In this FDD Talk post, you’ll learn the following:
- Section I – Estimated initial investment (franchise costs) for a Culver’s franchise, based on Item 7 of the company’s 2022 FDD
- Section II – Initial franchise fee, royalty fee, and marketing fee for a Culver’s franchise, based on Items 5 and 6 of the company’s 2022 FDD
- Section III – Number of franchised and company-owned Culver’s 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 Culver’s franchise opportunity, including relevant news updates
- Section V – Presentation and analysis of Culver’s 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, high, and low sales for the 770 franchised Culver’s Restaurants open for the entire 12-month period ended December 31, 2021
- 2021 average sales, food cost, paper cost, gross profit, salaries and wages, employee benefits, direct operating expenses, supplies and chemicals, utilities, general and administrative expenses, repairs and maintenance, advertising royalty, local advertising, service royalty, and income as a percentage of sales, for the 6 company-owned Culver’s Restaurants open for the entire 12-month period ended December 31, 2021
- Section VI – Key ratios, comparables, computations, and analyses for the Culver’s franchise opportunity (exclusive content for Platinum subscribers)
Section I – Culver’s Franchise Costs
- Culver’s franchise costs, based on Item 7 of the company’s 2022 FDD:
- Initial Franchise Fee: $20,000 to $55,000
- Land: $185,000 to $2,000,000
- Site Work: $316,000 to $917,000
- Building: $1,115,000 to $1,774,000
- Travel, Living, and Other Expenses During Training: $20,000 to $80,000
- Initial Inventory: $45,000 to $60,000
- Furniture, Fixtures, Equipment, and Supplies (excluding sign package and POS cash register system): $387,000 to $492,000
- Sign Package: $106,000 to $220,000
- POS System: $37,000 to $50,000
- Miscellaneous Expenses: $20,000 to $40,000
- Additional Funds (Working Capital) for 3 Months: $50,000 to $100,000
- Total Estimated Culver’s Franchise Costs: $2,301,000 to $5,788,000
Section II – Culver’s Initial Franchise Fee, Royalty Fee, and Marketing Fee
- Culver’s initial franchise fee, royalty fee, and marketing fee, based on Items 5 and 6 of the company’s 2022 FDD:
- Initial Franchise Fee: $45,000 to $55,000
- Service Fee (i.e., Royalties): 4% of Gross Sales
- Advertising Fee: 2.5% of Gross Sales
- Cooperative Advertising: up to 4% of Gross Sales, as approved by a majority vote of the members of the Co-op Advertising Region
Section III – Number of Franchised and Company-Owned Culver’s Outlets
- Outlets at the Start of the Year: 680
- Outlets at the End of the Year: 726
- Net Change: +46
- Outlets at the Start of the Year: 726
- Outlets at the End of the Year: 776
- Net Change: +50
- Outlets at the Start of the Year: 776
- Outlets at the End of the Year: 831
- Net Change: +55
- Outlets at the Start of the Year: 6
- Outlets at the End of the Year: 6
- Net Change: 0
- Outlets at the Start of the Year: 6
- Outlets at the End of the Year: 6
- Net Change: 0
- Outlets at the Start of the Year: 6
- Outlets at the End of the Year: 6
- Net Change: 0
Section IV – Background Information on the Culver’s Franchise
23 Things You Need to Know About the Culver’s Franchise
Thank You Farmers Project Donations Surpass $3.5 Million
1. In late December 2021, Culver’s announced that its Thank You Farmers Project has raised over $3.5 million since its creation in 2013. In 2021, the program raised around $500,000 toward its mission of advocating for the positive impact agriculture has on the world. Culver’s reached the milestone at a critical time, as the rapidly growing world population places an increasing reliance on a climate-smart agricultural system to produce an abundant, nutritious food supply.
2. Money raised through the Thank You Farmers Project directly supports people making a positive impact in the industry, including those involved with local agriculture efforts in the communities Culver’s calls home and larger, national projects advancing the industry.
3. Alison Demmer, Culver’s marketing specialist, said, “There’s never been a more important time to collaborate and lead to create a better world, and advancing the future of agriculture is a critical way to do that. Our guests continue to passionately support this mission through the Thank You Farmers Project, and we’re proud and encouraged to see the program’s success in 2021.”
4. Thank You Farmers Project cornerstones, including the FFA Essay Contest and local Thank You Farmers Project Share Nights to support organizations like FFA, were held again in 2021, bolstering Culver’s longstanding commitment to growing the next generation of leaders in agriculture. Scoops of Thanks Day, which offered guests a scoop of fresh frozen custard for just $1 at all Culver’s restaurants nationwide on May 6, raised over $159,000 for local FFA and agriculture organizations in 2021 – a new record for the fundraiser.
5. Beyond these established events to advance agriculture education, Culver’s took steps in 2021 to support the creation of a more resilient and sustainable agricultural future by joining the Decade of Ag Movement. The Decade of Ag is the first food and agriculture sector-wide movement to create a shared vision for a climate-smart agricultural system that secures the nation’s food supply, and Culver’s and other endorsing organizations will collaborate to help achieve this vision.
Chooses Local Hero for Digital Local Store Marketing
6. At the end of April 2022, Culver’s announced that it has selected Local Hero, a digital local marketing platform, to help the company’s franchisees expand their digital marketing capabilities. “For Culver’s, digital marketing is critical for our restaurants to compete in a crowded marketplace and Local Hero is the ideal partner to support our franchisees and our brand’s overall advertising efforts,” said Julie Fussner, vice president of marketing for Culver’s.
7. Local Hero will enable Culver’s franchisees to execute digital marketing campaigns quickly and easily to support hiring efforts, menu promotions, and more. The platform utilizes pre-approved branded creative with proprietary targeting capabilities to put powerful local digital marketing tools into the hands of franchisees.
8. Through Local Hero, franchisees can create and implement advertising campaigns on a variety of digital media channels including Snapchat, Facebook, Instagram, YouTube, Waze, digital radio, and much more. Local Hero’s targeted ads have already driven new hire applications far exceeding expectations and past efforts, delivering valuable return in a tight labor market.
9. Adam Edelman, founder and chairman of Boulder Heavy Industries, which developed Local Hero, said, “We are excited to support Culver’s expansion into digital local marketing with Local Hero. Our low-cost, easy-to-use platform takes the guesswork out of digital local marketing for franchisees, gives them the tools they need to achieve bottom line results.”
10. The simplicity of Local Hero makes it a powerful tool for both inexperienced and seasoned marketers alike. Corporate marketing departments can use Local Hero to make brand-approved templates and may also leverage Local Hero’s library of market-tested local ad units. Local Hero’s LocalCreator ad localization software automatically turns the templates into high quality local ads that are personalized for each location. The app even auto-customizes hard-to-make formats such as video and radio. Every localized ad is guaranteed to meet brand guidelines, so brands never have to worry about “rogue creative” in the marketplace.
11. Before and after each brand launch, Local Hero’s success teams and local franchisee advisors are there to provide individualized training and real-time support to brands’ regional operations teams, franchisees, and store managers.
Wisconsin Roots Front and Center in New Campaign
12. In early May 2022, Culver’s launched its newly evolved “Welcome to Delicious” integrated marketing campaign. The campaign, which is headlined by a 17-city event tour featuring the first-ever Culver’s food truck along with several new TV spots, arrives over 11 years after the brand launched its first Welcome to Delicious campaign. While much has changed in the decade since, the messaging in each tactic amplifies an idea that has remained constant: that Culver’s identity lies in its quality food and a passion for taking care of people.
13. “Being from Sauk City, Wisconsin, not only represents our past – it makes us who we are today, and who we will always be for our guests and team members,” said Culver’s co-founder Craig Culver. “After more than forty years, we’re proud that guests in 25 states have grown to value our commitment to hospitality, making food the right way and going the extra mile to treat people with kindness.”
14. The first of four new TV spots for the campaign is currently live. Dubbed “From Wisconsin With Love,” this anthem spot brings Dairyland delicacies and warm Wisconsin welcomes to life through scenes of farm fields, guests coming together over made-to-order menu items, and team members demonstrating Culver’s trademark hospitality. Craig Culver, who narrates the commercial, is briefly seen scooping Fresh Frozen Custard in archival footage from 1984 – a nod to the personal touch and family principles he has instilled throughout every step of the brand’s journey from Sauk City secret to national favorite.
15. To give guests around the country a more vivid look into its heritage, Culver’s is taking its first-ever food truck, a 22-foot truck wrapped in an illustrated scene of farm fields and dairy cows, to 17 cities on the “From Wisconsin With Love” tour. Beyond the free Wisconsin Cheese Curds and Fresh Frozen Custard served from the truck, the immersive experience is the brand’s way of “exporting Wisconsin” through family fun and larger-than-life guest experiences, as well as giving back to its communities along the way.
16. Culver’s had 16 cities confirmed on the tour route, while giving guests the chance to bring a slice of America’s Dairyland to their city by making it the 17th destination. In the From Wisconsin With Love Sweepstakes, guests could nominate a city of their choice to become the final tour stop from May 9 through June 5.
17. The Wisconsin-centric messaging and visual cues of the campaign are further brought to life in a new branded content piece, “12 Reasons Culver’s Could Only Have Come From Wisconsin.” Viewers can click icons on an interactive, 3-D map of Wisconsin and explore how Culver’s roots are evident in every aspect of the brand today, from the state’s championing of frozen custard and supper club traditions to a deep appreciation for farmers and agriculture.
18. Elements of the integrated campaign will take hold throughout 2022 across touchpoints including television, social media, digital, radio, and out-of-home advertising, as well as in-restaurant point-of-purchase elements like signage and menu boards.
19. Culver’s was founded in 1984 by Craig Culver, his wife Lea, and his parents George and Ruth Culver in Sauk City, Wisconsin. The Culvers already had decades of experience in the fast food industry because George and Ruth owned several A&W franchises. Craig grew up in the industry and worked for McDonald’s as a store manager after graduating from college.
20. After a few years, Craig decided he wanted to start his own restaurant. He thought that his mother’s “Butter Burgers” could compete in the saturated burger sector. Craig also wanted to sell frozen custard, a popular regional dessert that the Culvers had always enjoyed.
21. The first Culver’s was a success and the family knew they wanted the company to grow through franchising. The Culvers made their first attempt to franchise in 1988. However, this failed as the Culvers did not develop a strong franchise agreement/system and the franchisee quit after only a year. Following the closure of the franchise, the Culvers spent the next few years coming up with a better franchising system. Franchising officially launched in 1990 and this time it stuck.
22. During the 1990s and the early 2000s, Culver’s successfully expanded around the Midwestern U.S. Then, in 2005, Culver’s began expanding to other areas of the country. Today, there are Culver’s restaurants across 26 states with plans to continue expanding into other territories. Additionally, the Culver family maintains majority ownership of the company although they have stepped down from day-to-day operations.
Entrepreneur’s Franchise 500
23. Culver’s ranked No. 5 on Entrepreneur’s 2022 Franchise 500 list.
Section V – Financial Performance Representations (Average Revenues and/or Profits) for the Culver’s Franchise (Item 19, 2022 FDD)
Schedule of Restaurant Financial Data
- The following information discloses sales of the 770 franchised Culver’s Restaurants (“Franchised Restaurants”) and the 6 company-owned Culver’s Restaurants (“Company-Owned Restaurants”) open for the entire 12-month period ended December 31, 2021, and also selected cost percentages for the 6 Company-Owned Restaurants for the entire 12-month period ended December 31, 2021.
- This includes information about non-traditional locations (including 2 Culver’s Restaurants that do not have a drive-thru window, 6 Culver’s Restaurants that share a building with a convenience store, and 4 Culver’s Restaurants that occupy an end-cap of a multi-tenant building).
- The following information does not include information from the Restaurants that did not operate for the entire 12-month period, including the 55 franchised Culver’s Restaurants that opened in 2021, nor does it include information from 3 franchised Culver’s Restaurants that were closed for a period of time during 2021 due to damage to the Restaurants, or 3 franchised Culver’s Restaurants that were closed for a period of time during 2021 due to a substantial remodel, rebuild, or relocation of the Restaurants, and therefore none of these Restaurants operated for the entire 12-month period.
- The Company-Owned Restaurants are located in Sauk City, Spring Green, Richland Center, Baraboo, Middleton, and Madison, Wisconsin.
- The buildings housing the Company-Owned Restaurants are single-purpose, one story, and freestanding, seating 88 to 120 guests at one time, which is comparable to the Culver’s Restaurants expected to be operated under the Franchise Agreement.
- Substantially the same services were offered to the Company-Owned Restaurants as are provided to the Franchised Restaurants. The franchisor does not, however, provide certain services to franchisees such as financing, accounting, legal, personnel, construction, management, financial, and food and labor cost systems.
- The Company-Owned Restaurants also offered substantially the same products and services to the general public as will the Culver’s Restaurants to be operated under the Franchise Agreement.
- The following tables were prepared on a basis consistent with generally accepted accounting principles and the same accounting system was used for each Company-Owned Restaurant.
- The figures used in the tables are based on an annual performance. The information presented in the tables has not been audited, and the franchisor has not independently verified that the information provided by Franchised Restaurants is correct.
Part 1 – Franchised Restaurants Open 12 Months
- $4,500,000 and Above: 21 Restaurants
- $4,250,000 to $4,499,999: 18 Restaurants
- $4,000,000 to $4,249,999: 26 Restaurants
- $3,750,000 to $3,999,999: 57 Restaurants
- $3,500,000 to $3,749,999: 75 Restaurants
- $3,250,000 to $3,499,999: 92 Restaurants
- $3,000,000 to $3,249,999: 116 Restaurants
- $2,750,000 to $2,999,999: 104 Restaurants
- $2,500,000 to $2,749,999: 87 Restaurants
- $2,250,000 to $2,499,999: 72 Restaurants
- $2,000,000 to $2,249,999: 56 Restaurants
- Below $2,000,000: 46 Restaurants
- Highest Sales: $6,888,379
- Lowest Sales: $938,084
- Average Sales: $3,061,676
- Median Sales: $3,039,326
- Of the 770 Franchised Restaurants, 371 (or 48%) met or exceeded the average sales.
- Average sales were taken from Franchised Restaurants open for the 12-month period ended December 31, 2021.
- “Sales” are defined as the total revenue received from the sale of goods and services, whether by cash or by check or credit card, at or through a Culver’s Restaurant, less sales tax, customer refunds, and unreimbursed amounts involving the franchisor’s approved coupon or discount programs.
Part 2 – Company-Owned Restaurants Open 12 Months
- Average Sales: $3,512,786 (100.0%)
Select Cost Percentages
- Food Cost: $1,063,356 (30.3%)
- Paper Cost: $94,628 (2.7%)
- Total Food and Paper Cost: $1,157,984 (33.0%)
Gross Profit: $2,354,802 (67.0%)
- Salaries and Wages: $1,022,402 (29.1%)
- Employee Benefits: $177,408 (5.1%)
- Direct Operating Expenses: $19,568 (0.6%)
- Supplies and Chemicals: $52,187 (1.5%)
- Utilities: $54,176 (1.5%)
- General and Administrative: $106,734 (3.0%)
- Repairs and Maintenance: $61,575 (1.8%)
- Advertising Royalty: $87,820 (2.5%)
- Local Advertising: $35,128 (1.0%)
- Service Royalty: $140,512 (4.0%)
- Total Operating Expenses: $1,757,510 (50.0%)
Income: $597,292 (17.0%)
- “Sales” are defined as the total revenue received from the sale of goods and services, whether by cash or by check or credit card, at or through a Company-Owned Restaurant, less sales tax, customer refunds, and unreimbursed amounts involving the franchisor’s approved coupon or discount programs.
- “Food Cost” includes costs of food and beverage items, as reduced by vendor rebates.
- “Paper Cost” includes paper product expenses.
- “Gross Profit” is Sales less Food Costs and Paper Costs.
- “Salaries and Wages” includes wages paid to Company-Owned Restaurant managers and crew. Hourly Manager wages range from $17.00/hour to $26.11/hour. Salaried Manager wages range from $74,769/yr to $84,668/yr. Crew wages range from $10.00/hour to $20.65/hour. Franchised Restaurants may incur higher percentages depending on wages paid and staffing levels.
- “Employee Benefits” includes payroll taxes and workers’ compensation, health, dental, life, STD and LTD insurance, as well as a 401K plan and a flexible spending account, and team instruction and education account. Franchised Restaurants may incur different expenses depending on benefits offered to employees and staffing levels.
- “Direct Operating Expenses” includes licenses, permits, uniforms, laundry, music and cable, printed supplies, auto expenses, team recruitment, background checks, and miscellaneous expenses. Franchised Restaurants may incur different expenses for auto or travel expenses.
- “Supplies and Chemicals” includes supplies and chemicals used at the Company-Owned Restaurants.
- “Utilities” includes electricity, fuel, water and sewer, and garbage collection. Franchised Restaurants may incur different expenses depending on rate differences.
- “General and Administrative” includes bank charges, credit card fees, dues and subscriptions, liability insurance, office supplies, postage, telephone, POS support, internet, payroll service, and legal and accounting service. Franchised Restaurants may incur higher expenses because the Company-Owned Restaurants are supported by office personnel, and the personnel wages and benefits are not included in this expense.
- “Repairs and Maintenance” includes repair and maintenance expenses actually incurred. Franchised Restaurants may incur different expenses depending on the repairs and maintenance needed at the Franchised Restaurant.
- “Advertising Royalty” represents the percentage of sales that a Franchised Restaurant will pay to the Advertising Fund under the Franchise Agreement. This percentage will be 2.00% for all Franchise Agreements signed prior to March 31, 2012 and 2.50% for all Franchise Agreements signed on or after March 31, 2012.
- “Local Advertising” represents 1.00% which is the minimum percentage of sales that a Franchised Restaurant must spend on local advertising expenses under the Franchise Agreement.
- “Service Royalty” represents 4.00% which is the percentage of sales that a Franchised Restaurant would pay to the franchisor as a service royalty under the Franchise Agreement.
- “Income” is sales less the expenses listed above. The income above is before deductions for rent, real estate taxes, personal property taxes, interest costs, depreciation and amortization, or income tax.
- The statements shown in the table do not include the following expense items, which must be calculated and included separately for every Culver’s Restaurant:
- Depreciation of property and equipment;
- Rent, interest, or other financing cost for land, buildings, equipment, and inventory;
- Initial franchise fee and organization costs;
- Any management fees;
- Income taxes and property taxes;
- Travel and entertainment;
- Other employee benefits, such as incentive, other team member compensation, team events, and team recognition;
- Other expenses, such as furniture and equipment, technology software and equipment, flowers and decoration, meeting expense, cash over/short, and credit card chargebacks and discrepancies.
- These excluded items will affect the net income and/or cash flow of any Culver’s Restaurant and must be carefully considered and evaluated by any prospective franchisee. The actual performance of any Culver’s Restaurant will depend on a number of factors specific to the property, including the above factors.