Ok, you are interested in how much you can make with this franchise, right?
So, I want you to a take a serious look at this Item 19, Financial Performance Representation, found in the 2013 Popeyes Louisiana Kitchen FDD.
First, the Item 19 is 14 pages long, with useful data collected from the franchise owner's profit and loss statements.
Here is one of the seven sales charts, detailing gross sales.
(Click on the image to see a full scale view.)
This is a good presentation. We don't have to guess about how many locations did how much volume.
We can read it off from the chart.
For example, we know that 24 stores had gross sales less than $600,000 and exactly 126 stores had gross sales between $900,000 and $1,000,000.
We aren't presented with meaningless AUV numbers, instead we are given data from which we can draw our own conclusions.
(There is a table at the bottom showing the high, middle, and low AUVs, but it is presented in the context of useful data. I am not against AUV, but there is no reason to present an AUV only without showing the data the average was calculated from.)
Second, there are seven charts - each an attempt to compare apples with apples.
The seven charts are for: all free standing restaurants, freestanding built in 2010, freestanding built in 2011, inline restaurants, convenience store restaurants, and other.
Again, this is very useful. It is especially helpful for Popeyes to have broken out the gross sales figures for stores built in 2010, and 2011. This will give you a better idea of what the first few years may hold in store for you.
Third, and this is most remarkable, Popeyes has constructed a composite P&L, profit and loss statement.
Click on the image to see the large image.
All in all, this is a useful Item 19 and will help the probable purchaser of a Popeyes Louisiana Kitchen franchise.
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Popeyes gets their Item 19 FPR in their FDD right.
This does two important things.
One it makes it clear to franchise buyers what the financial performance historically has been and two it helps mitigate potential franchise lawsuits for non-compliant earnings claims by franchisees against the franchisor.
Popeyes is part of a growing trend of franchisors who both collect P&L statement from their franchise owners and create a comprehensive FPR from that data.
It is no wonder that they are currently leading the pack.
Just wondering, why request/collect P&L statements from franchisees when the POS system could provide said data in real-time at the headquarter?
On a related note, I noticed that COGS and labor costs as % of sales are above established (common) parameters. Considering that franchise and marketing fees as % of sales (combined) varies between 7-12% (see Subway), I'm skeptic of an average operating profit of 20.4% of sales.
Thoughts?
Jorge,
There are a couple of reasons.
1. The POS system won't give labor and rent costs.
2. The POS system isn't tied into the beverage volume rebates.
It looks like from the notes that the franchise owners are faxing in their P&Ls and that there is only a partial standard chart of accounts.
From note 6: Restaurant Operating Profits are calculated by subtracting Operating expenses from Sales, Operating expenses consist of the following major items: Food and Paper Costs. Labor Costs, Controllable Expenses, Marketing Expenses, Non-controllable Expenses
Operating Expenses do not include any non-cash expenses such as depreciation, gains and losses on the sale of assets, deferred gains, impairment or disposal of assets and amortization.
business value, franchise fees, or loan fees.
So, yes I believe the gross profit margin as reported.