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

• Section I – Background information on the Cousins Subs franchise opportunity, including relevant news updates

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

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

• 2020 average gross receipts for the 25 affiliate-owned Cousins Subs Shops that were open the entire 2020 fiscal year

• 2020 average gross receipts for the 62 franchised traditional Cousins Subs Shops that were open the entire 2020 fiscal year

• 2020 average gross receipts for the 6 franchised non-traditional Cousins Subs Shops that were open the entire 2020 fiscal year

• 2020 average total revenue, cost of goods sold, wages, occupancy costs, telephone and utilities, advertising, employee benefits, other operating expenses, franchise fees, and shop EBITDA for the 25 affiliate-owned traditional Cousins Subs Shops that were open the entire 2020 fiscal year

• growth in average unit volume for all Cousins Subs Shops between fiscal year 2011 and fiscal year 2020

• system-wide annual net sales in fiscal years 2011 and 2020 for the 52 traditional franchised Cousins Subs Shops, 6 non-traditional franchised Cousins Subs Shops, 27 traditional affiliate-owned Cousins Subs Shops, and 2 non-traditional affiliate-owned Cousins Subs Shops that were open during both the entire 2011 fiscal year and the entire 2020 fiscal year

• percentage growth in net sales in the 1st, 2nd, 3rd, and 4th quarters of 2020 as compared to the previous year for all Cousins Subs Shops that were open for both of the full comparison periods

Section I – Background Information

13 Things You Need to Know About the Cousins Subs Franchise

Announces Plans to Hire 500 Employees After Being Named Top Workplace

1.  At the end of May 2021, Cousins Subs announced that it had plans to hire 500 new employees in preparation for the busy summer season. The company and its franchise partners have opportunities throughout the state of Wisconsin in Milwaukee, Green Bay, Madison, Eau Claire, and Stevens Point, as well as throughout Chicago and northwest Indiana. Recently named a 2021 Top Workplace by the Milwaukee Journal Sentinel, Cousins Subs takes pride in its employees and strives to set them up for a successful future.

2.  Alan Lundeen, senior director of talent management for Cousins Subs, said, “At Cousins Subs, we’re proud to employ enthusiastic team members who share our passion to be better through the continual improvement in everything we do. We provide a positive work environment through our family-like culture and truly care about each and every one of our team members.”

3.  All Cousins Subs employees enjoy flexible schedules, food discounts, casual uniforms, growth opportunities, and no late nights. In addition to traditional employee compensation packages, each year Cousins Subs awards four $2,500 scholarships to store-level team members to help cover the costs of their post-secondary education through its Legacy Scholarship Contest. To date, the organization has awarded more than $42,500 in scholarships to 17 Cousins Subs crew members. The scholarships are funded by the Make It Better Foundation, the brand’s non-profit organization that addresses the vital community needs of health and wellness, hunger, and youth education.

Corporate Acquires Six Franchise Locations

4.  In early November 2021, Cousins Subs announced that six restaurants in Brookfield, New Berlin, Pewaukee, and Waukesha, Wisconsin are now company-owned locations. The restaurants were purchased from Cousins Subs franchise partners Jim and Leah Valentine, who were the first Cousins Subs franchisees and owned locations for more than 30 years. With the acquisition of these six stores, Cousins Subs welcomes 134 store level employees and two corporate additions to the company-owned system.

5.  Jason Westhoff, president of Cousins Subs, said, “This is our largest acquisition to date and we’re very excited. However, it’s also bittersweet. The Valentines were our first, and some of our best, franchisees and we are sad to lose them. We thank them for their many years with the brand and wish them the best.”

6.  As part of Cousins Subs’ systemwide rebranding initiative, the Brookfield restaurant was remodeled in October 2021 to incorporate the brand’s “Milwaukee Sub Shop” look – natural wood, stone and metal accents, décor that promotes Cousins Subs’ cuisine philosophy, rich history and commitment to the community through its Make It Better Foundation, the brand’s updated logo and digital menu boards.

Launches ‘Catering for a Cure’ Initiative

7.  At the beginning of September 2021, Cousins Subs launched Catering for a Cure, an initiative benefiting the Vince Lombardi Cancer Foundation’s (VLCF) Starr Children’s Fund, which raises funds for pediatric cancer care and research. Throughout the month of September, Cousins Subs and their Make It Better Foundation will donate $15 from every 20-piece Party Box sold, up to $50,000, to the Starr Children’s Fund.

8.  Justin McCoy, VLCF committee chair and vice president of marketing for Cousins Subs, said, “Cousins Subs is a long-time supporter of the Vince Lombardi Cancer Foundation with more than $250,000 in donations since 2015 to benefit cancer research and compassionate care in local communities across Wisconsin. We’re excited that this new initiative offers our guests an opportunity to show their support for such an important organization.”

9.  The Starr Children’s Fund focuses solely on raising funds to support pediatric cancer care and research, which are drastically underfunded compared to other types of cancer. Only 4% of the billions of dollars spent annually on cancer care and research benefit pediatric cancer. The Starr Children’s Fund will use the funds donated through Catering for a Cure to support their innovative research and implementation of immunotherapy treatment for better outcomes in childhood cancer.

Company History

10.  Cousins Subs was founded in 1972 by cousins Bill Specht and James Sheppard in Milwaukee, Wisconsin. Specht and Sheppard decided to open their own sub shop when they moved to Wisconsin because they couldn’t find a local place that had suitable sub options like those they were used to in New Jersey. Not long after opening the first shop, Specht and Sheppard partnered with a local baker to make their own bread.

11.  With the success of the first location, Specht and Sheppard opened a second shop in the Milwaukee area. More locations followed in the region and Specht and Sheppard began franchising in the mid-1980s. Cousins Subs’ growth has always been slow and steady and most of its locations are still in the Midwest region of the U.S.

12.  In 2015, Christine Specht-Palmert, daughter of co-founder Bill Specht, took over as CEO when her father retired. The following year, Cousins Subs rebranded and announced it was expanding its footprint in the Midwest. By 2019, there were more than 100 Cousins Subs locations across Wisconsin, Illinois, and Indiana. There are also a few locations in Arizona.

Entrepreneur’s Franchise 500

13.  Cousins Subs did not rank on Entrepreneur’s 2021 Franchise 500 list.

Section II – Estimated Costs

• Detailed estimates of Cousins Subs 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 Cousins Subs’ 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:  78
• Outlets at the End of the Year:  72
• Net Change:  -6

2019

• Outlets at the Start of the Year:  72
• Outlets at the End of the Year:  71
• Net Change:  -1

2020

• Outlets at the Start of the Year:  71
• Outlets at the End of the Year:  65
• Net Change:  -6

Company-Owned

2018

• Outlets at the Start of the Year:  18
• Outlets at the End of the Year:  20
• Net Change:  +2

2019

• Outlets at the Start of the Year:  20
• Outlets at the End of the Year:  27
• Net Change:  +7

2020

• Outlets at the Start of the Year:  27
• Outlets at the End of the Year:  31
• Net Change:  +4

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

• “Traditional Shops” mean all Cousins Subs other than those “Non-Traditional Shops.” “Non-Traditional Shops” mean those Cousins Subs which are (a) co-branded with a pizza establishment, (b) located within a convenience store, or (c) attached to a convenience store.

• There were two affiliate-owned Non-Traditional Shops operated in 2020, which are included in the total affiliated-owned Cousins Subs Shops.

• Each chart below includes all the affiliate-owned and franchised Shops that were open the entire 2020 fiscal year. These charts do not include Shops that were opened during the 2020 fiscal year or closed for an extended period during a remodel. These charts do not include special event locations, a food truck, or a delivery only location.

• The affiliate-owned chart includes Shops that were reacquired from a franchisee, or sold to a franchisee, during the fiscal year if the Shop was affiliate-owned for 6 months or longer during the fiscal year; if the Shop was not affiliate-owned for at least 6 months, it was included in the applicable Franchised Shops chart. During the 2020 fiscal year, Cousins acquired 4 Shops from franchisees, none of which are included in the affiliate-owned chart.

• The affiliate-owned Shops and the franchised Traditional Shops were ranked according to the annual amount of gross receipts and divided into 3 equal categories. The “High” category contains the top third, the “Middle” category contains the middle third, and the “Low” category contains the bottom third.

• “Gross receipts” means the aggregate amount of all sales of food products, beverages, and other merchandise and products of every kind or nature sold from, at, or in connection with your Shop or arising out of the operation or conduct of business by your Shop, including any revenues from all vending machine, video game machine, and jukebox sales, less any customer refunds up to the amount of the sales price and excluding all sales, use, or service taxes collected and paid to the appropriate taxing authority.

• “Gross receipts” shall include: (a) all amounts redeemed from gift certificates, gift cards, or similar mediums, (b) all insurance proceeds received by you for loss of business due to a casualty or similar event at your Shop, and (c) the fair market value of any services or products received by you in barter or exchange for your services or products.

Part 1 – 2020 Average Gross Receipts of Affiliate-Owned Shops

All Shops

High

• Number of Shops in Category:  9
• Average Gross Receipts:  $1,200,276
• Number and Percent of Shops Exceeding Average:  4 (44%)
• Median Gross Receipts:  $1,198,520
• Range – Low End:  $1,000,493
• Range – High End:  $1,380,727

Middle

• Number of Shops in Category:  8
• Average Gross Receipts:  $786,228
• Number and Percent of Shops Exceeding Average:  4 (50%)
• Median Gross Receipts:  $775,919
• Range – Low End:  $597,293
• Range – High End:  $967,444

Low

• Number of Shops in Category:  8
• Average Gross Receipts:  $457,647
• Number and Percent of Shops Exceeding Average:  5 (63%)
• Median Gross Receipts:  $476,802
• Range – Low End:  $353,317
• Range – High End:  $594,317

System-wide

• System-wide Average of Affiliate-Owned Shops:  $830,139
• Number of Shops Exceeding the System-wide Average:  13 (52%)
• System-wide Median of Affiliate-Owned Shops:  $840,647

Part 2 – 2020 Average Gross Receipts of Franchised Shops

Traditional Shops

• Number of Shops in Category:  21
• Average Gross Receipts:  $960,643
• Number and Percent of Shops Exceeding Average:  7 (33%)
• Median Gross Receipts:  $866,362
• Range – Low End:  $757,451
• Range – High End:  $1,899,793

Middle

• Number of Shops in Category:  21
• Average Gross Receipts:  $628,839
• Number and Percent of Shops Exceeding Average:  11 (52%)
• Median Gross Receipts:  $636,883
• Range – Low End:  $535,100
• Range – High End:  $744,226

Low

• Number of Shops in Category:  20
• Average Gross Receipts:  $341,191
• Number and Percent of Shops Exceeding Average:  9 (45%)
• Median Gross Receipts:  $333,885
• Range – Low End:  $172,731
• Range – High End:  $524,848

System-wide

• System-wide Average of Traditional Shops:  $648,435
• Number of Shops Exceeding the System-wide Average:  29 (47%)
• System-wide Median of Traditional Shops:  $637,342

Non-Traditional Shops

• Number of Shops in Category:  6
• Average Gross Receipts:  $422,869
• Number and Percent of Shops Exceeding Average:  2 (33%)
• Median Gross Receipts:  $339,239
• Range – Low End:  $251,810
• Range – High End:  $778,290

Part 3 – 2020 Average Annual Revenue, Expenses, and EBITDA of Affiliate-Owned Shops

• “EBITDA” means the earnings of the Shop before interest, taxes, depreciation, and amortization expenses.

• These Shops are owned and operated by Cousins Submarines, Inc. The financial information from each Shop has not been audited. No corporate overhead of Cousins Submarines, Inc. is allocated to the Shops for certain services, including accounting, legal, and human resources. None of these Shops pay a continuing service fee to Cousins.

• These charts include information on all the Shops that were open during the entire fiscal year. They do not include a company-owned food truck, a delivery only location, or 2 additional seasonal units which operated at multiple venues in Milwaukee, Wisconsin and at multiple venues in Madison, Wisconsin.

• The chart does not include the 4 Shops that were acquired from franchisees and 1 new Shop that was opened in 2020.

• “Wages” means the base salary and wages for management and hourly employees, including taxes.

• “Advertising” includes each Shop’s contribution to the Advertising and Development Fund and an advertising cooperative, as well as other promotional expenses.

• “Employee Benefits” include bonuses, vacation pay, and health and dental insurance.

• “Other Operating Expenses” include maintenance and cleaning services and supplies and POS software expenses.

• “Franchise Fees” include the Continuing Service Fees that would have been payable from these Shops if they were franchised Shops.

Revenue From $0 to $699,999 (11 Stores)

Revenue

• Product Sales:  $554,886 (110.11%)
• Less:  Discounts – Coupons:  ($16,373) (-3.25%)
• Less:  Employee Discounts:  ($34,562) (-6.86%)
• Total Revenue:  $503,951 (100%)

Cost of Goods Sold

• Food and Beverage Products:  $122,236 (24.26%)
• Paper Products:  $11,853 (2.35%)
• Total Cost of Goods Sold:  $134,089 (26.61%)

Operating Expenses

• Wages:  $168,401 (33.42%)
• Occupancy:  $47,515 (9.43%)
• Telephone and Utilities:  $15,176 (3.01%)
• Advertising:  $24,836 (4.93%)
• Employee Benefits:  $8,421 (1.67%)
• Other Operating Expenses:  $53,281 (10.57%)
• Franchise Fees:  $30,237 (6.00%)
• Total Operating Expenses:  $347,867 (69.03%)

Shop EBITDA:  $21,995 (4.36%)

Revenue From $700,000 to $999,999 (5 Stores)

Revenue

• Product Sales:  $958,595 (108.67%)
• Less:  Discounts – Coupons:  ($31,451) (-3.57%)
• Less:  Employee Discounts:  ($45,053) (-5.10%)
• Total Revenue:  $882,091 (100%)

Cost of Goods Sold

• Food and Beverage Products:  $210,374 (23.85%)
• Paper Products:  $18,442 (2.09%)
• Total Cost of Goods Sold:  $228,816 (25.94%)

Operating Expenses

• Wages:  $232,893 (26.40%)
• Occupancy:  $66,074 (7.49%)
• Telephone and Utilities:  $21,235 (2.41%)
• Advertising:  $40,393 (4.58%)
• Employee Benefits:  $16,036 (1.82%)
• Other Operating Expenses:  $66,759 (7.57%)
• Franchise Fees:  $52,925 (6.00%)
• Total Operating Expenses:  $496,315 (56.27%)

Shop EBITDA:  $156,960 (17.79%)

Revenue Greater Than $1,000,000 (9 Stores)

Revenue

• Product Sales:  $1,312,347 (109.36%)
• Less:  Discounts – Coupons:  ($40,759) (-3.40%)
• Less:  Employee Discounts:  ($71,611) (-5.96%)
• Total Revenue:  $1,199,977 (100%)

Cost of Goods Sold

• Food and Beverage Products:  $283,686 (23.64%)
• Paper Products:  $27,507 (2.29%)
• Total Cost of Goods Sold:  $311,193 (25.93%)

Operating Expenses

• Wages:  $314,476 (26.21%)
• Occupancy:  $94,955 (7.91%)
• Telephone and Utilities:  $25,868 (2.16%)
• Advertising:  $53,963 (4.50%)
• Employee Benefits:  $22,205 (1.85%)
• Other Operating Expenses:  $82,478 (6.87%)
• Franchise Fees:  $71,999 (6.00%)
• Total Operating Expenses:  $665,944 (55.50%)

Shop EBITDA:  $222,840 (18.57%)

Part 4 – Growth in Average Unit Volume Between Fiscal Year 2011 and Fiscal Year 2020

• The Average Unit Volume of all Shops increased by 62% in fiscal year 2020 from the Average Unit Volume of all Shops in fiscal year 2011.

• The “Average Unit Volume” is the average of the Average Weekly Volume for all 52 weeks of the applicable fiscal year multiplied by 52.

• The “Average Weekly Volume” is the average of the Net Sales for all Shops that were open for the applicable fiscal week. To calculate the Average Weekly Volume, the franchisor combined the Net Sales of all Shops (including all franchised and affiliated-owned traditional and non-traditional Shops) that were open during the applicable fiscal week, and divided the total Net Sales by the number of Shops that had been open during that fiscal week.

Part 5 – System-Wide Annual Net Sales for Shops in Fiscal Years 2011 and 2020

• System-Wide Annual Net Sales – Fiscal Year 2011:  $45,979,432

• System-Wide Annual Net Sales – Fiscal Year 2020:  $61,236,265

• 2020 vs. 2011:  +33.2%

• This includes the annual Net Sales of the 52 traditional franchised Shops, 6 non-traditional franchised Shops, 27 traditional affiliate-owned Shops, and 2 non-traditional affiliate-owned Shops that were open during both the entire 2011 fiscal and the entire 2020 fiscal year.

Part 6 – Quarterly Growth in Net Sales

Percentage Growth in Net Sales as Compared to Previous Year

• 1st Quarter 2020:  0.0% (91 Shops)
• 2nd Quarter 2020:  2.6% (87 Shops)
• 3rd Quarter 2020:  11.3% (89 Shops)
• 4th Quarter 2020:  8.4% (91 Shops)

• For each of the above referenced fiscal quarters, the percentage growth is the percentage increase in Net Sales as compared to the same fiscal quarter of the prior fiscal year.

• The Shops included in each comparison include all of the Shops which were open for both of the full comparison periods and exclude those Shops which were not open for both full comparison periods.

• They do not include a company-owned food truck, a delivery only location, or 2 additional seasonal units which operated at multiple venues in Milwaukee, Wisconsin and at multiple venues in Madison, Wisconsin.

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