Dippin Dots Survived the Pandemic. What now? (2023)
Written by: Anna Marchesseault
Last Updated:
January 23, 2023
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Download NowThis article is based on its 2021 FDD and the video above, from Vetted Biz Youtube Channel
Have you heard of nitrogen ice cream? Nitrogen ice cream is exactly what it sounds like with flash freezing ice cream made with liquid nitrogen giving it a unique taste. Dippin Dots uses this technology to make small frozen balls of ice cream that taste so light and yummy. Dippin Dots sells various ice cream flavors such as birthday cake, cool mint crunch, cotton candy, rainbow ice, and much more. This chain is global, and they are sold in 14 countries.
Lucky for you, Dippin Dots is a franchise where you can own your store or Kiosk of Dippin Dots.
If this sounds like an interest to you, keep reading!
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History of Dippin Dots Franchise
In 1988, Curt Jones who is a microbiologist invented Dippin Dots which is beaded ice cream. They started implementing Dippin Dots in amusement parks in the ’80s and ’90s, and in 1995 they introduced Dippin Dots to Japan. The company then grew and moved to various locations such as movie theaters, stadiums, arenas, and more. CEO of Dippin Dots is Scott Fischer since May 2012, and he also serves as President and Manager of DDL as of April 2012.
Dippin Dots Bankruptcy
On November 3, 2011, DDI, which is Dippin Dots affiliated company and supplier of the products for franchisees, filed a voluntary bankruptcy petition. DDL purchased all of DDI’s assets in which they entered an Asset Purchase Agreement. This thus ended their bankruptcy.
Dippin Dot’s Franchise Cost
The initial franchise fee is $15,000, which is on the low end for a food and beverage franchise.
Estimated Initial Investment. Your Estimated Initial Investment Franchise Agreement
| Type of expenditure | Low Amount | High Amount | To Whom Payment Is to Be Made |
|---|---|---|---|
| Initial Franchise Fee | $7,500 | $15,000 | DDF |
| Grand Opening Advertising Materials Expenditure | $500 | $2,500 | DDL and Third Parties |
| Credit Card and Gift Card Processing | $755 | $800 | Third Parties |
| Office and Retail Supplies | $100 | $500 | DDL and Third Parties |
| Opening Inventory | $2,500 | $5,250 | DDL and Third Parties |
| Insurance | $1,500 | $2,500 | Third Parties |
| Printing and Signage | $499 | $5,000 | DDL and Third Parties |
| Equipment (Freezers, etc.) | $65,700 | $84,900 | DDL and Third Parties |
| Leased Warehouse and Cold Storage | $5,000 | $20,000 | Third Parties |
| 20 Ft. Box Truck Monthly Payments to Lease or Own | $1,000 | $2,000 | Third Parties |
| Travel, Lodging, Meals, Etc. for Initial Training11 | $1,500 | $2,500 | Third Parties |
| Real Estate and Improvements | $500 | $10,000 | Third Parties |
| Security Deposit and Prepaid Rent | $2,400 | $120,000 | Third Parties |
| Miscellaneous Start-up Costs | $12,500 | $32,500 | Third Parties |
| Additional Funds (6 months) | $10,250 | $63,500 | Third Parties |
| TOTALS | $112,204 | $366,950 |
The lowest and the highest
The chart above shows the lowest and the highest it can cost for the estimated initial investment and all of the costs of the items within this. Estimated initial investment can be as low as $112,204 to as high as $366,950. This is due to equipment that can cost from $65,700 to $84,900 which is the majority of the investment fee.
Equipment
This is such a high cost because you are required to purchase or lease and install office/kitchen equipment for your franchise. The first order is 40 route delivery freezers, 5 storage freezers, a tent, and a serving freezer with shipping as well as equipment for the kiosk or store. Freezers are essential to Dippin Dots, so there isn’t much way of getting around these costs unless you decide to get a kiosk instead of a store that will be on the lower side of the cost.
Dippin Dot’s ongoing costs and fees
Estimated Initial Investment. Your Estimated Initial Investment Franchise Agreement
Up to 6% on ancillary items (non-Dippin’ Dots manufactured retail food, drink and/or non-food approved items). Up to 2% on ancillary items (non-Dippin’ Dots manufactured retail food, drink and/or non-food approved items).| Type of Fee | Amount |
|---|---|
| Royalty Fee | $2.16 per bag for bulk ice cream products. |
| $0.09 per unit for pre-pack units. | |
| Advertising Fund Contributions | $0.24 per bag for bulk ice cream products. |
| $0.01 per unit for pre-pack units. | |
| Regional Advertising Fund Contributions | Up to 50% of the contributions made to Advertising Fund. |
| Additional Training Fees | $75.00 per day per person. |
| Relocation Fee for Relocation of Franchised Business | $1,000. |
| Evaluation and Testing of New Approved Supplier | Reasonable cost of the evaluation and testing. |
| Reimbursement of Amounts Paid to Correct any Deficiencies | Actual cost to us. |
| Replacement Fee for lost Manuals | At least $200. |
| P.O.S. System Transaction Fee | $100—$150 per month. |
| Late Fee for Sales Reports | $5.00 per day |
| Late Fee for Profit and Loss Statement | $5.00 per day. |
| Interest on Understated Amounts Payable | 18% per annum or the maximum rate permitted by law, whichever is less. |
| Reimbursement of Audit Costs | Actual cost to us. |
| Insurance Coverage | Actual cost to us. |
Keep track of these fees
The chart above shows the advertising fund contributions which are $.24 per bag for bulk for ice cream products, $.01 per unit for pre-pack units, and up to 2%, additional products such as non-Dippin Dots manufactured retail food, drink, and/or approved items. Although, 50% of these funds will go to regional advertising fund contributions. There is also the P.O.S system transaction fee, which costs $100-$150 per month. This can add up quickly for each month, so keeping track of this fee is very important. Many of the costs above are late fees, or additional costs, so making sure you stay on top of this is important, so you don’t add unnecessary fees to the cost of running a franchise.
Franchise Royalty Fee
The royalty fee is $2.16 per bag for bulk ice cream products and $ .09 per unit for pre-pack units. There is also up to 6% on additional products such as non-Dippin Dots manufactured retail food, drink, and/or approved items.
Dippin Dot Units Opened and Closed
Systemwide Outlet Summary for Years 2018—2020
| Outlet type | Year | Outlets at the Start of the Year | Outlets at the End of the Year | Net Change |
|---|---|---|---|---|
| Franchised | 2018 | 210 | 221 | +11 |
| 2019 | 221 | 228 | +7 | |
| 2020 | 228 | 224 | -4 | |
| Company-Owned | 2018 | 1 | 1 | 0 |
| 2019 | 1 | 0 | -1 | |
| 2020 | 0 | 0 | 0 | |
| Total Outlets | 2018 | 211 | 222 | +11 |
| 2019 | 222 | 228 | +6 | |
| 2020 | 228 | 224 | -4 |
Dippin Dots Franchise Outlets
In the chart above it shows that the majority of the outlets are a franchise outlet while there was only one company-owned outlet which ended up closing. This is a good sign that Dippin Dots is focused on building their franchises, which gives you more of an opportunity to open up one. For the franchise outlets, the net change is overall positive except for 2020 which could be due to Covid. In 2018 the franchise outlets increased by 11 outlets, then 7 outlets in 2019, and then 4 franchise outlets closed in 2020. Unfortunately, it shows that the franchise is decreasing each year, but Covid-19 has had a large impact on the food industry which must have impacted the Dippin Dot franchise.
How much do the owners of Dippin Dot make?
Dippin Dots does not provide financial information on the performances of their existing franchise. The information will be provided when the franchisor is seriously considering buying a unit and has evidence to prove this. According to their FDD, Dippin Dots does not make predictions on how a franchise will perform and instead provides actual records of that outlet. You should ask existing franchises how much they are earning in their location.
Dippin Dot LLC’s Income statement
DIPPIN’ DOTS FRANCHISING, LLC. STATEMENTS OF INCOME For the Years Ended December 31, 2020 and 2019
| 2020 | 2019 | |
|---|---|---|
REVENUES | ||
| Royalties and advertising fees | $1,406,349 | $2,597,073 |
| Franchise, renewal transfer fees | 240,716 | 270,264 |
| Freezer sales | 55,435 | 244,408 |
| REVENUES | 1,702,500 | 3,111,745 |
COST OF GOODS SOLD | ||
| Cost of Freezers | 33,637 | 154,956 |
| GROSS PROFIT | 1,668,863 | 2,956,789 |
OPERATING EXPENSES | ||
| Administrative | 3,520 | 4,635 |
| Advertising | 248,859 | 341,284 |
| Bad debt expense, trade | 396 | 0 |
| Bank charges | 3,885 | 4,678 |
| Commisions | 900 | 2,050 |
| Conferences and meetings | 200,186 | 225,103 |
| Depreciation | 4,555 | 4,648 |
| Dues and subscriptions | 75,014 | 18,978 |
| Insurance | 22,228 | 13,432 |
| Management fees | 208,041 | 633,664 |
| Miscellaneous | 9,681 | 1,800 |
| Office expense | 19,127 | 23,581 |
| Professional fees | 134,301 | 103,893 |
| Public relations | 12,375 | 13,875 |
| Rents and lease | 41,885 | 41,649 |
| Repairs and maintenance | 1,205 | 7,146 |
| Taxes and licenses | 12,199 | 7,118 |
| Training | 254 | 1,385 |
| Travel | 35,019 | 85,956 |
| Tradeshows | 23,224 | 116,738 |
| Wages | 408,677 | 639,817 |
| 1,765,531 | 2,291,430 | |
| INCOME (LOSS) FROM OPERATIONS | (96,668) | 665,359 |
OTHER INCOME (EXPENSE) | ||
| Bad debt expense, related party | (170,583) | (259,520) |
| Foreign currency transaction gain (loss) | (2,588) | (261) |
| Other income | 1,966 | 0 |
| Gain (loss) on sale of property and equipment | (19,593) | 3,698 |
| Gain on business interruption insurance | 64,402 | 0 |
| Interest expense | (18,462) | (21,233) |
| Income from investment in subsidiary | 9,296 | 51,453 |
| Management fee income | 83,918 | 139,608 |
| Miscellaneous income | 3,652 | 16,692 |
| (47,991) | (69,563) | |
| INCOME (LOSS) FROM CONTINUING OPERATIONS | (144,659) | 595,796 |
DISCONTINUED OPERATIONS | 0 | (51,134) |
| NET INCOME (LOSS) | $(144,659) |
Revenue
The revenue has decreased significantly from 2019 which was $2.6 million to 2020 which was $1.41 million. The revenue in 2020 is cut almost half from 2019 and this could be due to them closing operations caused by Covid. In 2019 their income from operations is $665,359 and in 2020 is $-96,668 which is a large gap.
Dippin Dot Cash flow
DIPPIN’ DOTS FRANCHISING, LLC. STATEMENTS OF CASH FLOWS For the Years Ended December 31, 2020 and 2019
CASH AND CASH EQUIVALENTS END OF YEAR
$265,837$349,258
| 2020 | 2019 | |
|---|---|---|
CASH FLOWS FROM OPERATING ACTIVITIES | ||
| Net income (loss) | $144,659 | $544,662 |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||
| Investment subsidiary | (9,296) | (51,453) |
| Provision for doubtful accounts | 396 | 0 |
| Provision for doubtful accounts, related parties | 170,583 | 259,520 |
| Loss on disposal of fixed assets | 19,593 | 55,660 |
| Loss on foreign currency | 2,588 | 261 |
| Depreciation | 4,555 | 4,648 |
| 606 implementation adjustment (see Footnote A) | 0 | (661,816) |
(Increase) decrease in: | ||
| Accounts receivable | 58,399 | 5,519 |
| Accounts receivable, related parties | (81,218) | (696,839) |
| Inventory | (55,641) | 31,297 |
| Prepaid expenses | 61,026 | (19,689) |
Increase (decrease) in: | ||
| Accounts payable | (31,044) | (28,019) |
| Accounts payable, related parties | 31,904 | (256,944) |
| Unearned revenue | (124,748) | 651,616 |
| Liability to advertising fund | 0 | 368,147 |
| Accrued liabilities | 13,653 | (10,188) |
| NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES | (81,909) | 196,382 |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
| Long-term accounts receivable | (1,914) | (46,944) |
| Purchase of equipment | 0 | (5,475) |
| Proceeds from sale of equipment | 402 | 121,662 |
| NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES | (1,512) | 69,243 |
| Net increase (decrease) in cash and cash equivalents | (83,421) | (265,625) |
| Cash and cash equivalents at beginning of year | 349,258 | 83,633 |
Look at previous years
The net income was $544,662 in 2019 and then decreased to -$144,569. This is concerning since they are losing money with their net income. It caused their net cash provided by operating activities to be $-81,909. This is due to their unearned revenue which is $-124,748 while the year before was $651,616. Dippin Dots in 2020 could have been shut down, which caused them to lose money due to the pandemic. I recommend looking at previous years to get more of a normal estimate for their net income if the pandemic declines.
Although at the end of 2020 they still have $265,837 in cash which means they have the means to stay afloat and to recover if a crisis occurs such as the pandemic.
Conclusion
Dippin Dots have been significantly impacted by the pandemic, from the number of franchises closing to their financials. This is a difficult time for food industries, so keeping updated on the world is essential to making sure you make the right decision in buying a franchise. I highly recommend researching on previous years to get a better idea of how much they earn without the effect of the pandemic.
Think Dippin Dots is the right franchise for you, or interested in exploring other franchise opportunities? Make sure to check out our website for listings of other similar franchises in the Frozen Dessert Industry.
