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

• Section I – Estimated initial investment (franchise costs) for a Freddy’s Frozen Custard & Steakburgers franchise, based on Item 7 of the company’s 2022 FDD

• Section II – Initial franchise fee, royalty fee, and marketing fee for a Freddy’s Frozen Custard & Steakburgers franchise, based on Items 5 and 6 of the company’s 2022 FDD

• Section III – Number of franchised and company-owned Freddy’s Frozen Custard & Steakburgers outlets at the start of the year and the end of the year for 2019, 2020, and 2021, based on Item 20 of the company’s 2022 FDD

• Section IV – Background information on the Freddy’s Frozen Custard & Steakburgers franchise opportunity, including relevant news updates

• Section V – Presentation and analysis of Freddy’s Frozen Custard & Steakburgers’ financial performance representations (average revenues and/or profits), based on Item 19 of the company’s 2022 FDD, including information on the:

• 2021 average, median, and range of (average) weekly gross receipts and annual gross receipts for the 22 stand alone with drive-thru, 2 end cap with drive-thru, 3 in-line with no drive-thru, and all 27 company-owned Freddy’s Frozen Custard & Steakburgers restaurants that were open for the entire fiscal year that ended December 29, 2021

• 2021 average, median, and range of (average) weekly gross receipts and annual gross receipts for the 323 stand alone with drive-thru, 29 end cap with drive-thru, 4 in-line with no drive-thru, and all 356 franchised Freddy’s Frozen Custard & Steakburgers restaurants that were open for the entire fiscal year that ended December 29, 2021

• 2021 average cost of sales, labor costs, and controllable expenses (as percentages of total gross receipts) for the 27 company-owned Freddy’s Frozen Custard & Steakburgers restaurants that were open for the entire fiscal year that ended December 29, 2021

• Section VI – Key ratios, comparables, computations, and analyses for the Freddy’s Frozen Custard & Steakburgers franchise opportunity (exclusive content for Platinum subscribers)

Section I – Freddy’s Frozen Custard & Steakburgers Franchise Costs

• Freddy’s Frozen Custard & Steakburgers (standalone with drive-thru) franchise costs, based on Item 7 of the company’s 2022 FDD:

• License Fee:  $30,000
• Training Expenses (Travel, Meals, Lodging, and Employee Wages):  $20,000 to $50,000
• Construction, Remodeling, and Leasehold Improvements:  $650,660 to $1,478,899
• Real Property Rent (one month):  $5,667 to $15,750
• Security Deposit:  $5,667 to $15,750
• Computer, Point-of-Sale Equipment, Outdoor Ordering System and Software, Security Cameras, Drive-Thru Headsets:  $53,764 to $70,200
• Equipment, Furniture, Fixtures, and Decor:  $312,480 to $452,900
• Building Signage, Interior Neon, LED Border:  $22,090 to $100,830
• Miscellaneous Opening Costs:  $8,000 to $15,000
• Opening Inventory and Supplies:  $10,000 to $25,000
• Insurance:  $2,000 to $8,000
• Grand Opening Advertising:  $2,500 to $5,000
• Additional Funds – 3 Months:  $20,000 to $60,000
• Total Estimated Freddy’s Frozen Custard & Steakburgers Franchise Costs:  $1,142,828 to $2,327,329

Section II – Freddy’s Frozen Custard & Steakburgers’ Initial Franchise Fee, Royalty Fee, and Marketing Fee

• Freddy’s Frozen Custard & Steakburgers’ initial franchise fee, royalty fee, and marketing fee, based on Items 5 and 6 of the company’s 2022 FDD:

• License Fee:  $30,000
• Royalty:  4.5% of Gross Receipts
• Marketing and Advertising Fund:  1.5% of Gross Receipts

Section III – Number of Franchised and Company-Owned Freddy’s Frozen Custard & Steakburgers Outlets

Franchised

2019

• Outlets at the Start of the Year:  306
• Outlets at the End of the Year:  335
• Net Change:  +29

2020

• Outlets at the Start of the Year:  335
• Outlets at the End of the Year:  357
• Net Change:  +22

2021

• Outlets at the Start of the Year:  357
• Outlets at the End of the Year:  391
• Net Change:  +34

Company-Owned

2019

• Outlets at the Start of the Year:  25
• Outlets at the End of the Year:  29
• Net Change:  +4

2020

• Outlets at the Start of the Year:  29
• Outlets at the End of the Year:  32
• Net Change:  +3

2021

• Outlets at the Start of the Year:  32
• Outlets at the End of the Year:  29
• Net Change:  -3

Section IV – Background Information on the Freddy’s Frozen Custard & Steakburgers Franchise

19 Things You Need to Know About the Freddy’s Frozen Custard & Steakburgers Franchise

Announces New Chief Development Officer and Expansion of Franchise Development Executive Team

1.  In late July 2021, Freddy’s Frozen Custard & Steakburgers announced the addition of multiple new members joining the development team, which will be led by Andrew Thengvall, who was recently appointed to chief development officer. For the last six years, Thengvall has served as senior vice president of strategic growth & chief legal officer. In his new role, he will oversee the company’s most recent additions including Mary Coots, director of franchise development, and Todd Phelps, director of franchise real estate.

2.  CEO Chris Dull said, “Andrew Thengvall’s dedication to advising and strengthening the Freddy’s brand has been stellar and we have the utmost trust in his ability to continue to accelerate our franchise growth in this expanded position. We are thrilled that he has taken on this new role and excited to see him lead this skilled and enthusiastic team of experts to capitalize on our opportunities for expansion, as one of the fastest-growing franchises in the country.”

3.  Upon joining Freddy’s in 2015, Thengvall brought more than 10 years of legal experience, followed by the more than six years of experience he has gained at the company in the area of strategic franchise growth. Mary Coots, who joined the Freddy’s team in May of 2021, most recently served as senior franchise sales manager at Global Franchise Group. Todd Phelps joined the Freddy’s team in June 2021 and his past experience includes real estate director at The Wendy’s Company as well as real estate manager positions at RetailCorridor online, Great Clips, and GolfTEC.

4.  Thengvall added, “I’m very excited to welcome Mary and Todd to our team and look forward to the new ideas and expertise they will bring to the brand’s franchise development strategy. In the midst of such an exciting period of growth for Freddy’s, their combined wealth of franchise sales and real estate experience will be a valuable asset as we define our growth plans and decisions. I look forward to leading this team as we accelerate Freddy’s momentum and drive the concept’s footprint throughout markets nationwide.”

5.  These investments in the company’s development leadership team are fueled by Freddy’s continued surge in franchise growth and ongoing success systemwide. Thengvall’s team will be responsible for establishing market prioritization, franchise sales, DMA management, identifying prospective new franchisees, and coaching prospects through the discovery process. Together, the group brings over three decades of franchise experience combined, in addition to Thengvall’s 10+ years of legal experience.

Announces New CMO and VP of Brand Marketing Amid Ongoing Success

6.  At the end of September 2021, Freddy’s Frozen Custard & Steakburgers announced that it has named Laura Rueckel as chief marketing officer and Erin Walter as vice president of brand marketing. Additionally, Freddy’s has also promoted Jill Tinsley, who joined Freddy’s in 2019 as public relations manager, to director of communications. Under the leadership of CEO Chris Dull, the brand’s growing corporate team will continue to focus on accelerating Freddy’s growth.

7.  Dull said, “I’m thrilled to welcome Laura and Erin to our team at Freddy’s, each of whom brings an unparalleled level of expertise that will elevate the strategic approach behind our marketing efforts. As we celebrate our latest executive appointments, we’re also delighted to recognize the well-deserved promotion of Jill Tinsley, who has been a tremendous asset for the brand over the last several years. Our franchisees are the foundation of Freddy’s, which is why we’ve continued to prioritize investing in our leadership team and marketing expertise to ensure they have access to best-in-class support.”

8.  Laura Rueckel, a seasoned marketing executive with two decades of experience in brand and franchise marketing, has been named Freddy’s new chief marketing officer. Prior to joining Freddy’s, she held the role of vice president of marketing for Edible Brands, where she led marketing for the company’s 1,000 stores across the United States and Canada, specifically overseeing national brand marketing, creative content and media, field marketing, merchandising, and public relations. Prior to Edible, Rueckel’s career has been spent in marketing leadership with nationally recognized companies such as The Coca-Cola Company, Subway, Schlotzsky’s, and The HoneyBaked Ham Company.

9.  Serving as Freddy’s new vice president of brand marketing, Erin Walter brings more than 15 years of experience in the quick-service restaurant franchising industry. Walter comes from Global Franchise Group and most recently held the position of director of marketing for Round Table Pizza, where she was responsible for executing engaging, interactive marketing to drive awareness, traffic, and overall profitability for the brand.

10.  Jill Tinsley joined Freddy’s in March 2019 as public relations manager. Before becoming part of the Freddy’s team, she was the marketing and communications director for The Independent School in Wichita and prior to that served as corporate communications manager with Sedgwick County, KS. With nearly two decades of experience in communications and public relations, Tinsley will lead the brand’s public relations and Digital Hospitality team in her new role as director of communications.

11.  Dull added, “It’s an exciting time to be part of Freddy’s, and with these latest additions to our leadership team, we’re positioned to continue accelerating all of the momentum achieved over the past several years and reach new heights.”

Achieves Significant Systemwide Success and Development Growth in 2021

12.  In mid-February 2022, Freddy’s Frozen Custard & Steakburgers announced that it had achieved significant growth and success throughout 2021, reporting a 17.8% increase in systemwide sales year-over-year. This compounding success further fueled the brand’s nationwide expansion through franchise development, with 32 new restaurants opened in key target markets throughout 2021 – including its first locations in New Jersey and Wisconsin. In addition to growing its national footprint, Freddy’s signed 17 new multi-unit agreements with new and existing franchisees, adding 102 new units to its substantial development pipeline.

13.  According to Freddy’s CEO Chris Dull, “On the heels of Freddy’s acquisition by Thompson Street Capital Partners in early 2021, last year marked one of the most transformative and noteworthy years in our company’s history. In the midst of continued growth and development systemwide, we leveraged this new partnership to invest in unparalleled corporate leadership and operational excellence while putting franchisees and their success first. We closed out 2021 stronger than ever, with franchisees reporting an AUV growth of 13.7%, and look forward to further bringing this craveable concept to new heights throughout 2022 and beyond.”

14.  Building off its tremendous success over the last year, Freddy’s is kicking off 2022 with a robust development pipeline of nearly 15 restaurants slated to open in the first 75 days of 2022 alone, including locations in North Dakota and South Dakota, which are new states for the brand. Looking ahead, the brand is projected to open over 50 total locations throughout 2022 with new restaurants across the nation in states like California, Florida, and Virginia. These efforts, coupled with the brand’s exceptional commitment to its franchisees, team members, and one-of-a-kind Freddy’s guest experience, help to support its greater development goal to double its footprint within the next four years, bringing the total unit count to 800 by 2026.

15.  Freddy’s continues to be recognized as a leading fast-casual concept and franchise system by receiving numerous industry accolades. Most recently, the brand ranked No. 59 on Entrepreneur magazine’s highly competitive Franchise 500 ranking of the top franchise brands, as well as Franchise Times’ Fast and Serious Ranking at No. 28. In 2021, Freddy’s also ranked No. 46 on QSR Magazine’s esteemed QSR 50 list, No. 117 on Franchise Times’ annual Top 400 list, and was recognized on Nation’s Restaurant News’ Top 500 Restaurant Chains at No. 73.

Company History

16.  Freddy’s Frozen Custard & Steakburgers was founded in 2002 by brothers Bill and Randy Simon and their friend/business partner Scott Redler in Wichita, Kansas. The Simons named the restaurant after their father Freddy, who was a World War II veteran. They also chose to go with a retro diner theme, similar to the ones they frequented with their father when they were younger. The menu for Freddy’s Frozen Custard & Steakburgers features high-quality, yet simple dishes like those found in American diners.

17.  Building on the success of the first Freddy’s, the Simons and Redler opened two more restaurants and began franchising in 2004. Over the next decade, Freddy’s grew around the U.S. By 2018, there were more than 300 Freddy’s Frozen Custard & Steakburgers restaurants in operation. That same year, Freddy’s opened its first international locations in the Middle East.

18.  A few years later, in 2021, Freddy’s Frozen Custard & Steakburgers was acquired by Thompson Street Capital Partners. Today, there are Freddy’s Frozen Custard & Steakburgers restaurants across more than 32 states, the United Arab Emirates, Saudi Arabia, Bahrain, Jordan, Kuwait, Lebanon, Oman, and Qatar.

Entrepreneur’s Franchise 500

19.  Freddy’s Frozen Custard & Steakburgers ranked No. 59 on Entrepreneur’s 2022 Franchise 500 list.

Section V – Financial Performance Representations (Average Revenues and/or Profits) for the Freddy’s Frozen Custard & Steakburgers Franchise (Item 19, 2022 FDD)

• As of December 29, 2021, there were 29 company-owned Restaurants and 391 franchised Restaurants.

• Parts 1 through 5 below display the Gross Receipts of 27 company-owned Restaurants that were open for the entire fiscal year that ended December 29, 2021 (“2021 Fiscal Year”) and 356 franchised Restaurants that were open for the entire 2021 Fiscal Year.

• These tables exclude the results of two company-owned Restaurants and 28 franchised Restaurants that were not open for the entire 2021 Fiscal Year and the seven non-traditional franchised Restaurants that are not open seven days per week and operate during limited hours (these include four units located at college campuses, one in a casino, one at an airport, and one in a sports arena).

Part 1 – Weekly Gross Receipts of Company-Owned Restaurants for 2021 Fiscal Year by Facility Type

Stand Alone with Drive-Thru

• Number of Restaurants:  22
• Average Weekly Gross Receipts:  $47,126
• Number and Percentage of Restaurants That Met or Exceeded the Average:  10 (45%)
• Median Weekly Gross Receipts:  $46,404
• Range of Average Weekly Gross Receipts:  $32,216 to $67,006

End Cap with Drive-Thru

• Number of Restaurants:  2
• Average Weekly Gross Receipts:  $59,591
• Number and Percentage of Restaurants That Met or Exceeded the Average:  1 (50%)
• Median Weekly Gross Receipts:  $59,591
• Range of Average Weekly Gross Receipts:  $56,929 to $62,254

In-Line with No Drive-Thru

• Number of Restaurants:  3
• Average Weekly Gross Receipts:  $46,565
• Number and Percentage of Restaurants That Met or Exceeded the Average:  1 (33%)
• Median Weekly Gross Receipts:  $42,122
• Range of Average Weekly Gross Receipts:  $38,937 to $58,635

All Restaurants

• Number of Restaurants:  27
• Average Weekly Gross Receipts:  $47,987
• Number and Percentage of Restaurants That Met or Exceeded the Average:  12 (44%)
• Median Weekly Gross Receipts:  $46,600
• Range of Average Weekly Gross Receipts:  $32,216 to $67,006

Part 2 – Annual Gross Receipts of Company-Owned Restaurants for 2021 Fiscal Year by Facility Type

Stand Alone with Drive-Thru

• Number of Restaurants:  22
• Average Annual Gross Receipts:  $2,448,259
• Number and Percentage of Restaurants That Met or Exceeded the Average:  10 (45%)
• Median Annual Gross Receipts:  $2,412,998
• Range of Annual Gross Receipts:  $1,675,224 to $3,484,335

End Cap with Drive-Thru

• Number of Restaurants:  2
• Average Annual Gross Receipts:  $3,098,755
• Number and Percentage of Restaurants That Met or Exceeded the Average:  1 (50%)
• Median Annual Gross Receipts:  $3,098,755
• Range of Annual Gross Receipts:  $2,960,302 to $3,237,209

In-Line with No Drive-Thru

• Number of Restaurants:  3
• Average Annual Gross Receipts:  $2,421,359
• Number and Percentage of Restaurants That Met or Exceeded the Average:  1 (33%)
• Median Annual Gross Receipts:  $2,190,327
• Range of Annual Gross Receipts:  $2,024,740 to $3,049,009

All Restaurants

• Number of Restaurants:  27
• Average Annual Gross Receipts:  $2,493,455
• Number and Percentage of Restaurants That Met or Exceeded the Average:  12 (44%)
• Median Annual Gross Receipts:  $2,423,179
• Range of Annual Gross Receipts:  $1,675,224 to $3,484,335

Part 3 – Weekly Gross Receipts of Franchised Restaurants for 2021 Fiscal Year by Facility Type

Stand Alone with Drive-Thru

• Number of Restaurants:  323
• Average Weekly Gross Receipts:  $36,012
• Number and Percentage of Restaurants That Met or Exceeded the Average:  148 (46%)
• Median Weekly Gross Receipts:  $34,705
• Range of Average Weekly Gross Receipts:  $15,333 to $89,171

End Cap with Drive-Thru

• Number of Restaurants:  29
• Average Weekly Gross Receipts:  $33,476
• Number and Percentage of Restaurants That Met or Exceeded the Average:  14 (48%)
• Median Weekly Gross Receipts:  $33,007
• Range of Average Weekly Gross Receipts:  $17,739 to $49,714

In-Line with No Drive-Thru

• Number of Restaurants:  4
• Average Weekly Gross Receipts:  $19,895
• Number and Percentage of Restaurants That Met or Exceeded the Average:  3 (75%)
• Median Weekly Gross Receipts:  $21,845
• Range of Average Weekly Gross Receipts:  $13,406 to $22,484

All Restaurants

• Number of Restaurants:  356
• Average Weekly Gross Receipts:  $35,624
• Number and Percentage of Restaurants That Met or Exceeded the Average:  162 (46%)
• Median Weekly Gross Receipts:  $34,479
• Range of Average Weekly Gross Receipts:  $13,406 to $89,171

Part 4 – Annual Gross Receipts of Franchised Restaurants for 2021 Fiscal Year by Facility Type

Stand Alone with Drive-Thru

• Number of Restaurants:  323
• Average Annual Gross Receipts:  $1,872,619
• Number and Percentage of Restaurants That Met or Exceeded the Average:  148 (46%)
• Median Annual Gross Receipts:  $1,804,684
• Range of Annual Gross Receipts:  $797,331 to $4,636,891

End Cap with Drive-Thru

• Number of Restaurants:  29
• Average Annual Gross Receipts:  $1,740,741
• Number and Percentage of Restaurants That Met or Exceeded the Average:  14 (48%)
• Median Annual Gross Receipts:  $1,716,372
• Range of Annual Gross Receipts:  $922,416 to $2,585,142

In-Line with No Drive-Thru

• Number of Restaurants:  4
• Average Annual Gross Receipts:  $1,034,525
• Number and Percentage of Restaurants That Met or Exceeded the Average:  3 (75%)
• Median Annual Gross Receipts:  $1,135,922
• Range of Annual Gross Receipts:  $697,102 to $1,169,152

All Restaurants

• Number of Restaurants:  356
• Average Annual Gross Receipts:  $1,852,460
• Number and Percentage of Restaurants That Met or Exceeded the Average:  162 (46%)
• Median Annual Gross Receipts:  $1,792,929
• Range of Annual Gross Receipts:  $697,102 to $4,636,891

Part 5 – Systemwide Annual Gross Receipts of Company-Owned and Franchised Restaurants for 2021 Fiscal Year

• Number of Restaurants:  383
• Average Annual Gross Receipts:  $1,897,647
• Number and Percentage of Restaurants That Met or Exceeded the Average:  173 (45%)
• Median Annual Gross Receipts:  $1,833,524
• Range of Annual Gross Receipts:  $697,102 to $4,636,891

• “Weekly Gross Receipts” means all gross revenue during each week of each 28-day operating period of every kind or nature related to the Restaurant, including all Restaurant revenue posted whether it is collected or remains uncollected, all charges for other products, services, and facilities and vending machine receipts, and any amounts payable from insurance policies to compensate you for loss of the same, but excluding sales taxes or other taxes collected by you from customers for transmittal to appropriate taxing authorities.

• “Annual Gross Receipts” is calculated in the same manner for the fiscal year.

• Freddy’s compiled the Gross Receipts of the company-owned Restaurants on the basis of generally accepted accounting principles. The information presented is unaudited. All company-owned Restaurants use the same accounting methods and system.

• The information presented for franchised Restaurants are the result of information included in royalty reports and other financial reports provided by the franchisees. Freddy’s has not audited this information nor has Freddy’s verified its accuracy.

Part 6 – Cost of Sales, Labor, and Controllable Expenses of Company-Owned Restaurants for 2021 Fiscal Year

• As of December 29, 2021, there were 29 company-owned Restaurants.

• Part 6 below depicts the Cost of Sales, Labor, and Controllable Expenses for 27 company-owned Restaurants that were open during the entire Fiscal Year 2021 as percentages of total Gross Receipts for Fiscal Year 2021.

• Part 6 excludes the results of 2 company-owned Restaurants that were not open for the entire 2021 Fiscal Year.

• Cost of Sales:  31.80%
• Labor with Benefits:  32.71%
• Controllable Expenses:  10.01%

• “Cost of Sales” includes all costs associated with food, beverage, and disposable paper and plastic, but does not include any other costs, including costs related to real estate or leasehold improvements, rental payments, marketing costs, or costs related to equipment, fixtures, or décor.

• “Labor with Benefits” includes all salaries and wages paid to employees, payroll taxes, and short-term management incentive pay of 6% of store net profit, and includes 100% employer paid health insurance, 401K with employer match, employer paid health savings account contribution, and any other employee benefits.

• Labor expenses do not include deferred management compensation of 5% of store net profit, phantom stock bonuses, owners’ draws, or management expenses not directly attributable to a Restaurant, such as an area manager’s salary.

• Freddy’s believes its robust benefits package and management short-term and deferred incentive pay plans reduce turnover and are integral to the operations of its Restaurants.

• “Controllable Expenses” includes maintenance, supplies, utilities, uniforms, bank and credit card fees, equipment rental, and other miscellaneous expenses. It does not include items such as fixed costs, advertising, professional and accounting fees, licenses, insurance, or taxes, nor does it include rent, other real estate costs, depreciation, or amortization.

• Because the company-owned Restaurants in Part 6 are not franchised Restaurants, they are not subject to royalty fees.

• Based on the franchisor’s experience, the company-owned Restaurants experience seasonal fluctuations, with greater sales occurring during the months of March through August and lesser sales occurring during the months of September through February.

• The information provided is based on a number of conditions and assumptions that may not be applicable to you. For example, each of the company-owned Restaurants for which information is provided is located in the Midwest. The costs of labor, including the pay scale, bonus plans, and other benefits you choose to provide your employees or that may be mandated by local law for the market in which your Restaurant would be located may or may not be comparable to these Restaurants. Costs of inventory and supplies may or may not be comparable to those obtainable in the Midwest.

• The information provided does not include certain non-recurring, opening, and pre-opening costs such as grand opening advertising; initial employee training; real estate acquisition costs/rent; real estate or leasehold improvements; computer and points-of-sale equipment and software; equipment, furniture, fixtures, décor, signage, and neon; opening inventory and supplies; insurance; utility deposits; licenses and business permits; other prepaid expenses; legal and other professional fees; and recruitment.

• The financial performance representation figures do not reflect all of the costs or expenses that must be deducted from the Gross Receipts to obtain your net income or profit.

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

Section VI – Freddy’s Frozen Custard & Steakburgers Franchise Ratios, Comparables, Computations, and Analyses (Exclusive Content for Platinum Subscribers) ⬇️