SHOW ME THE MONEY

Financial Performance

SHOW ME THE MONEY

Financial Performance

Chop Stop Salad customer places order
 
Financials are an important consideration in choosing any franchise. What does a typical location gross? What are the biggest expenses? And most importantly, how much money will you take home at the end of the year? The table below contains financial information for the three company-owned and two franchised Chop Stop restaurants that were open and continuously operating for at least 12 months as of December 31, 2019 under our “standard” format. Please refer to the footnotes below the table for important information regarding the individual expenses and other important details. Also, please keep in mind the following: Some outlets have earned this amount. Your individual results may differ. There is no assurance you’ll earn as much.
Chop Stop Salad customer places order

Table 1
FOR FISCAL YEAR ENDED DECEMBER 29, 2019

(Figures in parentheticals represent the expense as a percentage of gross sales. See Note 17 for more information.)

Financial Items Average Median Highest Lowest
Gross Sales (1)
$999,977
$995,685
$1,410,727
$680,792
---Food & Beverage Sales (2)
$952,192
$950,104
$1,328,871
$648,165
---Retail Sales (3)
$47,785
$44,302
$81,856
$32,627
Cost of Sales (4) (17)
$286,150
(28.62%)
$288,345
(28.96%)
$381,245
$204,236
---Food & Beverage Costs (5) (17)
$263,219
(27.64%)
$265,932
(27.99%)
$343,064
$188,923
---Retail Costs (6) (17)
$22,931
(47.99%)
$21,267
(48.00%)
$38,181
$15,313
Labor (7) (17)
$299,353
(29.94%)
$288,843
(29.01%)
$397,084
$231,345
---Wages (8) (17)
$243,664
(24.37%)
$238,480
(23.95%)
$318,810
$190,280
---Taxes Benefits & Insurance (9) (17)
$55,689
(5.57%)
$55,118
(5.54%)
$78,273
$41,066
Occupancy Expenses (10) (17)
$72,163
(7.22%)
$73,002
(7.33%)
$88,573
$54,560
Operational Expenses (11) (17)
$112,316
(11.23%)
$111,859
(11.23%)
$164,401
$76,489
General & Admin Expenses (12) (17)
$84,302
(8.43%)
$81,433
(8.18%)
$112,129
$55,658
---Royalties (13) (17)
$48,536
(4.85%)
$48,438
(4.86%)
$68,191
$33,275
---Brand Fund Fees (14) (17)
$4,902
(.49%)
$5,017
(.50%)
$6,819
$3,273
---Other (15) (17)
$30,864
(3.09%)
$27,149
(2.73%)
$58,910
$19,111
Net Operating Income (EBITDA) (16) (17)
$145,693
(14.57%)
$131,299
(13.19%)
$275,649
$56,001
Average Gross Sales (1) ---Food & Beverage Sales (2) ---Retail Sales (3) Cost of Sales (4) (17) ---Food & Beverage Costs (5) (17) ---Retail Costs (6) (17) Labor (7) (17) ---Wages (8) (17) ---Taxes Benefits & Insurance (9) (17) Occupancy Expenses (10) (17) Operational Expenses (11) (17) General & Admin Expenses (12) (17) ---Royalties (13) (17) ---Brand Fund Fees (14) (17) ---Other (15) (17) Net Operating Income (EBITDA) (16) (17) Median Gross Sales (1) ---Food & Beverage Sales (2) ---Retail Sales (3) Cost of Sales (4) (17) ---Food & Beverage Costs (5) (17) ---Retail Costs (6) (17) Labor (7) (17) ---Wages (8) (17) ---Taxes Benefits & Insurance (9) (17) Occupancy Expenses (10) (17) Operational Expenses (11) (17) General & Admin Expenses (12) (17) ---Royalties (13) (17) ---Brand Fund Fees (14) (17) ---Other (15) (17) Net Operating Income (EBITDA) (16) (17) Highest Gross Sales (1) ---Food & Beverage Sales (2) ---Retail Sales (3) Cost of Sales (4) (17) ---Food & Beverage Costs (5) (17) ---Retail Costs (6) (17) Labor (7) (17) ---Wages (8) (17) ---Taxes Benefits & Insurance (9) (17) Occupancy Expenses (10) (17) Operational Expenses (11) (17) General & Admin Expenses (12) (17) ---Royalties (13) (17) ---Brand Fund Fees (14) (17) ---Other (15) (17) Net Operating Income (EBITDA) (16) (17) Lowest Gross Sales (1) ---Food & Beverage Sales (2) ---Retail Sales (3) Cost of Sales (4) (17) ---Food & Beverage Costs (5) (17) ---Retail Costs (6) (17) Labor (7) (17) ---Wages (8) (17) ---Taxes Benefits & Insurance (9) (17) Occupancy Expenses (10) (17) Operational Expenses (11) (17) General & Admin Expenses (12) (17) ---Royalties (13) (17) ---Brand Fund Fees (14) (17) ---Other (15) (17) Net Operating Income (EBITDA) (16) (17)
$999,977
$952,192
$47,785
$286,150 (28.62%)
$263,219 (27.64%)
$22,931 (47.99%)
$299,353 (29.94%)
$243,664 (24.37%)
$55,689 (5.57%)
$72,163 (7.22%)
$112,316 (11.23%)
$84,302 (8.43%)
$48,536 (4.85%)
$4,902 (.49%)
$30,864 (3.09%)
$145,693 (14.57%)
$995,685
$950,104
$44,302
$288,345 (28.96%)
$265,932 (27.99%)
$21,267 (48.00%)
$288,843 (29.01%)
$238,480 (23.95%)
$55,118 (5.54%)
$73,002 (7.33%)
$111,859 (11.23%)
$81,433 (8.18%)
$48,438 (4.86%)
$5,017 (.50%)
$27,149 (2.73%)
$131,299 (13.19%)
$1,410,727
$1,328,871
$81,856
$381,245
$343,064
$38,181
$397,084
$318,810
$78,273
$88,573
$164,401
$112,129
$68,191
$6,819
$58,910
$275,649
$680,792
$648,165
$32,627
$204,236
$188,923
$15,313
$231,345
$190,280
$41,066
$54,560
$76,489
$55,658
$33,275
$3,273
$19,111
$56,001

The FTC’s Franchise Rule permits a franchisor to provide information about the actual or potential financial performance of its franchised and/or franchisor-owned outlets, if there is a reasonable basis for the information, and if the information is included in the disclosure document. Financial performance information that differs from that included in Item 19 may be given only if: 

(1) a franchisor provides the actual records of an existing outlet you are considering buying; or 

(2) a franchisor supplements the information provided in this Item 19, for example, by providing information about possible performance at a particular location or under particular circumstances.

The table above contains information on the average and median Gross Sales and various costs and expenses for the 6 Chop Stop restaurants (3 company-owned and 3 franchised) that were open and continuously operating for at least 12 months as of December 31, 2019 under our “standard” format. Our “standard” format requires a Chop Stop restaurant to have access to a dedicated parking lot and a minimum footprint of at least 1,100 interior square feet. A total of 15 Chop Stop restaurants were open as of December 31, 2019. Nine of these locations are excluded from the table below. Seven locations (all franchised locations) were excluded because they were not in operation for at least 12 months as of December 31, 2019. One location (a company-owned location) was excluded because it does not operate under our “standard” format. Finally, one location (a company-owned location) was excluded because it serves as our designated training location and, as a result, incurs costs of goods and labor expenses that are materially higher than, and not representative of, a typical company-owned or franchised Chop Stop restaurant.

The Chop Stop restaurants presented in the table below are all located in California, have a footprint ranging from 1,100 to 1,700 square feet, and have been open from 1 to 9 years. Each Chop Stop restaurant included in the below table is located on a major thoroughfare and has an adjacent open-air parking lot. The company-owned and franchised restaurants included in the table below are substantially similar.

NOTES:

1. “Gross Sales” means the aggregate amount of all sales of goods and services, whether for cash, on credit or otherwise, made or provided in connection with each Chop Stop restaurant, excluding sales tax.
2. “Food & Beverage Sales” means Gross Sales related to food items prepared at the Chop Stop restaurant and fountain beverages.
3. “Retail Sales” means Gross Sales related to prepackaged items such as cookies, chips and bottled beverages that the Chop Stop restaurant resells to customers.
4. “Cost of Sales” means costs that are directly attributable to the preparation or purchase of menu items and other goods sold at the Chop Stop restaurant. This amount includes the cost of ingredients and packaging, but does not include labor, marketing, overhead or other general expenses of the Chop Stop restaurant. Cost of Sales is the sum of Food & Beverage Costs (as defined below) and Retail Costs (as defined below).
5. “Food & Beverage Costs” means costs that are directly attributable to the preparation of food and beverage items prepared at the Chop Stop restaurant.
6. “Retail Costs” means costs that are directly attributable to prepackaged items such as cookies, chips and bottled beverages that the Chop Stop restaurant resells to customers.
7. “Labor” means costs attributable to the wages, benefits, employment taxes, insurance and other compensation for the employees of the Chop Stop restaurant, including shift leaders. “Labor” does not include any employment expenses associated with a full-time manager. Your Restaurant must have a full-time manager. We assume that you (or if you are an entity, one of your owners) will serve as the Operating Manager. Labor is the sum of Wages (as defined below) and Taxes, Benefits and Insurance (as defined below).
8. “Wages” means costs attributable to wages and compensation for employees of the Chop Stop restaurant, including shift leaders, but excluding full-time managers.
9. “Taxes, Benefits and Insurance” means costs attributable to benefits, employment taxes and insurance related to employees of the Chop Stop restaurant, including shift leaders, but excluding full-time managers.
10. “Occupancy Expenses” means costs attributable to rent, taxes and insurance associated with the Chop Stop restaurant premises.
11. “Operational Expenses” includes costs attributable to utilities, supplies & equipment (kitchen, janitorial, office, front-of-house), repairs & maintenance, local marketing, sales incentives, security, delivery commissions, and other miscellaneous expenditures directly related to the operation of the Chop Stop restaurant.
12. “General & Administrative Expenses” is the sum of “Royalty Fees” (as defined below), “Brand Fund Fees” (as defined below), and “Other” (as defined below).
13. “Royalty Fees” means the Royalty Fee described in Item 6. Although company-owned locations are not required to pay a Royalty Fee, for purposes of consistency in this Item 19, we included a Royalty Fee equal to 5% of Net Sales (as defined in Item 6) for each company-owned location.
14. “Brand Fund Fees” means the Brand Fund Fee described in Item 6. The company-owned locations included above contributed to the Brand Fund on the same basis as the franchisees included above.
15. “Other” includes those general & administrative expenses attributable to accounting, human resources, legal and other professional fees, technology fees, dues & subscriptions, bank fees, and other miscellaneous expenditures related to the operation of the Chop Stop restaurant.
16. “Net Operating Income (EBITDA)” represents earnings before interest, taxes, depreciation and amortization, and is calculated by subtracting Cost of Sales, Labor, Occupancy Expenses, Operational Expenses and General & Administrative Expenses from Gross Sales.
17. “% of Sales” expresses the relevant expense category as a percentage of Gross Sales. The percentage figures provided for “Food & Beverage Costs” and “Retail Costs” are expressed as a percentage of “Food & Beverage Sales” and “Retail Sales,” respectively.

 

Table 2
YEAR-OVER-YEAR COMPARISON OF GROSS SALES BETWEEN 2019 AND 2020

The below table contains information on the average and median Gross Sales for the same 6 Chop Stop restaurants that are included in Table 1. The below table compares average and median Gross Sales from January 1, 2019 to July 5, 2019 against average and median Gross Sales from December 30, 2019 (the beginning of our 2020 fiscal year) to July 5, 2020.

Average Median Highest - Lowest
Period(1)
2019 Gross Sales(4)
2020 Gross Sales
% Difference
2019 Gross Sales
2020 Gross Sales
% Difference
2019 Highest - Lowest Gross Sales
2020 Highest - Lowest Gross Sales
Period 1
$67,085
$67,547
0.69%
$67,749
$68,891
1.69%
$91,883 -
$38,111
$96,543 -
$43,326
Period 2
$67,330
$70,147
4.18%
$63,819
$71,256
11.65%
$96,764 -
$42,623
$101,247 -
$44,215
Period 3(2)
$80,105
$56,308
-29.71%
$76,657
$55,385
-27.75%
$112,376 -
$63,514
$81,606 -
$36,120
Period 4(2)
$86,883
$26,904
-69.03%
$85,191
$26,958
-68.36%
$121,493 -
$70,260
$37,512 -
$18,757
Period 5(2)
$83,626
$54,242
-35.14%
$81,594
$53,459
-34.48%
$117,029 -
$64,006
$73,777 -
$40,824
Period 6(2, 3)
$86,038
$62,483
-27.38%
$85,243
$62,877
-26.24%
$118,370 -
$60,247
$84,732 -
$47,096
Period 7(2)
$61,715
$50,765
-17.74%
$62,331
$54,143
-13.14%
$86,205 -
$40,758
$67,435 -
$35,812

Notes to Table 2:
1. Except for Period 7, each “Period” means a consecutive four-week period, with Period 1 commencing as of January 1st each calendar year. Period 7 only consists of a three-week period.
2. During Periods 3 – 7 in 2020, each of the 6 Chop Stop restaurants that are included in this Table 2 were required to temporarily close or limit operations to take-out and/or delivery only due to federal, state, or local laws or regulations that were imposed in response to COVID-19. GP:4832-3373-0227 v5 34 Chop Stop FDD
3. For approximately 1-2 weeks during Period 6, each of the Chop Stop restaurants that are included in this Table 2 were required to close early each night due to mandatory curfews imposed by the government as a result of civil unrest in the area.
4. “Gross Sales” means the aggregate amount of all sales of goods and services, whether for cash, on credit or otherwise, made or provided in connection with each Chop Stop restaurant, excluding sales tax.

ADDITIONAL NOTES TO THE FINANCIAL PERFORMANCE REPRESENTATION:

A. Written substantiation for the financial performance representation will be made available to the prospective franchisee upon reasonable request.
B. Some outlets have earned this amount. Your individual results may differ. There is no assurance that you’ll earn as much.
C. The information presented above relates to the actual historical performance of the Chop Stop restaurants presented above. The financial information we utilized in preparing this Item 19 was based entirely upon information reported to us by CSI and our franchisees. None of this information was audited.
D. You are responsible for developing your own business plan for your Restaurant, including capital budgets, financial statements, projections and other elements appropriate to your particular circumstances. We encourage you to consult with your own accounting, business, and legal advisors in doing so.
E. The financial performance representation does not reflect all costs or expenses that must be deducted from Gross Sales to obtain your net profit, including without limitation any compensation required for a full-time manager, interest, taxes, depreciation or amortization. You should conduct an independent investigation of the costs and expenses you will incur in operating your Restaurant. Franchisees or former franchisees, listed in this disclosure document, may be one source of this information.

Other than the above information, we do not make any representations about a franchisee’s future financial performance or the past financial performance of company-owned or franchised outlets, nor do we authorize our employees or representatives to make any such representations either orally or in writing. If you receive any other financial performance information or projections of your future income, you should report it to Mark Kulkis at 2626 Foothill Blvd, Suite 230, La Crescenta, California 91214, telephone (818) 369-7350, contact the Federal Trade Commission, and the appropriate state regulatory agencies.

Frank GallagherFinancial Page

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If you have additional questions or concerns, please call (818) 369-7350
during regular business hours:
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