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FDD Talk 2019: Firehouse Subs Franchise Review (Financial Performance Analysis, Costs, Fees, and More)

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Firehouse Subs Photo by gsbrown99Firehouse Subs Photo by gsbrown99

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

  • Section I – Background information on the Firehouse Subs franchise opportunity, including relevant news updates
  • Section II – Estimated initial investment for a Firehouse Subs franchise, based on Item 7 of the company’s 2019 FDD
  • Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for a Firehouse Subs franchise, based on Items 5 and 6 of the company’s 2019 FDD
  • Section IV – Number of franchised and company-owned Firehouse Subs outlets at the start of the year and the end of the year for 2016, 2017, and 2018, based on Item 20 of the company’s 2019 FDD
  • Section V – Presentation and analysis of Firehouse Subs’ financial performance representations, based on Item 19 of the company’s 2019 FDD, including information on the:
  • 2018 average, median, high, and low weekly unit sales volume for the 36 company-owned traditional, 1,040 franchised traditional, 17 franchised free-standing with drive-thru, and 26 franchised end-cap center with drive-thru Firehouse Subs Restaurants that were open during the company’s fiscal year 2018
  • 2018 average food sales, discounts, employee meals, total revenue, food costs, paper costs, total cost of sales, gross profit, wages and benefits, health insurance, marketing expenses, telephone and utilities, professional fees, rent and occupancy expenses, other operating expenses, royalty, total operating expenses, and EBITDA from operations for the 32 Firehouse Subs Restaurants that were operated in Florida and the 5 Firehouse Subs Restaurants that were operated in Iowa by the company’s affiliates for the year ending December 30, 2018, grouped according to average weekly unit sales volume (>$17,000; $14,000 to $17,000; $11,000 to $14,000; $8,000 to $11,000; and $0 to $8,000)

Section I – Background Information

12 Things You Need to Know About the Firehouse Subs Franchise

Announces Partnership with Uber Eats

1.  In mid-September 2018, Firehouse Subs announced a national partnership with Uber Eats to address growing consumer demand for the convenience of food delivery coupled with superior food quality. At the time of the announcement, there were already 500 Firehouse Subs restaurants on Uber Eats, with the goal of reaching 700 by the end of the year. In addition to serving local communities, the new partnership allows Firehouse Subs to better serve its franchisees by expanding their sales channels.

2.  Vince Burchianti, chief financial officer of Firehouse Subs, said, “Through third-party delivery, we’re able to widen our franchisees’ business while also offering our brand to customers where and when they choose to enjoy our food. Uber Eats is the premier delivery service provider, with the ability to increase brand visibility among off-premise consumers that otherwise might not consider Firehouse Subs, ultimately driving incremental revenue to our franchise family.”

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3.  Liz Meyerdirk, global head of business development for Uber Eats, added, “It’s our mission to make food delivery an everyday thing. Whether you can’t step out of the office and need a quick lunch, or are simply craving your favorite, subs have become increasingly popular on Uber Eats. We’re excited to work with a best in class brand like Firehouse Subs, to deliver delicious subs to more people – that includes both faithful customers and those who are simply looking for something new to try.”

Opens in 46th State

4.  In January 2019, Firehouse Subs opened its fourth store in Rhode Island, the brand’s 46th state. The new Firehouse Subs store is under the ownership of first-time Firehouse Subs franchisees Sejal and Harsh Patel, who have worked as engineers their entire lives but decided to chase their dream of owning their own business after falling in love with Firehouse Subs’ food and commitment to the community.

5.  According to Robert Baldacci, area representative for Firehouse Subs, “This is an exciting milestone for Firehouse Subs to arrive in Rhode Island with enthusiastic franchisees ready to introduce new guests to the brand’s signature steamed subs and our commitment to the communities we serve through Firehouse Subs Public Safety Foundation.”

6.  Baldacci added, “Growing our presence into new states and markets, especially in the Northeast, is an important component of our continued development strategy. Personally, this is a wonderful accomplishment for me and my family to see the opening of this restaurant near where my grandparents first settled as immigrants from Italy to Federal Hill in Providence.”

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Celebrates 25th Anniversary with New Sub

7.  To kick off its 25th anniversary, Firehouse Subs debuted a new menu item at the beginning of January 2019, the Spicy Cajun Chicken Sub. The sandwich was available for a limited time in all participating U.S. and Puerto Rico locations. The Spicy Cajun Chicken Sub featured a hearty serving of Cajun-seasoned grilled chicken breast with zesty cherry peppers, melted Pepper Jack cheese, and house-made Cajun mayo, served steaming hot on Firehouse Subs’ signature toasted sub roll, available in white or wheat.

8.  Jay Miller, director of product development for Firehouse Subs, said, “The Spicy Cajun Chicken Sub includes bold flavors in a recipe unique to our brand that we are proud to debut during this milestone year for us. We look forward to unveiling innovative new offerings for our guests this year, starting with this sub packed with Cajun spice and zesty medium heat.”

Company History

9.  Firehouse Subs was founded in 1994 by brothers Chris and Robin Sorensen in Jacksonville, Florida. The Sorensens were firefighters like their their father, Captain Rob Sorensen, a 43-year veteran of the Jacksonville Fire & Rescue Department in Jacksonville. However, the brothers had always wanted to start their own business and after a few attempts in other industries, they decided to open a restaurant and called it Firehouse Subs as an homage to their family’s firefighting history.

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10.  The Sorensens first attempted to franchise the Firehouse Subs concept in 1995, but quickly decided to pull back on the idea. They purchased those first few franchises back and chose to focus on company-owned stores, especially in the Jacksonville area. In 1998, when Firehouse Subs had grown to more than 10 locations, the Sorensens opened the first store outside of Florida.

11.  A few years later, in 2000, the Sorensens were ready to try franchising again and hired consultants to develop a franchise growth plan. Firehouse Subs relaunched its franchise program in 2001 and by 2003, the brand had grown to 100 locations. Over the following decade, Firehouse Subs continued to grow and by 2016, there were 1,000 restaurants. Today, Firehouse Subs has locations across the United States, Puerto Rico, and Canada.

Entrepreneur’s Franchise 500

12.  Firehouse Subs ranked No. 49 on Entrepreneur’s 2019 Franchise 500 list.

Section II – Estimated Costs

  • Please click here for detailed estimates of Firehouse Subs franchise costs, based on Item 7 of the company’s 2019 FDD.

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

  • Please click here for detailed information on Firehouse Subs’ initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2019 FDD.

Section IV – Number of Franchised and Company-Owned Outlets

Franchised

2016

  • Outlets at the Start of the Year:  912
  • Outlets at the End of the Year:  1,005
  • Net Change:  +93

2017

  • Outlets at the Start of the Year:  1,005
  • Outlets at the End of the Year:  1,050
  • Net Change:  +45

2018

  • Outlets at the Start of the Year:  1,050
  • Outlets at the End of the Year:  1,092
  • Net Change:  +42

Company-Owned

2016

  • Outlets at the Start of the Year:  32
  • Outlets at the End of the Year:  32
  • Net Change:  0

2017

  • Outlets at the Start of the Year:  32
  • Outlets at the End of the Year:  37
  • Net Change:  +5

2018

  • Outlets at the Start of the Year:  37
  • Outlets at the End of the Year:  37
  • Net Change:  0

Section V – Financial Performance Representations (Item 19, 2019 FDD) and Analysis

Part 1 – Firehouse Subs’ Historical Average Unit Volume for Company-Owned and Franchised Locations

  • The following charts show historical sales information regarding both franchised and affiliated Firehouse Subs Restaurants that were open during the company’s fiscal year 2018.
  • This historical sales information was compiled using the reports provided to Firehouse Subs by these Restaurants. The reports are provided to Firehouse Subs on a cash accounting basis and are used to form the basis of royalty payments to the franchisor.
  • The franchisor does not directly operate any Restaurants; all company-owned Restaurants are operated by affiliates, which are owned and controlled by the franchisor’s parent – FRG.
  • The characteristics of those Restaurants are not materially different from the franchises that the franchisor offers for sale, except that they may incur greater marketing and promotional expenses (as a sponsor of Jacksonville Jaguars and other programs); and incur additional expenses to offer health insurance to all full-time employees.
  • Average Unit Weekly Sales Volume is weighted based on the number of operating weeks for each Restaurant.
  • The sales information provided is unaudited.
  • This sales summary does not reflect any expenses of Firehouse Subs Restaurants. Some of the expenses that are not reflected in this summary, but that you will incur and should take into consideration, are the following:
  • franchise payments, including royalties;
  • salaries, payroll taxes, and other employee benefits;
  • licenses;
  • rent and utilities;
  • cost of equipment;
  • cost of food and other product costs;
  • financing costs (in addition to occupancy expense);
  • accounting and legal expenses;
  • debt repayment.
  • These expenses will affect the net income and cash flow of a Firehouse Subs Restaurant. You should consider them and evaluate their impact on your operations.

2018 Weekly Average Unit Volume (Company-Owned Traditional)

$17,000+

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