

• Outlets at the Start of the Year:  471
• Outlets at the End of the Year:  492
• Net Change:  +21

2020

• Outlets at the Start of the Year:  492
• Outlets at the End of the Year:  496
• Net Change:  +4

Company-Owned

2018

• Outlets at the Start of the Year:  55
• Outlets at the End of the Year:  57
• Net Change:  +2

2019

• Outlets at the Start of the Year:  57
• Outlets at the End of the Year:  57
• Net Change:  0

2020

• Outlets at the Start of the Year:  57
• Outlets at the End of the Year:  55
• Net Change:  -2

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

• The Statement of Average Gross Sales below presents information about the historic annual sales of 470 franchised Restaurants that were open during the entire 2020 calendar year. This table includes the performance of 377 franchised Restaurants that temporarily closed during 2020 due to COVID-19 restrictions. This table excludes the performance of 48 franchised Restaurants that either opened or permanently closed during 2020.

Military Bases

• Average Gross Sales:  $434,413
• Median Gross Sales:  $410,021
• Range of Gross Sales:  $83,962 to $1,228,556
• Number of Restaurants:  82
• Number and Percent of Restaurants That Met or Exceeded Average:  36 (43.90%)

Airport

• Average Gross Sales:  $783,060
• Median Gross Sales:  $634,641
• Range of Gross Sales:  $363,971 to $1,350,567
• Number of Restaurants:  3
• Number and Percent of Restaurants That Met or Exceeded Average:  1 (33.33%)

Mall Food Court

• Average Gross Sales:  $590,886
• Median Gross Sales:  $545,039
• Range of Gross Sales:  $96,003 to $1,697,273
• Number of Restaurants:  348
• Number and Percent of Restaurants That Met or Exceeded Average:  142 (40.80%)

Strip Center

• Average Gross Sales:  $769,663
• Median Gross Sales:  $653,044
• Range of Gross Sales:  $238,257 to $1,780,420
• Number of Restaurants:  37
• Number and Percent of Restaurants That Met or Exceeded Average:  14 (37.84%)

All Restaurants

• Average Gross Sales:  $578,887
• Median Gross Sales:  $532,350
• Range of Gross Sales:  $83,962 to $1,780,420
• Number of Restaurants:  470
• Number and Percent of Restaurants That Met or Exceeded Average:  189 (40.21%)

• The term “Gross Sales” means the aggregate amount of all sales of food, beverages, and other products sold and services rendered in connection with a Restaurant, including monies derived from sales at or away from the Restaurant, whether for cash or credit, but excluding: (1) all federal, state, or municipal sales or service taxes collected from customers and paid to the appropriate taxing authorities; and (2) all customer refunds and adjustments and promotional discounts made by the Restaurant.

• The Gross Sales of franchised Restaurants were derived from unaudited financial reports submitted by franchisees for the purpose of computing royalty fees.

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

• Charleys has not included the costs of sales, operating costs, or other costs and expenses for the Restaurants.

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