Aroma Joe’s Coffee Franchise Pays Back in 7 Years (2024)
Aroma Joe’s Coffee is a coffee chain that was founded in Biddeford, Maine in 2002. The company was founded by four cousins who went from building forts at Grandma’s house, to building their own careers, to building their first Aroma Joe’s drive-thru coffee kiosk in East Rochester, New Hampshire, in 2000. Aroma Joe’s began as a small, locally owned coffee shop, but has since grown to multiple locations throughout New England.
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The company is known for its friendly atmosphere and commitment to using only the finest, locally sourced ingredients in its beverages. In addition to coffee, Aroma Joe’s also offers a variety of specialty drinks, smoothies, and food items, making it a popular destination for both coffee lovers and those looking for a quick and delicious meal. Despite facing challenges in the competitive coffee industry, Aroma Joe’s Coffee has remained a beloved fixture in the New England community, thanks to its dedication to quality and customer service.
How Is Aroma Joe’s Franchise Positioned in the Food and Beverage Industry?
The Food and Beverage industry in the United States accounts for 13% of all manufacturing employment in the country, employing around 14.6 million people. Food franchises make up 36% of the total franchise establishments in the U.S. and are expected to create 1.6 million more jobs by 2027. The annual growth rate in the industry is around 2% and the EBITDA multiplier is around 3x. This industry is diverse and includes a variety of businesses such as quick-service restaurants, full-service restaurants, cafe franchises, and convenience stores, among others. It is an important contributor to the economy and continues to evolve and adapt to changing consumer trends.
How Much Is an Aroma Joe’s Coffee Franchise?
The initial Aroma Joe’s Franchise Fee is from $12,500 – $25,000. You have to pay this upfront fee when opening an Aroma Joe’s Coffee franchise.
Aroma Joe’s Franchise Cost
The estimated total investment necessary to begin the operation of an Aroma Joe’s Franchise ranges from $283,500 – $1,046,500. The following costs are part of the upfront costs included in the initial investment for an Aroma Joe’s. Many of these are one-time fees that are needed to launch the franchise. Review the chart below to see how much it costs to buy an Aroma Joe’s Coffee franchise in 2022.
Estimated Initial Investment
| Type of Expediture | Amount | To Whom Payment Is to Be Made | |
|---|---|---|---|
| Low | High | ||
| Initial Franchise Fee | $12,500 | $25,000 | Us |
| Real Property | $3,000 | $12,000 | Landlord |
| Leasehold Improvements | $100,000 | $300,000 | Vendor |
| Equipment Package | $105,000 | $185,000 | Us |
| Opening Inventory | $10,000 | $15,000 | Approved Suppliers |
| Insurance | $1,000 | $6,000 | Vendor |
| Training Expenses (including travel & lodging) | $2,500 | $5,000 | Vendor |
| Store Development, Architectural and Design Fees | $0 | $15,000 | Vendors |
| Site Development | $10,000 | $300,000 | Vendors |
| Engineering/Planning | $2,000 | $75,000 | Vendors |
| Miscellaneous Expense | $1,500 | $10,000 | Vendor |
| New Store Marketing | $5,000 | $5,000 | Us |
| Professional Fees | $1,500 | $10,000 | Vendor |
| Optional Security System (not including monitoring) | $1,000 | $5,000 | Vendor |
| Outside signage | $8,000 | $30,000 | Us |
| Additional Funds – 3 months | $10,000 | $30,000 | |
| 10% Buffer Fee | $10,500 | $18,500 | Us |
| TOTAL | $283,500 | $1,046,500 | |
Requirements
Aroma Joe’s Coffee states, “We ask that our franchisees begin with a minimum of $150,000 in liquid capital, and that they are qualified to secure capital for the investment necessary to their goal.”
Ongoing Fees
Royalty: 8% of total gross sales
Marketing Fee: 2.5% to 4.5% of total gross sales
How Much Do Aroma Joe’s Franchise Owners Make?
2021 Aroma Joe’s Coffee Median Franchise Sales: $854,948
| Initial investment (midpoint) | %Profit margin of median franchise sales | Estimated Profits | Time to recoup investments |
|---|---|---|---|
| $665,000 | 10% | $85,495 | 9 years |
| 15% | $128,242 | 7.5 years | |
| 20% | $170,990 | 5.5 years |
Based on the median sales provided by Aroma Joe’s franchise locations, at an average of a 15% profit margin it will take around 7.5 years to recoup your investment. This is slightly longer than other franchise opportunities. You may not get a 15% profit margin, which would elongate getting a return on your investment.
Many factors affect the sales, costs, and expenses of your Franchised store, such as the Franchised Store’s size, geographic location, menu mix, and competition in the marketplace; the presence of other Food and Beverage stores; and the extent of market penetration and brand awareness that Aroma Joe’s coffee stores have attained in your market. Also, the quality of management and service at your Franchised store are major factors.
Is the Aroma Joe’s Coffee Profit Worth the Franchise Cost?
To assign a valuation multiple for Aroma Joe’s franchises, we leverage estimates from DealStats, a database of acquired private company transactions sourced from U.S. business brokers and SEC filings. We reviewed the larger franchise industry as well as selling price multiples for larger systems where more transaction data is available.
Under $5 Million Net Sales
- Estimated Selling Price = Net Sales * 0.55
When you go to sell an Aroma Joe’s franchise based on the median multiple of .55 and net sales of $854,948, it would sell for $470,221. This is significantly lower than the midpoint investment of $665,000.
The more franchises you own, the more earning potential you have as private equity firms become interested in your business instead of individual owner-operators.
Aroma Joe’s (Franchisor) Income Statement Key Insights
Statements of Income and Members’ Equity
| (in thousands) | Year Ended December 31, | |
|---|---|---|
| 2021 | 2020 | |
| Revenues | ||
| Royalties | $4,107,582 | $3,040,283 |
| Franchise Fees | 82,500 | 60,000 |
| Advertising | 1,838,907 | 1,395,536 |
| Management Fees | 58,000 | 133,000 |
| Other Income | 85,517 | 68,316 |
| Total Revenue | $6,172,506 | $4,697,135 |
| Expenses | ||
| Selling, general and administrative expenses | 6,360,116 | 4,498,332 |
| Other (Income) Expense | ||
| Interest Income | (5,748) | (135,395) |
| Interest Expense | 1,238 | 1,741 |
| PPP Loan Forgiveness | (184,500) | – |
| Total Other Income | $(189,010) | $(133,654) |
| Net Income | $1,400 | $332,457 |
Aroma Joe’s Coffee is a profitable business for the franchisor with retained earnings of $1,400 in 2021. Compared to the previous year when they had earnings of $332,457, Aroma Joe’s Franchising has seen a big drop in income. Most of this drop is attributable to a PPP Loan forgiveness of $184,500.
How Many Aroma Joe’s Units Have Opened and Closed?
| Outlet Type | Year | Outlets at the Start of the Year | Outlets at the End of the Year | Net Change |
|---|---|---|---|---|
| U.S. Franchised | 2019 | 61 | 66 | +5 |
| 2020 | 66 | 71 | +5 | |
| 2021 | 71 | 81 | +10 | |
| Company-Owned | 2019 | 1 | 1 | 0 |
| 2020 | 1 | 2 | +1 | |
| 2021 | 2 | 1 | -2 | |
| Total Outlets | 2019 | 62 | 67 | +5 |
| 2020 | 67 | 73 | +6 | |
| 2021 | 73 | 72 | +9 |
Over the last three years, the company has slowly expanded. Franchises have opened at a rate of 6 – 7 units a year.
Conclusion
Aroma Joe’s is a successful coffee chain that has grown from a locally owned shop in Maine to multiple locations throughout New England. The company is known for its high-quality ingredients and friendly atmosphere, and has remained popular despite facing competition in the coffee industry. However, potential franchisees should be aware that the initial investment for an Aroma Joe’s Coffee franchise can be significant, ranging from $283,500 to $1,046,500. In addition, it may take several years to recoup this investment, based on the median sales of Aroma Joe’s Coffee franchises and the profit margin achieved. Potential franchisees should carefully consider these factors before deciding to invest in an Aroma Joe’s franchise.
While this may be the business for you, make sure also to check out other companies offered on Vetted Biz and in the Food and Beverage industry.
