Insomnia Cookies Franchise & 3 Alternatives Available In 2022

Written by: Parth Parth
Last Updated: August 5, 2022
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cookie franchise

Contents

Insomnia Cookies is a U.S. bakery chain that specializes in delivering warm cookies, ice cream, and other baked goods. It was started by Seth Berkowitz in 2003 at the University of Pennsylvania when he began baking and delivering cookies late at night to students. Their first store was established in Syracuse. NY in 2004. Their stores usually open from 10 AM to 3 AM on weekdays and from noon to 3 AM on the weekends. Krispy Kreme acquired them in 2018, but they still operate independently. As of April 4, 2021, Insomnia had 191 locations in 40 states nationwide. They have a very strong online presence with 50% of their sales coming from digital sources.

imsomnia cookies

How is Insomnia positioned in the Cookies industry?

The industry brings $24.5 billion in yearly revenue and $1.1 billion in profit. While this industry has historically experienced stable demand due to stable diets over the years, changing nutrition trends that encourage cutting out carbohydrates and sugars from diets are leading to slower growth. Between 2016 and 2021, the industry shrunk by 2%. However, the industry is expected to return to growth over the five years to 2021, with revenue anticipated to increase at an annualized rate of 0.6% to $25.3 billion.

Fiscal Years Ended
January 3, 2021 December 29, 2019 December 30, 2018
U.S and Canada:
Revenue 782,717 587,522 443,563
Non Fresh Revenue 128,619 112,051 125,684
Fresh Revenue from Insomnia and Hubs Without Spokes 323,079 271,067 156,778

As reported by Krispy Kreme, Insomnia and Krispy Kreme stores that do not operate on a hub and spoke model brought in $323 million in 2021, up more than 100% from $156 million in 2018.

What is Insomnia Cookies valued at?

As of 2018 acquisition, Insomnia Cookies was valued at $137.5 million. More details about this valuation are in the table below:

Insomnia Cookies
Assets Acquired:
Cash, cash equivalents and restricted cash1,233
Marketable securities
Receivables232
Inventory2,346
Other current assets506
Property and equipment22,364
Other intangible assets104,500
Other assets672
Total identified assets acquired131,853
Liabilities Assumed:
Accounts payable(5,866)
Accrued liabilities(3,933)
Deferred income taxes, net
Long- term debt, less current portion(2,692)
Other long-term obligations and deferred credits
Total liabilities assumed(12,491)
Goodwill54,851
Non-controlling interest(34,758)
Bargain purchase gain
Purchase consideration, net139,455
Transactiion cost in 2018 (approx.)3,952

What are the costs associated with running an Insomnia Cookies Franchise?

Insomnia Cookies no longer offers franchises but we will review the costs and profits associated with operating a cookie franchise. Let’s look at three alternatives to Insomnia, starting with Crumbl Cookies.

Crumbl Cookies

Crumbl Cookies is a cookie and baked goods chain that features a weekly rotating menu with open concept kitchens. It was founded by Sawyer Hemsley and has 326 franchised locations as of 2022.

The estimated total investment necessary to begin the operation of a Crumbl Cookies Franchise ranges from $347,666 – $691,783. The following costs are part of the upfront costs included in the initial investment for a Crumbl Cookies Franchise. 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 a franchise in 2022.

crumbl
Type of ExpenditureAmountMethod of Payment
Initial franchise fee$25,000 (if the franchise agreement is signed on or prior to June 30, 2022) $50,000 (if the franchise agreement is signed after June 30, 2022)Lump Sum
Initial tech and other equipment package23,300 – 167,650Lump Sum
Initial training fees, and travel, lodging, food, and other expenses while training20,000 – 30,000As Incurred
Real estate and improvements75,000 – 250,000As incurred
Rent – 3 months16,666 – 83,333As Incurred
Professional fees8,000 – 15,000As Incurred
Equipment, furniture, fixtures, decor, and supplies75,000 – 100,000As Incurred or Leased
POS system, computer hardware, and software3,500 – 8,000As Incurred
Signs6,500 – 15,000As Incurred
Misc. opening costs2,500 – 5,000As Incurred
Opening inventory5,000 – 10,000Lump Sum
Additional funds – 3 months10,000As Incurred
Total322,666 – 666,783 (if the franchise agreement is signed on or prior to June 30, 2022)
$347,666 – 691,783 (if the franchise agreement is signed after to Jun 30, 2022
Does not include royalties or marketing fees.

This is not an exhaustive list of fees and there might be other fees associated with starting a franchise. We recommend you talk to the franchisor to get a better idea of the required financials.

There are also fees associated with running a franchise. Once again, these numbers have been taken from Crumbl:

Royalty: 8% of Gross sales

Marketing Fee: 2% of Gross sales

Technology Fee: $500

 

What can a franchise owner earn?

2021 Calendar Year Average High Median Low
Total Revenue 1,687,731 3,369,139 1,582,090 734,278
Gross Profit 749,555 1,771,793 707,912,53 282,380
Net Profit 357,512 618,102 279,212 33,260

For the 2021 calendar year, the median Crumbl Cookies franchise made $1,582,090 in revenue with $279,212 in profit. That is a profit margin of around 17.5%.

Based on the median sales provided by Crumbl’s franchise locations, at an average of a 17.5% profit margin it will take around 4.5 years to recoup your midpoint investment of $519,724. This is longer than other franchise opportunities. You may not get a 17.5% 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 baked goods stores; the extent of market penetration and brand awareness that Cumbl Cookies stores have attained in your market. Also, the quality of management and service at your Franchised Store.

Is the Crumbl Cookies Franchise Profit Worth the Franchise Cost?

To assign a valuation multiple for Crumbl 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 $1 Million Net Sales

  • Estimated Selling Price = Net Sales – 0.61

$1 Million – $5 Million Net Sales

  • Estimated Selling Price = Net Sales – 0.54

When you go to sell a Crumbl Cookies franchise based on the median multiple of .61 and net sales in 2020 of $1,582,090, it would sell for $965,074. This is significantly higher than the midpoint investment of $519,724.

The more franchised locations you own, the more earning potential you have as private equity firms become interested in your business instead of individual owner-operators.

crumbl

How many franchised locations can the industry support?

Outlet TypeYearOutlets at the Start of the YearOutlets at the End of the YearNet Change
Franchised20191554+39
202054141+87
2021141326+185
Company-Owned201911+0
202011+0
202111+0
Total Outlets20191655+39
202055143+87
2021142327+185

 

As of 2021, there are 327 Crumbl Cookies outlets with 185 of them opening in 2021 itself. This might indicate strong growth in the industry and a demand for more outlets, boosting confidence that franchises in this industry are largely successful.

Mrs. Fields

Mrs. Fields is a cookie and related products chain that offers two types of franchised locations: a store and a kiosk. It is currently led by Darren Hale who is the CEO of the parent company, Famous Brands. As of 2021, they had 128 franchised locations.

The estimated total investment necessary to begin the operation of a Mrs. Fields Franchised store ranges from $255,995 to $415,500. The following costs are part of the upfront costs included in the initial investment for a Mrs. Fields Franchise. 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 a franchise in 2022.

mrs fields
Type of Expenditure Amount Method of Payment
Initial franchise fee 35,000 Lump Sum
Travel and living expenses while training 2,000 – 3,000 Lump Sum, as Incurred
Real Estate Lease Note 3 Note 3
Improvements and equipment 179,495 – 312,500 As Agreed, with Suppliers
Opening Product and soft goods 5,000 – 10,000 As Agreed, with Suppliers
Grand opening promotion, if opening a new store 5,000 – 10,000 Lump Sum
Deposits and other prepaid expenses 4,000 – 5,000 Lump Sum
Profesional fees 9,000 – 10,000 Lump Sum or as Arranged by Providers
Insurance 2,500 – 3,500 Lump Sum, or as Arranged by Providers
Coffee preparation and serving equptment 2,500 – 10,000 Monthly
Computer hardware and software 3,500 – 4,500 Lump Sum
Additional funds (3 months) 8,000 – 12,000 Lump Sum, as Incurred
Totals 255,995 – 415,500

This is not an exhaustive list of fees and there might be other fees associated with starting a franchise. We recommend you talk to the franchisor to get a better idea of the required financials.

There are also fees associated with running a franchise. For Mrs. Fields, we see the following costs:

Royalty: 6% of Gross revenue

Marketing Fee: 3% of Gross sales

 

What can a franchise owner earn?

Group Number of Stores in Group Average Gross Revenue Median Gross Revenue Range
Highest Quartile 16 525,949 496,781 388,354 – 1,012,046
Second Highest Quartile 16 320,886 321,946 265,923 – 378,536
Third Highest Quartile 16 220,946 219,676 190,489 – 263,616
Lowest Quartile 16 102,147 101,313 30,702 – 179,223
Total Group 64 292,368 264,768 30,702 – 1,012,046

For the 2021 calendar year, the median Mrs. Fields franchise made $264,768 in revenue.

3778400147_0b3bba266a

2021 Median Franchise Sales: $264,768

Initial Investent (Midpoint) %Profit Margin of Average Franchise Sales Estimated Profits Time to Recoup Investment
335,747 10% 26,476 15 years
335,747 15% 39,715 11 years
335,747 20% 52,953 9 years

Based on the median sales provided by franchise locations, at an average of a 15% profit margin it will take around 11 years to recoup your investment. This is longer than other franchise opportunities. You may not get a 15% profit margin which would elongate getting a return on your investment. This is significantly more than other franchise opportunities.

Based on the median sales provided by franchise locations, at an average of a 15% profit margin it will take around 11 years to recoup your investment. This is longer than other franchise opportunities. You may not get a 15% profit margin which would elongate getting a return on your investment. This is significantly more than other franchise opportunities.

Is the Mrs. Fields Franchise Profit Worth the Franchise Cost?

To assign a valuation multiple for Mrs. Fields 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 $1 Million Net Sales

  • Estimated Selling Price = Net Sales – 0.61

When you go to sell a Mrs. Fields franchise based on the median multiple of .61 and net sales in 2020 of $264,768, it would sell for $161,508. This is significantly lower than the midpoint investment of $335,747.

The more franchised locations you own, the more earning potential you have as private equity firms become interested in your business instead of individual owner-operators.

How is Mrs. Fields (the franchisor) doing?

 Years Ended
 January 3, 2021December 29, 2019December 30, 2018
Revenues, net
Mrs. Fields gifts$34,870$30,592$25,447
Domestic franchising4,6974,8367,463
Ad Fund – franchising1,125
Mrs. Fields licensing9181,3671,728
International franchising6067951,002
Total revenues42,21637,59035,640
Operating costs and expenses
Mrs. Fields gifts29,38525,34922,659
Domestic franchising1,3611,1491,428
Ad Fund – franchising894
Mrs. Fields licensing153474349
International franchising148180198
General and administrative4,9354,,6705,551
Depreciation and amortization9789351,530
Total operating costs and expenses37,85432,75731,715
Income from operations4,3624,8333,925
Interest expense, net6,3189,1849,382
Other income(37)(349)
Gain on debt extinguishment(1,475)
Loss before provision for income taxes(444)(4,351)(5,108)
Provision for income taxes530393(1,644)
Net loss from continuing operations, net of income tax(974)(4,744)(3,464)
Net loss from discontinued operations, net of income tax(322)(209)
Comprehensive loss, net of income taxes
Net loss(974)(5,066)(3,673)
Foreign currency translation adjustment396685
Comprehensive loss(935)(5,000)(3,588)

In 2021, Mrs. Fields ran a loss of $974,000. This is down from a loss of $3.6 million in 2019, but the company is not doing well and prospective franchisees should wait to see if profits are seen again.

crumbl cookies

How many franchised locations can Mrs. Fields support?

Outlet TypeYearOutlets at the Start of the YearOutlets at the End of the YearNet Change
Franchised2019172151-21
2020151138-13
2021138128-10
Company-Owned2019000
2020000
2021000
Total Outlets2019172151-21
2020151138-13
2021138128-10

As of 2021, there are 128 Mrs. Fields outlets. They have been declining at a rate of around 15 locations per year. In an industry that is growing this is not a good sign. This might be due to frustrations owners have with the franchisor or declining sales in the product offerings, leading to owners not renewing their franchises.

Great American Cookies

Great American Cookies is a cookie and brownies chain that claims to be the home of the Cookie Cake. As of 2021, they had 128 franchised locations. It was owned by Mrs. Fields in 1998 but is owned by FAT brands now. As of 2020, they had 370 franchised and no company-owned locations.

The estimated total investment necessary to begin the operation of a Great American Cookies Franchised store ranges from $277,400 to $403,150. The following costs are part of the upfront costs included in the initial investment for a Great American Cookies Franchise. 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 a franchise in 2022.

great american cookies

Additional requirements for owning a Great American franchise is that you’re financially stable, with a net worth of at least $250K and liquidity of $100K per store.

Type of ExpenditureAmountMethod of Payment
Franchise fee$25,000 – $25,000Lump Sum
Grand opening marketing3,000 – 5,000As Incurred
Travel and living expenses while training1,000 – 3,000As Incurred
Cookie ingredients5,000 – 10,000As Incurred
Other opening inventory5,700 – 15,150Lump Sum
Architectural fees7,000 – 12,500As Incurred
Furniture, fixtures, equipment and decor91,000 – 121,000As Incurred
Signs4,500 – 9,500As Incurred
Prepaid rent and security deposit2,500 – 5,000As Incurred
Leasehold improvements115,000 – 165,000As Incurred
Utility deposits2,200 , 3,000As Incurred
Professional Fees1,000 – 6,000As Incurred
Computer  System2,500 – 5,000As Incurred
Business licenses, permits, etc. (for first 6 months)1,500 – 2,500As Incurred
Insurance (3 months)2,500 – 3,500As Incurred
Additional funds (3 months)8,000 – 12,000As Incurred
Totals277,400 – 403,150For a traditional store

This is not an exhaustive list of fees and there might be other fees associated with starting a franchise. We recommend you talk to the franchisor to get a better idea of the required financials.

There are also fees associated with running a franchise. For Great American Cookies, we see the following costs:

Royalty: 6% of net sales for the preceding month

Marketing Fee: 1.5% of sales for Traditional Mall stores, otherwise 2%

Local Marketing: 2% of Net Sales

What can a franchise owner earn?

Great American does not report yearly sales but does so monthly. Assuming the median of around $31,000, we can proceed with calculations below.

2021 Median Franchise Sales: $31,000 - 12 = $372,000

Initial Investent (Midpoint)%Profit Margin of Average Franchise SalesEstimated ProfitsTime to Recoup Investment
$680,55010%$37,200 21 years
$680,55015%$55,83014.5 years
$680,55020%$74,400 11.5 years

Based on the median sales provided by franchise locations, at an average of a 15% profit margin it will take around 14.5 years to recoup your investment. This is longer than other franchise opportunities. You may not get a 15% profit margin which would elongate getting a return on your investment. This is significantly longer than other franchise opportunities in the industry.

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 baked goods stores; the extent of market penetration and brand awareness that Great American Cookies stores have attained in your market. Also, the quality of management and service at your Franchised Store.

Is the Great American Cookies Franchise Profit Worth the Franchise Cost?

To assign a valuation multiple for Great American Cookies 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 $1 Million Net Sales

  • Estimated Selling Price = Net Sales – 0.61

When you go to sell a Great American Cookies franchise based on the median multiple of .61 and net sales in 2020 of $372,000, it would sell for $226,920. This is significantly lower than the midpoint investment of $680,550.

The more franchised locations you own, the more earning potential you have as private equity firms become interested in your business instead of individual owner-operators.

How is Great American Cookies (the franchisor) doing?

Statement of Income

Year to date period ended  – February 28, 2021
Revenues
Royalty revenue1,068
Franchise fee revenue52
Total Revenues1,120
Expenses
Magnagement fees – affiliate448
Selling, general and administrative expenses
Bad debt expense4
Total Expenses452
Net Income668

In 2021, Great American Cookies made a profit of around $668,000. No information has been made available by Great American Cookies about past figures.

great american cookies

How many franchised locations can Great American Cookies support?

Outlet TypeYearOutlets at the Start of the YearOutlets at the End of the YearNet Change
Franchised2019355363+8
2020363369+6
2021369370+1
Company-Owned2019000
2020000
2021000
Total Outlets2019355363+8
2020363369+6
2021369370+1

As of 2020, there are 370 Great American Cookies outlets. New stores have been opening at a slowing rate with the average between 2018 and 2020 being 5 per year. However, only one new franchise opened in 2020.

Conclusion

We hope that this article gave you an idea of how profitable it is to run a franchise in the baked goods industry, taking Crumbl Cookies as the base model. While Insomnia Cookies no longer offers franchises, opting to keep everything under its own control, you might be interested in franchising a location for Krispy Kreme, the parent company of Insomnia. The cookies industry is expected to grow in the future and Crumbl Cookies, Great American, Mrs. fields, and Krispy Kreme all offer a chance to be a part of it.

Think you are interested in owning a cookies franchise or another franchise in the Food and Beverage industry? Check out our listings page on the Vetted Biz website for much more information about franchise opportunities. 

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