By Mark Kalinowski
Published on June 25, 2019 at 12:00 AM
Not too long ago, IHOP (owned and franchised by Dine Brands [DIN; Buy]) filed its 500+ page Franchise Disclosure Document (FDD) for 2019. In this report, we cite some of the highlights from that document following our review of it, including our review of it in comparison to last year’s Franchise Disclosure Document. For example, the footnote to the National Advertising Fee — currently 3.5% of total Gross Sales — indicates that “Commencing on January 1, 2023, the National Advertising Fee will be the greater of: (i) 2.25% of total Gross Sales or (ii) the National Advertising Fee set forth in at least 88% of IHOP franchise agreements, as amended, in effect as of January 1, 2023 (“2023 Franchise Agreements”). Commencing on January 1, 2023, the Local Advertising Fee will be (i) .75% of total Gross Sales or (ii) if the National Advertising Fee is at least 3.5%, the Local Advertising Fee set forth in at least 88% of the 2023 Franchise Agreements. These fees will be electronically debited from your account if we request that you participate in our electronic funds transfer program authorizing us to receive payments from you by pre-authorized bank draft, wire transfer, automated clearinghouse transfer or otherwise.” The 2019 FDD indicates that “There is currently no required local advertising fee.” We maintain our Buy rating on DIN and note the following:
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By Mark Kalinowski
Published on June 20, 2019 at 12:00 AM
Not too long ago, Papa John’s (PZZA; Buy) filed its Franchise Disclosure Document (FDD) for 2019. In this report, we cite some of the highlights from that document following our review of it, including our review of it in comparison to last year’s Franchise Disclosure Document. For example, we would note that the On-Line Transaction Fee for 2019 is “1.75% of Net Sales via Internet on-line ordering,” as compared to the 2018 FDD which shows that fee as “1.5% of Net Sales via Internet online ordering” at that time. Also, the 2019 FDD shows that — for company-owned restaurants only — food costs represented 29.7% of sales, while labor costs/taxes represented another 21.6% of sales. The average pre-tax cash flow for a companyowned restaurant in 2018 was $131,859, or 12.3% of sales. We maintain our Buy rating on PZZA and note the following:
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By Mark Kalinowski
Published on June 18, 2019 at 12:00 AM
In our Domino’s (DPZ; Buy) report published yesterday (“DPZ: 2019 Franchise Disclosure Document Review for Domino’s”), we noted that “The Royalty Fee for a Domino’s U.S. franchisee is 5.5% of sales, and the Advertising Fund contribution for a Domino’s U.S. franchisee is 4% of sales.” We want to clarify that at present, Domino’s U.S. franchisees are funding the Domino’s National Advertising Fund (DNAF) at a rate of 6% of sales, as the other 2% that would typically go to the advertising cooperative under section 13.2 of Domino’s standard franchise agreement is instead being rolled up into DNAF (resulting in the 6% being paid to DNAF). So it’s a rate of 6% of sales for all franchisees, with the exception of incentives.
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